Preliminary Terms No. 2,092
Buffered PLUS Based on the Value of an Equally
Weighted Basket Consisting of Two Indices due June 10, 2021
The Buffered PLUS offered 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 basket has appreciated in value, investors will receive the stated principal amount of their investment plus
leveraged 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 Buffered PLUS 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 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-based return and who are willing to risk their principal and forgo current
income in exchange for the leverage and buffer features that in each case apply to a limited range of performance of the basket.
The Buffered PLUS are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
SUMMARY TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Maturity date:
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June 10, 2021
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Original issue price:
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$1,000 per Buffered PLUS
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Stated principal amount:
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$1,000 per Buffered PLUS
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Pricing date:
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June 5, 2019
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Original issue date:
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June 10, 2019 (3 business days after the pricing date)
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Aggregate principal amount:
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$
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Interest:
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None
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Basket:
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Basket component
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Bloomberg
ticker symbol
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Basket component weighting
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Initial basket component value
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Multiplier
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EURO STOXX 50
®
Index (the “SX5E Index”)
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SX5E
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50%
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MSCI Emerging Markets Index
SM
(the “MXEF Index”)
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MXEF
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50%
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We refer to each of the SX5E Index and the MXEF Index as an underlying index and, together, as the basket components.
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Payment at maturity
(per Buffered PLUS):
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§
If the final basket value is
greater than
the initial basket value: $1,000 + the leveraged upside payment
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§
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 10%: $1,000
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§
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 10%:
($1,000
x basket performance factor) + $100
Under these circumstances, the
payment at maturity will be less than the stated principal amount of $1,000. However, under no circumstances will the Buffered
PLUS pay less than $100 per Buffered PLUS at maturity.
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Leveraged upside payment:
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$1,000 × leverage factor × basket percent change
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Leverage factor:
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At least 142.10%. The actual leverage factor will be determined on the pricing date.
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Basket percent change:
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(final basket value – initial basket value) / initial basket value
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Buffer amount:
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10%
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Minimum payment at maturity:
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$100 per Buffered PLUS (10% of the stated principal amount)
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Basket performance factor:
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Final basket value / initial basket value
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Initial basket value:
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100, which will be 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 will be determined on the pricing date.
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Final basket value:
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The basket closing value on the valuation date.
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Valuation date:
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June 7, 2021, subject to postponement for non-index business days and certain market disruption events.
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Basket closing value:
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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.
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Basket component closing value:
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In the case of each underlying index, the index closing value of such underlying index.
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Multiplier:
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The multiplier will be set on the pricing date based on each basket component’s respective initial basket component value so that each basket component will represent its applicable basket component weighting in the predetermined initial basket value. Each multiplier will remain constant for the term of the Buffered PLUS. See “Basket—Multiplier” above.
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Listing:
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The Buffered PLUS will not be listed on any securities exchange.
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CUSIP / ISIN:
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61769HFL4 / US61769HFL42
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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Approximately $988.30 per Buffered PLUS, or within $10.00 of that estimate. See “Investment Overview” on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions
(1)
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Proceeds to us
(2)
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Per Buffered PLUS
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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Selected dealers and their financial advisors will collectively
receive from the agent, MS & Co., a fixed sales commission of $ 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.
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(2)
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See “Use of proceeds and hedging” on page
15.
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The Buffered PLUS 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 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 Terms of the Buffered PLUS” and “Additional Information About the Buffered PLUS” at
the end of this document.
References to “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for PLUS dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Buffered Performance Leveraged Upside Securities
The Buffered PLUS Based on the Value of an Equally Weighted Basket
Consisting of Two Indices due June 10, 2021 (the “Buffered PLUS”) can be used:
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§
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As an alternative to direct exposure to the basket that enhances returns for any potential positive
performance of the basket
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§
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To enhance returns and potentially outperform the basket in a bullish scenario
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§
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To achieve similar levels of upside exposure to the basket as a direct investment while using
fewer dollars by taking advantage of the leverage factor
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§
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To obtain a buffer against a specified level of negative performance in the basket
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Maturity:
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2 years
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Leverage factor:
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At least 142.10%. The actual leverage factor will be determined on the pricing date.
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Buffer amount:
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10%
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Minimum payment at maturity:
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$100 per Buffered PLUS (10% of the stated principal amount). Investors may lose up to 90% of the stated principal amount of the Buffered PLUS.
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Basket weightings:
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50% for the SX5E Index and 50% for the MXEF Index
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Interest:
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None
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The original issue price
of each Buffered PLUS is $1,000. 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 will be less than
$1,000. We estimate that the value of each Buffered PLUS on the pricing date will be approximately $988.30, or within $10.00 of
that estimate. Our estimate of the value of the Buffered PLUS as determined on the pricing date will be set forth in the final
pricing supplement.
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 basket components. The estimated value of the Buffered PLUS 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 Buffered PLUS?
In determining the economic
terms of the Buffered PLUS, including the leverage factor, 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 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 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 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 Buffered PLUS and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
The Buffered PLUS offer leveraged upside exposure to 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 leveraged 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 Buffered PLUS 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 90% of the stated principal amount of the Buffered
PLUS.
Leveraged Performance
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The Buffered PLUS offer investors an opportunity to capture enhanced returns for any positive performance relative to a direct investment in the basket.
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Upside Scenario
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The basket increases in value, and, at maturity, the Buffered PLUS redeem for the stated principal amount of $1,000 plus at least 142.10% of the basket percent change. The actual leverage factor will be determined on the pricing date.
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Par Scenario
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The basket declines in value by no more than 10%, and, at maturity, the Buffered PLUS redeem for the stated principal amount of $1,000.
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Downside Scenario
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The basket 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 basket in excess of the buffer amount of 10%. (Example: if the basket decreases in value by 50%, the Buffered PLUS will redeem for $600 or 60% of the stated principal amount.) The minimum payment at maturity is $100 per Buffered PLUS.
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Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
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:
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$1,000 per Buffered PLUS
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Hypothetical leverage factor:
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142.10%
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Buffer amount:
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10%
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Minimum payment at maturity:
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$100 per Buffered PLUS
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Buffered PLUS Payoff Diagram
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How it works
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Upside Scenario.
If the final basket
value is greater than the initial basket value, investors will receive the $1,000 stated principal amount plus 142.10% of the appreciation
of the basket over the term of the Buffered PLUS (assuming a hypothetical leverage factor of 142.10%). The actual leverage factor
will be determined on the pricing date.
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§
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Given the leverage factor of 142.10%, if the basket appreciates 20%, the investor would receive
$1,284.20 per Buffered PLUS, or 128.42% of the stated principal amount.
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§
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Par Scenario.
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 10%, investors will receive the stated principal amount of $1,000 per Buffered PLUS.
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§
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If the basket depreciates 5%, investors would receive the $1,000 stated principal amount.
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§
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Downside Scenario.
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 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 basket in excess of the buffer amount of 10%. The minimum payment at maturity is $100 per Buffered
PLUS.
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§
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For example, if the basket depreciates 60%, investors will lose 50% of their principal and receive
only $500 per Buffered PLUS at maturity, or 50% of the stated principal amount.
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Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk factors
for investors in the Buffered PLUS. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement for PLUS, index supplement and prospectus. You should also consult with your
investment, legal, tax, accounting and other advisers in connection with your investment in the Buffered PLUS.
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§
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The Buffered PLUS do not pay interest and provide a minimum payment at maturity of only 10%
of your principal.
The terms of the Buffered PLUS differ from those of ordinary debt securities in that the Buffered PLUS do
not pay interest and provide a minimum payment at maturity of only 10% of the stated principal amount of the Buffered PLUS. If
the final basket value is less than 90% of the initial basket value, you will receive for each Buffered PLUS that you hold a payment
at maturity that is less than the stated principal amount of each Buffered PLUS by an amount proportionate to the decline in the
value of the basket from the initial ba
sket value, plus $100 per Buffered PLUS
.
Accordingly, investors may lose up to
90% of the stated principal amount of the Buffered PLUS.
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§
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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 Buffered PLUS in the secondary market and the price at which MS
& Co. may be willing to purchase or sell the Buffered PLUS 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 Buffered PLUS if you
try to sell your Buffered PLUS prior to maturity.
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§
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The Buffered PLUS are subject to our credit risk, and any actual or anticipated changes to
our credit ratings or credit spreads may adversely affect the market value of the Buffered PLUS.
You are dependent on our ability
to pay all amounts due on the Buffered PLUS at maturity and therefore you are subject to our credit risk. The Buffered PLUS are
not guaranteed by any other entity. If we default on our obligations under the Buffered PLUS, your investment would be at risk
and you could lose some or all of your investment. As a result, the market value of the Buffered PLUS prior to maturity will be
affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings
or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value
of the Buffered PLUS.
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§
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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.
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§
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There are risks associated with investments in securities, such as the Buffered PLUS, linked
to the value of foreign (and especially emerging markets) equity securities.
The Buffered PLUS are linked to 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. 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. In addition, the stocks included in the MSCI Emerging Markets Index
SM
have
been issued by companies in various emerging markets countries, which pose further risks in addition to the risks associated with
investing in foreign equity markets generally. Countries with emerging markets may have relatively unstable governments, may present
the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and
may have less protection of property rights than more developed countries. The economies of countries with emerging markets may
be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. 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
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Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
difficult
or impossible at times. Moreover, the economies in such countries may differ favorably or 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.
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§
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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, an increase in the value of one basket component may be moderated, or wholly offset, by a lesser
increase or a decline in the value of the other basket component.
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§
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Adjustments to the basket components could adversely affect the value of the Buffered PLUS.
The publisher of each 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 Buffered
PLUS. In addition, an index publisher may discontinue or suspend calculation or publication of the relevant 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 Buffered PLUS will be an amount based on the closing prices on the valuation date of
the securities constituting such underlying index at the time of such discontinuance, without rebalancing or substitution, computed
by the calculation agent in accordance with the formula for calculating such underlying index last in effect prior to discontinuance
of such index.
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§
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Investing in the Buffered PLUS is not equivalent to investing in the basket components.
Investing in the Buffered PLUS is not equivalent to investing directly in the basket components
or any of the component stocks of the EURO STOXX 50
®
Index or the
MSCI Emerging Markets Index
SM
.
Investors in the Buffered PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights
with respect to any of the component stocks of the EURO STOXX 50
®
Index or the
MSCI Emerging Markets Index
SM
.
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§
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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 Buffered PLUS in the original
issue price reduce the economic terms of the Buffered PLUS, cause the estimated value of the Buffered PLUS to be less than the
original issue price and will adversely affect secondary market prices.
Assuming no change in market conditions or any other
relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to purchase the Buffered PLUS in
secondary market transactions will likely be significantly lower than the original issue price, because secondary market prices
will exclude the issuing, selling, structuring and hedging-related costs that are included in the original issue price and borne
by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer spread that any
dealer would charge in a secondary market transaction of this type as well as other factors.
|
The
inclusion of the costs of issuing, selling, structuring and hedging the Buffered PLUS in the original issue price and the lower
rate we are willing to pay as issuer make the economic terms of the Buffered PLUS less favorable to you than they otherwise would
be.
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 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.
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§
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The estimated value of the Buffered PLUS is determined by reference to our pricing and valuation
models, which may differ from those of other dealers and is not a maximum or minimum secondary market price.
These pricing
and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about
future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities,
our models may yield a higher estimated value of the Buffered PLUS than those generated by others, including other dealers in the
market, if they attempted to value the Buffered PLUS. In addition, the estimated value on the pricing date does not represent a
minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your Buffered PLUS in the secondary
market (if any exists) at any time. The value of your Buffered PLUS at any time after the date of this document will vary based
on many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also
“The market price will be influenced by many unpredictable factors” above.
|
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
The Buffered PLUS will not be listed on any securities exchange and secondary trading may
be limited.
The Buffered PLUS will not be listed on any securities exchange. Therefore, there may be little or no secondary
market for the Buffered PLUS. MS & Co. may, but is not obligated to, make a market in the Buffered PLUS. Even if there is a
secondary market, it may not provide enough liquidity to allow you to trade or sell the Buffered PLUS easily.
Because
we do not expect that other broker dealers will participate significantly in the secondary market for the Buffered PLUS, the price
at which you may be able to trade your Buffered PLUS is likely to depend on the price, if any, at which MS & Co. is willing
to transact. If, at any time, MS & Co. were not to make a market in the Buffered PLUS, it is likely that there would be no
secondary market for the Buffered PLUS.
Accordingly, you should be willing to hold your Buffered PLUS to maturity.
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§
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The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will
make determinations with respect to the Buffered PLUS.
As calculation agent, MS & Co. will determine the initial basket
component values, the multipliers and 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 an 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 PLUS—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 Buffered PLUS on the
pricing date.
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§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value
of the Buffered PLUS.
One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related
to the Buffered PLUS (and possibly to other instruments linked to the basket components or component stocks of the EURO STOXX 50
®
Index or the MSCI Emerging Markets Index
SM
), including trading in the stocks that constitute
the
EURO STOXX 50
®
Index or the
MSCI Emerging Markets Index
SM
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 Buffered
PLUS, 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 stocks that constitute
the EURO STOXX 50
®
Index or the
MSCI Emerging Markets Index
SM
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 potentially increase the initial basket component values of the basket components, and, therefore, could
increase 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 Buffered PLUS. Additionally, such hedging or trading activities during the term of the
Buffered PLUS, 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.
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§
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The U.S. federal income tax consequences of an investment in the Buffered PLUS are uncertain.
Please read the discussion under “Additional Information—Tax considerations” in this document and the discussion
under “United States Federal Taxation” in the accompanying product supplement for PLUS (together, the “Tax Disclosure
Sections”) concerning the U.S. federal income tax consequences of an investment in the Buffered PLUS. If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the
Buffered PLUS might differ significantly from the tax treatment described in the Tax Disclosure Sections. For example, under one
possible treatment, the IRS could seek to recharacterize the Buffered PLUS as debt instruments. In that event, U.S. Holders would
be required to accrue into income original issue discount on the Buffered PLUS every year at a “comparable yield” determined
at the time of issuance and recognize all income and gain in respect of the Buffered PLUS as ordinary income. Additionally, as
discussed under “United States Federal Taxation—FATCA” in the accompanying product supplement for PLUS, the withholding
rules commonly referred to as “FATCA” would apply to the Buffered PLUS if they were recharacterized as debt instruments.
However, recently proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization)
eliminate the withholding requirement on payments of gross proceeds of a taxable disposition. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the Buffered PLUS, would be recharacterized as
debt is greater than the risk of recharacterization for comparable financial instruments that do not have such features. We do
not plan to request a ruling from the IRS regarding the tax treatment of the Buffered PLUS, and the IRS or a court may not agree
with the tax treatment described in the Tax Disclosure Sections.
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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
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
number of related topics, including
the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such
accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying
property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by
non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and
impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury
regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences
of an investment in the Buffered PLUS, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax
advisers regarding the U.S. federal income tax consequences of an investment in the Buffered PLUS, including possible alternative
treatments, the issues presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S.
taxing jurisdiction.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Basket Overview
The basket consists of the EURO STOXX 50
®
Index
(the “SX5E Index”) and the MSCI Emerging Markets Index
SM
(the “MXEF Index”) and offers exposure
to price movements in international equity markets.
EURO STOXX 50
®
Index.
The EURO STOXX 50
®
Index
was created by STOXX Limited, which is owned by Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50
®
Index
began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The EURO STOXX 50
®
Index
is composed of 50 component stocks of market sector leaders from within the STOXX 600 Supersector Indices, which includes stocks
selected from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all
market sectors. For additional information about the EURO STOXX 50
®
Index, see the information set forth under “EURO
STOXX 50
®
Index” in the accompanying index supplement.
MSCI Emerging Markets Index
SM
.
The MSCI Emerging
Markets Index
SM
is a stock index calculated, published and disseminated by MSCI Inc. (“MSCI”) and is
intended to provide performance benchmarks for certain emerging equity markets including Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia,
South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. For additional information about the MSCI Emerging
Markets Index
SM
, see the information set forth under “MSCI Emerging Markets Index
SM
” and “MSCI
Global Investable Market Indices Methodology” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Two Indices due June 10, 2021
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Information as of market close on May 30, 2019:
Basket Component Information as of May 30, 2019
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Bloomberg Ticker Symbol
|
Current Basket Component Level
|
52 Weeks Ago
|
52-Week High
|
52-Week Low
|
SX5E Index
|
SX5E
|
3,318.15
|
3,441.19
|
(on 7/27/2018): 3,527.18
|
(on 12/27/2018): 2,937.36
|
MXEF Index
|
MXEF
|
994.93
|
1,112.75
|
(on 6/6/2018): 1,150.17
|
(on 10/29/2018): 934.80
|
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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 the indicated period. The
graph does not take into account the terms of the Buffered PLUS, nor does it attempt to show your expected return on an investment
in the Buffered PLUS. The historical performance of the basket should not be taken as an indication of its future performance.
The following graphs set forth the daily closing values of each
of the basket components for the period from January 1, 2014 through May 30, 2019. The related tables set forth the published high
and low closing values, as well as end-of-quarter closing values, for each of the basket components for each quarter in the same
period. The closing values for each of the basket components on May 30, 2019 were: (i) in the case of the SX5E Index, 3,318.15,
and (ii) in the case of the MXEF Index, 994.93. 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.