July 2019
Preliminary Terms
No. 2,180
Registration Statement
Nos. 333-221595; 333-221595-01
Dated June 25, 2019
Filed pursuant to
Rule 433
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in U.S. Equities
Participation Securities Based on the Performance
of the S&P 500
®
Index due July 26, 2024
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Participation Securities, or “securities,” offered
are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan
Stanley. The securities will pay no interest, provide a minimum payment at maturity of only 50% of the stated principal amount
and have the terms described in the accompanying product supplement for Participation Securities, index supplement and prospectus,
as supplemented or modified by this document. At maturity, if the underlying index has
appreciated
in value, investors will
receive the stated principal amount of their investment plus a return reflecting at least 100% (to be determined on the pricing
date) of the appreciation of the underlying index. However, if the underlying index has
depreciated
in value, investors
will lose 0.50% for every 1% decline in the index value over the term of the securities. Under these circumstances, the payment
at maturity will be less than the stated principal amount.
Investors may lose up to 50% of the stated principal amount of the
securities.
These long-dated securities are for investors who seek an equity index-based return and who are willing to risk
their principal and forgo current income in exchange for the opportunity to receive a return based on the performance of the underlying
index. The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
Summary Terms
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Maturity date:
|
July 26, 2024
|
Underlying index:
|
S&P 500
®
Index
|
Aggregate principal amount:
|
$
|
Payment at maturity per security:
|
If the final index value is greater than the initial index value:
$1,000 + upside payment
If the final index value is less than or equal to the initial
index value:
$1,000 + ($1,000 × index percent change ×
50%)
Under these circumstances, the payment at maturity will be
less than or equal to the stated principal amount of $1,000. However, under no circumstances will the securities pay less than
$500 per security at maturity.
|
Upside payment
|
$1,000 × upside participation rate ×index percent change
|
Index percent change:
|
(final index value – initial index value) / initial index value
|
Initial index value:
|
, which is the index closing value on the pricing date
|
Final index value:
|
The index closing value on the valuation date
|
Valuation date:
|
July 19, 2024, subject to postponement for non-index business days and certain market disruption events
|
Upside participation rate:
|
At least 100%. The actual upside participation rate will be determined on the pricing date.
|
Minimum payment at maturity:
|
$500 per security (50% of the stated principal amount)
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing date:
|
July 19, 2019
|
Original issue date:
|
July 26, 2019 (5 business days after the pricing date)
|
CUSIP:
|
61769HHX6
|
ISIN:
|
US61769HHX61
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
Approximately $940.10 per security, or within $30.00 of that estimate. See “Investment Summary” beginning on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$30
|
$970
|
Total
|
$
|
$
|
$
|
|
|
|
|
|
|
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed
sales commission of $30 for each security they sell. In addition, selected dealers and their financial advisors will receive a
structuring fee of $4 for each security. See “Supplemental information regarding plan of distribution; conflicts of interest.”
For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement
for Participation Securities.
|
|
(2)
|
See “Use of proceeds and hedging” on page 13.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 6.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they
obligations of, or guaranteed by, a bank.
You should read this document together with the related
product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Prospectus
dated November 16, 2017
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance
of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
Investment Summary
Principal at Risk Securities
The Participation Securities Based on the Performance of the
S&P 500
®
Index due July 26, 2024 (the “securities”) can be used:
|
§
|
As an alternative to direct exposure to the underlying index that provides returns reflecting any positive performance of the
underlying index
|
|
§
|
The securities are exposed on a 0.50%-to-1.00% basis to any negative performance of the underlying index.
|
Maturity:
|
5 years
|
Upside participation rate:
|
At least 100% (applicable only if the final index value is greater than the initial index value). The actual upside participation rate will be determined on the pricing date.
|
Minimum payment at maturity:
|
$500 per security. Investors may lose up to 50% of the stated principal amount of the securities.
|
Coupon:
|
None
|
The original issue price of each security is $1,000. This price
includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the value of each security
on the pricing date will be approximately $940.10, 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 index. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying index, instruments based on the underlying index, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the upside participation rate and the minimum payment at maturity, we use an internal funding rate, which is likely to be lower
than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs
borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the 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 index, 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 index, 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.
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
Key Investment Rationale
The securities offer a return reflecting at least 100% of any
potential positive performance of the S&P 500
®
Index. At maturity, if the underlying index has appreciated moderately
in value, investors will receive the stated principal amount of their investment plus a return reflecting at least 100% of the
upside performance of the underlying index (to be determined on the pricing date). However, if the underlying index has depreciated
in value, investors will lose 0.50% for every 1% decline in the index value over the term of the securities. Under these circumstances,
the payment at maturity will be less than the stated principal amount. Investors may lose up to 50% of the stated principal amount
of the securities. All payments on the securities are subject to our credit risk.
|
|
Upside Scenario
|
The underlying index increases in value, and, at maturity, the securities redeem for the stated principal amount of $1,000 plus at least 100% of the index percent change. The actual upside participation rate will be determined on the pricing date.
|
Par Scenario
|
The final index value is equal to the initial index value. In this case, you receive the stated principal amount of $1,000 at maturity.
|
Downside Scenario
|
The underlying index declines in value, and, at maturity, the securities redeem for less than the stated principal amount by an amount reflecting 50% of the decline in the value of the underlying index over the term of the securities. For example, if the final index value is 30% less than the initial index value, the securities will redeem at maturity for a loss of 15% of principal at $850, or 85% of the stated principal amount. The minimum payment at maturity is $500 per securitiy.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
How the Securities Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the securities based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Hypothetical upside participation rate:
|
100%
|
Minimum payment at maturity:
|
$500 per security
|
Participation Securities Payoff Diagram
|
|
How it works
§
Upside Scenario.
If the final index value is greater than the initial index value,
investors will receive the $1,000 stated principal amount
plus
100% of the appreciation of the underlying index over the
term of the security (assuming a hypothetical upside participation rate of 100%). The actual upside participation rate will be
determined on the pricing date.
|
§
|
Given the upside participation rate of 100%, if the underlying index appreciates 2%, the investor would receive a 2.00% return,
or $1,020.00 per security.
|
|
§
|
Par Scenario.
If the final index value is equal to the initial index value, the
investor would receive the $1,000 stated principal amount.
|
|
§
|
Downside Scenario.
If the final index value is less than the initial index value,
the investor would receive an amount that is less than the $1,000 stated principal amount, based on a 0.50% loss of principal for
each 1% decline in the underlying index. Under these circumstances, the payment at maturity will be less than the stated principal
amount per security. The minimum payment at maturity is $500 per security.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
|
§
|
If the underlying index depreciates 60%, the investor would lose 30% of the investor’s principal and receive only $700
per security at maturity, or 70% of the stated principal amount.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
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 product supplement for Participation Securities, index supplement and prospectus.
We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the
securities.
|
§
|
The securities do not pay interest and provide a minimum payment at maturity of only 50% of your principal.
The terms
of the securities differ from those of ordinary debt securities in that the securities do not pay interest, and provide a minimum
payment at maturity of only 50% of the stated principal amount of the securities, subject to our credit risk. If the final index
value is less than the initial index value, the payout at maturity will be an amount in cash that is less than the $1,000 stated
principal amount of each security by an amount reflecting 50% of the decline in the value of the underlying index over the term
of the securities.
Accordingly, investors may lose up to 50% of the stated principal amount of the securities.
|
|
§
|
The market price of the securities 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, including the value, volatility (frequency and magnitude
of changes in value) and dividend yield of the underlying index, interest and yield rates in the market, time remaining until the
securities mature, geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying
index or equities markets generally and which may affect the final index value of the underlying index and any actual or anticipated
changes in our credit ratings or credit spreads. Generally, the longer the time remaining to maturity, the more the market price
of the securities will be affected by the other factors described above. The value of the underlying index may be, and has recently
been, volatile, and we can give you no assurance that the volatility will lessen. See “S&P 500
®
Index
Overview” below. You may receive less, and possibly significantly less, than the stated principal amount per security if
you try to sell your securities prior to maturity.
|
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities.
You are dependent on our ability to pay all amounts due on the securities
at maturity and therefore you are subject to our credit risk. If we default on our obligations under the securities, your investment
would be at risk and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity
will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit
ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market
value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets.
As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated
pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
|
|
§
|
The amount payable on the securities is not linked to the value of the underlying index at any time other than the valuation
date.
The final index value will be based on the index closing value on the valuation date, subject to postponement for non-index
business days and certain market disruption events. Even if the value of the underlying index appreciates prior to the valuation
date but then drops by the valuation date, the payment at maturity may be less, and may be significantly less, than it would have
been had the payment at maturity been linked to the value of the underlying index prior to such drop. Although the actual value
of the underlying index on the stated maturity date or at other times during the term of the securites may be higher than the index
closing value on the valuation date, the payment at maturity will be based solely on the index closing value on the valuation date.
|
|
§
|
Investing in the securities is not equivalent to investing in the underlying index.
Investing in the securities is not
equivalent to investing in the underlying index or its component stocks. As an investor in the securities, you will not have voting
rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying
index.
|
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the 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
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
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 index, 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.
|
§
|
Adjustments to the underlying index could adversely affect the value of the securities.
The underlying index publisher
may add, delete or substitute the stocks constituting the underlying index or make other methodological changes that could change
the value of the underlying index. The underlying index publisher may discontinue or suspend calculation or publication of the
underlying index at any time. In these circumstances, the calculation agent will have the sole discretion to substitute a successor
index that is comparable to the discontinued underlying index and is not precluded from considering indices that are calculated
and published by the calculation agent or any of its affiliates. If the calculation agent determines that there is no appropriate
successor index, the payment at maturity on the securities will be an amount based on the closing prices at maturity of the securities
composing the underlying index at the time of such discontinuance, without rebalancing or substitution, computed by the calculation
agent in accordance with the formula for calculating the underlying index last in effect prior to discontinuance of the underlying
index.
|
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price.
These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the securities will be influenced
by many unpredictable factors” above.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited.
The securities will
not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. 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 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 and the final index value, and
will calculate the amount of cash you receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity
as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence
or non-occurrence of market disruption events and the selection of a successor index or calculation of the final index value in
the event of a market disruption event or discontinuance of the underlying index. These potentially subjective determinations may
adversely affect the payout to you at maturity. For further information regarding these types of determinations, see “Description
of securities—Postponement of Valuation Date(s)” and “—Calculation Agent and Calculations” and related
definitions in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the securities
on the pricing date.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities.
One or
more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other
instruments linked to the underlying index or its component stocks), including trading in the stocks that constitute the underlying
index as well as in other instruments related to the underlying index. As a result, these entities may be unwinding or adjusting
hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the valuation date approaches. Some of our affiliates also trade the stocks that constitute the underlying index
and other financial instruments related to the underlying index on a regular basis as part of their general broker-dealer and other
businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially increase the initial index
value, and, therefore, could increase the value at or above which the underlying index must close on the valuation date so that
investors do not suffer a loss on their initial investment in the securities. Additionally, such hedging or trading activities
during the term of the securities, including on the valuation date, could adversely affect the value of the underlying index on
the valuation date, and, accordingly, the amount of cash an investor will receive at maturity.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
Please read the discussion
under “Additional Information—Tax considerations” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for participation securities (together, the “Tax Disclosure
Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the
securities might differ significantly from the tax treatment described in the Tax Disclosure Sections. There is a risk that the
IRS may seek to treat all or a portion of the gain on the securities as ordinary income. Due to the large minimum amount payable
at maturity, there is a substantial risk that the IRS could seek to recharacterize the securities as debt instruments. In that
event, U.S. Holders would be required to accrue into income original issue discount on the securities every year at a “comparable
yield” determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income.
Additionally, as discussed under “United States Federal Taxation—FATCA” in the accompanying product supplement
for participation securities, the withholding rules commonly referred to as “FATCA” would apply to the securities if
they were recharacterized as debt instruments. However, recently proposed regulations (the preamble to which specifies that taxpayers
are permitted to rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable
disposition. We do not plan to request a ruling from the IRS regarding the tax treatment of the securities, and the IRS or a court
may not agree with the tax treatment described in the Tax Disclosure Sections.
|
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of
factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which
very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities,
possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income
tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by this notice
and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500
®
Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943. For additional information about the S&P 500
®
Index, see the information set forth under “S&P
500
®
Index” in the accompanying index supplement.
Information as of market close on June 21, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,950.46
|
52 Weeks Ago:
|
2,749.76
|
52 Week High (on 6/20/2019):
|
2,954.18
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
The following graph sets forth the daily index closing values
of the underlying index for each quarter in the period from January 1, 2014 through June 21, 2019. The related table sets forth
the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in
the same period. The index closing value of the underlying index on June 21, 2019 was 2,950.46. We obtained the information in
the table and graph below from Bloomberg Financial Markets, without independent verification. The underlying index has at times
experienced periods of high volatility. You should not take the historical values of the underlying index as an indication of its
future performance, and no assurance can be given as to the index closing value of the underlying index on the valuation date.
S&P 500
®
Index Daily Index Closing Values
January 1, 2014 to June
21, 2019
|
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter (through June 21, 2019)
|
2,954.18
|
2,744.45
|
2,950.46
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500
®
Index” in the accompanying index
supplement.
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
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 document.
Additional Terms
:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Interest:
|
None
|
Postponement of maturity date:
|
If the scheduled valuation date is not an index business day or if a market disruption event occurs on that day so that the valuation date as postponed falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that valuation date as postponed.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement by
first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York
office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date for determining the final index value.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee and to the depositary of the amount of cash to be delivered with respect to each stated principal
amount of the securities, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii)
deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of
the securities, on the maturity date.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
Additional Information About the Securities
|
Additional Information:
|
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
There is uncertainty
regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority. We
intend to treat a securities as a single financial contract that is an “open transaction” for U.S. federal income tax
purposes. In the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current
law; however, our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not
to be upheld, and that alternative treatments are possible. Moreover, because our counsel’s opinion is based in part on market
conditions as of the date of this document, it is subject to confirmation on the pricing date.
|
|
Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for participation securities, the following U.S. federal income tax consequences should result based on current law:
|
|
§
A U.S. Holder should not be required to recognize taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange.
|
|
§
Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise.
|
|
There is
a risk that the Internal Revenue Service (the “IRS”) may seek to treat all or a portion of the gain on the securities
as ordinary income. Due to the large minimum amount payable at maturity, there is a substantial risk that the IRS could seek to
recharacterize the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original
issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize
all income and gain in respect of the securities as ordinary income.
In 2007,
the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime;
the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which
the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest
charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the securities, possibly with retroactive effect.
As discussed
in the accompanying product supplement for participation securities, Section 871(m) of the Internal Revenue Code of 1986, as amended,
and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty
rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain
exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more
Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”).
However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on the terms of the securities and current market conditions, we
expect that the securities will not have a delta of one with respect to any Underlying Security on the pricing date. However, we
will provide an updated determination in the final pricing supplement. Assuming that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may
depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security.
If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You
should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
Both U.S.
and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for
participation securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by the aforementioned notice and
any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
|
The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement for participation securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 2 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we will hedge our anticipated
exposure in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers.
We expect our hedging counterparties to take positions in stocks of the underlying index, futures and options contracts on the
underlying index and any component stocks of the underlying index listed on major securities markets or positions in any other
available securities or instruments that they may wish to use in connection with such hedging. Such purchase activity could potentially
increase the value of the underlying index on the pricing date, and, therefore, could increase the value at or above which the
underlying index must close on the valuation date so that investors do not suffer a loss on their initial investment in the securities.
In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the securities, including
on the valuation date, by purchasing and selling the stocks constituting the underlying index, futures or options contracts on
the underlying index or its component stocks listed on major securities markets or positions in any other available securities
or instruments that we may wish to use in connection with such hedging activities. As a result, these entities may be unwinding
or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent
dynamic adjustments to the hedge as the valuation date approaches. We cannot give any assurance that our hedging activities will
not affect the value of the underlying index, and, therefore, adversely affect the value of the securities or the payment you will
receive at maturity. For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging”
in the accompanying product supplement for Participation Securities.
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Section 4975 of the Code generally prohibit
transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA
or the Code would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which
MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant
to an exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction”
rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless
exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related lending
transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority
or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further
that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction
(the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions
will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
|
governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute or result
in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i)
the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder
and the purchaser or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser
of the purchaser or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment
in the securities, or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii)
we and our affiliates have acted and will act solely for our own account in connection with (A) all transactions
relating to the securities and (B) all hedging transactions in connection with our obligations under the securities;
(iii)
any and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions
of those entities and are not assets and positions held for the benefit of the purchaser or holder;
(iv)
our interests are adverse to the interests of the purchaser or holder; and
(v)
neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any
such assets, positions or transactions, and any information that we or any of our affiliates may provide is not intended to be
impartial investment advice.
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of the securities should consult and
rely on their own counsel and advisers as to whether an investment in the securities is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $30 for each security they sell. In addition,
selected dealers and their financial advisors will receive a structuring fee of $4 for each security.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities, including
the upside participation rate, such that for each security the estimated value on the pricing date will be no lower than the minimum
level described in “Investment Summary” beginning on page 2.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts
of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for Participation Securities.
|
Where you can find more information:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Participation Securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration
statement, the product supplement for Participation Securities, the index supplement and any other documents relating to this offering
that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering.
You may get these documents without
|
M
organ
S
tanley
F
inance
LLC
Participation Securities Based on the Performance of the S&P 500
®
Index due June 28, 2024
Principal at Risk Securities
Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum) (NYSE:MSPI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum) (NYSE:MSPI)
Historical Stock Chart
From Jul 2023 to Jul 2024