Opportunities in U.S. and International Equities
The Buffered Participation Securities (the “securities”)
are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan
Stanley. The securities will pay no interest, provide a minimum payment at maturity of only 20% of the stated principal amount
and have the terms described in the accompanying product supplement for Participation Securities, index supplement and prospectus,
as supplemented or modified by this document. At maturity, if the basket has appreciated in value, investors will receive the
stated principal amount of their investment plus 100% participation in the upside performance of the basket. If the basket has
depreciated in value, but the basket has not declined by more than the specified buffer amount, the securities will redeem for
par. However, if the basket 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 20% of the stated principal amount. Investors may lose
up to 80% of the stated principal amount of the securities.
The securities are for investors who
seek an equity-based return and who are willing to risk their principal and forgo current income in exchange for the buffer feature
that applies to a limited range of performance of the basket.
The securities are notes issued as part of MSFL’s Series
A Global Medium-Term Notes program.
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Maturity
date:
|
May 26, 2022
|
Original
issue price:
|
$1,000 per security
|
Stated
principal amount:
|
$1,000 per security
|
Pricing
date:
|
May 23, 2019
|
Original
issue date:
|
May 29, 2019 (3 business days after the pricing date)
|
Aggregate
principal amount:
|
$1,020,000
|
Interest:
|
None
|
Basket:
|
Basket component
|
Bloomberg
ticker symbol
|
Basket component weighting
|
Initial basket component value
|
Multiplier
|
|
Shares of the iShares
®
MSCI EAFE ETF (the “EFA Shares”)
|
EFA UP
|
20%
|
$64.09
|
0.312061164
|
|
S&P 500
®
Index (the “SPX Index”)
|
SPX
|
80%
|
2,822.24
|
0.028346278
|
|
We refer to the EFA Shares as the underlying
shares, and the SPX Index as the underlying index and, together with the underlying shares, as the basket components.
|
Payment
at maturity
(per security):
|
§
If
the final basket value is
greater than
the initial basket value:
$1,000 + ($1,000 x participation
rate x basket percent change)
§
If
the final basket value is
less than or equal to
the initial basket value but has decreased from the initial basket value
by an amount
less than or equal to
the buffer amount of 20%: $1,000
§
If
the final basket value is
less than
the initial basket value and has decreased from the initial basket value by an amount
greater than
the buffer amount of 20%:
($1,000 x basket performance
factor) + $200
Under these circumstances,
the payment at maturity will be less than the stated principal amount of $1,000. However, under no circumstances will the securities
pay less than $200 per security at maturity.
|
Participation
rate:
|
100%
|
Basket
percent change:
|
(final basket value – initial basket value) / initial basket value
|
Buffer
amount:
|
20%
|
Minimum
payment at maturity:
|
$200 per security (20% of the stated principal amount)
|
Basket
performance factor:
|
Final basket value / initial basket value
|
Maximum
payment at maturity:
|
None
|
Initial
basket value:
|
100, which is equal to the sum of the products of the initial basket component values of each of the basket components, as set forth under “Basket—Initial basket component value” above, and the applicable multiplier for each of the basket components, each of which was determined on the pricing date.
|
Final
basket value:
|
The basket closing value on the valuation date.
|
Valuation
date:
|
May 23, 2022, subject to postponement for non-index business days or non-trading days, as applicable, and certain market disruption events.
|
Basket
closing value:
|
The basket closing value on any day is the sum of the products of (i) the basket component closing value of each of the basket components and (ii) the applicable multiplier for such basket component on such date.
|
Basket
component closing value:
|
In the case of the underlying index, the index closing value as published by the index publisher. In the case of the underlying shares, the closing price of one share of the underlying shares
times
the adjustment factor for the underlying shares.
|
Multiplier:
|
The multipliers were set on the pricing date based on each basket component’s respective initial basket component value so that each basket component represents its applicable basket component weighting in the predetermined initial basket value. Each multiplier will remain constant for the term of the securities. See “Basket—Multiplier” above.
|
Adjustment
factor:
|
With respect to the underlying shares, 1.0, subject to adjustment for certain events affecting the underlying shares.
|
Listing:
|
The securities will not be listed on any securities exchange.
|
CUSIP
/ ISIN:
|
61769HEK7 / US61769HEK77
|
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:
|
$982.40 per security. See “Investment Overview” on page 2.
|
Commissions
and issue price:
|
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per
security
|
|
$1,000
|
$7.50
|
$992.50
|
Total
|
|
$1,020,000
|
$7,650
|
$1,012,350
|
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, MS &
Co., a fixed sales commission of $7.50 for each security 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 Participation Securities.
|
|
(2)
|
See “Use of proceeds and hedging” on page 16.
|
The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 5.
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 securities 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 Securities” and “Additional Information About the Securities”
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 Participation Securities dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Investment Summary
Buffered Participation Securities
The Buffered Participation Securities Based on a Basket Consisting
of an Exchange-Traded Fund and an Index due May 26, 2022 (the “securities”) can be used:
|
§
|
As an alternative to direct exposure to the basket that provides returns reflecting any potential positive performance of the
basket
|
|
§
|
To achieve similar levels of upside exposure to the basket as a direct investment
|
|
§
|
To obtain a buffer against a specified level of negative performance in the basket
|
Maturity:
|
Approximately 3 years
|
Participation
rate:
|
100%
|
Buffer
amount:
|
20%
|
Minimum
payment at maturity:
|
$200 per security (20% of the stated principal amount). Investors may lose up to 80% of the stated principal amount of the securities.
|
Maximum
payment at maturity:
|
None
|
Basket
weighting:
|
20% for the EFA Shares and 80% for the SPX Index
|
Interest:
|
None
|
The original issue price
of each security is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities,
which are borne by you, and, consequently, the estimated value of the securities on the pricing date is less than $1,000. We estimate
that the value of each security on the pricing date is $982.40.
What goes into the estimated
value on the pricing date?
In valuing the securities
on the pricing date, we take into account that the securities comprise both a debt component and a performance-based component
linked to the basket components. The estimated value of the securities is determined using our own pricing and valuation models,
market inputs and assumptions relating to the basket components, instruments based on the basket components, 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 securities?
In determining the economic
terms of the securities, including the participation rate, 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 securities 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 securities?
The price at which MS &
Co. purchases the securities in the secondary market, absent changes in market conditions, including those related to the basket
components, 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 securities 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 securities in the secondary market, absent changes in market conditions, including those related
to the basket components, 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 securities and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Key Investment Rationale
The securities offer 100% participation in any positive performance
of the basket while providing limited protection against negative performance of the basket. Once the basket has decreased in value
by more than the specified buffer amount, investors are exposed to the negative performance of the basket, subject to the minimum
payment at maturity. At maturity, if the basket has appreciated, investors will receive the stated principal amount of their investment
plus 100% participation in the upside performance of the underlying basket. At maturity, if the basket has depreciated and (i)
if the closing value of the basket has not declined by more than the specified buffer amount, the securities will redeem for par,
or (ii) if the closing value of the basket has declined by more than the buffer amount, the investor will lose 1% for every 1%
decline beyond the specified buffer amount.
Investors may lose up to 80% of the stated principal amount of the securities.
Upside
Scenario
|
The basket increases in value, and, at maturity, the securities redeem for the stated principal amount of $1,000
plus
100% of the basket percent change.
|
Par
Scenario
|
The basket declines in value by no more than 20%, and, at maturity, the securities redeem for the stated principal amount of $1,000.
|
Downside
Scenario
|
The basket declines in value by more than 20%, and, at maturity, the securities redeem for less than the stated principal amount by an amount that is proportionate to the percentage decrease of the basket in excess of the buffer amount of 20%. (Example: if the basket decreases in value by 50%, the securities will redeem for $700 or 70% of the stated principal amount.) The minimum payment at maturity is $200 per security.
|
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
How the Securities Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the securities based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Participation rate:
|
100%
|
Buffer amount:
|
20%
|
Minimum payment at maturity:
|
$200 per security
|
Risk Factors
The following is a non-exhaustive list of certain key risk factors
for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement for Participation Securities, index supplement and prospectus. You should
also consult with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not pay interest and provide a minimum payment at maturity of only 20% of your principal.
The terms
of the securities differ from those of ordinary debt securities in that the securities do not pay interest and provide a minimum
payment at maturity of only 20% of the stated principal amount of the securities. If the final basket value is less than 80% of
the initial basket value, you will receive for each security that you hold a payment at maturity that is less than the stated principal
amount of each security by an amount proportionate to the decline in the value of the basket from the initial basket value
,
plus $200 per security
.
Accordingly, investors may lose up to 80% of the stated principal amount of the securities.
|
|
§
|
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 securities in the secondary market and the price at which MS & Co. may be willing to purchase
or sell the securities in the secondary market, including: the value, volatility and dividend yield of the basket components, interest
and yield rates in the market, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory
or judicial events and any actual or anticipated changes in our credit ratings or credit spreads. You may receive less, and possibly
significantly less, than the stated principal amount per security if you try to sell your securities prior to maturity.
|
|
§
|
The securities 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 securities.
You are dependent on our ability to pay all amounts due on the securities
at maturity and therefore you are subject to our credit risk. The securities are not guaranteed by any other entity. If we default
on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities 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 securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets.
As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated
pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
|
|
§
|
Changes in the values of the basket components may offset each other.
Value movements in the basket components may not
correlate with each other. At a time when the value of one basket component increases, the value of the other basket component
may not increase as much, or may even decline. Therefore, in calculating the basket components’ performance on the valuation
date, increases in the value of one basket component may be moderated, or wholly offset, by lesser increases or declines in the
value of the other basket component.
|
|
§
|
The basket components are not equally weighted.
The securities are linked to a basket of two basket components, and
the basket components have significantly different weights in determining the value of the basket. The same percentage change in
the two basket components would therefore have different effects on the basket closing value because of the unequal weighting.
For example, a 5% decrease in the value of the basket component with the greater weighting will have a greater impact on the basket
closing value than a 5% increase in the value of the basket component with the lesser weighting.
|
|
§
|
There are risks associated with investments in securities, such as the securities, linked to the value of foreign equity
securities.
The EFA Shares track the performance of the MSCI EAFE Index
SM
(the “share underlying index”),
which measures the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities
involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental
intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly
available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the United
States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards
and requirements different from those applicable to U.S.
|
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
reporting companies. The prices
of securities issued in foreign markets may be affected by political, economic, financial and social factors in those countries,
or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Local securities markets
may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making
prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may differ unfavorably
from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payment positions between countries.
|
§
|
The prices of the EFA Shares are subject to currency exchange risk.
Because
the prices of the EFA Shares are related to the U.S. dollar value of stocks underlying the MSCI EAFE Index
SM
,
holders of the securities will be exposed to currency exchange rate risk with respect to each of the currencies in which such component
securities trade. Exchange rate movements for a particular currency are volatile and are the result of numerous factors including
the supply of, and the demand for, those currencies, as well as relevant government policy, intervention or actions, but are also
influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative
actions related to the relevant region. An investor’s net exposure will depend on the extent to which the currencies of the
component securities strengthen or weaken against the U.S. dollar and the relative weight of each currency. If, taking into account
such weighting, the dollar strengthens against the currencies of the component securities represented in the MSCI EAFE Index
SM
,
the price of the underlying shares will be adversely affected and the payment at maturity on the securities may be reduced.
|
|
§
|
Of particular importance to potential currency exchange risk are:
|
|
§
|
existing and expected rates of inflation;
|
|
§
|
existing and expected interest rate levels;
|
|
§
|
the balance of payments; and
|
|
§
|
the extent of governmental surpluses or deficits in the countries represented
in the MSCI EAFE Index
SM
and the United States.
|
All
of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of various countries
represented in the MSCI EAFE Index
SM
the United States and
other countries important to international trade and finance.
|
§
|
Adjustments to the underlying shares or to the MSCI EAFE Index
SM
could adversely affect the value of the securities.
The investment adviser to the EFA Shares seeks investment results that correspond generally
to the price and yield performance, before fees and expenses, of the MSCI EAFE Index
SM
. Pursuant to its investment
strategy or otherwise, the investment adviser may add, delete or substitute the components of the underlying shares. Any of
these actions could adversely affect the price of the underlying shares and, consequently, the value of the securities. In addition,
the publisher of the share underlying index is responsible for calculating and maintaining the share underlying index. The index
publisher may add, delete or substitute the stocks constituting the share underlying index or make other methodological changes
that could change the value of the share underlying index. The index publisher may also discontinue or suspend calculation or publication
of the share underlying index at any time. If this discontinuance or suspension occurs following the termination of the underlying
shares, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued
share underlying index, and is permitted to consider indices that are calculated and published by the calculation agent or any
of its affiliates. Any of these actions could adversely affect the values of any of the underlying shares and, consequently, the
value of the securities.
|
|
§
|
The performance and market price of the underlying shares, particularly during periods of market volatility, may not correlate
with the performance of the share underlying index, the performance of the component securities of the share underlying index or
the net asset value per share of the underlying shares.
The underlying shares do not fully replicate the share underlying
index and may hold securities that are different than those included in the share underlying index. In addition, the performance
of the underlying shares will reflect additional transaction costs and fees that are not included in the calculation of the share
underlying index. All of these factors may lead to a lack of correlation between the performance of the underlying shares
and the share underlying index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity
securities underlying the underlying shares may impact the variance between the performances of the underlying shares and the share
underlying index. Finally, because the shares of the underlying shares are traded on an exchange and are subject to market
supply and investor demand, the market price of one share of the underlying shares may differ from the net asset value per share
of the underlying shares.
|
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
In particular, during periods of
market volatility, or unusual trading activity, trading in the securities underlying the underlying shares may be disrupted or
limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the underlying
shares may be adversely affected, market participants may be unable to calculate accurately the net asset value per share of the
underlying shares, and their ability to create and redeem shares of the underlying shares may be disrupted. Under these circumstances,
the market price of the underlying shares may vary substantially from the net asset value per share of the underlying shares or
the level of the share underlying index.
For all of the foregoing reasons,
the performance of the underlying shares may not correlate with the performance of the share underlying index, the performance
of the component securities of the share underlying index or the net asset value per share of the underlying shares. Any
of these events could materially and adversely affect the price of the underlying shares and, therefore, the value of the securities.
Additionally, if market volatility or these events were to occur on the valuation date, the calculation agent would maintain
discretion to determine whether such market volatility or events have caused a market disruption event to occur, and such determination
would affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event
has taken place, the payment at maturity would be based solely on the published closing price per share of the underlying shares
on the valuation date, even if the underlying shares are underperforming the share underlying index or the component securities
of the share underlying index and/or trading below the net asset value per share of the underlying shares.
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the underlying
shares.
MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the underlying shares.
However, the calculation agent will not make an adjustment for every event that can affect the underlying shares. If an event occurs
that does not require the calculation agent to adjust the adjustment factor, the market price of the
securities
may be materially and adversely affected.
|
|
§
|
Adjustments to the underlying index could adversely affect the value of the securities.
The publisher of the underlying
index can add, delete or substitute the stocks underlying such index, and can make other methodological changes that could change
the value of such underlying index. Any of these actions could adversely affect the value of the securities. In addition, the index
publisher may discontinue or suspend calculation or publication of the underlying index at any time. In these circumstances, MS
& Co., as the calculation agent, will have the sole discretion to substitute a successor index for such index that is comparable
to the discontinued index and is permitted to consider indices that are calculated and published by MS & Co. or any of its
affiliates. If MS & Co. determines that there is no appropriate successor index for such index, the payment at maturity on
the securities will be an amount based on the closing prices on the valuation date of the securities constituting 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 such index.
|
|
§
|
Investing in the securities is not equivalent to investing in the basket components.
Investing
in the securities is not equivalent to investing directly in the basket components or any of the component stocks of the MSCI EAFE
Index
SM
or the S&P 500
®
Index. Investors in the securities will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to the underlying shares or any of the component stocks
of the MSCI EAFE Index
SM
or the S&P 500
®
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 securities in the original issue
price reduce the economic terms of the securities, cause the estimated value of the securities 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 securities 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 securities in the original issue price and the lower rate
we are willing to pay as issuer make the economic terms of the securities less favorable to you than they otherwise would be.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
However,
because the costs associated with issuing, selling, structuring and hedging the securities 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 securities in the
secondary market, absent changes in market conditions, including those related to the basket components, 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 securities 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 securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. 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 securities in the secondary market (if any exists) at any time. The value
of your securities 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 securities will not be listed on any securities exchange and secondary trading may be limited.
The securities will
not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co.
may, but is not obligated to, make a market in the securities. Even if there is a secondary market, it may not provide enough liquidity
to allow you to trade or sell the securities easily.
Because we do not expect that other broker
dealers will participate significantly in the secondary market for the securities, the price at which you may be able to trade
your securities is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS &
Co. were not to make a market in the securities, it is likely that there would be no secondary market for the securities.
Accordingly,
you should be willing to hold your securities to maturity.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities.
As calculation agent, MS & Co. has determined the initial basket component values and the multipliers,
will determine the final basket value and will calculate the basket percent change or basket performance factor, as applicable,
and the amount of cash 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 basket component closing
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. For further information regarding these types of determinations, see “Description
of Participation Securities—Postponement of Valuation Date(s)” and “—Calculation Agent and Calculations”
in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities.
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 securities (and possibly to other instruments linked to the basket components or component stocks of
the
MSCI EAFE Index
SM
or the S&P 500
®
Index)
, including
trading in the underlying shares or the stocks that constitute
the MSCI EAFE Index
SM
or the S&P 500
®
Index
as well as in other instruments related to the basket components. As a result,
these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. Some of our affiliates also trade
the underlying shares or the stocks that constitute
the MSCI EAFE Index
SM
or the S&P
500
®
Index
and other financial instruments related to the basket components 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 basket component values of the basket components, and, therefore, could have increased the values at
or above which the basket components must close on the valuation date so that investors do not suffer a loss on their initial investment
in the securities. Additionally, such hedging or trading activities during the term of the securities, including on the valuation
date, could adversely affect the closing values of the basket components on the valuation date, and, accordingly, the amount of
cash an investor will receive at maturity.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities 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 participation securities (together, the “Tax Disclosure
Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. As discussed in the Tax
Disclosure Sections, there is a substantial risk that the “constructive ownership” rule could apply, in which case
all or a portion of any long-term capital gain recognized by a U.S. Holder could be recharacterized as ordinary income and an
|
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
interest charge could be imposed.
If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character
of income on the securities 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 securities as debt instruments. In that event, U.S. Holders
would be required to accrue into income original issue discount on the securities every year at a “comparable yield”
determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income. Additionally,
as discussed under “United States Federal Taxation—FATCA” in the accompanying product supplement for participation
securities, the withholding rules commonly referred to as “FATCA” would apply to the securities 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 securities,
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 securities, 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, as
discussed in this document. 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 securities, 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 securities, including possible alternative treatments,
the potential application of the constructive ownership rule, 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
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Basket Overview
The basket consists of shares of the iShares
®
MSCI EAFE ETF (20%) and the S&P 500
®
Index (80%) and offers exposure to price movements in the international
and U.S. equity markets.
iShares
®
MSCI
EAFE ETF.
The iShares
®
MSCI EAFE ETF is an exchange-traded fund that seeks investment results
that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index
SM
. The
iShares
®
MSCI EAFE ETF is managed by iShares, Inc. (“iShares”), a registered investment company
that consists of numerous separate investment portfolios, including the iShares
®
MSCI EAFE ETF. Information
provided to or filed with the Commission by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940
can be located by reference to Commission file numbers 333-92935 and 811-09729, respectively, through the Commission’s website
at
.
www.sec.gov. In addition, information may be obtained from other publicly available sources.
We make no representation or warranty as to the accuracy or completeness of such information.
The MSCI EAFE Index
SM
.
The MSCI EAFE Index
SM
is
a stock index calculated, published and disseminated daily by MSCI. The MSCI EAFE Index
SM
is a free float-adjusted market
capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States
and Canada, and it consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. For additional information about the MSCI EAFE Index
®
, please see the information
set forth under “MSCI EAFE Index
SM
” in the accompanying index supplement.
This document relates only to the securities referenced hereby
and does not relate to the underlying shares. We have derived all disclosures contained in this document regarding iShares
from the publicly available documents described above. In connection with the offering of the securities, neither we
nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither
we nor the agent makes any representation that such publicly available documents or any other publicly available information regarding
iShares is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date
hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that
would affect the trading price of the underlying shares (and therefore the price of the underlying shares at the time we priced
the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure
to disclose material future events concerning iShares could affect the value received at maturity with respect to the securities
and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the underlying shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information
with respect to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In
addition, one or more of our affiliates may publish research reports with respect to the underlying shares. The statements
in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As
a purchaser of the securities, you should undertake an independent investigation of iShares as in your judgment is appropriate
to make an informed decision with respect to an investment linked to the underlying shares.
S&P 500
®
Index.
The S&P 500
®
Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”),
consists of stocks of 500 component companies selected to provide a performance benchmark for the U.S. equity markets. The calculation
of the S&P 500
®
Index is based on the relative value of the float adjusted aggregate market capitalization
of the 500 component companies as of a particular time as compared to the aggregate average market capitalization of 500 similar
companies during the base period of the years 1941 through 1943. For additional information about the S&P 500
®
Index,
see the information set forth under “S&P 500
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Information as of market close on May 23, 2019:
Basket Component Information as of May 23, 2019
|
|
Bloomberg Ticker Symbol
|
Current Basket Component Level
|
52 Weeks Ago
|
52 Week High
|
52 Week Low
|
EFA Shares
|
EFA UP
|
$64.09
|
$70.90
|
(on 5/23/2018): $70.90
|
(on 12/24/2018): $56.89
|
SPX Index
|
SPX
|
2,822.24
|
2,733.29
|
(on 4/30/2019): 2,945.83
|
(on 12/24/2018): 2,351.10
|
The following graph is calculated based on an initial basket
value of 100 on January 1, 2014 (assuming that each basket component is weighted as described in “Basket” on the cover
page) and illustrates the effect of the offset and/or correlation among the basket components during such period. The graph does
not take into account the terms of the securities, nor does it attempt to show your expected return on an investment in the securities.
The historical performance of the basket should not be taken as an indication of its future performance.
Basket Historical
Performance
January 1,
2014 to May 23, 2019
|
|
The following graphs set forth the daily closing values and closing
prices, as applicable, of each of the basket components for the period from January 1, 2014 through May 23, 2019. The related tables
set forth the published high and low closing values and closing prices, as applicable, as well as end-of-quarter closing values
and closing prices, for each of the basket components for each quarter in the same period. The closing values and closing prices,
as applicable, for each of the basket components on May 23, 2019 were: (i) in the case of the EFA Shares,
$64.09
,
and (ii) in the case of SPX Index,
2,822.24
. We obtained the information in the tables and
graphs below from Bloomberg Financial Markets, without independent verification. The historical values of the basket components
should not be taken as an indication of their future performance, and no assurance can be given as to the basket closing value
on the valuation date.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Shares of the iShares
®
MSCI EAFE ETF
Daily Closing Prices
January 1, 2014 to May 23, 2019
|
|
iShares
®
MSCI EAFE ETF (CUSIP 464287465)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
68.03
|
62.31
|
67.17
|
Second Quarter
|
70.67
|
66.26
|
68.37
|
Third Quarter
|
69.25
|
64.12
|
64.12
|
Fourth Quarter
|
64.51
|
59.53
|
60.84
|
2015
|
|
|
|
First Quarter
|
65.99
|
58.48
|
64.17
|
Second Quarter
|
68.42
|
63.49
|
63.49
|
Third Quarter
|
65.46
|
56.25
|
57.32
|
Fourth Quarter
|
62.06
|
57.50
|
58.75
|
2016
|
|
|
|
First Quarter
|
58.75
|
51.38
|
57.13
|
Second Quarter
|
59.87
|
52.64
|
55.81
|
Third Quarter
|
59.86
|
54.44
|
59.13
|
Fourth Quarter
|
59.20
|
56.20
|
57.73
|
2017
|
|
|
|
First Quarter
|
62.60
|
57.73
|
62.29
|
Second Quarter
|
67.22
|
61.44
|
65.20
|
Third Quarter
|
68.48
|
64.83
|
68.48
|
Fourth Quarter
|
70.80
|
68.42
|
70.31
|
2018
|
|
|
|
First Quarter
|
52.08
|
45.69
|
48.28
|
Second Quarter
|
71.90
|
66.35
|
66.97
|
Third Quarter
|
68.98
|
65.43
|
67.99
|
Fourth Quarter
|
68.07
|
56.89
|
58.78
|
2019
|
|
|
|
First Quarter
|
65.61
|
58.13
|
64.86
|
Second Quarter (through May 23, 2019)
|
66.99
|
63.81
|
64.09
|
iShares
®
is a registered mark of BlackRock Institutional
Trust Company, N.A. (“BTC”). The securities are not sponsored, endorsed, sold, or promoted by BTC. BTC makes no representations
or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities.
BTC has no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
S&P 500
®
Index
Daily Index Closing Values
January 1, 2014 to May 23, 2019
|
|
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter (through May 23, 2019)
|
2,945.83
|
2,811.87
|
2,822.24
|
“Standard
& Poor’s
®
,” “S&P
®
,” “S&P 500
®
,” “Standard
& Poor’s 500” and “500” are trademarks of Standard and Poor’s Financial Services LLC. See “S&P
500
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities
Additional Terms of the Securities
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.
|
Share
underlying index:
|
The MSCI EAFE Index
SM
|
Share
underlying index publisher:
|
MSCI Inc., or any successor thereof
|
Underlying
index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Postponement
of maturity date:
|
If the valuation date for any basket component is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following such valuation date as postponed.
|
Bull
market or bear market securities:
|
Bull market securities
|
Trustee:
|
The Bank of New York Mellon
|
Calculation
agent:
|
Morgan Stanley & Co. LLC (“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 securities 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
securities 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 and to the depositary of the amount of cash to be delivered with respect to each
stated principal amount of the securities, 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 securities to the trustee for delivery to the depositary,
as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Buffered Participation Securities Based on a Basket Consisting of an Exchange-Traded Fund and an Index due May 26, 2022
Principal at Risk Securities