Investment Summary
Buffered Performance Leveraged Upside Securities
The Buffered PLUS Based on a Basket Consisting of an Exchange-Traded
Fund and an Index due June 9, 2023 (the “Buffered PLUS”) can be used:
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As an alternative to direct exposure to the basket that enhances returns for any positive performance
of the basket
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To enhance returns and potentially outperform the basket in a bullish scenario
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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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To obtain a buffer against a specified level of negative performance in the basket
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Maturity:
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Approximately 4 years
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Leverage factor:
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121%
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Buffer amount:
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20%
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Minimum payment at maturity:
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$200 per Buffered PLUS (20% of the stated principal amount). Investors may lose up to 80% of the stated principal amount of the Buffered PLUS.
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Maximum payment at maturity:
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None
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Basket weighting:
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20% for the EFA Shares and 80% for the SPX 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 is less than $1,000.
We estimate that the value of each Buffered PLUS on the pricing date is $978.70.
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 a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
The Buffered PLUS offer leveraged upside exposure to the 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 80% 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 a certain range of 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
121% of the basket percent change.
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Par Scenario
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The basket declines in value by no more than 20%, 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 20%, 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 20%. (Example: if the basket decreases in value by 50%, the Buffered PLUS will redeem for $700 or 70% of the stated principal amount.) The minimum payment at maturity is $200 per Buffered PLUS.
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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
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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Leverage factor:
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121%
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Buffer amount:
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20%
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Minimum payment at maturity:
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$200 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 121% of the appreciation
of the basket over the term of the Buffered PLUS.
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If the basket appreciates 2%, the investor would receive a 2.42% return, or $1,024.20 per Buffered
PLUS.
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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 20%, investors will receive the stated principal amount of $1,000 per Buffered PLUS.
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If the basket depreciates 5%, investors would receive the $1,000 stated principal amount.
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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 20%, 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 20%. The minimum payment at maturity is $200 per Buffered
PLUS.
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For example, if the basket depreciates 60%, investors would lose 40% of their principal and receive
only $600 per Buffered PLUS at maturity, or 60% of the stated principal amount.
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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
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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The Buffered PLUS do not pay interest and provide a minimum payment at maturity of only 20%
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 20% of the stated principal amount of the Buffered PLUS. If
the final basket value is less than 80% 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 $200 per Buffered PLUS
.
Accordingly, investors may lose up to
80% of the stated principal amount of the Buffered PLUS.
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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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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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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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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.
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The basket components are not equally weighted.
The Buffered PLUS 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.
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There are risks associated with investments in securities, such as the Buffered PLUS, 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 is 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
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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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. 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.
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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 Buffered PLUS 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 Buffered PLUS may be reduced.
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Of particular importance to potential currency exchange risk are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments; and
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the extent of governmental surpluses or deficits in the countries represented
in the MSCI EAFE IndexSM and the United States.
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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.
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Adjustments to the underlying shares or to the MSCI EAFE Index
SM
could adversely
affect the value of the Buffered PLUS.
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 Buffered
PLUS. 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 Buffered PLUS.
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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
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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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.
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 Buffered
PLUS. 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 Buffered PLUS. 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.
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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
Buffered PLUS
may be materially and adversely affected.
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Adjustments to the underlying index could adversely affect the value of the Buffered PLUS.
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 Buffered
PLUS. 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 Buffered PLUS 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.
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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 MSCI EAFE Index
SM
or the S&P 500
®
Index. 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 the
underlying shares or any of the component stocks of the MSCI EAFE Index
SM
or the S&P 500
®
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 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.
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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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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.
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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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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. has determined the initial basket
component values and the multipliers, will determine the final basket value and will calculate the basket percent change 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
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 have carried out, and will continue 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 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 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 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 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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Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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. 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 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 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 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 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 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 PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Basket Overview
The basket consists of shares of the iShares
®
MSCI EAFE ETF (“EFA Shares”) and the S&P 500
®
Index (the “SPX Index”) and offers exposure
to price movements in U.S. and international 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 Buffered PLUS 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 Buffered PLUS,
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 Buffered PLUS) 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 Buffered PLUS and therefore the value of the Buffered PLUS.
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 Buffered PLUS under the securities laws. As
a purchaser of the Buffered PLUS, 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 PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Information as of market close on June 6, 2019:
Basket Component Information as of June 6, 2019
|
|
Bloomberg Ticker Symbol
|
Current Basket Component Level
|
52 Weeks Ago
|
52 Week High
|
52 Week Low
|
EFA Shares
|
EFA UP
|
$64.74
|
$70.73
|
(on 6/11/2018): $70.86
|
(on 12/24/2018): $56.89
|
SPX Index
|
SPX
|
2,843.49
|
2,772.35
|
(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 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.
Basket Historical
Performance
January 1, 2014 to June
6, 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 June 6, 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 June 6, 2019 were: (i) in the case of the EFA Shares, $64.74, and (ii) in the
case of SPX Index, 2,843.49. We obtained the information in the tables and graphs below from Bloomberg Financial Markets, without
independent verification. The historical values of the basket components should not be taken as an indication of their future performance,
and no assurance can be given as to the basket closing value on the valuation date.
Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Shares of the iShares
®
MSCI EAFE ETF
Daily Closing Prices
January 1, 2014 to June 6, 2019
|
|
iShares
®
MSCI EAFE ETF (CUSIP 464287465)
|
High ($)
|
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 June 6, 2019)
|
66.99
|
63.40
|
64.74
|
iShares
®
is a registered mark of BlackRock Institutional
Trust Company, N.A. (“BTC”). The Buffered PLUS are not sponsored, endorsed, sold, or promoted by BTC. BTC makes no
representations or warranties to the owners of the Buffered PLUS or any member of the public regarding the advisability of investing
in the Buffered PLUS. BTC has no obligation or liability in connection with the operation, marketing, trading or sale of the Buffered
PLUS.
Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
S&P 500
®
Index
Daily Index Closing Values
January 1, 2014 to June 6, 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
|
2,238.83
|
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
|
2,519.36
|
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 June 6, 2019)
|
2,945.83
|
2,744.45
|
2,843.49
|
“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 PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Terms of the Buffered PLUS
Please read this information
in conjunction with the summary terms on the front cover of this document.
Additional Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
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 Buffered PLUS:
|
Bull Market Buffered PLUS
|
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 Buffered PLUS by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New
York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the
Buffered PLUS in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether
or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case
later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee and to the depositary of the amount of cash to be delivered with respect to each stated principal
amount of the Buffered PLUS, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and
(ii) deliver the aggregate cash amount due with respect to the Buffered PLUS to the trustee for delivery to the depositary, as
holder of the Buffered PLUS, on the maturity date.
|
Morgan Stanley Finance LLC
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 9, 2023
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities