CALCULATION
OF REGISTRATION FEE
|
|
Maximum
Aggregate
|
|
Amount
of Registration
|
Title
of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
|
|
|
|
|
Trigger
Jump Securities due 2020
|
|
$7,398,000
|
|
$896.64
|
June 2019
Pricing Supplement No. 2,171
Registration Statement Nos. 333-221595;
333-221595-01
Dated June 28, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in International
Equities
Trigger Jump Securities Based on the Performance
of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
The Trigger Jump Securities (the “securities”) are
unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan
Stanley. The securities will pay no interest, do not guarantee any return of principal at maturity and have the terms described
in the accompanying product supplement for Jump Securities, index supplement and prospectus, as supplemented or modified by this
document. At maturity, if the shares of the iShares
®
MSCI Emerging Markets ETF, which we refer to as the underlying
shares, have
not depreciated or have appreciated
in value, you will receive for each security that you hold at maturity
the stated principal amount of $10
plus
the upside payment of $1.705. If the underlying shares have
depreciated
in
value but by no more than 10%, you will receive the stated principal amount of your investment. However, if the underlying shares
have
depreciated
by more than 10%, you will be negatively exposed to the full amount of the percentage decline in the underlying
shares and will lose 1% of the stated principal amount for every 1% of decline, without any buffer. The securities are for investors
who seek a return based on the underlying shares and who are willing to risk their principal and forgo current income and upside
returns above the upside payment in exchange for the upside payment feature that applies to a limited range of performance of the
underlying shares.
Investors may lose their entire initial investment in the securities.
The securities are notes issued
as part of MSFL’s Series A Global Medium-Term Notes program.
The securities are not the Buffered Jump Securities described
in the accompanying product supplement for Jump Securities. Unlike the Buffered Jump Securities, the securities do not provide
any protection if the underlying shares depreciate by more than 10%.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
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Morgan Stanley
|
Maturity date:
|
December 31, 2020
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Valuation date:
|
December 28, 2020, subject to postponement for non-trading days and certain market disruption events
|
Underlying shares:
|
Shares of the iShares
®
MSCI Emerging Markets ETF (the “Fund”)
|
Aggregate principal amount:
|
$7,398,000
|
Payment at maturity:
|
·
If the final share price is
greater than or equal to
the initial share price:
$10 + the upside payment
·
If the final share price is
less than
the initial share price but is
greater than or equal to
the trigger
level:
$10
·
If the final share price is
less than
the trigger level:
$10 × share performance factor
Under these circumstances, the payment at maturity
will be less than the stated principal amount of $10, and will represent a loss of more than 10%, and possibly all, of your investment.
|
Upside payment:
|
$1.705 per security (17.05% of the stated principal amount)
|
Share percent change:
|
(final share price – initial share price) / initial share price
|
Share performance factor:
|
final share price / initial share price
|
Initial share price:
|
$42.91, which is the closing price of one underlying share on the pricing date
|
Final share price:
|
The closing price of one underlying share on the valuation date
times
the adjustment factor on such date
|
Adjustment factor:
|
1.0, subject to adjustment in the event of certain events affecting the underlying shares
|
Trigger level:
|
$38.619, which is 90% of the initial share price
|
Stated principal amount / Issue price:
|
$10 per security
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Pricing date:
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June 28, 2019
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Original issue date:
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July 3, 2019 (3 business days after the pricing date)
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CUSIP / ISIN:
|
61769Q154 / US61769Q1546
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$9.678 per security. See “Investment Summary” on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions
|
Proceeds to us
(3)
|
Per security
|
$10
|
$0.20
(1)
|
$9.75
|
|
|
$0.05
(2)
|
|
Total
|
$7,398,000
|
$184,950
|
$7,213,050
|
|
(1)
|
Selected dealers, including Morgan Stanley Wealth Management (an affiliate of the Agent), and their financial advisors will
collectively receive from the Agent, MS & Co., a fixed sales commission of $0.20 for each security they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement for Jump Securities.
|
|
(2)
|
Reflects a structuring fee payable to Morgan Stanley Wealth Management by the Agent or its affiliates of $0.05 for each
security.
|
|
(3)
|
See “Use of proceeds and hedging” on page 16.
|
The securities involve risks
not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 6.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
References to “we,” “us,”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Jump Securities dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 201
7
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
Investment Summary
Trigger Jump Securities
Principal at Risk Securities
The Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020 (the “securities”) can be used:
|
§
|
As an alternative to direct exposure to the underlying shares that provides a fixed positive
return of 17.05% if the underlying shares have not depreciated or have appreciated at all as of the valuation date.
|
§
To enhance returns and potentially outperform the underlying shares in a moderately bullish
scenario.
|
§
|
To obtain limited protection against the loss of principal in the event of a decline of the underlying
shares over the term of the securities, but only if the final share price is greater than or equal to the trigger level.
|
If the final share price is less than the trigger
level, the securities are exposed on a 1:1 basis to the percentage decline of the final share price from the initial share price.
Accordingly, investors may lose their entire initial investment in the securities.
Maturity:
|
Approximately 1.5 years
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Upside payment:
|
$1.705 per security (17.05% of the stated principal amount)
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Minimum payment at maturity:
|
None. Investors may lose their entire initial investment in the securities.
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Trigger level:
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90% of the initial share price
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Coupon:
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None
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Listing:
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The securities will not be listed on any securities exchange
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All payments on the securities are subject to our credit risk.
The original issue price of each security is $10. 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 is less than $10. We estimate that the value of each security on the
pricing date is $9.678.
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 shares. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying shares, instruments based on the underlying shares, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the upside payment and the trigger level, 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 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 shares, 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 shares,
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
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
Key Investment Rationale
The securities offer exposure to the performance of the underlying
shares. At maturity, if the underlying shares have
not depreciated or have appreciated
in value, investors will receive
a positive return of 17.05%. If the underlying shares have
depreciated
in value but by no more than 10%, investors will
receive the stated principal amount of their investment. However, if the underlying shares have
depreciated
by more than
10%, investors will be negatively exposed to the full amount of the percentage decline in the underlying shares and will lose 1%
of the stated principal amount for every 1% of decline, without any buffer.
Investors may lose their entire initial investment
in the securities.
All payments on the securities are subject to our credit risk.
Upside Scenario if the Underlying Shares Appreciate or Do Not Depreciate
|
The final share price is greater than or equal to the initial share price. In this case, you receive for each security that you hold $10
plus
the upside payment of $1.705 per security (17.05% of the stated principal amount).
|
Par Scenario
|
The final share price is less than the initial share price but is greater than or equal to the trigger level, which is 90% of the initial share price. In this case, you receive the stated principal amount of $10 per security.
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Downside Scenario
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The final share price is less than the trigger level. In this case, the securities redeem for at least 10% less than the stated principal amount, and this decrease will be by an amount proportionate to the decline in the closing price of the underlying shares over the term of the securities. Under these circumstances, the payment at maturity will be less than $9 per security and could be zero. For example, if the final share price is 35% less than the initial share price, the securities will be redeemed at maturity for a loss of 35% of principal at $6.50 per security, or 65% of the stated principal amount. There is no minimum payment at maturity on the securities, and investors may lose their entire initial investment.
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
How the Securities Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the securities based on the following terms:
Stated principal amount:
|
$10 per security
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Upside payment:
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$1.705 per security (17.05% of the stated principal amount)
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Trigger level:
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90% of the initial share price
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Minimum payment at maturity:
|
None. You could lose your entire initial investment in the securities.
|
|
|
Trigger Jump Securities Payoff Diagram
|
|
See the next page for a description of how the securities work.
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
How it works
|
§
|
Upside Scenario if the Underlying Shares Appreciate or Do Not Depreciate.
Under the terms of the securities, if the final share price is greater than or equal to
the initial share price, the investor would receive the $10 stated principal amount
plus
the upside payment of $1.705 per
security.
|
|
§
|
If the underlying shares appreciate 5%, the investor would receive a 17.05% return, or $11.705
per security.
|
§
If the underlying shares appreciate 60%, the investor would receive only a 17.05% return,
or $11.705 per security.
|
§
|
Par Scenario.
If the final share
price is less than the initial share price and is greater than or equal to the trigger level of 90% of the initial share price,
the investor would receive the $10 stated principal amount per security.
|
|
§
|
Downside Scenario.
If the final share
price is less than the trigger level, the investor would receive an amount significantly less than the $10 stated principal amount,
based on a 1% loss of principal for each 1% decline in the underlying shares. Under these circumstances, the payment at maturity
will be less than $9 per security and could be zero. There is no minimum payment at maturity on the securities.
|
|
§
|
If the underlying shares depreciate 50%, the investor would lose 50% of the investor’s
principal and receive only $5 per security at maturity, or 50% of the stated principal amount.
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement for Jump Securities and prospectus. We also urge you to consult
your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not
pay interest or guarantee return of any principal.
The terms of the securities differ from those of ordinary debt securities
in that the securities do not pay interest or guarantee the payment of any principal amount at maturity. If the final share price
is less than the trigger level (which is 90% of the initial share price), the payout at maturity will be an amount in cash that
is at least 10% less than the $10 stated principal amount of each security, and this decrease will be by an amount proportionate
to the full amount of the decline in the closing price of the underlying shares over the term of the securities, without any buffer.
There is no minimum payment at maturity on the securities, and, accordingly, you could lose your entire initial investment in
the securities.
|
|
§
|
The appreciation potential is fixed and limited.
Where
the final share price is greater than or equal to the initial share price, the appreciation potential of the securities is limited
to the upside payment of $1.705 per security (17.05% of the stated principal amount), even if the final share price is significantly
greater than the initial share price.
|
|
§
|
There are risks associated with investments in securities, such as the securities, linked
to the value of foreign (and especially emerging markets) equity securities.
The price of the Fund tracks the performance of
the MSCI Emerging Markets Index
SM
(the “share underlying index”), which measures the value of foreign
(and especially emerging markets) equity securities. Investments in securities linked to the value of foreign equity securities
involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental
intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly
available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the United
States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards
and requirements different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets
may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in
government, economic and fiscal policies and currency exchange laws. In addition, the stocks included in the MSCI Emerging Markets
Index
SM
and that are generally tracked by the Fund have been issued by companies in various emerging markets countries,
which pose further risks in addition to the risks associated with investing in foreign equity markets generally. Countries with
emerging markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions
on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more
developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable
to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may
differ unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payment positions between countries.
|
|
§
|
The price of the underlying shares is subject to currency exchange risk.
Because
the price of the underlying shares is related to the U.S. dollar value of stocks underlying the share underlying index, holders
of the securities will be exposed to currency exchange rate risk with respect to each of the currencies in which such component
securities trade. Exchange rate movements for a particular currency are volatile and are the result of numerous factors including
the supply of, and the demand for, those currencies, as well as relevant government policy, intervention or actions, but are also
influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative
actions related to the relevant region. An investor’s net exposure will depend on the extent to which the currencies of the
component securities strengthen or weaken against the U.S. dollar and the relative weight of each currency. If, taking into account
such weighting, the dollar strengthens against the currencies of the component securities represented in the share underlying index,
the price of the underlying shares will be adversely affected and the payment at maturity on the securities may be reduced.
|
Of
particular importance to potential currency exchange risk are:
|
o
|
existing and expected rates of inflation;
|
|
o
|
existing and expected interest rate levels;
|
|
o
|
the balance of payments between countries; and
|
|
o
|
the extent of governmental surpluses or deficits in the relevant countries and the United
States.
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
All
of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of various countries
represented in the share underlying index and the United States and other countries important to international trade and finance.
|
§
|
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 the trading price (including
whether the trading price is at or below the trigger level), volatility (frequency and magnitude of changes in value) and dividends
of the underlying shares and of the stocks composing the share underlying index, interest and yield rates in the market,
time remaining until the securities mature, geopolitical conditions and economic, financial, political and regulatory or judicial
events that affect the underlying shares or equities markets generally and which may affect the final share price of the underlying
shares, the occurrence of certain events affecting the underlying shares that may or may not require an adjustment to the adjustment
factor, and any actual or anticipated changes in our credit ratings or credit spreads. The price of the underlying shares may be,
and has recently been, volatile, and we can give you no assurance that the volatility will lessen. See “iShares
®
MSCI
Emerging Markets ETF” below. You may receive less, and possibly significantly less, than the stated principal amount per
security if you try to sell your securities prior to maturity.
|
|
§
|
The performance and market price of the fund, particularly during periods of market volatility,
may not correlate with the performance of the share underlying index, the performance of the component securities of the share
underlying index or the net asset value per share of the Fund.
The
Fund does not fully replicate
the share underlying index and may hold securities that are different than those included in the share underlying index.
In addition, the performance of the Fund will reflect additional transaction costs and fees that are not included in the calculation
of the share underlying index. All of these factors may lead to a lack of correlation between the performance of the Fund
and the share underlying index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity
securities underlying the Fund may impact the variance between the performances of the Fund and the share underlying index.
Finally, because the shares of the Fund are traded on an exchange and are subject to market supply and investor demand, the
market price of one share of the Fund may differ from the net asset value per share of the Fund.
|
In
particular, during periods of market volatility, or unusual trading activity, trading in the securities underlying the Fund may
be disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity
of the Fund may be adversely affected, market participants may be unable to calculate accurately the net asset value per share
of the Fund, and their ability to create and redeem shares of the Fund may be disrupted. Under these circumstances, the market
price of shares of the Fund may vary substantially from the net asset value per share of the Fund or the level of the share underlying
index.
For
all of the foregoing reasons, the performance of the Fund may not correlate with the performance of the share underlying index,
the performance of the component securities of the share underlying index or the net asset value per share of the Fund. Any
of these events could materially and adversely affect the price of the shares of the Fund and, therefore, the value of the securities.
Additionally, if market volatility or these events were to occur on the valuation date, the calculation agent would maintain
discretion to determine whether such market volatility or events have caused a market disruption event to occur, and such determination
would affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event
has taken place, the payment at maturity would be based solely on the published closing price per share of the Fund on the valuation
date, even if the Fund’s shares are underperforming the share underlying index or the component securities of the share underlying
index and/or trading below the net asset value per share of the Fund
.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our
credit ratings or credit spreads may adversely affect the market value of the securities.
You are dependent on our ability
to pay all amounts due on the securities at maturity and therefore you are subject to our credit risk. If we default on our obligations
under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market
value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual
or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will
have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of such securities
in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available
under
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
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.
|
§
|
Investing in the securities is not equivalent to investing in the underlying shares or the
stocks composing the share underlying index.
Investing in the securities is not equivalent
to investing in the underlying shares, the share underlying index or the stocks that constitute the share underlying index. 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 underlying shares or the stocks that constitute the share underlying index.
|
|
§
|
Adjustments to the underlying shares or to the MSCI Emerging Markets Index
SM
could adversely affect the value of the securities.
The investment advisor to the Fund, BlackRock Fund Advisors (the
“Investment Advisor”), seeks investment results that correspond generally to the price and yield performance, before
fees and expenses, of MSCI Emerging Markets Index
SM
. Pursuant to its investment strategy or otherwise, the Investment
Advisor may add, delete or substitute the stocks composing the Fund. Any of these actions could adversely affect the price of the
underlying shares and, consequently, the value of the securities. MSCI Inc. (“MSCI”) is responsible for calculating
and maintaining the MSCI Emerging Markets Index
SM
. MSCI may add, delete or substitute the stocks constituting the MSCI
Emerging Markets Index
SM
or make other methodological changes that could change the level of the MSCI Emerging
Markets Index
SM
. MSCI may discontinue or suspend calculation or publication of the MSCI Emerging Markets Index
SM
at
any time. In these circumstances, the calculation agent will have the sole discretion to substitute a successor index that is comparable
to the discontinued MSCI Emerging Markets Index
SM
and is permitted to consider indices that are calculated and
published by the calculation agent or any of its affiliates. Any of these actions could adversely affect the price of the underlying
shares and, consequently, the value of the securities.
|
|
§
|
The amount payable on the securities is not linked to the price of the underlying shares at
any time other than the valuation date.
The final share price will be based on the closing price of the underlying shares
on the valuation date, subject to postponement for non-trading days and certain market disruption events. Even if the price of
the underlying shares appreciates prior to the valuation date but then drops by the valuation date, the payment at maturity may
be less, and may be significantly less, than it would have been had the payment at maturity been linked to the price of the underlying
shares prior to such drop. Although the actual price of the underlying shares on the stated maturity date or at other times during
the term of the securities may be higher than the final share price, the payment at maturity will be based solely on the closing
price of one underlying share on the valuation date.
|
|
§
|
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 shares, 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
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the securities will be influenced
by many unpredictable factors” above.
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every
event that could affect the underlying shares.
MS & Co., as calculation agent, will adjust the adjustment factor for certain
events affecting the underlying shares. However, the calculation agent will not make an adjustment for every event that could affect
the underlying shares. If an event occurs that does not require the calculation agent to adjust the adjustment factor, the market
price of the securities may be materially and adversely affected.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be
limited.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market
for the securities. MS & Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make
a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary
market size at prices based on its estimate of the current value of the securities, taking into account its bid/offer spread, our
credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions,
the time remaining to maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market,
it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate
significantly in the secondary market for the securities, the price at which you may be able to trade your securities is likely
to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making
a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be
willing to hold your securities to maturity.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will
make determinations with respect to the securities.
As calculation agent, MS & Co. has determined the initial share price
and the trigger level, will determine the final share price, including whether the final share price of the underlying shares has
decreased to below the trigger level, and will calculate the amount of cash you receive at maturity, if any. Moreover, certain
determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective
judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor
index or calculation of the final share price in the event of a discontinuance of the underlying shares or a market disruption
event. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information
regarding these types of determinations, see “Description of Securities—Postponement of Valuation Date(s),” “—Discontinuance
of Any ETF Shares and/or Share Underlying Index; Alteration of Method of Calculation,” “—Alternate Exchange Calculation
in Case of an Event of Default” and “—Calculation Agent and Calculations” in the accompanying product supplement.
In addition, MS & Co. has determined the estimated value of the securities on the pricing date.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value
of the securities.
One or more of our affiliates and/or third-party dealers
have carried
out, and will continue
to carry out, hedging activities related to the securities (and to other instruments linked to the
underlying shares or the share underlying index), including trading in the underlying shares and in other instruments related to
the underlying shares or the share 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 share underlying index and other
financial instruments related to the underlying shares 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 have increased the initial share price and, therefore,
could have increased the trigger level, which is the level at or above which the underlying shares must close on the valuation
date so that investors do not suffer a significant loss on their initial investment in the securities. Additionally, such hedging
or trading activities during the term of the securities, including on the valuation date, could adversely affect the closing price
of the underlying shares on the valuation date and, accordingly, the amount of cash an investor will receive at maturity, if any.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain
.
Please read the discussion under “Additional Information—Tax considerations” in this document and the discussion
under “United States Federal Taxation” in the accompanying product supplement for Jump Securities (together, the “Tax
Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal
Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income
on the securities might differ significantly from the tax treatment described in the Tax Disclosure Sections. For example, under
one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders would
be required to accrue into income original issue discount on the securities every year at a “comparable yield” determined
at the time of issuance and recognize all income
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
and gain in respect of the securities
as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA” in the accompanying
product supplement for Jump Securities, the withholding rules commonly referred to as “FATCA” would apply to the securities
if they were recharacterized as debt instruments. However, recently proposed regulations (the preamble to which specifies that
taxpayers are permitted to rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds
of a taxable disposition. 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. We do not plan to request a ruling from the IRS regarding the tax treatment of the
securities, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of
factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which
very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities,
possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income
tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by this notice
and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
iShares
®
MSCI Emerging Markets
ETF Overview
The iShares
®
MSCI Emerging Markets ETF is
an exchange-traded fund that seeks investment results that correspond generally to the price and yield performance, before fees
and expenses, of the MSCI Emerging Markets Index
SM
. The iShares
®
MSCI Emerging Markets ETF is managed
by iShares Trust (“iShares”), a registered investment company that consists of numerous separate investment portfolios,
including the iShares
®
MSCI Emerging Markets ETF. Information provided to or filed with the Securities and
Exchange Commission (the “Commission”) by iShares pursuant to the Securities Act of 1933 and the Investment Company
Act of 1940 can be located by reference to Commission file numbers 033-97598 and 811-09102, respectively, through the Commission’s
website at www.sec.gov. In addition, information may be obtained from other publicly available sources.
Neither the issuer
nor the agent makes any representation that any such publicly available information regarding the iShares
®
MSCI
Emerging Markets ETF is accurate or complete.
Information as of market close on June 28, 2019:
Bloomberg Ticker Symbol:
|
EEM UP
|
Current Share Price:
|
$42.91
|
52 Weeks Ago:
|
$42.69
|
52 Week High (on 7/25/2018):
|
$45.03
|
52 Week Low (on 10/29/2018):
|
$38.00
|
The following graph sets forth
the daily closing prices of the underlying shares for the period from January 1, 2014 through June 28, 2019. The related table
sets forth the published high and low closing prices, as well as the end-of-quarter closing prices, of the underlying shares for
each quarter in the same period. The closing price of the underlying shares on June 28, 2019 was $42.91. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The historical closing prices
of the underlying shares should not be taken as an indication of future performance, and no assurance can be given as to the closing
price of the underlying shares on the valuation date.
Shares of the iShares
®
MSCI Emerging Markets ETF
Daily Closing Prices
January 1, 2014 to June 28, 2019
|
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
iShares
®
MSCI Emerging Markets ETF (CUSIP:
464287234
)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
40.99
|
37.09
|
40.99
|
Second Quarter
|
43.95
|
40.82
|
43.23
|
Third Quarter
|
45.85
|
41.56
|
41.56
|
Fourth Quarter
|
42.44
|
37.73
|
39.29
|
2015
|
|
|
|
First Quarter
|
41.07
|
37.92
|
40.13
|
Second Quarter
|
44.09
|
39.04
|
39.62
|
Third Quarter
|
39.78
|
31.32
|
32.78
|
Fourth Quarter
|
36.29
|
31.55
|
32.19
|
2016
|
|
|
|
First Quarter
|
34.28
|
28.25
|
34.25
|
Second Quarter
|
35.26
|
31.87
|
34.36
|
Third Quarter
|
38.20
|
33.77
|
37.45
|
Fourth Quarter
|
38.10
|
34.08
|
35.01
|
2017
|
|
|
|
First Quarter
|
39.99
|
35.43
|
39.39
|
Second Quarter
|
41.93
|
38.81
|
41.39
|
Third Quarter
|
45.85
|
41.05
|
44.81
|
Fourth Quarter
|
47.81
|
44.82
|
47.12
|
2018
|
|
|
|
First Quarter
|
52.08
|
45.69
|
48.28
|
Second Quarter
|
48.14
|
42.33
|
43.33
|
Third Quarter
|
45.03
|
41.14
|
42.92
|
Fourth Quarter
|
42.93
|
38.00
|
39.06
|
2019
|
|
|
|
First Quarter
|
43.71
|
38.45
|
42.92
|
Second Quarter (through June 28, 2019)
|
44.59
|
39.91
|
42.91
|
This document relates only to the securities referenced hereby
and does not relate to the underlying shares. We have derived all disclosures contained in this document regarding iShares from
the publicly available documents described above. In connection with the offering of the securities, neither we nor the agent has
participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the
agent makes any representation that such publicly available documents or any other publicly available information regarding iShares
is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the
trading price of the underlying shares (and therefore the price of the underlying shares at the time we priced the securities)
have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future
events concerning iShares could affect the value received at maturity with respect to the securities and therefore the value of
the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the underlying shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the underlying shares. The statements in the preceding two sentences
are not intended to affect the rights of investors in the securities under the securities laws. As a purchaser of the securities,
you should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with
respect to an investment linked to the underlying shares.
iShares
®
is a registered trademark of BlackRock
Institutional Trust Company, N.A. (“BTC”). The securities are not sponsored, endorsed, sold, or promoted by BTC. BTC
makes no representations or warranties to the owners of the
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
securities or any member of the public regarding the advisability
of investing in the securities. BTC has no obligation or liability in connection with the operation, marketing, trading or sale
of the securities.
The MSCI Emerging
Markets Index
SM
.
The MSCI Emerging Markets Index
SM
is a stock
index calculated, published and disseminated daily by MSCI Inc. (“MSCI”) and is intended to provide performance benchmarks
for certain emerging equity markets including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United
Arab Emirates. The MSCI Emerging Markets IndexSM is described in “MSCI Emerging Markets Index
SM
” and “MSCI
Global Investable Market Indices Methodology” in the accompanying index supplement.
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities
Additional Terms of the Securities
Please read this information
in conjunction with the summary terms on the front cover of this document.
Additional Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Share underlying index:
|
The MSCI Emerging Markets Index
SM
|
Share underlying index publisher:
|
MSCI Inc. or any successor thereof
|
Postponement of maturity date:
|
If, due to a market disruption event or otherwise, the valuation date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the valuation date as postponed.
|
Additional information related to calculating the final share price:
|
If a market disruption event occurs with respect to the underlying
shares, the calculation agent may determine the final share price in accordance with the procedures set forth in the product supplement
for Jump Securities. You should refer to the section “Description of Securities—General Terms of Securities —Some
Definitions––share closing price” in the product supplement for Jump Securities for more information.
If the underlying shares are subject to a stock split or reverse
stock split, the calculation agent may make the antidilution adjustments in accordance with the procedures set forth in the product
supplement for Jump Securities. You should refer to the section “Description of Securities—Antidilution Adjustments
for Securities linked to Exchange-Traded Funds” in the product supplement for Jump Securities for more information.
If no closing price of the underlying shares is available on
the valuation date through discontinuance or liquidation of the Fund, the calculation agent may determine the final share price
in accordance with the procedures set forth in the product supplement for Jump Securities. You should refer to the section “Description
of Securities—Discontinuance of Any ETF Shares and/or Share Underlying Index; Alteration of Method of Calculation”
in the product supplement for Jump Securities for more information.
|
Denominations:
|
$10 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement by
first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York
office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date.
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, if any, with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the business day
preceding the maturity date, and (ii) deliver the aggregate cash amount due, if any, with respect to the securities to the trustee
for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Trigger Jump Securities Based on the Performance of the iShares
®
MSCI Emerging Markets ETF due December 31, 2020
Principal at Risk Securities