M
organ
S
tanley
F
inance
LLC
|
Free Writing Prospectus to Preliminary
Terms No. 2,048
Registration Statement Nos. 333-221595;
333-221595-01
Dated May 29, 2019
Filed pursuant to Rule 433
|
Structured Investments
Jump Securities with Auto-Callable Feature
due June 30, 2022
All Payments on the Securities Based on the Worst
Performing of the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
This document provides a summary of the terms of the securities
offered by Morgan Stanley Finance LLC. Investors should review carefully the accompanying preliminary terms, product supplement,
index supplement and prospectus prior to making an investment decision.
SUMMARY TERMS
|
Issuer:
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Morgan Stanley Finance LLC (“MSFL”)
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Guarantor:
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Morgan Stanley
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Maturity date:
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June 30, 2022
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Underlying indices:
|
Russell 2000
®
Index (the “RTY Index”) and Dow Jones Industrial Average
SM
(the “INDU Index”). For more information about the underlying indices, see the accompanying preliminary terms.
|
Issue Price
|
$1,000 per security
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Early redemption:
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If, on any annual determination date, beginning June 26, 2020,
the index closing value of
each
underlying index is
greater than or equal to
its respective call threshold level,
the securities will be automatically redeemed for the applicable early redemption payment on the related early redemption date.
The securities will not be redeemed early on any early redemption
date if the index closing value of either underlying index is below its respective call threshold level on the related determination
date.
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Early redemption payment:
|
The early redemption payment will be an amount in cash per stated
principal amount (corresponding to a return of at least 7.50% per annum, to be determined on the pricing date) for each annual
determination date, as follows:
1
st
determination date: At least $1,075
2
nd
determination date: At least $1,150
No further payments will be made on the securities once
they have been redeemed.
|
Determination dates:
|
1
st
determination date: June 26, 2020
2
nd
determination date: June 25, 2021
Final determination date: June 27, 2022
The determination dates are subject to postponement
for non-index business days and certain market disruption events.
|
Early redemption dates:
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See “Determination Dates, Early Redemption Dates and Early Redemption Payments” in the accompanying preliminary terms. If any such day is not a business day, the early redemption payment, if payable, will be paid on the next business day, and no adjustment will be made to the early redemption payment.
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Downside threshold level:
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With respect to the RTY Index, 70% of its initial index value
on the pricing date
With respect to the INDU Index, 70% of its initial index
value on the pricing date
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Call threshold level:
|
With respect to the RTY Index, , which is 95% of its initial
index value
With respect to the INDU Index, , which is 95% of its
initial index value
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Payment at maturity:
|
If the securities have not previously been redeemed, you will
receive at maturity a cash payment per security as follows:
If the final index value of
each underlying index
is
greater than or equal to
its respective call threshold level:
At least $1,225 (to be determined on the pricing date)
If the final index value of
either underlying index is less
than
its respective call threshold level but the final index value of
each underlying index is greater than or equal to
its respective downside threshold level:
$1,000
If the final index value of
either underlying index
is
less than
its respective downside threshold level:
$1,000 × index performance factor of
the worst performing underlying index
Under these circumstances, you will lose more than 30%, and
possibly all, of your investment.
|
Index percent change:
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With respect to each underlying index, (final index value – initial index value) / initial index value
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Worst performing underlying index:
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The underlying index with the lesser index percent change
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Index performance factor
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With respect to each underlying index, final index value / initial index value
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Initial index value:
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With respect each underlying index, the index closing value of such index on the pricing date
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Final index value:
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With respect to each underlying index, the index closing value of such index on the final determination date
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Stated principal amount:
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$1,000 per security
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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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CUSIP / ISIN:
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61769HEG6 / US61769HEG65
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Listing:
|
The securities will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC, an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest” in the accompanying preliminary terms. The agent commissions will be as set forth in the final pricing supplement.
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Estimated value on the pricing date:
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Approximately $950.60 per security, or within $22.50 of that estimate. See “Investment Summary” in the accompanying preliminary terms.
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Overview
The securities offered are unsecured obligations of MSFL and
are fully and unconditionally guaranteed by Morgan Stanley. The securities do not guarantee the repayment of principal and do not
provide for the regular payment of interest and have the terms described in the accompanying preliminary terms, product supplement,
index supplement and prospectus. The securities will be automatically redeemed if the index closing value of
each
of the
Russell 2000
®
Index and the Dow Jones Industrial Average
SM
, which we refer to as the underlying indices,
on any of the annual determination dates is greater than or equal to 95% of its respective initial index value, which we refer
to as the respective call threshold level, for an early redemption payment that will increase over the term of the securities.
No further payments will be made on the securities once they have been redeemed. At maturity, if the securities have not previously
been redeemed and the final index value of each underlying index is
greater than or equal to
its respective call threshold
level, investors will receive a payment at maturity of at least $1,225 per $1,000 security (to be determined on the pricing date).
If the securities have not previously been redeemed and the final index value of
either underlying index is less than
its
respective call threshold level but the final index value of
each underlying index is greater than or equal to
70% of its
respective initial index value, which we refer to as the respective downside threshold level, investors will receive the stated
principal amount of their investment. However, if the securities are not redeemed prior to maturity and the final index value of
either underlying index
is less than its respective downside threshold level, investors will be exposed to the decline in
the worst performing underlying index on a 1-to-1 basis, and will receive a payment at maturity that is less than 70% of the stated
principal amount of the securities and could be zero.
Accordingly, investors in the securities must be willing to accept the
risk of losing their entire initial investment.
The securities are for investors who are willing to forego current income
and participation in the appreciation of either underlying index in exchange for the possibility of receiving an early redemption
payment or payment at maturity greater than the stated principal amount if each underlying index closes at or above the respective
call threshold level on an annual determination date or the final determination date, respectively. Because all payments on the
securities are based on the worst performing of the underlying indices, a decline beyond the respective downside threshold level
of either underlying index will result in a significant loss of your investment, even if the other underlying index has appreciated
or has not declined as much. Investors will not participate in any appreciation of either underlying index. 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.
Investing in the securities involves risks. See “Selected
Risks” on the following page and “Risk Factors” in the accompanying preliminary terms.
You should read this document together with the accompanying
preliminary terms, product supplement, index supplement and prospectus describing the offering before you decide to invest. You
may access the preliminary terms through the below link:
https://www.sec.gov/Archives/edgar/data/895421/000095010319006908/dp107399_fwp-ps2048.htm
The issuer has filed a registration statement (including a prospectus)
with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that
registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and
this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively,
the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request
it by calling toll-free 1-800-584-6837.
Risk Considerations
The risks set forth below are discussed in more detail in the
“Risk Factors” section in the accompanying preliminary terms. Please review those risk factors carefully prior to making
an investment decision.
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·
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The securities do not pay interest or guarantee
the return of any principal.
|
|
·
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The appreciation potential of the securities
is limited by the fixed early redemption payment or payment at maturity specified for each determination date.
|
|
·
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You are exposed to the price risk of both
underlying indices.
|
|
·
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The market price will be influenced by many
unpredictable factors.
|
|
·
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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.
|
|
·
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As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
|
|
·
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The securities are linked to the Russell 2000
®
Index and are subject to risks associated with small-capitalization companies.
|
|
·
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As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
|
|
·
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Investing in the securities is not equivalent
to investing in either underlying index.
|
|
·
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If the securities are redeemed prior to maturity,
you will receive no further payments on the securities and may be forced to invest in a lower interest rate environment and may
not be able to reinvest at comparable terms or returns.
|
|
·
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The rate we are willing to pay for securities
of this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and
advantageous to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
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.
|
|
·
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The securities will not be listed on any securities
exchange and secondary trading may be limited, and accordingly, you should be willing to hold your securities for the entire 3-year
term of the securities.
|
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·
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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.
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·
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Hedging and trading activity by our affiliates
could potentially adversely affect the value of the securities.
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·
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The calculation agent, which is a subsidiary
of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
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·
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The U.S. federal income tax consequences of
an investment in the securities are uncertain.
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Tax Considerations
You should review carefully the discussion in the accompanying
preliminary terms under the caption “Additional Information About the Securities– Tax considerations” concerning
the U.S. federal income tax consequences of an investment in the securities. However, you should consult your tax adviser regarding
all aspects of the U.S. federal income tax consequences of an investment in the securities, as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
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 actual early redemption
payment amounts, initial index values, call threshold levels and downside threshold levels will be determined on the pricing date.
All payments on the securities are subject to our credit risk. The below examples are based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Hypothetical Early redemption payment:
|
The early redemption payment will be an amount in cash per stated
principal amount (corresponding to a return of approximately 7.50% per annum) for each annual determination date, as follows:
1
st
determination date: $1,075
2
nd
determination date: $1,150
No further payments will be made on the securities once they
have been redeemed.
|
Hypothetical downside threshold level:
|
With respect to the RTY Index: 1,190, which is 70% of its hypothetical
initial index value
With respect to the INDU Index: 17,850, which is 70% of its hypothetical
initial index value
|
Hypothetical call threshold level:
|
With respect to the RTY Index: 1,615, which is 95% of its hypothetical
initial index value
With respect to the INDU Index: 24,225, which is 95% of its hypothetical
initial index value
|
Hypothetical initial index value:
|
With respect to the RTY Index: 1,700
With respect to the INDU Index: 25,500
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Automatic Call:
Example 1 — the securities are redeemed following the
second determination date
Date
|
RTY Index Closing Value
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INDU Index Closing Value
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Payment (per Security)
|
1
st
Determination Date
|
1,900 (
at or above
the call threshold level)
|
21,000 (
below
the call threshold level)
|
--
|
2
nd
Determination Date
|
1,850 (
at or above
the call threshold level)
|
26,000 (
at or above
the call threshold level)
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$1,150
|
In this example, on the first determination date, the index closing
value of one of the underlying indices is at or above its respective call threshold level, but the index closing value of the other
underlying index is below its respective call threshold level. Therefore, the securities are not redeemed. On the second determination
date, the index closing value of each underlying index is at or above the respective call threshold level. Therefore, the securities
are automatically redeemed on the second early redemption date. Investors will receive a payment of $1,150 per security on the
related early redemption date. No further payments will be made on the securities once they have been redeemed, and investors do
not participate in the appreciation in either underlying index.
How to calculate the payment at maturity:
In the following examples, one or both of the underlying indices
close below the respective initial index value(s) on each of the annual determination dates, and, consequently, the securities
are not automatically redeemed prior to, and remain outstanding until, maturity.
|
RTY Index Final Index Value
|
INDU Index Final Index Value
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Payment at Maturity (per Security)
|
Example 1:
|
2,000 (
at or above
its call threshold level)
|
28,000 (
at or above
its call threshold level)
|
$1,225
|
Example 2:
|
1,360 (
below
its call threshold level but
at or above
its downside threshold level)
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30,600 (
at or above
its call threshold level and downside threshold level)
|
$1,000
|
Example 3:
|
2,125 (
at or above
its call threshold level and downside threshold level)
|
12,750 (
below
its downside threshold level)
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$1,000 x (12,750 / 25,500) = $500
|
Example 4:
|
340 (
below
its downside threshold level)
|
19,125 (
below
its call threshold level but
at or above
its downside threshold level)
|
$1,000 x (340 / 1,700) = $200
|
Example 5:
|
340 (
below
its downside threshold level)
|
10,200 (
below
its downside threshold level)
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$1,000 x (340 / 1,700) = $200
|
In example 1, the final index value of each underlying index
is at or above its respective call threshold level. Therefore, investors receive $1,225 per security at maturity. Investors do
not participate in any appreciation in either underlying index.
In example 2, the final index value of one of the underlying
indices is at or above its call threshold level and downside threshold level, but the final index value of the other underlying
index is below its call threshold level and at or above its downside threshold level. The INDU Index has increased 20% from its
initial index value to its final index value and the RTY Index has declined 20% from its initial index value to its final index
value. Therefore, investors receive a payment at maturity equal to the stated principal amount of $1,000 per security. Investors
do not participate in any appreciation in either underlying index.
In example 3, the final index value of one of the underlying
indices is at or above its call threshold level and downside threshold level, but the final index value of the other underlying
index is below its respective downside threshold level. Therefore, investors are exposed to the downside performance of the worst
performing underlying index at maturity. The RTY Index has increased 25% from its initial index value to its final index value
and the INDU Index has declined 50% from its initial index value to its final index value. Therefore, investors receive at maturity
an amount equal to the stated principal amount times the index performance factor of the INDU Index, which is the worst performing
underlying index in this example.
In example 4, the final index value of one of the underlying
indices is below its call threshold level but at or above its downside threshold level, while the final index value of the other
underlying index is below its respective downside threshold level. Therefore, investors are exposed to the downside performance
of the worst performing underlying index at maturity. The INDU Index has declined 25% from its initial index value to its final
index value and the RTY Index has declined 80% from its initial index value to its final index value. Therefore, investors receive
at maturity an amount equal to the stated principal amount times the index performance factor of the RTY Index, which is the worst
performing underlying index in this example.
In example 5, the final index value of each underlying index
is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated principal amount
times
the index performance factor of the worst performing underlying index. The RTY Index has declined 80% from its initial
index value to its final index value and the INDU Index has declined 60% from its initial index value to its final index value.
Therefore, the payment at maturity equals the stated principal amount
times
the index performance factor of the RTY Index,
which is the worst performing underlying index in this example.
If the securities are not redeemed prior to maturity and the
final index value of either underlying index is below its respective downside threshold level, you will be exposed to the downside
performance of the worst performing underlying index at maturity, and your payment at maturity will be less than 70% of the stated
principal amount per security and could be zero.
Russell 2000
®
Index Historical
Performance
The following graph sets forth the daily index closing values
of the Russell 2000
®
Index for each quarter in the period from January 1, 2014 through May 24, 2019. You should
not take the historical values of the Russell 2000
®
Index as an indication of its future performance, and no assurance
can be given as to the index closing value of the Russell 2000
®
Index on the valuation date.
Russell 2000
®
Index
Daily Index Closing
Values
January 1, 2014 to May
24, 2019
|
|
Dow Jones Industrial Average
SM
Historical
Performance
The following graph sets forth the daily index closing values
of the Dow Jones Industrial Average
SM
for each quarter in the period from January 1, 2014 through May 24, 2019. You
should not take the historical values of the Dow Jones Industrial Average
SM
as an indication of its future performance,
and no assurance can be given as to the index closing value of the Dow Jones Industrial Average
SM
on the valuation date.
Dow Jones Industrial
Average
SM
Daily Index Closing
Values
January 1, 2014 to May
24, 2019
|
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