Observation Dates and Coupon
Payment Dates
Observation Dates
|
Coupon Payment Dates
|
N/A
|
March 26, 2019
|
N/A
|
June 26, 2019
|
N/A
|
September 26, 2019
|
N/A
|
December 27, 2019
|
N/A
|
March 26, 2020
|
N/A
|
June 25, 2020
|
N/A
|
September 24, 2020
|
N/A
|
December 24, 2020
|
N/A
|
March 25, 2021
|
N/A
|
June 24, 2021
|
N/A
|
September 24, 2021
|
N/A
|
December 27, 2021
|
N/A
|
March 24, 2022
|
N/A
|
June 24, 2022
|
N/A
|
September 26, 2022
|
N/A
|
December 27, 2022
|
N/A
|
March 24, 2023
|
N/A
|
June 26, 2023
|
N/A
|
September 26, 2023
|
N/A
|
December 27, 2023
|
March 21, 2024
|
March 26, 2024
|
June 21, 2024
|
June 26, 2024
|
September 23, 2024
|
September 26, 2024
|
December 23, 2024
|
December 27, 2024
|
March 21, 2025
|
March 26, 2025
|
June 23, 2025
|
June 26, 2025
|
September 22, 2025
|
September 25, 2025
|
December 22, 2025
|
December 26, 2025
|
March 23, 2026
|
March 26, 2026
|
June 22, 2026
|
June 25, 2026
|
September 21, 2026
|
September 24, 2026
|
December 21, 2026
|
December 24, 2026
|
March 22, 2027
|
March 25, 2027
|
June 21, 2027
|
June 24, 2027
|
September 21, 2027
|
September 24, 2027
|
December 21, 2027
|
December 27, 2027
|
March 21, 2028
|
March 24, 2028
|
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
June 21, 2028
|
June 26, 2028
|
September 21, 2028
|
September 26, 2028
|
December 21, 2028
|
December 27, 2028
|
March 21, 2029
|
March 26, 2029
|
June 21, 2029
|
June 26, 2029
|
September 21, 2029
|
September 26, 2029
|
December 21, 2029
|
December 27, 2029
|
March 21, 2030
|
March 26, 2030
|
June 21, 2030
|
June 26, 2030
|
September 23, 2030
|
September 26, 2030
|
December 23, 2030
|
December 27, 2030
|
March 21, 2031
|
March 26, 2031
|
June 23, 2031
|
June 26, 2031
|
September 22, 2031
|
September 25, 2031
|
December 22, 2031
|
December 26, 2031
|
March 22, 2032
|
March 25, 2032
|
June 21, 2032
|
June 24, 2032
|
September 21, 2032
|
September 24, 2032
|
December 21, 2032
|
December 27, 2032
|
March 21, 2033
|
March 24, 2033
|
June 21, 2033
|
June 24, 2033
|
September 21, 2033
|
September 26, 2033
|
December 21, 2033 (final observation date)
|
December 27, 2033 (maturity date)
|
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Investment Overview
Contingent Income Securities
Principal
at Risk Securities
Contingent Income Securities due December 27, 2033 Payments on
the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
(the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment of interest
after the first 5 years. For the first 5 years, the securities will pay a fixed quarterly coupon at the rate specified below. Thereafter,
the securities will pay a contingent quarterly coupon
but only if
the index closing value of
each of the Russell 2000
®
Index and the S&P 500
®
Index
(which we refer to together as the “underlying indices”) is
at
or above
65% of its respective initial index value, which we refer to as the coupon barrier level, on the related observation
date. If the index closing value
of either underlying index
is less than the coupon barrier level for such index on any
observation date after the first 5 years, we will pay no coupon for the related quarterly period. It is possible that the index
closing value of one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of
time or even throughout years 6-15 so that you will receive few or no contingent quarterly coupons during that period. We refer
to the coupon on the securities after the first 5 years as contingent, because there is no guarantee that you will receive a coupon
payment on any coupon payment date during that period. Even if an underlying index were to be at or above the coupon barrier level
for such index on some quarterly observation dates, it may fluctuate below the coupon barrier level on others. In addition, even
if one underlying index were to be at or above the coupon barrier level for such index on all quarterly observation dates, you
will receive a contingent quarterly coupon only with respect to the observation dates on which the other underlying index is also
at or above the coupon barrier level for such index, if any. At maturity, if the final index value of
each
underlying index
is greater than or equal to 50% of the respective initial index value, which we refer to as the downside threshold level, the payment
at maturity will be the stated principal amount, and, if the final index value of
each
underlying index is also greater
than or equal to its respective coupon barrier level, the related contingent quarterly coupon. If, however, the final index value
of
either
underlying index is less than its downside threshold level, investors will be exposed to the decline in the worst
performing underlying index on a 1-to-1 basis and will receive a payment at maturity that is less than 50% of the stated principal
amount of the securities and could be zero.
Accordingly, investors in the securities must be willing to accept the risk of losing
their entire initial investment based on the performance of either index and also the risk of not receiving any contingent quarterly
coupons after the first 5 years.
Maturity:
|
15 years
|
Contingent
quarterly coupon:
|
Years 1-5: On all coupon payment dates through December 2023,
a fixed coupon at an annual rate of 6.50% (corresponding to approximately $16.25 per quarter per security) is paid quarterly.
Years 6-15: Beginning with the March 2024 coupon payment date,
a
contingent
coupon at an annual rate of 6.50% (corresponding to approximately $16.25 per quarter per security) is paid
quarterly
but only if
the closing value of
each underlying index
is
at or above
its respective coupon barrier
level on the related observation date.
If, on any observation date, the closing value of either underlying
index is less than the coupon barrier level for such index, we will pay no coupon for the applicable interest period. It is possible
that one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or even
throughout years 6-15 so that you will receive few or no contingent quarterly coupons during that period.
|
Payment
at maturity:
|
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount, and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent quarterly coupon with
respect to the final observation date.
If the final index value of
either
underlying index is
less than
its respective downside
threshold level: (i) the stated principal amount
multiplied
by
(ii) the index performance factor of the worst performing underlying
index. Under these circumstances, the payment at maturity will be less than 50% of the stated principal amount of the securities
and could be zero.
|
We are using this preliminary pricing supplement to solicit from
you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at
which we accept such offer by notifying the relevant agent. We reserve the right to change the terms of, or reject any offer to
purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will
notify you.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Morgan Stanley clients may contact their local Morgan Stanley
branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).
All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured
Investment Sales at (800) 233-1087.
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 $911.40, or within $40.00 of that estimate. Our estimate of the value of the securities
as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent quarterly coupon rate, the coupon barrier levels and the downside threshold levels, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying indices, may vary from, and be
lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and
other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully
deducted upon issuance, for a period of up to 18 months following the issue date, to the extent that MS & Co. may buy or sell
the securities in the secondary market, absent changes in market conditions, including those related to the underlying indices,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those
higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Key Investment Rationale
The securities provide for fixed quarterly coupon payments at
the rate specified herein for the first 5 years. Thereafter, the securities do not provide for the regular payment of interest
and instead will pay a contingent quarterly coupon
but only if
the index closing value of
each underlying index
is
at or above
65% of its initial index value, which we refer to as the coupon barrier level, on the related observation date.
The following scenarios are for illustration purposes only to demonstrate how the payment at maturity and contingent quarterly
coupon are calculated, and do not attempt to demonstrate every situation that may occur. Accordingly, the contingent quarterly
coupon may be payable with respect to none of, or some but not all of, the quarterly periods during years 6-15, and the payment
at maturity may be less than 50% of the stated principal amount and could be zero. Investors will not participate in any appreciation
in either underlying index.
Scenario 1:
A contingent quarterly coupon is paid for all interest periods, and investors receive principal back at maturity, which is the best-case scenario.
|
This scenario assumes that during years 6-15, each underlying index closes at or above its respective coupon barrier level on every quarterly observation date. Investors receive the fixed quarterly coupon for the quarterly interest periods during the first 5 years, and investors receive the contingent quarterly coupon for each interest period during years 6-15. At maturity, each underlying index closes above its respective downside threshold level and coupon barrier level, and so investors receive the stated principal amount and the contingent quarterly coupon with respect to the final observation date.
|
Scenario 2:
A contingent quarterly coupon is paid for some, but not all, interest periods, and investors receive principal back at maturity.
|
This scenario assumes that each underlying index closes at or above its respective coupon barrier level
on some quarterly observation dates after the first 5 years, but one or both underlying indices close below the respective coupon
barrier level(s) for such index on the others. Investors receive the fixed quarterly coupon for the quarterly interest periods
during the first 5 years. Investors receive the contingent quarterly coupon for the quarterly interest periods during years 6-15
for which the index closing value of each underlying index is at or above its respective coupon barrier level on the related observation
date, but not for the interest periods for which one or both underlying indices close below the respective coupon barrier level(s)
on the related observation date. On the final observation date, each underlying index closes at or above its downside threshold
level. At maturity, investors receive the stated principal amount and, if the final index value of each underlying index is also
greater than or equal to its respective coupon barrier level, the contingent quarterly coupon with respect to the final observation
date.
|
Scenario 3:
No contingent quarterly coupon is paid for any interest period during years 6-15, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that one or both underlying indices close below the respective coupon barrier level(s) on every quarterly observation date during years 6-15. Investors receive the fixed quarterly coupon for the quarterly interest periods during the first 5 years. However, since one or both underlying indices close below the respective coupon barrier level(s) on every quarterly observation date during years 6-15, investors do not receive any contingent quarterly coupon during that period. On the final observation date, one or both underlying indices close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 50% of the stated principal amount and could be zero.
|
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Underlying Indices Summary
Russell 2000
®
Index
The Russell 2000
®
Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks
of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the
2,000 smallest securities that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed
of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity
market. The Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The Russell
2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market.
Information as of market close on November 27, 2018:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,492.855
|
52 Weeks Ago:
|
1,513.309
|
52 Week High (on 8/31/2018):
|
1,740.753
|
52 Week Low (on 2/8/2018):
|
1,463.793
|
For additional information about the Russell 2000
®
Index, see the information set forth under “Russell 2000
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “Russell 2000
®
Index Historical Performance”
below.
S&P 500
®
Index
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.
Information as of market close on November 27, 2018:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,682.17
|
52 Weeks Ago:
|
2,601.42
|
52 Week High (on 9/20/2018):
|
2,930.75
|
52 Week Low (on 2/8/2018):
|
2,581.00
|
For additional information about the S&P 500
®
Index, see the information set forth under “S&P 500
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “S&P 500
®
Index Historical Performance”
below.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity.
The following examples are for illustrative purposes only. For the first 5 years, you will receive a fixed quarterly coupon at
a rate of 6.50% per annum regardless of the performance of the underlying indices. Whether you receive a contingent quarterly coupon
after the first 5 years will be determined by reference to the index closing value of each underlying index on each quarterly observation
date, and the amount you will receive at maturity, if any, will be determined by reference to the final index value of each underlying
index on the final observation date. The actual initial index value, coupon barrier level and downside threshold level for each
underlying index will be determined on the pricing date. All payments on the securities, if any, are subject to our credit risk.
The below examples are based on the following terms:
Contingent Quarterly Coupon:
|
Years 1-5: On all coupon payment dates through December 2023,
a fixed coupon at an annual rate of 6.50% (corresponding to approximately $16.25 per quarter per security) is paid quarterly.
Years 6-15: Beginning with the March 2024 coupon payment date,
a
contingent
coupon at an annual rate of 6.50% (corresponding to approximately $16.25 per quarter per security) is paid
quarterly
but only if
the closing value of
each underlying index
is
at or above
its respective coupon barrier
level on the related observation date.*
If, on any observation date in years 6-15, the closing value
of either underlying index is less than the coupon barrier level for such index, we will pay no coupon for the applicable interest
period. It is possible that one or both underlying indices will remain below the respective coupon barrier level(s) for extended
periods of time or even throughout years 6-15 so that you will receive few or no contingent quarterly coupons during that period.
|
Payment at Maturity:
|
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount, and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent quarterly coupon with
respect to the final observation date.
If the final index value of
either
underlying index is
less than
its respective downside
threshold level: (i) the stated principal amount
multiplied
by
(ii) the index performance factor of the worst performing underlying
index. Under these circumstances, the payment at maturity will be less than 50% of the stated principal amount of the securities
and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the RTY Index: 1,650
With respect to the SPX Index: 2,800
|
Hypothetical Coupon Barrier Level:
|
With respect to the RTY Index: 1,072.50, which is 65% of the
hypothetical initial index value for such index
With respect to the SPX Index: 1,820, which is 65% of the hypothetical initial index value for such index
|
Hypothetical Downside Threshold Level:
|
With respect to the RTY Index: 825, which is 50% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,400, which is 50% of
the hypothetical initial index value for such index
|
* The actual quarterly coupon will be an amount determined by
the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The hypothetical
quarterly coupon of $16.25 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date during years 6-15:
|
Index Closing Value
|
Contingent Quarterly Coupon
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Observation Date 1
|
1,100 (
at or above
coupon barrier level)
|
1,900 (
at or above
coupon barrier level)
|
$16.25
|
Hypothetical Observation Date 2
|
1,200 (
at or above
coupon barrier level)
|
1,000 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
500 (
below
coupon barrier level)
|
2,000 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
500 (
below
coupon barrier level)
|
1,100 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the RTY Index and SPX
Index close at or above their respective coupon barrier levels. Therefore a contingent quarterly coupon of $16.25 is paid on the
relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, one underlying
index closes at or above its coupon barrier level but the other underlying index closes below its coupon barrier level. Therefore,
no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level and accordingly no contingent quarterly coupon is paid on the relevant coupon payment
date.
Beginning after 5 years, you will not receive a contingent
quarterly coupon on any coupon payment date if the closing value of either underlying index is below its respective coupon barrier
level on the related observation date.
How to calculate the payment at maturity:
|
Final Index Value
|
Payment at Maturity
|
|
RTY Index
|
SPX Index
|
|
Example 1:
|
2,000 (
at or above
the downside threshold level and coupon barrier level)
|
3,000 (
at or above
the downside threshold level and coupon barrier level)
|
$1,016.25 (the stated principal amount
plus
the contingent quarterly coupon with respect to the final observation date)
|
Example 2:
|
900 (
at or above
the downside threshold level but
below
the coupon barrier level)
|
1,950 (
at or above
the downside threshold level and coupon barrier level)
|
$1,000 (the stated principal amount)
|
Example 3:
|
1,150 (
at or above
the downside threshold level)
|
1,120 (
below
the downside threshold level)
|
$1,000 x index performance factor of the worst performing underlying = $1,000 x (1,120 / 2,800) = $400
|
Example 4:
|
660 (
below
the downside threshold level)
|
1,800 (
at or above
the downside threshold level)
|
$1,000 x (660/ 1,650) = $400
|
Example 5:
|
412.50 (
below
the downside threshold level)
|
1,120 (
below
the downside threshold level)
|
$1,000 x (412.50 / 1,650) = $250
|
Example 6:
|
660 (
below
the downside threshold level)
|
840 (
below
the downside threshold level)
|
$1,000 x (840 / 2,800) = $300
|
In example 1, the final index values of both the RTY Index and
SPX Index are at or above their downside threshold levels and coupon barrier levels. Therefore, investors receive at maturity the
stated principal amount of the securities and the contingent quarterly coupon with respect to the final observation date. Investors
do not participate in any appreciation of either underlying index.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
In example 2, the final index values of both the RTY Index and
the SPX Index are at or above their downside threshold levels. However, the final index value of the RTY Index is below its coupon
barrier level. Therefore, investors receive at maturity the stated principal amount of the securities but do not receive the contingent
quarterly coupon with respect to the final observation date.
In examples 3 and 4, the final index value of one underlying
index is at or above its downside threshold level but the final index value of the other underlying index is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying index at maturity
and receive at maturity an amount equal to the stated principal amount
times
the index performance factor of the worst performing
underlying index.
Similarly, in examples 5 and 6, the final index value of each
underlying index is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated
principal amount
times
the index performance factor of the worst performing underlying index. In example 5, the RTY Index
has declined 75% from its initial index value to its final index value, while the SPX Index has declined 60% from its initial index
value to its final index value. Therefore, the payment at maturity equals the stated principal amount
times
the index performance
factor of the RTY Index, which is the worst performing underlying index in this example. In example 6, the RTY Index has declined
60% from its initial index value, while the SPX Index has declined 70% from its initial index value to its final index value. Therefore
the payment at maturity equals the stated principal amount
times
the index performance factor of the SPX Index, which is
the worst performing underlying index in this example.
If the final index value of EITHER underlying index is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying index
at maturity, and your payment at maturity will be less than $500 per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income Securities due December 27, 2033
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities