The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 12.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying prospectus supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they
obligations of, or guaranteed by, a bank.
You should read this document together with the related
prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley
Finance LLC
Callable
Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors®
Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Terms continued from previous page:
|
Redemption payment:
|
The redemption payment will be an amount equal to (i) the stated principal amount plus (ii) any contingent quarterly coupon otherwise due with respect to the related observation date.
|
Redemption dates:
|
Beginning on May 5, 2021, quarterly. See “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment will be made to any redemption payment made on that succeeding business day.
|
Initial share price:
|
With respect to the GDX Shares, $ ,
which is the closing price of such underlying shares on the pricing date
With respect to the SLV Shares, $ ,
which is the closing price of such underlying shares on the pricing date
|
Final share price:
|
With respect to each of the underlying shares, the respective closing price on the final observation date times the applicable adjustment factor on such day
|
Determination closing price:
|
With respect to each of the underlying shares, on any trading day, the closing price of such underlying shares on such day times the applicable adjustment factor on such day
|
Worst performing underlying shares:
|
The underlying shares with the larger percentage decrease
from the respective initial share price to the respective final share price
|
Share performance factor:
|
With respect to each of the underlying shares, final share price divided by the initial share price
|
Coupon barrier level:
|
With respect to the GDX Shares, $ , which is 60% of
the initial share price for such underlying shares
With respect to the SLV Shares, $ , which is 60% of
the initial share price for such underlying shares
|
Downside threshold level:
|
With respect to the GDX Shares, $ , which is 60% of
the initial share price for such underlying shares
With respect to the SLV Shares, $ , which is 60% of
the initial share price for such underlying shares
|
Coupon payment dates:
|
Quarterly, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, that contingent quarterly coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day; provided further that the contingent quarterly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
|
Observation dates:
|
Quarterly, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below, subject to postponement for non-trading days and certain market disruption events. We also refer to October 30, 2023 as the final observation date.
|
Adjustment factor:
|
With respect to each of the underlying shares, 1.0, subject to adjustment in the event of certain events affecting such underlying shares
|
CUSIP / ISIN:
|
61771EEM6 / US61771EEM66
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates, Coupon
Payment Dates and Redemption Dates
Observation Dates
|
Coupon Payment Dates / Redemption Dates
|
February 1, 2021
|
February 4, 2021*
|
April 30, 2021
|
May 5, 2021
|
July 30, 2021
|
August 4, 2021
|
November 1, 2021
|
November 4, 2021
|
January 31, 2022
|
February 3, 2022
|
May 2, 2022
|
May 5, 2022
|
August 1, 2022
|
August 4, 2022
|
October 31, 2022
|
November 3, 2022
|
January 30, 2023
|
February 2, 2023
|
May 1, 2023
|
May 4, 2023
|
July 31, 2023
|
August 3, 2023
|
October 30, 2023 (final observation date)
|
November 2, 2023 (maturity date)
|
|
*The securities are not subject to early redemption until the second coupon payment date, which is May 5, 2021.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Investment Overview
Callable Contingent Income Securities
Principal at Risk Securities
Callable Contingent Income Securities due November 2, 2023 Payments
on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares®
Silver Trust (the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment
of interest. Instead, the securities will pay a contingent quarterly coupon but only if the determination closing price
of each of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust (which we refer
to together as the “underlying shares”) is at or above 60% of its respective initial share price, which we refer
to as the respective coupon barrier level, on the related observation date. If the determination closing price of either of
the underlying shares is less than the coupon barrier level for such underlying shares on any observation date, we will pay no
coupon for the related quarterly period. It is possible that the determination closing price of one or both of the underlying shares
will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire term of the
securities so that you will receive few or no contingent quarterly coupons during the entire 2-year term of the securities. Even
if each of the underlying shares were to close at or above the coupon barrier level for such underlying shares on some quarterly
observation dates, the price of either of the underlying shares may fluctuate below the respective coupon barrier level
on others. In addition, even if one of the underlying shares were to be at or above the coupon barrier level for such underlying
shares on all quarterly observation dates, you will receive a contingent quarterly coupon only with respect to the observation
dates on which the other underlying shares are also at or above the respective coupon barrier level for such underlying shares,
if any. In addition, beginning on May 5, 2021, we will redeem the securities on any quarterly redemption date, for a redemption
payment equal to the sum of the stated principal amount plus any contingent quarterly coupon otherwise due with respect
to the related observation date, if and only if the output of a risk neutral valuation model on a business day that is at least
2 but no more than 5 business days prior to such redemption date, based on the inputs indicated under “Call feature”
on the cover page, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date.
An early redemption of the securities will not automatically occur based on the performance of the underlying shares. At maturity,
if the securities have not been previously redeemed and if the final share price of each of the underlying shares is greater
than or equal to 60% of the respective initial share price, which we refer to as the respective downside threshold level, the payment
at maturity will be the stated principal amount and the related contingent quarterly coupon. If, however, the final share price
of either of the underlying shares is less than its respective downside threshold level, investors will be exposed to the
decline in the worst performing underlying shares on a 1-to-1 basis and will receive a payment at maturity that is less than 60%
of the stated principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing
to accept the risk of losing their entire initial investment based on the performance of either of the underlying shares and also
the risk of not receiving any quarterly coupons throughout the entire term of the securities.
Maturity:
|
Approximately 3 years, unless redeemed earlier based on the output of a risk neutral valuation model
|
|
|
Contingent quarterly coupon:
|
If, on any observation date, the determination closing price
of each of the underlying shares is greater than or equal to its respective coupon barrier level, we will pay a contingent
quarterly coupon at an annual rate of at least 10.25% (corresponding to approximately $25.625 per quarter per security) on the
related contingent coupon payment date. The actual contingent quarterly coupon rate will be determined on the pricing date.
If, on any observation date, the determination closing
price of either of the underlying shares is less than the coupon barrier level for such underlying shares, no contingent
quarterly coupon will be paid with respect to that observation date. It is possible that one or both of the underlying shares
will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire term of the
securities so that you will receive few or no contingent quarterly coupons.
|
|
|
Early redemption:
|
Beginning on May 5, 2021, we will redeem the securities
on any quarterly redemption date for an early redemption payment equal to the stated principal amount plus any contingent
quarterly coupon otherwise due with respect to the related observation date, if and only if the output of a risk neutral valuation
model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, based on the inputs
indicated under “Call feature” on the cover page, indicates that redeeming on such date is economically rational for
us as compared to not redeeming on such date. An early redemption of the securities will not automatically occur based on the
performance of the underlying shares. In accordance with the risk neutral valuation
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
|
model determination noted herein, it is more likely that we will
redeem the securities when it would otherwise be advantageous for you to continue to hold the securities. As such, we will be more
likely to redeem the securities when the determination closing price of each of the underlying shares on the observation dates
is at or above its respective coupon barrier level, which would otherwise result in an amount of interest payable on the securities
that is greater than instruments of a comparable maturity and credit rating trading in the market. In other words, we will be more
likely to redeem the securities at a time when the securities are paying an above-market coupon. If the securities are redeemed
prior to maturity, you will receive no more contingent quarterly coupon payments, may be forced to invest in a lower interest rate
environment and may not be able to reinvest at comparable terms or returns.
On the other hand, we will be less likely to redeem
the securities when the determination closing price of either of the underlying shares is below its respective coupon barrier
level and/or when the final share price of either of the underlying shares is expected to be below the downside threshold level,
such that you will receive no contingent quarterly coupons and/or that you will suffer a significant loss on your initial investment
in the securities at maturity. Therefore, if we do not redeem the securities, it is more likely that you will receive few or no
contingent quarterly coupons and suffer a significant loss at maturity.
|
|
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final share price of each of the underlying shares
is greater than or equal to its respective downside threshold level: the stated principal amount and the contingent quarterly
coupon with respect to the final observation date.
If the final share price of either of the underlying
shares is less than its respective downside threshold level: (i) the stated principal amount multiplied by (ii)
the share performance factor of the worst performing underlying shares. Under these circumstances, the payment at maturity will
be less than 60% of the stated principal amount of the securities and could be zero.
|
We are using this preliminary pricing supplement to solicit from
you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at
which we accept such offer by notifying the relevant agent. We reserve the right to change the terms of, or reject any offer to
purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will
notify you.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
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 $937.40, or within $30.00 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, the coupon barrier levels and the downside threshold levels, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying 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 6 months following the issue date, to the extent that MS & Co. may buy or sell
the securities in the secondary market, absent changes in market conditions, including those related to the underlying 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
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent quarterly coupon but only if the determination closing price of each of the underlying
shares is at or above 60% of its initial share price, which we refer to as the respective coupon barrier level, on the related
observation date. These 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 no quarterly interest if either of the underlying
shares closes below the coupon barrier level for such underlying shares on the observation dates, and the risk of an early redemption
of the securities based on the output of a risk neutral valuation model. The following scenarios are for illustration purposes
only to demonstrate how the payment at maturity and contingent quarterly coupon (if the securities have not previously been redeemed)
are determined, and do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be
redeemed based on the output of a risk neutral valuation model, the contingent quarterly coupon may be payable with respect to
none of, or some but not all of, the quarterly periods, and the payment at maturity may be less than 60% of the stated principal
amount and could be zero. Investors will not participate in any appreciation in either of the underlying shares.
Scenario 1: The securities are redeemed prior to maturity.
|
This scenario assumes that the securities are redeemed prior to the maturity date on one of the quarterly redemption dates, starting on May 5, 2021, six months after the original issue date, based on the output of a risk neutral valuation model, for the redemption payment equal to the stated principal amount plus any contingent quarterly coupon with respect to the relevant observation date, as applicable. Prior to the early redemption, each of the underlying shares closes at or above its respective coupon barrier level on some or all of the quarterly observation dates. In this scenario, investors receive the contingent quarterly coupon with respect to each such observation date, but not for the quarterly periods for which one or both of the underlying shares close(s) below the respective coupon barrier level(s) on the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
|
This scenario assumes that the securities are not redeemed on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each of the underlying shares closes at or above its respective coupon barrier level on some quarterly observation dates, but one of both of the underlying shares close(s) below the respective coupon barrier level(s) for such underlying shares on the others. Investors will receive the contingent quarterly coupon for the quarterly periods for which the determination closing price of each of the underlying shares is at or above its respective coupon barrier level on the related observation date, but not for the quarterly periods for which one or both of the underlying shares close(s) below the respective coupon barrier level(s) on the related observation date. On the final observation date, each of the underlying shares closes at or above its respective downside threshold level. At maturity, investors receive the stated principal amount and the contingent quarterly coupon with respect to the final observation date.
|
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that the securities are not redeemed on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or both of the underlying shares close(s) below the respective coupon barrier level(s) on every quarterly observation date. Since one or both of the underlying shares close(s) below the respective coupon barrier level(s) on every quarterly observation date, investors do not receive any contingent quarterly coupon. On the final observation date, one or both of the underlying shares close(s) below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the share performance factor of the worst performing underlying shares. Under these circumstances, the payment at maturity will be less than 60% of the stated principal amount and could be zero.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Underlyings Summary
VanEck Vectors® Gold Miners
ETF
The VanEck Vectors® Gold Miners ETF is an exchange-traded
fund managed by VanEck, a registered investment company that seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the NYSE Arca Gold Miners Index. VanEck Vectors® ETF Trust (the
“Trust”) is an investment portfolio managed by VanEck. Information provided to or filed with the Securities and Exchange
Commission by the Trust pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference
to Commission file numbers 333-123257 and 811-10325, respectively, through the Commission’s website at www.sec.gov. In addition,
information may be obtained from other publicly available sources. Neither the issuer nor the agent makes any representation
that any such publicly available information regarding the VanEck Vectors® Gold Miners ETF is accurate or complete.
Information as of market close on October 21, 2020:
Bloomberg Ticker Symbol:
|
GDX UP
|
Current Share Price:
|
$39.92
|
52 Weeks Ago:
|
$26.58
|
52 Week High (on 8/5/2020):
|
$44.53
|
52 Week Low (on 3/13/2020):
|
$19.00
|
This document relates only to the securities offered hereby
and does not relate to the GDX Shares. We have derived all disclosures contained in this document regarding the Trust 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 Trust. Neither we nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding the Trust 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 above) that would affect the trading price
of the GDX Shares (and therefore the price of the GDX 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 Trust
could affect the value received with respect to the securities and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the GDX Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Trust. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to the Trust, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or
more of our affiliates may publish research reports with respect to the GDX Shares. The statements in the preceding two sentences
are not intended to affect the rights of investors in the securities under the securities laws. As a prospective purchaser of the
securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate to make an informed
decision with respect to an investment linked to the GDX Shares.
Market VectorsSM is a service mark of Van Eck Associates
Corporation (“Van Eck”). The securities are not sponsored, endorsed, sold, or promoted by Van Eck. Van Eck makes no
representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing
in the securities. Van Eck has no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The NYSE Arca Gold Miners Index.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved
primarily in the mining of gold and silver. The NYSE Arca Gold Miners Index includes common stocks, ADRs or GDRs of selected companies
involved in the mining for gold and silver ore and are listed for trading and electronically quoted on a major stock market that
is accessible by foreign investors. For additional information about the NYSE Arca Gold Miners Index, please see the information
set forth under “NYSE Arca Gold Miners Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
iShares® Silver Trust
The iShares® Silver Trust (the “Silver Trust”)
is an investment trust sponsored by iShares® Delaware Trust Sponsor LLC , which seeks to provide investment results
that reflect the performance of the price of silver, less the iShares® Silver Trust’s expenses and liabilities.
The assets of the iShares® Silver Trust consists primarily of silver held by a custodian on behalf of the iShares®
Silver Trust. Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by the
iShares® Silver Trust pursuant to the Securities Act of 1933 can be located by reference to Commission file number
001-32863 through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly available
sources. Neither the issuer nor the agent makes any representation that any such publicly available information regarding the
iShares® Silver Trust is accurate or complete.
All information contained in this document regarding the iShares®
Silver Trust (the “Silver Trust”), has been derived from publicly available information, without independent verification.
This information reflects the policies of, and is subject to change by, iShares® Delaware Trust Sponsor LLC, a subsidiary
of BlackRock, Inc., the sponsor of the Silver Trust. The Bank of New York Mellon is the trustee of the Silver Trust, and JPMorgan
Chase Bank, N.A. is the custodian of the Silver Trust. Shares of the Silver Trust trades under the ticker symbol “SLV”
on NYSE Arca, Inc.
The Silver Trust issues shares in exchange for deposits of silver
and distributes silver in connection with the redemption of shares. The shares of the Silver Trust are intended to constitute a
simple and cost-effective means of making an investment similar to an investment in silver.
The Silver Trust does not engage in any activity designed to
derive a profit from changes in the price of silver. The Silver Trust’s only ordinary recurring expense is expected to be
the sponsor’s fee, which accrues daily at an annualized rate equal to 0.50% of the net asset value of the Silver Trust and
is payable monthly in arrears. The trustee of the Silver Trust will, when directed by the sponsor of the Silver Trust, and, in
the absence of such direction, may in its discretion, sell silver in such quantity and at such times as may be necessary to permit
payment of the Silver Trust sponsor’s fee and of Silver Trust expenses or liabilities not assumed by the sponsor. As a result
of the recurring sales of silver necessary to pay the Silver Trust sponsor’s fee and the Silver Trust expenses or liabilities
not assumed by the Silver Trust sponsor, the net asset value of the Silver Trust will decrease over the life of the Silver Trust.
Information as of market close on October 21, 2020:
Bloomberg Ticker Symbol:
|
SLV UP
|
Current Share Price:
|
$23.29
|
52 Weeks Ago:
|
$16.41
|
52 Week High (on 8/10/2020):
|
$27.00
|
52 Week Low (on 3/18/2020):
|
$11.21
|
This document relates only to the securities offered hereby
and does not relate to the SLV Shares. We have derived all disclosures contained in this document regarding the Silver Trust 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 Silver Trust. Neither we
nor the agent makes any representation that such publicly available documents or any other publicly available information regarding
the Silver Trust 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 above) that
would affect the trading price of the SLV Shares (and therefore the price of the SLV 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 Silver Trust could affect the value received with respect to the securities and therefore the value of the
securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the SLV Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Silver Trust. In the course of such business, we and/or our affiliates may acquire non-public information
with respect to the Silver Trust, and neither we nor any of our affiliates undertakes to disclose any such information to you.
In addition, one or more of our affiliates may publish research reports with respect to the SLV Shares. The statements in the preceding
two sentences are not intended to affect the rights of investors in the securities under the securities laws. As a prospective
purchaser of the securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate
to make an informed decision with respect to an investment linked to the SLV Shares.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity.
The following examples are for illustrative purposes only. Whether you receive a contingent quarterly coupon will be determined
by reference to the determination closing price of each of the underlying shares on each quarterly observation date, and the amount
you will receive at maturity, if any, will be determined by reference to the final share price of each of the underlying shares
on the final observation date. Any early redemption of the securities will be based on the output of a risk neutral valuation model.
The actual initial share price, coupon barrier level and downside threshold level for each of the underlying shares will be determined
on the pricing date. All payments on the securities, if any, are subject to our credit risk. The below examples are based on the
following terms:
Hypothetical Contingent Quarterly Coupon:
|
If, on any observation date, the determination closing price
of each of the underlying shares is greater than or equal to its respective coupon barrier level, we will pay a contingent
quarterly coupon at an annual rate of 10.25% (corresponding to approximately $25.625 per quarter per security) on the related contingent
coupon payment date. The actual contingent quarterly coupon rate will be determined on the pricing date.
If, on any observation date, the determination closing
price of either of the underlying shares is less than the coupon barrier level for such underlying shares, no contingent
quarterly coupon will be paid with respect to that observation date. It is possible that the price of one or both of the underlying
shares will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire term
of the securities so that you will receive few or no contingent quarterly coupons.
|
Call Feature:
|
Beginning on May 5, 2021, an early redemption, in whole but not in part, will occur on a redemption date if and only if the output of a risk neutral valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, as selected by the calculation agent (the “determination date”), taking as input: (i) prevailing reference market levels, volatilities and correlations, as applicable and in each case as of the determination date and (ii) Morgan Stanley’s credit spreads as of the pricing date, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. If we call the securities, we will give you notice at least 2 business days before the call date specified in the notice. Any redemption payment will be equal to the stated principal amount plus any contingent quarterly coupon otherwise due with respect to the related observation date. If the securities are redeemed prior to maturity, you will receive no more contingent quarterly coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early):
|
If the final share price of each of the underlying shares
is greater than or equal to its respective downside threshold level: the stated principal amount and the contingent quarterly
coupon with respect to the final observation date.
If the final share price of either of the underlying
shares is less than its respective downside threshold level: (i) the stated principal amount multiplied by (ii)
the share performance factor of the worst performing underlying shares. Under these circumstances, the payment at maturity will
be less than 60% of the stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
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$1,000
|
Hypothetical Initial Share Price:
|
With respect to the GDX Shares: $40.00
With respect to the SLV Shares: $25.00
|
Hypothetical Coupon Barrier Level:
|
With respect to the GDX Shares: $24.00, which is 60%
of the hypothetical initial share price for such underlying shares
With respect to the SLV Shares: $15.00, which is 60%
of the hypothetical initial share price for such underlying shares
|
Hypothetical Downside Threshold Level:
|
With respect to the GDX Shares: $24.00, which is 60%
of the hypothetical initial share price for such underlying shares
With respect to the SLV Shares: $15.00, which is 60%
of the hypothetical initial share price for such underlying shares
|
* The actual contingent quarterly coupon will be an amount determined
by the calculation agent based on the actual contingent quarterly coupon rate and the number of days in the applicable payment
period, calculated on a 30/360 basis. The hypothetical contingent quarterly coupon of $25.625 is used in these examples for ease
of analysis.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date (if the securities have not been previously redeemed):
|
Determination Closing Price
|
Contingent Quarterly Coupon
|
|
GDX Shares
|
SLV Shares
|
|
Hypothetical Observation Date 1
|
$36.00 (at or above coupon barrier level)
|
$27.00 (at or above coupon barrier level)
|
$25.625
|
Hypothetical Observation Date 2
|
$38.00 (at or above coupon barrier level)
|
$10.00 (below coupon barrier level)
|
$0
|
Hypothetical Observation Date 2
|
$20.00 (below coupon barrier level)
|
$9.00 (below coupon barrier level)
|
$0
|
On hypothetical observation date 1, the GDX Shares and the SLV
Shares both close at or above their respective coupon barrier levels. Therefore, a contingent quarterly coupon of $25.625 is paid
on the relevant coupon payment date.
On hypothetical observation date 2, the GDX Shares close at or
above its coupon barrier level but the SLV Shares close below its coupon barrier level. Therefore, no contingent quarterly coupon
is paid on the relevant coupon payment date.
On hypothetical observation date 3, each of the underlying shares
closes below its respective coupon barrier level and accordingly no contingent quarterly coupon is paid on the relevant coupon
payment date.
How to calculate the payment
at maturity (if the securities have not been redeemed early):
|
Final Share Price
|
Payment at Maturity
|
|
GDX Shares
|
SLV Shares
|
|
Example 1:
|
$45.00 (at or above the downside threshold level and coupon barrier level)
|
$30.00 (at or above the downside threshold level and coupon barrier level)
|
$1,025.625 (the stated principal amount plus the contingent quarterly coupon with respect to the final observation date)
|
Example 2:
|
$12.00 (below the downside threshold level)
|
$20.00 (at or above the downside threshold level and coupon barrier level)
|
$1,000 × share performance factor = $1,000 × ($12.00 / $40.00) = $300
|
Example 3:
|
$16.00 (below the downside threshold level)
|
$11.25 (below the downside threshold level)
|
$1,000 × share performance factor = $1,000 × ($16.00 / $40.00) = $400
|
Example 4:
|
$16.00 (below the downside threshold level)
|
$5.00 (below the downside threshold level)
|
$1,000 × share performance factor = $1,000 × ($5.00 / $25.00) = $200
|
|
|
|
|
|
In example 1, the final share price of each of the underlying
shares is at or above its respective downside threshold level. Therefore, investors receive at maturity the stated principal amount
of the securities and the contingent quarterly coupon with respect to the final observation date. However, investors do not participate
in the appreciation of either of the underlying shares.
In example 2, the final share price of one of the underlying
shares is at or above its respective downside threshold level, but the final share price of the other underlying shares is below
its respective downside threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying
shares at maturity and receive at maturity an amount equal to the stated principal amount times the share performance factor
of the worst performing underlying shares.
In examples 3 and 4, the final share price of each of the underlying
shares is below its respective downside threshold level, and investors receive at maturity an amount equal to the state principal
amount times the share performance factor of the worst performing underlying shares. In example 3, the GDX Shares have declined
60% from the respective initial share price to the respective final share price, while the SLV Shares have declined 55% from the
respective initial share price to the final share price. Therefore, the payment at maturity equals the stated principal amount
times the share performance factor of the GDX Shares, which are the worst performing underlying shares in this example.
In example 4, the GDX Shares have declined 60% from the respective initial share price to the respective final share price and
the SLV Shares have declined 80% from the respective initial share price to the final share price.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities
Therefore, the payment at maturity equals the stated principal
amount times the share performance factor of the SLV Shares, which are the worst performing underlying shares in this example.
If the securities have not been redeemed prior to maturity
and the final share price of EITHER of the underlying shares is below its respective downside threshold level, you will be exposed
to the downside performance of the worst performing underlying shares at maturity, and your payment at maturity will be less than
$600 per security and could be zero.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the VanEck Vectors® Gold Miners ETF and the iShares® Silver Trust
Principal at Risk Securities