Preliminary Pricing Supplement
No. 2,068
Registration Statement Nos. 333-221595; 333-221595-01
Dated May 31, 2019
Filed pursuant to Rule 424(b)(2)
Opportunities in U.S. Equities
The securities offered 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 prospectus supplement, index supplement and prospectus, as supplemented or modified by this document.
The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead, the
securities will pay a contingent monthly coupon
but only if
the index closing value of
each of the NASDAQ-100 Index
®
,
the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
on the related observation date is
at or above 70% of its respective initial index value
, which we refer to as the respective coupon barrier level. If the
index closing value
of any underlying index
is less than the coupon barrier level for such index on any observation date,
we will pay no interest for the related monthly period. In addition, beginning on July 2, 2020,
we will redeem the securities
on any quarterly redemption date
when the output of a risk neutral valuation model, based on the inputs indicated in the contingent
early redemption terms, indicates that redeeming on such date is more to our economic advantage than not redeeming on such date.
Any redemption payment will be equal to the sum of the stated principal amount plus any contingent monthly coupon otherwise due
with respect to the related observation date. An early redemption of the securities will not automatically occur based solely on
the performance of the underlying indices. 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 60% of the respective initial index value, which we refer to
as the downside threshold level, the payment at maturity will be the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its coupon barrier level, the related contingent monthly coupon. If, however,
the final index value of
any
underlying index is less than its 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 60%
of the stated principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be
willing to accept the risk of losing their entire initial investment based on the performance of any underlying index and also
the risk of not receiving any monthly coupons during the entire 5-year term of the securities.
Because payments on the securities
are based on the worst performing of the underlying indices, a decline beyond the respective coupon barrier level and/or respective
downside threshold level, as applicable, of
any
underlying index will result in few or no contingent monthly coupons and/or
a significant loss of your investment, as applicable, even if the other underlying indices have appreciated or have not declined
as much. Investors will not participate in any appreciation in any underlying index. These long-dated securities are for investors
who are willing to risk their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange
for the risk of receiving no monthly interest if
any underlying index
closes below the coupon barrier level for such index
on the observation dates, and the risk of an early redemption of the securities. The securities are notes issued as part of MSFL’s
Series A Global Medium-Term Notes program.
SUMMARY
TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying indices:
|
NASDAQ-100 Index
®
(the “NDX Index”), Russell 2000
®
Index (the “RTY Index”) and Dow Jones Industrial Average
SM
(the “INDU Index”)
|
Aggregate principal amount:
|
$
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing date:
|
June 28, 2019
|
Original issue date:
|
July 3, 2019 (3 business days after the pricing date)
|
Maturity date:
|
July 3, 2024
|
Contingent early redemption:
|
Beginning on July 2, 2020, an early redemption, in whole but not in part, will occur on a quarterly redemption date if the output from a risk neutral valuation model based on (i) the performance of the underlying indices, (ii) the forward level of the underlying indices, (iii) the volatility of the underlying indices and (iv) the level of interest rates, and based on our credit spreads as of the original issue date, indicates that redeeming on such date is more to our economic advantage than not redeeming on such date. If we decide to redeem the securities, we will give you notice at least 3 business days before the redemption date specified in the notice. No further payments will be made on the securities once they have been redeemed.
|
Contingent monthly coupon:
|
If, on any observation date, the index closing value of
each
underlying index
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent monthly coupon
at an annual rate of 8.00% to 10.00% (corresponding to approximately $6.667 to $8.333 per month per security) on the related contingent
coupon payment date. The actual contingent monthly coupon rate will be determined on the pricing date.
If, on any observation date, the closing value
of any underlying
index
is
less than
the coupon barrier level for such index, no contingent monthly coupon will be paid with respect to
that observation date.
It is possible that one or more underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons.
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its respective coupon barrier level, the contingent monthly coupon with respect
to the final observation date.
If the final index value of
any
underlying index is
less
than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the index performance
factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 60% of the
stated principal amount of the securities and could be zero.
|
|
Terms continued on the following page
|
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 $967.00 per security, or within $30.00 of that estimate. See “Investment Overview” beginning on page 4.
|
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 prospectus supplement.
|
|
(3)
|
See “Use of proceeds and hedging” on page 34.
|
The securities involve risks
not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying prospectus 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
prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“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.
Prospectus
Supplement dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Terms continued from previous page:
|
Redemption payment:
|
The redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) any contingent monthly coupon otherwise due with respect to the related observation date.
|
Redemption dates:
|
Beginning after one year, quarterly, on July 2, 2020, October 1, 2020, December 31, 2020, April 1, 2021, July 1, 2021, October 1, 2021, December 31, 2021, March 31, 2022, July 1, 2022, October 3, 2022, January 3, 2023, March 31, 2023, July 3, 2023, October 3, 2023, January 3, 2024 and April 3, 2024. If any such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment will be made to any redemption payment made on that succeeding business day.
|
Initial index value:
|
With respect to the NDX Index: , which is the index closing value
of such index on the pricing date
With respect to the RTY Index: , which is the index closing value
of such index on the pricing date
With respect to the INDU Index: , which is the index closing
value of such index on the pricing date
|
Final index value:
|
With respect to each underlying index, the respective index closing value on the final observation date
|
Worst performing
underlying index:
|
The underlying index with the largest percentage decrease from the respective initial index value to the respective final index value
|
Index performance factor:
|
Final index value
divided by
the initial index value
|
Coupon barrier level:
|
With respect to the NDX Index: , which is 70% of the initial
index value for such index
With respect to the RTY Index: , which is 70% of the initial
index value for such index
With respect to the INDU Index: , which is 70% of the initial
index value for such index
|
Downside threshold level:
|
With respect to the NDX Index: , which is 60% of the initial
index value for such index
With respect to the RTY Index: , which is 60% of the initial
index value for such index
With respect to the INDU Index: , which is 60% of the initial
index value for such index
|
Coupon payment dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below. If any such day is not a business day, that contingent monthly coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
|
Observation dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to June 28, 2024 as the final observation date.
|
CUSIP / ISIN:
|
61769HEV3 / US61769HEV33
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates and Coupon
Payment Dates
Observation Dates
|
Coupon Payment Dates
|
July 29, 2019
|
August 1, 2019
|
August 28, 2019
|
September 3, 2019
|
September 30, 2019
|
October 3, 2019
|
October 28, 2019
|
October 31, 2019
|
November 29, 2019
|
December 4, 2019
|
December 30, 2019
|
January 3, 2020
|
January 28, 2020
|
January 31, 2020
|
February 28, 2020
|
March 4, 2020
|
March 30, 2020
|
April 2, 2020
|
April 28, 2020
|
May 1, 2020
|
May 28, 2020
|
June 2, 2020
|
June 29, 2020
|
July 2, 2020
|
July 28, 2020
|
July 31, 2020
|
August 28, 2020
|
September 2, 2020
|
September 28, 2020
|
October 1, 2020
|
October 28, 2020
|
November 2, 2020
|
November 30, 2020
|
December 3, 2020
|
December 28, 2020
|
December 31, 2020
|
January 28, 2021
|
February 2, 2021
|
March 1, 2021
|
March 4, 2021
|
March 29, 2021
|
April 1, 2021
|
April 28, 2021
|
May 3, 2021
|
May 28, 2021
|
June 3, 2021
|
June 28, 2021
|
July 1, 2021
|
July 28, 2021
|
August 2, 2021
|
August 30, 2021
|
September 2, 2021
|
September 28, 2021
|
October 1, 2021
|
October 28, 2021
|
November 2, 2021
|
November 29, 2021
|
December 2, 2021
|
December 28, 2021
|
December 31, 2021
|
January 28, 2022
|
February 2, 2022
|
February 28, 2022
|
March 3, 2022
|
March 28, 2022
|
March 31, 2022
|
April 28, 2022
|
May 3, 2022
|
May 31, 2022
|
June 3, 2022
|
June 28, 2022
|
July 1, 2022
|
July 28, 2022
|
August 2, 2022
|
August 29, 2022
|
September 1, 2022
|
September 28, 2022
|
October 3, 2022
|
October 28, 2022
|
November 2, 2022
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Observation Dates
|
Coupon Payment Dates
|
November 28, 2022
|
December 1, 2022
|
December 28, 2022
|
January 3, 2023
|
January 30, 2023
|
February 2, 2023
|
February 28, 2023
|
March 3, 2023
|
March 28, 2023
|
March 31, 2023
|
April 28, 2023
|
May 3, 2023
|
May 30, 2023
|
June 2, 2023
|
June 28, 2023
|
July 3, 2023
|
July 28, 2023
|
August 2, 2023
|
August 28, 2023
|
August 31, 2023
|
September 28, 2023
|
October 3, 2023
|
October 30, 2023
|
November 2, 2023
|
November 28, 2023
|
December 1, 2023
|
December 28, 2023
|
January 3, 2024
|
January 29, 2024
|
February 1, 2024
|
February 28, 2024
|
March 4, 2024
|
March 28, 2024
|
April 3, 2024
|
April 29, 2024
|
May 2, 2024
|
May 28, 2024
|
May 31, 2024
|
June 28, 2024 (final observation date)
|
July 3, 2024 (maturity date)
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Investment Overview
Callable Contingent Income Securities
Principal at Risk Securities
Callable Contingent Income Securities due July 3, 2024 Payments
on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
(the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment of interest.
Instead, the securities will pay a contingent monthly coupon
but only if
the index closing value of
each of the NASDAQ-100
Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
(which we refer
to together as the “underlying indices”) is
at or above
70% of its respective initial index value, which we
refer to as the respective coupon barrier level, on the related observation date. If the index closing value
of any underlying
index
is less than the coupon barrier level for such index on any observation date, we will pay no coupon for the related monthly
period. It is possible that the index closing value of one or more underlying indices will remain below the respective coupon barrier
level(s) for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons during the entire term of the securities. Even if an underlying index were to be at or above the coupon barrier
level for such index on some monthly observation dates, it may fluctuate below the coupon barrier level on others. In addition,
even if one underlying index were to be at or above the coupon barrier level for such index on all monthly observation dates, you
will receive a contingent monthly coupon only with respect to the observation dates on which the other underlying indices are also
at or above their respective coupon barrier levels, if any. In addition, beginning on July 2, 2020,
we will redeem the securities
on any quarterly redemption date
when the output of a risk neutral valuation model, based on the inputs indicated in the contingent
early redemption terms, indicates that redeeming on such date is more to our economic advantage than not redeeming on such date.
Any redemption payment will be equal to the sum of the stated principal amount plus any contingent monthly coupon otherwise due
with respect to the related observation date. An early redemption of the securities will not automatically occur based solely on
the performance of the underlying indices. At maturity, if the securities have not been previously redeemed and if the final index
value of
each
underlying index is greater than or equal to 60% of the respective initial index value, which we refer to
as the downside threshold level, the payment at maturity will be the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its coupon barrier level, the related contingent monthly coupon. If, however,
the final index value of
any
underlying index is less than its 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 60%
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 based on the performance of any index and also the risk of not receiving
any monthly coupons throughout the entire term of the securities.
Maturity:
|
5 years, unless redeemed earlier
|
Contingent monthly coupon:
|
If, on any observation date, the index closing value of
each
underlying index
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent monthly coupon
at an annual rate of 8.00% to 10.00% (corresponding to approximately $6.667 to $8.333 per month per security) on the related contingent
coupon payment date. The actual contingent monthly coupon rate will be determined on the pricing date.
If, on any observation date, the closing value
of any underlying
index
is
less than
the coupon barrier level for such index, no contingent monthly coupon will be paid with respect to
that observation date.
It is possible that one or more underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons.
|
Early redemption:
|
Beginning on July 2, 2020, we have the right to redeem
the securities based on the output of a risk neutral valuation model on any quarterly redemption date for an early redemption
payment equal to the stated principal amount plus any contingent monthly coupon otherwise due with respect to the related observation
date. Any early redemption of the securities will not automatically occur based solely on the performance of the underlying indices.
In accordance with the risk neutral valuation model determination noted below, it is more likely that we will redeem the securities
when it would otherwise be advantageous for you to continue to hold the securities. As such, we will be more likely to redeem
the securities when the index closing value of each underlying index on the observation dates is at or above its respective coupon
barrier level, which would otherwise result in an amount of interest payable on the
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
securities that is greater than instruments of a comparable maturity
and credit rating trading in the market. In other words, we will be more likely to redeem the securities at a time when the securities
are paying an above-market coupon. If the securities are redeemed prior to maturity, you will receive no more contingent monthly
coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms
or returns.
On the other hand, we will be less likely to exercise our redemption
right when the index closing value of any underlying index is below its respective coupon barrier level and/or when the final index
value of any underlying index is expected to be below the downside threshold level, such that you will receive no contingent monthly
coupons and/or that you will suffer a significant loss on your initial investment in the securities at maturity. Therefore, if
we do not exercise our redemption right, it is more likely that you will receive few or no contingent monthly coupons and suffer
a significant loss at maturity.
Beginning on July 2, 2020, an early redemption,
in whole but not in part, will occur on a quarterly redemption date if the output from a risk neutral valuation model based on
(i) the performance of the underlying indices, (ii) the forward level of the underlying indices, (iii) the volatility of the underlying
indices and (iv) the level of interest rates, and based on our credit spreads as of the original issue date, indicates that redeeming
on such date is more to our economic advantage than not redeeming on such date. If we decide to redeem the securities, we will
give you notice at least 3 business days before the redemption date specified in the notice. No further payments will be made
on the securities once they have been redeemed.
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its respective coupon barrier level, the contingent monthly coupon with respect
to the final observation date.
If the final index value of
any
underlying index is
less
than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the index performance
factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 60% of the
stated principal amount of the securities and could be zero.
|
We are using this preliminary pricing supplement to solicit from
you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at
which we accept such offer by notifying the relevant agent. We reserve the right to change the terms of, or reject any offer to
purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will
notify you.
Morgan Stanley clients may contact their local Morgan Stanley
branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).
All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured
Investment Sales at (800) 233-1087.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
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 $967.00, or within $30.00 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 underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, 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 contingent monthly coupon rate, the coupon barrier levels and the downside threshold levels, 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.
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 underlying indices, 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 underlying indices,
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.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent monthly coupon
but only if
the index closing value of
each underlying index
is
at or above
70% of its initial index value, which we refer to as the respective coupon barrier level, on the related observation
date. These securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a
potentially above-market rate in exchange for the risk of receiving no monthly interest if any underlying index closes below the
coupon barrier level for such index on the observation dates, and the risk of an early redemption of the securities. The following
scenarios are for illustration purposes only to demonstrate how the payment at maturity and contingent monthly coupon (if the securities
have not previously been redeemed) are determined, and do not attempt to demonstrate every situation that may occur. Accordingly,
the securities may or may not be redeemed by us, the contingent monthly coupon may be payable with respect to none of, or some
but not all of, the monthly periods, and the payment at maturity may be less than 60% of the stated principal amount and could
be zero. Investors will not participate in any appreciation in any underlying index.
Scenario 1:
The securities are redeemed prior to maturity.
|
This scenario assumes that we redeem the securities prior to the maturity date on one of the quarterly redemption dates, starting on July 2, 2020, one year after the original issue date, for the redemption payment equal to the stated principal amount
plus
any contingent monthly coupon with respect to the relevant observation date, as applicable. Prior to the contingent early redemption, each underlying index closes at or above its respective coupon barrier level on some or all of the monthly observation dates. In this scenario, investors receive the contingent monthly coupon with respect to each such observation date, but not for the monthly periods for which one of more underlying indices close below the respective coupon barrier level on the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Scenario 2:
The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each underlying index closes at or above its respective coupon barrier level on some monthly observation dates, but one or more underlying indices close below the respective coupon barrier level(s) for such index on the others. Investors will receive the contingent monthly coupon for the monthly periods for which the index closing value of each underlying index is at or above its respective coupon barrier level on the related observation date, but not for the monthly periods for which one or more underlying indices close below the respective coupon barrier level(s) on the related observation date. At maturity, each underlying index closes at or above its downside threshold level, and so investors receive the stated principal amount and, depending on whether the final index value of each underlying index is greater than, equal to or below the respective coupon barrier level, the contingent monthly coupon with respect to the final observation date.
|
Scenario 3:
The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or more underlying indices close below the respective coupon barrier level(s) on every monthly observation date. Since one or more underlying indices close below the respective coupon barrier level(s) on every monthly observation date, investors do not receive any contingent monthly coupon. On the final observation date, one or more underlying indices close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 60% of the stated principal amount and could be zero.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Underlying Indices Summary
NASDAQ-100 Index
®
The NASDAQ-100 Index
®
, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index
®
includes companies
across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index
®
equals the
aggregate value of the then-current NASDAQ-100 Index
®
share weights of each of the NASDAQ-100 Index
®
component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index
®
component security,
multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published
by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index
®
value.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
Current Index Value:
|
7,216.859
|
52 Weeks Ago:
|
6,926.544
|
52 Week High (on 5/3/2019):
|
7,845.729
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
For additional information about the NASDAQ-100 Index
®
,
see the information set forth under “NASDAQ-100 Index
®
” in the accompanying index supplement. Furthermore,
for additional historical information, see “NASDAQ-100 Index
®
Historical Performance” below.
Russell 2000
®
Index
The Russell 2000
®
Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks
of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the
2,000 smallest securities that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed
of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity
market. The Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The Russell
2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,489.952
|
52 Weeks Ago:
|
1,623.649
|
52 Week High (on 8/31/2018):
|
1,740.753
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
For additional information about the Russell 2000
®
Index, see the information set forth under “Russell 2000
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “Russell 2000
®
Index Historical Performance”
below.
Dow Jones Industrial Average
SM
The Dow Jones Industrial Average
SM
is a price-weighted index composed of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and
a licensed trademark of CME Group Index Services LLC, as representative of the broad market of U.S. industry.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
INDU
|
Current Index Value:
|
25,126.41
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
52 Weeks Ago:
|
24,361.45
|
52 Week High (on 10/3/2018):
|
26,828.39
|
52 Week Low (on 12/24/2018):
|
21,792.20
|
For additional information about the Dow Jones Industrial Average
SM
,
see the information set forth under “Dow Jones Industrial Average
SM
” in the accompanying index supplement.
Furthermore, for additional historical information, see “Dow Jones Industrial Average
SM
Historical Performance”
below.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity. The
following examples are for illustrative purposes only. Whether you receive a contingent monthly coupon will be determined by reference
to the index closing value of each underlying index on each monthly observation date, and the amount you will receive at maturity,
if any, will be determined by reference to the final index value of each underlying index on the final observation date. The actual
initial index value, coupon barrier level, and downside threshold level for each underlying index will be determined on the pricing
date. All payments on the securities, if any, are subject to our credit risk. The below examples are based on the following terms:
Hypothetical Contingent Monthly Coupon:
|
If, on any observation date, the index closing value of
each
underlying index
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent monthly coupon
at an annual rate of 9.00% (corresponding to approximately $7.50 per month per security) on the related contingent coupon payment
date. The actual contingent monthly coupon rate will be determined on the pricing date.
If, on any observation date, the closing value
of any underlying
index
is
less than
the coupon barrier level for such index, no contingent monthly coupon will be paid with respect to
that observation date.
It is possible that one or more underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons.
|
Contingent Early Redemption:
|
Beginning on July 2, 2020, the securities may be redeemed by us on any quarterly redemption date for a redemption payment equal to the stated principal amount plus any contingent monthly coupon otherwise due with respect to the related observation date.
If the securities are redeemed prior to maturity, you will receive no more contingent monthly coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early):
|
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent monthly coupon with
respect to the final observation date.
If the final index value of
any
underlying index is
less
than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the index performance
factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 60% of the
stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the NDX Index: 7,400
With respect to the RTY Index: 1,200
With respect to the INDU Index: 24,000
|
Hypothetical Coupon Barrier Level:
|
With respect to the NDX Index: 5,180, which is 70% of the hypothetical
initial index value for such index
With respect to the RTY Index: 840, which is 70% of the hypothetical
initial index value for such index
With respect to the INDU Index: 16,800, which is 70% of the hypothetical
initial index value for such index
|
Hypothetical Downside Threshold Level:
|
With respect to the NDX Index: 4,440, which is 60% of the hypothetical
initial index value for such index
With respect to the RTY Index: 720, which is 60% of the hypothetical
initial index value for such index
With respect to the INDU Index: 14,400, which is 60% of the hypothetical
initial index value for such index
|
* The actual contingent monthly coupon will be an amount determined
by the calculation agent based on the actual contingent monthly coupon rate and the number of days in the applicable payment period,
calculated on a 30/360 basis. The hypothetical contingent monthly coupon of $7.50 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
How to determine whether a contingent monthly
coupon is payable with respect to an observation date (if the securities have not been previously redeemed):
|
Index Closing Value
|
Contingent Monthly Coupon
|
|
NDX Index
|
RTY Index
|
INDU Index
|
|
Hypothetical Observation Date 1
|
5,500 (
at or above
coupon barrier level)
|
950 (
at or above
coupon barrier level)
|
17,000 (
at or above
coupon barrier level)
|
$7.50
|
Hypothetical Observation Date 2
|
5,400 (
at or above
coupon barrier level)
|
1,200 (
at or above
coupon barrier level)
|
13,000 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
4,000 (
below
coupon barrier level)
|
600 (
below
coupon barrier level)
|
17,500 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
3,800 (
below
coupon barrier level)
|
500 (
below
coupon barrier level)
|
12,500 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, the NDX Index, the RTY Index
and the INDU Index all close at or above their respective coupon barrier levels. Therefore a contingent monthly coupon of $7.50
is paid on the relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, at least
one underlying index closes at or above its coupon barrier level but one or both of the other underlying indices close below their
respective coupon barrier level(s). Therefore, no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level and accordingly no contingent monthly coupon is paid on the relevant coupon payment date.
How to calculate the payment
at maturity (if the securities have not been redeemed early):
|
Final Index Value
|
Payment at Maturity
|
|
NDX Index
|
RTY Index
|
INDU Index
|
|
Example 1:
|
7,500 (
at or above
the downside threshold level and coupon barrier level)
|
1,300 (
at or above
the downside threshold level and coupon barrier level)
|
25,000 (
at or above
the downside threshold level and coupon barrier level)
|
$1,007.50 (the stated principal amount
plus
the contingent monthly coupon with respect to the final observation date)
|
Example 2:
|
6,400 (
at or above
the downside threshold level and coupon barrier level)
|
800 (
at or above
the downside threshold level but
below
the coupon barrier level)
|
18,000 (
at or above
the downside threshold level and coupon barrier level)
|
$1,000.00 (the stated principal amount)
|
Example 3:
|
4,700 (
at or above
the downside threshold level)
|
1,200 (
at or above
the downside threshold level)
|
9,600 (
below
the downside threshold level)
|
$1,000 x index performance factor of the worst performing underlying = $1,000 x (9,600 / 24,000) = $400
|
Example 4:
|
3,700 (
below
the downside threshold level)
|
480 (
below
the downside threshold level)
|
10,000 (
below
the downside threshold level)
|
$1,000 x (480 / 1,200) = $400
|
Example 5:
|
3,330 (
below
the downside threshold level)
|
360 (
below
the downside threshold level)
|
9,600 (
below
the downside threshold level)
|
$1,000 x (360 / 1,200) = $300
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Example 6:
|
2,220 (
below
the downside threshold level)
|
480 (
below
the downside threshold level)
|
9,600 (
below
the downside threshold level)
|
$1,000 x (2,220 / 7,400) = $300
|
In example 1, the final index values of the NDX Index, the RTY
Index and the INDU Index are all at or above their downside threshold levels. Therefore, investors receive at maturity the stated
principal amount of the securities and the contingent monthly coupon with respect to the final observation date. Investors do not
participate in the appreciation of any underlying index.
In example 2, the final index value of each underlying index
is at or above its respective downside threshold level. However, the final index value of the RTY Index is below its respective
coupon barrier level. Therefore, investors receive at maturity the stated principal amount of the securities but do not receive
the contingent monthly coupon with respect to the final observation date.
In examples 3 and 4, the final index value(s) of one or two of
the underlying indices are at or above their respective downside threshold level(s) but the final index value(s) of one or both
of the other underlying indices are below their respective downside threshold level(s). Therefore, investors are exposed to the
downside performance of the worst performing underlying index at maturity and receive at maturity an amount equal to the stated
principal amount
times
the index performance factor of the worst performing underlying index.
Similarly, in examples 5 and 6, 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. In example 5, the NDX Index
has declined 55% from its initial index value to its final index value, the RTY Index has declined 70% 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. In example 6, the NDX Index has declined 70% from its initial index value
to its final index value, the RTY Index has declined 60% from its initial 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 NDX Index, which is the worst performing underlying index in this example.
If the securities have not been redeemed prior to maturity
and the final index value of ANY 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 $600
per security and could be zero.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers before you invest in the securities.
|
§
|
The securities do not guarantee the return of any principal.
The terms of the securities differ from those of ordinary
debt securities in that they do not guarantee the repayment of principal. If the securities have not been redeemed prior to maturity
and the final index value of
any
underlying index is less than its downside threshold level of 60% of its initial index
value, you will be exposed to the decline in the closing value of the worst performing underlying index, as compared to its initial
index value, on a 1-to-1 basis, and you will receive for each security that you hold at maturity an amount equal to the stated
principal amount
times
the index performance factor of the worst performing underlying index.
In this case, the payment
at maturity will be less than 60% of the stated principal amount and could be zero.
|
|
§
|
The securities do not provide for regular interest payments.
The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. The securities will pay a contingent monthly coupon
only if the index closing value of each underlying index is at or above 70% of its respective initial index value, which we refer
to as the respective coupon barrier level, on the related observation date. If, on the other hand, the index closing value of any
underlying index is lower than the coupon barrier level for such index on the relevant observation date for any interest period,
we will pay no coupon on the applicable coupon payment date. It is possible that the index closing value of one or more underlying
indices will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire term
of the securities. If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall return
on the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
The securities are subject to our redemption right.
The
term of the securities, and thus your opportunity to earn a potentially above-market coupon if the index closing value of each
underlying index is greater than or equal to the coupon barrier level for such index on monthly observation dates, may be limited
by our right to redeem the
securities
based
on the output of a risk neutral valuation model on any quarterly redemption date, beginning July 2, 2020. The term of your investment
in the
securities
may be limited to as short
as one year. In accordance with the risk neutral valuation model determination noted herein, it is more likely that we will redeem
the
securities
when it would be advantageous
for you to continue to hold the securities.
As such, we will be more likely to redeem the securities when the index closing
value of each underlying index on the observation dates is at or above the coupon barrier level for such index, which would otherwise
result in an amount of interest payable on the securities that is greater than instruments of a comparable maturity and credit
rating trading in the market. In other words, we will be more likely to redeem the securities at a time when the securities are
paying an above-market coupon. If the securities are redeemed prior to maturity, you will receive no more contingent monthly coupon
payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
On the other hand, we will be less
likely to exercise our redemption right when the index closing value of any underlying index is below the respective coupon barrier
level and/or when the final index value for any underlying index is expected to be below the respective downside threshold level,
such that you will receive no contingent monthly coupons and/or that you will suffer a significant loss on your initial investment
in the securities at maturity. Therefore, if we do not exercise our redemption right, it is more likely that you will receive few
or no contingent monthly coupons and suffer a significant loss at maturity.
|
§
|
You are exposed to the price risk of each underlying index, with respect to both the contingent monthly coupons, if any,
and the payment at maturity, if any.
Your return
on the securities is not linked to a basket consisting of all three underlying indices. Rather, it will be contingent upon the
independent performance of each underlying index. 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 index. Poor performance by
any
underlying
index over the term of the securities may negatively affect your return and will not be offset or mitigated by any
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
positive
performance by the other underlying indices. To receive any contingent monthly coupons,
each
underlying
index must close at or above its respective coupon barrier level on the applicable observation date. In addition, if
any
underlying index has declined to below its respective downside threshold level as of the final
observation date, you will be
fully exposed
to the decline in the worst performing
underlying index over the term of the securities on a 1-to-1 basis, even if the other underlying indices have appreciated or have
not declined as much. Under this scenario, the value of any such payment will be less than 60% of the stated principal amount and
could be zero. Accordingly, your investment is subject to the price risk of each underlying index.
|
§
|
Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risks of no contingent monthly coupons and sustaining a significant loss on your investment than if the securities were linked
to just one index.
The risk that you will not receive any contingent monthly coupons, or that you will suffer a significant
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 index. With three underlying indices, it is more likely that any underlying index will
close below its coupon barrier level on any observation date, or below its downside threshold level on the final observation date,
than if the securities were linked to only one underlying index. Therefore, it is more likely that you will not receive any contingent
monthly coupons and that you will suffer a significant loss on your investment.
|
|
§
|
The contingent monthly coupon, if any, is based only on the value of each underlying index on the related monthly observation
date.
Whether the contingent monthly coupon will be paid on any coupon payment date will be determined at the end of the relevant
interest period, based on the closing value of each underlying index on the relevant monthly observation date. As a result, you
will not know whether you will receive the contingent monthly coupon on any coupon payment date until near the end of the relevant
monthly period. Moreover, because the contingent monthly coupon is based solely on the value of each underlying index on monthly
observation dates, if the closing value of any underlying index on any observation date is below the coupon barrier level for such
index, you will receive no coupon for the related interest period, even if the level of such underlying index was at or above its
respective coupon barrier level on other days during that interest period and even if the closing values of the other underlying
indices were at or above the coupon barrier levels for such indices.
|
|
§
|
Investors will not participate in any appreciation in any underlying index.
Investors
will not participate in any appreciation in any underlying index from the initial index value for such index, and the return on
the securities will be limited to the contingent monthly coupons, if any, that are paid with respect to each observation date on
which the index closing value of each underlying index is greater than or equal to its respective coupon barrier level until the
securities are redeemed or reach maturity.
|
|
§
|
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 underlying indices, 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 business
and economic developments, and the stocks of small-capitalization companies may be thinly traded. In addition, small capitalization
companies are typically less well-established and less stable financially than large-capitalization companies and may depend on
a small number of key personnel, making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues,
less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive
strengths than large-capitalization companies and are more susceptible to adverse developments related to their products.
|
|
§
|
The market price will 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. We expect that generally the level of interest rates available in the market and the value of each
underlying
index
on any day, including in relation to its respective
coupon barrier level and downside threshold level, will affect the value of the securities more than any other factors. Other factors
that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlying indices,
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
o
|
whether the index closing value of any underlying index has been below its respective coupon barrier level on any observation
date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity.
Generally,
the longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described
above.
In particular, if any underlying index has
closed near or below the coupon barrier level for such index, and especially if any underlying index has closed near or below its
downside threshold level, the market value of the securities is expected to decrease substantially and you may have to sell your
securities at a substantial discount from the stated principal amount of $1,000 per security.
You cannot predict the future performance
of any underlying index based on its historical performance. The value of any underlying index may decrease and be below the coupon
barrier level for such index on each observation date so that you will receive no return on your investment, and one or all of
the underlying indices may close below the respective downside threshold level(s) on the final observation date so that you lose
more than 40% or all of your initial investment in the securities. There can be no assurance that the closing value of each underlying
index will be at or above the respective coupon barrier level on any observation date so that you will receive a coupon payment
on the securities for the applicable interest period or that they will be at or above their respective downside threshold levels
on the final observation date so that you do not suffer a significant loss on your initial investment in the securities. See “NASDAQ-100
Index
®
Historical Performance,” “Russell 2000
®
Index Historical Performance” and
“Dow Jones Industrial Average
SM
Historical Performance” below.
|
§
|
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 or on any coupon payment date, and therefore you are subject to our credit risk. The securities are not guaranteed
by any other entity. 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.
|
|
§
|
Not equivalent to investing in the underlying indices.
Investing in the securities
is not equivalent to investing in any underlying index or the component stocks of any underlying index. Investors in the securities
will not participate in any
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
positive
performance of any underlying index, and will not have voting rights or rights to receive dividends or other distributions or any
other rights with respect to stocks that constitute any underlying index.
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should
be willing to hold your securities for the entire 5-year term of the securities
.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
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 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., may be 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.
|
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 underlying indices, 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 will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially 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 underlying indices or their component stocks), including trading in the stocks that constitute the underlying indices
as well as in other instruments related to the underlying indices. 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 final observation date approaches. Some of our affiliates also trade the stocks that
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
constitute the underlying indices
and other financial instruments related to the underlying indices 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
index value of an underlying index, and, therefore, could increase (i) the coupon barrier level for such underlying index, which,
if the securities have not been redeemed, is the value at or above which such underlying index must close on the observation dates
in order for you to earn a contingent monthly coupon (depending also on the performance of the other underlying indices), and (ii)
the downside threshold level for such underlying index, which, if the securities have not been redeemed prior to maturity, is the
value at or above which the underlying index must close on the final observation date so that you are not exposed to the negative
performance of the worst performing underlying index at maturity (depending also on the performance of the other underlying indices).
Additionally, such hedging or trading activities during the term of the securities could affect the value of an underlying index
on the observation dates, and, accordingly, whether we pay a contingent monthly coupon on the securities and the amount of cash
you receive at maturity, if any (depending also on the performance of the other underlying indices).
|
§
|
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 index value, coupon barrier level and downside
threshold level for each underlying index, the payment at maturity, if any, and whether you receive a contingent monthly coupon
on each coupon payment date. 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 in the event of a market disruption event
or discontinuance of an underlying index. These potentially subjective determinations may affect the payout to you upon a contingent
early redemption or at maturity, if any. For further information regarding these types of determinations, see “Additional
Terms of the Securities—Additional Terms—Calculation agent,” “—Market disruption event,” “—Postponement
of observation dates,” “—Discontinuance of an underlying index; alteration of method of calculation” and
“—Alternate exchange calculation in case of an event of default” below. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
|
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities.
The publisher of each underlying
index may add, delete or substitute the component stocks of such underlying index or make other methodological changes that could
change the value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of each underlying index may also discontinue or suspend calculation or publication of such underlying 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 index. 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 on any observation date, the determination
of whether a contingent monthly coupon will be payable on the securities on the applicable coupon payment date, and/or the amount
payable at maturity, will be based on the value of such underlying index, based on the closing prices of the stocks constituting
such underlying index at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation
agent in accordance with the formula for calculating such underlying index last in effect prior to such discontinuance, as compared
to the coupon barrier level or downside threshold level, as applicable (depending also on the performance of the other underlying
indices).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
of income or loss on the securities
might differ significantly from the tax treatment described herein. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders (as defined below) 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 (as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on
the securities) 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.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
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. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that 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. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. 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.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
NASDAQ-100 Index
®
Historical Performance
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2014 through May 29, 2019. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the NDX Index for each quarter for the period from January 1, 2014 through
May 29, 2019. The closing value of the underlying index on May 29, 2019 was 7,216.859. We obtained the information in the table
and graph below from Bloomberg Financial Markets, without independent verification. The NDX Index has at times experienced periods
of high volatility, and you should not take the historical values of the NDX Index as an indication of its future performance.
No assurance can be given as to the level of the NDX Index on any observation date, including the final observation date.
NDX Index Daily Closing
Values
January 1, 2014 to May
29, 2019
|
|
*The black solid line in the graph indicates the hypothetical
coupon barrier level, and the red solid line indicates the hypothetical downside threshold level, in each case assuming the index
closing value on May 29, 2019 were the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
NASDAQ-100 Index
®
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,727.185
|
3,440.502
|
3,595.736
|
Second Quarter
|
3,849.479
|
3,446.845
|
3,849.479
|
Third Quarter
|
4,103.083
|
3,857.938
|
4,049.445
|
Fourth Quarter
|
4,337.785
|
3,765.281
|
4,236.279
|
2015
|
|
|
|
First Quarter
|
4,483.049
|
4,089.648
|
4,333.688
|
Second Quarter
|
4,548.740
|
4,311.257
|
4,396.761
|
Third Quarter
|
4,679.675
|
4,016.324
|
4,181.060
|
Fourth Quarter
|
4,719.053
|
4,192.963
|
4,593.271
|
2016
|
|
|
|
First Quarter
|
4,497.857
|
3,947.804
|
4,483.655
|
Second Quarter
|
4,565.421
|
4,201.055
|
4,417.699
|
Third Quarter
|
4,891.363
|
4,410.747
|
4,875.697
|
Fourth Quarter
|
4,965.808
|
4,660.457
|
4,863.620
|
2017
|
|
|
|
First Quarter
|
5,439.742
|
4,911.333
|
5,436.232
|
Second Quarter
|
5,885.296
|
5,353.586
|
5,646.917
|
Third Quarter
|
6,004.380
|
5,596.956
|
5,979.298
|
Fourth Quarter
|
6,513.269
|
5,981.918
|
6,396.422
|
2018
|
|
|
|
First Quarter
|
7,131.121
|
6,306.100
|
6,581.126
|
Second Quarter
|
7,280.705
|
6,390.837
|
7,040.802
|
Third Quarter
|
7,660.180
|
7,014.554
|
7,627.650
|
Fourth Quarter
|
7,645.453
|
5,899.354
|
6,329.964
|
2019
|
|
|
|
First Quarter
|
7,493.270
|
6,147.128
|
7,378.771
|
Second Quarter (through May 29, 2019)
|
7,845.729
|
7,216.859
|
7,216.859
|
“Nasdaq
®
,” “NASDAQ-100
®
”
and “NASDAQ-100 Index
®
” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index
®
”
in the accompanying index supplement. See “NASDAQ-100 Index
®
” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Russell 2000
®
Index Historical Performance
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through May 29, 2019. 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 for the period from January 1, 2014 through
May 29, 2019. The closing value of the underlying index on May 29, 2019 was 1,489.952. We obtained the information in the table
and graph 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.
No assurance can be given as to the level of the RTY Index on any observation date, including the final observation date.
RTY Index Daily Closing
Values
January 1, 2014 to May
29, 2019
|
|
*The black solid line in the graph indicates the hypothetical coupon barrier level, and the red solid line indicates the hypothetical downside threshold level, in each case assuming the index closing value on May 29, 2019 were the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.964
|
1,095.986
|
1,192.964
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter (through May 29, 2019)
|
1,614.976
|
1,489.952
|
1,489.952
|
The
“Russell 2000
®
Index” is a trademark of FTSE Russell. For more information, see “Russell 2000
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Dow Jones Industrial Average
SM
Historical Performance
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2014 through May 29, 2019. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the INDU Index for each quarter for the period from January 1, 2014 through
May 29, 2019. The closing value of the INDU Index on May 29, 2019 was 25,126.41. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The INDU Index has at times experienced periods of high
volatility, and you should not take the historical values of the INDU Index as an indication of its future performance. No assurance
can be given as to the level of the INDU Index on any observation date, including the final observation date.
INDU Index Daily Closing Values
January 1, 2014 to May 29, 2019
|
|
* The black solid line in the graph indicates the hypothetical coupon barrier level, and the red solid line indicates the hypothetical downside threshold level, in each case assuming the index closing value on May 29, 2019 were the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Dow Jones Industrial Average
SM
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
16,530.94
|
15,372.80
|
16,457.66
|
Second Quarter
|
16,947.08
|
16,026.75
|
16,826.60
|
Third Quarter
|
17,279.74
|
16,368.27
|
17,042.90
|
Fourth Quarter
|
18,053.71
|
16,117.24
|
17,823.07
|
2015
|
|
|
|
First Quarter
|
18,288.63
|
17,164.95
|
17,776.12
|
Second Quarter
|
18,312.39
|
17,596.35
|
17,619.51
|
Third Quarter
|
18,120.25
|
15,666.44
|
16,284.70
|
Fourth Quarter
|
17,918.15
|
16,272.01
|
17,425.03
|
2016
|
|
|
|
First Quarter
|
17,716.66
|
15,660.18
|
17,685.09
|
Second Quarter
|
18,096.27
|
17,140.24
|
17,929.99
|
Third Quarter
|
18,636.05
|
17,840.62
|
18,308.15
|
Fourth Quarter
|
19,974.62
|
17,888.28
|
19,762.60
|
2017
|
|
|
|
First Quarter
|
21,115.55
|
19,732.40
|
20,663.22
|
Second Quarter
|
21,528.99
|
20,404.49
|
21,349.63
|
Third Quarter
|
22,412.59
|
21,320.04
|
22,405.09
|
Fourth Quarter
|
24,837.51
|
22,557.60
|
24,719.22
|
2018
|
|
|
|
First Quarter
|
26,616.71
|
23,533.20
|
24,103.11
|
Second Quarter
|
25,322.31
|
23,644.19
|
24,271.41
|
Third Quarter
|
26,743.50
|
24,174.82
|
26,458.31
|
Fourth Quarter
|
26,828.39
|
21,792.20
|
23,327.46
|
2019
|
|
|
|
First Quarter
|
26,091.95
|
22,686.22
|
25,928.68
|
Second Quarter (through May 29, 2019)
|
26,656.39
|
25,126.41
|
25,126.41
|
“Dow
Jones,” “Dow Jones Industrial Average,” “Dow Jones Indexes” and “DJIA” are service marks
of Dow Jones Trademark Holdings LLC. See “Dow Jones Industrial Average
SM
” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this preliminary pricing supplement.
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.
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying index publishers:
|
With respect to the NDX Index, Nasdaq Inc., or any successor
thereof.
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to the INDU Index, S&P Dow Jones Indices LLC,
or any successor thereof.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Senior security or subordinated security:
|
Senior
|
Specified currency:
|
U.S. dollars
|
Record date:
|
One business day prior to the related scheduled coupon payment date;
provided
that any contingent monthly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
Calculation agent:
|
The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent monthly coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption event has occurred.
See “Market disruption event” and “Discontinuance of an underlying index; alteration of method of calculation”
below. MS & Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable
judgment.
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index business day:
|
With respect to each underlying index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Index closing value:
|
With respect to the RTY Index, index closing value on any index
business day means 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 RTY Index will be based on the alternate calculation of such underlying index as described under “Discontinuance
of an underlying index; alteration of method of calculation” below.
The closing value of the RTY Index reported by Bloomberg Financial
Services may be lower or higher than the official closing value of the RTY Index published by the underlying index publisher for
such underlying index.
With respect to each of the NDX Index and the INDU Index, index
closing value on any index business day means the official closing value of such underlying index, or any successor index as defined
under “Discontinuance of an underlying index; alteration of method of calculation” below), published at the regular
official weekday close of trading on such index business day by the underlying index publisher for such underlying index, as determined
by the calculation agent. In certain circumstances, the index closing value
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
for the NDX Index or the INDU Index will be based on
the alternate calculation of such underlying index as described under “Discontinuance of an underlying index; alteration
of method of calculation” below.
|
Market disruption event:
|
With respect to each underlying index, market disruption event
means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material limitation of
trading of securities then constituting 20 percent or more of the value of such underlying index (or a successor index) on the
relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding the close
of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure in the price and trade reporting
systems of any relevant exchange as a result of which the reported trading prices for securities then constituting 20 percent or
more of the value of such underlying index (or a successor index) during the last one-half hour preceding the close of the principal
trading session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material limitation or absence
of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds related to
such underlying index (or a successor index) for more than two hours of trading or during the one-half hour period preceding the
close of the principal trading session on such market,
in each case as determined by the calculation agent
in its sole discretion; and
(ii) a determination
by the calculation agent in its sole discretion that any event described in clause (i) above materially interfered with our ability
or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with respect to the
securities.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index, if trading in a security included in such underlying index is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the value of such underlying
index shall be based on a comparison of (x) the portion of the value of such underlying index attributable to that security relative
to (y) the overall value of such underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index: (1) a limitation on the hours or number of days of trading will not constitute
a market disruption event if it results from an announced change in the regular business hours of the relevant exchange or market,
(2) a decision to permanently discontinue trading in the relevant futures or options contract or exchange-traded fund will not
constitute a market disruption event, (3) a suspension of trading in futures or options contracts or exchange-traded funds on such
underlying index by the primary securities market trading in such contracts or funds by reason of (a) a price change exceeding
limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds or (c) a disparity
in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material limitation of trading
in futures or options contracts or exchange-traded funds related to such underlying index and (4) a “suspension, absence
or material limitation of trading” on any relevant exchange or on the primary market on which futures or options contracts
or exchange-traded funds related to such underlying index are traded will not include any time when such securities market is itself
closed for trading under ordinary circumstances.
|
Relevant exchange:
|
With respect to each underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Postponement of observation dates:
|
The observation dates are subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If any scheduled observation date, including the final observation
date, is not an index business day with respect to any underlying index or if there is a market disruption event on such day with
respect to any underlying index, the relevant observation date solely with respect to that affected underlying index shall be the
next succeeding index business day with respect to that underlying index on which there is no market disruption event with respect
to that underlying index;
provided
that if a market disruption event with respect to that underlying index has occurred
on each of the five index business days with respect to that underlying index immediately succeeding any of the scheduled observation
dates, then (i) such fifth succeeding index business day shall be deemed to be the relevant observation date with respect to that
affected underlying index, notwithstanding the occurrence of a market disruption event with respect to that underlying index on
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
such day and (ii) with respect to any such fifth index business
day on which a market disruption event occurs with respect to that underlying index, the calculation agent shall determine
the index closing value on such fifth index business day in accordance with the formula for and method of calculating that
underlying index last in effect prior to the commencement of the market disruption event, using the closing price (or, if
trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing
price that would have prevailed but for such suspension or limitation) at the close of the principal trading session of the
relevant exchange on such index business day of each security most recently constituting that affected underlying index without
any rebalancing or substitution of such securities following the commencement of the market disruption event.
|
Postponement
of coupon payment dates (including the maturity date and redemption dates):
|
If any scheduled
coupon payment date is not a business day, that monthly coupon, if any, shall be paid on the next succeeding business day;
provided
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the
maturity date;
provided further
that if, due to a market disruption event or otherwise, any observation date with respect
to any underlying index is postponed so that it falls less than two business days prior to the scheduled coupon payment date,
maturity date or redemption date, as applicable, the coupon payment date, maturity date or redemption date, as applicable,
shall be postponed to the second business day following the observation date as postponed, by which date the index closing
value of each underlying index has been determined. In any of these cases, no adjustment shall be made to any contingent
monthly coupon payment, payment at maturity or redemption payment made on that postponed date.
|
Discontinuance
of an underlying index; alteration of method of calculation:
|
If any underlying index
publisher discontinues publication of the relevant underlying index and such underlying index publisher or another entity
(including MS & Co.) publishes a successor or substitute index that the calculation agent determines, in its sole
discretion, to be comparable to the discontinued index (such index being referred to herein as the “successor index”),
then any subsequent index closing value for the discontinued index will be determined by reference to the published value
of such successor index at the regular weekday close of trading on any index business day that the index closing value
for such underlying index is to be determined, and, to the extent the index closing value of such successor index differs
from the index closing value of the relevant underlying index at the time of such substitution, proportionate adjustments
shall be made by the calculation agent to the relevant initial index value, coupon barrier level and downside threshold
level.
Upon any selection by
the calculation agent of a successor index, the calculation agent will cause written notice thereof to be furnished to
the trustee, to us and to the depositary, as holder of the securities, within three business days of such selection. We
expect that such notice will be made available to you, as a beneficial owner of the securities, in accordance with the
standard rules and procedures of the depositary and its direct and indirect participants.
If any underlying index
publisher discontinues publication of the relevant underlying index or a successor index prior to, and such discontinuance
is continuing on, any observation date and the calculation agent determines, in its sole discretion, that no successor
index is available at such time, then the calculation agent will determine the index closing value for such underlying
index for such date. The index closing value of such underlying index or such successor index will be computed by the
calculation agent in accordance with the formula for and method of calculating such index last in effect prior to such
discontinuance, using the closing price (or, if trading in the relevant securities has been materially suspended or materially
limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation)
at the close of the principal trading session of the relevant exchange on such date of each security most recently constituting
such index without any rebalancing or substitution of such securities following such discontinuance. Notwithstanding these
alternative arrangements, discontinuance of the publication of an underlying index may adversely affect the value of the
securities.
If at any time, the method
of calculating any underlying index or any successor index, or the value thereof, is changed in a material respect, or
if any underlying index or any successor index is in any other way modified so that such index does not, in the opinion
of the calculation agent, fairly represent the value of such index had such changes or modifications not been made, then,
from and after such time, the calculation agent will, at the close of business in New York City on each date on which
the index closing value for such underlying index is to be determined, make such calculations and adjustments as, in the
good faith judgment of the calculation agent, may be necessary in order to arrive at a value of a stock index comparable
to such underlying index or such successor index, as the case may be, as if such changes or modifications had not been
made, and the calculation agent will calculate the index closing value with reference to such underlying index or such
successor index, as adjusted. Accordingly, if the method of calculating any underlying index or any successor index is
modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due
to a split in such underlying index), then the calculation agent will adjust such index in order to arrive at a value
of such underlying index or such successor index as if it had not been
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
modified (e.g., as if such split had not occurred).
|
Alternate
exchange calculation in case of an event of default:
|
If an event of default
with respect to the securities shall have occurred and be continuing, the amount declared due and payable upon any acceleration
of the securities (the “Acceleration Amount”) will be an amount, determined by the calculation agent in its
sole discretion, that is equal to the cost of having a qualified financial institution, of the kind and selected as described
below, expressly assume all our payment and other obligations with respect to the securities as of that day and as if
no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic
value to you with respect to the securities. That cost will equal:
·
the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
·
the reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing
any documentation necessary for this assumption or undertaking.
During the default quotation
period for the securities, which we describe below, the holders of the securities and/or we may request a qualified financial
institution to provide a quotation of the amount it would charge to effect this assumption or undertaking. If either party
obtains a quotation, it must notify the other party in writing of the quotation. The amount referred to in the first bullet
point above will equal the lowest—or, if there is only one, the only—quotation obtained, and as to which notice
is so given, during the default quotation period. With respect to any quotation, however, the party not obtaining the
quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial
institution providing the quotation and notify the other party in writing of those grounds within two business days after
the last day of the default quotation period, in which case that quotation will be disregarded in determining the Acceleration
Amount.
Notwithstanding the foregoing,
if a voluntary or involuntary liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect
to MSFL or Morgan Stanley, then depending on applicable bankruptcy law, your claim may be limited to an amount that could
be less than the Acceleration Amount.
If the maturity of the
securities is accelerated because of an event of default as described above, we shall, or shall cause the calculation
agent to, provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely,
and to the depositary of the Acceleration Amount and the aggregate cash amount due, if any, with respect to the securities
as promptly as possible and in no event later than two business days after the date of such acceleration.
Default quotation period
The default quotation
period is the period beginning on the day the Acceleration Amount first becomes due and ending on the third business day
after that day, unless:
·
no quotation of the kind referred to above is obtained, or
·
every quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two
events occurs, the default quotation period will continue until the third business day after the first business day on
which prompt notice of a quotation is given as described above. If that quotation is objected to as described above within
five business days after that first business day, however, the default quotation period will continue as described in
the prior sentence and this sentence.
In any event, if the default
quotation period and the subsequent two business day objection period have not ended before the final observation date,
then the Acceleration Amount will equal the principal amount of the securities.
Qualified financial
institutions
For the purpose of determining
the Acceleration Amount at any time, a qualified financial institution must be a financial institution organized under
the laws of any jurisdiction in the United States or Europe, which at that time has outstanding debt obligations with
a stated maturity of one year or less from the date of issue and rated either:
·
A-2 or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used
by that rating agency, or
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities
|
·
P-2 or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating
agency.
|
Issuer
notices to registered security holders, the trustee and the depositary:
|
In the event that the
maturity date is postponed due to postponement of the final observation 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 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 final observation
date as postponed.
The issuer shall, or shall
cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively
rely, and to the depositary of the amount of cash to be delivered as contingent monthly coupon, if any, with respect to
the securities on or prior to 10:30 a.m. (New York City time) on the business day preceding each coupon payment date,
and (ii) deliver the aggregate cash amount due with respect to the applicable interest to the trustee for delivery to
the depositary, as holder of the securities, on the applicable coupon payment date.
In the event that any
coupon payment date is postponed due to the postponement of the relevant observation date, the issuer shall give notice
of such postponement and, once it has been determined, of the date to which the applicable coupon payment 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 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 any coupon payment date, the business day immediately
preceding the applicable scheduled coupon payment date and (ii) with respect to notice of the date to which the applicable
coupon payment date has been rescheduled, the business day immediately following the applicable observation date as postponed.
The issuer shall, or shall
cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively
rely, and to the depositary of the amount of cash, if any, to be delivered with respect to the securities, on or prior
to 10:30 a.m. (New York City time) on the business day preceding the redemption date or the business day preceding the
maturity date, as applicable, and (ii) deliver the aggregate cash amount due with respect to the securities, if any, to
the trustee for delivery to the depositary, as holder of the securities, on the redemption date or maturity date, as applicable.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due July 3, 2024
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the Dow Jones Industrial Average
SM
Principal at Risk Securities