June 2019
Preliminary Terms No. 2,050
Registration Statement Nos. 333-221595; 333-221595-01
Dated May 29, 2019
Filed pursuant to Rule 433
M
organ
S
tanley
F
inance
LLC
STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Trigger PLUS Based on the Value of the Worst
Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Fully
and Unconditionally Guaranteed by Morgan Stanley
Principal at Risk Securities
The Trigger PLUS are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The Trigger PLUS will pay no interest,
do not guarantee any return of principal at maturity and have the terms described in the accompanying product supplement for PLUS,
index supplement and prospectus, as supplemented or modified by this document. The payment at maturity on the Trigger
PLUS will be based on the value of the worst performing of the S&P 500
®
Index and the Russell 2000
®
Index, which we refer to as the underlying indices. At maturity, if
both
underlying indices have
appreciated
in value, investors will receive the stated principal amount of their investment plus leveraged upside performance of the worst
performing underlying index, subject to the maximum payment at maturity. If
either
of the underlying indices
depreciates
in value, but the final index value of
each
underlying index is greater than or equal to 60% of the respective
initial index value, which we refer to as the respective trigger level, investors will receive the stated principal amount of their
investment. However, if the final index value of
either
underlying index is less than its respective trigger
level, investors will lose a significant portion or all of their investment, resulting in a loss of 1% for every 1% decline in
the worst performing underlying index from its initial index value.
Investors may lose their entire initial investment
in the Trigger PLUS.
Because the payment at maturity of the Trigger PLUS is based on the worst performing of the
underlying indices, a decline in
either
underlying index below its respective trigger level will result in a significant
loss of your investment, even if the other underlying index has appreciated or has not declined as much. These long-dated Trigger
PLUS are for investors who seek an equity index-based return and who are willing to risk their principal, risk exposure to the
worst performing of two underlying indices and forgo current income and upside above the maximum payment at maturity in exchange
for the upside leverage feature and the limited protection against loss that applies only if the final index value of each underlying
index is greater than or equal to the respective trigger level. The Trigger PLUS are notes issued as part of MSFL’s
Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These Trigger PLUS are not secured obligations and
you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
SUMMARY TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Maturity date:
|
July 3, 2024
|
Underlying indices:
|
S&P 500
®
Index (the “SPX Index”) and Russell 2000
®
Index (the “RTY Index”)
|
Valuation date:
|
June 28, 2024, subject to postponement for non-index business days and certain market disruption events
|
Aggregate principal amount:
|
$
|
Payment at maturity:
|
If the final index value of
each underlying index
is
greater
than
its respective initial index value,
$1,000 + leveraged upside payment
In no event will the payment at maturity exceed the maximum
payment at maturity.
If the final index value of
either underlying index
is
less than or equal to
its respective initial index value, but the final index value of each underlying index is
greater than or equal to
its respective trigger level:
$1,000
If the final index value of
either underlying index
is
less than
its respective trigger level:
$1,000 x index performance factor of the worst
performing underlying index
Under these circumstances, the payment at maturity will be
less than the stated principal amount of $1,000 and will represent a loss of at least 40%, and possibly all of your investment.
|
Leveraged upside payment:
|
$1,000 × leverage factor × index percent change of the worst performing underlying index
|
Leverage factor:
|
400%
|
Index percent change:
|
With respect to each underlying index, (final index value – initial index value) / initial index value
|
Worst performing underlying index:
|
The underlying index with the lesser index percent change
|
Index performance factor
|
With respect to each underlying index, final index value / initial index value
|
Maximum payment at maturity:
|
$1,640 to $1,690 per Trigger PLUS (164% to 169% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
|
Initial index value:
|
With respect to the SPX Index,
, which is the index closing value of such index on the pricing date
With respect to the RTY Index,
, which is the index closing value of such index on the pricing date
|
Final index value:
|
With respect to each underlying index, the index closing value of such index on the valuation date
|
Trigger level:
|
With respect to the SPX Index,
, which is 60% of the initial index value of such index
With respect to the RTY Index,
, which is 60% of the initial index value of such index
|
Stated principal amount / Issue price:
|
$1,000 per Trigger PLUS (see “Commissions and issue price” below)
|
Pricing date:
|
June 28, 2019
|
Original issue date:
|
July 3, 2019 (3 business days after the pricing date)
|
CUSIP / ISIN:
|
61769HEC5 / US61769HEC51
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
Approximately $962.40 per Trigger PLUS, or within $30.00 of that estimate. See “Investment Summary” beginning on page 2.
|
Commissions and issue price:
|
Price to public
(1)
|
Agent’s commissions and fees
(2)
|
Proceeds to us
(3)
|
Per Trigger PLUS
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
|
(1)
|
The Trigger PLUS will be sold only to investors purchasing
the Trigger PLUS in fee-based advisory accounts.
|
|
(2)
|
MS & Co. expects to sell all of the Trigger PLUS
that it purchases from us to an unaffiliated dealer at a price of $ per Trigger PLUS, for further sale
to certain fee-based advisory accounts at the price to public of $1,000 per Trigger PLUS. MS & Co. will not receive a sales
commission with respect to the Trigger PLUS. See “Supplemental information regarding plan of distribution; conflicts of
interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
product supplement for PLUS.
|
|
(3)
|
See “Use of proceeds and hedging” on page
20.
|
The Trigger PLUS involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 8.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Trigger PLUS are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they
obligations of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Trigger PLUS” and “Additional Information About the Trigger PLUS” 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.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Investment Summary
Performance Leveraged Upside Securities
The Trigger PLUS Based on the Value of the Worst Performing of
the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024 (the “Trigger PLUS”)
can be used:
|
§
|
As an alternative to direct exposure to the underlying
indices that enhances returns for a certain range of positive performance of the worst performing underlying index, subject to
the maximum payment at maturity
|
|
§
|
To potentially outperform the worst performing of
the S&P 500
®
Index and the Russell 2000
®
Index in a moderately bullish scenario by taking advantage
of the leverage factor
|
|
§
|
To provide limited protection against loss of principal
in the event of a decline of the underlying indices but only if the respective final index level of the
worst performing underlying
index
is
greater than or equal to
the respective trigger level
|
Maturity:
|
5 years
|
Leverage factor:
|
400% (applicable only if the final index value of each underlying index is greater than its respective initial index value)
|
Maximum payment at maturity:
|
$1,640 to $1,690 per Trigger PLUS (164% to 169% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
|
Trigger level:
|
With respect to the SPX Index, 60% of the initial index value. With respect to the RTY Index, 60% of the initial index value
|
Minimum payment at maturity:
|
None. You could lose your entire initial investment in the Trigger PLUS
|
Coupon:
|
None
|
The original issue price of each Trigger PLUS is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the Trigger PLUS, which are borne by you, and, consequently,
the estimated value of the Trigger PLUS on the pricing date will be less than $1,000. We estimate that the value of
each Trigger PLUS on the pricing date will be approximately $962.40, or within $30.00 of that estimate. Our estimate
of the value of the Trigger PLUS 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 Trigger PLUS on the pricing date, we take into
account that the Trigger PLUS comprise both a debt component and a performance-based component linked to the underlying indices. The
estimated value of the Trigger PLUS is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlying indices, instruments based on the underlying indices, 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 Trigger PLUS?
In determining the economic terms of the Trigger PLUS, including
the leverage factor, the trigger levels and the maximum payment at maturity, 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
Trigger PLUS 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 Trigger PLUS?
The price at which MS & Co. purchases the Trigger PLUS in
the secondary market, absent changes in market conditions, including those related to the underlying indices, 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,
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
selling, structuring and hedging the Trigger PLUS are not fully
deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell
the Trigger PLUS in the secondary market, absent changes in market conditions, including those related to the underlying indices,
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
Trigger PLUS, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Key Investment Rationale
The Trigger PLUS offer leveraged upside exposure to the worst
performing of the S&P 500
®
Index and the Russell 2000
®
Index, subject to the maximum payment
at maturity. In exchange for the leverage feature, investors are exposed to the risk of loss of a significant portion
or all of their investment due to the trigger feature. At maturity, an investor will receive an amount in cash based
upon the closing value of the worst performing underlying index on the valuation date. The Trigger PLUS are unsecured
obligations of ours, and all payments on the Trigger PLUS are subject to our credit risk.
Investors may lose their
entire initial investment in the Trigger PLUS.
Leveraged Performance Up to a Cap
|
The Trigger PLUS offer investors an opportunity to receive 400% of the positive return of the worst performing of the underlying indices, subject to the maximum payment at maturity, if
both
underlying indices have appreciated in value.
|
Trigger Feature
|
At maturity, even if the worst performing underlying index has declined over the term of the Trigger PLUS, you will receive your stated principal amount but only if the final index value of the worst performing underlying index is
greater than or equal to
the respective trigger level.
|
Upside Scenario
|
Both
underlying indices increase in value and, at maturity, the Trigger PLUS redeem for the stated principal amount of $1,000 plus 400% of the index percent change of the worst performing underlying index, subject to the maximum payment at maturity of $1,640 to $1,690 per Trigger PLUS (164% to 169% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
|
Par Scenario
|
The final index value of the worst performing index is less than or equal to the respective initial index value but is greater than or equal to the respective trigger level. In this case, you receive the stated principal amount of $1,000 at maturity even though the worst performing underlying index has depreciated.
|
Downside Scenario
|
Either
underlying index declines in value such that, at
maturity, the final index value of the worst performing index is less than the respective trigger level. In this case,
the Trigger PLUS will redeem for at least 40% less than the stated principal amount, and this decrease will be by an amount proportionate
to the full decline in value of the worst performing underlying index over the term of the Trigger PLUS.
Because the payment at maturity of the Trigger PLUS is based
on the worst performing of the underlying indices, a decline in
either
underlying index below its respective trigger level
will result in a significant loss of your investment, even if the other underlying index has appreciated or has not declined as
much.
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to calculate
the payment at maturity on the Trigger PLUS. The following examples are for illustrative purposes only. The
actual initial index value and trigger level for each underlying index will be determined on the pricing date. The payment
at maturity on the Trigger PLUS is subject to our credit risk. The below examples are based on the following terms:
Stated principal amount:
|
$1,000 per PLUS
|
Leverage factor:
|
400%
|
Hypothetical maximum payment at maturity:
|
$1,665 per Trigger PLUS (166.50% of the stated principal amount, the midpoint of the specified range)
|
Hypothetical trigger level:
|
With respect to the SPX Index, 1,200, 60% of the respective hypothetical
initial index value
With respect to the RTY Index, 600, 60% of the respective hypothetical
initial index value
|
Hypothetical initial index value:
|
With respect to the SPX Index: 2,000
With respect to the RTY Index: 1,000
|
EXAMPLE 1
:
Both
underlying indices appreciate significantly and so investors receive only the maximum payment at maturity.
Final index value
|
|
SPX Index: 3,800
|
|
|
RTY Index: 1,800
|
Index percent change
|
|
SPX Index: (3,800 –
2,000) / 2,000 = 90%
RTY Index: (1,800
– 1,000) / 1,000 = 80%
|
Payment at maturity
|
=
|
$1,000 + leveraged upside payment, subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × leverage factor × index percent change of the worst performing underlying index), subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × 400% × 80%), subject to the maximum payment at maturity
|
|
=
|
maximum payment at maturity of $1,665 per Trigger PLUS
|
|
|
|
In example 1, the final
index values of both the SPX Index and the RTY Index are significantly greater than their initial index values. The
SPX Index has appreciated by 90%, while the RTY Index has appreciated by 80%. Therefore, investors receive at maturity
the stated principal amount
plus
400% of the appreciation of the worst performing underlying index, subject to the hypothetical
maximum payment at maturity of $1,665 per Trigger PLUS. Under the terms of the Trigger PLUS, investors will realize the hypothetical
maximum payment at maturity at a final index value of the worst performing underlying index of 116.625% of its respective initial
index value. Therefore, in this example, investors receive only the hypothetical maximum payment at maturity of $1,665 per stated
principal amount, even though both underlying indices have appreciated significantly.
EXAMPLE 2
:
Both underlying indices appreciate over
the term of the Trigger PLUS, and investors receive the stated principal amount
plus
the leveraged upside payment, calculated
based on the index percent change of the worst performing underlying index.
Final index value
|
|
SPX Index: 2,200
|
|
|
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
RTY Index: 1,400
|
Index percent change
|
|
SPX Index: (2,200 – 2,000) / 2,000 = 10%
RTY Index: (1,400 – 1,000) / 1,000 = 40%
|
Payment at maturity
|
=
|
$1,000 + leveraged upside payment, subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × leverage factor × index percent change of the worst performing underlying index), subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × 400% × 10%), subject to the maximum payment at maturity
|
|
=
|
$1,400
|
|
|
|
In example 2, the final index values of both the SPX Index and
the RTY Index are greater than their initial index values. The SPX Index has appreciated by 10%, while the RTY Index
has appreciated by 40%. Therefore, investors receive at maturity the stated principal amount
plus
400% of the
appreciation of the worst performing underlying index, which is the SPX Index in this example. Investors
receive $1,400 per Trigger PLUS at maturity.
EXAMPLE 3
:
One underlying index appreciates, while
the other declines over the term of the Trigger PLUS but neither index declines below the respective trigger level, and investors
receive the stated principal amount.
Final index value
|
|
SPX Index: 2,600
|
|
|
RTY Index: 800
|
Index percent change
|
|
SPX Index: (2,600 – 2,000) / 2,000 = 30%
RTY Index: (800 – 1,000) / 1,000 = -20%
|
Payment at maturity
|
=
|
$1,000
|
|
|
|
In example 3, the final index value of the SPX Index is greater
than its initial index value, while the final index value of the RTY Index is less than its initial index value, but is greater
than or equal to the respective trigger level. The SPX Index has appreciated by 30% while the RTY index has declined
by 20%. Investors will receive the stated principal amount of $1,000.
EXAMPLE 4
:
One underlying index appreciates while the
other declines over the term of the Trigger PLUS, and the final index value of the worst performing underlying index is less than
the respective trigger level. Investors are therefore exposed to the decline in the worst performing underlying index
from its initial index value.
Final index value
|
|
SPX Index: 2,600
|
|
|
RTY Index: 400
|
Index percent change
|
|
SPX Index: (2,600 – 2,000) / 2,000 = 30%
RTY Index: (400 – 1,000) / 1,000 = -60%
|
Payment at maturity
|
=
|
$1,000 × (index performance factor of the worst performing index)
|
|
=
|
$1,000 x (400 / 1,000)
|
|
=
|
$400
|
|
|
|
In example 4, the final index value of the SPX Index is greater
than its initial index value, while the final index value of the RTY Index has declined below the trigger level. The
SPX Index has appreciated by 30% while the RTY Index has depreciated by 60%. Because the final index value of the RTY
Index has declined below the trigger level, investors are exposed to the negative performance of the RTY Index, which is the worst
performing underlying index in this example. Investors receive a payment at maturity of $400.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
EXAMPLE 5
:
Both underlying indices decline below their
respective trigger levels, and investors are therefore exposed to the decline in the worst performing underlying index from its
initial index value.
Final index value
|
|
SPX Index: 600
|
|
|
RTY Index: 400
|
Index percent change
|
|
SPX Index: (600 – 2,000) / 2,000 = -70%
RTY Index: (400 – 1,000) / 1,000 = -60%
|
Payment at maturity
|
=
|
$1,000 × (index performance factor of the worst performing index)
|
|
=
|
$1,000 × (600 / 2,000)
|
|
=
|
$300
|
|
|
|
In example 5, the final index values of both the SPX Index and
the RTY Index are less than their respective trigger levels. The SPX Index has declined by 70% while the RTY Index has
declined by 60%. Therefore, investors are exposed to the negative performance of the SPX Index, which is the worst performing
underlying index in this example. Investors receive a payment at maturity of $300.
Because the payment at maturity of the Trigger PLUS is based
on the worst performing of the underlying indices, a decline in either underlying index below its respective trigger level will
result in a significant loss of your investment, even if the other underlying index has appreciated or has not declined as much
.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the Trigger PLUS. For further discussion of these and other risks, you should read the section
entitled “Risk Factors” in the accompanying product supplement for PLUS, 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 Trigger
PLUS.
|
§
|
The Trigger PLUS do not pay interest or guarantee
return of any principal.
The terms of the Trigger PLUS differ from those of ordinary debt securities in that the
Trigger PLUS do not pay interest or guarantee payment of any principal at maturity. If the final index value of
either
underlying index is less than the respective trigger level (which is 60% of the respective initial index level), the payout at
maturity will be an amount in cash that is at least 40% less than the $1,000 stated principal amount of each Trigger PLUS, and
this decrease will be by an amount proportionate to the full decrease in the value of the worst performing underlying index over
the term of the Trigger PLUS. There is no minimum payment at maturity on the Trigger PLUS, and you could lose your entire
investment.
|
|
§
|
The appreciation potential of the Trigger PLUS
is limited by the maximum payment at maturity.
The appreciation potential of the Trigger PLUS is limited by the maximum payment
at maturity of $1,640 to $1,690 per Trigger PLUS, or 164% to 169% of the stated principal amount. Although the leverage factor
provides leveraged upside returns if the final index value of each underlying index is greater than its respective initial index
value, because the payment at maturity will be limited to 164% to 169% of the stated principal amount for the Trigger PLUS, any
increase in the final index value of the worst performing underlying index over its initial index value by more than 16% to 17.25%
of its initial index value will not further increase the return on the Trigger PLUS.
|
|
§
|
You are exposed to the price risk of both underlying
indices.
Your return on the Trigger PLUS it not linked to a basket consisting of both underlying indices. Rather,
it will be based upon the independent performance of each underlying index. 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 both underlying indices. Poor performance by either underlying index over the term of
the Trigger PLUS will negatively affect your return and will not be offset or mitigated by any positive performance by the other
underlying index. If either underlying index declines to below its respective trigger level as of the valuation date,
you will be exposed to the negative performance of the worst performing underlying index at maturity, even if the other underlying
index has appreciated or has not declined as much, and you will lose a significant portion or all of your investment. Accordingly,
your investment is subject to the price risk of both underlying indices.
|
|
§
|
Because the Trigger PLUS are linked to the performance
of the worst performing underlying index, you are exposed to greater risk of sustaining a significant loss on your investment than
if the Trigger PLUS were linked to just one underlying index.
The risk that you will suffer a significant loss on
your investment is greater if you invest in the Trigger PLUS as opposed to substantially similar securities that are linked to
just the performance of one underlying index. With two underlying indices, it is more likely that either underlying
index will decline to below its trigger level as of the valuation date, than if the Trigger PLUS were linked to only one underlying
index. Therefore it is more likely that you will suffer a significant loss on your investment.
|
|
§
|
The market price will be influenced by many unpredictable
factors.
Several factors will influence the value of the Trigger PLUS in the secondary market and the price at which
MS & Co. may be willing to purchase or sell the Trigger PLUS in the secondary market, including the value, volatility and dividend
yield of the underlying indices, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial,
political and regulatory or judicial events and any actual or anticipated changes in our credit ratings or credit spreads. Generally,
the longer the time remaining to maturity, the more the market price of the Trigger PLUS will be affected by the other factors
described above. The levels of the underlying indices may be, and have recently been, extremely volatile, and we can
give you no assurance that the volatility will lessen. See “S&P 500
®
Index Overview”
and “Russell 2000
®
Index Overview” below. You may receive less, and possibly significantly
less, than the stated principal amount per Trigger PLUS if you try to sell your Trigger PLUS prior to maturity.
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
§
|
The Trigger PLUS 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 Trigger
PLUS.
You are dependent on our ability to pay all amounts due on the Trigger PLUS at maturity and therefore you
are subject to our credit risk. If we default on our obligations under the Trigger PLUS, your investment would be at
risk and you could lose some or all of your investment. As a result, the market value of the Trigger PLUS 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 Trigger PLUS.
|
|
§
|
As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance
and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities
if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any
recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have
recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued
by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should be treated
pari
passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued
securities.
|
|
§
|
The Trigger PLUS 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 underlying indices, and the Russell 2000
®
Index consists of stocks issued by companies with
relatively small market capitalization, the Trigger PLUS 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 indices 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.
|
|
§
|
The amount payable on the Trigger PLUS is not linked
to the values of the underlying indices at any time other than the valuation date.
The final index value of each
underlying index will be based on the index closing value of such index on the valuation date, subject to adjustment for non-index
business days and certain market disruption events. Even if both underlying indices appreciate prior to the valuation
date but the value of
either
underlying index drops by the valuation date to below its trigger level, the payment at maturity
will be significantly less than it would have been had the payment at maturity been linked to the values of the underlying indices
prior to such drop. Although the actual values of the underlying indices on the stated maturity date or at other times
during the term of the Trigger PLUS may be higher than their respective final index values, the payment at maturity will be based
solely on the index closing values on the valuation date.
|
|
§
|
Investing in the Trigger PLUS is not equivalent
to investing in either underlying index.
Investing in the Trigger PLUS is not equivalent to investing in either
underlying index or the component stocks of either underlying index. Investors in the Trigger PLUS will not have voting
rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute either
underlying index.
|
|
§
|
Adjustments to the underlying indices could adversely
affect the value of the Trigger PLUS.
The publisher of either underlying index may add, delete or substitute the
stocks constituting such underlying index or make other methodological changes that could change the value of such underlying index.
The publisher of either underlying index may discontinue or suspend calculation or publication of such underlying index at any
time. In these circumstances, the calculation agent will have the sole discretion to substitute a successor index that
is comparable to the discontinued
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
underlying index and will be permitted to consider
indices that are calculated and published by the calculation agent or any of its affiliates.
|
§
|
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
Trigger PLUS in the original issue price reduce the economic terms of the Trigger PLUS, cause the estimated value of the Trigger
PLUS to be less than the original issue price and will adversely affect secondary market prices.
Assuming no change
in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing
to purchase the Trigger PLUS in secondary market transactions will likely be significantly lower than the original issue price,
because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the
original issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing, selling, structuring
and hedging the Trigger PLUS in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the Trigger PLUS less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the Trigger PLUS are not fully deducted upon issuance, for a period of up to 6 months following
the issue date, to the extent that MS & Co. may buy or sell the Trigger PLUS in the secondary market, absent changes in market
conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do so based
on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The Trigger PLUS will not be listed on any securities
exchange and secondary trading may be limited.
The Trigger PLUS will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the Trigger PLUS. MS & Co. may, but is not obligated to, make a market
in the Trigger PLUS. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the Trigger PLUS easily. Because we do not expect that other broker-dealers will participate significantly in
the secondary market for the Trigger PLUS, the price at which you may be able to trade your Trigger PLUS is likely to depend on
the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were not to make a market
in the Trigger PLUS, it is likely that there would be no secondary market for the Trigger PLUS. Accordingly, you should
be willing to hold your Trigger PLUS to maturity.
|
|
§
|
The estimated value of the Trigger PLUS 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
Trigger PLUS than those generated by others, including other dealers in the market, if they attempted to value the Trigger PLUS. 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 Trigger PLUS in the secondary market (if any exists) at any time. The value
of your Trigger PLUS at any time after the date of this pricing supplement will vary based on many factors that cannot be predicted
with accuracy, including our creditworthiness and changes in market conditions. See also “The market price will
be influenced by many unpredictable factors” above.
|
|
§
|
Hedging and trading activity by our affiliates
could potentially adversely affect the value of the Trigger PLUS.
One or more of our affiliates and/or third-party
dealers expect to carry out hedging activities related to the Trigger PLUS (and to other instruments linked to the underlying index
or its component stocks), including trading in the stocks that constitute the underlying indices as well as in other instruments
related to the underlying indices. As a result, these entities may be unwinding or adjusting hedge positions during
the term of the Trigger PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the valuation date approaches. MS & Co. and some of our other affiliates also trade the stocks that constitute the
underlying indices and other financial instruments related to the underlying indices on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could
potentially increase the initial
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
index value of an underlying index, and, therefore,
could increase the trigger level for such underlying index, which is the level at or above which such underlying index must close
on the valuation date so that investors do not suffer a significant loss on their initial investment in the Trigger PLUS (depending
also on the performance of the other underlying index). Additionally, such hedging or trading activities during the
term of the Trigger PLUS, including on the valuation date, could potentially affect whether the value of an underlying index on
the valuation date is below the respective trigger level, and, therefore, whether an investor would receive significantly less
than the stated principal amount of the Trigger PLUS at maturity (depending also on the performance of the other underlying index).
|
§
|
The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the Trigger PLUS.
As calculation
agent, MS & Co. will determine the initial index values, the trigger levels and the final index values, including whether either
underlying index has decreased to below the respective trigger level, and will calculate the amount of cash, if any, you will receive
at maturity. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require
it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption
events and the selection of a successor index or calculation of the final index value in the event of a market disruption event
or discontinuance of the underlying indices. 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 PLUS—Postponement
of Valuation Date(s)” and “—Calculation Agent and Calculations” and related definitions in the accompanying
product supplement. In addition, MS & Co. has determined the estimated value of the Trigger PLUS on the pricing
date.
|
|
§
|
The U.S. federal income tax consequences of an
investment in the Trigger PLUS are uncertain.
Please read the discussion under “Additional Information—Tax
considerations” in this document and the discussion under “United States Federal Taxation” in the accompanying
product supplement for PLUS (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences
of an investment in the Trigger PLUS. If the Internal Revenue Service (the “IRS”) were successful in asserting
an alternative treatment, the timing and character of income on the Trigger PLUS might differ significantly from the tax treatment
described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize the Trigger
PLUS as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the Trigger
PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect
of the Trigger PLUS as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA”
in the accompanying product supplement for PLUS, the withholding rules commonly referred to as “FATCA” would apply
to the Trigger PLUS if they were recharacterized as debt instruments. However, recently proposed regulations (the preamble
to which specifies that taxpayers are permitted to rely on them pending finalization) eliminate the withholding requirement on
payments of gross proceeds of a taxable disposition. The risk that financial instruments providing for buffers, triggers
or similar downside protection features, such as the Trigger PLUS, would be recharacterized as debt is greater than the risk of
recharacterization for comparable financial instruments that do not have such features. We do not plan to request a
ruling from the IRS regarding the tax treatment of the Trigger PLUS, and the IRS or a court may not agree with the tax treatment
described in the Tax Disclosure Sections.
|
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income
or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance
of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which
very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the Trigger
PLUS, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the Trigger PLUS, including
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
possible alternative treatments, the issues presented
by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of 500 component stocks selected to provide a
performance benchmark for the U.S. equity markets. The calculation of the S&P 500
®
Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943. For additional information about the S&P 500
®
Index, see the information set forth under “S&P
500
®
Index” in the accompanying index supplement.
Information as of market close on May 28, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,802.39
|
52 Weeks Ago:
|
2,689.86
|
52 Week High (on 4/30/2019):
|
2,945.83
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
|
|
The following graph sets forth the daily closing values of the
SPX Index for the period from January 1, 2014 through May 28, 2019. The related table sets forth the published high
and low closing values, as well as end-of-quarter closing values, of the SPX Index for each quarter in the same period. The
closing value of the SPX Index on May 28, 2019 was 2,802.39. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The SPX Index has at times experienced periods of
high volatility, and you should not take the historical values of the SPX Index as an indication of its future performance.
SPX Index Daily Closing Values
January 1, 2014 to May 28, 2019
|
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter (through May 28, 2019)
|
2,945.83
|
2,802.39
|
2,802.39
|
|
|
|
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500
®
Index” in the accompanying
index supplement.
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Russell 2000
®
Index Overview
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.
Information as of market close on May 28, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,504.019
|
52 Weeks Ago:
|
1,623.649
|
52 Week High (on 8/31/2018):
|
1,740.753
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
|
|
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through May 28, 2019. The related table sets forth the published high
and low closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The
closing value of the RTY Index on May 28, 2019 was 1,504.019. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods of
high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
RTY Index Daily Closing Values
January 1, 2014 to May 28, 2019
|
|
Morgan Stanley Finance LLC
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.960
|
1,095.986
|
1,192.960
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter (through May 28, 2019)
|
1,614.976
|
1501.380
|
1,504.019
|
|
|
|
|
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
|
Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Additional Terms of the Trigger PLUS
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.
|
Underlying index publishers:
|
With respect to the SPX Index, S&P Dow Jones Indices LLC,
or any successor thereof
With respect to the RTY Index, FTSE Russell, or any
successor thereof
|
Index closing value:
|
With respect to the SPX Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the official closing value of the SPX Index, or
any successor index as defined under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation”
in the accompanying product supplement), published at the regular official weekday close of trading on such index business day
by the underlying index publisher for the SPX Index, as determined by the calculation agent. In certain circumstances,
the index closing value for the SPX Index will be based on the alternate calculation of the SPX Index as described under “Discontinuance
of Any Underlying Index or Basket Index; Alteration of Method of Calculation” in the accompanying product supplement.
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index or any successor
index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index
business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation
of the RTY Index as described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation”
in the accompanying product supplement. The closing value of the RTY Index reported by Bloomberg Financial Services may be lower
or higher than the official closing value of the RTY Index published by the underlying index publisher for the RTY Index.
|
Denominations:
|
$1,000 per Trigger PLUS and integral multiples thereof
|
Interest:
|
None
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Bull market or bear market PLUS:
|
Bull market PLUS
|
Postponement of maturity date:
|
If the scheduled valuation date is not an index business day with respect to either underlying index or if a market disruption event occurs with respect to either underlying index on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the second business day following the latest valuation date as postponed with respect to either underlying index.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the Trigger PLUS by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New
York office and (iii) to The
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
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Index due July 3, 2024
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Principal at Risk Securities
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Depository Trust Company (the “depositary”) by telephone
or facsimile, confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice that
is mailed to a registered holder of the Trigger PLUS in the manner herein provided shall be conclusively presumed to have been
duly given to such registered holder, whether or not such registered holder receives the notice. The issuer shall give
such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement of the maturity date,
the business day immediately preceding the scheduled maturity date and (ii) with respect to notice of the date to which the maturity
date has been rescheduled, the business day immediately following the actual valuation date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash, if any, to be delivered with respect to the Trigger PLUS, 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 Trigger PLUS, if any, to the
trustee for delivery to the depositary, as holder of the Trigger PLUS, on the maturity date.
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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Additional Information About the Trigger PLUS
Minimum ticketing size:
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$1,000 / 1 Trigger PLUS
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Tax considerations:
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Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS due to the lack of governing authority, in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a Trigger PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.
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Assuming this treatment of the Trigger PLUS is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for PLUS, the following U.S. federal income tax consequences should result based on current law:
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§
A U.S. Holder should not be required
to recognize taxable income over the term of the Trigger PLUS prior to settlement, other than pursuant to a sale or exchange.
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§
Upon sale,
exchange or settlement of the Trigger PLUS, a U.S. Holder should recognize gain or loss equal to the difference between the amount
realized and the U.S. Holder’s tax basis in the Trigger PLUS. Such gain or loss should be long-term capital gain
or loss if the investor has held the Trigger PLUS for more than one year, and short-term capital gain or loss otherwise.
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In 2007, the U.S. Treasury Department and
the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal income tax treatment
of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require
holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number
of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments
should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and
the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated
accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject
to the “constructive ownership” rule, which very generally can operate to recharacterize certain long-term capital
gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition
rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the Trigger PLUS, possibly with retroactive effect.
As discussed
in the accompanying product supplement for PLUS, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury
regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding
tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S.
equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions,
Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying
Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However,
pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of
one with respect to any Underlying Security. Based on the terms of the Trigger PLUS and current market conditions, we
expect that the Trigger PLUS will not have a delta of
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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one with respect to any Underlying Security
on the pricing date. However, we will provide an updated determination in the final pricing supplement. Assuming that the Trigger
PLUS do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the Trigger PLUS should
not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the
IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your
particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If
withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You
should consult your tax adviser regarding the potential application of Section 871(m) to the Trigger PLUS.
Both U.S. and non-U.S. investors considering
an investment in the Trigger PLUS should read the discussion under “Risk Factors” in this document and the discussion
under “United States Federal Taxation” in the accompanying product supplement for PLUS and consult their tax advisers
regarding all aspects of the U.S. federal income tax consequences of an investment in the Trigger PLUS, including possible alternative
treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
The discussion in the preceding paragraphs
under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation”
in the accompanying product supplement for PLUS, insofar as they purport to describe provisions of U.S. federal income tax laws
or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material
U.S. federal tax consequences of an investment in the Trigger PLUS.
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Use of proceeds and hedging:
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The proceeds from the sale of the Trigger PLUS will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per Trigger PLUS issued, because, when we enter
into hedging transactions in order to meet our obligations under the Trigger PLUS, our hedging counterparty will reimburse the
cost of the agent’s commissions. The costs of the Trigger PLUS borne by you and described on page 2 above comprise
the agent’s commissions and the cost of issuing, structuring and hedging the Trigger PLUS.
On or prior to the pricing date, we, through our affiliates or
others, will hedge our anticipated exposure in connection with the Trigger PLUS by taking positions in stocks of the underlying
indices, futures and/or options contracts on the underlying indices, any component stocks of the underlying indices listed on major
securities markets or positions in any other available securities or instruments that we may wish to use in connection with such
hedging. Such purchase activity could potentially increase the value of either underlying index on the pricing date,
and therefore could increase the respective trigger level, which is the level at or above which such underlying index must close
on the valuation date so that investors do not suffer a significant loss on their initial investment in the Trigger PLUS (depending
also on the performance of the other underlying index). In addition, through our affiliates, we are likely to modify
our hedge position throughout the term of the Trigger PLUS, including on the valuation date, by purchasing and selling the stocks
constituting the underlying indices, futures or options contracts on the underlying indices or its component stocks listed on major
securities markets or positions in any other available securities or instruments that we may wish to use in connection with such
hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the term of the
Trigger PLUS, and the hedging strategy may involve greater and more frequent adjustments to the
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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hedge as the valuation date approaches. We cannot give any assurance that our hedging activities will not affect the value of either underlying index and, therefore, adversely affect the value of the Trigger PLUS or the payment you will receive at maturity, if any (depending also on the performance of the other underlying index). For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS.
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Benefit plan investor considerations:
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Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the Trigger PLUS. Accordingly, among other factors, the fiduciary should consider whether the investment
would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments
governing the Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit
transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning
of ERISA or the Code would likely arise, for example, if the Trigger PLUS are acquired by or with the assets of a Plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the Trigger PLUS are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited
transaction” rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those
persons, unless exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the Trigger PLUS. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities
and the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration” in
connection with the transaction (the so-called “service provider” exemption). There can be no assurance
that any of these class or statutory exemptions will be available with respect to transactions involving the Trigger PLUS.
Because we may be considered a party in interest with respect
to many Plans, the Trigger PLUS may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14
or the service provider exemption or such purchase, holding or disposition is otherwise not prohibited. Any purchaser,
including any fiduciary purchasing on behalf of a Plan, transferee or holder of the Trigger PLUS will be deemed to have represented,
in its corporate and its fiduciary capacity, by its purchase and holding of the Trigger PLUS that either (a) it is not a Plan or
a Plan Asset Entity and is not purchasing such Trigger PLUS on behalf of or with “plan assets” of any Plan or with
any assets of a governmental, non-U.S. or church plan that is subject to any federal, state, local or non-U.S. law that is substantially
similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”) or (b) its purchase,
holding and disposition of these Trigger PLUS will not constitute or result in a non-exempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the Trigger PLUS on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The Trigger PLUS are contractual financial instruments. The
financial exposure provided by the Trigger PLUS is not a substitute or proxy for, and is not intended as a substitute or proxy
for, individualized investment management or advice for the benefit of any purchaser or holder of the Trigger PLUS. The
Trigger PLUS have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives
of any purchaser or holder of the Trigger PLUS.
Each purchaser or holder of any Trigger PLUS acknowledges and
agrees that:
(i)
the purchaser or holder or its fiduciary has made and
shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely in
any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and
terms of the Trigger PLUS, (B) the purchaser or holder’s investment in the Trigger PLUS, or (C) the exercise of or failure
to exercise any rights we have under or with respect to the Trigger PLUS;
(ii)
we and our affiliates have acted
and will act solely for our own account in connection with (A) all transactions relating to the Trigger PLUS and (B) all hedging
transactions in connection with our obligations under the Trigger PLUS;
(iii)
any and all assets and positions
relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions
held for the benefit of the purchaser or holder;
(iv)
our interests are adverse to
the interests of the purchaser or holder; and
(v)
neither we nor any of our affiliates
is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information
that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the Trigger PLUS has exclusive responsibility
for ensuring that its purchase, holding and disposition of the Trigger PLUS do not violate the prohibited transaction rules of
ERISA or the Code or any Similar Law. The sale of any Trigger PLUS to any Plan or plan subject to Similar Law is in
no respect a
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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representation by us or any of our affiliates or representatives
that such an investment meets all relevant legal requirements with respect to investments by plans generally or any particular
plan, or that such an investment is appropriate for plans generally or any particular plan. In this regard, neither this discussion
nor anything provided in this document is or is intended to be investment advice directed at any potential Plan purchaser or at
Plan purchasers generally and such purchasers of these Trigger PLUS should consult and rely on their own counsel and advisers as
to whether an investment in these Trigger PLUS is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the Trigger PLUS if the account, plan or annuity is for the benefit of an employee of
Morgan Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for
example, an addition to bonus) based on the purchase of the Trigger PLUS by the account, plan or annuity.
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Additional considerations:
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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 Trigger PLUS, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
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MS & Co. expects to sell all of the Trigger PLUS that it
purchases from us to an unaffiliated dealer at a price of $ per Trigger PLUS, for further sale
to certain fee-based advisory accounts at the price to public of $1,000 per Trigger PLUS. MS & Co. will not receive a sales
commission with respect to the Trigger PLUS.
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 Trigger PLUS. When MS & Co. prices this offering of Trigger PLUS, it will determine the economic terms of the
Trigger PLUS, including the maximum payment at maturity, such that for each Trigger PLUS the estimated value on the pricing date
will be no lower than the minimum level described in “Investment Summary” beginning on page 2.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS &
Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan
of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement
for PLUS.
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Contact:
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Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776). All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured Investment Sales at (800) 233-1087.
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Where you can find more information:
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MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the product supplement for PLUS and index supplement) with the Securities and Exchange Commission,
or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement,
the product supplement for PLUS, the index supplement and any other documents relating to this offering that MSFL and Morgan Stanley
have filed with the SEC for more complete information about MSFL and Morgan Stanley and this offering. You may get these
documents without cost by visiting EDGAR on the SEC web site
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Morgan Stanley Finance LLC
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Trigger PLUS Based on the Value of Worst Performing of the S&P 500
®
Index and the Russell 2000
®
Index due July 3, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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at
.
www.sec.gov. Alternatively,
MSFL, Morgan Stanley, any underwriter or any dealer participating in this offering will arrange to send you the product supplement
for PLUS, index supplement and prospectus if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at
.
www.sec.gov
.
as
follows:
Product Supplement for PLUS dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for PLUS, in the index supplement or in the prospectus.
“Performance Leveraged Upside Securities
SM
”
and “PLUS
SM
” are our service marks.
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