CALCULATION OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
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Title of Each Class of Securities Offered
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|
Offering Price
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Fee
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Trigger Performance Leveraged Upside Securities due 2022
|
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$1,090,000
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$132.11
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July 2019
Pricing Supplement No. 2,301
Registration Statement Nos. 333-221595;
333-221595-01
Dated July 26, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in U.S.
Equities
Trigger PLUS Based on the Value
of the Russell 2000
®
Index due July 29, 2022
Fully and Unconditionally Guaranteed by Morgan Stanley
Trigger Performance Leveraged
Upside Securities
SM
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. At maturity, if the underlying index has
appreciated
in value, investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying
index. If the underlying index
depreciates
in value but the final index value is greater than or equal to the trigger level,
investors will receive the stated principal amount of their investment. However, if the underlying index has
depreciated
in value so that the final index value is less than the trigger level, investors will lose a significant portion or all of their
investment, resulting in a 1% loss for every 1% decline in the index value over the term of the Trigger PLUS. Under these circumstances,
the payment at maturity will be less than 70% of the stated principal amount and could be zero. Accordingly, you may lose your
entire investment. The Trigger PLUS are for investors who seek an equity index-based return and who are willing to risk their principal
and forgo current income in exchange for the upside leverage feature and the limited protection against loss but only if the final
index value is greater than or equal to the trigger level.
Investors may lose their entire initial investment in the Trigger
PLUS
. 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.
FINAL TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Maturity date:
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July 29, 2022
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Underlying index:
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Russell 2000
®
Index
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Aggregate principal amount:
|
$1,090,000
|
Payment at maturity:
|
If the final index value is
greater than
the initial index
value: $1,000 + leveraged upside payment
If the final index value is
less than or equal to
the initial
index value but is
greater than or equal to
the trigger level: $1,000
If the final index value is
less than
the trigger level: $1,000
× index performance factor
Under these circumstances, the payment at maturity will be less
than the stated principal amount of $1,000 and will represent a loss of more than 30%, and possibly all, of your investment
.
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Leveraged upside payment:
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$1,000 × leverage factor × index percent increase
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Leverage factor:
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109%
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Index percent increase:
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(final index value – initial index value) / initial index value
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Index performance factor:
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final index value / initial index value
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Initial index value:
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1,578.967, which is the index closing value on the pricing date
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Final index value:
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The index closing value on the valuation date
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Trigger level:
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1,105.277, which is approximately 70% of the initial index value
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Valuation date:
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July 26, 2022, subject to adjustment for non-index business days and certain market disruption events
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Stated principal amount:
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$1,000 per Trigger PLUS
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Issue price:
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$1,000 per Trigger PLUS (see “Commissions and issue price” below)
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Pricing date:
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July 26, 2019
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Original issue date:
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July 31, 2019 (3 business days after the pricing date)
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CUSIP / ISIN:
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61769HMS1 / US61769HMS12
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Listing:
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The Trigger PLUS will not be listed on any securities exchange.
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Agent:
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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.”
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Estimated value on the pricing date:
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$990.90 per Trigger PLUS. See “Investment Summary” beginning on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions
(1)
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Proceeds to us
(2)
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Per Trigger PLUS
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$1,000
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$0
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$1,000
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Total
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$1,090,000
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$0
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$1,090,000
|
|
(1)
|
MS & Co. will act as
the agent for this offering and will not receive a sales commission in connection with
sales of 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.
|
|
(2)
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See “Use of proceeds
and hedging” on page 15.
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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
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the Russell 2000
®
Index due July 29, 2022 (the “Trigger PLUS”) can be used:
|
§
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As an alternative to direct exposure to the underlying index that enhances returns for any positive performance of the underlying
index
|
|
§
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To enhance returns and potentially outperform the underlying index in a bullish scenario, with no limitation on the appreciation
potential
|
|
§
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To provide limited protection against a loss of principal in the event of a decline of the underlying index as of the valuation
date but only if the final index value
is greater than or equal to
the trigger level
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Maturity:
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Approximately 3 years
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Leverage factor:
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109%
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Trigger level:
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70% of the initial index value
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Minimum payment at maturity:
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None. You could lose your entire initial investment in the Trigger PLUS.
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Interest:
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None
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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 is less than $1,000. We estimate that the
value of each Trigger PLUS on the pricing date is $990.90.
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 index. The estimated value of the Trigger PLUS is determined using our own pricing and valuation models, market inputs
and assumptions relating to the underlying index, instruments based on the underlying index, volatility and other factors including
current and expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied
interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the Trigger PLUS?
In determining the economic terms of the Trigger
PLUS, including the leverage factor and the trigger level, 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 index, may
vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our
secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction
of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the 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,
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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 the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged exposure to any positive performance
of the underlying index. 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 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
|
The Trigger PLUS offer investors an opportunity to capture enhanced returns relative to a direct investment in the underlying index.
|
Trigger
Feature
|
At maturity, even if the 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 is
greater than or equal to
the trigger level.
|
Upside
Scenario
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The final index value is greater than the initial index value, and, at maturity, the Trigger PLUS redeem for the stated principal amount of $1,000
plus
109% of the increase in the value of the underlying index.
|
Par
Scenario
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The final index value is less than or equal to the initial index value but is greater than or equal to the trigger level. In this case, you receive the stated principal amount of $1,000 at maturity even though the underlying index has depreciated.
|
Downside
Scenario
|
The final index value is less than the trigger level. In this case, the Trigger PLUS redeem for at least 30% less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of the underlying index over the term of the Trigger PLUS.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
How the Trigger PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Trigger PLUS based on the following terms:
Stated principal amount:
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$1,000 per Trigger PLUS
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Leverage factor:
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109%
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Trigger level:
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70% of the initial index value
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Trigger PLUS Payoff Diagram
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|
How it works
|
§
|
Upside Scenario:
If the final index value is greater
than the initial index value, investors will receive the $1,000 stated principal amount plus 109% of the appreciation of the underlying
index over the term of the Trigger PLUS.
|
|
§
|
If the underlying index appreciates 5%, investors will receive a 5.45% return, or $1,054.50 per
Trigger PLUS.
|
|
§
|
Par Scenario:
If the final index value is less than
or equal to the initial index value but is greater than or equal to the trigger level, investors will receive the $1,000 stated
principal amount.
|
|
§
|
If the underlying index depreciates 20%, investors will receive the $1,000 stated principal amount.
|
|
§
|
Downside Scenario:
If the final index value is less
than the trigger level, investors will receive an amount significantly less than the $1,000 stated principal amount, based on a
1% loss of principal for each 1% decline in the underlying index.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
If the underlying index depreciates 80%, investors will lose 80% of their principal and receive
only $200 per Trigger PLUS at maturity, or 20% of the stated principal amount.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
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. You should also consult
with 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 is less than the trigger level (which
is 70% of the initial index value), the payout at maturity will be an amount in cash that is at least 30% 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 underlying index. There is no minimum payment at maturity on the Trigger PLUS, and you could lose your entire investment.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the 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 (frequency and magnitude of changes in value) and dividend yield of the underlying index, interest and yield rates,
time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events that affect
the underlying index or equities markets generally and which may affect the final index value of the underlying index, and any
actual or anticipated changes in our credit ratings or credit spreads. The value of the underlying index may be, and has recently
been, volatile, and we can give you no assurance that the volatility will lessen. See “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 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
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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 value of the underlying index at any time other than the valuation
date.
The final index value will be the index closing value on the valuation date, subject to adjustment for non-index business
days and certain market disruption events. Even if the value of the underlying index appreciates prior to the valuation date but
then drops by the valuation date, the payment at maturity will be less, and may be significantly less, than it would have been
had the payment at maturity been linked to the value of the underlying index prior to such drop. Although the actual value of the
underlying index on the stated maturity date or at other times during the term of the Trigger PLUS may be higher than the final
index value, the payment at maturity will be based solely on the index closing value on the valuation date.
|
|
§
|
Investing in the Trigger PLUS is not equivalent to investing in
the underlying index.
Investing in the Trigger PLUS is not equivalent to investing in the
underlying index or its component stocks. As an investor in the Trigger PLUS, you will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to stocks that constitute the underlying index.
|
|
§
|
Adjustments to the underlying index could adversely affect the value
of the Trigger PLUS.
The underlying index publisher may add, delete or substitute the stocks constituting the underlying
index or make other methodological changes that could change the value of the underlying index. The underlying index publisher
may discontinue or suspend calculation or publication of the 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
is not precluded from considering indices that are calculated and published by the calculation agent or any of its affiliates.
If the calculation agent determines that there is
no appropriate successor index, the payment at maturity on the Trigger PLUS will be an amount based on the closing prices at maturity
of the securities composing the underlying index at the time of such discontinuance, without rebalancing or substitution, computed
by the calculation agent in accordance with the formula for calculating the underlying index last in effect prior to discontinuance
of the underlying index.
|
|
§
|
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 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
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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.
|
|
§
|
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. has determined the initial index value and the trigger level, will
determine the final index value, including whether the underlying index has decreased to below the 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 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)” 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.
|
|
§
|
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 have carried out, and will continue 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 index as well as in other instruments related to the underlying index. As a result, these
entities may be unwinding or adjusting hedge positions during the term of the 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 index and other financial instruments related to the underlying
index on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities
on or prior to the pricing date could have increased the initial index value, and, therefore, could have increased the trigger
level, which is the level at or above which the 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. 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 the underlying index on
the valuation date is at or below the trigger level, and, therefore, whether an investor would receive significantly less than
the stated principal amount of the Trigger PLUS at maturity.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
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 (other than amounts treated as “FDAP income,” as defined in the
accompanying product supplement for PLUS). 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
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
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 July 26,
2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,578.967
|
52 Weeks Ago:
|
1,695.360
|
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 underlying index for the period from January 1, 2014 through July 26, 2019. The related table sets forth the published
high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in the same period.
The closing value of the underlying index on July 26, 2019 was 1,578.967. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The underlying index has at times experienced periods of high
volatility, and you should not take the historical values of the underlying index as an indication of its future performance.
Underlying
Index Historical Performance – Daily Index Closing Values
January 1,
2014 to July 26, 2019
|
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
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
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter (through July 26, 2019)
|
1,580.417
|
1,544.783
|
1,578.967
|
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 the Russell 2000
®
Index due
July 29, 2022
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 publisher:
|
FTSE Russell or any successor thereof
|
Denominations:
|
$1,000 per Trigger PLUS and integral multiples thereof
|
Interest:
|
None
|
Index closing value:
|
The index closing value on any index business day shall be determined by the calculation agent and shall equal the closing value of the underlying 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 underlying index will be based on the alternate calculation of the underlying 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 underlying index reported by Bloomberg Financial Services may be lower or higher than the official closing value of the underlying index published by the underlying index publisher.
|
Bull market or bear market PLUS:
|
Bull market PLUS
|
Postponement of maturity date:
|
If the scheduled valuation date is not an index business day or if a market disruption event occurs on that day so that the valuation date as postponed 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 that valuation date as postponed.
|
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 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
Trigger PLUS Based on the Value of the Russell 2000
®
Index due
July 29, 2022
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Information About the Trigger PLUS