Registration Statement
Nos. 333-200365; 333-200365-12
The Buffered PLUS are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The Buffered PLUS will pay no
interest, provide a minimum payment at maturity of only 10% of the stated principal amount 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 underlying index has not declined by more than the specified buffer amount, the Buffered
PLUS will redeem for par. However, if the underlying index has declined by more than the buffer amount, investors will lose 1%
for every 1% decline beyond the specified buffer amount, subject to the minimum payment at maturity of 10% of the stated principal
amount. Investors may lose up to 90% of the stated principal amount of the Buffered PLUS. The Buffered 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 leverage and buffer features that in each case apply to a limited range of performance
of the underlying index. The Buffered PLUS are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
FINAL Terms
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Maturity date:
|
June 5, 2019
|
Underlying index:
|
EURO STOXX 50
®
Index
|
Aggregate principal amount:
|
$2,325,500
|
Payment at maturity per Buffered PLUS:
|
If the final index value
is greater than the initial index value:
$10 + 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 has decreased from the initial index value by an amount less than or equal
to the buffer amount of 10%:
$10
If the final index value
is less than the initial index value and has decreased from the initial index value by an amount greater than the buffer amount
of 10%:
($10 x the index
performance factor) + $1
Under these circumstances,
the payment at maturity will be less than the stated principal amount of $10. However, under no circumstances will the
Buffered PLUS pay less than $1.00 per Buffered PLUS at maturity.
|
Leveraged upside payment:
|
$10 × leverage factor × index percent increase
|
Index percent increase:
|
(final index value – initial index value) / initial index
value
|
Initial index value:
|
3,051.61, which is the index closing value on the pricing date
|
Final index value:
|
The index closing value on the valuation date
|
Valuation date:
|
May 31, 2019, subject to postponement for non-index business days
and certain market disruption events
|
Leverage factor:
|
200%
|
Buffer amount:
|
10%. As a result of the buffer amount of 10%, the value
at or above which the underlying index must close on the valuation date so that investors do not suffer a loss on their initial
investment in the Buffered PLUS is 2,746.449, which is 90% of the initial index value.
|
Minimum payment at maturity:
|
$1.00 per Buffered PLUS (10% of the stated principal amount)
|
Index performance factor:
|
Final index value
divided
by the initial index value
|
Maximum payment at maturity:
|
$14.55 per Buffered PLUS (145.50% of the stated principal amount)
|
Stated principal amount:
|
$10 per Buffered PLUS
|
Issue price:
|
$10 per Buffered PLUS (see “Commissions and issue price”
below)
|
Pricing date:
|
November 30, 2016
|
Original issue date:
|
December 5, 2016 (3 business days after the pricing date)
|
CUSIP:
|
61766F557
|
ISIN:
|
US61766F5576
|
Listing:
|
The Buffered 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:
|
$9.816 per Buffered PLUS. See “Investment Summary”
beginning on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions and fees
|
Proceeds to us
(3)
|
Per Buffered PLUS
|
$10
|
$0.25
(1)
|
|
|
|
$0.05
(2)
|
$9.70
|
Total
|
$2,325,500
|
$69,765
|
$2,255,735
|
|
(1)
|
Selected dealers, including Morgan
Stanley Wealth Management (an affiliate of the agent), and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $0.25
for each Buffered PLUS they sell. 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)
|
Reflects a structuring fee payable
to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each
Buffered PLUS.
|
|
(3)
|
See “Use of proceeds and hedging”
on page 12.
|
The Buffered PLUS involve
risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 6.
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 Buffered 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
Information About the Buffered PLUS” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Prospectus dated February 16, 2016
M
organ
S
tanley
F
inance
LLC
Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Buffered Performance Leveraged Upside Securities
Principal at Risk
Securities
The Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019 (the "Buffered PLUS") can be used:
|
§
|
As an alternative to direct exposure to the underlying index that enhances returns for a certain range of 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 achieve similar levels of upside exposure to the underlying index as a direct investment, subject to the maximum payment
at maturity, while using fewer dollars by taking advantage of the leverage factor.
|
|
§
|
To obtain a buffer against a specified level of negative performance in the underlying index
|
Maturity:
|
2 years and 6 months
|
|
|
Leverage factor:
|
200%
|
|
|
Maximum payment at maturity:
|
$14.55 per Buffered PLUS (145.50% of the stated principal amount)
|
|
|
Buffer amount:
|
10%, with 1-to-1 downside exposure below the buffer
|
|
|
Minimum payment at maturity:
|
$1.00 per Buffered PLUS (10% of the stated principal amount). Investors may lose up to 90% of the stated principal amount of the Buffered PLUS.
|
|
|
Coupon:
|
None
|
The original issue price of each Buffered PLUS is $10. This price
includes costs associated with issuing, selling, structuring and hedging the Buffered PLUS, which are borne by you, and, consequently,
the estimated value of the Buffered PLUS on the pricing date is less than $10. We estimate that the value of each Buffered PLUS
on the pricing date is $9.816.
What goes into the estimated value on the pricing date?
In valuing the Buffered PLUS on the pricing date, we take into
account that the Buffered PLUS comprise both a debt component and a performance-based component linked to the underlying index.
The estimated value of the Buffered 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 Buffered PLUS?
In determining the economic terms of the Buffered PLUS, including
the leverage factor, the maximum payment at maturity, the buffer amount and the minimum payment at maturity, we use an internal
funding rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing,
selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the
economic terms of the Buffered 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 Buffered PLUS?
The price at which MS & Co. purchases the Buffered 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 Buffered 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 Buffered 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. 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
Buffered PLUS, and, if it once chooses to make a market, may cease doing so at any time.
M
organ
S
tanley
F
inance
LLC
Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
The Buffered PLUS offer leveraged upside exposure to the underlying
index, subject to the maximum payment at maturity, while providing limited protection against negative performance of the underlying
index. Once the underlying index has decreased in value by more than the specified buffer amount, investors are exposed to the
negative performance of the underlying index, subject to the minimum payment at maturity. At maturity, if the underlying index
has appreciated, 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. At maturity, if the underlying index has depreciated and (i) if the
final index value of the underlying index has not declined from the initial index value by more than the specified buffer amount,
the Buffered PLUS will redeem for par, or (ii) if the final index value of the underlying index has declined by more than the buffer
amount, the investor will lose 1% for every 1% decline beyond the specified buffer amount, subject to the minimum payment at maturity.
Investors may lose up to 90% of the stated principal amount of the Buffered PLUS.
Leveraged Performance
|
The Buffered PLUS offer investors an opportunity to capture enhanced returns for a certain range of positive performance relative to a direct investment in the underlying index.
|
Upside Scenario
|
The underlying index increases in value, and, at maturity, the Buffered PLUS redeem for the stated principal amount of $10 plus 200% of the index percent increase , subject to the maximum payment at maturity of $14.55 per Buffered PLUS (145.50% of the stated principal amount).
|
Par Scenario
|
The underlying index declines in value by no more than 10%, and, at maturity, the Buffered PLUS redeem for the stated principal amount of $10.
|
Downside Scenario
|
The underlying index declines in value by more than 10%, and, at maturity, the Buffered PLUS redeem for less than the stated principal amount by an amount that is proportionate to the percentage decrease of the underlying index from the initial index value, plus the buffer amount of 10%. (Example: if the underlying index decreases in value by 35%, the Buffered PLUS will redeem for $7.50, or 75% of the stated principal amount.) The minimum payment at maturity is $1 per Buffered PLUS.
|
M
organ
S
tanley
F
inance
LLC
Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
How the Buffered PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Buffered PLUS based on the following terms:
Stated principal amount:
|
$10 per Buffered PLUS
|
|
|
Leverage factor:
|
200%
|
|
|
Buffer amount:
|
10%
|
|
|
Maximum payment at maturity:
|
$14.55 per Buffered PLUS (145.50% of the stated principal amount)
|
|
|
Minimum payment at maturity:
|
$1 per Buffered PLUS
|
|
|
Buffered PLUS Payoff Diagram
|
|
How it works
|
§
|
Upside Scenario.
If the final index value is greater than the initial index value, investors will receive the $10 stated principal amount
plus
200% of the appreciation of the underlying index over the term of the Buffered PLUS, subject to the maximum payment at maturity.
Under the terms of the Buffered PLUS, an investor will realize the maximum payment at maturity of $14.55 per Buffered PLUS (145.50%
of the stated principal amount) at a final index value of 122.75% of the initial index value.
|
|
§
|
If the underlying index appreciates 2%, the investor would receive a 4% return, or $10.40 per Buffered PLUS.
|
|
§
|
If the underlying index appreciates 50%, the investor would receive only the maximum payment at maturity of $14.55 per Buffered
PLUS, or 145.50% of the stated principal amount.
|
M
organ
S
tanley
F
inance
LLC
Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019
Buffered 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 has decreased from the initial index value by an amount less than or equal to the buffer amount of 10%, investors will
receive the stated principal amount of $10 per Buffered PLUS.
|
|
§
|
If the underlying index depreciates 5%, investors will receive the $10 stated principal amount.
|
|
§
|
Downside Scenario.
If the final index value is less than the initial index value
and has decreased from the initial index value by an amount greater than the buffer amount of 10%, investors will receive an amount
that is less than the stated principal amount by an amount that is proportionate to the percentage decrease of the value of the
underlying index from the initial index value, plus the buffer amount of 10%. The minimum payment at maturity is $1 per Buffered
PLUS.
|
|
§
|
For example, if the underlying index depreciates 40%, investors would lose 30% of their principal and receive only $7 per Buffered
PLUS at maturity, or 70% of the stated principal amount.
|
M
organ
S
tanley
F
inance
LLC
Buffered PLUS Based on the Value of the EURO STOXX 50
®
Index due June 5, 2019
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities