The
information in this preliminary pricing supplement is not complete and may be changed. We may not deliver these notes until a
final pricing supplement is delivered. This preliminary pricing supplement and the accompanying prospectus, product supplement
and index supplement do not constitute an offer to sell these notes and we are not soliciting an offer to buy these notes in any
state where the offer or sale is not permitted.
Subject
to Completion, Preliminary Pricing Supplement dated April 15, 2019
PROSPECTUS Dated November
16, 2017
|
Pricing
Supplement No. 1,845 to
|
PRODUCT SUPPLEMENT Dated November 16, 2017
|
Registration Statement
Nos. 333-221595; 333-221595-01
|
INDEX SUPPLEMENT Dated November 16, 2017
|
Dated ,
2019
|
|
Rule 424(b)(2)
|
Morgan
Stanley Finance LLC
STRUCTURED
INVESTMENTS
Opportunities
in U.S. Equities
|
$
Digital NASDAQ-100 Index
®
-Linked
Notes due
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
The
notes are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed
by Morgan Stanley. The notes will not bear interest.
The amount that you will be paid on
your notes on the stated maturity date (expected to be the second scheduled business day after the determination date) is based
on the performance of the NASDAQ-100 Index
®
as measured from the trade date to and including the determination
date (expected to be between 13 and 15 months after the trade date). If the final underlier level on the determination date is
greater than or equal to the initial underlier level (which will be set on the trade date and may be higher or lower than the
actual closing level of the underlier on the trade date), you will receive an amount equal to the maximum settlement amount (expected
to be between $1,115.80 and $1,135.90 for each $1,000 face amount of your notes).
However, if the final underlier
level on the determination date is less than the initial underlier level, you will be negatively exposed to the full amount of
the percentage decline in the underlier value, and you will lose some or all of your investment
.
You could lose your entire investment in the notes.
The
notes are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject
to our credit risk. If we default on our obligations, you could lose some or all of your investment. These notes 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.
To
determine your payment at maturity, we will calculate the underlier return, which is the percentage increase or decrease in the
final underlier level from the initial underlier level. On the stated maturity date, for each $1,000 face amount of your notes,
you will receive an amount in cash equal to:
|
●
|
if the underlier return is
positive
or
zero
(the final underlier level is greater than or equal to the initial
underlier level), the maximum settlement amount of $1,115.80 to $1,135.90 per note, or 111.58% to 113.59% of the face amount (the
actual maximum settlement amount will be determined on the trade date); or
|
|
●
|
if the underlier return is
negative
(the final underlier level is
less than
the initial underlier level), the
sum
of (a) $1,000
plus
(b) $1,000
times
the underlier return. Under these circumstances, you will
lose some or all of your investment.
|
You should read the additional disclosure herein so that you
may better understand the terms and risks of your investment.
The estimated value on the trade date will be approximately
$979.70 per note, or within $15.00 of that estimate. See “Estimated Value” on page 2.
|
Price
to public
(1)
|
Agent’s
commissions
|
Proceeds
to us
(2)
|
Per note
|
$1,000
|
$13.30
|
$986.70
|
Total
|
$
|
$
|
$
|
(1)
The price to public will be between 98.67% and 100.00% of the face amount, reflecting, for certain investors, a foregone agent’s
commission with respect to sales of such notes; see “Additional Information About the Notes—Supplemental information
regarding plan of distribution; conflicts of interest” on page 21. Morgan Stanley & Co. LLC (“MS & Co.”)
will sell all of the notes that it purchases from us to an unaffiliated dealer. Investors that purchase and hold the notes in
fee-based accounts may be charged fees based on the amount of assets held in those accounts, including the notes.
(2) See
“Additional Information About the Notes—Use of proceeds and hedging” beginning on page 19.
The notes involve risks
not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 9.
The Securities and Exchange
Commission and state securities regulators have not approved or disapproved these notes, or determined if this document or the
accompanying product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The notes are not deposits
or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality,
nor are they obligations of, or guaranteed by, a bank.
You should read this document
together with the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks
below. Please also see “Terms” on page 3 and “Additional Information About the Notes” on page 19.
MORGAN STANLEY
About Your Prospectus
The notes are notes issued as part of MSFL’s Series
A Global Medium-Term Notes program. This prospectus includes this preliminary pricing supplement and the accompanying documents
listed below. This preliminary pricing supplement constitutes a supplement to the documents listed below and should be read in
conjunction with such documents:
●
Prospectus dated November 16, 2017
●
Product Supplement dated November 16, 2017
●
Index Supplement dated November 16, 2017
The information in this preliminary pricing supplement
supersedes any conflicting information in the documents listed above. In addition, some of the terms or features described in
the listed documents may not apply to your notes.
|
ESTIMATED
VALUE
The Original Issue Price of each note is $1,000. This price includes
costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently, the estimated
value of the notes on the Trade Date will be less than $1,000. We estimate that the value of each note on the Trade Date will be
approximately $979.70, or within $15.00 of that estimate. Our estimate of the value of the notes as determined on the Trade Date
will be set forth in the final pricing supplement.
What goes into the estimated value on the Trade Date?
In valuing the notes on the Trade Date, we take into account
that the notes comprise both a debt component and a performance-based component linked to the Underlier. The estimated value of
the notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the Underlier, instruments
based on the Underlier, 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 notes?
In determining the economic terms of the notes, including the
Threshold Level and the Maximum Settlement Amount, 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 notes would be more favorable to you.
What is the relationship between the estimated value on the
Trade Date and the secondary market price of the notes?
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to the Underlier, may vary from, and be lower than, the estimated
value on the Trade 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 notes are not fully deducted upon issuance, for a period
of up to 3 months following the issue date, to the extent that MS & Co. may buy or sell the notes in the secondary market,
absent changes in market conditions, including those related to the Underlier, 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
notes, and, if it once chooses to make a market, may cease doing so at any time.
SUMMARY
INFORMATION
The Digital NASDAQ-100 Index
®
-Linked
Notes, which we refer to as the notes, are unsecured obligations of MSFL and are fully and unconditionally guaranteed by Morgan
Stanley. The notes will pay no interest, do not guarantee any return of principal at maturity and have the terms described in
the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this document. The notes
are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
References to “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
|
Capitalized terms used but not defined herein have the meanings
assigned to them in the accompanying product supplement and prospectus. All references to “Threshold Level,” “Cash
Settlement Amount,” “Closing Level,” “Determination Date,” “Face Amount,” “Final
Underlier Level,” “Initial Underlier Level,” “Original Issue Price,” “Stated Maturity Date,”
“Trade Date,” “Underlier” and “Underlier Return” herein shall be deemed to refer to “initial
index value,” “payment at maturity,” “index closing value,” “valuation date,” “stated
principal amount,” “final index value,” “initial index value,” “issue price,” “maturity
date,” “pricing date,” “underlying index” and “index percent change,” respectively, as
used in the accompanying product supplement.
If the terms described herein are inconsistent with those described
in the accompanying product supplement or prospectus, the terms described herein shall control.
Terms
Issuer:
Morgan Stanley Finance LLC
Guarantor:
Morgan Stanley
Underlier:
NASDAQ-100 Index
®
Underlier Publisher:
Nasdaq Inc.
Notes:
The accompanying product supplement refers to the
notes as the “jump securities.”
Specified currency:
U.S. dollars (“$”)
Face Amount:
Each note will have a Face Amount of $1,000;
$ in the aggregate for all the notes; the aggregate Face Amount of notes may be increased if the Issuer, at its sole option, decides
to sell an additional amount of the notes on a date subsequent to the date hereof.
Denominations:
$1,000
and integral multiples thereof
Cash Settlement Amount (on the Stated Maturity Date):
For each $1,000 Face Amount of notes, we will pay you on the Stated Maturity Date an amount in cash equal to:
|
·
|
if the Final Underlier Level is
greater than
or
equal to
the Threshold Level, the Maximum Settlement Amount;
or
|
|
·
|
if the Final Underlier Level is
less than
the Threshold Level, the
sum
of (i) $1,000
plus
(ii) $1,000
times
the Underlier Return.
|
You will lose some or all of
your investment at maturity if the Final Underlier Level is less than the Initial Underlier Level. Any payment of the Cash Settlement
Amount is subject to the credit risk of Morgan Stanley.
Initial Underlier Level:
To be determined on the Trade
Date. The Initial Underlier Level may be higher or lower than the actual Closing Level of the Underlier on the Trade Date; provided
that the Initial Underlier Level will not be higher than the highest level of the Underlier on the Trade Date.
Final Underlier Level:
The Closing Level of the Underlier
on the Determination Date, except in the limited circumstances described under “Description of Securities—Postponement
of Valuation Date(s)” on page S-47 of the accompanying product supplement, and subject to adjustment as provided under
“Description of Securities—Discontinuance of Any
Underlying Index or Basket Index; Alteration of Method of Calculation” on page S-50 of the accompanying product supplement.
Underlier Return:
The
quotient
of (i) the
Final Underlier Level
minus
the Initial Underlier Level
divided
by (ii) the Initial Underlier Level, expressed as
a percentage
Threshold Level:
100.00% of the Initial Underlier Level
Maximum Settlement Amount (to be set on the Trade Date):
Expected to be between
$1,115.80 and $1,135.90
for each $1,000 Face Amount of notes (which is comprised of the $1,000 Face Amount
plus
an upside payment of between $115.80
and $135.90)
Trade Date:
Original Issue Date (Settlement Date) (to be set on the Trade
Date):
Expected to be the fifth scheduled Business Day following the Trade Date.
Determination Date (to be set on the Trade Date):
Expected
to be between 13 and 15 months after the Trade Date, subject to postponement as described in the accompanying product supplement
on page S-47 under “Description of Securities—Postponement of Valuation Date(s).”
Stated Maturity Date (to be set on the Trade Date):
Expected
to be the second scheduled Business Day following the Determination Date, subject to postponement as described below. The Stated
Maturity Date is a pricing term and will be determined by us on the Trade Date.
Postponement of Stated Maturity Date:
If the scheduled
Determination Date is not a Trading Day or if a market disruption event occurs on that day so that the Determination Date as postponed
falls less than two Business Days prior to the scheduled Stated Maturity Date, the Stated Maturity Date of the notes will be postponed
to the second Business Day following that Determination Date as postponed.
Closing Level:
As described under “Description of
Securities—Some Definitions—index closing value” on page S-37 of the accompanying product supplement.
Business Day:
As described under “Description of
Securities—Some Definitions—business day” on page S-36 of the accompanying product supplement
Trading Day:
As described under “Description of
Securities—Some Definitions—index business day” on page S-37 of the accompanying product supplement. The accompanying
product supplement refers to a Trading Day as an “index business day.”
Market disruption event:
The following replaces in its
entirety the section entitled “Description of Securities—Some Definitions—market disruption event” on page
S-37 of the accompanying product supplement:
“Market disruption event” means, with respect to
the Underlier:
(i) the occurrence or existence of:
|
(a)
|
a suspension, absence or material limitation of trading of securities then constituting 20 percent or more, by weight, of the
Underlier (or the successor index) on the relevant exchanges for such securities for more than two hours of trading or during the
one-half hour period preceding the close of the principal trading session on such relevant exchange, or
|
|
(b)
|
a breakdown or failure in the price and trade reporting systems of any relevant exchange as a result of which the reported
trading prices for securities then constituting 20 percent or more, by weight, of the Underlier (or the successor index), or futures
or options contracts, if available, relating to the Underlier (or the successor index) or the securities then constituting 20 percent
or more, by weight, of the Underlier during the last one-half hour preceding the close of the principal trading session on such
relevant exchange are materially inaccurate, or
|
|
(c)
|
the suspension, material limitation or absence of trading on any major U.S. securities market for trading in futures or options
contracts or exchange-traded funds related to the Underlier (or the successor index), or in futures or options contracts, if available,
relating
|
to securities then constituting 20 percent or more, by
weight, of the Underlier (or the successor index) for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such market,
in each case as determined by the calculation agent in its sole
discretion; and
(ii) a determination by the calculation agent in its sole discretion
that any event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to
unwind or adjust all or a material portion of the hedge position with respect to the notes.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the Underlier is suspended, absent or materially limited at that time,
then the relevant percentage contribution of that security to the value of the Underlier shall be based on a comparison of (x)
the portion of the value of the Underlier attributable to that security relative to (y) the overall value of the Underlier, in
each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
has occurred: (1) a limitation on the hours or number of days of trading will not constitute a market disruption event if it results
from an announced change in the regular business hours of the relevant exchange or market, (2) a decision to permanently discontinue
trading in the relevant futures or options contract or exchange-traded fund will not constitute a market disruption event, (3)
a suspension of trading in futures or options contracts or exchange-traded funds on the Underlier, or futures or options contracts,
if available, relating to securities then constituting 20 percent or more, by weight, of the Underlier, by the primary securities
market trading in such contracts or funds by reason of (a) a price change exceeding limits set by such securities exchange or market,
(b) an imbalance of orders relating to such contracts or funds, or (c) a disparity in bid and ask quotes relating to such contracts
or funds will constitute a suspension, absence or material limitation of trading in futures or options contracts or exchange-traded
funds related to the Underlier and (4) a “suspension, absence or material limitation of trading” on any relevant exchange
or on the primary market on which futures or options contracts or exchange-traded funds related to the Underlier are traded will
not include any time when such securities market is itself closed for trading under ordinary circumstances.
Trustee:
The Bank of New York Mellon
Calculation Agent:
MS & Co.
Issuer Notice To Registered
Security Holders, the Trustee and the Depositary:
In the event that the Stated Maturity Date is postponed due to postponement
of the Determination Date, the Issuer shall give notice of such postponement and, once it has been determined, of the date to which
the Stated Maturity Date has been rescheduled (i) to each registered holder of the notes by mailing notice of such 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 notes
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 Stated Maturity Date, the Business Day immediately preceding the scheduled Stated
Maturity Date and (ii) with respect to notice of the date to which the Stated Maturity Date has been rescheduled, the Business
Day immediately following the actual Determination Date for determining the Final Underlier Level.
The Issuer shall, or shall
cause the Calculation Agent to, (i) provide written notice to the Trustee and to the depositary of the amount of cash, if any,
to be delivered with respect to each Face Amount of notes, on or prior to 10:30 a.m. (New York City time) on the Business Day preceding
the Stated Maturity Date, and (ii) deliver the aggregate cash amount due with respect to the notes, if any, to the Trustee for
delivery to the depositary, as holder of the notes, on the Stated Maturity Date.
CUSIP no.:
61768D6K6
ISIN:
US61768D6K60
HYPOTHETICAL
EXAMPLES
The following table and
chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment
results and are intended merely to illustrate the impact that the various hypothetical Closing Levels of the Underlier on the Determination
Date could have on the Cash Settlement Amount.
The examples below are
based on a range of Final Underlier Levels that are entirely hypothetical; no one can predict what the level of the Underlier will
be on any day during the term of the notes, and no one can predict what the Final Underlier Level will be on the Determination
Date. The Underlier has at times experienced periods of high volatility — meaning that the level of the Underlier has changed
considerably in relatively short periods — and its performance cannot be predicted for any future period.
The information in the
following examples reflects hypothetical rates of return on the notes assuming that they are purchased on the Original Issue Date
at the Face Amount and held to the Stated Maturity Date. The value of the notes at any time after the Trade Date will vary based
on many economic and market factors, including interest rates, the volatility of the Underlier, our creditworthiness and changes
in market conditions, and cannot be predicted with accuracy. Any sale prior to the Stated Maturity Date could result in a substantial
loss to you.
Key
Terms and Assumptions
|
|
Face
Amount:
|
$1,000
|
Hypothetical
Maximum Settlement Amount:
|
$1,125.85 per $1,000 Face Amount of notes (112.585% of the Face Amount) (the midpoint of the expected range set forth on the cover of this pricing supplement)
|
Minimum
Cash Settlement Amount:
|
None
|
Threshold
Level:
|
100% of the Initial Underlier Level
|
·
Neither
a market disruption event nor a non-Trading Day occurs on the Determination Date.
·
No
discontinuation of the Underlier or alteration of the method by which the Underlier is calculated.
·
Notes
purchased on the Original Issue Date at the Face Amount and held to the Stated Maturity Date.
|
Moreover, we have not yet set the Initial Underlier Level that
will serve as the baseline for determining the Underlier Return and the amount that we will pay on the notes, if any, at maturity.
We will not do so until the Trade Date. As a result, the actual Initial Underlier Level may differ substantially from the level
of the Underlier at any time prior to the Trade Date.
For these
reasons
,
the actual performance of the Underlier over the term of the notes, as well as the Cash Settlement Amount, if any, may bear little
relation to the hypothetical examples shown below or to the historical levels of the Underlier shown elsewhere in this document.
For information about the historical levels of the Underlier during recent periods, see “The Underlier” below.
The levels in the left column of the table below represent hypothetical
Final Underlier Levels and are expressed as percentages of the Initial Underlier Level. The amounts in the right column represent
the hypothetical Cash Settlement Amount, based on the corresponding hypothetical Final Underlier Level (expressed as a percentage
of the Initial Underlier Level), and are expressed as percentages of the Face Amount of notes (rounded to the nearest one-thousandth
of a percent). Thus, a hypothetical Cash Settlement Amount of 100% means that the value of the cash payment that we would deliver
for each $1,000 Face Amount of notes on the Stated Maturity Date would equal 100% of the Face Amount of notes, based on the corresponding
hypothetical Final Underlier Level (expressed as a percentage of the Initial Underlier Level) and the assumptions noted above.
The numbers appearing in the table and chart below may have been rounded for ease of analysis.
Hypothetical Final Underlier Level
|
Hypothetical Cash Settlement Amount
|
(as Percentage of Initial Underlier Level)
|
(as Percentage of Face Amount)
|
200.000%
|
112.585%
|
175.000%
|
112.585%
|
150.000%
|
112.585%
|
125.000%
|
112.585%
|
120.000%
|
112.585%
|
115.000%
|
112.585%
|
110.000%
|
112.585%
|
105.500%
|
112.585%
|
100.000%
|
112.585%
|
95.000%
|
95.000%
|
90.000%
|
90.000%
|
85.000%
|
85.000%
|
80.000%
|
80.000%
|
75.000%
|
75.000%
|
50.000%
|
50.000%
|
25.000%
|
25.000%
|
0.000%
|
0.000%
|
If, for example, the Final Underlier Level were determined to
be 25.000% of the Initial Underlier Level, the Cash Settlement Amount would be 25.000% of the Face Amount of notes, as shown in
the table above. As a result, if you purchased your notes on the Original Issue Date at the Face Amount and held them to the Stated
Maturity Date, you would lose 75.000% of your investment. If you purchased your notes at a premium to the Face Amount, you would
lose a correspondingly higher percentage of your investment.
If the Final Underlier Level were determined to be 150.000% of
the Initial Underlier Level, the Cash Settlement Amount would be capped at the Maximum Settlement Amount (expressed as a percentage
of the Face Amount), or 112.585% of each $1,000 Face Amount of notes, as shown in the table above. As a result, if you purchased
the notes on the Original Issue Date at the Face Amount and held them to the Stated Maturity Date, you would not benefit from any
increase in the Final Underlier Level above the Initial Underlier Level.
Payoff Diagram
The following chart shows a graphical illustration of the hypothetical
Cash Settlement Amount (expressed as a percentage of the Face Amount of notes), if the Final Underlier Level (expressed as a percentage
of the Initial Underlier Level) were any of the hypothetical levels shown on the horizontal axis. The chart shows that any hypothetical
Final Underlier Level (expressed as a percentage of the Initial Underlier Level) of less than 100% (the section left of the 100%
marker on the horizontal axis) would result in a hypothetical Cash Settlement Amount of less than 100% of the Face Amount of notes
(the section below the 100% marker on the vertical axis), and, accordingly, in a loss of principal to the holder of the notes.
The chart also shows that any hypothetical Final Underlier Level (expressed as a percentage of the Initial Underlier Level) of
greater than or equal to 100% (the section right of the 100% marker on the horizontal axis) would result in a capped return on
your investment and a Cash Settlement Amount equal to the Maximum Settlement Amount.
Hypothetical Payoff Diagram
|
|
RISK
FACTORS
The following is a non-exhaustive list of certain key risk factors for investors in the notes. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement and prospectus. We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the notes.
|
The Notes Do Not Pay Interest Or Guarantee
The Return Of Any Of Your Principal
The terms of the notes differ from those of ordinary debt securities
in that the notes do not pay interest and do not guarantee any return of principal at maturity. If the Final Underlier Level is
less than the Initial Underlier Level, the Cash Settlement Amount will be an amount that is less than the Face Amount of the notes,
reflecting the full decline in the level of the Underlier over the term of the notes, without any buffer. As there is no minimum
Cash Settlement Amount on the notes, you could lose your entire initial investment.
Also, the market price of your notes prior to the Stated Maturity
Date may be significantly lower than the purchase price you pay for your notes. Consequently, if you sell your notes before the
Stated Maturity Date, you may receive significantly less than the amount of your investment in the notes.
The Appreciation Potential Of The Notes
Is Limited By The Maximum Settlement Amount
The appreciation potential of the notes is limited by the Maximum
Settlement Amount of
$1,115.80 to $1,135.90
per note, or 111.58% to 113.59% of the Face Amount. The actual Maximum Settlement Amount will be determined on the Trade Date.
Because the Cash Settlement Amount will be limited to 111.58% to 113.59% of the Face Amount for the notes, any increase in the
Final Underlier Level over the Threshold Level will not increase the return on the notes, even if the Final Underlier Level is
significantly greater than the Initial Underlier Level.
The Stated Maturity Date Of The Notes
Is A Pricing Term And Will Be Determined By Us On The Trade Date
We will not fix the Stated Maturity Date until the Trade Date,
and so you will not know the exact term or the Determination Date of the notes at the time that you make your investment decision.
The term could be as short as approximately 1 year and 1 month, and as long as approximately 1 year and 3 months. You should be
willing to hold your notes for up to approximately 1 year and 3 months, and the Stated Maturity Date selected by us could have
an impact on the value of the notes. For example, if the Underlier appreciates, a note with a shorter term will result in a higher
annualized return based on that appreciation than a note with a longer term. In addition, the Underlier may be lower on the actual
Determination Date and the Cash Settlement Amount may be lower than if the Determination Date and Stated Maturity Date had been
set differently in the two-month range.
If You Purchase Your Notes At A Premium
To The Face Amount, The Return On Your Investment Will Be Lower Than The Return On Notes Purchased At The Face Amount, And The
Impact Of Certain Key Terms Of The Notes Will Be Negatively Affected
The Cash Settlement Amount will not be adjusted based on the
issue price you pay for the notes. If you purchase notes at a price that differs from the Face Amount of notes, then the return
on your investment in such notes held to the Stated Maturity Date will differ from, and may be substantially less than, the return
on notes purchased at the Face Amount. If you purchase your notes at a premium to the Face Amount and hold them to the Stated Maturity
Date, the return on your investment in the notes will be lower than it would have been had you purchased the notes at the Face
Amount or at a discount to the Face Amount. In addition, the impact of the Maximum Settlement Amount on the return on your investment
will depend upon the price you pay for your notes relative to the Face Amount. The Cash Settlement Amount will be limited to the
Maximum Settlement Amount, which would represent a lower percentage return relative to your initial investment than it would have
been had you purchased the notes at the Face Amount.
The Underlier Reflects The Price Return
Of The Stocks Composing The Underlier, Not A Total Return
The return on the notes is based on the performance of the Underlier,
which reflects the changes in the market prices of the stocks composing the Underlier. It is not, however, linked to a “total
return” version of the Underlier, which, in addition to reflecting those price returns, would also reflect all dividends
and other distributions paid on the stocks composing the Underlier. The return on the notes will not include such a total return
feature.
The Market Price Will Be Influenced By
Many Unpredictable Factors
Several factors, many of which are beyond our control, will influence
the value of the notes in the secondary market and the price at which MS & Co. may be willing to purchase or sell the notes
in the secondary market, including: the level of the Underlier, volatility (frequency and magnitude of changes in value) of the
Underlier and dividend yield of the Underlier, interest and yield rates, time remaining to maturity, geopolitical conditions and
economic, financial, political and regulatory or judicial events that affect the Underlier or equities markets generally and which
may affect the Final Underlier Level of the Underlier and any actual or anticipated changes in our credit ratings or credit spreads.
The level of the Underlier may be, and has been, volatile, and we can give you no assurance that the volatility will lessen. See
“The Underlier” below. You may receive less, and possibly significantly less, than the Face Amount per note if you
try to sell your notes prior to maturity.
The
Notes Are Subject To Our Credit Risk, And Any Actual Or Anticipated Changes To Our Credit Ratings Or Credit Spreads May Adversely
Affect The Market Value Of The Notes
You are dependent on our
ability to pay all amounts due on the notes at maturity, and therefore you are subject to our credit risk. If we default on our
obligations under the notes, your investment would be at risk and you could lose some or all of your investment. As a result, the
market value of the notes prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the notes.
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 the notes if they make claims in respect of such notes 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 the notes should accordingly assume that in any such proceedings they could 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.
The Amount Payable On The Notes Is Not
Linked To The Level Of The Underlier At Any Time Other Than The Determination Date
The Final Underlier Level will be based on the Closing Level
on the Determination Date, subject to adjustment for non-Trading Days and certain market disruption events. Even if the level of
the Underlier appreciates prior to the Determination Date but then drops by the Determination Date, the Cash Settlement Amount
may be less, and may be significantly less, than it would have been had the Cash Settlement Amount been linked to the level of
the Underlier prior to such drop. Although the actual level of the Underlier on the Stated Maturity Date or at other times during
the term of the notes may be higher than the Final Underlier Level, the Cash Settlement Amount will be based solely on the Closing
Level on the Determination Date.
Investing In The Notes Is Not Equivalent
To Investing In The Underlier
Investing in the notes is not equivalent to investing in the
Underlier or its component stocks. Investors in the notes will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to stocks that constitute the Underlier.
Adjustments To The Underlier Could Adversely
Affect The Value Of The Notes
The publisher of the Underlier may add, delete or substitute
the stocks constituting the Underlier or make other methodological changes that could change the level of the Underlier. The publisher
of the Underlier may discontinue or suspend calculation or publication of the Underlier at any time. In these circumstances, the
calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued Underlier
and is permitted to consider indices that are calculated and published by the calculation agent or any of its affiliates. If the
calculation agent determines that there is no appropriate successor index, the Cash Settlement Amount on the notes will be an amount
based on the closing prices at maturity of the securities composing the Underlier at the time of such discontinuance, without rebalancing
or substitution, computed by the calculation agent in accordance with the formula for calculating the Underlier last in effect
prior to discontinuance of the Underlier.
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
Notes In The Original Issue Price Reduce The Economic Terms Of The Notes, Cause The Estimated Value Of The Notes 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 notes 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 notes in the Original Issue Price and the lower rate we are willing to pay as issuer make the economic terms of the
notes less favorable to you than they otherwise would be.
However, because the costs associated with issuing, selling,
structuring and hedging the notes are not fully deducted upon issuance, for a period of up to 3 months following the issue date,
to the extent that MS & Co. may buy or sell the notes in the secondary market, absent changes in market conditions, including
those related to the Underlier, 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 Notes 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 notes than those generated by others, including other dealers in the market, if they attempted to value the notes.
In addition, the estimated value on the Trade Date does not represent a minimum or maximum price at which dealers, including MS
& Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value of your notes
at any time after the date hereof 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.
The Notes Will Not Be Listed On Any Securities
Exchange And Secondary Trading May Be Limited
The notes will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the notes. MS & Co. may, but is not obligated to, make a market in the notes
and, if it once chooses to make a market, may cease doing so at any time. 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 notes, 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 notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the
notes easily. Since other broker-dealers may not participate significantly in the secondary market for the notes, the price at
which you may be able to trade your notes 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 notes, it is likely that there would be no secondary market
for the notes. Accordingly, you should be willing to hold your notes to maturity.
The Calculation Agent, Which Is A Subsidiary
Of Morgan Stanley And An Affiliate Of MSFL, Will Make Determinations With Respect To The Notes
As calculation agent, MS & Co. will determine the Initial
Underlier Level and the Final Underlier Level and will calculate the Cash Settlement Amount you receive at maturity, if any. Moreover,
certain determinations made by MS & Co. in its capacity as calculation agent, may require it to exercise discretion and make
subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of
a successor index or calculation of the Final Underlier Level in the event of a market disruption event or discontinuance of the
Underlier. These potentially subjective determinations may adversely affect the Cash Settlement Amount at maturity, if any. For
further information regarding these types of determinations, see “Description of Securities—Postponement of Valuation
Date(s)” and “—Calculation Agent and Calculations” in the accompanying product supplement. In addition,
MS & Co. has determined the estimated value of the notes on the Trade Date.
Hedging And Trading Activity By Our Affiliates
Could Potentially Adversely Affect The Value Of The Notes
One or more of our affiliates and/or third-party dealers expect
to carry out hedging activities related to the notes (and possibly to other instruments linked to the Underlier or its component
stocks), including trading in the stocks that constitute the Underlier as well as in other instruments related to the Underlier.
As a result, these entities may be unwinding or adjusting hedge positions during the term of the notes, and the hedging strategy
may involve greater and more frequent dynamic adjustments to the hedge as the Determination Date approaches. Some of our affiliates
also trade the stocks that constitute the Underlier and other financial instruments related to the Underlier on a regular basis
as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the Trade
Date could potentially increase the Initial Underlier Level, and, therefore, could increase the level at or above which the Underlier
must close on the Determination Date so that investors do not suffer a loss on their initial investment in the notes. Additionally,
such hedging or trading activities during the term of the notes, including on the Determination Date, could adversely affect the
level of the Underlier on the Determination Date, and, accordingly, the Cash Settlement Amount an investor will receive at maturity,
if any. Furthermore, if the dealer from which you purchase notes is to conduct trading and hedging activities for us in connection
with the notes, that dealer may profit in connection with such trading and hedging activities and such profit, if any, will be
in addition to the compensation that the dealer receives for the sale of the notes to you. You should be aware that the potential
to earn a profit in connection with hedging activities may create a further incentive for the dealer to sell the notes to you,
in addition to the compensation they would receive for the sale of the notes.
We May Sell An Additional Aggregate Face
Amount Of Notes At A Different Issue Price
At our sole option, we may decide to sell an additional aggregate
Face Amount of notes subsequent to the date hereof. The issue price of the notes in the subsequent sale may differ substantially
(higher or lower) from the issue price you paid as provided on the cover of this document.
Past Performance is No Guide to Future
Performance
The actual performance of the Underlier over the term of the
notes, as well as the amount payable at maturity, may bear little relation to the historical Closing Levels of the Underlier or
to the hypothetical return examples set forth herein. We cannot predict the future performance of the Underlier.
The U.S. Federal Income Tax Consequences
Of An Investment In The Notes Are Uncertain
Please read the discussion under “Tax Considerations”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement (together,
the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the notes. If
the
Internal Revenue Service (the “IRS”) were successful
in asserting an alternative treatment, the timing and character of income on the notes might differ significantly from the tax
treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize
the notes as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the
notes every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect
of the notes as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA” in the
accompanying product supplement, the withholding rules commonly referred to as “FATCA” would apply to the notes if
they were recharacterized as debt instruments. However, recently proposed regulations (the preamble to which specifies that taxpayers
are permitted to rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable
disposition. We do not plan to request a ruling from the IRS regarding the tax treatment of the notes, and the IRS or a court may
not agree with the tax treatment described in the Tax Disclosure Sections.
In 2007, the U.S. Treasury Department and the IRS released a
notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to
which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” rule, which very generally can operate to
recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments
on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive
effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of
an investment in the notes, 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.
THE UNDERLIER
The NASDAQ-100 Index
®
, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index includes companies across a variety
of major industry groups. At any moment in time, the value of the NASDAQ-100 Index equals the aggregate value of the then-current
NASDAQ-100 Index share weights of each of the NASDAQ-100 Index component securities, which are based on the total shares outstanding
of each such NASDAQ-100 Index component security, multiplied by each such security’s respective last sale price on NASDAQ
(which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the
reported NASDAQ-100 Index value. For additional information about the NASDAQ-100 Index
®
, see the information set
forth under “NASDAQ-100 Index
®
” in the accompanying index supplement.
The following replaces, in its entirety, the information related
to the underlier set forth under “The NASDAQ 100 Index
®
—Rebalancing of the NASDAQ-100 Index for Modified
Capitalization-weighted Methodology” on page IS-35 of the accompanying index supplement:
Effective after the close of trading on December 18,
1998, the NASDAQ-100 Index has been calculated under a “modified capitalization-weighted” methodology, which is a hybrid
between equal weighting and conventional capitalization weighting. This methodology is expected to: (1) retain in general the economic
attributes of capitalization weighting; (2) promote portfolio weight diversification (thereby limiting domination of the NASDAQ-100
Index by a few large stocks); (3) reduce NASDAQ-100 Index performance distortion by preserving the capitalization ranking of companies;
and (4) reduce market impact on the smallest NASDAQ-100 Index component securities from necessary weight rebalancings.
Under the methodology employed, on a quarterly basis
coinciding with NASDAQ’s quarterly scheduled weight adjustment procedures described above, the NASDAQ-100 Index will be rebalanced
if either one or both of the following two weight distribution requirements are not met: (1) the current weight of the single largest
market capitalization NASDAQ-100 Index component security must be less than or equal to 24.0% and (2) the “collective weight”
of those NASDAQ-100 Index component securities whose individual current weights are in excess of 4.5%, when added together, must
be less than or equal to 48.0%.
If either one or both of these weight distribution
requirements are not met upon quarterly review or NASDAQ determines that a special rebalancing is required, a weight rebalancing
will be performed in accordance with the following plan. First, relating to weight distribution requirement (1) above, if the current
weight of the single largest NASDAQ-100 Index component security exceeds 24.0%, then the weights of all stocks with weights greater
than 4.5% will be scaled down proportionately towards 1.0% by enough for the adjusted weight of the single largest NASDAQ-100 Index
component security to be set to 20.0%. Second, relating to weight distribution requirement (2) above, for those NASDAQ-100 Index
component securities whose individual current weights or adjusted weights in accordance with the preceding step are in excess of
4.5%, if their “collective weight” exceeds 48.0%, then the weights of all stocks with weights greater than 4.5% will
be scaled down proportionately towards 1.0% by just enough for the “collective weight,” so adjusted, to be set to 40.0%.
On an annual basis coinciding with the annual evaluation
in December, the NASDAQ-100 Index
®
will be rebalanced if it is determined that the collective weight of the five
largest NASDAQ-100 Index
®
stocks by weight, when added together, exceeds 40.0% of the NASDAQ-100 Index
®
.
In addition, NASDAQ may conduct a special rebalancing if it is determined necessary to maintain the integrity of the NASDAQ-100
Index. If the weight distribution requirement is met upon the annual evaluation or it is determined that a special rebalancing
is required, a weight rebalancing will be performed. If the collective weight of the five largest NASDAQ-100 Index
®
stocks by weight, when added together, exceeds 40.0% of the NASDAQ-100 Index
®
at the time of the annual evaluation,
those top five NASDAQ-100 Index
®
stocks will be scaled down proportionately towards 1.0% for the collective weight,
so adjusted, to be set to 38.5%. The excess weight due to capping from the five largest, capped NASDAQ-100 Index
®
stocks is redistributed to the remaining NASDAQ-100 Index
®
stocks.
Thereafter, all other NASDAQ-100 Index
®
stocks are capped at 4.5% and the weight is proportionately redistributed to all NASDAQ-100 Index
®
stocks that have
not yet been capped. If, after capping the top five NASDAQ-100 Index
®
stocks to reduce the aggregate weight to 38.5%,
the fifth largest NASDAQ-100 Index
®
stock has a weight less than 4.5%, all remaining securities are capped at the
weight of the fifth largest NASDAQ-100 Index
®
stock.
In the event of a special rebalance, either coinciding with the
quarterly review or annual evaluation (or at any other point in time where necessary), prior month-end shares outstanding and prices
for each NASDAQ-100 Index
®
stock are utilized to calculate the weights that require capping and the associated index
shares. If a special rebalance were to occur in accordance with the quarterly scheduled index adjustment or annual evaluation,
the NASDAQ-100 Index share weights will be determined anew based upon the last sale prices and aggregate capitalization of the
NASDAQ-100 Index at the close of trading on the last day in February, May, August and November. Changes to the NASDAQ-100 Index
share weights will be made effective after the close of trading on the third Friday in March, June, September, and December and
an adjustment to the NASDAQ-100 Index divisor will be made to ensure continuity of the NASDAQ-100 Index. Ordinarily, new rebalanced
weights will be determined by applying the above procedures to the current NASDAQ-100 Index share weights. However, NASDAQ may
from time to time determine rebalanced weights, if necessary, by instead applying the above procedure to the actual current market
capitalization of the NASDAQ-100 Index components. In such instances, NASDAQ would announce the different basis for rebalancing
prior to its implementation.
In addition, information about the Underlier may be obtained
from other sources including, but not limited to, the Underlier Publisher’s website (including information regarding (i)
the Underlier’s top ten constituents and weights and (ii) the Underlier’s sector weightings). We are not incorporating
by reference into this document the website or any material it includes. Neither the issuer nor the agent makes any representation
that such publicly available information regarding the Underlier is accurate or complete.
Information as of market close on April 12, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
Current Index Value:
|
7,628.150
|
52 Weeks Ago:
|
6,656.255
|
52 Week High (on 8/29/2018):
|
7,660.180
|
52 Week Low (12/24/2018):
|
5,899.354
|
|
|
The following graph sets forth the daily Closing Levels of the
Underlier for each quarter in the period from January 1, 2014 through April 12, 2019. The Closing Level of the Underlier on April
12, 2019 was 7,628.150. We obtained the information in the graph below from Bloomberg Financial Markets, without independent verification.
The Underlier has at times experienced periods of high volatility. The actual performance of the Underlier over the term of the
notes, as well as the amount payable at maturity, may bear little relation to the historical Closing Levels of the Underlier or
to the hypothetical return examples set forth herein. We cannot predict the future performance of the Underlier. You should not
take the historical levels of the Underlier as an indication of its future performance, and no assurance can be given as to the
Closing Level of the Underlier on the Determination Date.
NASDAQ-100 Index
®
Daily Underlier Closing Values
January 1, 2014 to April 12, 2019
|
|
“Nasdaq
®
,” “NASDAQ-100
®
”
and “NASDAQ-100 Index
®
” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index
®
”
in the accompanying index supplement.
TAX CONSIDERATIONS
Although there is uncertainty regarding the U.S. federal income
tax consequences of an investment in the notes due to the lack of governing authority, in the opinion of our counsel, Davis Polk
& Wardwell LLP, under current law, and based on current market conditions, a note should be treated as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion is
based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.
Assuming this treatment of the notes is respected and subject
to the discussion in “United States Federal Taxation” in the accompanying product supplement, the following U.S. federal
income tax consequences should result based on current law:
|
§
|
A U.S. Holder should not be required to recognize taxable income over
the term of the notes prior to settlement, other than pursuant to a sale or exchange.
|
|
§
|
Upon sale, exchange or settlement of the notes, a U.S. Holder should
recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the notes.
Such gain or loss should be long-term capital gain or loss if the investor has held the notes for more than one year, and short-term
capital gain or loss otherwise.
|
In 2007,
the U.S. Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on
the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in
particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks
for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether
short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status
of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which
income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these
instruments are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize
certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate
transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues
could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect.
As discussed
in the accompanying product supplement, Section 871(m) of the Internal Revenue Code of 1986, as amended, 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, 2021 that do not have a delta of one with
respect to any Underlying Security. Based on the terms of the notes and current market conditions, we expect that the notes 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 final pricing supplement. Assuming that the notes do not have a delta of one with respect to any Underlying Security, our
counsel is of the opinion that the notes 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 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 notes.
Both U.S.
and non-U.S. investors considering an investment in the notes should read the discussion under “Risk Factors” in this
document and the discussion under “United States Federal Taxation” in the accompanying product supplement and consult
their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any
state,
local or non-U.S. taxing jurisdiction.
The discussion in the preceding paragraphs under “Tax
considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the
accompanying product supplement, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions
with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of an investment in the notes.
ADDITIONAL
INFORMATION ABOUT THE NOTES
No interest or dividends:
The notes will not pay interest
or dividends.
No listing:
The notes will not be listed on any securities
exchange.
No redemption:
The notes will not be subject to any redemption
right.
Purchase
at amount other than Face Amount:
The amount we will pay you on the Stated Maturity Date
for your notes will not be adjusted based on the issue price you pay for your notes, so if you acquire notes at a premium (or discount)
to the Face Amount and hold them to the Stated Maturity Date, it could affect your investment in a number of ways. The return on
your investment in such notes will be lower (or higher) than it would have been had you purchased the notes at the Face Amount.
Additionally, the Maximum Settlement Amount would represent a lower (or higher) percentage return than it would have
had you purchased the notes at the Face Amount.
See
“Risk Factors—If You Purchase Your Notes At A Premium To The Face Amount, The Return On Your Investment Will Be Lower
Than The Return On Notes Purchased At The Face Amount, And The Impact Of Certain Key Terms Of The Notes Will Be Negatively Affected”
beginning on page 9 of this document.
Use of proceeds and hedging:
The proceeds from the sale
of the notes will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per note issued. The costs
of the notes borne by you and described on page 2 comprise the cost of issuing, structuring and hedging the notes.
On or prior to the Trade Date, we will hedge our anticipated
exposure in connection with the notes, by entering into hedging transactions with our affiliates and/or third-party dealers. We
expect our hedging counterparties to take positions in stocks of the Underlier, futures and options contracts on the Underlier,
and any component stocks of the Underlier listed on major securities markets or positions in any other available securities or
instruments that they may wish to use in connection with such hedging. Such purchase activity could increase the level of the Underlier
on the Trade Date, and therefore increase the level at or above which the Underlier must close on the Determination Date so that
investors do not suffer a loss on their initial investment in the notes. In addition, through our affiliates, we are likely to
modify our hedge position throughout the term of the notes, including on the Determination Date, by purchasing and selling the
stocks constituting the Underlier, futures or options contracts on the Underlier or its component stocks listed on major securities
markets or positions in any other available securities or 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 notes, and the hedging strategy
may involve greater and more frequent dynamic adjustments to the hedge as the Determination Date approaches. We cannot give any
assurance that our hedging activities will not affect the level of the Underlier, and, therefore, adversely affect the value of
the notes or the payment you will receive at maturity, if any. For further information on our use of proceeds and hedging, see
“Use of Proceeds and Hedging” in the accompanying product supplement.
Benefit Plan Investor Considerations:
Each fiduciary of
a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) (a “Plan”), should consider the fiduciary standards of ERISA in the context of the
Plan’s particular circumstances before authorizing an investment in the notes. 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 notes 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 notes 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 notes. 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 Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related lending
transactions, provided that neither the Issuer of the notes 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 notes.
Because we may be considered a party in interest with respect
to many Plans, the notes 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
notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes
that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes 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 notes 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 notes on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The notes are contractual financial instruments. The financial
exposure provided by the notes 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 notes. The notes 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 notes.
Each purchaser or holder of any notes acknowledges and agrees
that:
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(i)
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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 notes, (B) the purchaser or holder’s investment in
the notes, or (C) the exercise of or failure to exercise any rights we have under or with respect to the notes;
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(ii)
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we and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to
the notes and (B) all hedging transactions in connection with our obligations under the notes;
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(iii)
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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;
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(iv)
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our interests are adverse to the interests of the purchaser or holder; and
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(v)
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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.
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Each purchaser and holder of the notes has exclusive responsibility
for ensuring that its purchase, holding and disposition of the notes do not violate the prohibited transaction rules of ERISA or
the Code or any Similar Law. The sale of any notes 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 preliminary pricing supplement is or is intended to
be investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these notes
should consult and rely on their own counsel and advisers as to whether an investment in these notes 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 notes 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 notes 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 notes, either directly or indirectly.
Supplemental information regarding plan of distribution; conflicts
of interest:
We expect to agree to sell to MS & Co., and MS & Co. expects to agree to purchase from us, the aggregate
face amount of the offered notes specified on the cover of this pricing supplement. MS & Co. proposes initially to offer the
notes to an unaffiliated securities dealer at the price to public set forth on the cover of this pricing supplement less a concession
not in excess of 1.33% of the face amount. The price to public will be between 98.67% and 100.00% of the face amount, which reflects,
for certain fee-based advisory accounts, a foregone agent’s commission with respect to sales of such notes (i.e., the agent’s
commission specified on the cover of this pricing supplement with respect to such notes will be reduced, potentially down to 0.00%).
MS & Co., the agent for this offering, is our affiliate. Because MS & Co. is both our affiliate and a member of the Financial
Industry Regulatory Authority, Inc. (“FINRA”), the underwriting arrangements for this offering must comply with the
requirements of FINRA Rule 5121 regarding a FINRA member firm’s distribution of the securities of an affiliate and related
conflicts of interest. In accordance with FINRA Rule 5121, MS & Co. may not make sales in offerings of the notes to any of
its discretionary accounts without the prior written approval of the customer.
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 notes. When MS & Co. prices this offering of notes, it will determine the economic terms of the notes, including the Maximum
Settlement Amount, such that for each note the estimated value on the Trade Date will be no lower than the minimum level described
in “Estimated Value” 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 notes 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.
Settlement:
We expect to deliver the notes against payment
for the notes on the Original Issue Date, which will be the fifth scheduled Business Day following the Trade Date. Under Rule 15c6-1
of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two Business
Days, unless the parties to a trade expressly agree otherwise. Accordingly, if the Original Issue Date is more than two Business
Days after the Trade Date, purchasers who wish to
transact in the notes more than two Business Days prior to the
Original Issue Date will be required to specify alternative settlement arrangements to prevent a failed settlement.
CONTACT
Morgan Stanley clients may contact their local Morgan Stanley
branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).
All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured
Investment Sales at (800) 233-1087.
WHERE
YOU CAN FIND MORE INFORMATION
MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the product supplement and the index supplement) with the Securities and Exchange Commission,
or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the
product supplement, the index supplement and any other documents relating to this offering that MSFL and Morgan Stanley have filed
with the SEC for more complete information about MSFL, Morgan Stanley and this offering. You may get these documents without cost
by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively, MSFL and/or Morgan Stanley will arrange to send you the product
supplement, index supplement and prospectus if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at.www.sec.gov.as
follows:
Product Supplement dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement, in the index supplement or in the prospectus.
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