CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
|
Maximum Aggregate Offering Price
|
|
Amount of Registration
Fee
|
Trigger Performance Leveraged Upside Securities due 2024
|
|
$1,500,000
|
|
$181.80
|
April 2019
Pricing Supplement
No. 1,854
Registration
Statement Nos. 333-221595; 333-221595-01
Dated April
18, 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 April 22, 2024
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, subject to the maximum payment at maturity. If the underlying index has
depreciated
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 from the initial index value to the final index value. 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.
These long-dated Trigger PLUS are for investors who seek an equity index-based return and who are willing to risk their principal
and forgo current income and upside above the maximum payment at maturity in exchange for the upside leverage feature and the
limited protection against loss 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
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Maturity
date:
|
April 22, 2024
|
Underlying
index:
|
Russell 2000
®
Index
|
Aggregate principal
amount:
|
$1,500,000
|
Payment
at maturity:
|
If the final index value is
greater than
the
initial index value:
$1,000 + leveraged upside payment
In no event will the payment at maturity exceed the
maximum payment at maturity.
If the final index value 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
.
|
Leveraged
upside payment:
|
$1,000 × leverage factor × index percent increase
|
Leverage
factor:
|
175%
|
Maximum
payment at maturity:
|
$1,565 per Trigger PLUS (156.50% of the stated principal amount)
|
Index
percent increase:
|
(final index value – initial index value) / initial index value
|
Index
performance factor:
|
final index value / initial index value
|
Initial
index value:
|
1,565.748, which is the index closing value on the pricing date
|
Final
index value:
|
The index closing value on the valuation date
|
Trigger
level:
|
1,096.024, which is approximately 70% of the initial index value
|
Valuation
date:
|
April 18, 2024, subject to adjustment for non-index business days and certain market disruption events
|
Stated
principal amount:
|
$1,000 per Trigger PLUS
|
Issue
price:
|
$1,000 per Trigger PLUS (see “Commissions and issue price” below)
|
Pricing
date:
|
April 18, 2019
|
Original
issue date:
|
April 23, 2019 (3 business days after the pricing date)
|
CUSIP / ISIN:
|
61768D6P5 / US61768D6P57
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value
on the pricing date:
|
$947.70 per Trigger PLUS. See “Investment Summary” beginning on page 2.
|
Commissions
and issue price:
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per
Trigger PLUS
|
$1,000
|
$30
|
$970
|
Total
|
$1,500,000
|
$45,000
|
$1,455,000
|
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a
fixed sales commission of $30.00 for each Trigger PLUS they sell. In addition, selected dealers and their financial advisors will
receive a structuring fee of $4.00 for each 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)
|
See “Use of proceeds and hedging” on page 15.
|
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 April 22, 2024
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 April 22, 2024 (the “Trigger PLUS”) can be used:
|
§
|
As an alternative to direct exposure to the underlying index that enhances returns for any positive performance of the underlying
index, subject to the maximum payment at maturity
|
|
§
|
To enhance returns and potentially outperform the underlying index in a moderately bullish scenario
|
|
§
|
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
|
Maturity:
|
Approximately 5 years
|
Leverage factor:
|
175%
|
Maximum payment at maturity:
|
$1,565 per Trigger PLUS (156.50% of the stated principal amount)
|
Trigger level:
|
70% of the initial index value
|
Minimum payment at maturity:
|
None. You could lose your entire initial investment in the Trigger PLUS.
|
Interest:
|
None
|
The original issue price of each Trigger PLUS
is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the Trigger PLUS, which are borne
by you, and, consequently, the estimated value of the Trigger PLUS on the pricing date is less than $1,000. We estimate that the
value of each Trigger PLUS on the pricing date is $947.70.
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, the maximum payment at maturity 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
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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.
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 April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged exposure to positive performance
of the underlying index, subject to the maximum payment at maturity. In exchange for the leverage feature, investors are exposed
to the risk of loss of a significant portion or all of their investment due to the trigger feature. At maturity, an investor will
receive an amount in cash based upon the closing value of the underlying index on the valuation date, subject to the maximum payment
at maturity. 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, subject to the maximum payment at maturity.
|
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
|
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
175% of the increase in the value of the underlying index, subject to the maximum payment at maturity of $1,565 per Trigger PLUS (156.50% of the stated principal amount).
|
Par
Scenario
|
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 from the initial index value to the final index value.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
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:
|
$1,000 per Trigger PLUS
|
Leverage factor:
|
175%
|
Trigger level:
|
70% of the initial index value
|
Maximum payment at maturity:
|
$1,565 per Trigger PLUS (156.50% of the stated principal amount)
|
Trigger PLUS Payoff Diagram
|
|
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 175% of the appreciation of the underlying
index from the initial index value to the final index value, subject to the maximum payment at maturity. Under the terms of the
Trigger PLUS, an investor will realize the maximum payment at maturity of $1,565 per Trigger PLUS (156.50% of the stated principal
amount) at a final index value of approximately 132.29% of the initial index value.
|
|
§
|
If the underlying index appreciates 5%, investors will receive an 8.75% return, or $1,087.50 per Trigger PLUS.
|
|
§
|
If the underlying index appreciates 70%, the investor would receive only the maximum payment at maturity of $1,565 per Trigger
PLUS, or 156.50% of the stated principal amount.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
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 10%, 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.
|
|
§
|
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 April 22, 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. 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 appreciation potential of the Trigger PLUS is limited by the maximum payment at maturity.
The appreciation potential
of the Trigger PLUS is limited by the maximum payment at maturity of $1,565 per Trigger PLUS, or 156.50% of the stated principal
amount. Although the leverage factor provides 175% exposure to any increase in the final index value over the initial index value,
because the payment at maturity will be limited to 156.50% of the stated principal amount for the Trigger PLUS, any increase in
the final index value over the initial index value by more than approximately 32.29% of the initial index value will not further
increase the return on the Trigger PLUS.
|
|
§
|
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. 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 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
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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 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 may 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.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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.
|
|
§
|
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
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 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. 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.
|
§
|
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
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 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 April 18,
2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,565.748
|
52 Weeks Ago:
|
1,583.562
|
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 April 18, 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 April 18, 2019 was 1,565.748. 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 April 18, 2019
|
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Russell 2000
®
Index due April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.960
|
1,095.986
|
1,192.960
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter (through April 18, 2019)
|
1,584.802
|
1,553.325
|
1,565.748
|
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 April 22, 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 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 to be delivered, if any, with respect to each stated principal amount of 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, if
any, with respect to the Trigger PLUS 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 April 22, 2024
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Information About the Trigger PLUS