CALCULATION
OF REGISTRATION FEE
|
|
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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|
|
|
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Buffered Performance Leveraged Upside
|
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$761,000
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$92.23
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Securities due 2024
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June 2019
Pricing Supplement No. 2,029
Registration Statement Nos. 333-221595;
333-221595-01
Dated June 25, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured Investments
Opportunities in U.S. Equities
Buffered PLUS Based on the Value of an Equally
Weighted Basket Consisting of Three Indices due June 28, 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, subject to the maximum payment at maturity. 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 and upside above the maximum payment at maturity 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.
FINAL TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Maturity date:
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June 28, 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 25, 2019
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Original issue date:
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June 28, 2019 (3 business days after the pricing date)
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Aggregate principal amount:
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$761,000
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Interest:
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None
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Basket:
|
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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S&P 500
®
Index (the “SPX Index”)
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SPX
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33.3333%
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2,917.38
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0.011425766
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|
Russell 2000
®
Index (the “RTY Index”)
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RTY
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33.3333%
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1,521.035
|
0.021914880
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S&P MidCap 400
®
Index (the “MID Index”)
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MID
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33.3333%
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1,901.33
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0.017531570
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|
We refer to each of the SPX Index, the RTY Index and the MID Index as an underlying index and, together, as the basket components.
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Payment at maturity
(per Buffered PLUS):
|
§
If the final basket value is
greater than
the initial basket value: $1,000 + the leveraged upside payment
In no event will the payment
at maturity exceed the maximum payment at maturity.
|
|
§
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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150%
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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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$1,450.00 per Buffered PLUS (145% of the stated principal amount)
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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 25, 2024, subject to postponement for non-index business days and certain market disruption events.
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Basket closing value:
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The basket closing value on any day is the sum of the products of (i) the basket component closing value of each of the basket components and (ii) the applicable multiplier for such basket component on such date.
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Basket component closing value:
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In the case of each underlying index, the index closing value of such underlying index.
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Multiplier:
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The 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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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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61769HDK8 / US61769HDK86
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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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$956.80 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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$35
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$965
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Total
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$761,000
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$26,635
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$734,365
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(1)
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Selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a
fixed sales commission of $35 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
17.
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The Buffered
PLUS involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on
page 6.
The Securities and Exchange Commission and
state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying
product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Buffered PLUS are not deposits or savings
accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality,
nor are they obligations of, or guaranteed by, a bank.
You should read this document together with
the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please
also see “Additional Terms of the Buffered PLUS” and “Additional Information About the Buffered PLUS” at
the end of this document.
References to “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for PLUS dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Buffered Performance Leveraged Upside Securities
The Buffered PLUS Based on the Value of an Equally Weighted Basket
Consisting of Three Indices due June 28, 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 a certain range
of potential positive performance of the basket, subject to the maximum payment at maturity
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§
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To enhance returns and potentially outperform the basket in a moderately bullish scenario
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§
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To achieve similar levels of upside exposure to the basket as a direct investment, subject to
the maximum payment at maturity, 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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150%
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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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$1,450.00 per Buffered PLUS (145% of the stated principal amount)
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Basket weightings:
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33.3333% for the SPX Index, 33.3333% for the RTY Index and 33.3333% for the MID 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 $956.80.
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, the minimum payment at maturity and the maximum payment
at maturity, we use an internal funding rate, which is likely to be lower than our secondary market credit spreads and therefore
advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate
were higher, one or more of the economic terms of the Buffered PLUS would be more favorable to you.
What is the relationship
between the estimated value on the pricing date and the secondary market price of the Buffered PLUS?
The price at which MS &
Co. purchases the Buffered PLUS in the secondary market, absent changes in market conditions, including those related to the basket
components, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes
into account our secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market
transaction of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging
the Buffered PLUS are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent
that MS & Co. may buy or sell the Buffered PLUS in the secondary market, absent changes in market conditions, including those
related to the basket components, and to our secondary market credit spreads, it would do so based on values higher than the estimated
value. We expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is
not obligated to, make a market in the Buffered PLUS and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
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, subject to the maximum payment at maturity, 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, subject to
the maximum payment at maturity. 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
|
The Buffered PLUS offer investors an opportunity to capture enhanced returns for a certain range of positive performance relative to a direct investment in the basket.
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Upside Scenario
|
The basket increases in value, and, at maturity, the Buffered PLUS redeem for the stated principal amount of $1,000 plus 150% of the basket percent change, subject to the maximum payment at maturity of $1,450.00 per Buffered PLUS (145% of the stated principal amount).
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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 35%, the Buffered PLUS will redeem for $850 or 85% of the stated principal amount.) The minimum payment at maturity is $200 per Buffered PLUS.
|
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
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:
|
$1,000 per Buffered PLUS
|
Leverage factor:
|
150%
|
Buffer amount:
|
20%
|
Maximum payment at maturity:
|
$1,450.00 per Buffered PLUS (145% of the stated principal amount)
|
Minimum payment at maturity:
|
$200 per Buffered PLUS
|
Buffered PLUS Payoff Diagram
|
|
How it works
|
§
|
Upside Scenario.
If the final basket
value is greater than the initial basket value, investors will receive the $1,000 stated principal amount plus 150% of the appreciation
of the basket over the term of the Buffered PLUS, subject to the maximum payment at maturity. An investor will realize the maximum
payment at maturity of $1,450.00 per Buffered PLUS (145% of the stated principal amount) at a final basket value of 130.00% of
the initial basket value.
|
|
§
|
If the basket appreciates 2%, the investor would receive a 3% return, or $1,030.00 per Buffered
PLUS.
|
|
§
|
If the basket appreciates 60%, the investor would receive only the maximum payment at maturity
of $1,450.00 per Buffered PLUS, or 145% of the stated principal amount.
|
|
§
|
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.
|
|
§
|
If the basket depreciates 5%, investors would receive the $1,000 stated principal amount.
|
§
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
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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.
|
§
|
For example, if the basket depreciates 60%, investors will lose 40% of their principal and receive
only $600 per Buffered PLUS at maturity, or 60% of the stated principal amount.
|
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 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.
|
§
|
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.
|
|
§
|
The appreciation potential of the Buffered PLUS is limited by the maximum payment at maturity.
The appreciation potential of the Buffered PLUS is limited by the maximum payment at maturity of $1,450.00 per Buffered PLUS,
or 145% of the stated principal amount. Although the leverage factor provides 150% exposure to any increase in the final basket
value over the initial basket value, because the payment at maturity will be limited to 145% of the stated principal amount for
the Buffered PLUS, any increase in the final basket value over the initial basket value by more than 30.00% of the initial basket
value will not further increase the return on the Buffered PLUS.
|
|
§
|
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.
|
|
§
|
The Buffered PLUS are
linked to the Russell 2000
®
Index and are subject to risks associated with small-capitalization companies.
As
the Russell 2000
®
Index is one of the underlying indices, and the Russell 2000
®
Index consists of
stocks issued by companies with relatively small market capitalization, the Buffered PLUS are linked to the value of small-capitalization
companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization
companies and therefore the Russell 2000
®
Index may be more volatile than indices that consist of stocks issued
by large-capitalization companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization
companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded.
In addition, small capitalization companies are typically less well-established and less stable financially than large-capitalization
companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Such companies
tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial
resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments
related to their products.
|
|
§
|
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.
|
|
§
|
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
|
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
that in any such proceedings they
would not have any priority over and should be treated
pari passu
with the claims of other unsecured, unsubordinated creditors
of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
§
|
Changes in the values of the basket components may offset each other.
Value movements
in the basket components may not correlate with each other. At a time when the values of one or more basket components increase,
the values of the other basket components may not increase as much, or may even decline. Therefore, in calculating the basket components’
performance on the valuation date, increases in the values of one or more basket components may be moderated, or wholly offset,
by lesser increases or declines in the values of other basket components.
|
|
§
|
Adjustments to the basket components could adversely affect the value of the Buffered PLUS.
The publisher of each underlying index can add, delete or substitute the stocks underlying such index, and can make other methodological
changes that could change the value of such underlying index. Any of these actions could adversely affect the value of the Buffered
PLUS. In addition, an index publisher may discontinue or suspend calculation or publication of the relevant underlying index at
any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor
index for such index that is comparable to the discontinued index and is permitted to consider indices that are calculated and
published by MS & Co. or any of its affiliates. If MS & Co. determines that there is no appropriate successor index for
such index, the payment at maturity on the Buffered PLUS will be an amount based on the closing prices on the valuation date of
the securities constituting such underlying index at the time of such discontinuance, without rebalancing or substitution, computed
by the calculation agent in accordance with the formula for calculating such underlying index last in effect prior to discontinuance
of such index.
|
|
§
|
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 S&P 500
®
Index, the
Russell
2000
®
Index or the S&P MidCap 400
®
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 any of the component stocks of the S&P 500
®
Index, the
Russell
2000
®
Index or the S&P MidCap 400
®
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.
|
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.
|
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
The Buffered PLUS will not be listed on any securities exchange and secondary trading may
be limited.
The Buffered PLUS will not be listed on any securities exchange. Therefore, there may be little or no secondary
market for the Buffered PLUS. MS & Co. may, but is not obligated to, make a market in the Buffered PLUS. Even if there is a
secondary market, it may not provide enough liquidity to allow you to trade or sell the Buffered PLUS easily.
Because
we do not expect that other broker dealers will participate significantly in the secondary market for the Buffered PLUS, the price
at which you may be able to trade your Buffered PLUS is likely to depend on the price, if any, at which MS & Co. is willing
to transact. If, at any time, MS & Co. were not to make a market in the Buffered PLUS, it is likely that there would be no
secondary market for the Buffered PLUS.
Accordingly, you should be willing to hold
your Buffered PLUS to maturity.
|
|
§
|
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 or basket
performance factor, as applicable, and the amount of cash you will receive at maturity. Moreover, certain determinations made by
MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such as
with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor index or calculation
of the basket component closing value in the event of a market disruption event or discontinuance of an underlying index. These
potentially subjective determinations may adversely affect the payout to you at maturity. For further information regarding these
types of determinations, see “Description of PLUS—Postponement of Valuation Date(s)” and “—Calculation
Agent and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined the estimated value
of the Buffered PLUS on the pricing date.
|
|
§
|
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 S&P 500
®
Index, the
Russell 2000
®
Index or the S&P MidCap 400
®
Index), including trading in the stocks that constitute
the S&P 500
®
Index, the
Russell
2000
®
Index or the S&P MidCap 400
®
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 stocks that constitute
the S&P 500
®
Index, the
Russell 2000
®
Index or the S&P MidCap 400
®
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.
|
|
§
|
The U.S. federal income
tax consequences of an investment in the Buffered PLUS are uncertain.
Please read the discussion under “Additional Information—Tax
considerations” in this document and the discussion under “United States Federal Taxation” in the accompanying
product supplement for PLUS (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences
of an investment in the Buffered PLUS. If the Internal Revenue Service (the “IRS”) were successful in asserting an
alternative treatment, the timing and character of income on the Buffered PLUS might differ significantly from the tax treatment
described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize the
Buffered PLUS as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount
on the Buffered PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income
and gain in respect of the Buffered PLUS as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA”
in the accompanying product supplement for PLUS, the withholding rules commonly referred to as “FATCA” would apply
to the Buffered PLUS if they were recharacterized as debt instruments. However, recently proposed regulations (the preamble to
which specifies that taxpayers are permitted to rely on them pending finalization) eliminate the withholding requirement on payments
of gross proceeds of a taxable disposition. The risk that financial instruments providing for buffers, triggers or similar downside
protection features, such as the Buffered PLUS, would be recharacterized as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features. We do not plan to request a ruling from the IRS regarding
the tax treatment of the Buffered PLUS, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure
Sections.
|
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
number of related topics, including
the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such
accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying
property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by
non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and
impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury
regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences
of an investment in the Buffered PLUS, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax
advisers regarding the U.S. federal income tax consequences of an investment in the Buffered PLUS, including possible alternative
treatments, the issues presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S.
taxing jurisdiction.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Basket Overview
The basket consists of the S&P 500
®
Index
(the “SPX Index”), the Russell 2000
®
Index (the “RTY Index”) and the S&P MidCap 400
®
Index (the “MID Index”) and offers exposure to price movements in U.S. equity markets.
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.
Russell 2000
®
Index.
The Russell 2000
®
Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks
of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the
2,000 smallest securities that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed
of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity
market. The Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The Russell
2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market.
For additional information about the Russell 2000
®
Index, see the information set forth under “Russell 2000
®
Index” in the accompanying index supplement.
S&P MidCap 400
®
Index.
The S&P
MidCap 400
®
Index is published by S&P Dow Jones Indices LLC (“S&P”) and is intended to
provide a benchmark for performance measurement of the medium-capitalization segment of the U.S. equity markets. It tracks the
stock price movement of 400 companies with mid-sized market capitalizations, primarily ranging from $1.6 billion to $6.8 billion.
S&P chooses companies for inclusion in the S&P MidCap 400
®
Index with an aim of achieving a distribution
by broad industry groupings that approximates the distribution of these groupings in the common stock population of the medium
capitalization segment of the U.S. equity market. For additional information about the S&P MidCap 400
®
Index,
see the information set forth under “S&P MidCap 400
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Information as of market close on June 25, 2019:
Basket Component Information as of June 25, 2019
|
|
Bloomberg Ticker Symbol
|
Current Basket Component Level
|
52 Weeks Ago
|
52-Week High
|
52-Week Low
|
SPX Index
|
SPX
|
2,917.38
|
2,717.07
|
(on 6/20/2019): 2,954.18
|
(on 12/24/2018): 2,351.10
|
RTY Index
|
RTY
|
1,521.035
|
1,657.510
|
(on 8/31/2018): 1,740.753
|
(on 12/24/2018): 1,266.925
|
MID Index
|
MID
|
1,901.33
|
1,960.90
|
(on 8/29/2018): 2,050.23
|
(on 12/24/2018): 1,567.40
|
The following graph is calculated based on an initial basket
value of 100 on January 1, 2014 (assuming that each basket component is weighted as described in “Basket” on the cover
page) and illustrates the effect of the offset and/or correlation among the basket components during the indicated period. The
graph does not take into account the terms of the Buffered PLUS, nor does it attempt to show your expected return on an investment
in the Buffered PLUS. The historical performance of the basket should not be taken as an indication of its future performance.
Basket Historical Performance
January 1, 2014 to June
25, 2019
|
|
The following graphs set forth the daily closing values of each
of the basket components for the period from January 1, 2014 through June 25, 2019. The related tables set forth the published
high and low closing values, as well as end-of-quarter closing values, for each of the basket components for each quarter in the
same period. The closing values for each of the basket components on June 25, 2019 were: (i) in the case of the SPX Index, 2,917.38,
(ii) in the case of the RTY Index, 1,521.035, and (iii) in the case of the MID Index, 1,901.33. 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 the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
S&P 500
®
Index
Daily Index Closing Values
January 1, 2014 to June 25, 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 25, 2019)
|
2,954.18
|
2,744.45
|
2,917.38
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. For more information, see “S&P 500
®
Index”
in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Russell 2000
®
Index
Daily Index Closing Values
January 1, 2014 to June 25, 2019
|
|
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.964
|
1,095.986
|
1,192.964
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,135.889
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,643.069
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter (through June 25, 2019)
|
1,614.976
|
1,465.487
|
1,521.035
|
The “Russell 2000
®
Index” is a trademark
of FTSE Russell. For more information, see “Russell 2000
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities
S&P MidCap 400
®
Index
Daily Index Closing Values
January 1, 2014 to June 25, 2019
|
|
S&P MidCap 400
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,389.21
|
1,265.61
|
1,378.50
|
Second Quarter
|
1,432.94
|
1,318.50
|
1,432.94
|
Third Quarter
|
1,445.16
|
1,365.31
|
1,370.97
|
Fourth Quarter
|
1,474.40
|
1,288.10
|
1,452.44
|
2015
|
|
|
|
First Quarter
|
1,539.61
|
1,410.91
|
1,524.03
|
Second Quarter
|
1,549.44
|
1,499.68
|
1,502.17
|
Third Quarter
|
1,522.99
|
1,351.29
|
1,368.91
|
Fourth Quarter
|
1,473.14
|
1,366.44
|
1,398.58
|
2016
|
|
|
|
First Quarter
|
1,445.19
|
1,238.82
|
1,445.19
|
Second Quarter
|
1,525.14
|
1,416.66
|
1,496.50
|
Third Quarter
|
1,581.51
|
1,482.30
|
1,552.26
|
Fourth Quarter
|
1,696.12
|
1,476.68
|
1,660.58
|
2017
|
|
|
|
First Quarter
|
1,758.27
|
1,660.58
|
1,719.65
|
Second Quarter
|
1,769.34
|
1,681.04
|
1,746.65
|
Third Quarter
|
1,795.94
|
1,691.67
|
1,795.94
|
Fourth Quarter
|
1,911.28
|
1,795.94
|
1,900.57
|
2018
|
|
|
|
First Quarter
|
1,995.23
|
1,801.29
|
1,878.77
|
Second Quarter
|
2,003.97
|
1,835.31
|
1,951.67
|
Third Quarter
|
2,050.23
|
1,951.67
|
2,019.55
|
Fourth Quarter
|
2,004.19
|
1,567.40
|
1,663.04
|
2019
|
|
|
|
First Quarter
|
1,933.72
|
1,631.56
|
1,896.27
|
Second Quarter (through June 25, 2019)
|
1,980.83
|
1,810.50
|
1,901.33
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 400
®
,” “Standard & Poor’s MidCap 400
®
Index” and
“S&P MidCap Index” are trademarks of Standard and Poor’s Financial Services LLC. For more information, see
“S&P MidCap 400
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Buffered PLUS Based on the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 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.
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.
|
Underlying index publishers:
|
With respect to each of the SPX Index and the MID Index, S&P
Dow Jones Indices LLC, or any successor thereof.
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
|
Index closing value:
|
With respect to each of the SPX Index and the MID Index, the
index closing value on any index business day shall be determined by the calculation agent and shall equal the official closing
value of the relevant underlying index, or any successor index as defined under “Discontinuance of Any Underlying Index or
Basket Index; Alteration of Method of Calculation” in the accompanying product supplement, published at the regular official
weekday close of trading on such index business day by the underlying index publisher for the relevant underlying index, as determined
by the calculation agent. In certain circumstances, the index closing value for the SPX Index or the MID Index will be based on
the alternate calculation of the relevant underlying index as described under “Discontinuance of Any Underlying Index or
Basket Index; Alteration of Method of Calculation” in the accompanying product supplement.
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index or any successor
index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index
business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation of
the RTY Index as described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation”
in the accompanying product supplement. The closing value of the RTY Index reported by Bloomberg Financial Services may be lower
or higher than the official closing value of the RTY Index published by the underlying index publisher for the RTY Index.
|
Interest:
|
None
|
Bull market or bear market Buffered PLUS:
|
Bull Market Buffered PLUS
|
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.
|
Denominations:
|
$1,000 per Buffered PLUS and integral multiples thereof
|
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 the Value of an Equally Weighted Basket Consisting of Three Indices due June 28, 2024
Buffered Performance Leveraged Upside Securities
SM
Principal at Risk Securities