Opportunities in U.S. Equities
Contingent Coupon Securities with One-Time Automatic
Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially
Payable During Only the First Two Years of the Term of the Securities
Unlike ordinary debt securities, the Contingent Coupon Securities
with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024, With Contingent
Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities, which we refer to as the securities,
do not provide for the regular payment of interest and provide for a minimum payment at maturity of only 20% of the stated principal
amount. Instead, the securities offer the opportunity for investors to earn a contingent monthly coupon during only the first
two years of the term of the securities but only if and for as long as the index closing value of the S&P 500®
Index (the “underlying index”) has remained greater than or equal to 80% of the initial index value, which we refer
to as the trigger level, on each day during the first two years of the term of the securities. If the index closing value
of the underlying index is less than the trigger level on any day during the first two years of the term of the securities,
a trigger event will have occurred and you will not receive any contingent monthly coupon payment for the corresponding monthly
period or for any subsequent monthly period for the remainder of the term of the securities. Therefore, investors in the
securities will permanently forfeit their ability to receive subsequent contingent monthly coupon payments (which would otherwise
be payable only during the first two years of the term of the securities) if the index closing value declines below the trigger
level on any day during the first two years of the term of the securities. As a result, investors must be willing to accept
the risk of not receiving any contingent monthly coupon payments during the entire term of the securities. In addition, if a trigger
event does not occur during the first two years of the term of the securities, the securities will be automatically redeemed
at the end of the first two years of the term of the securities, and investors will receive the early redemption payment equal
to the stated principal amount of the securities and the final contingent monthly coupon payment but will not participate in any
performance of the underlying index. No further payments will be made on the securities once they have been redeemed. However,
if a trigger event does occur on any day during the first two years of the term of the securities, investors will receive
no further contingent monthly coupon payments and the securities will not be redeemed prior to maturity. Instead, investors will
receive a return at maturity based on the performance of the underlying index over the term of the securities, determined as set
forth below. Therefore, if a trigger event occurs and the underlying index recovers such that the final index value is greater
than the trigger level, investors will receive a positive return on their investment. However, if a trigger event occurs and the
final index value is less than the trigger level, investors will lose 1% for every 1% of the initial index value that the underlying
index declines below the trigger level, subject to the minimum payment at maturity of 20% of the stated principal amount of the
securities. Accordingly, investors may lose up to 80% of the stated principal amount of the securities. These long-dated
securities are for investors who seek an opportunity to earn interest during only the first two years of the term of the securities
if and for as long as a trigger event has not occurred on any day during the first two years of the term of the securities in
exchange for the risk of forfeiting all subsequent contingent monthly coupon payments if a trigger event occurs during the first
two years of the term of the securities and the risk of losing some or a significant portion of their principal if the securities
are not automatically redeemed and the S&P 500® Index closes below 80% of the initial index value on the valuation
date. The securities are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally
guaranteed by Morgan Stanley. The securities are issued as part of MSFL’s Series A Global Medium-Term Notes program.
SUMMARY
TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying index:
|
S&P 500® Index
|
Aggregate principal amount:
|
$
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security
|
Pricing date:
|
November 7, 2019
|
Original issue date:
|
November 12, 2019 (2 business days after the pricing date)
|
Maturity date:
|
November 12, 2024
|
Early
redemption:
|
If a trigger event has not occurred on any day during the first two years of the term of the securities, the securities will be automatically redeemed for the early redemption payment on November 12, 2021 (subject to postponement if such day is not a business day). No further payments will be made on the securities once they have been redeemed, and investors will not participate in any appreciation of the underlying index.
|
Early
redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security plus (ii) the contingent monthly coupon with respect to the final coupon payment date.
|
Contingent
monthly coupon:
|
The securities may pay a contingent monthly coupon during
only the first two years of the term of the securities, depending on the performance of the underlying index throughout the
first two years of the term of the securities, as follows:
· If
a trigger event has not occurred on any day during the first two years of the term of the securities on or prior
to a monthly monitoring period end-date, we will pay a contingent monthly coupon at an annual rate of at least 4.05% (corresponding
to approximately $3.375 per month per security) on the related coupon payment date. The actual contingent monthly coupon rate
will be determined on the pricing date.
The contingent monthly coupons, if any,
will be payable only during the first two years of the term of the securities. Additionally, if a trigger event does not occur
during the first two years of the securities, the securities will be automatically redeemed at the end of the first two years
of the term of the securities. Investors will not participate in any appreciation of the underlying index, and no further payments
will be made on the securities once they have been redeemed.
· If
a trigger event has occurred on any day during the first two years of the term of the securities on or prior to
a monthly monitoring period end-date, no contingent monthly coupon will be paid on the related coupon payment date or on any subsequent
coupon payment dates.
Following the occurrence of a trigger
event, no further contingent monthly coupon payments will be payable over the remainder of the term of the securities, regardless
of the subsequent performance of the underlying index. Additionally if a trigger event occurs, the securities will not
be redeemed prior to maturity and investors will be exposed to the performance of the underlying index at maturity. See “Payment
at maturity” below.
|
Trigger
event:
|
A trigger event occurs if, on any day during any monthly monitoring period during the first two years of the term of the securities, the index closing value of the underlying index is less than the trigger level. If a trigger event occurs on any day during any monitoring period during the first two years of the term of the securities, you will receive no contingent monthly coupon payment on the related coupon payment date or on any subsequent coupon payment dates, the securities will not be automatically redeemed prior to maturity and you will be exposed to the performance of the underlying index at maturity.
|
Trigger
level:
|
, which is equal to 80% of the initial index value
|
Payment at maturity:
|
If a trigger event has occurred
on any day during the first two years of the term of the securities, the securities will not be redeemed prior to maturity and
you will receive at maturity an amount in cash per $1,000 security equal to:
· If
the final index value is greater than or equal to the trigger level: $1,000 + ($1,000 × index strike return)
Under these circumstances,
you will receive a positive return on your investment.
· If
the final index value is less than the trigger level: $1,000 + ($1,000 × index strike return)
Under these circumstances, you
will lose some or a significant portion of your investment. However, under no circumstances will the securities pay less than
$200 per security at maturity.
|
Index strike return:
|
(final index value – trigger level) / initial index value
|
Initial index value:
|
, which is the index closing value of the underlying index on the pricing date
|
|
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 $992.30 per security, or within $20.00 of that estimate. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions and fees(1)
|
Proceeds to us(2)
|
Per security
|
$1,000
|
$0
|
$1,000
|
Total
|
$
|
$
|
$
|
|
(1)
|
MS
& Co. will act as the agent for this offering and will not receive a sales commission
in connection with sales of 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.
|
|
(2)
|
See
“Use of proceeds and hedging” on page 25.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 10.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this preliminary pricing supplement 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 preliminary pricing supplement together
with the related prospectus 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 preliminary pricing supplement.
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
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Terms continued from previous page:
|
Minimum payment at maturity:
|
$200 per security (20% of the stated principal amount)
|
Valuation date:
|
November 7, 2024, subject to postponement for non-index business days and certain market disruption events
|
Final index value:
|
The index closing value of the underlying index on the valuation date
|
Monitoring periods:
|
There are 24 monthly monitoring periods during the first two years of the term of the securities. The first monitoring period will consist of each index business day on which no market disruption event occurs from but excluding the pricing date to and including the first monitoring period end-date. Each subsequent monitoring period will consist of each index business day on which no market disruption event occurs from but excluding the prior monitoring period end-date to and including the following monitoring period end-date.
|
Monitoring period end-dates:
|
For the first two years of the term of the securities, monthly, as set forth under “Monitoring Period End-Dates and Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events . We also refer to November 8, 2021 as the final monitoring period end-date.
|
Coupon payment dates:
|
For the first two years of the term of the securities, monthly, as set forth under “Monitoring Period End-Dates and Coupon Payment Dates” below. If any coupon payment date is not a business day, that coupon payment, if any, will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. There will under no circumstances be any coupon payments made after the first two years of the term of the securities.
|
CUSIP / ISIN:
|
61769HP58 / US61769HP587
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Monitoring Period End-Dates
and Coupon Payment Dates
Monitoring Period End-Dates
|
Coupon Payment Dates
|
December 9, 2019
|
December 12, 2019
|
January 7, 2020
|
January 10, 2020
|
February 7, 2020
|
February 12, 2020
|
March 9, 2020
|
March 12, 2020
|
April 7, 2020
|
April 13, 2020
|
May 7, 2020
|
May 12, 2020
|
June 8, 2020
|
June 11, 2020
|
July 7, 2020
|
July 10, 2020
|
August 7, 2020
|
August 12, 2020
|
September 8, 2020
|
September 11, 2020
|
October 7, 2020
|
October 13, 2020
|
November 9, 2020
|
November 13, 2020
|
December 7, 2020
|
December 10, 2020
|
January 7, 2021
|
January 12, 2021
|
February 8, 2021
|
February 11, 2021
|
March 8, 2021
|
March 11, 2021
|
April 7, 2021
|
April 12, 2021
|
May 7, 2021
|
May 12, 2021
|
June 7, 2021
|
June 10, 2021
|
July 7, 2021
|
July 12, 2021
|
August 9, 2021
|
August 12, 2021
|
September 7, 2021
|
September 10, 2021
|
October 7, 2021
|
October 13, 2021
|
November 8, 2021
|
November 12, 2021
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Investment Summary
Contingent Coupon Securities
Principal at Risk Securities
The Contingent Coupon Securities with One-Time Automatic Redemption
Feature Linked to the S&P 500® Index due November 12, 2024, With Contingent Monthly Coupons Potentially Payable
During Only the First Two Years of the Term of the Securities, which we refer to as the securities, provide an opportunity for
investors to earn a contingent monthly coupon at an annual rate of at least 4.05% (corresponding to approximately $3.375 per month
per security) but only if and for as long as the index closing value of the underlying index has remained greater than or equal
to 80% of the initial index value, which we refer to as the trigger level, on each day during the first two years of the
term of the securities. The actual contingent monthly coupon rate will be determined on the pricing date. If the index closing
value of the underlying index is less than the trigger level on any day during the first two years of the term of the securities,
a trigger event will have occurred and you will not receive any contingent monthly coupon payment for the corresponding monthly
period or for any subsequent monthly period for the remainder of the term of the securities. Therefore, investors in the
securities will permanently forfeit their ability to receive subsequent contingent monthly coupon payments (which would otherwise
be payable only during the first two years of the term of the securities) if the index closing value declines below the trigger
level on any day during the first two years of the term of the securities. In addition, if a trigger event does not
occur during the first two years of the term of the securities, the securities will be automatically redeemed at the end of the
first two years of the term of the securities, and investors will receive the early redemption payment equal to the stated principal
amount of the securities and the final contingent monthly coupon payment but will not participate in any performance of the underlying
index. No further payments will be made on the securities once they have been redeemed. However, if a trigger event does occur
on any day during the first two years of the term of the securities, investors will receive no further contingent monthly coupon
payments and the securities will not be redeemed prior to maturity. Instead, investors will receive a return at maturity based
on the performance of the underlying index over the term of the securities. Therefore, if a trigger event occurs and the underlying
index recovers such that the final index value is greater than the trigger level, investors will receive a positive return on their
investment. However, if a trigger event occurs and the final index value is less than the trigger level, investors will lose 1%
for every 1% of the initial index value that the underlying index declines below the trigger level, subject to the minimum payment
at maturity of 20% of the stated principal amount. Under these circumstances, you will lose some or a significant portion of your
investment. Investors may lose up to 80% of the stated principal amount of the securities.
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.
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 $992.30, or within $20.00 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 contingent monthly coupon rate, the trigger level 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.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the 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.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Key Investment Rationale
The securities do not guarantee repayment of more than 20% of
principal at maturity and do not provide for the regular payment of interest. Instead, the securities offer investors an opportunity
to earn a contingent monthly coupon during only the first two years of the securities at a rate of at least 4.05% per annum (to
be determined on the pricing date) but only if and for as long as the index closing value of the underlying index has remained
greater than or equal to 80% of the initial index value, which we refer to as the trigger level, on each day during the
first two years of the term of the securities. Additionally, if a trigger event has not occurred during the first two years of
the term of the securities, the securities will be automatically redeemed at the end of the first two years of the term of the
securities, and investors will receive the stated principal amount of the securities plus the final contingent monthly coupon
payment but will not participate in any performance of the underlying index. No further payments will be made on the securities
once they have been redeemed. However, if a trigger event occurs on any day during the first two years of the term of the
securities, investors will receive no further contingent monthly coupon payments and the securities will not be redeemed prior
to maturity. Instead, investors will receive a return at maturity based on the performance of the underlying index. The payment
at maturity may be up to 80% less than the stated principal amount of the securities. The return on the securities will vary depending
on whether or not a trigger event has occurred during the first two years of the term of the securities, as follows:
Scenario
1: A trigger event does not occur on any day during the first two years of the term of the securities, and so the securities
are automatically redeemed after two years.
|
This scenario assumes that the underlying index closes at or above the trigger level on every day during the first two years of the term of the securities. Therefore, a trigger event has not occurred and investors will receive the contingent monthly coupon on each coupon payment date during the first two years of the term of the securities. In addition, the securities will be automatically redeemed at the end of the first two years of the term of the securities, and investors will receive the stated principal amount plus the final contingent monthly coupon payment. No further payments will be made on the securities once they have been redeemed, and investors will not participate in any appreciation of the underlying index.
|
Scenario
2: A trigger event occurs on any day during the first two years of the term of the securities. Investors will forfeit
all subsequent contingent monthly coupons and may suffer a loss of principal at maturity.
|
This scenario assumes that the underlying index closes
below the trigger level on any day during the first two years of the term of the securities. Therefore, a trigger event
has occurred. In this scenario, investors will receive contingent monthly coupons only for the monitoring period(s) prior to the
monitoring period in which the trigger event occurs, if any. Therefore, investors either do not receive any contingent monthly
coupons during the first two years of the term of the securities or they receive contingent monthly coupons on only a limited
number of coupon payment dates during the first two years of the term of the securities.
In addition, because a trigger event has occurred, the
securities will not be redeemed prior to maturity and, at maturity, investors will receive a return based on the performance of
the underlying index over the term of the securities. This means that if the underlying index recovers such that the final index
value is greater than the trigger level, investors will receive a positive return on their investment. However, if the final index
value is less than the trigger level, investors will lose 1% for every 1% of the initial index value that the underlying index
declines below the trigger level, subject to the minimum payment at maturity of 20% of the stated principal amount. Investors
may lose up to 80% of the stated principal amount of the securities.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
How the Contingent Coupon Securities Work
Monitoring Period End-Dates
|
|
Automatic
Call
|
|
You will receive a contingent monthly
coupon on each coupon payment date during the first two years of the term of the securities.
The securities will be automatically redeemed
after the first two years of the term of the securities and you will receive (a) $1,000 plus (b) the contingent monthly
coupon applicable to the final coupon payment date.
No further payments will be made on the
securities once they have been redeemed, and you will not participate in any performance of the underlying index.
|
|
|
|
No contingent monthly coupon payment
will be made on the applicable coupon payment date or on any subsequent coupon payment date. The securities will not
be redeemed prior to maturity. Investors will receive no further contingent monthly coupon payments for the remainder of the
term of the securities, and investors will be exposed to the performance of the underlying index at maturity.
|
Payment at Maturity (applicable only if a trigger event occurs on any day during the first two years of the term of the securities)
|
You will receive:
If the final index value is greater
than or equal to the trigger level:
$1,000 + ($1,000 × index strike return)
Under these circumstances, you will receive
a positive return on your investment.
If the final index value is less
than the trigger level:
$1,000 + ($1,000 × index strike
return)
Under these circumstances, you
will lose some or a signficant portion of your investment. Investors may lose up to 80% of the stated principal amount at maturity.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples are for illustrative purposes
only. The actual initial index value and trigger level will be determined on the pricing date. Any payment on the securities is
subject to our credit risk. The numbers in the hypothetical examples may be rounded for ease of analysis. The below examples are
based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Hypothetical initial index value:
|
3,000
|
Hypothetical trigger level:
|
2,400, which is 80% of the hypothetical initial index value
|
Hypothetical contingent monthly coupon:
|
4.05% per annum (corresponding to $3.375 per month per security)*
|
Minimum payment at maturity:
|
$200 per security
|
* The actual contingent 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 payment of $3.375 is used in these examples for ease of analysis.
|
Example 1: A trigger event HAS NOT occurred
on any day during the first two years of the term of the securities.
Date
|
Trigger event has occurred on or prior to monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$3.375
|
Second monitoring period end-date
|
No
|
$3.375
|
Third through twenty-third monitoring period end-dates
|
No
|
$3.375 each (21 x $3.375 = $70.875)
|
Twenty-fourth monitoring period end-date
|
No
|
$1,003.375 (early redemption payment)
|
Total payments (over two years)
|
|
$1,081.00 (contingent monthly coupon payments + early redemption payment)
|
Because a trigger event has not occurred during
the first two years of the term of the securities, investors receive the contingent monthly coupon payment on each coupon payment
date during the first two years of the term of the securities. Additionally, because a trigger event has not occurred during the
first two years of the term of the securities, the securities are automatically redeemed at the end of the first two years of the
term of the securities. Investors receive the early redemption payment, which equals $1,003.375 (equal to the stated principal
amount of $1,000 plus the final contingent monthly coupon payment). When added to the contingent monthly coupon payments received
with respect to the prior coupon payment dates, the total amount paid for each $1,000 principal amount of securities over the two-year
term of the securities is $1,081.00. Investors do not participate in any performance of the
underlying index because a trigger event has not occurred during the first two years of the term of the securities. No further
payments will be made on the securities once they have been redeemed.
Example 2: A trigger event HAS occurred
on or prior to the first monitoring period end-date, and the final index value is less than the trigger level.
Date
|
Trigger event has occurred on or prior to monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
Yes
|
$0
|
Second monitoring period end-date
|
Yes
|
$0
|
Third through twenty-fourth monitoring period end-dates
|
Yes
|
$0
|
Valuation date (final index value = 900)
|
N/A
|
$500.00
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Total payments over the five-year term of the securities
|
|
$500.00
|
Because a trigger event has occurred on or
prior to the first monitoring period end-date, investors receive no contingent monthly coupon payment for that monthly period or
for any subsequent monthly period during the first two years of the term of the securities. Therefore, investors receive no contingent
monthly coupon payments. Additionally, the securities are not redeemed prior to maturity. Because the final index value is less
than the trigger level, investors lose 1% of their investment for every 1% of the initial index value that the final index
value is less than the trigger level, subject to the minimum payment at maturity. The payment at maturity is $500.00 per $1,000
principal amount of securities, representing a substantial loss on the initial investment, calculated as follows:
$1,000 + ($1,000 ×
(900 – 2,400 / 3,000))
= $1,000 + ($1,000 ×
-0.50) = $500.00
Example 3: A trigger event HAS occurred
for the first time between the third monitoring period end-date and the fourth monitoring period end-date, and the final index
value is greater than or equal to the trigger level.
Date
|
Trigger event has occurred on or before monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$3.375
|
Second monitoring period end-date
|
No
|
$3.375
|
Third monitoring period end-date
|
No
|
$3.375
|
Fourth monitoring period end-date
|
Yes
|
$0
|
Fifth through twenty-fourth monitoring period end-dates
|
Yes
|
$0
|
Valuation date (final index value = 2,850)
|
N/A
|
$1,150.00
|
Total payments over the five-year term of the securities
|
|
$1,160.125
|
Because a trigger event has occurred between
the third monitoring period end-date and the fourth monitoring period end-date, investors receive no contingent monthly coupon
payment for the fourth monthly period or for any subsequent monthly period. Additionally, the securities are not redeemed prior
to maturity. The underlying index subsequently recovers, and the final index value is greater than the trigger level. Because a
trigger event has occurred and the final index value is greater than the trigger level, the payment at maturity will be
$1,150.00 per $1,000 principal amount of securities, calculated as follows:
$1,000 + ($1,000 ×
(2,850 – 2,400 / 3,000))
$1,000 + ($1,000 ×
0.15) = $1,150.00
When added to the contingent monthly coupon
payments received with respect to the prior monitoring period end-dates, the total amount paid for each $1,000 principal amount
of securities over the five-year term of the securities is $1,160.125.
Example 4: A trigger event HAS occurred
for the first time between the fourteenth monitoring period end-date and the fifteenth monitoring period end-date, and the final
index value is less than the trigger level.
Date
|
Trigger event has occurred on or before monitoring period end-date
|
Payment (per $1,000 principal amount of securities)
|
First monitoring period end-date
|
No
|
$3.375
|
Second monitoring period end-date
|
No
|
$3.375
|
Third monitoring period end-date
|
No
|
$3.375
|
Fourth monitoring period end-date
|
No
|
$3.375
|
Fifth monitoring period end-date
|
No
|
$3.375
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
Sixth monitoring period end-date
|
No
|
$3.375
|
Seventh monitoring period end-date
|
No
|
$3.375
|
Eighth monitoring period end-date
|
No
|
$3.375
|
Ninth monitoring period end-date
|
No
|
$3.375
|
Tenth monitoring period end-date
|
No
|
$3.375
|
Eleventh monitoring period end-date
|
No
|
$3.375
|
Twelfth monitoring period end-date
|
No
|
$3.375
|
Thirteenth monitoring period end-date
|
No
|
$3.375
|
Fourteenth monitoring period end-date
|
No
|
$3.375
|
Fifteenth monitoring period end-date
|
Yes
|
$0
|
Sixteenth through twenty-fourth monitoring period end-dates
|
Yes
|
$0
|
Valuation date (final index value = 300)
|
N/A
|
$300.00
|
Total payments over the five-year term of the securities
|
|
$347.25
|
Because a trigger event has occurred between
the fourteenth monitoring period end-date and the fifteenth monitoring period end-date, investors receive no contingent monthly
coupon payment for the fifteenth monthly period or for any subsequent monthly period. Additionally, the securities are not redeemed
prior to maturity. Because the final index value is less than the trigger level, investors lose 1% of their investment for
every 1% of the initial index value that the final index value is less than the trigger level, subject to the minimum payment at
maturity. The payment at maturity is $300.00 per $1,000 principal amount of securities, representing a substantial loss on the
initial investment, calculated as follows:
$1,000 + ($1,000 ×
(300 – 2,400 / 3,000))
$1,000 + ($1,000 ×
-0.70) = $300.00
When added to the contingent monthly coupon
payments received with respect to the prior monitoring period end-dates, the total amount paid for each $1,000 principal amount
of securities over the five-year term of the securities is $347.25.
If a trigger event occurs on any day during
the first two years of the term of the securities, you will receive no subsequent contingent monthly coupon payments and the securities
will not be redeemed prior to maturity. Under these circumstances, you will be exposed to the performance of the underlying index
at maturity, and if the final index value is less than the trigger level, you will lose some or a significant portion of your investment.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
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 index supplement and prospectus. You should also consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities provide a minimum payment at maturity
of only 20% of your principal.
The terms of the securities differ from those of ordinary debt securities in that the securities
do not guarantee the payment of regular interest and provide a minimum payment at maturity
of only 20% of the stated principal amount at maturity. If a trigger event has occurred on any day during the first two
years of the term of the securities and the final index value is less than the trigger level, you will lose 1% of the principal
amount of your securities for every 1% of the initial index value that the final index value is less than the trigger level, subject
to the minimum payment at maturity of 20% of the principal amount of the securities. Accordingly,
investors may lose up to 80% of the stated principal amount of the securities.
|
|
§
|
If a trigger event occurs, you will forfeit all subsequent coupons and you will be exposed
to the performance of the underlying index at maturity. If a trigger event occurs on any day during the first two years of
the term of the securities, you will receive no subsequent contingent monthly coupon payments and the securities will not be redeemed
prior to maturity. Under these circumstances, you will be exposed to the performance of the underlying index at maturity, and if
the final index value is less than the trigger level, you will lose some or a significant portion of your investment. For purposes
of determining whether or not a trigger event has occurred, the index closing value will be monitored on every day during
the first two years of the term of the securities, and therefore it is more likely that a trigger event will occur than if the
index closing value were monitored less frequently.
|
|
§
|
The securities do not guarantee the payment of any interest. The opportunity to receive contingent
monthly coupon payments will exist only during the first two years of the term of the securities, and it will be permanently forfeited
if a trigger event occurs. The securities do not guarantee the payment of any interest. The contingent monthly coupon payments,
if any, will be potentially available during only the first two years of the term of the securities. Moreover, if the index closing
value of the underlying index is less than the trigger level on any day during the first two years of the term of the securities,
you will not receive a contingent monthly coupon payment for that monthly period or for any subsequent monthly period. Even
if the index closing value of the underlying index subsequently appreciates following the occurrence of a trigger event, you will
receive no further contingent monthly coupon payments. A trigger event could occur as early as during the first monitoring period,
in which case you will receive no contingent monthly coupon payments over the entire 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.
Additionally, if a trigger event occurs on any day during the first two years of the term of the securities and the final index
value is less than the trigger level, investors will lose some or a significant portion of their investment at maturity.
|
|
§
|
If a trigger event does not occur during the first
two years of the term of the securities, the securities will be automatically redeemed at the end of the first two years of the
term of the securities, and the appreciation potential of the securities will be limited to the contingent monthly coupon payments
that will be paid during the first two years of the term of the securities. If a trigger
event does not occur during the first two years of the term of the securities, the securities will be automatically redeemed after
the first two years of the term of the securities and you will not participate in the performance of the underlying index. Under
these circumstances, the return on the securities will be limited to the contingent monthly coupon payments, regardless of any
appreciation in the value of the underlying index, which may be significant. If you receive all available contingent monthly coupon
payments during the first two years of the term of the securities because a trigger event does not occur, you will receive only
the principal amount of your securities (plus the final contingent monthly coupon payment) upon early redemption, and you will
not benefit from any appreciation of the underlying index.
|
|
§
|
The market price of the securities may be influenced by many unpredictable factors. Several
factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price
at which MS & Co. may be willing to purchase or sell the securities in the secondary market, including:
|
|
o
|
whether a trigger event has occurred on any day during the first two years of the term of the securities,
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the S&P 500® Index,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying index or securities markets generally and which may affect the value of the underlying index,
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
|
o
|
dividend rates on the securities underlying the S&P 500® Index,
|
|
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 S&P 500® Index and changes in the constituent stocks of such index, and
|
|
o
|
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. Some or all of these factors will influence the price that you will receive if you sell your securities prior to maturity.
For example, you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security
if the value of the S&P 500® Index at the time of sale is near or below the trigger level or if market interest
rates rise.
You cannot predict the future performance
of the S&P 500® Index based on its historical performance. The index closing value of the underlying index may
decrease and be below the trigger level on any day during the first two years of the term of the securities so that you will forfeit
some or all of the contingent monthly coupon payments, or be below the trigger level on the valuation date so that you will lose
some or a significant portion of your initial investment in the securities. See “S&P 500® Index 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 on any coupon payment date and 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.
|
|
§
|
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. Investors in the securities will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to the stocks that constitute the underlying index.
|
|
§
|
If a trigger event occurs on any day during the first two years of the term of the securities,
the amount payable at maturity 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. If a trigger event occurs on any day during the first two years of the term of the securities,
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 will be 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 securities may be higher than the index closing value on the valuation date, if a trigger event occurs on any day during the
first two years of the term of the securities, the payment at maturity will be based solely on the index closing value on the valuation
date.
|
|
§
|
Reinvestment risk. The term of your investment in the securities may be shortened
due to the automatic early redemption feature of the securities. If the securities are redeemed prior to maturity, you will not
participate in any appreciation of the underlying index and may be forced to invest in a lower interest rate environment and may
not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities be redeemed at
any time other than at the end of the first two years of the term of the securities.
|
|
§
|
Adjustments to the underlying index could adversely affect the value of the securities. The
publisher of the underlying index may add, delete or substitute the component stocks of the underlying index or make other methodological
changes that could
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
change the value of the underlying
index. Any of these actions could adversely affect the value of the securities. The publisher of the underlying index may also
discontinue or suspend calculation or publication of the 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, the determination of whether the contingent monthly coupon will
be payable on the securities and the determination of the payment at maturity will be based on the value of the underlying index,
based on the closing prices of the stocks constituting the 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 the underlying index
last in effect prior to such discontinuance.
|
§
|
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 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.
|
§
|
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.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
|
§
|
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 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 trigger level, which is the (i) value at or above which the
underlying index must close on each day during the first two years of the term of the securities so that you receive a contingent
monthly coupon on the securities, and (ii) the value at or above which the underlying index must close on the valuation date (if
the securities are not redeemed prior to maturity) so that you do not lose some or a significant portion of your investment at
maturity. Additionally, such hedging or trading activities during the term of the securities could potentially affect the value
of the underlying index during the term of the securities and accordingly, the payout to you at maturity, and whether we pay a
contingent monthly coupon on the securities.
|
|
§
|
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,
the trigger level, the daily index closing value, including the final index value, whether a trigger event has occurred, whether
the contingent monthly coupon will be paid on each coupon payment date, whether a market disruption event has occurred and the
payment that you will 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 index closing value in the event of a
market disruption event or discontinuance of the underlying index. These potentially subjective determinations may affect the payout
to you at maturity. For further information regarding these types of determinations, see “Additional Terms of the Securities—Additional
Terms—Calculation agent,” “—Market disruption event,” “—Postponement of valuation date,”
“—Discontinuance of the 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.
|
|
§
|
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. It is also
possible that a trigger event would result in a deemed termination and reissuance of the securities for U.S. federal income tax
purposes. In that case, a U.S. Holder might be required to recognize gain or loss (subject to the possible application of the wash
sale rules) with respect to the securities on the first date on which a trigger event occurs. 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 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.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
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, 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,
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 possibility of a deemed exchange upon the occurrence of a trigger event, the issues
presented by the IRS notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
S&P 500® Index Summary
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 November 1, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Share Price:
|
3,066.91
|
52 Weeks Ago:
|
2,740.37
|
52 Week High (on 11/1/2019):
|
3,066.91
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
The following graph sets forth
the daily values of the underlying index for the period from January 1, 2014 through November 1, 2019. The related table sets forth
the published high and low values, as well as end-of-quarter closing values, of the underlying index for each quarter in the same
period. The closing value of the underlying index on November 1, 2019 was 3,066.91. We obtained the information in the table below
from Bloomberg Financial Markets, without independent verification. The historical values of the underlying index should not be
taken as an indication of future performance, and no assurance can be given as to the closing value of the underlying index on
any day during the term of the securities, including on the valuation date.
Underlying
Index Daily Closing Values
January 1,
2014 to November 1, 2019
|
|
* The red solid line indicates the hypothetical trigger level, assuming the closing value on November 1, 2019 were the initial index value.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
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
|
2,954.18
|
2,744.45
|
2,941.76
|
Third Quarter
|
3,025.86
|
2,840.60
|
2,976.74
|
Fourth Quarter (through November 1, 2019)
|
3,066.91
|
2,887.61
|
3,066.91
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. For more information, see “S&P 500® Index” in
the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
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 prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
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.
|
Day
count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying
index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Denominations:
|
$1,000 per security and integral multiples 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 upon early redemption shall be payable to the person to whom the early redemption payment 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 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 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 the 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:
|
A day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for the 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:
|
The official closing value of the underlying index, or any successor index as defined under “Discontinuance of the 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, as determined by the calculation agent. In certain circumstances, the index closing value will be based on the alternate calculation of the underlying index described under “Discontinuance of the underlying index; alteration of method of calculation” below.
|
Market
disruption event:
|
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 the underlying index (or the 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
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
|
the value of the underlying index
(or the 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 the underlying index (or the 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, if trading in a security included in the underlying index is materially suspended or materially limited at
that time, then the relevant percentage contribution of that security to the value of the underlying index shall be based on a
comparison of (x) the portion of the value of the underlying index attributable to that security relative to (y) the overall value
of the 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: (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 the 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 the 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 the
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 the 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 the valuation date:
|
The valuation date is subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If the scheduled valuation date is not an index business
day or if there is a market disruption event on such day, the valuation date shall be the next succeeding index business day on
which there is no market disruption event; provided that if a market disruption event has occurred on each of the five
index business days immediately succeeding the scheduled valuation date, then (i) such fifth succeeding index business day shall
be deemed to be the valuation date, notwithstanding the occurrence of a market disruption event on such day and (ii) with respect
to such fifth index business day on which a market disruption event occurs, 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 the 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 the 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 early redemption date, if applicable):
|
If any scheduled coupon payment date (including the early redemption date, if applicable) is not a business day, that contingent monthly coupon (or early redemption payment, if applicable), if any, shall be paid on the next succeeding business day. No adjustment shall be made to any payment made on a postponed date.
|
Discontinuance of the underlying
index; alteration of method of calculation:
|
If the underlying index publisher discontinues publication of the underlying index and the 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 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 is to be determined, and, to the extent the index closing value of the successor index differs from the index closing value of the underlying index at the time of such substitution, proportionate adjustments will be made by the calculation agent to the initial index value and trigger level.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
|
Upon any selection by the calculation agent of the 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 the underlying index publisher discontinues publication of
the underlying index or the successor index prior to, and such discontinuance is continuing on, any day on which an index closing
value must be determined 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 date. The index closing value of the underlying
index or the 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 the underlying index may adversely affect
the value of the securities.
If at any time, the method of calculating the underlying
index or the successor index, or the value thereof, is changed in a material respect, or if the underlying index or the 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 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 the underlying index or the 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 the underlying index or the successor
index, as adjusted. Accordingly, if the method of calculating the underlying index or the 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 the underlying
index), then the calculation agent will adjust such index in order to arrive at a value of the underlying index or the successor
index as if it had not been 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 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.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities
|
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 valuation 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
· 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 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 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 valuation 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.
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 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 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
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due November 12, 2024
With Contingent Monthly Coupons Potentially Payable During Only the First Two Years of the Term of the Securities
Principal at Risk Securities