October 2020
Preliminary Terms No. 5,005
Registration Statement Nos.
333-221595; 333-221595-01
Dated September 30, 2020
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities
in U.S. Equities
Contingent Income Auto-Callable Securities due
November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the
Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial
AverageSM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities offered are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have
the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this
document. The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon but only if the index closing value of each of the Russell 2000®
Index, the NASDAQ-100 Index® and the
Dow Jones Industrial AverageSM is at or above 70% of its respective initial index value, which we refer to as
the respective coupon threshold level, on the related observation date. However, if the index closing value of any underlying
index is less than its coupon threshold level on any observation date, we will pay no interest for the related monthly
period. In addition, starting one year after the original issue date, the securities will be automatically redeemed if the index
closing value of each underlying index is greater than or equal to its respective initial index value on
any quarterly redemption determination date, for the early redemption payment equal to the sum of the stated principal amount
plus the related contingent monthly coupon. No further payments will be made on the securities once they have been redeemed. At
maturity, if the securities have not previously been redeemed and the final index value of each underlying index
is greater than or equal to 70% of its respective initial
index value, which we refer to as the respective downside threshold level, the payment at maturity will be the stated principal
amount and the related contingent monthly coupon. If, however, the final index value of any underlying index is less
than its respective downside threshold level, investors will be fully exposed to the decline in the worst performing underlying
index on a 1-to-1 basis and will receive a payment at maturity that is less than 70% of the stated principal amount of
the securities and could be zero. Accordingly, investors in the securities must be willing to accept the risk of losing
their entire initial investment and also the risk of not receiving any contingent monthly coupons throughout the 5-year term of
the securities. Because all payments on the securities are based on the worst performing of the underlying indices, a decline
beyond the respective coupon threshold level or respective downside threshold level, as applicable, of any underlying index will
result in few or no contingent coupon payments or a significant loss of your investment, even if one or both of the other underlying
indices have appreciated or have not declined as much. These long-dated securities are for investors who are willing to risk their
principal based on the worst performing of three underlying indices and who seek an opportunity to earn interest at a potentially
above-market rate in exchange for the risk of receiving no monthly coupons over the entire 5-year term, with no possibility of
being called out of the securities until after the initial 1-year non-call period. Investors will not participate in any appreciation
of any underlying index. The securities are notes issued as part of MSFL’s
Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
SUMMARY
TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying
indices:
|
Russell 2000® Index (the “RTY Index”), NASDAQ-100 Index® (the “NDX Index”) and Dow Jones Industrial AverageSM (the “INDU Index”)
|
Aggregate principal amount:
|
$
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing
date:
|
October 30, 2020
|
Original
issue date:
|
November 4, 2020 (3 business days after the pricing date)
|
Maturity
date:
|
November 4, 2025
|
Contingent
monthly coupon:
|
A contingent coupon will be paid on the securities on
each coupon payment date but only if the index closing value of each underlying index is at or above its respective
coupon threshold level on the related observation date. If payable, the contingent monthly coupon will be an amount in cash
per stated principal amount corresponding to a return of 7.00% to 9.00% per annum (corresponding to approximately $5.833
to $7.50 per month per security, to be determined on the pricing date) for each interest payment period for each applicable observation
date.
If, on any observation date, the index closing value of any
underlying index is less than its respective coupon threshold level, we will pay no coupon for the applicable monthly period. It
is possible that any underlying index will remain below its respective coupon threshold level for extended periods of time or even
throughout the entire 5-year term of the securities so that you will receive few or no contingent monthly coupons.
|
Payment
at maturity:
|
If the securities have not been automatically redeemed prior
to maturity, the payment at maturity will be determined as follows:
If the final index value of each underlying index is greater
than or equal to its respective downside threshold level, investors will receive the stated principal amount plus the
contingent monthly coupon with respect to the final observation date.
If the final index value of any underlying index is less
than its respective downside threshold level, investors will receive (i) the stated principal amount multiplied by (ii)
the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will
be less than 70% of the stated principal amount of the securities and could be zero.
|
|
Terms continued on the following page
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the
pricing date:
|
Approximately $925.80 per security, or within $55.00 of that estimate. See “Investment Summary” beginning on page 4.
|
Commissions
and issue price:
|
Price to public(1)
|
Agent’s commissions and fees(2)
|
Proceeds to us(3)
|
Per
security
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
|
(1)
|
The securities will be sold only to investors purchasing
the securities in fee-based advisory accounts.
|
|
(2)
|
MS & Co. expects to sell all of the securities that
it purchases from us to an unaffiliated dealer at a price of $ per security, for further sale to
certain fee-based advisory accounts at the price to public of $1,000 per security. MS & Co. will not receive a sales commission
with respect to the securities. See "Supplemental information regarding plan of distribution; conflicts of interest."
For additional information, see "Plan of Distribution (Conflicts of Interest)" in the accompanying product supplement.
|
|
(3)
|
See “Use of proceeds and hedging” on page
31.
|
The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning
on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Auto-Callable Securities dated November 16, 2017 Index Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Contingent
Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the
Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial
AverageSM
Principal at Risk Securities
Terms continued from previous page:
|
Early
redemption:
|
The securities are not subject to automatic early redemption
until one year after the original issue date. Following this initial 1-year non-call period, if, on any redemption determination
date, beginning on October 29, 2021, the index closing value of each underlying index is greater than or equal to
its respective initial index value, the securities will be automatically redeemed for an early redemption payment on the related
early redemption date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the index closing value of any underlying index is below the respective initial index value for such underlying index on
the related redemption determination date.
|
Early
redemption payment:
|
The early redemption payment will be an amount equal to the stated principal amount for each security you hold plus the contingent monthly coupon with respect to the related observation date.
|
Redemption
determination dates:
|
Beginning after one year, quarterly, on October 29, 2021, January 31, 2022, April 29, 2022, July 29, 2022, October 31, 2022, January 30, 2023, April 28, 2023, July 31, 2023, October 30, 2023, January 30, 2024, April 30, 2024, July 30, 2024, October 30, 2024, January 30, 2025, April 30, 2025 and July 30, 2025, subject to postponement for non-index business days and certain market disruption events.
|
Early
redemption dates:
|
Beginning after one year, quarterly, on November 3, 2021, February 3, 2022, May 4, 2022, August 3, 2022, November 3, 2022, February 2, 2023, May 3, 2023, August 3, 2023, November 2, 2023, February 2, 2024, May 3, 2024, August 2, 2024, November 4, 2024, February 4, 2025, May 5, 2025 and August 4, 2025. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
|
Downside
threshold level:
|
With respect to the RTY Index:
, which is 70% of its initial index value
With respect to the NDX Index: ,
which is 70% of its initial index value
With respect to the INDU Index:
, which is 70% of its initial index value
|
Coupon
threshold level:
|
With respect to the RTY Index:
, which is 70% of its initial index value
With respect to the NDX Index: ,
which is 70% of its initial index value
With respect to the INDU Index:
, which is 70% of its initial index value
|
Initial
index value:
|
With respect to the RTY Index:
, which is its index closing value on the pricing date
With respect to the NDX Index:
, which is its index closing value on the pricing date
With respect to the INDU Index:
, which is its index closing value on the pricing date
|
Final
index value:
|
With respect to each index, the respective index closing value on the final observation date
|
Worst
performing underlying:
|
The underlying index with the largest percentage decrease from the respective initial index value to the respective final index value
|
Index
performance factor:
|
Final index value divided by the initial index value
|
Coupon
payment dates:
|
Monthly, beginning December 3, 2020, as set forth under “Observation Dates and Coupon Payment Dates” below; provided that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent monthly coupon, if any, with respect to the final observation date will be paid on the maturity date.
|
Observation
dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to the observation date immediately prior to the scheduled maturity date as the final observation date.
|
CUSIP / ISIN:
|
61771EAW8 / US61771EAW84
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates and Coupon
Payment Dates
Observation Dates
|
Coupon Payment Dates
|
November 30, 2020
|
December 3, 2020
|
December 30, 2020
|
January 5, 2021
|
January 29, 2021
|
February 3, 2021
|
February 26, 2021
|
March 3, 2021
|
March 30, 2021
|
April 2, 2021
|
April 30, 2021
|
May 5, 2021
|
May 28, 2021
|
June 3, 2021
|
June 30, 2021
|
July 6, 2021
|
July 30, 2021
|
August 4, 2021
|
August 30, 2021
|
September 2, 2021
|
September 30, 2021
|
October 5, 2021
|
October 29, 2021
|
November 3, 2021
|
November 30, 2021
|
December 3, 2021
|
December 30, 2021
|
January 4, 2022
|
January 31, 2022
|
February 3, 2022
|
February 28, 2022
|
March 3, 2022
|
March 30, 2022
|
April 4, 2022
|
April 29, 2022
|
May 4, 2022
|
May 31, 2022
|
June 3, 2022
|
June 30, 2022
|
July 6, 2022
|
July 29, 2022
|
August 3, 2022
|
August 30, 2022
|
September 2, 2022
|
September 30, 2022
|
October 5, 2022
|
October 31, 2022
|
November 3, 2022
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Observation Dates
|
Coupon Payment Dates
|
November 30, 2022
|
December 5, 2022
|
December 30, 2022
|
January 5, 2023
|
January 30, 2023
|
February 2, 2023
|
February 28, 2023
|
March 3, 2023
|
March 30, 2023
|
April 4, 2023
|
April 28, 2023
|
May 3, 2023
|
May 30, 2023
|
June 2, 2023
|
June 30, 2023
|
July 6, 2023
|
July 31, 2023
|
August 3, 2023
|
August 30, 2023
|
September 5, 2023
|
September 29, 2023
|
October 4, 2023
|
October 30, 2023
|
November 2, 2023
|
November 30, 2023
|
December 5, 2023
|
December 29, 2023
|
January 4, 2024
|
January 30, 2024
|
February 2, 2024
|
February 29, 2024
|
March 5, 2024
|
March 28, 2024
|
April 2, 2024
|
April 30, 2024
|
May 3, 2024
|
May 30, 2024
|
June 4, 2024
|
June 28, 2024
|
July 3, 2024
|
July 30, 2024
|
August 2, 2024
|
August 30, 2024
|
September 5, 2024
|
September 30, 2024
|
October 3, 2024
|
October 30, 2024
|
November 4, 2024
|
November 29, 2024
|
December 4, 2024
|
December 30, 2024
|
January 3, 2025
|
January 30, 2025
|
February 4, 2025
|
February 28, 2025
|
March 5, 2025
|
March 31, 2025
|
April 3, 2025
|
April 30, 2025
|
May 5, 2025
|
May 30, 2025
|
June 4, 2025
|
June 30, 2025
|
July 3, 2025
|
July 30, 2025
|
August 4, 2025
|
August 29, 2025
|
September 4, 2025
|
September 30, 2025
|
October 3, 2025
|
October 30, 2025 (final observation date)
|
November 4, 2025 (maturity date)
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due November 4, 2025,
with 1-Year Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Russell 2000®
Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM (the “securities”) do
not provide for the regular payment of interest. Instead, the securities will pay a contingent monthly coupon but only if
the index closing value of each underlying index is at or above its respective coupon threshold level on the
related observation date. However, if the index closing value of any underlying index is less than its respective
coupon threshold level on any observation date, we will pay no interest for the related monthly period. If the index closing
value of any underlying index is less than its respective coupon threshold level on each observation date,
you will not receive any contingent monthly coupon for the entire 5-year term of the securities. We refer to these coupons as contingent,
because there is no guarantee that you will receive a coupon payment on any coupon payment date. Even if each underlying index
were to be at or above its respective coupon threshold level on some monthly observation dates, they may not all close at or above
their respective coupon threshold levels on other observation dates, in which case you will not receive some contingent monthly
coupon payments. In addition, if the securities have not been automatically called prior to maturity and the final index value
of any underlying index is less than its respective downside threshold level, investors will be fully exposed to
the decline in the worst performing underlying index on a 1-to-1 basis, and will receive a payment at maturity that is less than
70% of the stated principal amount of the securities and could be zero. Accordingly, investors in the securities must
be willing to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent monthly
coupons throughout the entire 5-year term of the securities.
Maturity:
|
5 years
|
Contingent
monthly coupon:
|
A contingent monthly coupon will be paid on the securities on each coupon payment date but only if the index closing value of each underlying index is at or above its respective coupon threshold level on the related observation date. If payable, the contingent monthly coupon will be an amount in cash per stated principal amount corresponding to a return of 7.00% to 9.00% per annum (corresponding to approximately $5.833 to $7.50 per month per security, to be determined on the pricing date) for each interest payment period for each applicable observation date. If, on any observation date, the index closing value of any underlying index is less than the respective coupon threshold level, we will pay no coupon for the applicable monthly period.
|
Automatic
early redemption beginning after one year:
|
If the index closing value of each underlying index is greater than or equal to its initial index value on any quarterly redemption determination date, beginning on October 29, 2021 (approximately one year after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Payment
at maturity:
|
If the securities have not been automatically redeemed prior
to maturity, the payment at maturity will be determined as follows:
If the final index value of each underlying index is greater
than or equal to its respective downside threshold level, investors will receive the stated principal amount and the contingent
monthly coupon with respect to the final observation date.
If the final index value of any underlying index is less
than its downside threshold level, investors will receive a payment at maturity equal to the stated principal amount times
the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will
be less than 70% of the stated principal amount of the securities and could be zero. No monthly coupon will be
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
payable at maturity. Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment.
|
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 $925.80, or within $55.00 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 comprise both a debt component and a performance-based component linked to the underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying indices, may vary from, and be
lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and
other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully
deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell
the securities in the secondary market, absent changes in market conditions, including those related to the underlying indices,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those
higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities will pay a contingent monthly coupon but only if the index closing value of each underlying
index is at or above its respective coupon threshold level on the related observation date. However, if the index
closing value of any underlying index is less than its respective coupon threshold level on any observation
date, we will pay no interest for the related monthly period. The securities have been designed for investors who are willing to
forgo market floating interest rates and accept the risk of receiving no coupon payments for the entire 5-year term of the securities
in exchange for an opportunity to earn interest at a potentially above-market rate if each underlying index closes at or above
its respective coupon threshold level on the monthly observation dates until the securities are redeemed early or reach maturity.
The following scenarios are for illustrative purposes only to
demonstrate how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and
do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent
monthly coupon may be payable in none of, or some but not all of, the monthly periods during the 5-year term of the securities
and the payment at maturity may be less than 70% of the stated principal amount of the securities and may be zero.
Scenario
1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
index closes at or above its coupon threshold level on some monthly observation dates, but one or more underlying indices
close below the respective coupon threshold level(s) on the others. Investors receive the contingent monthly coupon, corresponding
to a return of 7.00% to 9.00% per annum (to be determined on the pricing date), for the monthly periods for which each index
closing value is at or above the respective coupon threshold level on the related observation date, but not for the monthly periods
for which any index closing value is below the respective coupon threshold level on the related observation date.
Starting after one year, when each underlying index closes
at or above its respective initial index value on a quarterly redemption determination date, the securities will be automatically
redeemed for the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Scenario
2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that each underlying index closes at or
above the respective coupon threshold level on some monthly observation dates, but one or more underlying indices close below the
respective coupon threshold level(s) on the others, and each underlying index closes below its respective initial index value on
every quarterly redemption determination date. Consequently, the securities are not automatically redeemed, and investors receive
the contingent monthly coupon, corresponding to a return of 7.00% to 9.00% per annum (to be determined on the pricing date),
for the monthly periods for which each index closing value is at or above the respective coupon threshold level on the related
observation date, but not for the monthly periods for which any index closing value is below the respective coupon threshold level
on the related observation date.
On the final observation date, each underlying index closes at
or above its downside threshold level. At maturity, investors will receive the stated principal amount and the contingent monthly
coupon with respect to the final observation date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Scenario
3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that each underlying index closes at or
above its respective coupon threshold level on some monthly observation dates, but one or more underlying indices close below the
respective coupon threshold level(s) on the others, and each underlying index closes below its respective initial index value on
every quarterly redemption determination date. Consequently, the securities are not automatically redeemed, and investors receive
the contingent monthly coupon, corresponding to a return of 7.00% to 9.00% per annum (to be determined on the pricing date),
for the monthly periods for which each index closing value is at or above the respective coupon threshold level on the related
observation date, but not for the monthly periods for which any index closing value is below the respective coupon threshold level
on the related observation date.
On the final observation date, one or more underlying indices
close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal
amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment
at maturity will be less than 70% of the stated principal amount and could be zero. No coupon will be paid at maturity in this
scenario.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the index closing values on each monthly observation date, (2) the index closing values on each
quarterly redemption determination date (starting after one year) and (3) the final index values. Please see “Hypothetical
Examples” beginning on page 10 for illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Monthly Coupons (Beginning
on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Starting
after one year)
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Diagram #3: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 10.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity, if
any, if the securities have not been automatically redeemed early. The following examples are for illustrative purposes only. Whether
you receive a contingent monthly coupon will be determined by reference to the index closing value of each underlying index on
each monthly observation date, and the amount you will receive at maturity, if any, will be determined by reference to the final
index value of each underlying index on the final observation date. The actual initial index value, coupon threshold level and
downside threshold level for each underlying index will be determined on the pricing date. All payments on the securities, if any,
are subject to our credit risk. The numbers in the hypothetical examples below may have been rounded for the ease of analysis.
The below examples are based on the following terms:
Hypothetical Contingent Monthly Coupon:
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A contingent monthly coupon will be paid on the securities on each coupon payment date but only if the index closing value of each underlying index is at or above its respective coupon threshold level on the related observation date. If payable, the contingent monthly coupon will be an amount in cash per stated principal amount corresponding to a return of 7.00% per annum for each interest payment period for each applicable observation date. These hypothetical examples reflect a hypothetical contingent monthly coupon rate of 7.00% per annum (corresponding to approximately $5.833 per month per security*).
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Automatic Early Redemption (starting after one year):
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If the index closing value of each underlying index is greater than or equal to its respective initial index value on any quarterly redemption determination date, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
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Payment at Maturity (if the securities have not been automatically redeemed early):
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If the final index value of each underlying index is greater
than or equal to its respective downside threshold level, investors will receive the stated principal amount plus the
contingent monthly coupon with respect to the final observation date.
If the final index value of any underlying index is less
than its respective downside threshold level, investors will receive a payment at maturity equal to the stated principal amount
multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment
at maturity will be less than 70% of the stated principal amount of the securities and could be zero.
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Stated Principal Amount:
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$1,000
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Hypothetical Initial Index Value:
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With respect to the RTY Index: 1,200
With respect to the NDX Index: 7,600
With respect to the INDU Index: 26,000
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Hypothetical Coupon Threshold Level:
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With respect to the RTY Index: 840, which is 70% of the hypothetical
initial index value for such index
With respect to the NDX Index: 5,320, which is 70% of the hypothetical
initial index value for such index
With respect to the INDU Index: 18,200, which is 70% of the hypothetical
initial index value for such index
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Hypothetical Downside Threshold Level:
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With respect to the RTY Index: 840, which is 70% of the hypothetical
initial index value for such index
With respect to the NDX Index: 5,320, which is 70% of the hypothetical
initial index value for such index
With respect to the INDU Index: 18,200, which is 70% of the hypothetical
initial index value for such index
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* The actual contingent monthly coupon will be an amount determined
by the calculation agent based on the actual contingent monthly coupon rate and the number of days in the applicable payment period,
calculated on a 30/360 basis. The hypothetical contingent monthly coupon of $5.833 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
How to determine whether a contingent monthly
coupon is payable with respect to an observation date:
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Index Closing Value
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Hypothetical Contingent Monthly Coupon
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RTY Index
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NDX Index
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INDU Index
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Hypothetical Observation Date 1
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1,750 (at or above the coupon threshold level)
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8,800 (at or above the coupon threshold level)
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21,000 (at or above the coupon threshold level)
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$5.833
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Hypothetical Observation Date 2
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800 (below the coupon threshold level)
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6,100 (at or above the coupon threshold level)
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22,500 (at or above the coupon threshold level)
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$0
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Hypothetical Observation Date 3
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1,400 (at or above the coupon threshold level)
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3,900 (below the coupon threshold level)
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17,000 (below the coupon threshold level)
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$0
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Hypothetical Observation Date 4
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700 (below the coupon threshold level)
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2,800 (below the coupon threshold level)
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17,000 (below the coupon threshold level)
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$0
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On hypothetical observation date 1, each underlying index closes
at or above its respective coupon threshold level. Therefore, a hypothetical contingent monthly coupon of $5.833 is paid on the
relevant coupon payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying index closes at or above its respective coupon threshold level, but one or both of the other underlying indices close
below their respective coupon threshold levels. Therefore, no contingent monthly coupon is paid on the relevant coupon payment
date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon threshold level, and, accordingly, no contingent monthly coupon is paid on the relevant coupon payment
date.
If the index closing value of any underlying index is less
than its respective coupon threshold level on each observation date, you will not receive any contingent monthly coupons for the
entire 5-year term of the securities.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
How to calculate the payment at maturity (if
the securities have not been automatically redeemed):
Starting after one year, if the index closing value of each underlying
index is greater than or equal to its initial index value on any quarterly redemption determination date, the securities will be
automatically redeemed for an early redemption payment equal to the stated principal amount for each security you hold plus
the contingent monthly coupon with respect to the related observation date.
The examples below illustrate how to calculate the payment at
maturity if the securities have not been automatically redeemed prior to maturity.
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Final Index Value
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Payment at Maturity
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RTY Index
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NDX Index
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INDU Index
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Example 1:
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540 (below the downside threshold level)
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3,600 (below the downside threshold level)
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19,500 (at or above the downside threshold level)
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$1,000 × index performance factor of the worst performing underlying index =
$1,000 × (540 / 1,200) = $450
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Example 2:
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1,200 (at or above the downside threshold level)
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5,600 (at or above the downside threshold level)
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10,400 (below the downside threshold level)
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$1,000 × (10,400 / 26,000) = $400
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Example 3:
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540 (below the downside threshold level)
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3,040 (below the downside threshold level)
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7,800 (below the downside threshold level)
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$1,000 × (7,800 / 26,000) = $300
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Example 4:
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360 (below the downside threshold level)
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3,040 (below the downside threshold level)
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10,400 (below the downside threshold level)
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$1,000 × (360 / 1,200) = $300
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Example 5:
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1,300 (at or above the downside threshold level)
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8,000 (at or above the downside threshold level)
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30,000 (at or above the downside threshold level)
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The stated principal amount + the hypothetical
contingent monthly coupon with respect to the final observation date.
For more information, please see
above under “How to determine whether a contingent monthly coupon is payable with respect to an observation date.”
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In examples 1 and 2, the final index value(s) of one or two of
the underlying indices are at or above the respective downside threshold level(s), but the final index value(s) of one or both
of the other underlying indices are below the respective downside threshold level(s). Therefore, investors are exposed to the downside
performance of the worst performing underlying index at maturity and receive at maturity an amount equal to the stated principal
amount multiplied by the index performance factor of the worst performing underlying index. Moreover, investors do not receive
any contingent monthly coupon for the final monthly period.
Similarly, in examples 3 and 4, the final index value of each
underlying index is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated
principal amount times the index performance factor of the worst performing underlying index. In example 3, the RTY Index
has declined 55% from its initial index value to its final index value, the NDX Index has declined 60% from its initial index value
to its final index value and the INDU Index has declined 70% from its initial index value to its final index value. Therefore,
the payment at maturity equals the stated principal amount multiplied by the index performance factor of the INDU Index,
which is the worst performing underlying index in this example. In example 4, the RTY Index has declined 70% from its initial index
value to its final index value, the NDX Index has declined 60% from its initial index value to its final index value and the INDU
Index has declined 60% from its initial index value. Therefore, the payment at maturity equals the stated principal amount times
the index performance factor of the RTY Index, which is the worst performing underlying index in this example. Moreover, investors
do not receive the contingent monthly coupon for the final monthly period.
In example 5, the final index value of each underlying index
is at or above its respective downside threshold level. Therefore, investors receive at maturity the stated principal amount of
the securities plus the hypothetical contingent monthly coupon with respect to the final observation date. However, investors
do not participate in any appreciation of the underlying indices.
If the final index value of ANY underlying index is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying index
at maturity, and your payment at maturity will be less than $700 per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Risk Factors
The
following is a list of certain key risk factors for investors in the securities. For further discussion of these and other risks,
you should read the section entitled “Risk Factors” in the accompanying product supplement, index supplement and prospectus.
We also urge you to consult with your investment, legal, tax, accounting and other advisers in connection with your
investment in the securities.
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The securities do not guarantee the return of any principal. The
terms of the securities differ from those of ordinary debt securities in that they do not guarantee the repayment of any principal.
If the securities have not been automatically redeemed prior to maturity, and if the final index value of any underlying
index is less than its downside threshold level of 70% of its initial index value, you will be exposed to the decline in the index
closing value of the worst performing underlying index, as compared to its initial index value, on a 1-to-1 basis, and you will
receive for each security that you hold at maturity an amount equal to the stated principal amount multiplied by the index
performance factor of the worst performing underlying index. In this case, the payment at maturity will be less than 70% of
the stated principal amount and could be zero.
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§
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The securities do not provide for the regular payment of interest.
The terms of the securities differ from those of ordinary debt securities in that they do not provide for the regular
payment of interest. Instead, the securities will pay a contingent monthly coupon but only if the index closing value of
each underlying index is at or above its respective coupon threshold level on the related observation date.
If the index closing value of any underlying index is lower than its coupon threshold level on the relevant observation
date for any interest period, we will pay no coupon on the applicable coupon payment date. It is possible that the index closing
value of any underlying index will be less than its respective coupon threshold level for extended periods of time or even
throughout the entire term of the securities so that you will receive few or no contingent monthly coupons. If you do not
earn sufficient contingent monthly coupons over the term of the securities, the overall return on the securities may be less than
the amount that would be paid on a conventional debt security of ours of comparable maturity.
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You are exposed to the price risk of each underlying index, with
respect to both the contingent monthly coupons, if any, and the payment at maturity, if any. Your
return on the securities is not linked to a basket consisting of the underlying indices. Rather, it will be contingent upon the
independent performance of each underlying index. Unlike an instrument with a return linked to a basket of underlying assets, in
which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each
underlying index. Poor performance by any underlying index over the term of the
securities will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying
indices. To receive any contingent monthly coupons, each underlying
index must close at or above its respective coupon threshold level on the applicable observation date. In addition, if the
securities have not been automatically redeemed early and any underlying
index has declined to below its respective downside threshold level as of the final observation date, you will be fully
exposed to the decline in the worst performing underlying index over the term of the securities
on a 1-to-1 basis, even if one or both of the other underlying indices have appreciated or have not declined as much. Under this
scenario, the value of any such payment will be less than 70% of the stated principal amount and could be zero. Accordingly, your
investment is subject to the price risk of each underlying index.
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§
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Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risks of receiving no contingent monthly coupons and sustaining a significant loss on your investment than if the securities were
linked to just one index. The risk that you will not receive any contingent monthly coupons, or that you will suffer a significant
loss on your investment, is greater if you invest in the securities as opposed to substantially similar securities that are linked
to the performance of just one underlying index. With three underlying indices, it is more likely that any underlying index will
close below its coupon threshold level on any observation date, and below its downside threshold level on the final observation
date, than if the securities were linked to only one underlying index. Therefore, it is more likely that you will not receive any
contingent monthly coupons and that you will suffer a significant loss on your investment. In addition, because each underlying
index must close above its initial index value on a quarterly redemption determination date in order for the securities to be called
prior to
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
maturity, the securities are less
likely to be called on any early redemption date than if the securities were linked to just one underlying index.
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§
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The contingent monthly coupon, if any, is based on the value of each underlying index on only the related monthly observation
date at the end of the related interest period. Whether the
contingent monthly coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the index closing value of each underlying index on the relevant monthly observation date. As a result, you will not know
whether you will receive the contingent monthly coupon on any coupon payment date until near the end of the relevant interest period.
Moreover, because the contingent monthly coupon is based solely on the value of each underlying index on monthly observation dates,
if the index closing value of any underlying index on any observation date is below the coupon threshold level for such index,
you will not receive the contingent monthly coupon for the related interest period, even if the level of such underlying index
was at or above its respective coupon threshold level on other days during that interest period, and even if the index closing
value(s) of one or both of the other underlying indices are at or above their respective coupon threshold level(s).
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§
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Investors will not participate in any appreciation in any underlying index. Investors will not participate in any appreciation
in any underlying index from the initial index value for such index, and the return on the securities will be limited to the contingent
monthly coupons, if any, that are paid with respect to each observation date on which the index closing value of each underlying
index is greater than or equal to its respective coupon threshold level, if any.
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§
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The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of each underlying
index on any day, including in relation to its respective
coupon threshold level, downside threshold level and initial index value, will affect the value of the securities more than any
other factors. Other factors that may influence the value of the securities include:
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o
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the volatility (frequency and magnitude of changes in value) of the underlying indices,
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o
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whether the index closing value of any underlying index has been below its respective coupon threshold level on any observation
date,
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o
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geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
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o
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dividend rates on the securities underlying the underlying
indices,
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o
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the time remaining until the securities mature,
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o
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interest and yield rates in the market,
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o
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the availability of comparable instruments,
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o
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the composition of the underlying indices and changes in the constituent stocks of such indices, and
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o
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any actual or anticipated changes in our credit ratings or credit spreads.
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Generally,
the longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described
above. Some or all of these factors will influence the price that you will receive if you sell your securities prior to maturity.
In particular, if any underlying index has closed near or below its coupon threshold level and downside threshold level, the market
value of the securities is expected to decrease substantially, and you may have to sell your securities at a substantial discount
from the stated principal amount of $1,000 per security.
You cannot predict the future performance
of any underlying index based on its historical performance. The value of any underlying index may decrease and be below the respective
coupon threshold level for such index on each observation date so that you will receive no return on your investment, and any or
all of the underlying indices may close below the respective downside threshold level(s) on the final observation date so that
you will lose more than 30%
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
or all of your initial investment
in the securities. There can be no assurance that the index closing value of each underlying index will be at or above the respective
coupon threshold level on any observation date so that you will receive a coupon payment on the securities for the applicable interest
period, or that it will be at or above its respective downside threshold level on the final observation date so that you do not
suffer a significant loss on your initial investment in the securities. See “Russell 2000® Index Overview,”
“NASDAQ-100 Index® Overview” and “Dow Jones Industrial AverageSM Overview” below.
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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, upon early redemption or on any coupon payment date, and therefore you are subject to our credit risk. The securities
are not guaranteed by any other entity. If we default on our obligations under the securities, your investment would be at risk
and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity will be affected
by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase
in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the securities.
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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 securities are linked to the Russell 2000® Index and are subject to risks associated with small-capitalization
companies. As the Russell 2000® Index is one of the underlying indices, and the Russell 2000®
Index consists of stocks issued by companies with relatively small market capitalization, the securities are linked to the value
of small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and
less liquidity than large-capitalization companies and therefore the Russell 2000® Index may be more volatile than
indices that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization companies
are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks
of small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less
well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel,
making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product
lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization
companies and are more susceptible to adverse developments related to their products.
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Not equivalent to investing in the underlying indices. Investing in the securities
is not equivalent to investing in any underlying index or the component stocks of any underlying index. Investors in the securities
will not participate in any positive performance of any underlying index, and will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to stocks that constitute any underlying index.
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Reinvestment risk. The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent monthly coupons and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities
be redeemed in the first year of the term of the securities.
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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 5-year term of the securities. The
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
securities will not be listed on
any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co. may, but is not
obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so at any time. When it
does make a market, it will generally do so for transactions of routine secondary market size at prices based on its estimate of
the current value of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional
size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood
that it will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it is likely
that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
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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.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
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The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities 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 will be influenced by many unpredictable
factors” above.
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Hedging and trading activity by our affiliates could potentially affect the value of the securities. One or more of
our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other instruments
linked to the underlying indices or their component stocks), including trading in the stocks that constitute the underlying indices
as well as in other instruments related to the underlying indices. As a result, these entities may be unwinding or adjusting hedge
positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final observation date approaches. Some of our affiliates also trade the stocks that constitute the underlying
indices and other financial instruments related to the underlying
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
indices on a regular basis as part
of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date
could potentially increase the initial index value of an underlying index, and, therefore, could increase (i) the level at or above
which such underlying index must close on any redemption determination date so that the securities are redeemed prior to maturity
for the early redemption payment (depending also on the performance of the other underlying indices), (ii) the level at or above
which such underlying index must close on each observation date in order for you to earn a contingent monthly coupon (depending
also on the performance of the other underlying indices) and (iii) the level at or above which such underlying index must close
on the final observation date so that you are not exposed to the negative performance of the worst performing underlying index
at maturity (depending also on the performance of the other underlying indices). Additionally, such hedging or trading activities
during the term of the securities could affect the value of an underlying index on the redemption determination dates and the observation
dates, and, accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent monthly coupon on the
securities and the amount of cash you receive at maturity, if any (depending also on the performance of the other underlying indices).
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The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities. As calculation agent, MS & Co. will determine the initial index value, coupon threshold level and downside
threshold level for each underlying index, whether you receive a contingent monthly coupon on each coupon payment date and/or at
maturity, whether the securities will be redeemed on any early redemption date and the payment at maturity, if any. Moreover, certain
determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective
judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor
index or calculation of the index closing value in the event of a market disruption event or discontinuance of an underlying index.
These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information
regarding these types of determinations, see "Description of Auto-Callable Securities—Postponement of Determination
Dates," "—Alternate Exchange Calculation in Case of an Event of Default,” "—Discontinuance of
Any Underlying Index; Alteration of Method of Calculation” and "—Calculation Agent and Calculations" in the
accompanying product supplement. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities. The publisher of each underlying
index may add, delete or substitute the component stocks of such underlying index or make other methodological changes that could
change the value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of each underlying index may also discontinue or suspend calculation or publication of such underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index on any observation date, the determination
of whether a contingent monthly coupon will be payable on the securities on the applicable coupon payment date, whether the securities
will be redeemed and/or the amount payable at maturity, if any, will be based on the value of such underlying index, based on the
closing prices of the stocks constituting such underlying index at the time of such discontinuance, without rebalancing or substitution,
computed by MS & Co. as calculation agent in accordance with the formula for calculating such underlying index last in effect
prior to such discontinuance, as compared to the relevant initial index value, coupon threshold level or downside threshold level,
as applicable (depending also on the performance of the other underlying indices).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
ordinary income treatment of the
coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of
the securities, could result in adverse tax consequences to holders of the securities because the deductibility of capital losses
is subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding
the tax treatment of the securities, and the IRS or a court may not agree with the tax treatment described herein. If the IRS were
successful in asserting an alternative treatment for the securities, the timing and character of income or loss on the securities
might differ significantly from the tax treatment described herein. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue
into income original issue discount on the securities every year at a “comparable yield” determined at the time of
issuance (as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on
the securities) and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Russell 2000®
Index Overview
The Russell 2000® Index is an index calculated,
published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated
in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities
that form the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The
Russell 2000® Index consists of the smallest 2,000 companies included in the Russell 3000®
Index and represents a small portion of the total market capitalization of the Russell 3000® Index. The
Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S.
equity market. For additional information about the Russell 2000® Index, see the information set forth
under “Russell 2000® Index” in the accompanying index supplement.
Information as of market close on September 25, 2020:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 1/16/2020):
|
1,705.215
|
Current Index Value:
|
1,474.908
|
52 Week Low (on 3/18/2020):
|
991.160
|
52 Weeks Ago:
|
1,550.654
|
|
|
The following graph sets forth the daily index closing values
of the RTY Index for the period from January 1, 2015 through September 25, 2020. The related table sets forth the published high
and low index closing values, as well as end-of-quarter index closing values, of the RTY Index for each quarter for the period
from January 1, 2015 through September 25, 2020. The index closing value of the RTY Index on September 25, 2020 was 1,474.908.
We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The
RTY Index has at times experienced periods of high volatility, and you should not take the historical values of the RTY Index as
an indication of its future performance.
RTY Index Daily
Closing Values
January 1, 2015
to September 25, 2020
|
|
|
* The red line in the graph indicates both the hypothetical downside threshold level and the hypothetical coupon threshold level, assuming the index closing value on September 25, 2020 were the initial index value.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Russell 2000® Index
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter
|
1,585.599
|
1,456.039
|
1,523.373
|
Fourth Quarter
|
1,678.010
|
1,472.598
|
1,668.469
|
2020
|
|
|
|
First Quarter
|
1,705.215
|
991.160
|
1,153.103
|
Second Quarter
|
1,536.895
|
1,052.053
|
1,441.365
|
Third Quarter (through September 25, 2020)
|
1,592.287
|
1,398.920
|
1,474.908
|
The “Russell 2000®
Index” is a trademark of FTSE Russell. See “Russell 2000® Index” in the accompanying
index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
NASDAQ-100 Index® Overview
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index® includes companies
across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index® equals the
aggregate value of the then-current NASDAQ-100 Index® share weights of each of the NASDAQ-100 Index®
component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index® component security,
multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published
by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index® value. For
additional information about the NASDAQ-100 Index®, see the information set forth under “NASDAQ-100 Index®”
in the accompanying index supplement.
Information as of market close on September 25, 2020:
Bloomberg Ticker Symbol:
|
NDX
|
52 Week High (on 9/2/2020):
|
$12,420.54
|
Current Index Value:
|
11,151.13
|
52 Week Low (on 3/20/2020):
|
6,994.29
|
52 Weeks Ago:
|
7,803.54
|
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the NDX Index for the period from January 1, 2015 through September 25, 2020. The related table sets forth the published high
and low index closing values, as well as end-of-quarter index closing values, of the NDX Index for each quarter for the period
from January 1, 2015 to September 25, 2020. The index closing value of the NDX Index on September 25, 2020 was 11,151.13. We obtained
the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The NDX Index
has at times experienced periods of high volatility, and you should not take the historical values of the NDX Index as an indication
of its future performance.
NDX Index Daily
Closing Values
January 1, 2015
to September 25, 2020
|
|
|
* The red line in the graph indicates both the hypothetical downside threshold level and the hypothetical coupon threshold level, assuming the index closing value on September 25, 2020 were the initial index value.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
NASDAQ-100 Index®
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
4,483.05
|
4,089.65
|
4,333.69
|
Second Quarter
|
4,548.74
|
4,311.26
|
4,396.76
|
Third Quarter
|
4,679.68
|
4,016.32
|
4,181.06
|
Fourth Quarter
|
4,719.05
|
4,192.96
|
4,593.27
|
2016
|
|
|
|
First Quarter
|
4,497.86
|
3,947.80
|
4,483.66
|
Second Quarter
|
4,565.42
|
4,201.06
|
4,417.70
|
Third Quarter
|
4,891.36
|
4,410.75
|
4,875.70
|
Fourth Quarter
|
4,965.81
|
4,660.46
|
4,863.62
|
2017
|
|
|
|
First Quarter
|
5,439.74
|
4,911.33
|
5,436.23
|
Second Quarter
|
5,885.30
|
5,353.59
|
5,646.92
|
Third Quarter
|
6,004.38
|
5,596.96
|
5,979.30
|
Fourth Quarter
|
6,513.27
|
5,981.92
|
6,396.42
|
2018
|
|
|
|
First Quarter
|
7,131.12
|
6,306.10
|
6,581.13
|
Second Quarter
|
7,280.71
|
6,390.84
|
7,040.80
|
Third Quarter
|
7,660.18
|
7,014.55
|
7,627.65
|
Fourth Quarter
|
7,645.45
|
5,899.35
|
6,329.96
|
2019
|
|
|
|
First Quarter
|
7,493.27
|
6,147.13
|
7,378.77
|
Second Quarter
|
7,845.73
|
6,978.02
|
7,671.08
|
Third Quarter
|
8,016.95
|
7,415.69
|
7,749.45
|
Fourth Quarter
|
8,778.31
|
7,550.79
|
8,733.07
|
2020
|
|
|
|
First Quarter
|
9,718.73
|
6,994.29
|
7,813.50
|
Second Quarter
|
10,209.82
|
7,486.29
|
10,156.85
|
Third Quarter (through September 25, 2020)
|
12,420.54
|
10,279.25
|
11,151.13
|
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. See “NASDAQ-100 Index®”
in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Dow Jones Industrial AverageSM Overview
The Dow Jones Industrial AverageSM is a price-weighted
index composed of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark
of CME Group Inc., as representative of the broad market of U.S. industry. For additional information about the Dow Jones Industrial
AverageSM, see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying
index supplement.
Information as of market close on September 25, 2020:
Bloomberg Ticker Symbol:
|
INDU
|
52 Week High (on 2/12/2020):
|
29,551.42
|
Current Index Value:
|
27,173.96
|
52 Week Low (on 3/23/2020):
|
18,591.93
|
52 Weeks Ago:
|
26,970.71
|
|
|
The following graph sets forth the daily index closing values
of the INDU Index for the period from January 1, 2015 through September 25, 2020. The related table sets forth the published high
and low index closing values, as well as end-of-quarter index closing values, of the INDU Index for each quarter for the period
from January 1, 2015 through September 25, 2020. The index closing value of the INDU Index on September 25, 2020 was 27,173.96.
We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The
INDU Index has at times experienced periods of high volatility, and you should not take the historical values of the INDU Index
as an indication of its future performance.
INDU Index Daily Closing Values
January 1, 2015 to September 25, 2020
|
|
* The red line in the graph indicates both the hypothetical
downside threshold level and the hypothetical coupon threshold level, assuming the index closing value on September 25, 2020 were
the initial index value.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Dow Jones Industrial AverageSM
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
18,288.63
|
17,164.95
|
17,776.12
|
Second Quarter
|
18,312.39
|
17,596.35
|
17,619.51
|
Third Quarter
|
18,120.25
|
15,666.44
|
16,284.70
|
Fourth Quarter
|
17,918.15
|
16,272.01
|
17,425.03
|
2016
|
|
|
|
First Quarter
|
17,716.66
|
15,660.18
|
17,685.09
|
Second Quarter
|
18,096.27
|
17,140.24
|
17,929.99
|
Third Quarter
|
18,636.05
|
17,840.62
|
18,308.15
|
Fourth Quarter
|
19,974.62
|
17,888.28
|
19,762.60
|
2017
|
|
|
|
First Quarter
|
21,115.55
|
19,732.40
|
20,663.22
|
Second Quarter
|
21,528.99
|
20,404.49
|
21,349.63
|
Third Quarter
|
22,412.59
|
21,320.04
|
22,405.09
|
Fourth Quarter
|
24,837.51
|
22,557.60
|
24,719.22
|
2018
|
|
|
|
First Quarter
|
26,616.71
|
23,533.20
|
24,103.11
|
Second Quarter
|
25,322.31
|
23,644.19
|
24,271.41
|
Third Quarter
|
26,743.50
|
24,174.82
|
26,458.31
|
Fourth Quarter
|
26,828.39
|
21,792.20
|
23,327.46
|
2019
|
|
|
|
First Quarter
|
26,091.95
|
22,686.22
|
25,928.68
|
Second Quarter
|
26,753.17
|
24,815.04
|
26,599.96
|
Third Quarter
|
27,359.16
|
25,479.42
|
26,916.83
|
Fourth Quarter
|
28,645.26
|
26,078.62
|
28,538.44
|
2020
|
|
|
|
First Quarter
|
29,551.42
|
18,591.93
|
21,917.16
|
Second Quarter
|
27,572.44
|
20,943.51
|
25,812.88
|
Third Quarter (through September 25, 2020)
|
29,100.50
|
25,706.09
|
27,173.96
|
“Dow Jones,” “Dow Jones Industrial Average,”
“Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. See “Dow Jones
Industrial AverageSM” in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying
index publisher:
|
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to the NDX Index, Nasdaq, Inc., or any successor
thereof.
With respect to the INDU Index, S&P Dow Jones Indices LLC,
or any successor thereof.
|
Interest
period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record
date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date; provided, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Threshold
level:
|
The accompanying product supplement refers to the threshold level as the “trigger level.”
|
Day-count
convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement
of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-index business day or certain market disruption events so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment or early redemption payment made on that postponed date.
|
Index
closing value:
|
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of such underlying index or any
successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select,
on such index business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate
calculation of such underlying index as described under “Discontinuance of Any Underlying Index; Alteration of Method of
Calculation” in the accompanying product supplement. The closing value of the RTY Index reported by Bloomberg Financial Services
may be lower or higher than the official closing value of the RTY Index published by the underlying index publisher for such underlying
index.
With respect to each of the NDX Index and the INDU Index, the
index closing value on any index business day shall be determined by the calculation agent and shall equal the official closing
value of such underlying index, or any successor index as defined under “Discontinuance of Any Underlying Index; Alteration
of Method of Calculation” in the accompanying product supplement, published at the regular official weekday close of trading
on such index business day by the underlying index publisher for such underlying index, as determined by the calculation agent.
In certain circumstances, the index closing value for the NDX Index or the INDU Index will be based on the alternate calculation
of such underlying index as described under “Discontinuance of Any Underlying Index; Alteration of Method of Calculation”
in the accompanying product supplement.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation
agent:
|
MS & Co.
|
Issuer
notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
registered holder’s last address as it shall appear upon
the registry books, (ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage
prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered
holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered
holder, whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and
in no case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the
scheduled maturity date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business
day immediately following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each
registered holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such
notice to the trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption
date, deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder
of the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively
presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. This notice
shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with
any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to each security on or prior to 10:30 a.m. (New York City
time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with respect
to the contingent monthly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New York City time)
on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Additional Information About the Securities
Additional Information:
|
Minimum
ticketing size:
|
$1,000 / 1 security
|
Tax
considerations:
|
Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying product supplement does not apply to the securities
issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This discussion
applies only to investors in the securities who:
· purchase
the securities in the original offering; and
· hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the
tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject
to special rules, such as:
· certain
financial institutions;
· insurance
companies;
· certain
dealers and traders in securities or commodities;
· investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
· U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
· partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
· regulated
investment companies;
· real
estate investment trusts; or
· tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership
for U.S. federal income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner
in such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing
of the securities to you.
As the law applicable to the U.S. federal income
taxation of instruments such as the securities is technical and complex, the discussion below necessarily represents only a general
summary. The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to
any of which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of
the securities should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or
administrative authorities that directly address the
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
treatment of the securities or instruments
that are similar to the securities for U.S. federal income tax purposes, no assurance can be given that the IRS or a court will
agree with the tax treatment described herein. We intend to treat a security for U.S. federal income tax purposes as a single financial
contract that provides for a coupon that will be treated as gross income to you at the time received or accrued in accordance with
your regular method of tax accounting. In the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities
is reasonable under current law; however, our counsel has advised us that it is unable to conclude affirmatively that this treatment
is more likely than not to be upheld, and that alternative treatments are possible. Moreover, our counsel’s opinion is based
on market conditions as of the date of this preliminary pricing supplement and is subject to confirmation on the pricing date.
You should consult your tax adviser regarding
all aspects of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments
of the securities). Unless otherwise stated, the following discussion is based on the treatment of each security as described in
the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are
a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal
income tax purposes:
· a
citizen or individual resident of the United States;
· a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
· an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as
set forth above is respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax
basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments.
Any coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in
accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the
Securities. Upon a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the
difference between the amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities
sold, exchanged or settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include
sale proceeds attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should
be long-term capital gain or loss if the U.S. Holder has held the securities for more than one year at the time of the sale, exchange
or settlement, and should be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in
conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could
result in adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of
an Investment in the Securities
Due to the absence of authorities that directly
address the proper tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold,
the treatment described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning
the securities under Treasury regulations governing
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
contingent payment debt instruments (the “Contingent
Debt Regulations”). If the IRS were successful in asserting that the Contingent Debt Regulations applied to the securities,
the timing and character of income thereon would be significantly affected. Among other things, a U.S. Holder would be required
to accrue into income original issue discount on the securities every year at a “comparable yield” determined at the
time of their issuance, adjusted upward or downward to reflect the difference, if any, between the actual and the projected amount
of any contingent payments on the securities. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange
or other disposition of the securities would be treated as ordinary income, and any loss realized would be treated as ordinary
loss to the extent of the U.S. Holder’s prior accruals of original issue discount and as capital loss thereafter. The risk
that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities, would
be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not have
such features.
Other alternative federal income tax treatments
of the securities are possible, which, if applied, could significantly affect the timing and character of the income or loss with
respect to the securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S.
federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether
to require holders of “prepaid forward contracts” and similar instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange–traded
status of the instruments and the nature of the underlying property to which the instruments are linked; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates.
While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of
payments on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S.
Holder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable
requirements of the backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax
and may be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required
information is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection with
payments on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the
U.S. Holder provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are
a Non-U.S. Holder. As used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S.
federal income tax purposes:
· an
individual who is classified as a nonresident alien;
· a
foreign corporation; or
· a
foreign estate or trust.
The term “Non-U.S. Holder” does
not include any of the following holders:
· a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
United States for U.S.
federal income tax purposes;
· certain
former citizens or residents of the United States; or
· a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any
additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding
tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that it is not a U.S. person
and is eligible for such an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult
your tax adviser regarding the tax treatment of the securities, including the possibility of obtaining a refund of any withholding
tax and the certification requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally
applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined
based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS
notice, Section 871(m) will not apply to securities issued before January 1, 2023 that do not have a delta of one with respect
to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities will
not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination
in the pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security, our
counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section
871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we
will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax.
Prospective investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers
regarding the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts
paid to the Non-U.S. Holder, unless such
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
Non-U.S. Holder complies with certification procedures to establish
that it is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup
withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income
tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the
IRS.
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
FATCA generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments
of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain financial
instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which
specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds
(other than amounts treated as FDAP income). While the treatment of the securities is unclear, you should assume that any coupon
payment with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will not
be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult their
tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Use
of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 5 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we expect to hedge our anticipated
exposure in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers.
We expect our hedging counterparties to take positions in the stocks constituting the underlying indices, in futures and/or options
contracts on the underlying indices or the component stocks of the underlying indices listed on major securities markets, or positions
in any other available securities or instruments that they may wish to use in connection with such hedging. Such purchase activity
could potentially increase the initial index value of an underlying index, and, as a result, could increase (i) the level at or
above which such underlying index must close on any redemption determination date so that the securities are redeemed prior to
maturity for the early redemption payment (depending also on the performance of the other underlying indices), (ii) the level at
or above which such underlying index must close on each observation date in order for you to earn a contingent monthly coupon (depending
also on the performance of the other underlying indices) and (iii) the level at or above which such underlying index must close
on the final observation date so that you are not exposed to the negative performance of the worst performing underlying index
at maturity (depending also on the performance of the other underlying indices). These entities may be unwinding or adjusting hedge
positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final observation date approaches. Additionally, our hedging activities, as well as our other trading activities,
during the term of the securities could potentially affect the value of an underlying index on the redemption determination dates
and observation dates, and, accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent monthly
coupon on the securities and the amount of cash you receive at maturity, if any (depending also on the performance of the other
underlying indices).
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
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 such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and
the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration”
in connection with the transaction (the so-called “service provider” exemption). There can be no assurance that any
of these class or statutory exemptions will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with
respect to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets
include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or
any person investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive
relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase,
holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee
or holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and
holding of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf
of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject
to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section
4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute
or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar
Law.
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with
their counsel regarding the availability of exemptive relief.
The securities are contractual financial instruments.
The financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy
for,
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
individualized investment management or advice
for the benefit of any purchaser or holder of the securities. The securities have not been designed and will not be administered
in a manner intended to reflect the individualized needs and objectives of any purchaser or holder of the securities.
Each purchaser or holder of any securities
acknowledges and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect
a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements
with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally
or any particular plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be
investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these securities
should consult and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley, 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.
|
Additional
considerations:
|
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.
|
Supplemental
information regarding plan of distribution; conflicts of interest:
|
MS & Co. expects to sell all of the securities that it purchases
from us to an unaffiliated dealer at a price of $ per security, for further sale to certain fee-based
advisory accounts at the price to public of $1,000 per security. MS & Co. will not receive a sales commission with respect
to the securities.
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, it will determine the economic terms of the securities, including
the contingent monthly coupon rate, such that for each security the estimated value on the pricing date will be no lower than the
minimum level described in “Investment Summary” beginning on page 4.
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
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due November 4, 2025, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for auto-callable securities.
|
Where
you can find more information:
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Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for auto-callable securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration
statement, the product supplement for auto-callable securities, the index supplement and any other documents relating to this offering
that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering.
You may get these documents without cost by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, Morgan Stanley, MSFL,
any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the product supplement for
auto-callable securities and the index supplement if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at www.sec.gov
as follows:
Product
Supplement for Auto-Callable Securities dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for auto-callable securities, in the index supplement or in the prospectus.
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