424B2 1 ms1453_424b2-04896.htm PRELIMINARY PRICING SUPPLEMENT NO. 1,453

March 2024

Preliminary Pricing Supplement No. 1,453

Registration Statement Nos. 333-275587; 333-275587-01

Dated March 14, 2024

Filed pursuant to Rule 424(b)(2)

Morgan Stanley Finance LLC

Structured Investments

Opportunities in U.S. Equities

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Fully and Unconditionally Guaranteed by Morgan Stanley

Principal at Risk Securities

The Enhanced Buffered Jump Securities, which we refer to as the securities, are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described in the accompanying product supplement for Jump Securities, index supplement and prospectus, as supplemented and modified by this document. The securities pay no interest and will instead pay an amount in cash at maturity that may be greater than or less than the stated principal amount, depending on the closing level of each underlying on the valuation date. If the final level of each underlying is greater than or equal to 75% of its respective initial level, which we refer to as the respective downside threshold value, you will receive the stated principal amount for each security that you hold at maturity plus the upside payment of at least $80.50 per security (to be determined on the pricing date). However, if the final level of any underlying is less than its respective downside threshold value, you will be exposed to the decline in the level of the worst performing underlying beyond the buffer amount of 25%, and you will lose 1.3333% for every 1% decline beyond the buffer amount. There is no minimum payment at maturity on the securities. Accordingly, you could lose your entire initial investment in the securities. Because the payment at maturity on the securities is based on the worst performing of the underlyings, a decline in any final level below 75% of its respective initial level will result in a loss of some or all of your investment, even if the other underlyings have appreciated or have not declined as much. The securities are for investors who seek an equity-based return and who are willing to risk their principal, risk exposure to the worst performing of three underlyings and forgo current income and returns above the fixed upside payment in exchange for the upside payment and buffer features that in each case apply to a limited range of performance of the worst performing underlying. The securities 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 securities 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.

SUMMARY TERMS

Issuer:

Morgan Stanley Finance LLC

Guarantor:

Morgan Stanley

Issue price:

$1,000 per security

Stated principal amount:

$1,000 per security

Pricing date:

March 20, 2024

Original issue date:

March 25, 2024 (3 business days after the pricing date)

Maturity date:

April 2, 2025

Aggregate principal amount:

$

Interest:

None

Underlyings:

Utilities Select Sector SPDR® Fund (the “XLU Shares”), Russell 1000® Growth Index (the “RLG Index”) and Russell 2000® Index (the “RTY Index”)

Payment at maturity:

●If the final level of each underlying is greater than or equal to its respective downside threshold value:

$1,000 + the upside payment

●If the final level of any underlying is less than its respective downside threshold value, meaning the value of any underlying has declined by more than the buffer amount of 25% from its respective initial level to its respective final level:

$1,000 + $[1,000 × (underlying percent change of the worst performing underlying + 25%) × downside factor]

In this scenario, the payment at maturity will be less than the stated principal amount of $1,000, and could be zero.

Upside payment:

At least $80.50 per security (8.05% of the stated principal amount). The actual upside payment will be determined on the pricing date.

Downside factor:

1.3333

Underlying percent change:

With respect to each underlying, (final level - initial level) / initial level

Worst performing underlying:

The underlying that has declined the most, meaning that it has the lowest underlying percent change

Initial level:

With respect to the XLU Shares, $ , which is the closing level of such underlying on the pricing date

With respect to the RLG Index, , which is the closing level of such underlying on the pricing date

With respect to the RTY Index, , which is the closing level of such underlying on the pricing date

Downside threshold value:

With respect to the XLU Shares, $ , which is 75% of the initial level for such underlying

With respect to the RLG Index, , which is 75% of the initial level for such underlying

With respect to the RTY Index, , which is 75% of the initial level for such underlying

Final level:

With respect to each underlying, the closing level of such underlying on the valuation date

Closing level:

With respect to the XLU Shares, on any trading day, the closing price of one XLU Share on such day times the adjustment factor on such day

With respect to the RLG Index, on any index business day, the index closing value of such underlying on such day

With respect to the RTY Index, on any index business day, the index closing value of such underlying on such day

Valuation date:

March 28, 2025, subject to postponement for non-index business days or non-trading days, as applicable, and certain market disruption events

Buffer amount:

25%

Minimum payment at maturity:

None

Adjustment factor:

With respect to the XLU Shares, 1.0, subject to adjustment in the event of certain events affecting the XLU Shares

CUSIP / ISIN:

61776LEN3 / US61776LEN38

Listing:

The securities will not be listed on any securities exchange.

Agent:

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.”

Estimated value on the pricing date:

Approximately $986.80 per security, or within $25.00 of that estimate. See “Investment Summary” on page 2.

Commissions and issue price:

Price to public(1)

Agent’s commissions and fees(2)

Proceeds to us(3)

Per security

$1,000

$

$

Total

$

$

$

(1)The securities will be sold only to investors purchasing the securities in fee-based advisory accounts.

(2)MS & Co. expects to sell all of the securities that it purchases from us to an unaffiliated dealer at a price of $ per security, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per security. MS & Co. will not receive a sales commission with respect to the securities. 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 Jump Securities.

(3)See “Use of proceeds and hedging” on page 24.

The securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 8.

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 securities 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. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated February 22, 2024 or to the corresponding sections of such prospectus, as applicable. Please also see “Additional Terms of the Securities” and “Additional Information About the Securities” 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 Jump Securities dated November 16, 2023 ​Index Supplement dated November 16, 2023 Prospectus dated February 22, 2024 

 

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Investment Summary

Principal at Risk Securities

The Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025 (the “securities”) can be used:

￭As an alternative to direct exposure to the underlyings that provides a fixed return of at least 8.05% (to be determined on the pricing date) if the final level of each underlying is greater than or equal to its respective downside threshold value;

￭To enhance returns and potentially outperform the worst performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index in a moderately bullish or moderately bearish scenario; and

￭To obtain a buffer against a specified level of negative performance in the worst performing underlying.

The securities are exposed on a leveraged basis to the percentage decline of the final level of the worst performing underlying from its respective initial level beyond the buffer amount of 25%, and you will lose 1.3333% for every 1% decline beyond the buffer amount. Accordingly, you could lose your entire initial investment in the securities.

Maturity:

Approximately 53 weeks

Upside payment:

At least $80.50 per security (8.05% of the stated principal amount), payable only if the final level of each underlying is greater than or equal to its respective downside threshold value. The actual upside payment will be determined on the pricing date.

Buffer amount:

25%

Downside factor:

1.3333

Minimum payment at maturity:

None. You could lose your entire initial investment in the securities.

Interest:

None

The original issue price of each security is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently, the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the value of each security on the pricing date will be approximately $986.80, or within $25.00 of that estimate. Our estimate of the value of the securities as determined on the pricing date will be set forth in the final pricing supplement.

What goes into the estimated value on the pricing date?

In valuing the securities on the pricing date, we take into account that the securities comprise both a debt component and a performance-based component linked to the underlyings. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings, instruments based on the underlyings, 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 securities?

In determining the economic terms of the securities, including the upside payment, the buffer amount, the downside threshold values and the downside factor, 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 securities would be more favorable to you.

 

March 2024 Page 2

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

What is the relationship between the estimated value on the pricing date and the secondary market price of the securities?

The price at which MS & Co. purchases the securities in the secondary market, absent changes in market conditions, including those related to the underlyings, 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 securities 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 securities in the secondary market, absent changes in market conditions, including those related to the underlyings, 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 securities, and, if it once chooses to make a market, may cease doing so at any time.

 

March 2024 Page 3

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Key Investment Rationale

The securities provide a return based on the performance of the worst performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index. If the final level of each underlying, as determined on the valuation date, is greater than or equal to its respective downside threshold value, you will receive the stated principal amount for each security that you hold at maturity plus the upside payment of at least $80.50 per security (to be determined on the pricing date). However, if the final level of any underlying is less than its respective downside threshold value, the payment due at maturity will be less than the stated principal amount and you could lose your entire initial investment in the securities.

Upside Scenario

If the final level of each underlying is greater than or equal to its respective downside threshold value, the payment at maturity for each security will be equal to $1,000 plus the upside payment of at least $80.50. The actual upside payment will be determined on the pricing date.

Downside Scenario

If the final level of any underlying is less than its respective downside threshold value, you will be exposed to the decline in the value of the worst performing underlying beyond the buffer amount of 25%, and you will lose 1.3333% for every 1% decline beyond the buffer amount (e.g., a 50% depreciation in the worst performing underlying from the respective initial level to the respective final level will result in a payment at maturity of $666.68 per security).

 

Because the payment at maturity of the securities is based on the worst performing of the underlyings, a decline in any underlying below its respective downside threshold value will result in a loss on your investment, even if the other underlyings have appreciated or have not declined as much. There is no minimum payment at maturity on the securities, and you could lose your entire initial investment in the securities.

 

 

March 2024 Page 4

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Hypothetical Examples

The following hypothetical examples illustrate how to calculate the payment at maturity on the securities. The following examples are for illustrative purposes only. The payment at maturity on the securities is subject to our credit risk. The below examples are based on the following terms. The actual initial levels and downside threshold values will be determined on the pricing date.

Stated Principal Amount:

$1,000 per security

Hypothetical Initial Level:

With respect to the XLU Shares: $60.00

With respect to the RLG Index: 3,200

With respect to the RTY Index: 1,600

Hypothetical Downside Threshold Value:

With respect to the XLU Shares: $45.00, which is 75% of its hypothetical initial level

With respect to the RLG Index: 2,400, which is 75% of its hypothetical initial level

With respect to the RTY Index: 1,200, which is 75% of its hypothetical initial level

Hypothetical Upside Payment:

$80.50 (8.05% of the stated principal amount). The actual upside payment will be determined on the pricing date.

Buffer Amount:

25%

Downside Factor:

1.3333

Minimum Payment at Maturity:

None

Interest:

None

EXAMPLE 1: Each underlying appreciates substantially, and investors therefore receive the stated principal amount plus the upside payment.

Final level

 

XLU Shares: $111.00

RLG Index: 5,760

 

 

RTY Index: 3,040

Percent change

 

XLU Shares: ($111.00 – $60.00) / $60.00 = 85%

RLG Index: (5,760 – 3,200) / 3,200 = 80%

RTY Index: (3,040 – 1,600) / 1,600 = 90%

Payment at maturity

=

$1,000 + upside payment

 

=

$1,000 + $80.50

 

=

$1,080.50

In example 1, the final level for the XLU Shares has increased from its initial level by 85%, the final level for the RLG Index has increased from its initial level by 80% and the final level for the RTY Index has increased from its initial level by 90%. Because the final level of each underlying is above its respective downside threshold value, investors receive at maturity the stated principal amount plus the upside payment of $80.50. Investors receive $1,080.50 per security at maturity and do not participate in the appreciation of any underlying. Although each underlying has appreciated substantially, the return on the securities is limited to the upside payment of $80.50.

 

March 2024 Page 5

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

EXAMPLE 2: The final level of each underlying is at or above the respective downside threshold value, and investors therefore receive the stated principal amount plus the upside payment.

Final level

 

XLU Shares: $57.60

RLG Index: 3,104

 

 

RTY Index: 1,568

Percent change

 

XLU Shares: ($57.60 – $60.00) / $60.00 = -4%

RLG Index: (3,104 – 3,200) / 3,200 = -3%

RTY Index: (1,568 – 1,600) / 1,600 = -2%

Payment at maturity

=

$1,000 + upside payment

 

=

$1,000 + $80.50

 

=

$1,080.50

In example 2, the final level for the XLU Shares has decreased from its initial level by 4%, the final level for the RLG Index has decreased from its initial level by 3% and the final level for the RTY Index has decreased from its initial level by 2%. Because the final level of each underlying is above its respective downside threshold value, investors receive at maturity the stated principal amount plus the upside payment of $80.50. Although each underlying has depreciated, investors receive $1,080.50 per security at maturity.

EXAMPLE 3: The final level of one of the underlyings is less than its respective downside threshold value. Investors are therefore exposed on a leveraged basis to the negative performance of the worst performing underlying, and lose 1.3333% for every 1% decline beyond the buffer amount of 25%.

Final level

 

XLU Shares: $84.00

RLG Index: 3,840

 

 

RTY Index: 800

Percent change

 

XLU Shares: ($84.00 – $60.00) / $60.00 = 40%

RLG Index: (3,840 – 3,200) / 3,200 = 20%

RTY Index: (800 – 1,600) / 1,600 = -50%

Payment at maturity

=

$1,000 + [$1,000 × (underlying percent change of the worst performing underlying + 25%) × downside factor]

 

=

$1,000 + [$1,000 × (-50% + 25%) × downside factor]

 

=

$666.68

In example 3, the final level for the XLU Shares has increased from its initial level by 40%, the final level for the RLG Index has increased from its initial level by 20% and the final level for the RTY Index has decreased from its initial level by 50%. Because one of the underlyings has declined below its respective downside threshold value, investors do not receive the upside payment and are exposed on a leveraged basis to the negative performance of the RTY Index, which is the worst performing underlying in this example. Under these circumstances, investors lose 1.3333% for every 1% decline in the value of the worst performing underlying beyond the buffer amount of 25%. In this example, investors receive a payment at maturity equal to $666.68 per security, resulting in a loss of 33.332%.

 

March 2024 Page 6

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

EXAMPLE 4: The final level of each underlying is less than the respective downside threshold value. Investors are therefore exposed on a leveraged basis to the negative performance of the worst performing underlying, and will lose 1.3333% for every 1% decline beyond the buffer amount of 25%.

Final level

 

XLU Shares: $18.00

RLG Index: 480

 

 

RTY Index: 640

Percent change

 

XLU Shares: ($18.00 – $60.00) / $60.00 = -70%

RLG Index: (480 – 3,200) / 3,200 = -85%

RTY Index: (640 – 1,600) / 1,600 = -60%

Payment at maturity

=

$1,000 + [$1,000 × (underlying percent change of the worst performing underlying + 25%) × downside factor]

 

=

$1,000 + [$1,000 × (-85% + 25%) × downside factor]

 

=

$200.02

In example 4, the final level for the XLU Shares has decreased from its initial level by 70%, the final level for the RLG Index has decreased from its initial level by 85% and the final level for the RTY Index has decreased from its initial level by 60%. Because one or more underlyings have declined below their respective downside threshold values, investors do not receive the upside payment and are exposed on a leveraged basis to the negative performance of the RLG Index, which is the worst performing underlying in this example. Under these circumstances, investors lose 1.3333% for every 1% decline in the value of the worst performing underlying beyond the buffer amount of 25%. In this example, investors receive a payment at maturity equal to $200.02 per security, resulting in a loss of 79.998%.

Because the payment at maturity of the securities is based on the worst performing of the underlyings, a decline in the final level of any underlying to below its respective downside threshold value will result in a loss of some or all of your investment, even if the other underlyings have appreciated or have not declined as much.

 

March 2024 Page 7

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Risk Factors

This section describes the material risks relating to the securities. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement, index supplement and prospectus. You should also consult with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.

Risks Relating to an Investment in the Securities

￭The securities do not pay interest or guarantee the return of any of your principal. The terms of the securities differ from those of ordinary debt securities in that the securities do not pay interest or guarantee the payment of any principal at maturity. At maturity, you will receive for each $1,000 stated principal amount of securities that you hold an amount in cash based upon the final level of each underlying. If the final level of any underlying is less than 75% of its respective initial level, you will lose 1.3333% of your principal for every 1% decline in the final level of the worst performing underlying beyond the buffer amount of 25%. As there is no minimum payment at maturity on the securities, you could lose your entire initial investment in the securities.

￭Appreciation potential is fixed and limited. Where the final level of each underlying is greater than or equal to its respective downside threshold value, the appreciation potential of the securities is limited to the fixed upside payment of at least $80.50 per security (8.05% of the stated principal amount), even if all three underlyings have appreciated substantially. The actual upside payment will be determined on the pricing date.

￭The amount payable on the securities is not linked to the values of the underlyings at any time other than the valuation date. The final level of each underlying will be based on the closing level of such underlying on the valuation date, subject to postponement for non-index business days or non-trading days, as applicable, and certain market disruption events. Even if the values of all three underlyings appreciate prior to the valuation date but the value of any underlying drops by the valuation date, the payment at maturity may be less, and may be significantly less, than it would have been had the payment at maturity been linked to the values of the underlyings prior to such drop. Although the actual values of the underlyings on the stated maturity date or at other times during the term of the securities may be higher than their respective final levels, the payment at maturity will be based solely on the closing levels on the valuation date.

￭The securities will not be listed on any securities exchange and secondary trading may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. Morgan Stanley & Co. LLC, which we refer to as MS & Co., may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.

￭The market price of the securities may be influenced by many unpredictable factors. Several factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market, including:

￭the values of the underlyings at any time (including in relation to their respective initial levels),

￭the volatility (frequency and magnitude of changes in value) of the underlyings and of the stocks composing the share underlying index, the RLG Index and the RTY Index,

￭dividend rates on the securities underlying the share underlying index, the RLG Index and the RTY Index,

￭interest and yield rates in the market,

 

March 2024 Page 8

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

￭geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks of the underlyings or securities markets generally and which may affect the value of the underlyings,

￭the time remaining until the maturity of the securities,

￭the composition of the underlyings and changes in the constituent stocks of the share underlying index, the RLG Index and the RTY Index,

￭the occurrence of certain events affecting the XLU Shares that may or may not require an adjustment to the adjustment factor, and

￭Some or all of these factors will influence the price you will receive if you sell your securities prior to maturity. In particular, you may have to sell your securities at a substantial discount from the stated principal amount if at the time of sale the value of any underlying is near, at or below its respective downside threshold value.

You cannot predict the future performance of the underlyings based on their historical performance. If the final level of any underlying is less than 75% of its respective initial level, you will be exposed on a leveraged basis to the decline in the final level of the worst performing underlying beyond the buffer amount. There can be no assurance that the final level of each underlying will be greater than or equal to 75% of its respective initial level so that you will receive at maturity an amount that is greater than the $1,000 stated principal amount for each security you hold, or that you will not lose some or all of your investment.

￭The securities 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 securities. You are dependent on our ability to pay all amounts due on the securities at maturity and therefore you are subject to our credit risk. If we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the securities 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 securities.

￭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.

￭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 securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities 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., are willing to purchase the securities 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.

 

March 2024 Page 9

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

The inclusion of the costs of issuing, selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of the securities less favorable to you than they otherwise would be.

However, because the costs associated with issuing, selling, structuring and hedging the securities 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 securities in the secondary market, absent changes in market conditions, including those related to the underlyings, 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 securities 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 securities than those generated by others, including other dealers in the market, if they attempted to value the securities. 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 securities in the secondary market (if any exists) at any time. The value of your securities 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 of the securities may be influenced by many unpredictable factors” above.

￭Investing in the securities is not equivalent to investing in the underlyings or the stocks composing the share underlying index, the RLG Index or the RTY Index. Investing in the securities is not equivalent to investing in any underlying or the component stocks of the share underlying index, the RLG Index or the RTY Index. Investors in the securities will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the share underlying index, the RLG Index or the RTY Index.

￭The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities. As calculation agent, MS & Co. will determine the initial levels, the downside threshold values, the final levels, the underlying percent changes, if applicable, the payment that you will receive at maturity, if any. and whether to make any adjustments to the adjustment factor. 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 index closing value or the closing price, as applicable, of any underlying in the event of a market disruption event or discontinuance of any underlying.  These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types of determinations, see “Description of Securities—Postponement of Valuation Date(s),” “—Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation,” “—Discontinuance of Any ETF Shares and/or Share Underlying Index; Alteration of Method of Calculation,” “—Alternate Exchange Calculation in case of an Event of Default” and “—Calculation Agent and Calculations” in the accompanying product supplement.  In addition, MS & Co. has determined the estimated value of the securities on the pricing date.

￭Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other instruments linked to the underlyings and the share underlying index or their component stocks), including trading in the XLU Shares, the stocks that constitute the share underlying index, the RLG Index or the RTY Index as well as in other instruments related to the underlyings. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, 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 underlyings and other financial instruments related to the underlyings and the share underlying index on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially increase the initial level of an underlying, and, therefore, could increase the value at or above which such underlying must close on the valuation date so that you do not suffer a loss on your initial investment in the securities (depending also on the

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

performance of the other underlyings). Additionally, such hedging or trading activities during the term of the securities, including on the valuation date, could adversely affect the value of any underlying on the valuation date, and, accordingly, the amount of cash an investor will receive at maturity, if any (depending also on the performance of the other underlyings).

￭The U.S. federal income tax consequences of an investment in the securities 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 Jump Securities (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the securities might differ significantly from the tax treatment described in the Tax Disclosure Sections. There is a risk that the IRS may seek to treat all or a portion of the gain on the securities as ordinary income. For example, due to the terms of the securities and current market conditions, there is a substantial risk that the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities, 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 securities, 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, 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 securities, 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 securities, 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.

Risks Relating to the Underlyings

￭You are exposed to the price risk of each underlying. Your return on the securities is not linked to a basket consisting of each underlying. Rather, it will be based upon the independent performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor performance by any underlying over the term of the securities will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlyings. If the final level of any underlying declines to below 75% of its respective initial level, you will be exposed on a leveraged basis to the negative performance of the worst performing underlying at maturity, even if the other underlyings have appreciated or have not declined as much. Accordingly, your investment is subject to the price risk of each underlying.

Because the securities are linked to the performance of the worst performing underlying, you are exposed to greater risk of sustaining a loss on your investment than if the securities were linked to just one underlying. The risk that you will suffer a loss on your investment is greater if you invest in the securities as opposed to substantially similar securities that are linked to the performance of just one underlying. With three underlyings, it is more likely that the final level of any underlying will decline to below its respective downside

 

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Principal at Risk Securities

 

threshold value than if the securities were linked to only one underlying. Therefore, it is more likely that you will suffer a loss on your investment.

￭Investing in the securities exposes investors to risks associated with investments in securities with a concentration in the utilities sector. The stocks included in the Utilities Select Sector Index and that are generally tracked by the XLU Shares are stocks of companies whose primary business is directly associated with the utilities sector. Because the value of the securities is linked to the performance of the XLU Shares, an investment in the securities exposes investors to risks associated with investments in securities with a concentration in the utilities sector.

Utility companies are affected by supply and demand, operating costs, government regulation, environmental factors, liabilities for environmental damage and general civil liabilities and rate caps or rate changes. Although rate changes of a regulated utility usually fluctuate in approximate correlation with financing costs, due to political and regulatory factors, rate changes ordinarily occur only following a delay after the changes in financing costs. This factor will tend to favorably affect a regulated utility company’s earnings and dividends in times of decreasing costs, but, conversely, will tend to adversely affect earnings and dividends when costs are rising. The value of regulated utility equity securities may tend to have an inverse relationship to the movement of interest rates. Certain utility companies have experienced full or partial deregulation in recent years. These utility companies are frequently more similar to industrial companies in that they are subject to greater competition and have been permitted by regulators to diversify outside of their original geographic regions and their traditional lines of business. These opportunities may permit certain utility companies to earn more than their traditional regulated rates of return. Some companies, however, may be forced to defend their core business and may be less profitable. In addition, natural disasters, terrorist attacks, government intervention or other factors may render a utility company’s equipment unusable or obsolete and negatively impact profitability. Among the risks that may affect utility companies are the following: risks of increases in fuel and other operating costs; the high cost of borrowing to finance capital construction during inflationary periods; restrictions on operations and increased costs and delays associated with compliance with environmental and nuclear safety regulations; and the difficulties involved in obtaining natural gas for resale or fuel for generating electricity at reasonable prices. Other risks include those related to the construction and operation of nuclear power plants, the effects of energy conservation and the effects of regulatory changes. The value of the securities may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting the utilities sector than a different investment linked to securities of a more broadly diversified group of issuers.

￭The investment strategy represented by the Russell 1000® Growth Index may not be successful. The Russell 1000® Growth Index is designed to measure the full performance of companies included in the Russell 1000® Index that exhibit relatively strong growth characteristics and relatively weak value characteristics and a portion of the performance of companies with more balanced growth and value characteristics. There is, however, no assurance that the Russell 1000® Growth Index will outperform any other index or strategy that tracks U.S. stocks selected using other criteria. A “growth” investment strategy is premised on the goal of investing in stocks of companies with relatively higher price-to-book ratios, higher I/B/E/S forecast medium term (2 year) growth and higher sales per share historical growth (5 years) on the assumption that the value of those stocks will increase over time as these companies grow more rapidly than the broader market. However, the growth characteristics referenced by the Russell 1000® Growth Index may not be accurate predictors of future growth, and there is no guarantee that these stocks will appreciate. In addition, the Russell 1000® Growth Index’s selection methodology includes a bias toward stocks that have higher prices, and if these stocks prove to be overvalued, they may underperform the broader market. It is possible that the stock selection methodology of the Russell 1000® Growth Index will adversely affect its return and, consequently, the level of the Russell 1000® Growth Index and the value of your securities.

￭The securities 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 underlyings, and the Russell 2000® Index consists of stocks issued by companies with relatively small market capitalization, the securities 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

 

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Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

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.

￭Adjustments to the XLU Shares or the share underlying index could adversely affect the value of the securities. The investment adviser to the Utilities Select Sector SPDR® Fund, SSGA Funds Management, Inc. (the “Investment Adviser”), seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the share underlying index. Pursuant to its investment strategy or otherwise, the Investment Adviser may add, delete or substitute the stocks composing the Utilities Select Sector SPDR® Fund. Any of these actions could adversely affect the price of the XLU Shares and, consequently, the value of the securities. S&P® Dow Jones Indices LLC is responsible for calculating and maintaining the share underlying index. S&P® Dow Jones Indices LLC 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. S&P® Dow Jones Indices LLC may discontinue or suspend calculation or publication of the share underlying index at any time. If trading in the underlying shares is permanently discontinued and/or the XLU Shares is liquidated or otherwise terminated, and S&P® Dow Jones Indices LLC subsequently discontinues publication of the share underlying index, 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 value of the share underlying index, and, consequently, the price of the XLU Shares and the value of the securities.

￭Adjustments to the RLG Index and the RTY Index could adversely affect the value of the securities. The publisher of the RLG Index or the RTY Index may add, delete or substitute the stocks underlying such index or make other methodological changes that could change the value of the RLG Index or the RTY Index. Any of these actions could adversely affect the value of the securities. The publisher of the RLG Index or the RTY Index may also discontinue or suspend calculation or publication of the RLG Index or the RTY Index at any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the discontinued underlying. MS & Co. could have an economic interest that is different than that of investors in the securities insofar as, for example, MS & Co. 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, the payout on the securities at maturity will be an amount based on the closing prices on the valuation date of the stocks underlying the RLG Index or the RTY Index, as applicable, at the time of such discontinuance, without rebalancing or substitution, computed by the calculation agent in accordance with the formula for calculating the RLG Index or the RTY Index, as applicable, last in effect prior to such discontinuance (depending also on the performance of the other underlyings).

￭The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the XLU Shares. MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the XLU Shares. However, the calculation agent will not make an adjustment for every event that could affect the XLU Shares. If an event occurs that does not require the calculation agent to adjust the adjustment factor, the market price of the securities may be materially and adversely affected.

￭The performance and market price of the XLU 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 XLU Shares. The XLU 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 XLU 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 XLU Shares and the share underlying index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the XLU Shares may impact the variance between the performances of XLU Shares and the share underlying index. Finally, because the shares of the XLU Shares are traded on an exchange and are subject to market supply and

 

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Principal at Risk Securities

 

investor demand, the market price of one share of the XLU Shares may differ from the net asset value per share of the XLU Shares.

In particular, during periods of market volatility, or unusual trading activity, trading in the securities underlying the XLU Shares may be disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the XLU Shares may be adversely affected, market participants may be unable to calculate accurately the net asset value per share of the XLU Shares, and their ability to create and redeem shares of the XLU Shares may be disrupted. Under these circumstances, the market price of shares of the XLU Shares may vary substantially from the net asset value per share of the XLU Shares or the level of the share underlying index.

For all of the foregoing reasons, the performance of the XLU 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 XLU Shares. Any of these events could materially and adversely affect the price of the shares of the XLU Shares and, therefore, the value of the securities. 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 may affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event has taken place, the payment at maturity would be based on the published closing price per share of the XLU Shares on the valuation date, even if the XLU Shares’ 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 XLU Shares.

 

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Utilities Select Sector SPDR® Fund Overview

The Utilities Select Sector SPDR® Fund is an exchange-traded fund managed by Select Sector SPDR Trust (the “Trust”), a registered investment company. The Trust consists of numerous separate investment portfolios, including the Utilities Select Sector SPDR® Fund. The Utilities Select Sector SPDR® Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Utilities Select Sector Index. It is possible that this fund may not fully replicate the performance of the Utilities Select Sector Index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary circumstances. Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by the Trust pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-57791 and 811-08837, respectively, through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly available sources. Neither the issuer nor the agent makes any representation that any such publicly available information regarding the XLU Shares is accurate or complete.

Information as of market close on March 13, 2024:

Bloomberg Ticker Symbol:

XLU UP

Current Share Price:

$63.88

52 Weeks Ago:

$65.41

52 Week High (on 4/24/2023):

$69.97

52 Week Low (on 10/2/2023):

$56.19

The following graph sets forth the daily closing values of the XLU Shares for the period from January 1, 2019 through March 13, 2024. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the XLU Shares for each quarter in the same period. The closing value of the XLU Shares on March 13, 2024 was $63.88. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The XLU Shares have at times experienced periods of high volatility, and you should not take the historical values of the XLU Shares as an indication of its future performance.

XLU Shares Daily Closing Values
January 1, 2019 to March 13, 2024

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Utilities Select Sector SPDR® Fund (CUSIP 81369Y886)

High ($)

Low ($)

Period End ($)

2019

 

 

 

First Quarter

58.96

52.00

58.17

Second Quarter

61.24

56.94

59.63

Third Quarter

64.93

59.29

64.74

Fourth Quarter

64.82

61.37

64.62

2020

 

 

 

First Quarter

70.98

44.93

55.41

Second Quarter

62.83

51.79

56.43

Third Quarter

61.49

56.70

59.38

Fourth Quarter

66.76

59.98

62.70

2021

 

 

 

First Quarter

64.15

58.36

64.04

Second Quarter

67.72

63.23

63.23

Third Quarter

70.07

63.56

63.88

Fourth Quarter

71.58

63.88

71.58

2022

 

 

 

First Quarter

74.54

65.03

74.46

Second Quarter

76.96

64.87

70.13

Third Quarter

78.12

65.51

65.51

Fourth Quarter

72.67

61.52

70.50

2023

 

 

 

First Quarter

72.08

63.70

67.69

Second Quarter

69.97

64.34

65.44

Third Quarter

68.46

58.83

58.93

Fourth Quarter

65.96

56.19

63.33

2024

 

 

 

First Quarter (through March 13, 2024)

65.00

59.95

63.88

 

This document relates only to the securities offered hereby and does not relate to the XLU Shares. We have derived all disclosures contained in this document regarding the Trust from the publicly available documents described above. In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to the Trust. Neither we nor the agent makes any representation that such publicly available documents or any other publicly available information regarding the Trust 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 XLU Shares (and therefore the price of the XLU Shares at the time we price the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning the Trust could affect the value received with respect to the securities and therefore the value of the securities.

Neither we nor any of our affiliates makes any representation to you as to the performance of the XLU Shares.

We and/or our affiliates may presently or from time to time engage in business with the Trust. In the course of such business, we and/or our affiliates may acquire non-public information with respect to the Trust, 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 XLU Shares. The statements in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As a prospective purchaser of the securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate to make an informed decision with respect to an investment linked to the XLU Shares.

“Standard & Poor’s®”, “S&P®”, “S&P 500®”, “SPDR®”, “Select Sector SPDR®” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services LLC (“S&P®”), an affiliate of S&P® Global Inc. The securities are not sponsored, endorsed, sold, or promoted by S&P®, S&P® Global Inc. or the Trust. S&P®, S&P® Global Inc. and the Trust make no representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities. S&P®, S&P® Global Inc. and the

 

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Morgan Stanley Finance LLC

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Principal at Risk Securities

 

Trust have no obligation or liability in connection with the operation, marketing, trading or sale of the securities.

Utilities Select Sector Index. The Utilities Select Sector Index, which is one of the Select Sector sub-indices of the S&P 500® Index, is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that represent the utilities sector of the S&P 500® Index. The Utilities Select Sector Index includes component stocks in industries such as electric utilities; multi-utilities; independent power and renewable energy producers; water utilities; and gas utilities. For more information, see “S&P® Select Sector Indices—Utilities Select Sector Index” in the accompanying index supplement.

 

March 2024 Page 17

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Russell 1000® Growth Index Overview

The Russell 1000® Growth Index is a sub-group of the Russell 1000® Index, which is an index calculated, published and disseminated by FTSE International Limited (“FTSE Russell”), and measures the capitalization-weighted price performance of the stocks included in the Russell 1000® Index that are determined by FTSE Russell to be growth oriented, with higher price-to-book ratios and higher forecasted and historical growth. The Russell 1000® Index is designed to track the performance of the large-capitalization segment of the U.S. equity market. The companies included in the Russell 1000® Index are the 1,000 largest companies that form the Russell 3000E™ Index. The Russell 1000® Index represents approximately 89% of the U.S. equity market. For additional information about the Russell 1000® Growth Index, see the information set forth under “Russell Style Indices—Russell 1000® Growth Index” in the accompanying index supplement.

Information as of market close on March 13, 2024:

Bloomberg Ticker Symbol:

RLG

Current Index Value:

3,355.785

52 Weeks Ago:

2,265.524

52 Week High (on 3/1/2024):

3,371.625

52 Week Low (on 3/13/2023):

2,265.524

The following graph sets forth the daily closing values of the RLG Index for the period from January 1, 2019 through March 13, 2024. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the RLG Index for each quarter in the same period. The closing value of the RLG Index on March 13, 2024 was 3,355.785. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The RLG Index has at times experienced periods of high volatility, and you should not take the historical values of the RLG Index as an indication of its future performance.

RLG Index Daily Closing Values
January 1, 2019 to March 13, 2024

 

March 2024 Page 18

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Russell 1000® Growth Index

High

Low

Period End

2019

 

 

 

First Quarter

1,534.393

1,274.099

1,521.187

Second Quarter

1,601.813

1,466.106

1,586.624

Third Quarter

1,649.917

1,542.904

1,605.394

Fourth Quarter

1,778.684

1,561.557

1,770.520

2020

 

 

 

First Quarter

1,931.388

1,322.151

1,516.296

Second Quarter

1,947.458

1,450.413

1,933.049

Third Quarter

2,350.433

1,958.038

2,183.972

Fourth Quarter

2,428.400

2,108.844

2,427.765

2021

 

 

 

First Quarter

2,561.968

2,313.210

2,445.884

Second Quarter

2,738.562

2,460.574

2,732.493

Third Quarter

2,940.518

2,735.909

2,759.200

Fourth Quarter

3,114.730

2,727.058

3,074.990

2022

 

 

 

First Quarter

3,097.286

2,479.210

2,791.441

Second Quarter

2,850.106

2,110.817

2,202.056

Third Quarter

2,588.530

2,117.699

2,117.699

Fourth Quarter

2,339.908

2,082.303

2,158.187

2023

 

 

 

First Quarter

2,461.714

2,113.787

2,461.714

Second Quarter

2,770.265

2,408.303

2,770.265

Third Quarter

2,871.548

2,656.207

2,678.448

Fourth Quarter

3,063.122

2,585.716

3,051.676

2024

 

 

 

First Quarter (through March 13, 2024)

3,371.625

2,965.761

3,355.785

 

“Russell 1000® Growth Index, “Russell 1000® Index” and “Russell 3000ETM Index” are trademarks of FTSE Russell. For more information, see “Russell Style Indices” in the accompanying index supplement.

 

March 2024 Page 19

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Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Russell 2000® Index Overview

The Russell 2000® Index is an index calculated, published and disseminated by FTSE Russell, and measures the capitalization-weighted price performance of 2,000 U.S. small-capitalization stocks listed on eligible U.S. exchanges. The Russell 2000® Index is designed to track the performance of the small-capitalization segment of the U.S. equity market. The companies included in the Russell 2000® Index are the middle 2,000 (i.e., those ranked 1,001 through 3,000) of the companies that form the Russell 3000E™ Index. The Russell 2000® Index represents approximately 7% of the U.S. equity market. For additional information about the Russell 2000® Index, see the information set forth under “Russell Indices—Russell 2000® Index” in the accompanying index supplement.

Information as of market close on March 13, 2024:

Bloomberg Ticker Symbol:

RTY

Current Index Value:

2,071.711

52 Weeks Ago:

1,744.302

52 Week High (on 3/7/2024):

2,084.740

52 Week Low (on 10/27/2023):

1,636.938

The following graph sets forth the daily closing values of the RTY Index for the period from January 1, 2019 through March 13, 2024. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The closing value of the RTY Index on March 13, 2024 was 2,071.711. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.

RTY Index Daily Closing Values
January 1, 2019 to March 13, 2024

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Russell 2000® Index

High

Low

Period End

2019

 

 

 

First Quarter

1,590.062

1,330.831

1,539.739

Second Quarter

1,614.976

1,465.487

1,566.572

Third Quarter

1,585.599

1,456.039

1,523.373

Fourth Quarter

1,678.010

1,472.598

1,668.469

2020

 

 

 

First Quarter

1,705.215

991.160

1,153.103

Second Quarter

1,536.895

1,052.053

1,441.365

Third Quarter

1,592.287

1,398.920

1,507.692

Fourth Quarter

2,007.104

1,531.202

1,974.855

2021

 

 

 

First Quarter

2,360.168

1,945.914

2,220.519

Second Quarter

2,343.758

2,135.139

2,310.549

Third Quarter

2,329.359

2,130.680

2,204.372

Fourth Quarter

2,442.742

2,139.875

2,245.313

2022

 

 

 

First Quarter

2,272.557

1,931.288

2,070.125

Second Quarter

2,095.440

1,649.836

1,707.990

Third Quarter

2,021.346

1,655.882

1,664.716

Fourth Quarter

1,892.839

1,682.403

1,761.246

2023

 

 

 

First Quarter

2,001.221

1,720.291

1,802.484

Second Quarter

1,896.333

1,718.811

1,888.734

Third Quarter

2,003.177

1,761.609

1,785.102

Fourth Quarter

2,066.214

1,636.938

2,027.074

2024

 

 

 

First Quarter (through March 13, 2024)

2,084.740

1,913.166

2,071.711

 

“Russell 2000® Index” and “Russell 3000ETM Index” are trademarks of FTSE Russell. For more information, see “Russell Indices” in the accompanying index supplement.

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Additional Terms of the Securities

Please read this information in conjunction with the 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.

Denominations:

$1,000 and integral multiples thereof

Underlying index publisher:

With respect to each of the RLG Index and the RTY Index, FTSE Russell, or any successor thereof

Index closing value:

With respect to each of the RLG Index and 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 such underlying 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 RLG Index or the RTY Index will be based on the alternate calculation of such underlying 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 RLG Index or the RTY Index reported by Bloomberg Financial Services may be lower or higher than the official closing value of the RLG Index or the RTY Index published by the underlying index publisher for such underlying index.

Share underlying index:

Utilities Select Sector Index

Share underlying index publisher:

S&P® Dow Jones Indices LLC, or any successor thereof

Postponement of maturity date:

If the scheduled valuation date is not an index business day or a trading day, as applicable, with respect to any underlying or if a market disruption event occurs with respect to any underlying on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that valuation date as postponed with respect to any underlying.

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 securities 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 securities 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 securities, 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 securities to the trustee for delivery to the depositary, as holder of the securities, on the maturity date. 

 

 

March 2024 Page 22

Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

Additional Information About the Securities

Additional Information:

Minimum ticketing size:

$1,000 / 1 security

Tax considerations:

There is uncertainty regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority. We intend to treat a security as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. In the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however, our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative treatments are possible. Moreover, because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.

Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for Jump Securities, the following U.S. federal income tax consequences should result based on current law:

￭A U.S. Holder should not be required to recognize taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange.

￭Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise.

There is a risk that the Internal Revenue Service (the “IRS”) may seek to treat all or a portion of the gain on the securities as ordinary income. For example, due to the terms of the securities and current market conditions, there is a substantial risk that the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income.

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, 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 securities, possibly with retroactive effect.

As discussed in the accompanying product supplement for Jump Securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2025 that do not have a delta of one with respect to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities will not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination in the final pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section 871(m).

Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding the potential application of Section 871(m) to the securities.

Both U.S. and non-U.S. investors considering an investment in the securities should read the

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for Jump Securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement for Jump Securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.

Use of proceeds and hedging:

The proceeds from the sale of the securities will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s commissions. The costs of the securities borne by you and described beginning on page 2 above comprise the agent’s commissions and the cost of issuing, structuring and hedging the securities.

On or prior to the pricing date, we expect to hedge our anticipated exposure in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers. We expect our hedging counterparties to take positions in the XLU Shares, in stocks of the RLG Index, the RTY Index or the share underlying index and in futures and options contracts on the RLG Index, the RTY Index, the XLU Shares, the share underlying index or their component stocks listed on major securities markets. Such purchase activity could potentially increase the initial level of any underlying, and, therefore, could increase the value at or above which such underlying must close on the valuation date so that you do not suffer a loss on your initial investment in the securities (depending also on the performance of the other underlyings). In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the securities, including on the valuation date, by purchasing and selling the stocks constituting the RLG Index, the RTY Index or the share underlying index, futures or options contracts on the RLG Index, the RTY Index, the XLU Shares, the share underlying index or their component stocks listed on major securities markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. We cannot give any assurance that our hedging activities will not affect the value of any underlying, and, therefore, adversely affect the value of the securities or the payment you will receive at maturity (depending also on the performance of the other underlyings). For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement.

Additional considerations:

Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.

Supplemental information regarding plan of distribution; conflicts of interest:

MS & Co. expects to sell all of the securities that it purchases from us to an unaffiliated dealer at a price of $ per security, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per security. MS & Co. will not receive a sales commission with respect to the securities.

MS & Co. is an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities, including the upside payment, such that for each security the estimated value on the pricing date will be no lower than the minimum level described in “Investment Summary” on page 2.

MS & Co. will conduct this offering in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.

Where you can find more information:

Morgan Stanley and MSFL have filed a registration statement (including a prospectus, as supplemented by the product supplement for Jump Securities and the index supplement) with the Securities and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the product supplement for Jump Securities, the index supplement and any other documents relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated February 22, 2024 or to the corresponding sections of such prospectus, as applicable. You may get these documents without cost by visiting EDGAR on the SEC web

 

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Morgan Stanley Finance LLC

Enhanced Buffered Jump Securities Based on the Value of the Worst Performing of the Utilities Select Sector SPDR® Fund, the Russell 1000® Growth Index and the Russell 2000® Index due April 2, 2025

Principal at Risk Securities

 

site at www.sec.gov. Alternatively, Morgan Stanley, any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the product supplement for Jump Securities and the index supplement if you so request by calling toll-free 800-584-6837.

You may access these documents on the SEC web site at www.sec.gov as follows:

Product Supplement for Jump Securities dated November 16, 2023

Index Supplement dated November 16, 2023

Prospectus dated February 22, 2024

Terms used but not defined in this document are defined in the product supplement for Jump Securities, in the index supplement or in the prospectus.

 

 

March 2024 Page 25