December 2021
Preliminary Terms No. 3,270
Registration Statement Nos. 333-250103;
333-250103-01
Dated December 1, 2021
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities
in U.S. Equities
Market
Linked Securities—Auto-Callable with Contingent Coupon and Contingent Downside
Principal
at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000®
Index and the NASDAQ-100 Index® due June 23, 2023
Fully
and Unconditionally Guaranteed by Morgan Stanley
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§
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Linked to the lowest performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the NASDAQ-100 Index® (each referred to as an “underlying”)
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§
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The securities offered are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. Unlike ordinary debt securities, the securities do not guarantee the payment of interest, do not guarantee the repayment of principal and are subject to potential automatic call prior to the maturity date upon the terms described below. The securities have the terms described in the accompanying product supplement for auto-callable securities, index supplement and prospectus, as supplemented or modified by this document.
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Contingent Coupon. The securities will pay a contingent coupon on a quarterly basis until the earlier of the maturity date or automatic call if, and only if, the closing level of the lowest performing underlying on the determination date for that quarter is greater than or equal to its coupon threshold level. However, if the closing level of the lowest performing underlying on a determination date is less than its coupon threshold level, you will not receive any contingent coupon for the relevant quarter. If the closing level of the lowest performing underlying is less than its coupon threshold level on every determination date, you will not receive any contingent coupons throughout the entire term of the securities. The coupon threshold level for each underlying is equal to 75% of its starting level. The contingent coupon rate will be determined on the pricing date and will be within the range of 8.00% to 9.00% per annum.
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Automatic Call. Beginning after six months, the securities will be automatically called if the closing level of each underlying on any of the determination dates (other than the final determination date) is greater than or equal to its respective starting level for a cash payment equal to the face amount plus a final contingent coupon payment. No further payments will be made on the securities once they have been called.
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Potential Loss of Principal. If the securities are not automatically called, you will receive the face amount at maturity if, and only if, the closing level of each underlying on the final determination date is greater than or equal to its respective downside threshold level. If the closing level of any underlying on the final determination date is less than its respective downside threshold level, investors will be fully exposed to the decline in the lowest performing underlying on a 1-to-1 basis, and will receive a maturity payment amount that is less than 75% of the face amount of the securities and could be zero.
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Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent coupon payments throughout the entire term of the securities.
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Because all payments on the securities are based on the lowest performing underlying, a decline beyond the respective coupon threshold level or respective downside threshold level of any underlying will result in no contingent coupon payments or a significant loss of your investment, as applicable, even if the other underlyings have appreciated or have not declined as much.
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The securities are for investors who are willing to risk their principal based on the lowest performing of three underlyings and who seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no contingent coupon payments over the entire term of the securities.
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Investors will not participate in any appreciation of any underlying.
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The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program
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All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment
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These securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any securities included in any of the underlyings.
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The current estimated value of the securities is approximately
$955.20 per security, or within $45.00 of that estimate. The estimated value of the securities is determined using our own
pricing and valuation models, market inputs and assumptions relating to the underlyings, instruments based on the underlyings, 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. See “Estimated Value
of the Securities” on page 4.
The securities have complex features and investing
in the securities involves risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 11. All payments on the securities are subject to our credit risk.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement, index
supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related
product supplement for auto-callable securities, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please
also see “Additional Terms of the Securities” and “Additional Information About the Securities” at the end of
this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Commissions
and offering price:
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Price
to public
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Agent’s
commissions(1)(2)
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Proceeds
to us(3)
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Per
security
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$1,000
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$15.25
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$984.75
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Total
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$
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$
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$
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(1)
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Wells Fargo Securities, LLC, an agent for this offering,
will receive a commission of up to $15.25 for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”),
may receive a selling concession of up to $10.00 per security, and WFA will receive a distribution expense fee of $0.75 for each security
sold by WFA. See “Supplemental information concerning plan of distribution; conflicts of interest.”
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(2)
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In respect
of certain securities sold in this offering, we may pay a fee of up to $1.50 per security to selected securities dealers in consideration
for marketing and other services in connection with the distribution of the securities to other securities dealers.
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(3)
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See “Use of proceeds and hedging” on page 28.
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Prospectus
dated November 16, 2020
Morgan Stanley
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Wells Fargo Securities
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Terms
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Issuer:
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Morgan
Stanley Finance LLC
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Guarantor:
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Morgan
Stanley
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Maturity
date:
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June
23, 2023*, subject to postponement if the final determination date is postponed
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Underlyings:
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Dow
Jones Industrial AverageSM (the “INDU Index”), Russell 2000® Index (the “RTY Index”)
and the NASDAQ-100 Index® (the “NDX Index”)
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Aggregate
face amount:
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$
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Contingent
coupon payment:
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On each contingent coupon
payment date, you will receive a contingent coupon payment at a per annum rate equal to the contingent coupon rate if, and only
if, the closing level of the lowest performing underlying on the related determination date is greater than or equal to its coupon
threshold level. Each “contingent coupon payment”, if any, will be calculated per security as follows: ($1,000 ×
contingent coupon rate)/4. Any contingent coupon payment will be rounded to the nearest cent, with one-half cent rounded upward.
If the closing level
of the lowest performing underlying on any determination date is less than its coupon threshold level, you will not receive any contingent
coupon payment on the related contingent coupon payment date. If the closing level of the lowest performing underlying is less than
its coupon threshold level on all quarterly determination dates, you will not receive any contingent coupon payments over the term
of the securities.
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Contingent
coupon payment dates:
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Three
business days after the applicable determination date (as each such determination date may be postponed pursuant to “—Postponement
of the determination dates” below, if applicable); provided that the contingent coupon payment date with respect to
the final determination date will be the stated maturity date. If a determination date is postponed with respect to one or more underlyings,
the related contingent coupon payment date will be three business days after the last determination date as postponed.
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Contingent
coupon rate:
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The
“contingent coupon rate” will be determined on the pricing date and will be within the range of 8.00% to 9.00%
per annum.
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Automatic
call:
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The securities are not
subject to automatic call until approximately six months after the original issue date. Following this 6-month non-call period, if,
on any determination date (other than the final determination date), beginning in June 2022, the closing level of each underlying
is greater than or equal to its respective starting level, the securities will be automatically called for a cash payment per security
equal to the face amount plus a final contingent coupon payment on the related call settlement date.
The securities will
not be automatically called on any call settlement date if the closing level of any underlying is below its respective starting level
on the related determination date.
Any positive return
on the securities will be limited to the contingent coupon payments, if any, even if the closing level of any underlying on the applicable
determination date significantly exceeds its starting level. You will not participate in any appreciation of any underlying.
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Determination
dates:
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Quarterly,
on the 20th of each March, June, September and December, commencing in March 2022 and ending on the final determination
date, subject to postponement for non-trading days and certain market disruption events. We also refer to the June 2023 determination
date as the final determination date.
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Call
settlement date:
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Three
business days after the applicable determination date (as each such determination date may be postponed pursuant to “—Postponement
of the determination dates” below, if applicable). If a determination date is postponed with respect to one or more underlyings,
the related call settlement date will be three business days after the last determination date as postponed.
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Maturity payment amount:
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If the securities are
not automatically called, you will be entitled to receive on the maturity date a cash payment per security equal to the maturity
payment amount (in addition to the final contingent coupon payment, if payable). The “maturity payment amount” per security
will equal:
·
if the closing
level of each underlying on the final determination date is greater than or
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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equal to
its respective downside threshold level:
$1,000; or
·
if the closing
level of any underlying on the final determination date is less than its respective downside threshold level:
$1,000 ×
performance factor of the lowest performing underlying on the final determination date
Under these circumstances,
you will lose more than 25%, and possibly all, of your investment.
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Lowest
performing underlying:
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On
any determination date, the underlying with the lowest performance factor on that determination date
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Performance
factor:
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With
respect to each underlying, on any determination date, the closing level on such determination date divided by the starting
level
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Starting
level:
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With respect
to the Dow Jones Industrial AverageSM: , its closing level on the pricing
date.
With respect
to the Russell 2000® Index: , its closing level on the pricing date.
With respect
to the NASDAQ-100 Index®: , its closing level on the pricing date.
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Coupon
threshold level:
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With respect to the Dow Jones Industrial AverageSM:
, which is equal to 75% of its starting level.
With respect to the Russell 2000®
Index: , which is equal to 75% of its starting level.
With respect to the NASDAQ-100 Index®:
, which is equal to 75% of its starting level.
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Downside
threshold level:
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With respect to the Dow Jones Industrial AverageSM:
, which is equal to 75% of its starting level.
With respect to the Russell 2000®
Index: , which is equal to 75% of its starting level.
With respect to the NASDAQ-100 Index®:
, which is equal to 75% of its starting level.
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Face
amount:
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$1,000
per security. References in this document to a “security” are to a security with a face amount of $1,000.
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Pricing
date:
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December
17, 2021*
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Original
issue date:
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December
22, 2021* (3 business days after the pricing date)
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CUSIP
/ ISIN:
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61773HNB1
/ US61773HNB14
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Listing:
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The
securities will not be listed on any securities exchange.
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Agents:
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Morgan
Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells
Fargo Securities, LLC (“WFS”). See “Supplemental information regarding plan of distribution; conflicts
of interest.”
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*To
the extent we make any change to the pricing date or original issue date, the determination dates and maturity date may also be changed
in our discretion to ensure that the term of the securities remains the same.
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Estimated Value of the Securities
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The face amount 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 per security. We estimate that the value of each security
on the pricing date will be approximately $955.20, or within $45.00 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 underlyings. The estimated value
of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings,
instruments based on the underlyings, 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
coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal funding rate which is likely to be lower
than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging
costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities would be
more favorable to you.
What is the relationship between the estimated value on the pricing date
and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the secondary market,
absent changes in market conditions, including those related to the underlyings, 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 3 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 underlyings, 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
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
The Principal at Risk Securities Linked to the Lowest Performing of the Dow
Jones Industrial AverageSM, the Russell 2000® Index and the NASDAQ-100® Index due June 23, 2023
(the “securities”) may be appropriate for investors who:
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§
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Seek an investment with contingent coupon payments at a rate of 8.00% to 9.00% per
annum (to be determined on the pricing date) until the earlier of the maturity date or automatic call, if, and only if, the closing
level of each underlying on the applicable quarterly determination date is greater than or equal to 75% of its starting level;
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§
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Understand that if the closing level of any underlying on the final determination
date has declined by more than 25% from its starting level, they will be fully exposed to the decline in the lowest performing underlying
from its starting level and will lose more than 25%, and possibly all, of the face amount of their securities at maturity;
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§
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Are willing to accept the risk that they may receive few or no contingent coupon
payments over the term of the securities;
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§
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Understand that the securities may be automatically called prior to the maturity
date and that the term of the securities may be as short as approximately six months;
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Understand that the return on the securities will depend solely on the performance
of the underlying that is the lowest performing underlying on each determination date and that they will not benefit in any way from the
performance of the better performing underlyings;
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Understand that the securities are riskier than alternative investments linked to
only one of the underlyings or linked to a basket composed of each underlying;
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Understand and are willing to accept the full downside risks of each underlying;
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Are willing to forgo participation in any appreciation of any underlying, fixed interest
payments on the securities and dividends on securities included in the underlyings; and
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Are willing to hold the securities until maturity.
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The securities are not designed for, and may not be an appropriate investment
for, investors who:
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Seek a liquid investment or are unable or unwilling to hold the securities to maturity;
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Require full payment of the face amount of the securities at maturity;
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§
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Seek a security with a fixed term;
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§
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Are unwilling to accept the risk that the closing level of any underlying on the
final determination date may decline by more than 25% from its respective starting level to its closing level on the final determination
date, in which case they will lose a significant portion or all of their investment;
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§
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Are unwilling to accept the risk of exposure to each of the underlyings;
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Seek exposure to a basket composed of each underlying or a similar investment in
which the overall return is based on a blend of the performances of the underlyings, rather than solely on the lowest performing underlying;
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Seek exposure to the upside performance of any or each underlying;
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Are unwilling to accept our credit risk; or
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Prefer the lower risk of fixed income investments with comparable maturities issued
by companies with comparable credit ratings.
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The considerations identified above are not exhaustive.
Whether or not the securities are an appropriate investment for you will depend on your individual circumstances, and you should reach
an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the appropriateness
of an investment in the securities in light of your particular circumstances. You should also review carefully the “Risk Factors”
herein and in the accompanying product supplement for risks related to an investment in the securities. For more information about the
underlyings, please see the sections titled “Dow Jones Industrial AverageSM Overview,” “Russell 2000®
Index Overview” and “NASDAQ-100 Index® Overview” below.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Determining Payment on a Contingent Coupon Payment Date and on the Maturity Date
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If the securities have not been previously automatically
called, on each quarterly contingent coupon payment date, you will either receive a contingent coupon payment or you will not receive
a contingent coupon payment, depending on the closing level of the lowest performing underlying on the related quarterly determination
date.
Step 1: Determine which underlying is the lowest
performing underlying on the relevant determination. The lowest performing underlying on any determination date is the underlying with
the lowest performance factor on that determination date. The performance factor of an underlying on a determination date is
its closing level on that determination date as a percentage of its starting level (i.e., its closing level on that determination date
divided by its starting level).
Step 2: Determine whether a contingent coupon payment
is paid on the applicable contingent coupon payment date based on the closing level of the lowest performing underlying on the relevant
determination date, as follows:
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
On the maturity date, if the securities have not been
automatically called prior to the maturity date, you will receive (in addition to the final contingent coupon payment, if any) a cash
payment per security (the maturity payment amount) calculated as follows:
Step 1: Determine which underlying is the lowest
performing underlying on the final determination date. The lowest performing underlying on the final determination date is the underlying
with the lowest performance factor on the final determination date. The performance factor of an underlying on the final determination
date is its closing level as a percentage of its starting level (i.e., its closing level on the final determination date divided by
its starting level).
Step 2: Calculate the maturity payment amount based
on the closing level of the lowest performing underlying on the final determination date, as follows:
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Scenario Analysis and Examples of Hypothetical Payments on the Securities
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The following hypothetical examples illustrate
how to determine whether a contingent coupon payment is paid with respect to a determination date and how to calculate the payment at
maturity, if any, if the securities have not been automatically called. The following examples are for illustrative purposes
only. Whether you receive a contingent coupon payment will be determined by reference to the closing level of each underlying
on each determination date, and the amount you will receive at maturity, if any, will be determined by reference to the closing level
of each underlying on the final determination date. The actual starting level, coupon threshold level and downside threshold
level for each underlying and the actual contingent coupon rate will be determined on the pricing date. All payments on the
securities, if any, are subject to our credit risk. The numbers in the hypothetical examples below may have been rounded for
the ease of analysis. The below examples are based on the following terms*:
Hypothetical contingent coupon payment:
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On each contingent coupon payment date, you will receive a contingent coupon payment at a per annum rate equal to the contingent coupon rate if, and only if, the closing level of the lowest performing underlying on the related determination date is greater than or equal to its coupon threshold level. If payable, the contingent coupon payment will be an amount in cash per face amount corresponding to a return of 8.00% per annum for each interest payment period for each applicable determination date. These hypothetical examples reflect a historical contingent quarterly coupon rate of 8.00% (corresponding to $20.00 per quarter per security**) based on the bottom of the range specified.
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Hypothetical starting level:
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With respect to the INDU Index: 100
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With respect to the RTY Index: 100
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With respect to the NDX Index: 100
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Hypothetical coupon threshold level:
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With respect to the INDU Index: 75, which is 75% of its hypothetical starting level
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With respect to the RTY Index: 75, which is 75% of its hypothetical starting level
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With respect to the NDX Index: 75, which is 75% of its hypothetical starting level
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Hypothetical downside threshold level:
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With respect to the INDU Index: 75, which is 75% of its hypothetical starting level
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With respect to the RTY Index: 75, which is 75% of its hypothetical starting level
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With respect to the NDX Index: 75, which is 75% of its hypothetical starting level
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* The hypothetical starting
level of 100 for the underlyings has been chosen for illustrative purposes only and does not represent the actual starting level of any
underlying. The actual starting levels, coupon threshold levels and downside threshold levels will be determined on the pricing
date and will be set forth under “Terms” above. For historical data regarding the actual closing levels of the
underlyings, see the historical information set forth herein.
**The actual contingent coupon payment
will be an amount determined by the calculation agent based on the actual contingent coupon rate. The hypothetical contingent quarterly
coupon of $20.00 is used in these examples for ease of analysis.
How to determine whether a contingent coupon payment
is payable with respect to a determination date:
Date
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INDU Index Closing Level
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RTY Index Closing Level
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NDX Index Closing Level
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Contingent Coupon Payment (per Security)
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Hypothetical Determination
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90 (at or above the coupon threshold level)
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125 (at or above the coupon threshold level)
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135 (at or above the coupon threshold level)
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$20.00
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Date 1
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Hypothetical Determination Date 2
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60 (below the coupon threshold level)
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90 (at or above the coupon threshold level)
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120 (at or above the coupon threshold level)
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$0
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Hypothetical Determination Date 3
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90 (at or above the coupon threshold level)
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50 (below the coupon threshold level)
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110 (at or above the coupon threshold level)
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$0
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Hypothetical Determination Date 4
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60 (below the coupon threshold level)
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55 (below the coupon threshold level)
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65 (below the coupon threshold level)
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$0
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On hypothetical determination date 1, the closing level of each underlying
is at or above the respective coupon threshold level. Therefore, a contingent coupon payment of $20.00 is paid on the relevant
contingent coupon payment date.
On each of hypothetical determination dates 2 and 3, at least one underlying
closes at or above its respective coupon threshold level, but one or both of the other underlyings close below their respective coupon
threshold levels. Therefore, no contingent coupon payment is paid on the relevant contingent coupon payment date.
On hypothetical determination date 4, each underlying closes below its respective
coupon threshold level, and, accordingly no contingent quarterly coupon is paid on the relevant coupon payment date.
If the closing level of any underlying is less than its respective coupon
threshold level on each determination date, you will not receive any contingent coupon payments for the entire term of the securities.
How to calculate the payment investors will receive at maturity (if the
securities have not been automatically redeemed):
Starting after six months, if the closing level of each underlying is greater
than or equal to its starting level on any determination date, the securities will be automatically called for a cash payment per security
equal to the face amount plus a final contingent coupon payment.
The examples below illustrate how to calculate the payment at maturity if the
securities have not been automatically redeemed prior to maturity
|
INDU Index Closing Level on Final Determination Date
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RTY Index Closing Level on Final Determination Date
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NDX Index Closing Level on Final Determination Date
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Maturity Payment Amount (per Security)
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Example 1:
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150 (at or above its downside threshold level and coupon threshold level)
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140 (at or above its downside threshold level and coupon threshold level)
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142 (at or above its downside threshold level and coupon threshold level)
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$1,020.00 (the face amount plus the final contingent coupon payment)
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Example 2:
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125 (at or above its downside threshold level)
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40 (below its downside threshold level)
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120 (at or above its downside threshold level)
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$1,000 × (40 / 100) = $400
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Example 3:
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20 (below its downside threshold level)
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80 (at or above its downside threshold level)
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120 (at or above its downside threshold level)
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$1,000 × (20 / 100) = $200
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Example 4:
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45 (below its downside threshold level)
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50 (below its downside threshold level)
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20 (below its downside threshold level)
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$1,000 × (20 / 100) = $200
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In example 1, the closing level of each underlying on the final determination
date is at or above its respective downside threshold level and coupon threshold level. Therefore, investors receive at maturity
a cash payment per security equal to the face amount of the securities, in addition to the final contingent coupon payment. Investors
do not participate in any appreciation in any underlying.
In example 2, the closing levels of two of the underlyings on the final determination
date are at or above their downside threshold levels, but the closing level of the other underlying on the final determination date is
below its respective downside threshold level. Therefore, investors are exposed to the downside performance of the lowest performing
underlying at maturity. The INDU Index
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
has increased 25% from its starting level to its closing level on the final
determination date, the RTY Index has declined 60% from its starting level to its closing level on the final determination date and the
NDX Index has increased 20% from its starting level to its closing level on the final determination date. Therefore, investors receive
at maturity an amount equal to the face amount times the performance factor of the RTY Index, which is the lowest performing underlying
in this example.
In example 3, the closing levels of two of the underlyings on the final determination
date are at or above their downside threshold levels and the closing level of the other underlying on the final determination date is
below its respective downside threshold level. Therefore, investors are exposed to the downside performance of the lowest performing
underlying at maturity. The INDU Index has declined 80% from its starting level to its closing level on the final determination date,
the RTY Index has declined 20% from its starting level to its closing level on the final determination date and the NDX Index has increased
20% from its starting level to its closing level on the final determination date. Therefore, investors receive at maturity
an amount equal to the face amount the performance factor of the INDU Index, which is the lowest performing underlying in this example.
In example 4, the closing level of each underlying on the final determination
date is below its respective downside threshold level, and investors receive at maturity an amount equal to the face amount times the
performance factor of the lowest performing underlying. The INDU Index has declined 55% from its starting level to its closing
level on the final determination date, the RTY Index has declined 50% from its starting level to its closing level on the final determination
date and the NDX Index has declined 80% from its starting level to its closing level on the final determination date. Therefore,
the maturity payment amount equals the face amount times the performance factor of the NDX Index, which is the lowest performing
underlying in this example.
If the closing level of any underlying on the final determination date is
below its respective downside threshold level, you will be exposed to the downside performance of the lowest performing underlying at
maturity, and your maturity payment amount will be less than 75% of the face amount per security and could be zero.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
This section describes the material risks relating to the securities. For
further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product
supplement for auto-callable securities, index supplement and prospectus. We also urge you to consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
Risks Relating to an Investment in the Securities
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The securities do not guarantee the return of the face amount of your securities
at maturity. The terms of the securities differ from those of ordinary debt securities in that they do not guarantee the
return of the face amount of your securities at maturity. If the securities have not been automatically called and if the closing
level of any underlying on the final determination date is less than its respective downside threshold level of 75% of its starting
level, you will be exposed to the decline in the value of the lowest performing underlying, as compared to its starting level, on a 1-to-1
basis, and you will receive for each security that you hold at maturity an amount equal to the face amount times the performance
factor of the lowest performing underlying. In this case, you will lose more than 25%, and possibly all, of the face amount
of your securities at maturity.
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The securities do not provide for the regular payment of interest. The terms
of the securities differ from those of ordinary debt securities in that they do not provide for the regular payment of interest. Instead,
the securities will pay a contingent coupon payment but only if the closing level of each underlying is at or above its respective
coupon threshold level on the related determination date. If the closing level of any underlying is lower than its coupon threshold
level on the relevant determination date for any interest period, we will pay no contingent coupon payment on the applicable contingent
coupon payment date. It is possible that the closing level of any underlying will be less than its respective coupon threshold level for
extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent coupon payments.
If you do not earn sufficient contingent coupon payments over the term of the securities, the overall return on the securities may be
less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
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The contingent coupon payment, if any, is based on the value of each underlying
on only the related quarterly determination date at the end of the related interest period. Whether the contingent coupon payment
will be paid on any contingent coupon payment date will be determined at the end of the relevant interest period based on the closing
level of each underlying on the relevant quarterly determination date. As a result, you will not know whether you will receive the contingent
coupon payments on any contingent coupon payment date until near the end of the relevant interest period. Moreover, because the contingent
coupon payment is based solely on the value of each underlying on the quarterly determination dates, if the closing level of any underlying
on any determination date date is below the coupon threshold level for such underlying, you will not receive the contingent coupon payment
for the related interest period, even if the level of such underlying was at or above its respective coupon threshold level on other days
during that interest period, and even if the closing levels(s) of one or both of the other underlyings are at or above their respective
coupon threshold level(s).
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Investors will not participate in any appreciation in
any underlying. Investors will not participate in any appreciation in any underlying from the starting level for such underlying,
and the return on the securities will be limited to the contingent coupon payments, if any, that are paid with respect to each determination
date on which the closing level of each underlying is greater than or equal to its respective coupon threshold level, if any.
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The market price will be influenced by many unpredictable factors. Several
factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price at which
MS & Co. may be willing to purchase or sell the securities in the secondary market. We expect that generally the level
of interest rates available in the market and the value of each underlying on any day, including
in relation to its respective starting level, coupon threshold level and downside threshold level, will affect the value of the securities
more than any other factors. Other factors that may influence the value of the securities include:
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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o
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the volatility (frequency and magnitude of changes in value) of the underlyings,
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o
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whether the closing level of any underlying has been below its respective coupon
threshold level on any determination date,
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o
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geopolitical conditions and economic, financial, political, regulatory or judicial
events that affect the component stocks of the underlyings or securities markets generally and which may affect the value of each underlying,
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dividend rates on the securities underlying the underlyings,
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the time remaining until the securities mature,
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interest and yield rates in the market,
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the availability of comparable instruments,
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o
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the composition of the underlyings and changes in the constituent stocks of such
underlyings, and
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any actual or anticipated changes in our credit ratings or credit spreads.
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Generally, the
longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described above. Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. In
particular, if any underlying has closed near or below its coupon threshold level, and especially if any underlying has closed near or
below its downside threshold level, the market value of the securities is expected to decrease substantially, and you may have to sell
your securities at a substantial discount from the face amount of your securities.
You cannot predict the future performance of any
underlying based on its historical performance. The value of any underlying may decrease and be below the respective coupon
threshold level for such underlying on each determination date so that you will receive no return on your investment, and any or all of
the underlyings may close below the respective downside threshold level(s) on the final determination date so that you will lose more
than 25% or all of your initial investment in the securities. There can be no assurance that the closing level of each underlying will
be at or above the respective coupon threshold level on any determination date so that you will receive a coupon payment on the securities
for the applicable interest period, or that it will be at or above its respective downside threshold level on the final determination
date so that you do not suffer a significant loss on your initial investment in the securities. See
“Dow Jones Industrial AverageSM Overview,” “Russell 2000®
Index Overview” and “NASDAQ-100 Index® Overview” below.
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The securities are subject to our credit risk, and any actual or anticipated changes
to our credit ratings or credit spreads may adversely affect the market value of the securities. You are dependent on our
ability to pay all amounts due on the securities upon an automatic call, on any contingent coupon payment date or 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.
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As a finance subsidiary, MSFL has no independent operations and will have no independent
assets. As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities
and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of such securities
in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available
under the related guarantee by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated
obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee.
Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and
should be treated pari passu with the
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
claims of other unsecured, unsubordinated creditors
of Morgan Stanley, including holders of Morgan Stanley-issued securities.
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Investing in the securities is not equivalent to investing in the underlyings. Investing
in the securities is not equivalent to investing in the underlyings or the component stocks or any underlying. Investors in
the securities will not participate in any positive performance of any underlying, and will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to the stocks that constitute any underlying.
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Reinvestment risk. The term of
your investment in the securities may be shortened due to the automatic call feature of the securities. If the securities are
called prior to maturity, you will receive no further payments on the securities and may be forced to invest in a lower interest rate
environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the
securities be called within the first six months of the term of the securities.
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The rate we are willing to pay for securities of this type, maturity and issuance
size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower
rate and the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the face amount reduce the
economic terms of the securities, cause the estimated value of the securities to be less than the face amount 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 face amount, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that
are included in the face amount and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
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The inclusion of the costs of issuing, selling,
structuring and hedging the securities in the face amount 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 3 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 underlyings, and to our secondary market credit spreads, it would do so based on values higher than the estimated
value, and we expect that those higher values will also be reflected in your brokerage account statements.
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The estimated value of the securities is determined by reference to our pricing
and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price. These
pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about
future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of
securities, our models may yield a higher estimated value of the securities than those generated by others, including other dealers in
the market, if they attempted to value the securities. In addition, the estimated value on the pricing date does not represent
a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your securities in the secondary market
(if any exists) at any time. The value of your securities at any time after the date of this document will vary based on many
factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also “The
market price will be influenced by many unpredictable factors” above.
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The securities will not be listed on any securities exchange and secondary trading
may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little
or no secondary market for the securities. MS & Co. and WFS may, but are not obligated to, make a market in the securities
and, if either of them once chooses to make a market, may cease doing so at any time. When they do make a market, they will
generally do so for transactions of routine secondary market size at prices based on their respective estimates of the current value of
the
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
securities, taking into account their respective
bid/offer spreads, 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 they 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. or WFS is willing to transact. If, at any time,
MS & Co. and WFS were to cease making a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly,
you should be willing to hold your securities to maturity.
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The 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
starting levels, the coupon threshold levels and the downside threshold levels and will calculate the amount of cash you receive at maturity,
if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise
discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the
selection of a successor index or calculation of a closing level in the event of a market disruption event or discontinuance of any of
the underlyings. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For
further information regarding these types of determinations, see “Description of Auto-Callable Securities” “—Alternate
Exchange Calculation in Case of an Event of Default,” “—Discontinuance of Any Underlying Index; Alteration of Method
of Calculation” and “—Calculation Agent and Calculations” in the accompanying product supplement for auto-callable
securities and “Additional Terms of the Securities—Postponement of the determination dates” below. In addition,
MS & Co. has determined the estimated value of the securities on the pricing date.
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Hedging and trading activity by our affiliates could potentially adversely affect
the value of the securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities
related to the securities (and possibly to other instruments linked to the underlyings or the component stocks of the underlyings), including
trading in the stocks that constitute the underlyings as well as in other instruments related to the underlyings. 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 determination date approaches. Some of our affiliates also
trade the stocks that constitute the underlyings and other financial instruments related to the underlyings 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 affect the starting level of an underlying, and, therefore, could increase (i) the level at or above which such
underlying must close on the determination dates so that the securities are called for a cash payment equal to the face amount plus a
final contingent coupon payment (depending also on the performance of the other underlyings), (ii) the level at or above which such underlying
must close on each determination date in order for you to earn a contingent coupon payment (depending also on the performance of the other
underlyings) and (iii) the level at or above which such underlying must close on the final determination date so that you are not exposed
to the negative performance of the lowest performing underlying at maturity (depending also on the performance of the other underlyings).
Additionally, such hedging or trading activities during the term of the securities could potentially affect the value of any underlying
on the determination dates, and, accordingly, whether we call the securities prior to maturity, whether we pay a contingent coupon payment
on the securities and the amount of cash you will receive at maturity, if any.
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The maturity date may be postponed if the final determination date is postponed. If
the scheduled final determination date is not a trading day or if a market disruption event occurs on that day so that the final determination
date is postponed and falls less than two business days prior to the maturity date, the maturity date of the securities will be postponed
to the second business day following that final determination date as postponed.
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Potentially inconsistent research, opinions or recommendations by Morgan Stanley,
MSFL, WFS or our or their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates may publish
research from time to time on financial markets and other matters that may influence the value of the securities, or express opinions
or provide recommendations that are inconsistent with purchasing or holding the securities. Any
|
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
research, opinions or recommendations expressed
by Morgan Stanley, MSFL, WFS or our or their respective affiliates may not be consistent with each other and may be modified from time
to time without notice. Investors should make their own independent investigation of the merits of investing in the securities and the
underlyings to which the securities are linked.
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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.
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Please read the discussion under “Additional
Information—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment in the
securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract that provides
for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your regular method of tax
accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with the capital loss
treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse tax consequences to
holders of the securities because the deductibility of capital losses is subject to limitations. We do not plan to request a ruling from
the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities, and the IRS or a court may not agree
with the tax treatment described herein. If the IRS were successful in asserting an alternative treatment for the securities,
the timing and character of income or loss on the securities might differ significantly from the tax treatment described herein. For
example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event,
U.S. Holders (as defined below) would be required to accrue into income original issue discount on the securities every year at a “comparable
yield” determined at the time of issuance (as adjusted based on the difference, if any, between the actual and the projected amount
of any contingent payments on the securities) and recognize all income and gain in respect of the securities as ordinary income. The
risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities, would
be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined below) should
note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay any additional
amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the
IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts described
in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. The notice
focuses on a number of issues, the most relevant of which for holders of the securities are the character and timing of income or loss
and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax. Both U.S. and
Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities,
including possible alternative treatments, the issues presented by this notice and any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction.
Risks Relating to the Underlyings
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You are exposed to the price risk of each underlying. Your
return on the securities is not linked to a basket consisting of each underlying. Rather, it will be contingent upon the independent
performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated
and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor performance
by any underlying over the term of the securities may negatively affect your return and
will not be offset or mitigated by any positive performance by the other underlyings. To receive any contingent
coupon payments, each underlying
|
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
must close at
or above its respective coupon threshold level on the applicable determination date. In addition, if the securities have not
been called and any underlying has declined to below its respective downside threshold
level as of the final determination date, you will be fully exposed to the decline in
the lowest performing underlying over the term of the securities on a 1-to-1 basis, even if the other underlyings have appreciated or
have not declined as much. Under this scenario, the value of any such maturity payment amount will be less than 75% of the
face amount of your securities and could be zero. Accordingly, your investment is subject to the price risk of each underlying.
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Because the securities are linked to the performance of the lowest performing
underlying, you are exposed to greater risks of receiving no contingent coupon payments
and sustaining a significant loss on your investment than if the securities were linked to just one underlying. The risk that you
will not receive any contingent coupon payments, or that you will suffer a significant loss on your investment, is greater if you invest
in the securities as opposed to substantially similar securities that are linked to the performance of just one underlying. With three
underlyings, it is more likely that any underlying will close below its coupon threshold level on any determination date, and below its
downside threshold level on the final determination date, than if the securities were linked to only one underlying. Therefore, it is
more likely that you will not receive any contingent coupon payments and that you will suffer a significant loss on your investment. In
addition, because each underlying must close above its starting level on a quarterly determination date in order for the securities to
be called prior to maturity, the securities are less likely to be called on any call settlement date than if the securities were linked
to just one underlying.
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The securities are linked to the Russell 2000® Index and are subject
to risks associated with small-capitalization companies. As the Russell 2000® Index is one of the underlyings,
and the Russell 2000® Index consists of stocks issued by companies with relatively small market capitalization, the securities
are linked to the value of small-capitalization companies. These companies often have greater stock price volatility, lower
trading volume and less liquidity than large-capitalization companies and therefore the Russell 2000® Index may be more
volatile than underlyings that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization
companies are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the
stocks of small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less
well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making
them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller
shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies
and are more susceptible to adverse developments related to their products.
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Adjustments to the underlyings could adversely affect the value of the securities. The
publisher of any underlying may add, delete or substitute the stocks constituting such underlying or make other methodological changes
that could change the value of such underlying. The publisher of such underlying may discontinue or suspend calculation or
publication of such underlying at any time. In these circumstances, the calculation agent will have the sole discretion to
substitute a successor underlying that is comparable to the discontinued underlying and is permitted to consider underlyings that are
calculated and published by the calculation agent or any of its affiliates. If the calculation
agent determines that there is no appropriate successor underlying on any determination date, the determination of whether a contingent
coupon payment will be payable on the securities on the applicable contingent coupon payment date, whether the securities will be called
and/or the amount payable at maturity, if any, will be based on the value of such underlying, based on the closing prices of the stocks
constituting such underlying at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation
agent in accordance with the formula for calculating such underlying last in effect prior to such discontinuance, as compared to the relevant
starting level, coupon threshold level or downside threshold level, as applicable (depending also on the performance of the other underlyings).
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Historical levels of the underlyings should not be taken as an indication of the
future performance of the underlyings during the term of the securities. No assurance can be given as to the level of the
underlyings at any time, including on the final determination date, because historical levels of the underlyings do not provide an indication
of future performance of the underlyings.
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Dow Jones Industrial AverageSM Overview
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The Dow Jones Industrial AverageSM is a price-weighted index composed
of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark of CME Group Inc.,
as representative of the broad market of U.S. industry. For additional information about the Dow Jones Industrial AverageSM,
see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the INDU Index
for the period from January 1, 2016 through November 30, 2021. The closing level of the INDU Index on November 30, 2021 was 34,483.72. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The INDU Index
has at times experienced periods of high volatility. You should not take the historical levels of the INDU Index as an indication
of its future performance, and no assurance can be given as to the closing level of the INDU Index at any time, including on the determination
dates.
Dow Jones Industrial AverageSM
Daily Closing Levels
January 1, 2016 to November 30, 2021
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“Dow Jones,” “Dow Jones Industrial Average,” “Dow
Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. For more information, see
“Dow Jones Industrial AverageSM” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Russell 2000® Index Overview
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The Russell 2000® Index is an index calculated, published and
disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated in the U.S. and its
territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities that form the Russell
3000® Index. The Russell 3000® Index is composed of the 3,000 largest U.S. companies as
determined by market capitalization and represents approximately 98% of the U.S. equity market. The Russell 2000®
Index consists of the smallest 2,000 companies included in the Russell 3000® Index and represents a small portion
of the total market capitalization of the Russell 3000® Index. The Russell 2000®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000® Index, see the information set forth under “Russell 2000® Index” in
the accompanying index supplement.
The following graph sets forth the daily closing levels of the RTY Index for
the period from January 1, 2016 through November 30, 2021. The closing level of the RTY Index on November 30, 2021 was 2,198.908. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The RTY Index
has at times experienced periods of high volatility. You should not take the historical levels of the RTY Index as an indication
of its future performance, and no assurance can be given as to the closing level of the RTY Index at any time, including on the determination
dates.
Russell 2000® Index Daily
Closing Levels
January 1, 2016 to November 30, 2021
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The “Russell 2000® Index” is a trademark of FTSE
Russell. For more information, see “Russell 2000® Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
NASDAQ-100 Index® Overview
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The NASDAQ-100 Index®, which is calculated, maintained and published
by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities of non-financial
companies listed on The Nasdaq Stock Market LLC. The NASDAQ-100 Index® includes companies across a variety of major industry
groups. At any moment in time, the value of the NASDAQ-100 Index® equals the aggregate value of the then-current NASDAQ-100
Index® share weights of each of the NASDAQ-100 Index® component securities, which are based on the total
shares outstanding of each such NASDAQ-100 Index® component security, multiplied by each such security’s respective
last sale price on NASDAQ (which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes
the basis for the reported NASDAQ-100 Index® value. For additional information about the NASDAQ-100 Index®,
see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the NDX Index
for the period from January 1, 2016 through November 30, 2021. The closing level of the NDX Index on November 30, 2021 was
16,135.92. We obtained the information in the graph below from Bloomberg Financial Markets without independent
verification. The NDX Index has at times experienced periods of high volatility. You should not take the
historical levels of the NDX Index as an indication of its future performance, and no assurance can be given as to the closing level
of the NDX Index at any time, including on the determination dates.
NASDAQ-100 Index® Daily
Closing Levels
January 1, 2016 to November 30, 2021
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“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100
Index®” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Additional Terms of the Securities
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Additional Terms
Please read this information in conjunction
with the summary terms on the front cover of this document.
If the terms described herein are inconsistent
with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
Certain definitions
A “trading day” with respect to an
underlying means a day, as determined by the calculation agent, on which (i) the relevant stock exchanges with respect to each security
underlying such underlying are scheduled to be open for trading for their respective regular trading sessions and (ii) each related futures
or options exchange with respect to such underlying is scheduled to be open for trading for its regular trading session.
The “relevant stock exchange” for any
security underlying an underlying means the primary exchange or quotation system on which such security is traded, as determined by the
calculation agent.
The “related futures or options exchange”
for an underlying means an exchange or quotation system where trading has a material effect (as determined by the calculation agent) on
the overall market for futures or options contracts relating to such underlying.
Market disruption events
A “market disruption event” with respect
to an underlying means any of the following events as determined by the calculation agent in its sole discretion:
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(A)
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The occurrence or existence of a material suspension of or limitation imposed on trading by the relevant
stock exchanges or otherwise relating to securities which then comprise 20% or more of the level of such underlying or any successor equity
index at any time during the one-hour period that ends at the close of trading on that day, whether by reason of movements in price exceeding
limits permitted by those relevant stock exchanges or otherwise.
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(B)
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The occurrence or existence of a material suspension of or limitation imposed on trading by any related
futures or options exchange or otherwise in futures or options contracts relating to such underlying or any successor equity index on
any related futures or options exchange at any time during the one-hour period that ends at the close of trading on that day, whether
by reason of movements in price exceeding limits permitted by the related futures or options exchange or otherwise.
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(C)
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The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs
the ability of market participants in general to effect transactions in, or obtain market values for, securities that then comprise 20%
or more of the level of such underlying or any successor equity index on their relevant stock exchanges at any time during the one-hour
period that ends at the close of trading on that day.
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(D)
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The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs
the ability of market participants in general to effect transactions in, or obtain market values for, futures or options contracts relating
to such underlying or any successor equity index on any related futures or options exchange at any time during the one-hour period that
ends at the close of trading on that day.
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(E)
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The closure on any exchange business day of the relevant stock exchanges on which securities that then
comprise 20% or more of the level of such underlying or any successor equity index are traded or any related futures or options exchange
with respect to such underlying prior to its scheduled closing time unless the earlier closing time is announced by the relevant stock
exchange or related futures or options exchange, as applicable, at least one hour prior to the earlier of (1) the actual closing time
for the regular trading session on such relevant stock exchange or related futures or options exchange, as applicable, and
(2) the submission deadline for orders to be entered into the relevant stock exchange or related futures or options exchange, as applicable,
system for execution at such actual closing time on that day.
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Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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(F)
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The relevant stock exchange for any security underlying such underlying or successor equity index or any
related futures or options exchange with respect to such underlying fails to open for trading during its regular trading session.
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For purposes of determining whether a market disruption
event has occurred with respect to an underlying:
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(1)
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the relevant percentage contribution of a security to the level of such underlying or any successor equity
index will be based on a comparison of (x) the portion of the level of such index attributable to that security and (y) the overall level
of the underlying or successor equity index, in each case immediately before the occurrence of the market disruption event;
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(2)
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the “close of trading” on any trading day for such underlying or any successor equity
index means the scheduled closing time of the relevant stock exchanges with respect to the securities underlying such underlying or successor
equity index on such trading day; provided that, if the actual closing time of the regular trading session of any such relevant stock
exchange is earlier than its scheduled closing time on such trading day, then (x) for purposes of clauses (A) and (C) of the definition
of “market disruption event” above, with respect to any security underlying such underlying or successor equity index for
which such relevant stock exchange is its relevant stock exchange, the “close of trading” means such actual closing time and
(y) for purposes of clauses (B) and (D) of the definition of “market disruption event” above, with respect to any futures
or options contract relating to such underlying or successor equity index, the “close of trading” means the latest actual
closing time of the regular trading session of any of the relevant stock exchanges, but in no event later than the scheduled closing time
of the relevant stock exchanges;
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(3)
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the “scheduled closing time” of any relevant stock exchange or related futures or options
exchange on any trading day for such underlying or any successor equity index means the scheduled weekday closing time of such relevant
stock exchange or related futures or options exchange on such trading day, without regard to after hours or any other trading outside
the regular trading session hours; and
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(4)
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an “exchange business day” means any trading day for such underlying or any successor
equity index on which each relevant stock exchange for the securities underlying such underlying or any successor equity index and each
related futures or options exchange with respect to such underlying are open for trading during their respective regular trading sessions,
notwithstanding any such relevant stock exchange or related futures or options exchange closing prior to its scheduled closing time.
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Postponement of the determination dates
If a market disruption event occurs or is continuing with
respect to an underlying on any determination date, then such determination date for underlying will be postponed to the first succeeding
trading day for such underlying on which a market disruption event for such underlying has not occurred and is not continuing; however,
if such first succeeding trading day has not occurred as of the eighth trading day for such underlying after the originally scheduled
determination date, that eighth trading day shall be deemed to be the determination date for such underlying. If an determination
date has been postponed eight trading days for an underlying after the originally scheduled determination date and a market disruption
event occurs or is continuing with respect to such underlying on such eighth trading day, the calculation agent will determine the closing
level of such underlying on such eighth trading day in accordance with the formula for and method of calculating the closing level of
such underlying last in effect prior to commencement of the market disruption event, using the closing price (or, with respect to any
relevant security, if a market disruption event has occurred with respect to such security, its good faith estimate of the value of such
security at the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the
regular trading session of such relevant stock exchange) on such date of each security included in such underlying. As used herein, “closing
price” means, with respect to any security on any date, the relevant stock exchange traded or quoted price of such security as of
the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading
session of such relevant stock exchange. Notwithstanding the postponement of an determination date for an underlying due to a market disruption
event with respect to such underlying on such determination date, the originally scheduled determination date will remain the determination
date for any underlying not affected by a market disruption event on such day.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Postponement of maturity date
If the scheduled final determination date is not a trading
day or if a market disruption event occurs on that day so that the final determination date as postponed falls less than two business
days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following
that final determination date as postponed.
Underlying publisher
With respect to the INDU Index, S&P Dow
Jones Indices LLC, or any successor thereof
With respect to the RTY Index, FTSE Russell, or any successor thereof
With respect to the NDX Index, Nasdaq, Inc., or any successor thereof
Interest
None
Denominations
$1,000 per security and integral multiples thereof
Trustee
The Bank of New York Mellon
Calculation agent
MS & Co.
Issuer notice to registered security holders, the trustee and the depositary
In the event that the call settlement date
or the maturity date is postponed due to postponement of the relevant determination date, the issuer shall give notice of such postponement
and, once it has been determined, of the date to which the call settlement date or the maturity date, as applicable, has been rescheduled
(i) to the holder of the securities by mailing notice of such postponement by first class mail, postage prepaid, to the holder’s
last address as it shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee
by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”)
by telephone or facsimile confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice
that is mailed to the holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to
such holder, whether or not such 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 call settlement date or the maturity date, as applicable, the
business day immediately preceding the scheduled call settlement date or maturity date, as applicable, and (ii) with respect to notice
of the date to which the call settlement date or the maturity date, as applicable, has been rescheduled, the business day immediately
following the relevant determination date as postponed.
In the event that the securities are subject
to automatic call, the issuer shall, (i) on the business day following the applicable determination date, give notice of the automatic
call of the securities, including specifying the payment date of the applicable amount due upon the automatic call, (x) to each holder
of the securities by mailing notice of such automatic call by first class mail, postage prepaid, to such holder’s last address as
it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class
mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile confirmed by mailing such notice to
the depositary by first class mail, postage prepaid and (ii) on or prior to the call settlement date, deliver the aggregate cash amount
due with respect to the securities to the trustee for delivery to the depositary, as holder of the securities. Any notice that
is mailed to the holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such
holder, whether or not such holder receives the notice. This notice shall be given by the issuer or, at the issuer’s request, by
the trustee in the name and at the expense of the issuer, with any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation
agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount
of cash to be delivered as a contingent coupon payment, if any, with respect to each security on or prior to 10:30 a.m. (New York City
time) on the business day preceding each contingent coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with
respect to the contingent coupon payment to the trustee for delivery to the depositary, as holder of the securities, on the applicable
contingent coupon payment date.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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 each face amount of the securities, on or prior to
10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect
to the securities, if any, to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
Underlying
The accompanying product supplement refers to an underlying as the “underlying
asset.”
Face amount
The accompanying product supplement refers to the face amount as the “stated
principal amount.”
Maturity payment amount
The accompanying product supplement refers to the maturity payment amount as
the “payment at maturity.”
Closing level
The accompanying product supplement refers to the closing level as the “index
closing value.”
Notwithstanding the definition of “index closing value” in the
accompanying product supplement, the “closing level” on any trading day solely with respect to the RTY Index means the closing
value of such underlying or any successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation
agent may select, on such trading day.
Starting level
The accompanying product supplement refers to the starting level as the “initial
value” or “initial index value.”
Call settlement dates
The accompanying product supplement refers
to the call settlement dates as the “early redemption dates.”
Downside threshold level
The accompanying product supplement refers to the downside threshold level
as the “trigger level.”
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Additional Information About the Securities
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Minimum ticketing size
$1,000 / 1 security
Tax considerations
Prospective investors should note that the discussion under the section
called “United States Federal Taxation” in the accompanying product supplement does not apply to the securities issued under
this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal income tax
consequences and certain estate tax consequences of the ownership and disposition of the securities. This discussion applies
only to investors in the securities who:
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purchase the securities in the original offering; and
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hold the securities as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the “Code”).
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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:
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certain financial institutions;
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certain dealers and traders in securities or commodities;
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investors holding the securities as part of a “straddle,” wash sale,
conversion transaction, integrated transaction or constructive sale transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S. federal income
tax purposes;
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regulated investment companies;
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real estate investment trusts; or
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tax-exempt entities, including “individual retirement accounts” or “Roth
IRAs” as defined in Section 408 or 408A of the Code, respectively.
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If an entity that is classified as a partnership for U.S. federal income tax
purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and
the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership, you should consult
your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities to you.
As the law applicable to the U.S. federal income taxation of instruments such
as the securities is technical and complex, the discussion below necessarily represents only a general summary. The effect of any applicable
state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences or consequences resulting from the
Medicare tax on investment income. Moreover, the discussion below does not address the consequences to taxpayers subject to special tax
accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements, judicial
decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent to the
date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities should consult
their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities that
directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income tax purposes,
no assurance can be given that the IRS or
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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:
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a citizen or individual resident of the United States;
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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
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an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
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Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is respected, the
following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax
basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments. Any
coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance
with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities. Upon
a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged or settled. For
this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds attributable to an
accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term capital gain
or loss if the U.S. Holder has held the securities for more than one year at the time of the sale, exchange or settlement, and should
be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with the
capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse tax consequences
to holders of the securities because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of an Investment in the Securities
Due to the absence of authorities that directly address the proper tax treatment
of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment described above. In
particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities under Treasury regulations
governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the IRS were successful in asserting
that the Contingent Debt Regulations applied to the securities, the timing and character of income thereon would be significantly affected.
Among other things, a U.S. Holder would be required to accrue into income original issue discount on the securities every year at a “comparable
yield” determined at the time of their issuance, adjusted upward or downward to reflect the difference, if any, between the actual
and the projected amount of any contingent payments on the securities. Furthermore, any gain
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
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:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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The term “Non-U.S. Holder” does not include any
of the following holders:
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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;
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certain former citizens or residents of the United States; or
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a holder for whom income or gain in respect of the securities is effectively connected
with the conduct of a trade or business in the United States.
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Such holders should consult their tax advisers regarding the U.S. federal income
tax consequences of an investment in the securities.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
Although significant aspects of the tax treatment of each security are uncertain,
we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified by an applicable
income tax treaty under an “other income” or similar provision. We will not be required to pay any additional amounts
with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding tax, a Non-U.S.
Holder of the securities must comply with certification requirements to establish that it is not a U.S. person and is eligible for such
an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult your tax adviser
regarding the tax treatment of the securities, including the possibility of obtaining a refund of any withholding tax and the certification
requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated thereunder
(“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid
or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S.
equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities
that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in
the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m)
will not apply to securities issued before January 1, 2023 that do not have a delta of one with respect to any Underlying Security. Based
on the terms of the securities and current market conditions, we expect that the securities will not have a delta of one with respect
to any Underlying Security on the pricing date. However, we will provide an updated determination in the pricing supplement. Assuming
that the securities do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the securities
should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may disagree with
this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether
you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we will
not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which is potentially
includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers) should note that, absent an applicable treaty exemption,
the securities may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective investors that are non-U.S.
individuals, or are entities of the type described above, should consult their tax advisers regarding the U.S. federal estate tax consequences
of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection with any coupon
payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment of proceeds from a
sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts paid to the
Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a U.S. person for U.S.
federal income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from a payment to a
Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability and may entitle the
Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA
Legislation commonly referred to as “FATCA” generally imposes a
withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to certain financial
instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An intergovernmental
agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA generally
applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed or determinable
annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments of U.S.-source
FDAP income and to payments of
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
gross proceeds of the disposition (including upon retirement) of certain financial
instruments treated as providing for U.S.-source interest or dividends. Under proposed regulations (the preamble to which specifies
that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds (other than
amounts treated as FDAP income). While the treatment of the securities is unclear, you should assume that any coupon payment
with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will not be
required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult their
tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar
as it purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
Use of proceeds and hedging
The proceeds from the sale of the securities will be used
by us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into
hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 4 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we will hedge our anticipated exposure in
connection with the securities, by entering into hedging transactions with our affiliates and/or third party dealers. We expect
our hedging counterparties to take positions in stocks of the underlyings, in futures and options contracts on the underlyings and any
component stocks of the underlyings listed on major securities markets or positions in any other available securities or instruments that
they may wish to use in connection with such hedging. Such purchase activity could increase the level of an underlying on the
pricing date, and therefore increase (i) the level at or above which such underlying must close on the determination dates so that the
securities are called for a cash payment equal to the face amount plus a final contingent coupon payment (depending also on the performance
of the other underlyings), (ii) the level at or above which such underlying must close on each determination date in order for you to
earn a contingent coupon payment (depending also on the performance of the other underlyings) and (iii) the level at or above which such
underlying must close on the final determination date so that you are not exposed to the negative performance of the lowest performing
underlying at maturity (depending also on the performance of the other underlyings). 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 determination date approaches. Additionally, our hedging activities, as well as our other trading
activities, during the term of the securities could potentially affect the level of any underlying on the determination dates, and, accordingly,
whether we call the securities prior to maturity, whether we pay a contingent coupon payment on the securities and the amount of cash
you will receive at maturity, if any. For further information on our use of proceeds and hedging, see “Use of Proceeds
and Hedging” in the accompanying product supplement.
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. and WFS will act as the agents for this offering. WFS
will receive a commission of up to $15.25 for each security it sells. WFS proposes to offer the securities in part directly
to the public at the price to public set forth on the cover page of this document and in part to Wells Fargo Advisors (“WFA”)
(the trade name of the retail brokerage business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors
Financial Network, LLC), an affiliate of WFS, or other securities dealers at such price less a selling concession of up to $10.00 per
security. In addition to the selling concession allowed to WFA, WFS will pay $0.75 per security of the commission to WFA as
a distribution expense fee for each security sold by WFA.
In addition, in respect of certain securities sold in this
offering, we may pay a fee of up to $1.50 per security to selected securities dealers in consideration for marketing and other services
in connection with the distribution of the securities to other securities dealers.
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100 Index® due June 23, 2023
See "Plan of Distribution (Conflicts of Interest)"
in the accompanying product supplement for auto-callable securities for information about the distribution arrangements for the securities. References
therein to "agent" refer to each of MS & Co. and WFS, as agents for this offering, except that references to "agent"
in the context of offers to certain Morgan Stanley dealers and compliance with FINRA Rule 5121 do not apply to WFS. MS &
Co., WFS or their affiliates may enter into hedging transactions with us in connection with this offering.
MS & Co. is an affiliate of MSFL and a wholly owned
subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable,
hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities
such that for each security the estimated value on the pricing date will be no lower than the minimum level described in “Estimated
Value of the Securities” beginning on page 4.
MS & Co. will conduct this offering in compliance with the requirements
of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member
firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other
affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of
Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
Where you can find more information
Morgan Stanley and MSFL have filed a registration statement
(including a prospectus, as supplemented by the product supplement for auto-callable securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that
registration statement, the product supplement for auto-callable securities, the index supplement and any other documents relating to
this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering. You
may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively,
Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the product supplement for
auto-callable securities, index supplement and prospectus if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Auto-Callable Securities dated November 16, 2020
Index
Supplement dated November 16, 2020
Prospectus
dated November 16, 2020
Terms used but not defined in this document are defined
in the product supplement for auto-callable securities, in the index supplement or in the prospectus.
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