Free Writing Prospectus - Filing Under Securities Act Rules 163/433 (fwp)
May 31 2019 - 5:27PM
Edgar (US Regulatory)
M
organ
S
tanley
F
inance
LLC
|
Free Writing Prospectus to Preliminary Terms No.
2,065
Registration Statement Nos. 333-221595; 333-221595-01
Dated May 31, 2019
Filed pursuant to Rule 433
|
Structured
Investments
Equity-Linked Partial Principal at Risk Securities
due December 31, 2021 Based on the Performance of the Worst Performing of the Russell 2000
®
Index and the S&P
500
®
Index
This document provides a summary of the terms of the securities
offered by Morgan Stanley Finance LLC. Investors should review carefully the accompanying preliminary terms, product supplement,
index supplement and prospectus prior to making an investment decision.
SUMMARY
TERMS
|
|
Issuer:
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Morgan Stanley Finance LLC (“MSFL”)
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Guarantor:
|
Morgan Stanley
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Issue price:
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$1,000 per security
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Stated principal amount:
|
$1,000 per security
|
Pricing date:
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June 28, 2019
|
Original issue date:
|
July 3, 2019 (3 business days after the
pricing date)
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Maturity date:
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December 31, 2021
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Interest:
|
None
|
Underlying indices:
|
Russell
2000
®
Index (the “RTY Index”) and S&P 500
®
Index (the “SPX Index”).
For more information about the underlying indices, see the accompanying preliminary terms.
|
Payment at maturity:
|
If the final index
value of
each underlying index
is
greater than
its respective initial index value:
$1,000 + supplemental
redemption amount, subject to the maximum payment amount
If
the final index value of
either underlying index
is
less than or equal to
its respective initial index value:
$1,000
x index performance factor of the worst performing underlying index, subject to the minimum payment amount
Under these circumstances,
the payment at maturity will be less than the stated principal amount of $1,000 per security by an amount that is proportionate
to the percentage decline of the worst performing underlying index. However, under no circumstances will the payment due
at maturity be less than the minimum payment amount of $950 per security.
|
Supplemental redemption amount:
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(i) $1,000
times
(ii) the index percent change of the
worst performing underlying index
times
(iii) the participation rate
|
Worst performing underlying index:
|
The underlying index with the lesser index percent change
|
Maximum payment amount:
|
$1,200 to $1,250 per security (120% to
125% of the stated principal amount). The actual maximum payment amount will be determined on the pricing date.
|
Minimum payment amount:
|
$950 per security (95% of the stated principal amount)
|
Participation rate:
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100%
|
Index percent change:
|
With respect to each underlying index, (final index value
– initial index value) / initial index value
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Index performance factor
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With respect to each underlying index, final index value /
initial index value
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Final index value:
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With respect to each underlying index, the index closing value
of such index on the determination date
|
Determination date:
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December 28, 2021, subject to postponement for non-index business days and certain market
disruption events
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CUSIP/ISIN:
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61769HEQ4 / US61769HEQ48
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Listing:
|
The securities will not be listed on any securities exchange.
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Agent:
|
Morgan Stanley & Co. LLC, an affiliate of MSFL and a wholly
owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts
of interest” in the accompanying preliminary terms. The agent commissions will be as set forth in the final pricing
supplement.
|
Estimated value on the pricing
date:
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Approximately $976.60 per security, or within $15.00 of that estimate. See “Investment Summary” in the accompanying preliminary terms.
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Overview
Equity-Linked Partial Principal at
Risk Securities, which we refer to as the securities, are unsecured obligations of MSFL and are fully and unconditionally guaranteed
by Morgan Stanley. The securities will pay no interest, provide for a minimum payment amount of only 95% of principal at maturity
and will have the terms described in the accompanying preliminary terms, product supplement, index supplement and prospectus.
The payment at maturity on the securities will be based on the performance of the worst performing of the Russell 2000
®
Index and the S&P 500
®
Index. At maturity, if the final index value of each of the underlying indices
is greater than its respective initial index value, investors will receive the stated principal amount of their investment plus
a supplemental redemption amount reflecting 100% of the appreciation of the worst performing underlying index from its initial
index value to its final index value, subject to the maximum payment amount. The supplemental redemption amount will therefore
be payable only if both underlying indices have appreciated from their respective initial index values. However, if at maturity
the final index value of either underlying index has depreciated in value, investors will lose 1% for every 1% decline in the
worst performing underling index from its initial index value to its final index value, subject to the minimum payment amount.
Investors may lose up to 5% of the stated principal amount of the securities. Because the payment at maturity is based on the
worst performing of the underlying indices, a decline in either underlying index will result in a loss of up to 5% of your investment
even if the other underlying index has appreciated or has not declined as much. The securities are for investors who are concerned
about principal risk, but seek an equity index-based return, and who are willing to risk 5% of their principal and to forgo current
income and upside returns above the maximum payment amount in exchange for the repayment of at least 95% of the principal at maturity
and the opportunity to earn a return reflecting 100% of the appreciation of the worst performing underlying index from its initial
index value to its final index value, subject to the maximum payment amount. The securities are securities issued as part of MSFL’s
Series A Global Medium-Term Notes program.
All payments on the securities,
including the payment of the minimum payment amount at maturity, are subject to our credit risk. If we default on our obligations,
you could lose some or all of your investment. These securities are not secured obligations and you will not have any security
interest in, or otherwise have any access to, any underlying reference asset or assets.
|
Investing
in the securities involves risks. See “Selected Risks” on the following page
and “Risk Factors” in the accompanying preliminary terms.
You should read this document
together with the accompanying preliminary terms, product supplement, index supplement and prospectus describing the offering
before you decide to invest. You may access the preliminary terms through the below link:
https://www.sec.gov/Archives/edgar/data/1666268/000095010319007226/dp107568_fwp-ps2065msfl.htm
|
statement and other documents the issuer has filed with the
SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR
on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering
will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.
Risk Considerations
The risks set forth below are discussed in more detail in the
“Risk Factors” section in the accompanying preliminary terms. Please review those risk factors carefully prior to making
an investment decision.
|
·
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The securities do not pay interest and provide
for a minimum payment amount of only 95% of principal.
|
|
·
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The appreciation potential of the securities
is limited by the maximum payment amount.
|
|
·
|
You are exposed to the price risk of both
underlying indices.
|
|
·
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Because the securities are linked to the performance
of the worst performing underlying index, you are exposed to greater risk of sustaining a loss on your investment than if the securities
were linked to just one underlying index.
|
|
·
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The market price of the securities will be
influenced by many unpredictable factors.
|
|
·
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The securities are linked to the Russell 2000
®
Index
and are subject to risks associated with small-capitalization companies.
|
|
·
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The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities.
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·
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As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
|
|
·
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The amount payable on the securities is not
linked to the values of the underlying indices at any time other than the determination date.
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|
·
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The rate we are willing to pay for securities
of this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and
advantageous to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices.
|
|
·
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The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price.
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·
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Adjustments to the underlying indices could
adversely affect the value of the securities.
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|
·
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Investing in the securities is not equivalent
to investing in either underlying index.
|
|
·
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The securities will not be listed on any securities
exchange and secondary trading may be limited.
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|
·
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The calculation agent, which is a subsidiary
of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
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·
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Hedging and trading activity by our affiliates
could potentially adversely affect the value of the securities.
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Tax Considerations
You should review carefully the discussion in the accompanying preliminary
terms under the caption “Additional Information About the Securities– Tax considerations” concerning the U.S.
federal income tax consequences of an investment in the securities. However, you should consult your tax adviser regarding all
aspects of the U.S. federal income tax consequences of an investment in the securities, as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
Hypothetical Examples
The following hypothetical examples illustrate how
to calculate the payment at maturity on the securities. The following examples are for illustrative purposes only. The actual initial
index value for each underlying index will be determined on the pricing date. Any payment at maturity on the securities is subject
to our credit risk. The below examples are based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Participation rate:
|
100%
|
Minimum payment amount:
|
$950 per security (95% of the stated principal amount)
|
Hypothetical maximum payment amount:
|
$1,225 per security (122.50% of the stated principal amount, the midpoint of the specified range)
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Hypothetical initial index value:
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With respect to the RTY Index: 1,500
With respect to the SPX Index: 2,800
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EXAMPLE 1: Both underlying indices appreciate significantly
and so investors receive only the maximum payment at maturity.
Final index value
|
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RTY Index: 2,250
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|
|
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SPX Index: 3,920
|
Index percent change
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|
RTY Index: (2,250 – 1,500) / 1,500 = 50%
SPX Index: (3,920 – 2,800) / 2,800 =
40%
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Payment at maturity
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=
|
$1,000 + ($1,000 × index percent change of the worst performing underlying index), subject to the maximum payment amount
|
|
=
|
$1,000 + ($1,000 × 40%), subject to the maximum payment amount
|
|
=
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$1,225
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In example 1, the final index values of both the RTY
Index and SPX Index are greater than their initial index values. The RTY Index has appreciated by 50% while the SPX Index has appreciated
by 40%. Therefore, investors receive at maturity the stated principal amount
plus
a return reflecting 100% of the appreciation
of the worst performing underlying, subject to the maximum payment amount. Under the terms of the securities, investors will realize
the hypothetical maximum payment amount at a final index value of the worst performing underlying index of 122.50% of its respective
initial index value. Therefore, in this example, investors receive only the hypothetical maximum payment amount of $1,225 per stated
principal amount, even though both underlying indices have appreciated significantly.
EXAMPLE 2: The final index value of each underlying
index is greater than its respective initial index value.
Final index value
|
|
RTY Index: 1,575
|
|
|
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SPX Index: 3,640
|
Index percent change
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|
RTY Index: (1,575 – 1,500) / 1,500 = 5%
SPX Index: (3,640 – 2,800) / 2,800 = 30%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × index percent change of the worst performing underlying index), subject to the maximum payment amount
|
|
=
|
$1,000 + ($1,000 × 5%)
|
|
=
|
$1,050
|
In example 2, the final index values of both the RTY
Index and SPX Index are greater than their initial index values. The RTY Index has appreciated by 5% while the SPX Index has appreciated
by 30%. Therefore, investors receive at maturity the stated principal amount
plus
a return reflecting 100% of the appreciation
of the worst performing underlying index, which is the RTY Index in this example. Investors receive $1,050 per security at maturity.
EXAMPLE 3: The final index value of one underlying
index is greater than its respective initial index value, while the final index value of the other underlying index is less than
its respective initial index value, but not by more than 5%.
Final index value
|
|
RTY Index: 1,800
|
|
|
SPX Index: 2,716
|
Index performance factor
|
|
RTY Index: 1,800 / 1,500 = 120%
SPX Index: 2,716 / 2,800 = 97%
|
Payment at maturity
|
=
|
($1,000 x index performance factor of the worst performing underlying index), subject to the minimum payment amount
|
|
=
|
$1,000 × 97%
|
|
=
|
$970
|
In example 3, the final index value of the RTY Index
is greater than its initial index value, while the final index value of the SPX Index is less than its initial index value. While
the RTY Index has appreciated by 20%, the SPX Index has declined by 3%. Therefore, investors are exposed to the negative performance
of the SPX Index, which represents the worst performing underlying index in this example, subject to the minimum payment amount.
At maturity, investors receive a payment at maturity of $970 per security, or 97% of the stated principal amount. In this example,
investors are exposed to the negative performance of the worst performing underlying index, subject to the minimum payment amount,
even though the other underlying index has appreciated in value by 20%, because the final index value of each underlying index
is not greater than its respective initial index value.
EXAMPLE 4: The final index value of one underlying
index is greater than its respective initial index value, while the final index value of the other underlying index is less than
its respective initial index value by more than 5%.
Final index value
|
|
RTY Index: 1,050
|
|
|
|
SPX Index: 3,220
|
Index performance factor
|
|
RTY Index: 1,050 / 1,500 = 70%
SPX Index: 3,220 / 2,800 = 115%
|
Payment at maturity
|
=
|
($1,000 x index performance factor of the worst performing underlying index), subject to the minimum payment amount
|
|
=
|
$950
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In example 4, the final index value of the SPX Index
is greater than its initial index value, while the final index value of the RTY Index is less than its initial index value. While
the SPX Index has appreciated by 15%, the RTY Index has declined by 30%. Therefore, investors are exposed to the negative performance
of the RTY Index, which is the worst performing underlying index in this example, subject to the minimum payment amount. Because
the worst performing underlying index has declined by 5% or more, investors receive the minimum payment amount of $950 per security
at maturity, or 95% of the stated principal amount. In this example, investors are exposed to the negative performance of the worst
performing underlying index, subject to the minimum payment amount, even though the other underlying index has appreciated in value
by 15%, because the final index value of each underlying index is not greater than its respective initial index value.
Russell 2000
®
Index Historical
Performance
The following graph sets forth the daily index closing values
of the Russell 2000
®
Index for each quarter in the period from January 1, 2014 through May 28, 2019. You should
not take the historical values of the Russell 2000
®
Index as an indication of its future performance, and no assurance
can be given as to the index closing value of the Russell 2000
®
Index on the determination date.
Russell 2000
®
Index
Daily Index
Closing Values
January 1,
2014 to May 28, 2019
|
|
S&P 500
®
Index Historical
Performance
The following graph sets forth the daily index closing values
of the S&P 500
®
Index for each quarter in the period from January 1, 2014 through May 28, 2019. You should
not take the historical values of the S&P 500
®
Index as an indication of its future performance, and no
assurance can be given as to the index closing value of the S&P 500
®
Index on the determination date.
S&P 500
®
Index
Daily Index
Closing Values
January 1,
2014 to May 28, 2019
|
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