July 2019
Preliminary Terms No. 2,189
Registration Statement Nos. 333-221595; 333-221595-01
Dated June 27, 2019
Filed pursuant to Rule 433
Morgan Stanley Finance LLC
STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Dual Directional Trigger PLUS Based on the Value
of the Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31,
2024
Trigger Performance Leveraged Upside Securities
SM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Dual Directional Trigger PLUS, or “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 Dow Jones Industrial Average
SM
and the Russell 2000
®
Index. At maturity, if the final index value of
each
underlying index is
greater
than
its respective initial index value, investors will receive the stated principal amount of their investment
plus
leveraged upside performance of the worst performing underlying index. 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, investors will receive the stated principal amount of their investment
plus
an unleveraged positive return based on the absolute value of the performance of the worst performing underlying index,
which will be effectively limited to a 35% return. However, if the final index value of
either
underlying index is
less
than
its respective trigger level, investors will be negatively exposed to the full decline in the worst performing underlying
index and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying index, without
any buffer. 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 beyond 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 in exchange for the leverage and absolute return features that in each case apply to a limited
range of performance of the worst performing underlying index. The Trigger PLUS are notes issued as part of MSFL’s Series
A Global Medium-Term Notes program.
The Trigger PLUS differ from the PLUS described in the accompanying
product supplement for PLUS in that the Trigger PLUS offer the potential for a positive return at maturity if the worst performing
underlying index depreciates by no more than 35%. The Trigger PLUS are not the Buffered PLUS described in the accompanying product
supplement for PLUS. Unlike the Buffered PLUS, the Trigger PLUS do not provide any protection if the worst performing underlying
index depreciates by more than 35%.
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 31, 2024
|
Underlying indices:
|
Dow Jones Industrial Average
SM
(the “INDU Index”) and the Russell 2000
®
Index (the “RTY Index”)
|
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 + ($1,000 × leverage factor × index
percent change of the worst performing underlying index)
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 + ($1,000 × absolute index return of the
worst performing underlying index)
If the final index value of
either underlying index
is
less
than
its respective trigger level,
$1,000 × 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 35%, and possibly all, of your investment.
|
|
|
|
|
|
|
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
|
Absolute index return:
|
The absolute value of the index percent change. For example, a -5% index percent change will result in a +5% absolute index return.
|
Initial index value:
|
With respect to the INDU 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
|
Valuation date:
|
July 26, 2024, subject to adjustment for non-index business days and certain market disruption events
|
Leverage factor:
|
At least 125%. The actual leverage factor will be determined on the pricing date.
|
Trigger level:
|
With respect to the INDU Index, , which is 65% of the initial index
value of such index
With respect to the RTY Index, , which is 65% of the initial index
value of such index
|
Stated principal amount:
|
$1,000 per Trigger PLUS
|
Issue price:
|
$1,000 per Trigger PLUS
|
Pricing date:
|
July 26, 2019
|
Original issue date:
|
July 31, 2019 (4 business days after the pricing date)
|
CUSIP / ISIN:
|
61769HJJ5 / US61769HJJ59
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
Approximately $921.20 per Trigger PLUS, or within $30.00 of that estimate. See “Investment Summary” on page 2.
|
Commissions and issue price:
|
Price to public
(1)
|
Agent’s commissions
(2)
|
Proceeds to us
(3)
|
Per Trigger PLUS
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
|
(1)
|
The price to public for investors purchasing the Trigger
PLUS in fee-based advisory accounts will be $980 per Trigger PLUS.
|
|
(2)
|
Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $ for each Trigger PLUS they sell; provided that
dealers selling to investors purchasing the Trigger PLUS in fee-based advisory accounts will receive a sales commission of $ per
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.
|
|
(3)
|
See “Use of proceeds and hedging” on page
18.
|
The Trigger PLUS involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 7.
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.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for PLUS dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Dual Directional Trigger PLUS Based on the Value of the Worst
Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024 (the “Trigger
PLUS”) can be used:
|
§
|
To gain exposure to the worst performing of two U.S. equity indices
|
|
§
|
To potentially outperform the worst performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index
|
|
§
|
To obtain an unleveraged positive return for a limited range of negative performance of the worst
performing underlying index
|
If the final index value of
either
underlying index is
less than
its respective trigger level, investors will be negatively exposed to the full amount of the percent decline in
the worst performing underlying index and will lose 1% of the stated principal amount for every 1% of decline in the worst performing
underlying index, without any buffer.
Maturity:
|
5 years
|
Leverage factor:
|
At least 125%. The actual leverage factor will be determined on the pricing date.
|
Minimum payment at maturity:
|
None. Investors may lose all their entire initial investment in the Trigger PLUS.
|
Trigger level:
|
With respect to each underlying index, 65% of the initial index value of such index
|
Coupon:
|
None
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange
|
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 $921.20, 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 and the trigger 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 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, 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
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
The Trigger PLUS offer the potential for a positive return at
maturity based on the absolute value of a limited range of percentage changes of the worst performing underlying index. At maturity,
if the final index value of
each
underlying index is
greater than
its respective initial index value, investors will
receive the stated principal amount of their investment
plus
leveraged upside performance of the worst performing underlying
index. 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,
investors will receive the stated principal amount of their investment
plus
an unleveraged positive return based on the
absolute value of the performance of the worst performing underlying index, which will be effectively limited to a 35% return.
However, if the final index value of
either
underlying index is
less than
its respective trigger level, the absolute
return feature will no longer be available and instead investors will be negatively exposed to the full decline in the worst performing
underlying index and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying index,
without any buffer.
Investors may lose their entire initial investment in the Trigger PLUS. All payments on the Trigger PLUS
are subject to our credit risk.
Leveraged
Performance
|
The Trigger PLUS offer investors an opportunity to receive at least 125% of the positive return of the worst performing of the underlying indices if
both
underlying indices have appreciated in value. The actual leverage factor will be determined on the pricing date.
|
Absolute
Return Feature
|
The Trigger PLUS enable investors to obtain an unleveraged positive return 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.
|
Upside
Scenario if Both Underlying Indices Appreciate
|
Both
underlying indices increase in value, and, at maturity, the Trigger PLUS redeem for the stated principal amount of $1,000
plus
at least 125% of the index percent change of the worst performing underlying index. The actual leverage factor will be determined on the pricing date.
|
Absolute
Return Scenario
|
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. In this case, you receive a 1% positive return on the Trigger PLUS for each 1% negative return on the worst performing underlying index. For example, if the final index value of the worst performing underlying index is 10% less than its respective initial index value, the Trigger PLUS will provide a total positive return of 10% at maturity. The maximum return you may receive in this scenario is a positive 35% return at maturity.
|
Downside
Scenario
|
The final index value of
either
underlying index is
less
than
its respective trigger level.
In this case, the Trigger PLUS redeem for at least 35% less than
the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of the worst
performing underlying index over the term of the Trigger PLUS. Under these circumstances, the payment at maturity will be less
than 65% of the stated principal amount per Trigger PLUS. For example, if the final index value of the worst performing underlying
index is 70% less than its initial index value, the Trigger PLUS will be redeemed at maturity for a loss of 70% of principal at
$300, or 30% of the stated principal amount.
There is no minimum payment at maturity on the Trigger PLUS, and you could lose
your entire investment.
|
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 beyond 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
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 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. Any 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 Trigger PLUS
|
Hypothetical leverage factor:
|
125%. The actual leverage factor will be determined on the pricing date.
|
Hypothetical initial index value:
|
With respect to the INDU Index: 26,000
With respect to the RTY Index: 1,500
|
Hypothetical trigger level:
|
With respect to the INDU Index: 16,900
With respect to the RTY Index: 975
|
EXAMPLE 1: The final index value of each underlying index
is greater than its respective initial index value.
Final index value
|
|
INDU Index: 28,600
|
|
|
|
RTY Index: 2,100
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Index percent change
|
|
INDU Index: (28,600 – 26,000) / 26,000 = 10%
RTY Index: (2,100 – 1,500) / 1,500 = 40%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × leverage factor × index percent change of the worst performing underlying index),
|
|
=
|
$1,000 + ($1,000 × 125% × 10%)
|
|
=
|
$1,125.00
|
In example 1, the final index values of both the INDU Index and
the RTY Index are greater than their initial index values. The INDU Index has appreciated by 10% while the RTY Index has appreciated
by 40%. Therefore, investors receive at maturity the stated principal amount
plus
125% of the appreciation of the worst
performing underlying index, which is the INDU Index in this example. Investors receive $1,125.00 per Trigger PLUS at maturity
(assuming a hypothetical leverage factor of 125%).The actual leverage factor will be determined on the pricing date.
EXAMPLE 2: The final index value of one underlying index is
greater than its respective initial index value while the final index value of the other underlying index is less than its respective
initial index value but greater than its respective trigger level.
Final index value
|
|
INDU Index: 36,400
|
|
|
|
RTY Index: 1,275
|
Index percent change
|
|
INDU Index: (36,400 – 26,000) / 26,000 = 40%
RTY Index: (1,275 – 1,500) / 1,500 = -15%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × absolute index return of the worst performing underlying index)
|
|
=
|
$1,000 + ($1,000 × 15%)
|
|
=
|
$1,150
|
In example 2, the final index value of the INDU Index is greater
than its respective initial value, while the final index value of the RTY Index is less than its respective initial index value
but greater than its respective trigger level. While the INDU Index has appreciated by 40%, the RTY index has declined by 15%.
Therefore, investors receive at maturity the stated
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
principal amount
plus
the absolute value of the performance
of the worst performing underlying index, which is the RTY Index in this example. Investors receive $1,150 per Trigger PLUS at
maturity. In this example, investors receive a positive return even though one of the underlying indices declined in value by 15%,
due to the absolute return feature of the Trigger PLUS and because neither underlying index declined beyond its respective trigger
level.
EXAMPLE 3: The final index value of one underlying index is
greater than its respective initial index value while the final index value of the other underlying index is less than its respective
initial index value and trigger level.
Final index value
|
|
INDU Index: 28,600
|
|
|
RTY Index: 750
|
Index percent change
|
|
INDU Index: (28,600 – 26,000) / 26,000 = 10%
RTY Index: (750 – 1,500) / 1,500 = -50%
|
Index performance factor
|
|
INDU Index: 28,600 / 26,000 = 110%
RTY Index: 750 / 1,500 = 50%
|
Payment at maturity
|
=
|
$1,000 × index performance factor of the worst performing underlying index
|
|
=
|
$1,000 × 50%
|
|
=
|
$500
|
In example 3, the final index value of the INDU Index is greater
than its respective initial value, while the final index value of the RTY Index is less than its respective initial index value
and trigger level. While the INDU Index has appreciated by 10%, the RTY index has declined by 50%. Therefore, investors are exposed
to the negative performance of the RTY Index, which is the worst performing underlying index in this example, and receive a payment
at maturity of $500. In this example, investors are exposed to the negative performance of the worst performing underlying index
even though the other underlying index has appreciated in value by 10%, because the final index value of each index is not greater
than or equal to its respective trigger level.
EXAMPLE 4
:
The final index value of each underlying
index is less than its respective initial index value but is greater than its respective trigger level.
Final index value
|
|
INDU Index: 22,100
|
|
|
RTY Index: 1,260
|
Index percent change
|
|
INDU Index: (22,100 – 26,000) / 26,000 = -15%
RTY Index: (1,260 – 1,500) / 1,500 = -16%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × absolute index return of the worst performing underlying index)
|
|
=
|
$1,000 + ($1,000 × 16%)
|
|
=
|
$1,160
|
In example 4, the final index value of each underlying index
is less than its respective initial index value but is greater than its respective trigger level. The INDU Index has declined by
15% while the RTY Index has declined by 16%. Therefore, investors receive at maturity the stated principal amount
plus
the
absolute value of the performance of the worst performing underlying index, which is the RTY Index in this example. Investors receive
$1,160 per Trigger PLUS at maturity.
EXAMPLE 5
:
The final index value of each underlying
index is less than its respective trigger level.
Final index value
|
|
INDU Index: 7,800
|
|
|
RTY Index: 600
|
Index percent change
|
|
INDU Index: (7,800 – 26,000) / 26,000 = -70%
RTY Index: (600 – 1,500) / 1,500 = -60%
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Index performance factor
|
|
INDU Index: 7,800 / 26,000 = 30%
RTY Index: 600 / 1,500 = 40%
|
Payment at maturity
|
=
|
$1,000 × (index performance factor of the worst performing underlying index)
|
|
=
|
$1,000 × 30%
|
|
=
|
$300
|
In example 5, the final index values of both the INDU Index and
the RTY Index are less than their respective trigger levels. The INDU Index has declined by 70% while the RTY Index has declined
by 60%. Therefore, investors are exposed to the negative performance of the INDU Index, which is the worst performing underlying
index in this example, and 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 beyond 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
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 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 the 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 the payment of any principal amount
at maturity. If the final index value of
either
underlying index is
less than
its respective trigger level, the absolute
return feature will no longer be available and the payment at maturity will be an amount in cash that is at least 35% less than
the $1,000 stated principal amount of each Trigger PLUS, and this decrease will be by an amount proportionate to the full amount
of the decline in the value of the worst performing underlying index over the term of the Trigger PLUS, without any buffer.
There
is no minimum payment at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in 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 securities 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, and you will lose a significant
portion or all of your investment, even if the other underlying index has appreciated or has not declined as much. 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 the performance of just 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 “Dow Jones Industrial
Average
SM
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.
|
|
§
|
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 its 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.
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets.
As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated
pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
|
|
§
|
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 respective 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 trigger levels,
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 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
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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 index, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the 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 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.
|
|
§
|
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 and, if it once chooses to make a market, may cease doing so
at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at prices based
on its estimate of the current value of the Trigger PLUS, taking into account its bid/offer spread, our credit spreads, market
volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to
maturity and the likelihood that it will be able to resell the 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. Since other broker-dealers may not 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 to cease making 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.
|
|
§
|
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 possibly
to other instruments linked to the underlying indices or their 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. Some of our 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
affect the initial index value of either underlying index, and, therefore, could increase the value 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 adversely affect the value of either
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
underlying index on the valuation
date, and, accordingly, the amount of cash an investor will receive at maturity, if any (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 any underlying index has decreased to below its respective trigger level, 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 the final index value in the event of a market
disruption event or discontinuance of an underlying index. 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),” “—Alternate Exchange Calculation in case of an Event of Default” and “—Calculation
Agent and Calculations” 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 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
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Dow Jones Industrial Average
SM
Overview
The Dow Jones Industrial Average
SM
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
Average
SM
, see the information set forth under “Dow Jones Industrial Average
SM
” in the accompanying
index supplement.
Information as of market close on June 25, 2019:
Bloomberg Ticker Symbol:
|
INDU
|
Current Index Value:
|
26,548.22
|
52 Weeks Ago:
|
24,252.80
|
52 Week High (on 10/3/2018):
|
26,828.39
|
52 Week Low (on 12/24/2018):
|
21,792.20
|
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2014 through June 25, 2019. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the INDU Index for each quarter in the same period. The closing value of the
INDU Index on June 25, 2019 was 26,548.22. We obtained the information in the table and graph below from Bloomberg Financial Markets,
without independent verification. The INDU Index has at times experienced periods of high volatility, and you should not take the
historical values of the INDU Index as an indication of its future performance.
INDU Index Daily Closing Values
January 1, 2014 to June 25, 2019
|
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Dow Jones Industrial Average
SM
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
16,530.94
|
15,372.80
|
16,457.66
|
Second Quarter
|
16,947.08
|
16,026.75
|
16,826.60
|
Third Quarter
|
17,279.74
|
16,368.27
|
17,042.90
|
Fourth Quarter
|
18,053.71
|
16,117.24
|
17,823.07
|
2015
|
|
|
|
First Quarter
|
18,288.63
|
17,164.95
|
17,776.12
|
Second Quarter
|
18,312.39
|
17,596.35
|
17,619.51
|
Third Quarter
|
18,120.25
|
15,666.44
|
16,284.70
|
Fourth Quarter
|
17,918.15
|
16,272.01
|
17,425.03
|
2016
|
|
|
|
First Quarter
|
17,716.66
|
15,660.18
|
17,685.09
|
Second Quarter
|
18,096.27
|
17,140.24
|
17,929.99
|
Third Quarter
|
18,636.05
|
17,840.62
|
18,308.15
|
Fourth Quarter
|
19,974.62
|
17,888.28
|
19,762.60
|
2017
|
|
|
|
First Quarter
|
21,115.55
|
19,732.40
|
20,663.22
|
Second Quarter
|
21,528.99
|
20,404.49
|
21,349.63
|
Third Quarter
|
22,412.59
|
21,320.04
|
22,405.09
|
Fourth Quarter
|
24,837.51
|
22,557.60
|
24,719.22
|
2018
|
|
|
|
First Quarter
|
26,616.71
|
23,533.20
|
24,103.11
|
Second Quarter
|
25,322.31
|
23,644.19
|
24,271.41
|
Third Quarter
|
26,743.50
|
24,174.82
|
26,458.31
|
Fourth Quarter
|
26,828.39
|
21,792.20
|
23,327.46
|
2019
|
|
|
|
First Quarter
|
26,091.95
|
22,686.22
|
25,928.68
|
Second Quarter (through June 25, 2019)
|
26,753.17
|
24,815.04
|
26,548.22
|
“Dow Jones,” “Dow Jones Industrial Average,”
“Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. See “Dow Jones
Industrial Average
SM
” in the accompanying index supplement.
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 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 June 25, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,521.035
|
52 Weeks Ago:
|
1,657.510
|
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 June 25, 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 June 25, 2019 was 1,521.035. We obtained the information in the table 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 June 25, 2019
|
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 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
|
1,192.964
|
1,095.986
|
1,192.964
|
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
|
1,135.889
|
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 June 25, 2019)
|
1,614.976
|
1,465.487
|
1,521.035
|
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
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 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.
Additional Terms:
|
|
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 INDU Index, S&P Dow Jones Indices
LLC, or any successor thereof
With respect to the RTY Index, FTSE Russell, or any
successor thereof
|
Denominations:
|
$1,000 per Trigger PLUS and integral multiples thereof
|
Index closing value:
|
With respect to the INDU 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 INDU Index, or
any successor index, published at the regular official weekday close of trading on such index business day by the underlying index
publisher for such underlying index. In certain circumstances, the index closing value for the INDU Index shall be based on the
alternate calculation of the INDU Index 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 shall be based on the alternate
calculation of the RTY Index described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method
of Calculation” in the accompanying product supplement.
|
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.
|
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 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 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
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Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
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.
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Information About the Trigger PLUS
Additional Information:
|
|
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.
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:
§
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.
§
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.
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 one with respect to any
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
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 will hedge our anticipated
exposure in connection with the Trigger PLUS 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 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 they 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 value 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
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
involve greater and more frequent dynamic adjustments to the 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 Section 4975 of the Code 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 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
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
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 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
|
Morgan Stanley Finance LLC
Dual Directional Trigger PLUS Based on the Value of Worst Performing of the Dow Jones Industrial Average
SM
and the Russell 2000
®
Index due July 31, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
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:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management o 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.r 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:
|
Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $ for each Trigger PLUS they sell; provided
that dealers selling to investors purchasing the Trigger PLUS in fee-based advisory accounts will receive a sales commission of
$ per 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 leverage factor, 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” 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.
|
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 PLUS 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 PLUS, 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 or MSFL 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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