CALCULATION OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
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Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
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Auto- Callable Trigger PLUS due 2019
|
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$4,500,000
|
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$560.25
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November 2017
Pricing Supplement No. 19
Registration Statement No. 333-221595;
333-221595-01
Dated November 21, 2017
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities
in U.S. Equities
Auto-Callable Trigger PLUS Based on the Value
of the VanEck Vectors Gold Miners ETF due May 24, 2019
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
The Auto-Callable Trigger PLUS Based on the Value of the VanEck
Vectors Gold Miners ETF due May 24, 2019, 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 will pay no interest, do
not guarantee any return of principal at maturity and have the terms described in the accompanying product supplement for PLUS,
index supplement and prospectus, as supplemented or modified by this document. If the share closing price of the shares of the
VanEck Vectors Gold Miners ETF, which we refer to as the underlying shares, on the call observation date is greater than or equal
to 100% of the initial share price, which we refer to as the call threshold level, the securities will be automatically redeemed
for a fixed amount per security equal to $10.80 (108% of the stated principal amount), and no further payments will be made on
the securities. If the securities are not automatically redeemed prior to maturity and the final share price is
greater than
the initial share price, investors will receive the stated principal amount of their investment plus leveraged upside performance
of the underlying shares, subject to the maximum payment at maturity. If the securities are not automatically redeemed prior to
maturity and the final share price is
less than or equal to
the initial share price but is
greater than or equal to
the
trigger level, investors will receive the stated principal amount of their investment. However, if the securities are not automatically
redeemed prior to maturity and the final share price is
less than
the trigger level, investors will lose a significant portion
or all of their investment, resulting in a 1% loss for every 1% decline in the share price over the term of the securities. Under
these circumstances, the payment at maturity will be less than 80% of the stated principal amount and could be zero. Accordingly,
you may lose your entire investment. These securities are for investors who seek a return based on the performance of the underlying
shares and who are willing to risk their principal and forgo current income and upside above the maximum payment at maturity in
exchange for the upside leverage feature, which applies, subject to the maximum payment at maturity, only if the securities are
not redeemed prior to maturity and the final share price is greater than the initial share price, and the limited protection against
loss that applies only if the final share price is greater than or equal to the trigger level.
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.
All payments are subject 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
|
Maturity date:
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May 24, 2019
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Underlying shares:
|
Shares of the VanEck Vectors Gold Miners ETF (the “Fund”)
|
Aggregate principal amount:
|
$4,500,000
|
Stated principal amount:
|
$10 per security
|
Issue price:
|
$10 per security (see “Commissions and issue price” below)
|
Pricing date:
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November 21, 2017
|
Original issue date:
|
November 27, 2017 (3 business days after the pricing date)
|
Early redemption:
|
If, on the call observation date, the share closing price of the
underlying shares is
greater than or equal to
the call threshold level, the securities will be automatically redeemed for
the early redemption payment on the third business day following such call observation date. No further payments will be made on
the securities once they have been redeemed.
If the securities are redeemed prior to maturity, you will receive
only the fixed early redemption payment, regardless of the actual appreciation of the underlying shares, and you will not benefit
from the leverage feature that applies to the payment at maturity if the final share price is greater than the initial share price.
Moreover, the early redemption payment may be significantly less than the payment at maturity you would receive for the same level
of appreciation of the underlying shares had the securities not been automatically redeemed and instead remained outstanding until
maturity.
|
Payment at maturity:
|
If the securities are not redeemed prior to maturity, investors
will receive a payment at maturity determined as follows:
If the final share price is
greater than
the initial share
price: $10 + leveraged upside payment
In no event will the payment at maturity
exceed the maximum payment at maturity.
If the final share price is
less than or equal to
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 20%, and possibly all, of your investment
.
|
Maximum payment at maturity:
|
$12 per security. (120% of the stated principal amount)
|
CUSIP / ISIN:
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61768K430 / US61768K4307
|
|
Terms continued on the following page
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Listing:
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The securities will not be listed on any securities exchange.
|
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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$9.65 per security. See “Investment Summary” beginning on page 2.
|
Commissions and issue price:
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Price to public
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Agent’s commissions and fees
|
Proceeds to issuer
(3)
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Per security
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$10
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$0.20
(1)
|
|
|
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$0.05
(2)
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$9.75
|
Total
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$4,500,000
|
$112,500
|
$4,387,500
|
|
(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 PLUS.
|
|
(2)
|
Reflects a structuring fee payable to Morgan Stanley
Wealth Management by the agent or its affiliates of $0.05 for each security.
|
|
(3)
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See “Use of proceeds and hedging” on page
18.
|
The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 8.
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 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.
Product
Supplement for PLUS dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus dated November 16, 2017
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
Terms continued from previous page:
|
Call threshold level:
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$22.72, which is equal to 100% of the initial share price
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Early redemption payment:
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$10.80 per security (108% of the stated principal amount)
|
Call observation date:
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May 21, 2018, subject to postponement for non-trading days and certain market disruption events
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Valuation date:
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May 21, 2019, subject to postponement for non-trading days and certain market disruption events
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Leveraged upside payment:
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$10 × leverage factor × share percent increase
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Leverage factor:
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150%. The leverage factor will be applicable, subject to the maximum payment at maturity, only if the securities are not redeemed prior to maturity and the final share price is greater than or equal to the initial share price.
|
Share percent increase:
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(final share price – initial share price) / initial share price
|
Share performance factor:
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final share price / initial share price
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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
|
Initial share price:
|
$22.72, which is the closing price of one underlying share on the pricing date
|
Final share price:
|
The share closing price on the valuation date
|
Share closing price:
|
On any trading day, the closing price of one underlying share times the adjustment factor on such day
|
Trigger level:
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$18.176, which is 80% of the initial share price
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
Investment Summary
Principal at Risk Securities
The Auto-Callable Trigger PLUS Based on the Value of the VanEck
Vectors Gold Miners ETF due May 24, 2019 (the “securities”) can be used:
|
§
|
As an alternative to direct exposure to the underlying shares that potentially enhances returns for a limited range of positive
performance of the underlying shares but only if the securities are not redeemed prior to maturity
|
|
§
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To provide an opportunity to earn the fixed early redemption payment if the share closing price of the underlying shares on
the call observation date is greater than or equal to the call threshold level
|
|
§
|
To provide limited protection against a loss of principal in the event of a decline of the underlying shares as of the valuation
date (if the securities have not been redeemed) but only if the final share price is greater than or equal to the trigger level
|
If the securities are not redeemed prior to
maturity and the final share price is less than the trigger level, the securities are exposed on a 1:1 basis to the negative performance
of the underlying shares.
Maturity:
|
Approximately 1.5 years (unless redeemed earlier)
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Call threshold level:
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100% of the initial share price
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Early redemption payment:
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$10.80 per security (108% of the stated principal amount)
|
Leverage factor:
|
150% (applicable, subject to the maximum payment at maturity, only if the securities are not redeemed prior to maturity and the final share price is greater than the initial share price)
|
Trigger level:
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80% of the initial share price
|
Maximum payment at maturity:
|
$12 per security (120% of the stated principal amount)
|
Minimum payment at maturity:
|
None. You could lose your entire initial investment in the securities.
|
Interest:
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None
|
|
|
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 $9.65.
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 call threshold level, the early redemption payment, the leverage factor, the trigger level and the maximum 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.
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlying 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.
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
Key Investment Rationale
The securities provide exposure to the performance of the underlying
shares. If the share closing price of the underlying shares is greater than or equal to the call threshold level on the call observation
date, the securities will be automatically redeemed for a fixed amount per security equal to $10.80 (108% of the stated principal
amount). If the securities are not automatically redeemed prior to maturity and the final share price is
greater than
the
initial share price, investors will receive the stated principal amount of their investment plus leveraged upside performance of
the underlying shares, subject to the maximum payment at maturity. If the securities are not automatically redeemed prior to maturity
and the final share price is
less than or equal to
the initial share price but is
greater than or equal to
the trigger
level, investors will receive the stated principal amount of their investment. However, if the securities are not automatically
redeemed prior to maturity and the final share price is
less than
the trigger level, investors will lose a significant portion
or all of their investment, resulting in a 1% loss for every 1% decline in the share price over the term of the securities. Under
these circumstances, the payment at maturity will be less than 80% of the stated principal amount and could be zero.
Accordingly,
you may lose your entire investment.
If the securities are redeemed prior to maturity, you will receive
only the fixed early redemption payment, regardless of the actual appreciation of the underlying shares, and you will not benefit
from the leverage feature that applies to the payment at maturity if the final share price is greater than the initial share price.
Moreover, the early redemption payment may be significantly less than the payment at maturity you would receive for the same level
of appreciation of the underlying shares had the securities not been automatically redeemed and instead remained outstanding until
maturity.
Early Redemption Feature
|
If the share closing price of the underlying shares on the call observation date is greater than or equal to the call threshold level, the securities will be automatically redeemed for an amount per security equal to the early redemption payment. No further payments will be made on the securities after they have been redeemed.
|
Leveraged Performance
|
If the securities are not redeemed prior to maturity, the securities offer investors an opportunity to capture enhanced returns relative to a direct investment in the underlying shares.
|
Trigger Feature
|
At maturity, even if the underlying shares have declined over the term of the securities, you will receive your stated principal amount but only if the final share price is greater than or equal to the trigger level.
|
Early Redemption Scenario
|
If the share closing price of the underlying shares is greater than or equal to the call threshold level on the call observation date, the securities will be automatically redeemed for a fixed amount per security equal to $10.80 (108% of the stated principal amount).
|
Upside Scenario at Maturity
|
The securities are not redeemed prior to maturity, and the final share price is greater than the initial share price. In this case, at maturity, the securities redeem for the stated principal amount of $10
plus
150% of the increase in the price of the underlying shares, subject to the maximum payment at maturity of $12 per security (120% of the stated principal amount).
|
Par Scenario at Maturity
|
The securities are not redeemed prior to maturity, and the final share price is less than or equal to the initial share price but is greater than or equal to the trigger level. In this case, you receive the stated principal amount of $10 at maturity even though the underlying shares have depreciated.
|
Downside Scenario at Maturity
|
The securities are not redeemed prior to maturity, and the final share price is less than the trigger level. In this case, the securities redeem for at least 20% less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of the underlying shares over the term of the securities. There is no minimum payment at maturity on the securities. Accordingly, investors could lose their entire investment in the securities.
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the payment upon automatic
early redemption or at maturity on the securities based on the following terms:
Stated principal amount:
|
$10 per security
|
Call threshold level:
|
100% of the initial share price
|
Early redemption payment:
|
$10.80 per security (108% of the stated principal amount)
|
Maximum payment at maturity:
|
$12 per security (120% of the stated principal amount)
|
Leverage factor:
|
150%
|
Trigger level:
|
80% of the initial share price
|
|
|
Diagram #1: Call Observation Date
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
Diagram #2: Payment at Maturity if No Automatic
Early Redemption Occurs
Securities Payoff Diagram
|
|
How it works
|
§
|
Upside Scenario at Maturity:
If
the securities are not redeemed prior to maturity and the final share price is greater than the initial share price, investors
will receive the $10 stated principal amount plus 150% of the appreciation of the underlying shares over the term of the securities,
subject to the maximum payment at maturity. Under the terms of the securities, an investor would realize the maximum payment at
maturity of $12 per security (120% of the stated principal amount) at a final share price of approximately 113.333% of the initial
share price.
|
|
§
|
If the underlying shares appreciate 10%, investors will receive a 15% return, or $11.50 per security.
|
|
§
|
If the underlying shares appreciate 40%, investors will receive only a 20% return, or $12 per
security, due to the maximum payment at maturity.
|
|
§
|
Par Scenario at Maturity:
If the
securities are not redeemed prior to maturity and the final share price is less than or equal to the initial share price but is
greater than or equal to the trigger level, investors will receive the $10 stated principal amount.
|
|
§
|
If the underlying shares depreciate 10%, investors will receive the $10 stated principal amount.
|
|
§
|
Downside Scenario at Maturity:
If
the securities are not redeemed prior to maturity and the final share price is less than the trigger level, investors will 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.
|
|
§
|
If the underlying shares depreciate 60%, investors will lose 60% of their principal and receive
only $4 per security at maturity, or 40% of the stated principal amount.
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
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 PLUS, index supplement and prospectus. You should also consult
with 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
payment of any principal at maturity. If the securities are not redeemed prior to maturity and the final share price is less than
the trigger level (which is 80% of the initial share price), the payout at maturity will be an amount in cash that is at least
20% less than the $10 stated principal amount of each security, and this decrease will be by an amount proportionate to the full
decrease in the price of the underlying shares. There is no minimum payment at maturity on the securities, and, accordingly, you
could lose your entire investment.
|
|
§
|
The appreciation potential of the securities is limited by the maximum
payment at maturity.
The appreciation potential of the securities is limited by the maximum payment at maturity of $12
per security (120% of the stated principal amount). Although the leverage factor provides 150% exposure to any increase in the
value of the underlying shares as of the valuation date, because the payment at maturity will be limited to 120% of the stated
principal amount for the securities, any increase in the value of the underlying shares by more than approximately 13.333% will
not further increase the return on the securities.
|
|
§
|
If the securities are redeemed prior to maturity, the appreciation potential of the securities is limited to the fixed early
redemption payment.
If the share closing price of the underlying shares on the call observation date is greater than or equal
to the call threshold level, the securities will be automatically redeemed. In this scenario, the appreciation potential of the
securities is limited to the fixed early redemption payment of $10.80 per security (108% of the stated principal amount) regardless
of the actual appreciation of the underlying shares (which may be significant), and no further payments will be made on the securities
once they have been redeemed. In addition, if the securities are redeemed prior to maturity, you will not benefit from the leverage
feature that applies to the payment at maturity if the final share price is greater than the initial share price. Moreover, the
early redemption payment may be significantly less than the payment at maturity you would receive for the same level of appreciation
of the underlying shares had the securities not been automatically redeemed and instead remained outstanding until maturity.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market, including the trading price, volatility (frequency and magnitude of changes in value) and dividends of the underlying shares
and of the stocks composing
the NYSE Arca Gold Miners Index
(the
“share underlying index”)
,
interest
and yield rates in the market, time remaining until the securities mature,
geo
political
conditions and economic, financial, political, 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 exchange rates relative to the U.S. dollar with
respect to each of the currencies in which the shares comprising the share underlying index trade, 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 “
VanEck Vectors Gold Miners ETF
Overview”
below.
|
|
§
|
Investing in the securities exposes investors to risks associated with investments in securities with a concentration in
a single industry.
The securities are subject to certain risks applicable to the gold and silver mining industry. The stocks
included in the NYSE Arca Gold Miners Index and that are generally tracked by the Fund are stocks of companies primarily engaged
in the mining of gold or silver. The underlying shares may be subject to increased price volatility as they are linked to a single
industry, market or sector and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting
that industry, market or sector.
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
Because the Fund primarily invests
in stocks, American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) of companies that
are involved in the gold mining industry, the underlying shares are subject to certain risks associated with such companies.
Competitive pressures may have a
significant effect on the financial condition of companies in the gold mining industry. Also, gold mining companies are highly
dependent on the price of gold. Gold prices are subject to volatile price movements over short periods of time and are affected
by numerous factors. These include economic factors, including, among other things, the structure of and confidence in the global
monetary system, expectations of the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is generally quoted), interest rates and gold borrowing and lending rates, and global or regional
economic, financial, political, regulatory, judicial or other events. Gold prices may also be affected by industry factors such
as industrial and jewelry demand, lending, sales and purchases of gold by the official sector, including central banks and other
governmental agencies and multilateral institutions which hold gold, levels of gold production and production costs, and short-term
changes in supply and demand because of trading activities in the gold market.
The Fund invests to a lesser extent
in stocks, ADRs and GDRs of companies involved in the silver mining industry. Silver mining companies are highly dependent on the
price of silver. Silver prices can fluctuate widely and may be affected by numerous factors. These include general economic trends,
technical developments, substitution issues and regulation, as well as specific factors including industrial and jewelry demand,
expectations with respect to the rate of inflation, the relative strength of the U.S. dollar (the currency in which the price of
silver is generally quoted) and other currencies, interest rates, central bank sales, forward sales by producers, global or regional
political or economic events, and production costs and disruptions in major silver producing countries such as Mexico and Peru.
The supply of silver consists of a combination of new mine production and existing stocks of bullion and fabricated silver held
by governments, public and private financial institutions, industrial organizations and private individuals. In addition, the price
of silver has on occasion been subject to very rapid short-term changes due to speculative activities. From time to time, above-ground
inventories of silver may also influence the market. The major end-uses for silver include industrial applications, jewelry, photography
and silverware.
|
§
|
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:
|
·
|
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 countries represented in the share underlying index 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 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
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
on our ability to pay all amounts
due on the securities upon an early redemption or 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.
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§
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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.
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§
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Reinvestment risk.
The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no further payments on the securities and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns.
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§
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If the securities are not redeemed prior to maturity, the amount payable on the securities at maturity is not linked to
the price of the underlying shares at any time other than the valuation date.
If the securities are not redeemed prior to maturity,
the final share price will be the share closing price 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 share closing price on the valuation date.
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§
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Investing in the securities is not equivalent to investing in the
underlying shares or the securities composing the share underlying index.
Investing in the
securities is not equivalent to investing in the underlying shares, the
share underlying index
or
the securities 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
.
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|
§
|
Adjustments to the underlying shares or to the share underlying
index could adversely affect the value of the securities.
The investment advisor to the
VanEck Vectors Gold Miners ETF, Van Eck Associates Corporation (the “Investment Advisor” or “Van Eck”),
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 VanEck Vectors Gold Miners ETF. Any of these actions could adversely affect the price of the underlying shares and, consequently,
the value of the securities. NYSE Arca is responsible for calculating and maintaining the share underlying index. NYSE Arca may
add, delete or substitute the securities constituting the share underlying index or make other methodological changes that could
change the value of the share underlying index, and, consequently, the price of the underlying shares and the value of the securities.
NYSE Arca 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 will be
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
permitted
to consider indices that are calculated and published by the calculation agent or any of its affiliates.
|
§
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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.
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§
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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.
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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
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
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.
|
§
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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 will be influenced
by many unpredictable factors” above.
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§
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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.
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§
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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.
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§
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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, the call threshold level and
the trigger level, will determine the final share price, whether the securities will be automatically redeemed prior to maturity,
and, if not, whether the underlying shares have decreased to below the trigger level, and will calculate the amount of cash, if
any, 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 underlying shares. 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 PLUS—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” and related definitions 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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§
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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 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
|
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
involve greater and more frequent
dynamic adjustments to the hedge as the valuation date approaches. MS & Co. and some of our other affiliates also trade the
underlying shares or the stocks that constitute the share underlying index and other financial instruments related to the share
underlying index on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading
activities on or prior to the pricing date could have increased the initial share price, and, therefore, could have increased the
trigger level, which, if the securities are not redeemed prior to maturity, 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 potentially
affect whether the price of the underlying shares on the valuation date is below the trigger level, and, therefore, whether an
investor would receive significantly less than the stated principal amount of the securities 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 provisions—Tax considerations” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for PLUS (together, the “Tax Disclosure Sections”) concerning
the U.S. federal income tax consequences of an investment in the securities. As discussed in the Tax Disclosure Sections, there
is a substantial risk that the “constructive ownership” rule could apply, in which case all or a portion of any long-term
capital gain recognized by a U.S. Holder could be recharacterized as ordinary income and an interest charge could be imposed. 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 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 PLUS, the
withholding rules commonly referred to as “FATCA” would apply to the securities if they were recharacterized as debt
instruments. 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, as
discussed in this document. 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 potential application of the constructive ownership rule, the issues presented by this notice and any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
VanEck Vectors Gold Miners ETF Overview
The VanEck Vectors Gold Miners ETF is an exchange-traded fund
managed by Van Eck Associates Corporation (“Van Eck”), a registered investment company, that seeks investment results
that correspond generally to the price and yield performance, before fees and expenses, of the NYSE Arca Gold Miners Index. Information
provided to or filed with the Securities and Exchange Commission (“the Commission”) by Van Eck pursuant to the Securities
Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-123257 and 811-10325,
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 VanEck Vectors Gold Miners ETF is accurate or complete.
Information as of market close on November 21, 2017:
Ticker Symbol:
|
GDX UP
|
52 Week High (on 2/8/2017):
|
$25.57
|
Current Share Price:
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$22.72
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52 Week Low (on 12/15/2016):
|
$18.99
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52 Weeks Ago:
|
$21.48
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The following graph sets forth the daily closing prices
of the underlying shares for the period from January 1, 2012 through November 21, 2017. 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 November 21, 2017 was $22.72. We obtained the information in the table and
graph below from Bloomberg Financial Markets, without independent verification. The historical closing prices of the underlying
shares should not be taken as an indication of future performance, and no assurance can be given as to the closing price of the
underlying shares on the valuation date.
Shares of the VanEck Vectors Gold Miners ETF
Daily Closing Prices, January 1, 2012 to November 21, 2017
|
|
M
organ
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F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
VanEck Vectors Gold Miners ETF (CUSIP: 5706U100)
|
High ($)
|
Low ($)
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Period End ($)
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2012
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|
|
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First Quarter
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57.47
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48.75
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49.57
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Second Quarter
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50.37
|
39.34
|
44.77
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Third Quarter
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54.81
|
40.70
|
53.71
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Fourth Quarter
|
54.25
|
44.85
|
46.39
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2013
|
|
|
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First Quarter
|
47.09
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35.91
|
37.85
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Second Quarter
|
37.45
|
22.22
|
24.41
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Third Quarter
|
30.43
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22.90
|
25.06
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Fourth Quarter
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26.52
|
20.39
|
21.12
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2014
|
|
|
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First Quarter
|
27.73
|
21.27
|
23.60
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Second Quarter
|
26.45
|
22.04
|
26.45
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Third Quarter
|
27.46
|
21.35
|
21.35
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Fourth Quarter
|
21.94
|
16.59
|
18.38
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2015
|
|
|
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First Quarter
|
22.94
|
17.67
|
18.24
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Second Quarter
|
20.82
|
17.76
|
17.76
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Third Quarter
|
17.85
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13.04
|
13.74
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Fourth Quarter
|
16.90
|
13.08
|
13.72
|
2016
|
|
|
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First Quarter
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20.86
|
12.47
|
19.98
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Second Quarter
|
27.70
|
19.53
|
27.70
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Third Quarter
|
31.32
|
29.67
|
27.24
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Fourth Quarter
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25.96
|
18.99
|
20.92
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2017
|
|
|
|
First Quarter
|
25.57
|
21.14
|
22.81
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Second Quarter
|
24.57
|
21.10
|
22.08
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Third Quarter
|
25.49
|
21.21
|
22.96
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Fourth Quarter (through November 21, 2017)
|
23.84
|
22.43
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22.72
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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 Van Eck 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 Van Eck. Neither we nor the
agent makes any representation that such publicly available documents or any other publicly available information regarding Van
Eck 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 Van Eck 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 Van Eck. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to Van Eck, 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 Van Eck as in your judgment is appropriate to make an informed decision with
respect to an investment linked to the underlying shares.
M
organ
S
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F
inance
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Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities
The securities are not sponsored, endorsed, sold, or promoted
by Van Eck. Van Eck 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. Van Eck has no obligation or liability in connection with the operation, marketing,
trading or sale of the securities.
The NYSE Arca Gold Miners Index.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved
primarily in the mining of gold and silver. The NYSE Arca Gold Miners Index includes common stocks, ADRs or GDRs of selected companies
involved in the mining for gold and silver ore and are listed for trading and electronically quoted on a major stock market that
is accessible by foreign investors. For additional information about the NYSE Arca Gold Miners Index, please see the information
set forth under “NYSE Arca Gold Miners Index” in the accompanying index supplement.
M
organ
S
tanley
F
inance
LLC
Auto-Callable Trigger PLUS Based on the Value of the VanEck Vectors Gold Miners ETF due May 24, 2019
Principal at Risk Securities