October 2020
Preliminary Terms No. 5,083
Registration Statement Nos.
333-221595; 333-221595-01
Dated October 16, 2020
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured Investments
Opportunities
in U.S. Equities
Phoenix Auto-Callable Securities due November
2, 2021
Based on the Performance of the Common Stock
of The Goldman Sachs Group, Inc.
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk
Securities
Phoenix Auto-Callable Securities do not guarantee the payment
of interest or the repayment of principal. Instead, the securities offer the opportunity for investors to earn a contingent quarterly
coupon of $30.75 per quarter per security (plus any previously unpaid contingent quarterly coupons from prior determination
dates) but only with respect to each determination date on which the determination closing price of the underlying shares is greater
than or equal to 75% of the initial share price, which we refer to as the downside threshold level. In addition, if the determination
closing price of the underlying shares is greater than or equal to the initial share price on any determination date, the securities
will be automatically redeemed for an amount per security equal to the stated principal amount, the related contingent quarterly
coupon and any previously unpaid contingent quarterly coupons from prior determination dates. However, if the securities are not
automatically redeemed prior to maturity, the payment at maturity due on the securities will be determined as follows: (i) if the
final share price, as determined on five averaging dates, is greater than or equal to the downside threshold level, investors will
receive the stated principal amount, the related contingent quarterly coupon and any previously unpaid contingent quarterly coupons
from prior determination dates, or (ii) if the final share price is less than the downside threshold level, investors will be exposed
to the decline in the underlying shares on a 1-to-1 basis and will receive a payment at maturity that is less than 75% of the stated
principal amount of the securities and could be zero. Moreover, if the closing price of the underlying shares on any determination
date or the final share price is less than the downside threshold level, you will not receive any contingent quarterly coupon for
that quarterly period. Therefore, contingent quarterly coupons should not be viewed as guaranteed periodic interest payments. Investors
must be willing to accept the risk of not receiving any contingent quarterly coupons and also the risk of receiving a payment at
maturity that is significantly less than the stated principal amount of the securities and could be zero. Accordingly, investors
could lose their entire initial investment in the securities. The securities are for investors who are willing to risk their
principal and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving few
or no contingent quarterly coupons over the term of the securities. Investors will not participate in any appreciation of the underlying
shares. The securities are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally
guaranteed by Morgan Stanley, 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:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying
shares:
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The Goldman Sachs Group, Inc. common stock
|
Aggregate
principal amount:
|
$
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security (see “Commissions and issue price” below)
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Pricing
date:
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October 16, 2020
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Original
issue date:
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October 21, 2020 (3 business days after the pricing date)
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Maturity
date:
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November 2, 2021
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Early
redemption:
|
If, on any of the three determination dates, the determination closing price of the underlying shares is greater than or equal to the initial share price, 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.
|
Early
redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the related determination date and any previously unpaid contingent quarterly coupons from prior determination dates.
|
Determination
closing price:
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The closing price of the underlying shares on any determination date times the adjustment factor on such determination date
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Contingent
quarterly coupon:
|
· If
the determination closing price on any determination date or the final share price, as applicable, is greater than or equal to
the downside threshold level, we will pay a contingent quarterly coupon of $30.75 per quarter per security on the related contingent
payment date plus any previously unpaid contingent quarterly coupons with respect to any prior determination dates.
· If
the determination closing price on any determination date or the final share price, as applicable, is less than the downside threshold
level, no contingent quarterly coupon will be paid with respect to that quarterly period.
If the contingent quarterly coupon is not paid on
any coupon payment date (because the closing price on any determination date is less than the downside threshold level), such
unpaid contingent quarterly coupon will be paid on a later coupon payment date but only if the determination closing price on
such later determination date is greater than or equal to the downside threshold level; provided, however, in
the case of any such payment of a previously unpaid contingent quarterly coupon, that no additional interest shall accrue or be
payable in respect of such unpaid contingent quarterly coupon from and after the end of the original interest period for such
unpaid contingent quarterly coupon. You will not receive such unpaid contingent quarterly coupons if the closing price is less
than the downside threshold level on each subsequent determination date. If the closing price is less than the downside threshold
level on each determination date, you will not receive any contingent quarterly coupons for the entire term of the securities.
|
Determination
dates:
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January 28, 2021, April 28, 2021 and July 28, 2021, subject to postponement for non-trading days and certain market disruption events
|
Early
redemption dates:
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February 2, 2021, May 3, 2021 and August 2, 2021; provided that if any such day is not a business day, the related payment will be made on the next succeeding business day and no adjustment will be made to any payment made on that succeeding business day
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Contingent
payment dates:
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February 2, 2021, May 3, 2021 and August 2, 2021. If any such day is not a business day, that contingent quarterly coupon, if payable, will be paid on the next succeeding business day and no adjustment will be made to any payment made on that succeeding business day. The payment of the contingent quarterly coupon, if any, with respect to the final quarterly period will be made on the maturity date.
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Payment
at maturity:
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· If the final share price is greater than or equal to the downside threshold level:
|
(i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the final quarterly period and any previously unpaid contingent quarterly coupons with respect to the prior determination dates
|
|
· If the final share price is less than the downside threshold level:
|
(i) the stated principal amount multiplied by (ii) the share performance factor. Under these circumstances, the payment at maturity will be less than the stated principal amount, and will represent a loss of more than 25%, and up to all, of your investment.
|
Adjustment
factor:
|
1.0, subject to adjustment in the event of certain corporate events affecting the underlying shares
|
Share
performance factor:
|
Final share price divided by the initial share price
|
Downside
threshold level:
|
$156.45, which is equal to 75% of the initial share price
|
Initial
share price:
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$208.60, which is equal to the closing price of the underlying shares on October 15, 2020
|
Final
share price:
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The arithmetic average of the closing price of the underlying shares on each of the five averaging dates, each as multiplied by the adjustment factor on such date
|
Averaging
dates:
|
October 22, 2021, October 25, 2021, October 26, 2021, October 27, 2021 and October 28, 2021, subject to postponement for non-trading days and certain market disruption events.
|
CUSIP
/ ISIN:
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61771EDB1 / US61771EDB11
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated
value on the pricing date:
|
Approximately $975.50 per security, or within $25.00 of that estimate. See “Investment Summary” beginning on page 2.
|
Commissions
and issue price:
|
|
Price to public(1)
|
Agent’s commissions(1)(2)
|
Proceeds to us(3)
|
Per security
|
|
$1,000
|
$10
|
$990
|
Total
|
|
$
|
$
|
$
|
|
|
|
|
|
|
|
(1)
|
J.P.
Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents for
the securities. The placement agents will forgo fees for sales to certain fiduciary accounts.
The total fees represent the amount that the placement agents receive from sales to accounts
other than such fiduciary accounts. The placement agents will receive a fee from the
Issuer or one of its affiliates that will not exceed $10 per $1,000 stated principal
amount of securities.
|
|
(2)
|
Please
see “Supplemental information regarding plan of distribution; conflicts of interest”
in these preliminary terms for information about fees and commissions.
|
|
(3)
|
See
“Use of proceeds and hedging” on page 21.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 8.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement
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 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 Prospectus dated November 16, 2017
Morgan Stanley
|
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable
Securities due November 2, 2021
Based on the Performance of the Common Stock
of The Goldman Sachs Group, Inc.
Principal
at Risk Securities
Investment Summary
Phoenix Auto-Callable Securities
Principal at Risk Securities
The Phoenix Auto-Callable Securities due November
2, 2021 Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc., which we refer to as the securities, provide
an opportunity for investors to earn a contingent quarterly coupon of $30.75 per quarter per security (plus any previously
unpaid contingent quarterly coupons from prior determination dates) with respect to each quarterly determination date or the averaging
dates, as applicable, on which the determination closing price or the final share price, as applicable, is greater than or equal
to 75% of the initial share price, which we refer to as the downside threshold level. It is possible that the closing price of
the underlying shares could remain below the downside threshold level for extended periods of time or even throughout the term
of the securities so that you may receive few or no contingent quarterly coupons.
If the determination closing price is greater
than or equal to the initial share price on any of the three determination dates, the securities will be automatically redeemed
for an early redemption payment equal to the stated principal amount plus the contingent quarterly coupon with respect to
the related determination date and any previously unpaid contingent quarterly coupons from prior determination dates. No further
payments will be made on the securities once they have been redeemed. If the securities have not previously been redeemed and the
final share price, as determined on the five averaging dates, is greater than or equal to the downside threshold level, the payment
at maturity will be the sum of the stated principal amount, the contingent quarterly coupon with respect to the final quarterly
period and any previously unpaid contingent quarterly coupons with respect to the prior determination dates. However, if the securities
have not previously been redeemed and the final share price is less than the downside threshold level, investors will be exposed
to the decline in the final share price, as compared to the initial share price, on a 1-to-1 basis. In this case, the payment at
maturity will be less than 75% of the stated principal amount of the securities and could be zero. Investors in the securities
must be willing to accept the risk of losing their entire principal and also the risk of not receiving any contingent quarterly
coupon. In addition, investors will not participate in any appreciation of the underlying shares.
The original issue price of each security is
$1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by
you, and, consequently, the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the
value of each security on the pricing date will be approximately $975.50, or within $25.00 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
shares. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying shares, instruments based on the underlying shares, 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 quarterly coupon rate and the downside threshold level, we use an internal funding rate, which is likely
to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and
hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities
would be more favorable to you.
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlying shares, 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 4 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
shares, 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
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
Key Investment Rationale
The securities offer investors an opportunity to earn a contingent
quarterly coupon of $30.75 per quarter per security (plus any previously unpaid contingent quarterly coupons from prior
determination dates) with respect to each determination date or the averaging dates, as applicable, on which the determination
closing price or the final share price, as applicable, is greater than or equal to 75% of the initial share price, which we refer
to as the downside threshold level. The securities may be redeemed prior to maturity for the stated principal amount per security
plus the applicable contingent quarterly coupon and any previously unpaid contingent quarterly coupons, and the payment
at maturity will vary depending on the final share price, as follows:
Scenario 1
|
On any of the three determination dates,
the determination closing price is greater than or equal to the initial share price.
§ The
securities will be automatically redeemed for (i) the stated principal amount plus (ii) the contingent quarterly coupon
with respect to the related determination date and any previously unpaid contingent quarterly coupons with respect to any prior
determination dates.
§ Investors
will not participate in any appreciation of the underlying shares from the initial share price.
|
Scenario 2
|
The securities are not automatically redeemed
prior to maturity, and the final share price, as determined on the five averaging dates, is greater than or equal to the
downside threshold level.
§ The
payment due at maturity will be (i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to
the final quarterly period and any previously unpaid contingent quarterly coupons with respect to the prior determination dates.
§ Investors
will not participate in any appreciation of the underlying shares from the initial share price.
|
Scenario 3
|
The securities are not automatically redeemed
prior to maturity, and the final share price is less than the downside threshold level.
§ The
payment due at maturity will be equal to (i) the stated principal amount multiplied by (ii) the share performance factor.
§ Investors
will lose a significant portion, and may lose all, of their principal in this scenario.
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the determination closing price and (2) the final share price.
Diagram #1: Three Determination Dates
Diagram #2: Payment at Maturity if No Automatic
Early Redemption Occurs
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
Hypothetical Examples
The below examples are based on the following terms:
Hypothetical Initial Share Price:
|
$200.00
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Hypothetical Downside Threshold Level:
|
$150.00, which is 75% of the hypothetical initial share price
|
Hypothetical Adjustment Factor:
|
1.0
|
Contingent Quarterly Coupon:
|
$30.75 per quarter per security
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Stated Principal Amount:
|
$1,000 per security
|
In Examples 1 and 2, the closing price of the
underlying shares fluctuates over the term of the securities and the determination closing price of the underlying shares is greater
than or equal to the hypothetical initial share price of $200.00 on one of the determination dates. Because the determination closing
price is greater than or equal to the initial share price on one of the determination dates, the securities are automatically redeemed
following the relevant determination date. In Examples 3 and 4, the determination closing price on the determination dates is less
than the initial share price, and, consequently, the securities are not automatically redeemed prior to, and remain outstanding
until, maturity.
|
Example 1
|
Example 2
|
Determination Dates / Averaging Dates
|
Hypothetical Determination Closing Price / Final Share Price
|
Hypothetical Contingent Quarterly Coupon
|
Early Redemption Amount*
|
Hypothetical Determination Closing Price / Final Share Price
|
Hypothetical Contingent Quarterly Coupon
|
Early Redemption Amount*
|
#1
|
$200.00
|
—*
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$1,030.75
|
$170.00
|
$30.75
|
N/A
|
#2
|
N/A
|
N/A
|
N/A
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$135.00
|
$0
|
N/A
|
#3
|
N/A
|
N/A
|
N/A
|
$230.00
|
—*
|
$1,061.50
|
Averaging Dates
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
* The Early Redemption Amount includes the
unpaid contingent quarterly coupon with respect to the determination date on which the determination closing price is greater than
or equal to the initial share price and the securities are redeemed as a result.
|
§
|
In Example 1, the securities are automatically redeemed following the first determination date, as the determination
closing price on the first determination date is equal to the initial share price. You receive the early redemption payment, calculated
as follows:
|
stated principal
amount + contingent quarterly coupon = $1,000.00 + $30.75 = $1,030.75
In this example, the early redemption feature
limits the term of your investment to approximately 3 months, and you may not be able to reinvest at comparable terms or returns.
If the securities are redeemed early, you will receive no further payments. Additionally, you will not participate in any appreciation
of the underlying shares.
|
§
|
In Example 2, the securities are automatically redeemed following the third determination date, as the determination
closing price on the third determination date is greater than the initial share price. As the determination closing price on the
first determination date is greater than the downside threshold level, you receive the contingent coupon of $30.75 with respect
to such determination date. Following the third determination date, you receive an early redemption amount of $1,061.50, which
includes the contingent quarterly coupon with respect to the third determination date and the previously unpaid contingent quarterly
coupon with respect to the second determination date.
|
In this example, the early redemption feature
limits the term of your investment to approximately 9 months, and you may not be able to reinvest at comparable terms or returns.
If the securities are redeemed early, you will receive no further payments. Further, although the underlying shares have appreciated
by 15% from the initial share price as of the third determination date, you receive only $1,061.50 per security and do not benefit
from such appreciation.
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
Example 3
|
Example 4
|
Determination Dates / Averaging Dates
|
Hypothetical Determination Closing Price / Final Share Price
|
Hypothetical Contingent Quarterly Coupon
|
Early Redemption Amount
|
Hypothetical Determination Closing Price / Final Share Price
|
Hypothetical Contingent Quarterly Coupon
|
Early Redemption Amount
|
#1
|
$130.00
|
$0
|
N/A
|
$135.00
|
$0
|
N/A
|
#2
|
$115.00
|
$0
|
N/A
|
$130.00
|
$0
|
N/A
|
#3
|
$130.00
|
$0
|
N/A
|
$140.00
|
$0
|
N/A
|
Averaging Dates
|
$120.00
|
$0
|
N/A
|
$180.00
|
—*
|
N/A
|
Payment at Maturity
|
$600.00
|
$1,123.00
|
* The final contingent quarterly coupon, if
any, will be paid at maturity.
Examples 3 and 4 illustrate the payment at
maturity per security based on the final share price.
|
§
|
In Example 3, the closing price of the underlying shares remains below the downside threshold level on every determination
date. As a result, you do not receive any contingent coupons during the term of the securities, and, at maturity, you are fully
exposed to the decline in the closing price of the underlying shares. As the final share price is less than the downside threshold
level, investors will receive a payment at maturity equal to the stated principal amount times the share performance factor, calculated
as follows:
|
stated principal amount
× share performance factor = $1,000.00 × ($120.00 / $200.00) = $1,000.00 × 60% = $600.00
In this example, the amount of cash you
receive at maturity is significantly less than the stated principal amount.
|
§
|
In Example 4, the closing price of the underlying shares decreases to a final share price of $180.00. Although the final
share price is less than the initial share price, because the final share price is still not less than the downside threshold level,
you receive the stated principal amount plus a contingent quarterly coupon with respect to the final quarterly period and
the previously unpaid contingent quarterly coupons with respect to the prior determination dates. Your payment at maturity is calculated
as follows:
|
$1,030.75 + $92.25 = $1,123.00
In this example, although the final share
price represents a 10% decline from the initial share price, you receive the stated principal amount per security plus the final
contingent quarterly coupon and the previously unpaid contingent quarterly coupons with respect to the prior determination dates,
equal to a total payment of $1,123.00 per security at maturity, because the final share price is not less than the downside threshold
level.
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement and prospectus. You should also consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal. The terms of the securities differ from those of ordinary
debt securities in that the securities do not guarantee the payment of regular interest or the return of any of the principal amount
at maturity. Instead, if the securities have not been automatically redeemed prior to maturity and if the final share price is
less than the downside threshold level, you will be exposed to the decline in the final share price, as compared to the initial
share price, on a 1-to-1 basis. In this case, you will receive for each security that you hold at maturity a payment that will
be less than 75% of the stated principal amount and could be zero.
|
|
§
|
You will not receive any contingent quarterly coupon for any quarterly period when the determination closing price or the
final share price, as applicable, is less than the downside threshold level. Contingent quarterly coupons should not be viewed
as guaranteed periodic interest payments. A contingent quarterly coupon will be paid with respect to a quarterly period only if
the determination closing price or the final share price, as applicable, is greater than or equal to the downside threshold level.
If the determination closing price remains below the downside threshold level on each determination date over the term of the securities
and the final share price is also below the downside threshold level, you will not receive any contingent quarterly coupons.
|
|
§
|
The contingent quarterly coupon, if any, is based solely on the determination closing price or the final share price, as
applicable. Whether the contingent quarterly coupon will be paid with respect to a determination date or the averaging dates
will be based on the determination closing price or the final share price, as applicable. As a result, you will not know whether
you will receive the contingent quarterly coupon until near the end of the relevant quarterly period. Moreover, because the contingent
quarterly coupon is based solely on the determination closing price on a specific determination date or the final share price,
as applicable, if such determination closing price or final share price is less than the downside threshold level, you will not
receive any contingent quarterly coupon with respect to such determination date or the averaging dates, as applicable, even if
the closing price of the underlying shares was higher on other days during the term of the securities.
|
|
§
|
Investors will not participate in any appreciation in the price of the underlying shares. Investors will not participate
in any appreciation in the price of the underlying shares from the initial share price, and the return on the securities will be
limited to the contingent quarterly coupon, if any, that is paid with respect to each determination date or the averaging dates,
as applicable, on which the determination closing price or the final share price, as applicable, is greater than or equal to the
downside threshold level. It is possible that the closing price of the underlying shares could be below the downside threshold
level on most or all of the determination dates and/or that the final share price is below the downside threshold level so that
you will receive few or no contingent quarterly coupons and/or lose a significant portion or all of your investment. If you do
not earn sufficient contingent quarterly 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.
|
|
§
|
The automatic early redemption feature may limit the term of your investment to as short as approximately three months.
If the securities are redeemed early, you may not be able to reinvest at comparable terms or returns. The
term of your investment in the securities may be limited to as short as approximately three months by the automatic early redemption
feature of the securities. If the securities are redeemed prior to maturity, you will receive no more contingent quarterly 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.
For the avoidance of doubt, the costs borne by investors in the securities, including the fees and commissions described on the
cover page of this document, will not be rebated if the securities are redeemed early.
|
|
§
|
The market price will be influenced by many unpredictable factors. Several factors
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. Although we expect that generally the closing price of the underlying shares on
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
any
day will affect the value of the securities more than any other single factor, other factors that may influence the value of the
securities include:
|
o
|
the trading price and volatility (frequency and magnitude of changes in value) of the underlying shares,
|
|
o
|
whether the determination closing price has been below the downside threshold level on any determination date,
|
|
o
|
dividend rates on the underlying shares,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
time remaining until the securities mature,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying shares
and which may affect the final share price of the underlying shares,
|
|
o
|
the occurrence of certain events affecting the underlying shares that may or may not require an adjustment to the adjustment
factor, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
The
price of the underlying shares may be, and has recently been, volatile, and we can give you no assurance that the volatility will
lessen. See “The Goldman Sachs Group, Inc. Overview” below. You may receive less, and possibly significantly less,
than the stated principal amount per security if you try to sell your securities prior to maturity.
|
§
|
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
on each contingent payment date, upon automatic redemption or at maturity, and therefore you are subject to our credit risk of
Morgan Stanley. 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 Morgan Stanley credit risk is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley.
Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities
issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should be treated
pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued
securities.
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|
§
|
Investing in the securities is not equivalent to investing in the Common Stock of The Goldman Sachs Group, Inc. Investors
in the securities will not participate in any appreciation of the underlying shares, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to the underlying shares. As a result, any return
on the securities will not reflect the return you would realize if you actually owned shares of the underlying shares and received
the dividends paid or distributions made on them.
|
|
§
|
No affiliation with The Goldman Sachs Group, Inc. The Goldman Sachs Group, Inc. is not an affiliate of ours, is not
involved with this offering in any way, and has no obligation to consider your interests in taking any corporate actions that might
affect the value of the securities. We have not made any due diligence inquiry with respect to The Goldman Sachs Group, Inc. in
connection with this offering.
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|
§
|
We may engage in business with or involving The Goldman Sachs Group, Inc. without regard to your interests. We or our
affiliates may presently or from time to time engage in business with The Goldman Sachs Group, Inc. without regard to your interests
and thus may acquire non-public information about The Goldman Sachs
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
Group, Inc. Neither we nor any
of our affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time to time have
published and in the future may publish research reports with respect to The Goldman Sachs Group, Inc., which may or may not recommend
that investors buy or hold the underlying shares.
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§
|
The antidilution adjustments the calculation agent is required to make do not cover every corporate event that could affect
the underlying shares. MS & Co., as calculation agent, will adjust the adjustment factor for certain corporate events affecting
the underlying shares, such as stock splits, stock dividends and extraordinary dividends, and certain other corporate actions involving
the issuer of the underlying shares, such as mergers. However, the calculation agent will not make an adjustment for every corporate
event that can affect the underlying shares. For example, the calculation agent is not required to make any adjustments if the
issuer of the underlying shares or anyone else makes a partial tender or partial exchange offer for the underlying shares, nor
will adjustments be made following the last averaging date. In addition, no adjustments will be made for regular cash dividends,
which are expected to reduce the price of the underlying shares by the amount of such dividends. If an event occurs that does not
require the calculation agent to adjust the adjustment factor, such as a regular cash dividend, the market price of the securities
and your return on the securities may be materially and adversely affected. For example, if the record date for a regular cash
dividend were to occur on or shortly before a determination date, this may decrease the determination closing price to be less
than the downside threshold level (resulting in no contingent quarterly coupon being paid with respect to such date) or the final
share price to be less than the downside threshold level (resulting in a loss of a significant portion of all of your investment
in the securities), materially and adversely affecting your return.
|
|
§
|
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.
|
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 4 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 shares, 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.
|
§
|
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.
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. The securities will
not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. 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.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities. One or
more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other
instruments linked to the underlying shares), including trading in the underlying shares. 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 averaging dates approach. Some of our affiliates also trade the underlying shares and other
financial instruments related to the underlying shares 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 October 15, 2020 could potentially increase the initial share price,
and, as a result, the downside threshold level, which is the price at or above which the underlying shares must close on each determination
date in order for you to earn a contingent quarterly coupon, and, if the securities are not called prior to maturity, in order
for you to avoid being exposed to the negative price performance of the underlying shares at maturity. Additionally, such hedging
or trading activities during the term of the securities could potentially affect the price of the underlying shares on the determination
dates, and, accordingly, whether the securities are automatically called prior to maturity, and, if the securities are not called
prior to maturity, the payout to you at maturity, if any.
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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 share price, the downside threshold level,
the final share price, whether the contingent quarterly coupon will be paid on each contingent payment date, whether you will receive
any previously unpaid contingent quarterly coupons, whether the securities will be redeemed following any determination date, whether
a market disruption event has occurred, whether to make any adjustments to the adjustment factor and the payment that you will
receive upon an automatic early redemption or 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 nonoccurrence of market disruption events and certain adjustments to the adjustment factor. These potentially subjective
determinations may affect the payout to you upon an automatic early redemption or at maturity, if any. For further information
regarding these types of determinations, see “Description of Auto-Callable Securities—Auto-Callable Securities Linked
to Underlying Shares” 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.
|
|
§
|
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 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
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
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
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
The Goldman Sachs Group, Inc.
Overview
The Goldman Sachs Group, Inc., a bank holding company, is a global
investment banking and securities firm specializing in investment banking, trading and principal investments, asset management
and securities services. The underlying shares are registered under the Securities Exchange Act. Information provided to or filed
with the Securities and Exchange Commission by The Goldman Sachs Group, Inc. pursuant to the Exchange Act can be located by reference
to the Securities and Exchange Commission file number 001-14965 through the Securities and Exchange Commission’s website
at www.sec.gov. In addition, information regarding The Goldman Sachs Group, Inc. may be obtained from other sources including,
but not limited to, press releases, newspaper articles and other publicly disseminated documents. Neither the issuer nor the
agent makes any representation that such publicly available documents or any other publicly available information regarding the
issuer of the underlying shares is accurate or complete.
Information as of market close on October 15, 2020:
Bloomberg Ticker Symbol:
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GS
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Exchange:
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NYSE
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Current Share Price:
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$208.60
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52 Weeks Ago:
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$206.46
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52 Week High (on 1/16/2020):
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$249.72
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52 Week Low (on 3/23/2020):
|
$134.97
|
The following graph shows the closing prices
from January 1, 2015 through October 15, 2020. The closing price of the underlying shares on October 15, 2020 was $208.60. We obtained
the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The historical
closing prices of the underlying shares may have been adjusted for stock splits and other corporate events. The historical performance
of the underlying shares should not be taken as an indication of its future performance, and no assurance can be given as to the
price of the underlying shares at any time, including on the determination dates or averaging dates.
Common Stock of The Goldman Sachs Group, Inc. – Daily Closing Prices
January 1, 2015 to October 15, 2020
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|
*The red solid line indicates the downside
threshold level of $156.45, which is 75% of the initial share price.
This document relates only to the securities
offered hereby and does not relate to the underlying shares or other securities of The Goldman Sachs Group, Inc. We have derived
all disclosures contained in this document regarding The Goldman Sachs Group, Inc. from the publicly available documents described
above. In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such
documents or made any due diligence inquiry with respect to The Goldman Sachs Group, Inc. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
information regarding The Goldman Sachs
Group, Inc. is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof
(including events that would affect the accuracy or completeness of the publicly available documents described in the preceding
paragraph) that would affect the trading price of the underlying shares (and therefore the price of the underlying shares at the
time we price the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure
to disclose material future events concerning The Goldman Sachs Group, Inc. could affect the amount received with respect to the
securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the underlying shares.
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
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:
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|
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Record
date:
|
The record date for each contingent payment date shall be the date one business day prior to such scheduled contingent payment date; provided, however, that any contingent quarterly coupon payable at maturity or upon 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.
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Underlying
shares issuer:
|
The Goldman Sachs Group, Inc. The accompanying product supplement refers to the underlying shares issuer as the “underlying company.”
|
Denominations:
|
$1,000 per security and integral multiples thereof
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Interest
period:
|
The quarterly period from and including the original issue date (in the case of the first interest period) or the previous scheduled contingent payment date, as applicable, to but excluding the following scheduled contingent payment date, with no adjustment for any postponement thereof.
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Postponement
of contingent payment dates and early redemption dates:
|
If any determination date is postponed due to a non-trading day or certain market disruption events so that it falls less than two business days prior to the relevant scheduled contingent payment date or early redemption date, as applicable, the contingent payment date or the early redemption date will be postponed to the second business day following that determination date as postponed, and no adjustment will be made to any payment made on that postponed date.
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Postponement
of averaging dates:
|
If a market disruption event with respect to the underlying shares occurs on any scheduled averaging date or if any such scheduled averaging date is not a trading day, the closing price for such scheduled averaging date will be determined on the immediately succeeding trading day on which no market disruption event shall have occurred. Each succeeding averaging date will then be the next trading day following the preceding averaging date as postponed. The final share price will be determined on the date on which the closing prices for all scheduled averaging dates have been determined; provided that (i) the closing price for any averaging date will not be determined on a date later than the tenth business day after the last scheduled averaging date, (ii) the closing price for any remaining averaging dates that would otherwise fall after such tenth business day will be the closing price on such tenth business day and (iii) if such tenth business day is not a trading day or if there is a market disruption event on such date, the calculation agent will determine the closing price of the underlying shares on such date as the mean of the bid prices for the underlying shares for such date obtained from as many recognized dealers in such underlying shares, but not exceeding three, as will make such bid prices available to the calculation agent. Bids of MS & Co. or any of its affiliates may be included in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained. If no bid prices are provided from any third-party dealers, the closing price will be determined by the calculation agent in its sole and absolute discretion (acting in good faith), taking into account any information that it deems relevant.
|
Postponement
of maturity date:
|
If due to a market disruption event or otherwise, the last averaging date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that last averaging date as postponed.
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Antidilution
adjustments:
|
The following replaces in its entirety the portion of the
section entitled “Antidilution Adjustments” in the accompanying product supplement for auto-callable securities from
the start of paragraph 5 to the end of such section.
5. If (i) there occurs any reclassification or change of the
underlying ordinary shares represented by the underlying shares (the “underlying ordinary shares”), including, without
limitation, as a result of the issuance of any tracking stock by the underlying shares issuer, (ii) the underlying shares issuer
or any surviving entity or subsequent surviving entity of the underlying shares issuer (the “successor corporation”)
has been subject to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities
of the underlying shares issuer or any successor corporation with another corporation occurs (other than pursuant to clause (ii)
above), (iv) the underlying shares issuer is liquidated, (v) the underlying shares issuer issues to all of its shareholders equity
securities of an issuer other than the underlying shares issuer (other than in a transaction described in clause (ii), (iii) or
(iv) above) (a “spin-off event”) or (vi) a tender or exchange offer or going-private transaction is consummated for
all the outstanding shares of the underlying ordinary shares (any such event in clauses (i) through (vi), a “reorganization
event”), the method of determining whether an early redemption has occurred and the amount payable upon an early redemption
date or at maturity for each security will be as follows:
· Upon
any determination date following the effective date of a reorganization event: If the exchange property value (as defined below)
is greater than or equal to the initial share price, the securities will be automatically redeemed for an early redemption payment.
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
· Upon
the last averaging date, if the securities have not previously been automatically redeemed: You will receive for each security
that you hold a payment at maturity equal to:
Ø If
the final exchange property value (as defined below) is greater than or equal to the downside threshold level: (i) the stated
principal amount plus (ii) the contingent quarterly coupon with respect to the final quarterly period and any previously unpaid
contingent quarterly coupons from prior determination dates.
Ø If
the final exchange property value (as defined below) is less than the downside threshold level: (i) the stated principal amount
multiplied by (ii) the share performance factor. For purposes of calculating the share performance factor, the “final share
price” will be deemed to equal the final exchange property value (as defined below).
Following the effective date of a reorganization event, the contingent
quarterly coupon (and any previously unpaid contingent quarterly coupons from prior determination dates) will be payable for each
determination date on which the exchange property value is greater than or equal to the downside threshold level.
In the event exchange property consists of
securities, those securities will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not
the exchange property value is less than the initial share price or less than the downside threshold level, “exchange property
value” means (x) for any cash received in any reorganization event, the value, as determined by the Calculation Agent, as
of the date of receipt, of such cash received for one share of the underlying shares, as adjusted by the adjustment factor at the
time of such reorganization event, (y) for any property other than cash or securities received in any such reorganization event,
the market value, as determined by the Calculation Agent in its sole discretion, as of the date of receipt, of such exchange property
received for one share of the underlying shares, as adjusted by the adjustment factor at the time of such reorganization event
and (z) for any security received in any such reorganization event, an amount equal to the closing price, as of the day on which
the exchange property value is determined, per share of such security multiplied by the quantity of such security received for
each share of the underlying shares, as adjusted by the adjustment factor at the time of such reorganization event.
“Final exchange property value” means the arithmetic
average of the exchange property values as of each of the five averaging dates.
For purposes of paragraph 5 above, in the case
of a consummated tender or exchange offer or going-private transaction involving consideration of particular types, exchange property
shall be deemed to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an
amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event
of a tender or exchange offer or a going-private transaction with respect to exchange property in which an offeree may elect to
receive cash or other property, exchange property shall be deemed to include the kind and amount of cash and other property received
by offerees who elect to receive cash.
Following the occurrence of any reorganization
event referred to in paragraph 5 above, all references in this offering document and in the related product supplement with respect
to the securities to “the underlying shares” shall be deemed to refer to the exchange property and references to a
“share” or “shares” of the underlying shares shall be deemed to refer to the applicable unit or units of
such exchange property, unless the context otherwise requires.
No adjustment to the adjustment factor will
be required unless such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment
factor resulting from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward. Adjustments to the adjustment factor will be made up to the close of business on the last averaging date.
No adjustments to the adjustment factor or
method of calculating the adjustment factor will be required other than those specified above. The adjustments specified above
do not cover all events that could affect the determination closing price or the final share price of the underlying shares, including,
without limitation, a partial tender or exchange offer for the underlying ordinary shares.
The Calculation Agent shall be solely responsible
for the determination and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor
and of any related determinations and calculations with respect to any distributions of stock, other securities or other property
or assets (including cash) in connection with any corporate event described in paragraphs 1 through 5 above, and its determinations
and calculations with respect thereto shall be conclusive in the absence of manifest error.
The Calculation Agent will provide information as to
any adjustments to the adjustment factor or to the method of calculating the amount payable at maturity of the securities made
pursuant to paragraph 5 above upon written request by any investor in the securities.
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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 last averaging 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
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
postponement by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (ii) to the trustee by facsimile, confirmed by mailing
such notice to the trustee by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company
(the “depositary”) by telephone or facsimile confirmed by mailing such notice to the depositary by first class mail,
postage prepaid. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be
conclusively presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice.
The issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement
of the maturity date, the business day immediately preceding the scheduled maturity date, and (ii) with respect to notice of the
date to which the maturity date has been rescheduled, the business day immediately following the last averaging 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 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 quarterly 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 contingent payment date, and (ii) deliver the aggregate cash amount due, if any,
with respect to the contingent quarterly coupon to the trustee for delivery to the depositary, as holder of the securities, on
the applicable contingent 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, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the
business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities, if any,
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
Additional Information About the Securities
Additional
Information:
|
|
Listing:
|
The securities will not be listed on any securities exchange.
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Minimum
ticketing size:
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$1,000 / 1 security
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Tax
considerations:
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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 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
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
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 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
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Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
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 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
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
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 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.
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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 2 above comprise the Agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to October 15, 2020, we will 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 underlying shares, in futures and/or options contracts on the underlying
shares, 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 share price, and, as a result, the downside threshold level, which
is the price at or above which the underlying shares must close on each determination date in order for you to earn a contingent
quarterly coupon, and, if the securities are not redeemed prior to maturity, in order for you to avoid being exposed to the negative
price performance of the underlying shares at maturity. In addition, through our affiliates, we are likely to modify our hedge
position throughout the term of the securities, including on the averaging dates, by purchasing and selling the underlying shares,
options contracts relating to the underlying shares or any other available securities or
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Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
instruments that we may wish to use in connection with such hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the averaging dates approach. We cannot give any assurance that our hedging activities will not affect the value of the underlying shares, and, therefore, adversely affect the value of the securities or the payment you will receive at maturity, if any.
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Benefit
plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and the related lending transactions,
provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority or control
or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further that the
Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction (the so-called
“service provider” exemption). There can be no assurance that any of these class or statutory exemptions will be available
with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute or result
in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all
|
Morgan Stanley Finance LLC
Phoenix Auto-Callable Securities due November 2, 2021
Based on the Performance of the Common Stock of The Goldman Sachs Group, Inc.
Principal at Risk Securities
|
transactions
relating to the securities and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these securities should consult
and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual
retirement annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their
accounts, will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee
of Morgan Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as,
for example, an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
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:
|
JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and its
affiliates will act as placement agents for the securities and will receive a fee from the Issuer or one of its affiliates that
will not exceed $10 per $1,000 stated principal amount of securities, but will forgo any fees for sales to certain fiduciary accounts.
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 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 2.
MS & Co. will conduct this offering in compliance
with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as
FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest.
MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “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:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for auto-callable securities) 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 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 and the product supplement
for auto-callable securities 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
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined
in the product supplement for auto-callable securities or in the prospectus.
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