CALCULATION OF REGISTRATION FEE
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Maximum Aggregate
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Amount of Registration
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Title of Each Class of Securities Offered
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Offering Price
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Fee
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Buffered PLUS due 2024
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$1,100,000
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$133.32
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Morgan Stanley Finance LLC
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June 2019
Pricing Supplement No.
2,110
Registration Statement
Nos. 333-221595; 333-221595-01
Dated June 6, 2019
Filed pursuant to Rule
424(b)(2)
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St
ructured
Investments
Opportunities in U.S. and International Equities
Buffered PLUS Based on a Basket Consisting
of an Exchange-Traded Fund and an Index due June 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal
at Risk Securities
The Buffered PLUS are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The Buffered PLUS will
pay no interest, provide a minimum payment at maturity of only 20% 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 20% of the stated principal amount. Investors may lose up to 80% of the stated principal amount of the
Buffered PLUS. These long-dated 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.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These Buffered PLUS are not secured obligations,
and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
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 11, 2024
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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 6, 2019
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Original issue date:
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June 11, 2019 (3 business days after the pricing date)
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Aggregate principal amount:
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$1,100,000
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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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Shares of the iShares
®
MSCI EAFE ETF (the “EFA Shares”)
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EFA UP
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20%
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$64.74
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0.308928020
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S&P 500
®
Index (the “SPX Index”)
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SPX
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80%
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2,843.49
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0.028134440
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We refer to the EFA Shares as the underlying shares, and the SPX Index as the underlying index and, together with the underlying shares, as the basket components.
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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
§
If the final basket value is
less than
or equal to
the initial basket value but has decreased from the initial basket value by an amount
less than or equal to
the buffer amount of 20%: $1,000
§
If the final basket value is
less than
the initial basket value and has decreased from the initial basket value by an amount
greater than
the buffer amount
of 20%:
($1,000
x basket performance factor) + $200
Under these circumstances, the payment at maturity
will be less than the stated principal amount of $1,000. However, under no circumstances will the Buffered PLUS pay less than $200
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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138%
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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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20%
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Minimum payment at maturity:
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$200 per Buffered PLUS (20% 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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Maximum payment at maturity:
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None
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Initial basket value:
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100, which is equal to the sum of the products of the initial basket component values of each of the basket components, as set forth under “Basket—Initial basket component value” above, and the applicable multiplier for each of the basket components, each of which was determined on the pricing date.
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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 6, 2024, subject to postponement for non-index business days or non-trading days, as applicable, 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 the underlying index, the index closing value as published by the index publisher. In the case of the underlying shares, the closing price of one share of the underlying shares
times
the adjustment factor for the underlying shares.
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Multiplier:
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The multipliers were set on the pricing date based on each basket component’s respective initial basket component value so that each basket component represents its applicable basket component weighting in the predetermined initial basket value. Each multiplier will remain constant for the term of the Buffered PLUS. See “Basket—Multiplier” above.
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Adjustment factor:
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With respect to the underlying shares, 1.0, subject to adjustment for certain events affecting the underlying shares.
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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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61769HGC3 / US61769HGC34
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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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$973.70 per Buffered PLUS. 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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$7.50
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$992.50
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Total
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$1,100,000
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$8,250
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$1,091,750
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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 $7.50 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
16.
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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.
Morgan Stanley Finance LLC
|
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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 11, 2024 (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 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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§
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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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5 years
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Leverage factor:
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138%
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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 $973.70.
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 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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
138% 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 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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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138%
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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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§
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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
138% of the appreciation of the basket over the term of the Buffered PLUS.
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§
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If the basket appreciates 2%, the investor would receive
a 2.76% return, or $1,027.60 per Buffered PLUS.
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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 20%, 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 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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§
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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 11, 2024
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 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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§
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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. Generally, the longer the time remaining to maturity,
the more the market price of the Buffered PLUS will be affected by the other factors described above. 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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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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§
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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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§
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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
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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 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
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. 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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§
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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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§
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existing and expected rates of inflation;
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§
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existing and expected interest rate levels;
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§
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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 Index
SM
and the United States.
|
All of these factors are in turn sensitive to the
monetary, fiscal and trade policies pursued by the governments of various countries represented in the MSCI EAFE Index
SM
the United States and other countries important to international trade and finance.
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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.
|
|
§
|
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
|
Morgan Stanley Finance LLC
|
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 11, 2024
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.
|
§
|
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.
|
|
§
|
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.
|
|
§
|
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.
|
Morgan Stanley Finance LLC
|
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 11, 2024
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.
|
§
|
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.
|
|
§
|
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.
|
|
§
|
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.
|
|
§
|
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.
|
Morgan Stanley Finance LLC
|
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
§
|
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.
|
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 11, 2024
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 11, 2024
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,
$64.74, and (ii) in the case of SPX Index, 2,843.49. We obtained the information in the tables and graphs below from
Bloomberg Financial Markets, without independent verification. The historical values of the basket components should
not be taken as an indication of their future performance, and no assurance can be given as to the basket closing value on the
valuation date.
Morgan Stanley Finance LLC
|
Buffered PLUS Based on a Basket Consisting of an Exchange-Traded Fund and an Index due June 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
Shares of the iShares
®
MSCI EAFE ETF
Daily Closing Prices
January 1, 2014 to June 6, 2019
|
|
iShares
®
MSCI EAFE ETF (CUSIP 464287465)
|
High ($)
|
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 11, 2024
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 11, 2024
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.
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 11, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|