Monitoring Period End-Dates
and Coupon Payment Dates
Monitoring Period End-Dates
|
Coupon Payment Dates
|
December 16, 2019
|
December 19, 2019
|
January 15, 2020
|
January 21, 2020
|
February 18, 2020
|
February 21, 2020
|
March 16, 2020
|
March 19, 2020
|
April 15, 2020
|
April 20, 2020
|
May 15, 2020
|
May 20, 2020
|
June 15, 2020
|
June 18, 2020
|
July 15, 2020
|
July 20, 2020
|
August 17, 2020
|
August 20, 2020
|
September 15, 2020
|
September 18, 2020
|
October 15, 2020
|
October 20, 2020
|
November 16, 2020
|
November 19, 2020
|
December 15, 2020
|
December 18, 2020
|
January 15, 2021
|
January 21, 2021
|
February 16, 2021
|
February 19, 2021
|
March 15, 2021
|
March 18, 2021
|
April 15, 2021
|
April 20, 2021
|
May 17, 2021
|
May 20, 2021
|
June 15, 2021
|
June 18, 2021
|
July 15, 2021
|
July 20, 2021
|
August 16, 2021
|
August 19, 2021
|
September 15, 2021
|
September 20, 2021
|
October 15, 2021
|
October 20, 2021
|
November 15, 2021
|
November 18, 2021
|
December 15, 2021
|
December 20, 2021
|
January 18, 2022
|
January 21, 2022
|
February 15, 2022
|
February 18, 2022
|
March 15, 2022
|
March 18, 2022
|
April 18, 2022
|
April 21, 2022
|
May 16, 2022 (final valuation date)
|
May 19, 2022 (maturity date)
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Investment Summary
Contingent Coupon Securities
Principal at Risk Securities
The Contingent Coupon Securities Linked to the S&P 500®
Index due May 19, 2022, which we refer to as the securities, provide an opportunity for investors to earn a contingent monthly
coupon at an annual rate of at least 2.50% (corresponding to approximately $2.083 per month per security, to be determined on the
pricing date) but only if and for as long as the index closing value of the underlying index has remained greater than or equal
to 80% of the initial index value, which we refer to as the trigger level, on each day during the term of the securities.
If the index closing value of the underlying index is less than the trigger level on any day during the term of the securities,
a trigger event will have occurred and you will not receive any contingent monthly coupon payment for the corresponding monthly
period or for any subsequent monthly period. Therefore, investors in the securities will permanently forfeit their ability
to receive subsequent contingent monthly coupon payments if the index closing value declines below the trigger level on any day
during the 30-month term of the securities.
In addition, at maturity, if a trigger event has not occurred,
investors will receive the stated principal amount of the securities plus the final contingent monthly coupon payment but will
not participate in any performance of the underlying index. However, if a trigger event has occurred, investors will receive
a return that reflects the performance of the underlying index over the term of the securities times the leverage factor
of 125%. Therefore, if a trigger event occurs and the underlying index recovers such that the final index value is greater than
the trigger level, investors will receive the stated principal amount of their investment plus a positive return of 1.25% for every
1% of the initial index value by which the final index value exceeds the trigger level. However, if a trigger event occurs and
the final index value is less than the trigger level, investors will lose 1.25% for every 1% of the initial index value that the
underlying index declines below the trigger level. Under these circumstances, investors will lose some or all of their investment
in the securities.
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.
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 $990.10, or within $15.00 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 index. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying index, instruments based on the underlying index, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the trigger level and the leverage factor, 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 index, 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
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
the underlying index, and to our secondary market credit spreads,
it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected in your
brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Key Investment Rationale
The securities do not guarantee the repayment of any principal
at maturity and offer investors an opportunity to earn a contingent monthly coupon of at least 2.50% (to be determined on the pricing
date) per annum but only if and for as long as the index closing value of the underlying index has remained greater than
or equal to 80% of the initial index value, which we refer to as the trigger level, on each day during the term of the securities.
In addition, if a trigger event occurs, the investor becomes exposed to the downside performance of the underlying index at maturity.
The payment at maturity may be less than the stated principal amount of the securities and may be zero. The payment at maturity
will vary depending on whether or not a trigger event occurs, as follows:
Scenario
1: A trigger event does not occur on any day during the term of the securities.
|
This scenario assumes that the underlying index closes at or above the trigger level on every day during the 30-month term of the securities, including on the final valuation date. Therefore, a trigger event has not occurred. In this scenario, investors receive the contingent monthly coupons throughout the term of the securities. At maturity, investors receive the stated principal amount and the contingent monthly coupon with respect to the final valuation date. Investors will not participate in any appreciation in the value of the underlying index from the initial index value, and the return on the securities will be limited to the contingent monthly coupons that are paid on the securities.
|
Scenario
2: A trigger event occurs on any day during the term of the securities. Investors will suffer a loss of all subsequent
contingent monthly coupons and possible loss of principal at maturity.
|
This scenario assumes that the underlying index closes
below the trigger level on any day during the 30-month term of the securities. Therefore, a trigger event has occurred.
In this scenario, investors will receive contingent monthly coupons only for the monitoring period(s) prior to the monitoring
period in which the trigger event occurs, if any. Therefore, investors either do not receive any contingent monthly coupons or
they receive contingent monthly coupons on only a limited number of coupon payment dates.
In addition, at maturity, investors will receive a return
that reflects the performance of the underlying index over the term of the securities times the leverage factor of 125%.
This means that, if a trigger event occurs and the underlying index recovers such that the final index value is greater than the
trigger level, investors will receive the stated principal amount of their investment plus a positive return of 1.25% for every
1% of the initial index value by which the final index value exceeds the trigger level. However, if a trigger event occurs and
the final index value is less than the trigger level, investors will lose 1.25% for every 1% of the initial index value that the
underlying index declines below the trigger level. Under these circumstances, investors will lose some or all of their investment
in the securities.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
How the Contingent Coupon Securities Work
Monitoring Period End-Dates
|
|
You
will receive a contingent monthly coupon on the applicable coupon payment date.
|
|
|
|
No
contingent monthly coupon payment will be made on the applicable coupon payment date or on any subsequent coupon payment date.
Investors will receive no further contingent monthly coupon payments for the remaining term of the securities.
|
|
You
will receive (a) $1,000 plus (b) the contingent monthly coupon applicable to the
final valuation date.
|
|
|
|
You will receive:
$1,000 + [$1,000 x (index strike return x
leverage factor)]
Under these circumstances,
if the underlying index recovers such that the final index value is greater than the trigger level, investors will receive the
stated principal amount of their investment plus a positive return based on the performance of the underlying index. However,
if the final index value is less than the trigger level, investors will lose some or all of their investment.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples are for illustrative purposes
only. The actual contingent monthly coupon rate, initial index value and trigger level will be determined on the pricing date.
Any payment on the securities is subject to our credit risk. The numbers in the hypothetical examples may be rounded for ease of
analysis. The below examples are based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Hypothetical initial index value:
|
3,000
|
Hypothetical trigger level:
|
2,400, which is 80% of the hypothetical initial index value
|
Hypothetical contingent monthly coupon rate:
|
2.50% per annum (corresponding to $2.083 per month per security)*
|
Leverage Factor:
|
125%
|
Total number of monthly periods:
|
30
|
* The actual contingent coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 day-count basis.
The hypothetical contingent monthly coupon payment of $2.083 is used in these examples for ease of analysis.
Example 1: A trigger event HAS NOT occurred
and the final index value is greater than the initial index value.
Date
|
Trigger event has occurred on or prior to monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$2.083
|
Second monitoring period end-date
|
No
|
$2.083
|
Third through twenty-ninth monitoring period end-dates
|
No
|
$2.083 each (27 x $2.083 = $56.241)
|
Final valuation date
(final index value = 3,500)
|
No
|
$1,002.083
|
Total payments over the 2.5-year term of the securities
|
|
$1,062.49
|
Because a trigger event has not occurred, investors
receive the contingent monthly coupon payment on each coupon payment date over the term of the securities. Because a trigger event
has not occurred, investors do not participate in the performance of the underlying index, and the payment at maturity for each
$1,000 principal amount of securities will be $1,002.083 (equal to the stated principal amount of $1,000 plus the contingent monthly
coupon payment applicable to the final valuation date). When added to the contingent monthly coupon payments received with respect
to the prior coupon payment dates, the total amount paid for each $1,000 principal amount of securities over the 2.5-year term
of the securities is $1,062.49. Investors do not benefit from the appreciation of the underlying
index because a trigger event has not occurred.
Example 2: A trigger event HAS occurred
on or prior to the first monitoring period end-date, and the final index value is less than the trigger level.
Date
|
Trigger event has occurred on or prior to monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
Yes
|
$0
|
Second monitoring period end-date
|
Yes
|
$0
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Third through twenty-ninth monitoring period end-dates
|
Yes
|
$0
|
Final valuation date
(final index value = 1,800)
|
Yes
|
$750
|
Total payments over the term of the securities
|
|
$750
|
Because a trigger event has occurred on or
prior to the first monitoring period end-date, investors receive no contingent monthly coupon payment for that monthly period or
for any subsequent monthly period over the term of the securities. Therefore, investors receive no contingent monthly coupon payments
for the entire 30-month term of the securities. Because the final index value is less than the trigger level, investors lose 1.25%
of their investment for every 1% of the initial index value that the final index value is less than the trigger level. The payment
at maturity will be $750 per $1,000 principal amount of securities, representing a substantial loss on the initial investment,
calculated as follows:
Index strike
return = (1,800 - 2,400) / 3,000 = -20.00%
Payment
at maturity = $1,000 + [$1,000 × (-20.00% × 125%)] = $750
Example 3: A trigger event HAS occurred
for the first time between the third monitoring period end-date and the fourth monitoring period end-date, and the final index
value is greater than the trigger level.
Date
|
Trigger event has occurred on or before monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$2.083
|
Second monitoring period end-date
|
No
|
$2.083
|
Third monitoring period end-date
|
No
|
$2.083
|
Fourth monitoring period end-date
|
Yes
|
$0
|
Fifth through twenty-ninth monitoring period end-dates
|
Yes
|
$0
|
Final valuation date
(final index value = 2,700)
|
Yes
|
$1,125.00
|
Total payments over the 2.5-year term of the securities
|
|
$1,131.249
|
Because a trigger event has occurred between
the third monitoring period end-date and the fourth monitoring period end-date, investors receive no contingent monthly coupon
payment for the fourth monthly period or for any subsequent monthly period over the term of the securities. In this example, a
trigger event has occurred, the final index value is greater than the trigger level and the index strike return is 10.00%. Therefore,
the payment at maturity will be $1,125.00 per $1,000 principal amount of securities, calculated as follows:
Index strike
return = (2,700 - 2,400) / 3,000 = 10.00%
Payment at maturity = $1,000
+ [$1,000 × (+10.00% × 125%)] = $1,125.00
When added to the contingent monthly coupon
payments received with respect to the prior monitoring period end-dates, the total amount paid for each $1,000 principal amount
of securities over the 2.5-year term of the securities is $1,131.249.
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Example 4: A trigger event HAS occurred
for the first time between the twenty-fifth monitoring period end-date and the twenty-sixth monitoring period end-date, and the
final index value is less than the trigger level.
Date
|
Trigger event has occurred on or before monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$2.083
|
Second monitoring period end-date
|
No
|
$2.083
|
Third monitoring period end-date
|
No
|
$2.083
|
Fourth through twenty-fifth monitoring period end-dates
|
No
|
$2.083 each (22 x $2.083 = $45.826)
|
Twenty-sixth monitoring period end-date
|
Yes
|
$0
|
Twenty-seventh through twenty-ninth monitoring period end-dates
|
Yes
|
$0
|
Final valuation date
(final index value = 1,200)
|
Yes
|
$500
|
Total payments over the term of the securities
|
|
$552.075
|
Because a trigger event has occurred between
the twenty-fifth monitoring period end-date and the twenty-sixth monitoring period end-date, investors receive no contingent monthly
coupon payment for the twenty-sixth monthly period or for any subsequent monthly period over the term of the securities. In this
example, a trigger event has occurred and the final index value is less than the trigger level. Therefore, investors lose 1.25%
of their investment for every 1% of the initial index value that the final index value is less than the trigger level. The payment
at maturity will be $500 per $1,000 principal amount of securities, representing a substantial loss on the initial investment,
calculated as follows:
Index strike
return = (1,200 - 2,400) / 3,000 = -40.00%
Payment at maturity = $1,000
+ [$1,000 × (-40% × 125%)] = $500
When added to the contingent monthly coupon
payments received with respect to the prior monitoring period end-dates, the total amount paid for each $1,000 principal amount
of securities over the 2.5-year term of the securities is $552.075.
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying index supplement and prospectus. You should also consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal. The terms of the securities differ from those of ordinary
debt securities in that they do not guarantee the repayment of any principal. Instead, if a trigger event has occurred on any day
during the 2.5-year term of the securities and the final index value is less than the trigger level of 80% of the initial index
value, investors will lose 1.25% of their investment for every 1% of the initial index value that the underlying index by which
the final index value is less than the trigger level. Under these circumstances, investors will lose some or all of their investment
in the securities. If the final index value is less than the trigger level, a trigger event will have necessarily occurred,
and you will lose some or all of your investment. There is no minimum payment at maturity, and you could lose up to your entire
investment.
|
|
§
|
The securities do not guarantee the payment of any interest, and the opportunity to receive contingent monthly coupon payments
will be permanently forfeited if a trigger event occurs. The securities do not guarantee the payment of any interest. If the
index closing value of the underlying index is less than the trigger level on any day during the term of the securities,
you will not receive a contingent monthly coupon payment for that monthly period or for any subsequent monthly period over
the term of the securities. Even if the index closing value of the underlying index subsequently appreciates following the occurrence
of a trigger event, you will receive no further contingent monthly coupon payments. A trigger event could occur as early as during
the first monitoring period, in which case you will receive no contingent monthly coupon payments over the entire term of the securities.
If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall return on the securities
may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity. Additionally, if
a trigger event occurs and the final index value is less than the trigger level, investors will lose some or all of their investment
at maturity.
|
|
§
|
If a trigger event does not occur, the appreciation potential of
the securities is limited to the contingent monthly coupon payments that will be paid over the term of the securities. If
a trigger event does not occur, you will not participate in the performance of the underlying index. Under these circumstances,
the return on the securities will be limited to the contingent monthly coupon payments, regardless of any appreciation in the level
of the underlying index, which may be significant. If you receive all available contingent monthly coupon payments over the term
of the securities because a trigger event does not occur, you will receive only the principal amount of your securities at maturity
(plus the final contingent monthly coupon payment), and you will not benefit from the leverage factor or from any appreciation
of the underlying index.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of the underlying
index on any day, including in relation to the trigger
level, will affect the value of the securities more than any other factors. Other factors that may influence the value of the securities
include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the S&P 500® Index,
|
|
o
|
whether the index closing value of the S&P 500® Index is currently or has been below the trigger level on
any index business day during the term of the securities,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying index or securities markets generally and which may affect the value of the underlying index,
|
|
o
|
dividend rates on the securities underlying the S&P 500® Index,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
o
|
the composition of the S&P 500® Index and changes in the constituent stocks of such index, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. For example,
you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security if the value
of the S&P 500® Index at the time of sale is near or below the trigger level or if market interest rates rise.
You cannot predict the future performance
of the S&P 500® Index based on its historical performance. The index closing value of the underlying index may
decrease and be below the trigger level during the term of the securities so that you will forfeit some or all of the contingent
monthly coupon payments, or be below the trigger level on the final valuation date so that you will lose some or all of your initial
investment in the securities. See “S&P 500® Index Historical Performance” below.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities
on any coupon payment date and at maturity, and therefore you are subject to our credit risk. If we default on our obligations
under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market
value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual
or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and
will have no independent assets. As a finance subsidiary, MSFL has no independent operations
beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders
of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly,
any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims
of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
Not equivalent to investing in the underlying index. Investing
in the securities is not equivalent to investing in the underlying index or its component stocks. Investors in the securities will
not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute
the underlying index.
|
|
§
|
If a trigger event occurs, the amount payable at maturity is not linked to the value of the underlying index at any time
other than the final valuation date. The final index value will be based on the index closing value on the final valuation
date, subject to postponement for non-index business days and certain market disruption events. If a trigger event occurs, even
if the value of the underlying index appreciates prior to the final valuation date but then drops by the final valuation date,
the payment at maturity will be less than it would have been had the payment at maturity been linked to the value of the underlying
index prior to such drop. Although the actual value of the underlying index on the stated maturity date or at other times during
the term of the securities may be higher than the index closing value on the final valuation date, if a trigger event occurs, the
payment at maturity will be based solely on the index closing value on the final valuation date.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited.
Accordingly, you should be willing to hold your securities for the entire 30-month term of the securities.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
MS & Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease
doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at
prices based on its estimate of the current value of the securities, taking into account its bid/offer spread, our credit spreads,
market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining
to maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide
enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly
in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on
the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in
the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to
hold your securities to maturity.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the original issue price and will adversely affect secondary market
prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than
the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs
that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
|
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 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 index, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially affect the value of the securities. One or more of
our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other instruments
linked to the underlying index or its component stocks), including trading in the stocks that constitute the underlying index as
well as in other instruments related to the underlying index. As a result, these entities may be unwinding or adjusting hedge positions
during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge
as the final valuation date approaches. Some of our affiliates also trade the stocks that constitute the underlying index and other
financial instruments related to the underlying index on a regular basis as part of their general broker-dealer and other businesses.
Any of these hedging or trading activities on or prior to the pricing date could potentially increase the initial index value and,
therefore, could increase the trigger level, which is the value at or above which the underlying index must close on each day during
the term of the securities so that you receive a contingent monthly coupon on the securities, and the value at or above which the
underlying index must close on the final valuation date so that you are not exposed to the negative performance of the underlying
index at maturity. Additionally, such hedging or trading activities during the term of the securities could potentially affect
the value of the underlying index during the term of the securities and accordingly, the payout to you at maturity, if any, and
whether we pay a contingent monthly coupon on the securities.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities. As calculation agent, MS & Co. will determine the initial index value, the trigger level, the daily
index closing value, including the final index value, whether the contingent monthly coupon will be paid on each coupon payment
date, whether a market disruption event has occurred and the payment that you will 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 index closing value in the event of a market disruption event or discontinuance of the underlying index.
These potentially subjective determinations may affect the payout to you at
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
maturity, if any. For further information
regarding these types of determinations, see “Additional Terms of the Securities—Additional Terms—Calculation
agent,” “—Market disruption event,” “—Postponement of final valuation date,” “—Discontinuance
of the underlying index; alteration of method of calculation” and “—Alternate exchange calculation in case of
an event of default,” below. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
§
|
Adjustments to the underlying index could adversely affect the value of the securities. The publisher of the underlying
index may add, delete or substitute the component stocks of the underlying index or make other methodological changes that could
change the value of the underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index, the determination of whether the contingent
monthly coupon will be payable on the securities and the determination of the payment at maturity will be based on whether the
value of the underlying index, based on the closing prices of the stocks constituting the underlying index at the time of such
discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the formula
for calculating the underlying index last in effect prior to such discontinuance, is less than the trigger level.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. It is also
possible that a trigger event would result in a deemed termination and reissuance of the securities for U.S. federal income tax
purposes. In that case, a U.S. Holder might be required to recognize gain or loss (subject to the possible application of the wash
sale rules) with respect to the securities on the first date on which a trigger event occurs. We do not plan to request a ruling
from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities, and the IRS or a court
may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative treatment for the
securities, the timing and character of income or loss on the securities might differ significantly from the tax treatment described
herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In
that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount on the securities every
year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference, if any, between
the actual and the projected amount of any contingent payments on the securities) and recognize all income and gain in respect
of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar downside protection
features, such as the securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable
financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss, whether these instruments are or should be subject to the “constructive ownership” rule,
which very generally can operate to recharacterize certain long-
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
term capital gain as ordinary income
and impose an interest charge, and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the possibility of a deemed exchange upon the occurrence
of a trigger event, the issues presented by the IRS notice and any tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
S&P 500® Index Summary
The S&P
500® Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC
(“S&P”), consists of stocks of 500 component companies selected to provide a performance benchmark for the
U.S. equity markets. The calculation of the S&P 500® Index is based on the relative value of the float
adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared to the aggregate
average market capitalization of 500 similar companies during the base period of the years
1941 through 1943. For additional information about the S&P 500® Index, see the information set forth
under “S&P 500® Index” in the accompanying index supplement.
Information as of market close on November 6, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
3,076.78
|
52 Weeks Ago:
|
2,755.45
|
52 Week High (on 11/4/2019):
|
3,078.27
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
The following graph sets forth
the daily closing values of the underlying index for the period from January 1, 2014 through November 6, 2019. The related table
sets forth the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each
quarter in the same period. The closing value of the underlying index on November 6, 2019 was 3,076.78. We obtained the information
in the table below from Bloomberg Financial Markets, without independent verification. The historical values of the underlying
index should not be taken as an indication of future performance, and no assurance can be given as to the closing value of the
underlying index on any day during the term of the securities, including on the final valuation date.
Underlying
Index Daily Closing Values
January 1,
2014 to November 6, 2019
|
|
* The red solid line indicates the hypothetical trigger level, assuming the index closing value on November 6, 2019 were the initial index value.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
S&P 500® Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third Quarter
|
3,025.86
|
2,840.60
|
2,976.74
|
Fourth Quarter (through November 6, 2019)
|
3,078.27
|
2,887.61
|
3,076.78
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial
Services LLC. For more information, see “S&P 500®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this preliminary pricing supplement.
Additional
Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Day
count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying
index publisher:
|
S&P Dow Jones Indices LLC, or any successor thereof
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Senior
security or subordinated security:
|
Senior
|
Specified
currency:
|
U.S. dollars
|
Record
date:
|
One business day prior to the related scheduled coupon payment date; provided that any contingent monthly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
Calculation
agent:
|
The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent monthly coupon,
if any, and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the nearest one hundred-thousandth,
with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination
of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest ten-thousandth, with five one
hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal
amount of the securities, if any, shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the
economic interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities,
including with respect to certain determinations and judgments that the calculation agent must make in determining the payment
that you will receive, if any, on each coupon payment date and at maturity or whether a market disruption event has occurred.
See “Market disruption event” and “Discontinuance of the underlying index; alteration of method of calculation”
below. MS & Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable
judgment.
|
Business
day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index
business day:
|
A day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for the underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Index
closing value:
|
The official closing value of the underlying index, or any successor index as defined under “Discontinuance of the underlying index; alteration of method of calculation” below), published at the regular official weekday close of trading on such index business day by the underlying index publisher, as determined by the calculation agent. In certain circumstances, the index closing value will be based on the alternate calculation of the underlying index described under “Discontinuance of the underlying index; alteration of method of calculation” below.
|
Market
disruption event:
|
With respect to the underlying index, market disruption event
means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of securities then constituting 20 percent or more of the value of the underlying index (or the successor
index) on the relevant exchange(s) 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(s), 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 of the value of the underlying index (or the successor index) during the last one-half hour
preceding the close of the principal trading session on such relevant exchange(s) are materially inaccurate, or
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
(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 underlying index (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 securities.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the underlying index is materially suspended or materially limited at
that time, then the relevant percentage contribution of that security to the value of the underlying index shall be based on a
comparison of (x) the portion of the value of the underlying index attributable to that security relative to (y) the overall value
of the underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption
event exists at any time: (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 underlying index 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 underlying index 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
underlying index are traded will not include any time when such securities market is itself closed for trading under ordinary
circumstances.
|
Relevant
exchange:
|
With respect to the underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Postponement of the final valuation
date:
|
The final valuation date is subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If the scheduled final valuation date is not an index
business day or if there is a market disruption event on such day, the final valuation date shall be the next succeeding index
business day on which there is no market disruption event; provided that if a market disruption event has occurred on each
of the five index business days immediately succeeding the scheduled final valuation date, then (i) such fifth succeeding index
business day shall be deemed to be the final valuation date, notwithstanding the occurrence of a market disruption event on such
day and (ii) with respect to such fifth index business day on which a market disruption event occurs, the calculation agent shall
determine the index closing value on such fifth index business day in accordance with the formula for and method of calculating
the underlying index last in effect prior to the commencement of the market disruption event, using the closing price (or, if
trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing
price that would have prevailed but for such suspension or limitation) at the close of the principal trading session of the relevant
exchange on such index business day of each security most recently constituting the underlying index without any rebalancing or
substitution of such securities following the commencement of the market disruption event.
|
Discontinuance of the underlying
index; alteration of method of calculation:
|
If the underlying index publisher discontinues publication of
the underlying index and the underlying index publisher or another entity (including MS & Co.) publishes a successor or substitute
index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued index (such index being
referred to herein as the “successor index”), then any subsequent index closing value will be determined by reference
to the published value of such successor index at the regular weekday close of trading on any index business day that the index
closing value is to be determined, and, to the extent the index closing value of the successor index differs from the index closing
value of the underlying index at the time of such substitution, proportionate adjustments will be made by the calculation agent
to the initial index value and trigger level.
Upon any selection by the calculation agent of the successor
index, the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as
holder of the securities, within three business days of such selection. We expect that such notice will be made available to you,
as a beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct
and indirect participants.
If the underlying index publisher discontinues publication
of the underlying index or the successor index prior
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
to, and such discontinuance is continuing on, any day on which
the index closing value is to be determined, and the calculation agent determines, in its sole discretion, that no successor index
is available at such time, then the calculation agent will determine the index closing value for each such date. The index closing
value of the underlying index or the successor index will be computed by the calculation agent in accordance with the formula for
and method of calculating such index last in effect prior to such discontinuance, using the closing price (or, if trading in the
relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would
have prevailed but for such suspension or limitation) at the close of the principal trading session of the relevant exchange on
each such date of each security most recently constituting such index without any rebalancing or substitution of such securities
following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication of the underlying
index may adversely affect the value of the securities.
If at any time, the method of calculating the underlying
index or the successor index, or the value thereof, is changed in a material respect, or if the underlying index or the successor
index is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the
value of such index had such changes or modifications not been made, then, from and after such time, the calculation agent will,
at the close of business in New York City on each date on which the index closing value is to be determined, make such calculations
and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a value of a stock
index comparable to the underlying index or the successor index, as the case may be, as if such changes or modifications had not
been made, and the calculation agent will calculate the index closing value with reference to the underlying index or the successor
index, as adjusted. Accordingly, if the method of calculating the underlying index or the successor index is modified so that
the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the underlying
index), then the calculation agent will adjust such index in order to arrive at a value of the underlying index or the successor
index as if it had not been modified (e.g., as if such split had not occurred).
|
Alternate exchange calculation
in case of an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
· the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
· the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation period.
With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds,
to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing
of those grounds within two business days after the last day of the default quotation period, in which case that quotation will
be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning
on the day the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
· no
quotation of the kind referred to above is obtained, or
· every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final valuation date, then the Acceleration Amount will equal the principal
amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
· A-2
or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating
agency, or
· P-2
or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
|
Issuer notices to registered
security holders, the trustee
and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to
which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such 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 depositary by telephone or facsimile confirmed by mailing such notice to the depositary by first
class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall
be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder receives the
notice. The issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement
of the maturity date, the business day immediately preceding the scheduled maturity date, and (ii) with respect to notice of the
date to which the maturity date has been rescheduled, the business day immediately following the final valuation date as postponed.
The issuer shall, or shall cause the calculation agent to,
(i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of
the amount of cash to be delivered as contingent monthly coupon, if any, with respect to the securities on or prior to 10:30
a.m. (New York City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount
due with respect to the applicable interest to the trustee for delivery to the depositary, as holder of the securities, on
the applicable coupon payment date.
The issuer shall, or shall cause the calculation agent to,
(i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of
the amount of cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on
the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities,
if any, to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
Additional Information About the Securities
Additional
Information:
|
|
Book
entry security or certificated security:
|
Book entry. The securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, the depositary and will be registered in the name of a nominee of the depositary. The depositary’s nominee will be the only registered holder of the securities. Your beneficial interest in the securities will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in the depositary. In this preliminary pricing supplement, all references to payments or notices to you will mean payments or notices to the depositary, as the registered holder of the securities, for distribution to participants in accordance with the depositary’s procedures. For more information regarding the depositary and book entry notes, please read “The Depositary” in the accompanying prospectus supplement and “Forms of Securities—Global Securities—Registered Global Securities” in the accompanying prospectus.
|
Minimum
ticketing size:
|
$1,000 / 1 security
|
Tax
considerations:
|
Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the
securities issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This discussion
applies only to investors in the securities who:
· purchase
the securities in the original offering; and
· hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
· certain
financial institutions;
· insurance
companies;
· certain
dealers and traders in securities or commodities;
· investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
· U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
· partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
· regulated
investment companies;
· real
estate investment trusts; or
· tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
In addition, we will not attempt to ascertain whether
any issuer of any shares to which a security relates (such shares hereafter referred to as “Underlying Shares”) is
treated as a “passive foreign investment company” (“PFIC”) within the meaning of Section 1297 of the Code
or as a “U.S. real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code.
If any issuer of Underlying Shares were so treated, certain adverse U.S. federal income tax consequences might apply, to a U.S.
Holder in the case of a PFIC and to a Non-U.S. Holder (as defined below) in the case of a USRPHC, upon the sale, exchange or settlement
of the securities. You should refer to information filed with the Securities and Exchange Commission or other governmental authorities
by the issuers of the Underlying Shares and consult your tax adviser regarding the possible consequences to you if any issuer
is or becomes a PFIC or USRPHC.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities should
consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income
tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend to
treat a security for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated
as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In the opinion
of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however, our counsel
has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative
treatments are possible. Moreover, our counsel’s opinion is based on market conditions as of the date of this preliminary
pricing supplement and is subject to confirmation on the pricing date.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities).
Unless otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
· a
citizen or individual resident of the United States;
· a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
· an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax
basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments.
Any coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in
accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities.
Upon a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between
the amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged
or settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds
attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term
capital gain or loss if the U.S. Holder has held the securities for more than one year at the time of the sale, exchange or settlement,
and should be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations.
Potential Deemed Taxable Exchange
upon the Occurrence of a Trigger Event. It is possible that the occurrence of a trigger event would result in a deemed termination
and reissuance of the securities for U.S. federal income tax purposes. In that case, a U.S. Holder might be required to recognize
gain or loss (subject to the possible application of the wash sale rules in the case of loss) with respect to the securities on
the first date on which a trigger event occurs. U.S. Holders should consult their tax advisers regarding the potential
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
consequences of the occurrence of a trigger event.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the timing and character of income
thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue into income original issue
discount on the securities every year at a “comparable yield” determined at the time of their issuance, adjusted upward
or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the securities.
Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange or other disposition of the securities would
be treated as ordinary income, and any loss realized would be treated as ordinary loss to the extent of the U.S. Holder’s
prior accruals of original issue discount and as capital loss thereafter. The risk that financial instruments providing for buffers,
triggers or similar downside protection features, such as the securities, would be recharacterized as debt is greater than the
risk of recharacterization for comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether to require holders
of “prepaid forward contracts” and similar instruments to accrue income over the term of their investment. It also
asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether
short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange–traded
status of the instruments and the nature of the underlying property to which the instruments are linked; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates.
While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded,
or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely
furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder provides proof
of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder.
As used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
· an
individual who is classified as a nonresident alien;
· a
foreign corporation; or
· a
foreign estate or trust.
The term “Non-U.S. Holder” does not include any of
the following holders:
· a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
· certain
former citizens or residents of the United States; or
· a
holder for whom income or gain in respect of the securities is effectively connected with the
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
conduct of a trade or business
in the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any
additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding
tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that it is not a U.S. person
and is eligible for such an exemption or reduction under an applicable tax treaty. In addition, as discussed above, if any issuer
of Underlying Shares were treated as a USRPHC, certain adverse U.S. federal income tax consequences might apply to a Non-U.S. Holder
upon the sale, exchange or settlement of the securities. If you are a Non-U.S. Holder, you should consult your tax adviser regarding
the tax treatment of the securities, including the possibility of obtaining a refund of any withholding tax and the certification
requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally
applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined
based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS
notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of one with respect
to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities will
not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination
in the pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security, our
counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section
871(m). However, the securities could become subject to Section 871(m) if: (i) the securities are deemed to be reissued upon the
occurrence of a Trigger Event (as described above); (ii) on that date the securities satisfy the applicable delta threshold specified
by the applicable Treasury Regulations or administrative guidance (which under current guidance is generally delta of one for securities
issued prior to January 1, 2021 and delta of 0.8 or greater for securities issued thereafter); and (iii) the underlying index is
not entitled to an exception under the applicable Treasury Regulations or administrative guidance.
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we
will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax.
Prospective investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers
regarding the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts
paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a
U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from
a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability
and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
FATCA generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments
of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain financial
instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which
specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds
(other than amounts treated as FDAP income). While the treatment of the securities is unclear, you should assume that any coupon
payment with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will not
be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult their
tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar
as it purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the
full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Use
of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued. The costs of the securities borne
by you and described beginning on page 3 above comprise the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we expect to hedge
our anticipated exposure in connection with the securities, by entering into hedging transactions with our affiliates and/or third-party
dealers. We expect our hedging counterparties to take positions in the stocks constituting the underlying index, in futures and/or
options contracts on the underlying index or the component stocks of the underlying index listed on major securities markets,
or positions in any other available securities or instruments that they may wish to use in connection with such hedging. Such
purchase activity could potentially increase the initial index value and, therefore, could increase the trigger level, which is
the value at or above which the underlying index must close on each day during the term of the securities so that you receive
a contingent monthly coupon on the securities, and the value at or above which the underlying index must close on the final valuation
date so that you are not exposed to the negative performance of the underlying index at maturity. These entities may be unwinding
or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent
dynamic adjustments to the hedge as the final valuation date approaches. Additionally, our hedging activities, as well as our
other trading activities, during the term of the securities could potentially affect the value of the underlying index during
the term of the securities and accordingly, the payment to you at maturity, if any, and whether we pay a contingent coupon on
the securities.
|
Benefit
plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company separate accounts) and PTCE 84-14 (for certain transactions determined by
independent qualified professional asset managers). In addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide
an exemption for the purchase and sale of securities and the related lending transactions, provided that neither the issuer of
the securities nor any of its affiliates has or exercises any discretionary authority or control or renders any investment advice
with respect to the assets of the Plan involved in the transaction and provided further that the Plan pays no more, and receives
no less, than “adequate consideration” in connection with the transaction (the so-called “service provider”
exemption). There can be no assurance that any of these class or statutory exemptions will be available with respect to transactions
involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute or result
in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities
acknowledges and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no
respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements
with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally
or any particular plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be
investment advice directed at any potential Plan purchaser or
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
at Plan purchasers generally and such purchasers of these securities
should consult and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual
retirement annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their
accounts, will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee
of Morgan Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as,
for example, an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
MS & Co. will act as the agent for this offering and will
not receive a sales commission in connection with sales of the securities.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities, including
the contingent monthly coupon rate, such that for each security the estimated value on the pricing date will be no lower than the
minimum level described in “Investment Summary” beginning on page 3.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account.
In order to facilitate the offering of the securities,
the agent may engage in transactions that stabilize, maintain or otherwise affect the price of the securities. Specifically, the
agent may sell more securities than it is obligated to purchase in connection with the offering, creating a naked short position
in the securities, for its own account. The agent must close out any naked short position by purchasing the securities in the
open market. A naked short position is more likely to be created if the agent is concerned that there may be downward pressure
on the price of the securities in the open market after pricing that could adversely affect investors who purchase in the offering.
As an additional means of facilitating the offering, the agent may bid for, and purchase, the securities or the securities underlying
the underlying index in the open market to stabilize the price of the securities. Any of these activities may raise or maintain
the market price of the securities above independent market levels or prevent or retard a decline in the market price of the securities.
The agent is not required to engage in these activities, and may end any of these activities at any time. An affiliate of the
agent has entered into a hedging transaction with us in connection with this offering of securities. See “Plan of Distribution
(Conflicts of Interest)” in the accompanying prospectus supplement and “Use of Proceeds and Hedging” above.
|
Selling restrictions:
|
General
No action has been or will be taken by us, the agent or any dealer
that would permit a public offering of the securities or possession or distribution of this preliminary pricing supplement or the
accompanying prospectus supplement, index supplement or prospectus in any jurisdiction, other than the United States, where action
for that purpose is required. No offers, sales or deliveries of the securities, or distribution of this preliminary pricing supplement
or the accompanying prospectus supplement, index supplement or prospectus or any other offering material relating to the securities,
may be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations
and will not impose any obligations on us, the agent or any dealer.
The agent has represented and agreed, and each dealer through
which we may offer the securities has represented and agreed, that it (i) will comply with all applicable laws and regulations
in force in each non-U.S. jurisdiction in which it purchases, offers, sells or delivers the securities or possesses or distributes
this preliminary pricing supplement and the accompanying prospectus supplement, index supplement and prospectus and (ii) will obtain
any consent, approval or permission required by it for the purchase, offer or sale by it of the securities under the laws and regulations
in force in each non-U.S. jurisdiction to which it is subject or in which it makes purchases, offers or sales of the securities.
We shall not have responsibility for the agent’s or any dealer’s compliance with the applicable laws and regulations
or obtaining any required consent, approval or permission.
In addition to the selling restrictions set forth in “Plan
of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement, the following selling restrictions also
apply to the securities:
Brazil
|
Morgan Stanley Finance LLC
Contingent Coupon Securities Linked to the S&P 500® Index due May 19, 2022
Principal at Risk Securities
|
The securities have not been and will not be registered with
the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The securities may not be offered or sold
in the Federative Republic of Brazil except in circumstances which do not constitute a public offering or distribution under Brazilian
laws and regulations.
Chile
The securities have not been registered with the Superintendencia
de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer, sales or deliveries of the securities
or distribution of this preliminary pricing supplement or the accompanying prospectus supplement, index supplement or prospectus,
may be made in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.
Mexico
The securities have not been registered with the National
Registry of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or sold publicly
in Mexico. This preliminary pricing supplement, the accompanying prospectus supplement, the accompanying index supplement and
the accompanying prospectus may not be publicly distributed in Mexico.
|
Where
you can find more information:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the prospectus supplement and 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 prospectus
supplement, the index supplement and any other documents relating to this offering that Morgan Stanley and MSFL have filed with
the SEC for more complete information about Morgan Stanley, MSFL and this offering. You may get these documents without cost by
visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter
or any dealer participating in the offering will arrange to send you the prospectus, the prospectus supplement and the index supplement
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:
Prospectus Supplement dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this preliminary pricing
supplement are defined in the prospectus supplement, in the index supplement or in the prospectus.
|