Free Writing Prospectus - Filing Under Securities Act Rules 163/433 (fwp)
June 03 2019 - 6:12AM
Edgar (US Regulatory)
M
organ
S
tanley
F
inance
LLC
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Free
Writing Prospectus to Preliminary Pricing Supplement No. 2,069
Registration
Statement Nos. 333-221595; 333-221595-01
Dated
May 31, 2019
Filed pursuant
to Rule 433
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Structured
Investments
Dual Directional Market-Linked Notes due June
28, 2024 Based on the Value of the Morgan Stanley MAP Trend Index
This document provides a summary of the terms of the notes
offered by Morgan Stanley Finance LLC. Investors should review carefully the accompanying preliminary pricing supplement, product
supplement and prospectus prior to making an investment decision.
SUMMARY
TERMS
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Issuer:
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Morgan Stanley Finance LLC (“MSFL”)
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Guarantor:
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Morgan Stanley
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Issue price:
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$1,000 per note
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Stated principal amount:
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$1,000 per note
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Pricing date:
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June 25, 2019
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Original issue date:
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June 28, 2019 (3 business days after the pricing date)
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Maturity date:
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June 28, 2024
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Interest:
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None
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Underlying index:
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Morgan Stanley MAP Trend Index. For more information
about the underlying index, see the accompanying preliminary pricing supplement.
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Payment at maturity:
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The payment due at maturity
per $1,000 stated principal amount will equal:
$1,000 + supplemental
redemption amount, if any.
The payment due at maturity
will not be less than $1,000 per note regardless of the performance of the underlying index.
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Supplemental redemption amount:
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The supplemental redemption
amount payable at maturity per $1,000 note will equal:
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If
the final index value is
greater than
the initial index value: (i) $1,000
times
(ii) the index percent change
times
(iii) the upside participation rate
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If
the final index value is
equal to
the initial index value: $0
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If
the final index value is
less than
the initial index value: (i) $1,000
times
(ii) the absolute index return
times
(iii) the downside participation rate
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Upside participation rate:
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At least 140% (applicable only if the final index value is
greater than
the initial index value). The actual upside participation rate will be determined on the pricing date.
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Downside participation rate:
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50% (applicable only if the final index value is
less than
the initial index value)
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Maximum payment at maturity:
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None
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Index percent change:
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(final index value – initial index value) / initial index value
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Absolute index return:
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The absolute value of the index percent change. For example,
a -5% index percent change will result in a +5% absolute index return.
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Initial index value:
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The index closing value on the pricing date
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Final index value:
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The index closing value on the determination date
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Determination date:
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June 25, 2024, subject to postponement for non-index business days and certain market disruption
events
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CUSIP/ISIN:
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61769HET8 / US61769HET86
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Listing:
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The notes will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”),
an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding
plan of distribution; conflicts of interest” in the accompanying preliminary pricing supplement. The agent commissions
will be as set forth in the final pricing supplement.
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Estimated value on the pricing
date:
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Approximately $944.80 per note, or within $30.00 of that estimate. See
“Investment Summary” in the accompanying preliminary pricing supplement.
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Overview
The notes are unsecured obligations
of MSFL and are fully and unconditionally guaranteed by Morgan Stanley. The notes will pay no interest and will have the terms
described in the accompanying product supplement and prospectus, as supplemented and modified by this document. At maturity, we
will pay per note the stated principal amount of $1,000 plus a supplemental redemption amount, if any, based on the value of the
underlying index on the determination date. If the final index value is greater than the initial index value, the supplemental
redemption amount will equal the product of $1,000 times the index percent change times the upside participation rate of at least
140% (to be determined on the pricing date). If the final index value is less than the initial index value, the supplemental redemption
amount will equal the product of $1,000 times the absolute index return (which is the absolute value of the index percent change)
times the downside participation rate of 50%.
The Morgan Stanley MAP Trend Index
(the “underlying index”) was established by Morgan Stanley on March 7, 2017 and employs a rules-based quantitative
strategy (the “Index Methodology”) that combines a risk-weighted approach to portfolio construction with a momentum-based,
or trend-following, asset allocation methodology to construct a notional portfolio. In addition, the strategy imposes an overall
volatility-targeting feature upon the resulting portfolio. The goal of the underlying index is to seek positive return opportunities
in different market environments based upon recent trends in the underlying assets. The investment assumption underlying the allocation
strategy is two-fold: that historical volatility of the underlying assets can be used to risk-weight a portfolio, and that past
trends are likely to continue to be a good indicator of the future performance of that portfolio.
The components of the underlying
index consist of (i) 20 U.S.-listed exchange traded funds (“ETFs”), representing U.S. and non-U.S. equities, fixed
income securities, commodities and real estate, and (ii) the Morgan Stanley Two Year Treasury Index (collectively, the “Index
Components”). The notional portfolio constructed by the Index Methodology of Index Components is referred to as the “Asset
Portfolio.” The Asset Portfolio will consist of long-only positions in each Index Component, and each Index Component except
for the Morgan Stanley Two Year Treasury Index is subject to a maximum exposure cap. The targeted volatility for the underlying
index is 5% (the “Volatility Target”).
The underlying index is rebalanced
each Strategy Business Day (the “Daily Rebalancing”). Upon each Daily Rebalancing for the underlying index, the Index
Methodology uses the pre-assigned Risk Budget assigned to each ETF (as set forth under “Annex A – Morgan Stanley MAP
Trend Index – Index Components”) and the volatility for each ETF to make initial base allocations. The Index Methodology
then calculates a signal based on the upward or downward trend of each ETF (the “Trend Signal”). The index calculates
each Trend Signal by observing two moving averages, one short-term and one long-term, over different look-back periods for each
respective ETF. A Trend Signal that converges toward one indicates an upward trend and a Trend Signal that converges toward zero
indicates a downward trend. Once the Trend Signal is calculated for each ETF, the previously determined base allocations are scaled
by the Trend Signal by allocating more upward-trending securities to the Asset Portfolio. The magnitude of each position taken
by the underlying index following the Trend Signal adjustment is then scaled to the Volatility Target based on a pro-rata volatility-scaling
that seeks to achieve a balanced level of volatility in the underlying index’s exposure to each of the ETFs.
The underlying index is calculated
on an excess return basis, and therefore the level reflects the weighted return of the Asset Portfolio reduced by the return on
an equivalent cash investment receiving the 3-month LIBOR. The underlying index performance is further reduced by a servicing
cost of 0.85% per annum calculated on a daily basis. For more information, see “Annex A—Morgan Stanley MAP Trend Index”
and the “Risk Factors—There are risks associated with the underlying index” in the accompanying preliminary
pricing supplement.
These long-dated notes are for
investors who are concerned about principal risk but seek exposure to a multiple asset-linked index, and who are willing to forgo
current income in exchange for the repayment of principal at maturity plus the potential to receive a supplemental redemption
amount, if any. The notes 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 notes 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.
Investing
in the notes involves risks. See “Selected Risks” on the following page and
“Risk Factors” in the accompanying preliminary pricing supplement.
You should read this document
together with the accompanying preliminary pricing supplement, product supplement and prospectus describing the offering before
you decide to invest. You may access the preliminary pricing supplement through the below link:
https://www.sec.gov/Archives/edgar/data/895421/000095010319007288/dp107709_424b2-ps2069.htm
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The issuer has filed a registration statement (including a prospectus)
with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that
registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and
this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively,
the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request
it by calling toll-free 1-800-584-6837.
Risk Considerations
The risks set forth below are discussed in more detail in the
“Risk Factors” section in the accompanying preliminary pricing supplement. Please review those risk factors carefully
prior to making an investment decision.
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The
notes do not pay interest and may not pay more than the stated principal amount at maturity.
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The
market price of the notes will be influenced by many unpredictable factors.
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The
notes 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 notes.
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As
a finance subsidiary, MSFL has no independent operations and will have no independent assets.
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The
amount payable on the notes is not linked to the value of the underlying index at any time other than the determination date.
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There are risks associated with the underlying
index.
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The level of the underlying index can go down as well
as up.
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The base allocation of ETFs in the Asset Portfolio
is determined in reference to each ETF’s Risk Budget and volatility.
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There are risks associated with the underlying index’s
momentum investment strategy.
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Low volatility in the underlying index is not synonymous
with low risk in an investment linked to the underlying index.
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While the underlying index has a Volatility Target
of 5%, there can be no guarantee, even if the Asset Portfolio is rebalanced daily, that the realized volatility of the underlying
index will not be less than or greater than 5%.
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There can be no assurance that the actual volatility
of the underlying index will be lower than the volatility of any or all of the Index Components.
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The volatility target feature of the underlying index
may dampen its performance in bullish markets.
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The value of the underlying index and any instrument
linked to the underlying index may increase or decrease due to a number of factors, many of which are beyond our control.
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The future performance of the underlying index may
bear little or no relation to the historical or hypothetical retrospective performance of the underlying index.
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The underlying index is particularly susceptible to
“choppy” markets.
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The underlying index has fixed weighting constraints.
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The underlying index was established on March 7, 2017
and therefore has a very limited history.
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As the underlying index is new and has very limited
actual historical performance, any investment in the underlying index may involve greater risk than an investment in an index
with longer actual historical performance and a proven track record.
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The underlying index is reduced by an excess return
cost.
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The underlying index contains embedded costs.
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An investment in the notes involves risks associated
with emerging markets equities and bonds, currency exchange rates and commodities.
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Changes in the value of the Index Components may offset
each other.
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The Morgan Stanley Two Year Treasury Index can produce
negative returns, which may have an adverse effect on the level of the respective Sub-Indices, and consequently, the level of
the index.
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Adjustments to the underlying index could adversely
affect the value of instruments linked to the underlying index.
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Investing in the notes is not equivalent to investing
in the underlying index. Investing in the notes is not equivalent to investing in the underlying index or its component ETFs or
the Morgan Stanley Two Year Treasury Index.
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If the underlying index
is discontinued and no successor index is available, at maturity, Morgan Stanley will pay an alternative supplemental redemption
amount, if any, in lieu of the supplemental redemption amount.
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MS & Co., which
is a subsidiary of Morgan Stanley and an affiliate of MSFL, is both the calculation agent and the underlying index publisher, and
will make determinations with respect to the notes and the underlying index.
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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 notes in the original issue price reduce the economic terms of the notes, cause the estimated value of the notes
to be less than the original issue price and will adversely affect secondary market prices.
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The estimated value
of the notes 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.
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Adjustments to the
underlying index could adversely affect the value of the notes.
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Investing in the notes
is not equivalent to investing in the underlying index.
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The notes will not
be listed on any securities exchange and secondary trading may be limited.
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Hedging and trading
activity by our affiliates could potentially adversely affect the value of the notes.
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Tax Considerations
You should review carefully the discussion in the accompanying
preliminary pricing supplement under the caption “Additional Information About the Notes– Tax considerations”
concerning the U.S. federal income tax consequences of an investment in the notes. However, you should consult your tax adviser
regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, as well as any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Hypothetical Payout on the Notes
At maturity, for each $1,000 stated principal amount of notes
that you hold, you will receive the stated principal amount of $1,000
plus
a supplemental redemption amount, if any. The
supplemental redemption amount will be calculated on the determination date as follows:
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If the final index value is
greater than
the initial index value: (i) $1,000
times
(ii) the index percent change
times
(iii) the upside participation rate of at least 140%. The actual upside participation rate will be determined on the
pricing date.
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If the final index value is
equal to
the initial index value: $0
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If the final index value is
less than
the initial index value: (i) $1,000
times
(ii) the absolute index return
times
(iii) the downside participation rate of 50%.
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The payment due at maturity will not be less than $1,000 per
note regardless of the performance of the underlying index.
The table below illustrates the payment at maturity for each
note for a hypothetical range of index percent change and does not cover the complete range of possible payouts at maturity. The
table reflects the downside participation rate of 50% and assumes a hypothetical initial index value of 200 and a hypothetical
upside participation rate of 140%.
Index percent change
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Final index value
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Stated principal amount
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Supplemental redemption amount
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Payment at maturity
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Return on $1,000 note
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60%
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320
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$1,000
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$840.00
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$1,840.00
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84.00%
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50%
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300
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$1,000
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$700.00
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$1,700.00
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70.00%
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40%
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280
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$1,000
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$560.00
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$1,560.00
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56.00%
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30%
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260
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$1,000
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$420.00
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$1,420.00
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42.00%
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20%
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240
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$1,000
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$280.00
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$1,280.00
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28.00%
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10%
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220
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$1,000
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$140.00
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$1,140.00
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14.00%
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0%
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200
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$1,000
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$0.00
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$1,000.00
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0.00%
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–10%
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180
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$1,000
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$50.00
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$1,050.00
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5.00%
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–20%
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160
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$1,000
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$100.00
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$1,100.00
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10.00%
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–30%
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140
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$1,000
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$150.00
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$1,150.00
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15.00%
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–40%
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120
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$1,000
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$200.00
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$1,200.00
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20.00%
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–50%
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100
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$1,000
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$250.00
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$1,250.00
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25.00%
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–60%
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80
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$1,000
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$300.00
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$1,300.00
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30.00%
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