CALCULATION OF REGISTRATION FEE
|
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Maximum Aggregate
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Amount of Registration
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Title of Each Class of Securities Offered
|
|
Offering Price
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Fee
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|
|
|
|
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Buffered Jump Securities due 2024
|
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$2,290,000
|
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$277.55
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|
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Morgan Stanley Finance LLC
|
May 2019
Pricing Supplement No.
2,016
Registration Statement
Nos. 333-221595; 333-221595-01
Dated May 31, 2019
Filed pursuant to Rule
424(b)(2)
|
Structured
Investments
Opportunities in International Equities
Buffered
Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Fully
and Unconditionally Guaranteed by Morgan Stanley
Principal at Risk Securities
The Buffered Jump Securities, which we refer
to as the securities, are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally
guaranteed by Morgan Stanley. The securities offer the opportunity to earn a return based on the performance of the shares of the
iShares
®
MSCI ACWI ETF. Unlike ordinary debt securities, the Buffered Jump Securities do not pay interest
and provide for the minimum payment of only 25% of the principal at maturity. At maturity, you will receive for each
security that you hold an amount in cash that will vary depending on the performance of the underlying shares, as determined on
the valuation date. If the underlying shares appreciate or do not depreciate at all as of the valuation date, you will
receive for each security that you hold at maturity an upside payment of $400 in addition to the stated principal amount. However,
if the underlying shares decline in value by more than 25% as of the valuation date from the initial share price, the payment due
at maturity will be less, and possibly significantly less, than the stated principal amount of the securities.
You
could lose up to 75% of the stated principal amount of the securities.
These long-dated securities are for investors
who seek an equity fund-based return and who are willing to risk their principal and forgo current income and appreciation above
the fixed upside payment in exchange for the upside payment and buffer features that in each case apply to a limited range of performance
of the underlying shares. The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit
risk. If we default on our obligations, you could lose some or all of your investment. These securities are
not secured obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference
asset or assets.
FINAL TERMS
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Issuer:
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Morgan Stanley Finance LLC
|
Guarantor:
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Morgan Stanley
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Issue price:
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$1,000 per security (See “Commissions and issue price” below)
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Stated principal amount:
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$1,000 per security
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Pricing date:
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May 31, 2019
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Original issue date:
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June 5, 2019 (3 business days after the pricing date)
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Maturity date:
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June 5, 2024
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Aggregate principal amount:
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$2,290,000
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Interest:
|
None
|
Underlying shares:
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Shares of the iShares
®
MSCI ACWI ETF
|
Payment at maturity:
|
·
If the final share price is greater than
or equal to the initial share price:
$1,000 + the upside payment
·
If the final share price is less than the
initial share price but greater than or equal to $52.564, which is approximately 75% of the initial share price, meaning the price
of the underlying shares has declined by an amount less than or equal to the buffer amount of 25% from the initial share price:
$1,000
·
If the final share price is less than $52.564,
which is approximately 75% of the initial share price, meaning the price of the underlying shares has declined by more than the
buffer amount of 25% from the initial share price:
$1,000 × (share performance factor + 25%)
Under these circumstances, the payment at maturity
will be less, and potentially significantly less, than the stated principal amount of $1,000, subject to the minimum payment at
maturity of $250 per security.
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Upside payment:
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$400 per security (40% of the stated principal amount)
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Buffer amount:
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25%
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Share performance factor:
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final share price / initial share price
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Initial share price:
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$70.085, which is the closing price of one underlying share on the pricing date
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Final share price:
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The closing price of one underlying share on the valuation date
times
the adjustment factor on such date
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Valuation date:
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May 31, 2024, subject to postponement for non-trading days and certain market disruption events
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Adjustment factor:
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1.0, subject to adjustment in the event of certain events affecting the underlying shares
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Minimum payment at maturity:
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$250 per security (25% of the stated principal amount)
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CUSIP:
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61769HDA0
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ISIN:
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US61769HDA05
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Listing:
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The securities will not be listed on any securities exchange.
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Agent:
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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:
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$977.80 per security. See “Investment Summary” on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions
(1)
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Proceeds to us
(2)
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Per security
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$1,000
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$4
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$996
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Total
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$2,290,000
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$9,160
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$2,280,840
|
|
(1)
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Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $4 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.
|
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(2)
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See “Use of proceeds and hedging” on page
17.
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The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 6.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
Investment Summary
Buffered Jump Securities
Principal
at Risk Securities
The Buffered Jump Securities due June 5, 2024 Based on the Performance
of the iShares
®
MSCI ACWI ETF (the “securities”) can be used:
|
§
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As an alternative to direct exposure to the underlying
shares that provides a fixed positive return of 40% if the underlying shares appreciate or do not depreciate at all as of the valuation
date;
|
|
§
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To enhance returns and potentially outperform the
underlying shares in a moderately bullish scenario; and
|
|
§
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To obtain a buffer against a specified level of negative
performance in the underlying shares.
|
The securities are exposed on a 1:1 basis to the percentage decline
of the final share price from the initial share price beyond the buffer amount of 25%.
Accordingly, 75% of your principal
is at risk (
e.g.
, a 40% depreciation in the underlying shares will result in the payment at maturity of $850 per security).
Maturity:
|
5 years
|
Upside payment:
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$400 per security (40% of the stated principal amount)
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Buffer amount:
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25%
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Maximum payment at maturity:
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$1,400 per security (140% of the stated principal amount)
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Minimum payment at maturity:
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$250 per security. Investors may lose up to 75% of the stated principal amount of the securities.
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Interest:
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None
|
The original issue price of each security is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security
on the pricing date is $977.80.
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, the buffer amount and the minimum payment at maturity, we use an internal funding rate, which is likely to
be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring
and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the
securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying 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.
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk 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.
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
Key Investment Rationale
This 5-year investment does not pay interest but offers a fixed
positive return of 40% if the underlying shares appreciate or do not depreciate at all as of the valuation date and provides a
buffer against a decline in the underlying shares of up to 25%. However, if the underlying shares decline in value by
more than 25% as of the valuation date from the initial share price, the payment due at maturity will be less, and possibly significantly
less, than the stated principal amount of the securities, subject to the minimum payment at maturity of $250 per security.
Accordingly,
investors may lose up to 75% of their initial investment in the securities.
Upside Scenario
|
If the final share price is greater than or equal to the initial share price
, the payment at maturity for each security will be equal to $1,000
plus
the upside payment of $400.
|
Par Scenario
|
If the final share price is
less than the initial share price but greater than or equal to 75% of the initial share price
, which means that the final share price has
depreciated from the initial share price by no more than 25%,
the payment at maturity will be $1,000 per security.
|
Downside Scenario
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If the final share price is
less than 75% of the initial share price
, which means that the underlying shares have
depreciated by an amount greater than the buffer amount of 25%
, you will lose 1% for every 1% decline beyond the buffer amount of 25%, subject to the minimum payment at maturity of $250 per security (
e.g.
, a 40% depreciation in the underlying shares will result in the payment at maturity of $850 per security).
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
How the Buffered Jump Securities Work
Payoff Diagram
The payoff diagram below illustrates the payout on the securities
at maturity for a range of hypothetical percentage changes in the closing price of the underlying shares. The diagram
is based on the following terms:
Stated principal amount:
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$1,000 per security
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Upside payment:
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$400 per security (40% of the stated principal amount)
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Buffer amount:
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25%
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Minimum payment at maturity:
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$250 per security (25% of the stated principal amount)
|
|
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Buffered Jump Securities Payoff Diagram
|
|
How it works
|
¡
|
Upside Scenario.
If
the final share price is greater than or equal to the initial share price, the payment at maturity on the securities reflected
in the graph above is greater than the $1,000 stated principal amount but in all cases is equal to and will not exceed the $1,000
stated principal amount plus the upside payment amount of $400. Under the terms of the securities, an investor will
receive a payment at maturity of $1,400 per security at any final share price greater than or equal to the initial share price.
|
|
¡
|
Par Scenario.
If
the final share price is less than the initial share price but has decreased from the initial share price by an amount less than
or equal to the buffer amount of 25%, the investor would receive the $1,000 stated principal amount per security.
|
|
¡
|
Downside Scenario.
If
the final share price has decreased from the initial share price by an amount greater than the buffer amount of 25%, the payment
at maturity would be less than the stated principal amount of $1,000 by an amount that is proportionate to the percentage decrease
of the underlying shares beyond the buffer amount. However, under no circumstances will the payment due at maturity
be less than $250 per security.
|
|
o
|
For example, if the final share price declines by 40% from the initial share price, the payment at maturity will be $850 per
security (85% of the stated principal amount).
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
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, index supplement and prospectus. We also
urge you to consult with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not pay interest and provide
for the minimum payment at maturity of only 25% of your principal.
The terms of the securities differ from those
of ordinary debt securities in that we will not pay you any interest and will provide for the return of only 25% of the principal
amount of the securities at maturity. At maturity, you will receive for each $1,000 stated principal amount of securities
that you hold an amount in cash based upon the final share price.
If the final share price has decreased from
the initial share price by an amount less than or equal to the buffer amount, you will receive only the principal amount of $1,000
per security. If the final share price decreases from the initial share price by more than the buffer amount of 25%,
you will receive an amount in cash that is less than the $1,000 stated principal amount of each security by an amount proportionate
to the decline in the closing price of the underlying shares beyond the buffer amount, and you will lose money on your investment.
You
could lose up to 75% of the stated principal amount of the securities
. See “How the Buffered Jump Securities
Work” on page 5 above.
|
|
§
|
The appreciation potential is fixed and limited.
The
appreciation potential of the securities is limited to the fixed upside payment of $400 per security (40% of the stated principal
amount) even if the final share price is significantly greater than the initial share price. You will under no circumstances
receive a payment at maturity greater than $1,400 per security. See “How the Buffered Jump Securities Work”
on page 4 above.
|
|
§
|
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
underlying shares track the performance of the MSCI All Country World Index
SM
, which is linked to 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 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, certain stocks
included in the MSCI All Country World Index
SM
and that are generally tracked by the underlying shares 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
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
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:
|
·
|
existing and expected rates of inflation;
|
|
·
|
existing and expected interest rate levels;
|
|
·
|
the balance of payments between countries; and
|
|
·
|
the extent of governmental surpluses or deficits in the relevant countries
and the United States.
|
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:
|
|
o
|
the trading price, volatility (frequency and magnitude of changes in value) and dividends of the underlying shares and of the
stocks composing the MSCI All Country World Index
SM
,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying shares
or the securities markets generally and which may affect the final share price of the underlying shares,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
the exchange rates of the U.S. dollar relative to the currency in which the stocks underlying the share underlying index trade
|
|
o
|
the occurrence of certain events affecting the underlying shares that may or may not require an adjustment to the adjustment
factor, 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 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 if at the time of sale the value of the
underlying shares is below the initial share price.
You cannot predict the future performance of the underlying
shares based on their historical performance. If the final share price declines by more than the buffer amount from
the initial share price, you will be exposed on a 1-to-1 basis to such decline in the final share price beyond the buffer amount. There
can be no assurance that the final share price will be greater than or equal to the initial share price so that you will receive
at maturity an amount that is greater than the $1,000 stated principal amount for each security you hold, or that you will not
lose some or a significant portion of your investment.
|
§
|
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.
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
|
§
|
As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance
and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities
if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any
recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims of other
unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
The amount payable on the securities is not linked
to the 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 one underlying share 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 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 pricing supplement 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
may be influenced by many unpredictable factors” above.
|
|
§
|
Investing in the securities is not equivalent to
investing in the underlying shares or the stocks composing the MSCI All Country World Index
SM
.
Investing
in the securities is not equivalent to investing in the underlying shares, the MSCI All Country World Index
SM
or the
stocks that constitute the MSCI All Country World Index
SM
.
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
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 MSCI All Country World Index
SM
.
|
§
|
Adjustments to the underlying shares or the index
tracked by the underlying shares could adversely affect the value of the securities.
The investment adviser to the
iShares
®
MSCI ACWI ETF, BlackRock Fund Advisors (the “Investment Adviser”), seeks investment results
that correspond generally to the price and yield performance, before fees and expenses, of the share underlying index. Pursuant
to its investment strategy or otherwise, the Investment Advisor may add, delete or substitute the stocks composing the iShares
®
MSCI ACWI ETF. 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 share underlying index. MSCI
may add, delete or substitute the stocks constituting the share underlying index or make other methodological changes that could
change the value of the share underlying index. MSCI may discontinue or suspend calculation or publication of the share
underlying index at any time. In these circumstances, the calculation agent will have the sole discretion to substitute
a successor index that is comparable to the discontinued share underlying index 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 value
of the underlying shares, and consequently, the value of the securities.
|
|
§
|
The performance and market price of the underlying
shares, particularly during periods of market volatility, may not correlate with the performance of the MSCI All Country World
Index
SM
, the performance of the component securities of the MSCI All Country World Index
SM
or
the net asset value per share of such underlying shares.
The underlying shares do not fully replicate the MSCI All Country
World Index
SM
and may hold securities that are different than those included in the MSCI All Country World Index
SM
. In
addition, the performance of the underlying shares will reflect additional transaction costs and fees that are not included in
the calculation of the MSCI All Country World Index
SM
. All of these factors may lead to a lack of correlation
between the performance of the underlying shares and the MSCI All Country World Index
SM
. In addition, corporate
actions (such as mergers and spin-offs) with respect to the equity securities underlying the underlying shares may impact the variance
between the performances of the underlying shares and the MSCI All Country World Index
SM
. Finally, because
the shares of the underlying shares are traded on an exchange and are subject to market supply and investor demand,
the market price of one share of the underlying shares may differ from the net asset value per share of the underlying shares.
|
In particular, during periods of market volatility,
or unusual trading activity, trading in the securities underlying the underlying shares may be disrupted or limited, or such securities
may be unavailable in the secondary market. Under these circumstances, the liquidity of the underlying shares may be
adversely affected, market participants may be unable to calculate accurately the net asset value per share of the underlying shares,
and their ability to create and redeem shares of the underlying shares may be disrupted. Under these circumstances, the market
price of shares of the underlying shares may vary substantially from the net asset value per share of the underlying shares or
the level of the MSCI All Country World Index
SM
.
For all of the foregoing reasons, the performance
of the underlying shares may not correlate with the performance of the MSCI All Country World Index
SM
, the performance
of the component securities of the MSCI All Country World Index
SM
or the net asset value per share of the underlying
shares. Any of these events could materially and adversely affect the price of the shares of the underlying shares 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 underlying shares on the valuation date, even if the any of the underlying shares is underperforming
the MSCI All Country World Index
SM
or the component securities of the MSCI All Country World Index
SM
and/or
trading below the net asset value per share of the underlying shares.
|
§
|
The antidilution adjustments the calculation agent
is required to make do not cover every event that can affect the underlying shares.
MS & Co., as calculation
agent, will adjust the adjustment factor for the underlying shares for certain events affecting the underlying shares, such as
stock splits and stock dividends. However, the
|
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
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|
calculation agent will not make an adjustment for
every event or every distribution 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
determination by the calculation agent to adjust, or not to adjust, the adjustment factor may materially and adversely affect the
market price of the securities.
|
§
|
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. Morgan Stanley & Co. LLC, which we refer to as 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 will determine the final share price, the share performance factor,
if applicable, 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 final
share price in the event of a market disruption event or discontinuance of the MSCI All Country World Index
SM
. These
potentially subjective determinations may adversely affect the payout to you at maturity. For further information regarding
these types of determinations, see “Description of Securities—Market Disruption Event,” “—Postponement
of Valuation Date(s),” “—Antidilution Adjustments for Securities linked to Exchange-Traded Funds,” “—Alternate
Exchange Calculation in case of an Event of Default,” “—Discontinuance of Any ETF Shares and/or Share Underlying
Index; Alteration of Method of Calculation” 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.
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|
§
|
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 MSCI All Country World Index
SM
or its component stocks), including trading in
the underlying shares, the stocks that constitute the MSCI All Country World Index
SM
as well as in other instruments
related to the underlying shares or the MSCI All Country World Index
SM
. 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 underlying
shares and the stocks that constitute the MSCI All Country World Index
SM
and other financial instruments related to
the MSCI All Country World Index
SM
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 price at or above which the shares of the iShares
®
MSCI ACWI ETF must close on the valuation
date so that investors do not suffer a loss on their initial investment in the securities. Additionally, such hedging
or trading activities during the term of the securities, including on the valuation date, could adversely affect the closing price
of the underlying shares on the valuation date, and, accordingly, the amount of cash an investor will receive at maturity.
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§
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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
|
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|
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®
MSCI ACWI ETF
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|
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 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
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
iShares
®
MSCI ACWI ETF Overview
The iShares
®
MSCI ACWI 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 All Country World Index
SM
. The iShares
®
MSCI ACWI ETF is managed by iShares
®
,
Inc. (“iShares”), a registered investment company that consists of numerous separate investment portfolios, including
the iShares
®
MSCI ACWI 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
ACWI ETF is accurate or complete.
Information as of market close on May 31, 2019:
Bloomberg Ticker Symbol:
|
ACWI UP
|
52 Week High (on 5/3/2019):
|
$74.73
|
Current Share Price:
|
$70.085
|
52 Week Low (on 12/24/2018/2018):
|
$61.17
|
52 Weeks Ago:
|
$72.33
|
|
|
|
|
|
|
The following graph sets forth the daily closing values of the
underlying shares for the period from January 1, 2014 through May 31, 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 May 31, 2019 was $70.085. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The historical closing
prices of the underlying shares should not be taken as an indication of future performance, and no assurance can be given as to
the closing price of the underlying shares on the valuation date.
Shares of the iShares
®
MSCI ACWI ETF
Daily Closing Prices, January 1, 2014 to May 31, 2019
|
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Morgan Stanley Finance LLC
|
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®
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|
iShares
®
MSCI ACWI ETF (CUSIP 464288240)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
58.30
|
53.79
|
58.14
|
Second Quarter
|
61.19
|
57.02
|
60.26
|
Third Quarter
|
61.15
|
58.42
|
58.90
|
Fourth Quarter
|
60.81
|
55.52
|
58.52
|
2015
|
|
|
|
First Quarter
|
61.19
|
56.64
|
60.05
|
Second Quarter
|
62.99
|
59.33
|
59.46
|
Third Quarter
|
60.84
|
52.85
|
53.94
|
Fourth Quarter
|
58.91
|
54.06
|
55.83
|
2016
|
|
|
|
First Quarter
|
56.32
|
49.53
|
56.07
|
Second Quarter
|
58.11
|
53.31
|
56.24
|
Third Quarter
|
59.63
|
55.62
|
59.12
|
Fourth Quarter
|
60.61
|
56.76
|
59.16
|
2017
|
|
|
|
First Quarter
|
63.55
|
59.63
|
63.27
|
Second Quarter
|
66.67
|
62.60
|
65.46
|
Third Quarter
|
68.87
|
65.08
|
68.81
|
Fourth Quarter
|
72.62
|
68.94
|
72.05
|
2018
|
|
|
|
First Quarter
|
77.52
|
69.84
|
71.64
|
Second Quarter
|
74.22
|
70.23
|
71.14
|
Third Quarter
|
74.68
|
70.85
|
74.23
|
Fourth Quarter
|
74.47
|
61.17
|
64.17
|
2019
|
|
|
|
First Quarter
|
72.83
|
63.03
|
72.12
|
Second Quarter (through May 31, 2019)
|
74.73
|
70.085
|
70.085
|
|
|
|
|
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.
Morgan Stanley Finance LLC
|
Buffered Jump Securities due June 5, 2024
Based on the Performance of the iShares
®
MSCI ACWI ETF
Principal at Risk Securities
|
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 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 All Country World Index
SM
.
The
MSCI All Country World Index
SM
is a free float-adjusted market capitalization weighted index that is designed to
measure the equity market performance of developed and emerging markets. As of May 2019, the MSCI All Country World Index consisted
of 47 country indices comprising 23 developed and 24 emerging market country indices. The developed market country indices included
are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands,
New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market
country indices included are: 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 All Country World Index was developed with a base value of 100 as of December 31, 1987. The MSCI All Country World Index
is described in “MSCI All Country World Index
SM
” and “MSCI Global Investable Market Indices Methodology”
in the accompanying index supplement.
Morgan Stanley Finance LLC
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®
MSCI ACWI ETF
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|
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Share underlying index:
|
MSCI All Country World Index
SM
|
Share underlying index publisher:
|
MSCI Inc. or any successor thereof.
|
Postponement of maturity date:
|
If the scheduled valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that valuation date as postponed.
|
Denominations:
|
$1,000 and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
Morgan Stanley & Co. LLC (“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 and to the depositary of the amount of cash to be delivered with respect to each stated principal
amount of the securities, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii)
deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of
the securities, on the maturity date.
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®
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