CALCULATION
OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
Trigger Jump Securities due 2020
|
|
$1,300,000
|
|
$157.56
|
May 2019
Pricing Supplement No. 1,981
Registration Statement Nos.
333-221595; 333-221595-01
Dated May 29, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured Investments
Opportunities in U.S. and International Equities
Enhanced Trigger Jump Securities Based on the
Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Enhanced Trigger 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 will pay no interest, do not guarantee any return of principal at maturity and have the terms
described in the accompanying product supplement for Jump Securities and prospectus, as supplemented and modified by this document.
If the final level of
each
underlying is
greater than or equal to
60% of its respective initial level, which we
refer to as the respective downside threshold value, you will receive the stated principal amount for each security that you hold
at maturity plus the upside payment of $112.50 per security. However, if the final level of
any
underlying
is less than
its respective downside threshold value, the payment at maturity will be significantly less than the stated principal amount
of the securities by an amount proportionate to the percentage decrease in the final level of the worst performing underlying
from its initial level. Under these circumstances, the payment at maturity will be less than $600 per security and could be zero.
Accordingly, you could lose your entire initial investment in the securities.
Because the payment at maturity on the securities
is based on the worst performing of the underlyings, a decline in
any
final level below 60% of its respective initial level
will result in a significant loss on your investment, even if the other underlyings have appreciated or have not declined as much.
Investors will not participate in any appreciation of any underlying. The securities are for investors who seek an equity-based
return and who are willing to risk their principal, risk exposure to the worst performing of three underlyings and forgo current
income and returns above the fixed upside payment in exchange for the upside payment feature that applies only if the final level
of
each
underlying is
greater than or equal
to its respective downside threshold value. 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
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Issue price:
|
$1,000 per security
|
Stated principal amount:
|
$1,000 per security
|
Pricing date:
|
May 29, 2019
|
Original issue date:
|
June 3, 2019 (3 business days after the pricing date)
|
Maturity date:
|
June 10, 2020
|
Aggregate principal amount:
|
$1,300,000
|
Interest:
|
None
|
Underlyings:
|
The EURO STOXX Banks
®
Index (the “SX7E Index”), the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF (the “XOP Shares”) and the SPDR
®
S&P
®
Biotech ETF (the “XBI Shares”)
|
Payment at maturity:
|
If the final level of
each
underlying
is
greater than or equal to
its respective downside threshold value:
$1,000 + the upside payment
If the final level of
any
underlying
is
less than
its respective downside threshold value, meaning the level of any underlying has declined by more than 40%
from its respective initial level to its respective final level:
$1,000 × performance factor
of the worst performing underlying
Under these circumstances, the payment at maturity will be
significantly less than the stated principal amount of $1,000 and will represent a loss of more than 40%, and possibly all, of
your investment.
|
Upside payment:
|
$112.50 per security (11.25% of the stated principal amount)
|
Performance factor:
|
With respect to each underlying, final level / initial level
|
Worst performing underlying:
|
The underlying that has declined the most, meaning that it has the lowest performance factor
|
Initial level:
|
With respect to the SX7E Index, 87.26, which is the closing level
of such underlying on the pricing date
With respect to the XOP Shares, $26.85, which is the closing
level of such underlying on the pricing date
With respect to the XBI Shares, $81.27, which is the closing
level of such underlying on the pricing date
|
Downside threshold value:
|
With respect to the SX7E Index, 52.356, which is 60% of the initial
level for such underlying
With respect to the XOP Shares, $16.11, which is 60% of the initial
level for such underlying
With respect to the XBI Shares, $48.762, which is 60% of the
initial level for such underlying
|
Final level:
|
With respect to each underlying, the respective closing level of such underlying on the valuation date
|
Closing level:
|
With respect to the SX7E Index, on any index business day, the
index closing value of such underlying on such day.
With respect to each of the XOP Shares and XBI Shares, on any
trading day, the closing price of one share of such underlying on such day times the adjustment factor for such underlying on such
day
|
Valuation date:
|
June 5, 2020, subject to postponement for non-index business days and non-trading days, as applicable and certain market disruption events
|
Adjustment factor:
|
With respect to each of the XOP Shares and the XBI Shares, 1.0, subject to adjustment in the event of certain events affecting such underlying.
|
CUSIP / ISIN:
|
61769HBZ7 / US61769HBZ73
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$972.00 per security. See “Investment Summary” on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$7.50
|
$992.50
|
Total
|
$1,300,000
|
$9,750
|
$1,290,250
|
|
|
|
|
|
|
(1)
|
Selected
dealers and their financial advisors will collectively receive from the agent, MS &
Co., a fixed sales commission of $7.50 for each security they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional
information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
product supplement for Jump Securities.
|
|
(2)
|
See
“Use of proceeds and hedging” on page 25.
|
The securities
involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page
7.
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 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 and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
References to “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for Jump Securities dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan
Stanley Finance LLC
Enhanced Trigger
Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech
ETF due June 10, 2020
Principal at Risk Securities
Investment Summary
Principal at Risk Securities
The Enhanced Trigger Jump Securities Based on the Value of the
Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas
Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020 (the “securities”)
can be used:
|
§
|
As an alternative to direct exposure to the underlyings that provides a fixed return of 11.25% if the final level of
each
underlying is
greater than or equal
to its respective downside threshold value;
|
|
§
|
To potentially outperform the worst performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF in a moderately
bullish or moderately bearish scenario;
|
|
§
|
To obtain limited protection against the loss of principal in the event of a decline of the underlyings as of the valuation
date, but only if the final level of
each
underlying is
greater than or equal
to its respective downside threshold
value.
|
If the final level of
any
underlying
is less than its downside threshold value, the securities are exposed on a 1-to-1 basis to the percentage decline of the final
level of the worst performing underlying from its respective initial level.
Accordingly, investors may lose their entire initial
investment in the securities.
Maturity:
|
Approximately 53 weeks
|
Upside payment:
|
$112.50 per security (11.25% of the stated principal amount), payable only if the final level of each underlying is greater than or equal to its respective downside threshold value.
|
Downside threshold value:
|
For each underlying, 60% of the respective initial level
|
Interest:
|
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 $972.00.
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 underlyings.
The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlyings, instruments based on the underlyings, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the
securities?
In determining the economic terms of the securities,
including the upside payment and the downside threshold values, 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 underlyings, 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
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
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 underlyings,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those
higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not
obligated to, make a market in the securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Key Investment Rationale
The securities provide a return based on the performance of the
worst performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas
Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF. If the final level of each underlying
is greater than or equal to its respective downside threshold value, you will receive the stated principal amount for each security
that you hold at maturity plus the upside payment of $112.50 per security. However, if, as of the valuation date, the level of
any
underlying is
less
than its respective downside threshold value, the payment due at maturity will be less than
$600 per security and could be zero.
Upside Scenario
|
If the final level of
each
underlying is
greater than or equal to its respective downside threshold value,
the payment at maturity for each security will be equal to $1,000
plus
the upside payment of $112.50. You will not participate in any appreciation of any underlying.
|
Downside Scenario
|
If the final level of
any
underlying is
less than
its respective downside threshold value
, you will lose 1% for every 1% decline in the value of the worst performing underlying
from its initial level, without any buffer (e.g., a 50% depreciation in the worst performing underlying from the respective initial
level to the respective final level will result in a payment at maturity of $500 per security).
Because the payment at maturity of the securities is based on
the worst performing of the underlyings, a decline in
any
underlying below its respective downside threshold value will
result in a loss of a significant portion or all of your investment, even if the other underlyings have appreciated or have not
declined as much.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to calculate
the payment at maturity on the securities. The following examples are for illustrative purposes only. The payment at maturity on
the securities is subject to our credit risk. The below examples are based on the following terms. The actual initial levels and
downside threshold values are set forth on the cover of this document.
Stated Principal Amount:
|
$1,000 per security
|
Hypothetical Initial Level:
|
With respect to the SX7E Index: 100
With respect to the XOP Shares: $30
With respect to the XBI Shares: $80
|
Hypothetical Downside Threshold Value:
|
With respect to the SX7E Index: 60, which is 60% of its hypothetical
initial level
With respect to the XOP Shares: $18.00, which is 60% of its hypothetical
initial level
With respect to the XBI Shares: $48.00, which is 60% of its hypothetical
initial level
|
Upside Payment:
|
$112.50 (11.25% of the stated principal amount)
|
Interest:
|
None
|
EXAMPLE 1: Each underlying appreciates substantially, and
investors therefore receive the stated principal amount
plus
the upside payment.
Final level
|
|
SX7E Index: 200
|
|
|
|
XOP Shares: $52.50
XBI Shares: $168
|
Performance factor
|
|
SX7E Index: 200 / 100 = 200%
XOP Shares: $52.50 / $30 = 175%
XBI Shares: $168 / $80 = 210%
|
Payment at maturity
|
=
|
$1,000 + upside payment
|
|
=
|
$1,000 + $112.50
|
|
=
|
$1,112.50
|
In example 1, the final level for the SX7E Index has increased
from its initial level by 100%, the final level for the XOP Shares has increased from its initial level by 75% and the final level
for the XBI Shares has increased from its initial level by 110%. Because the final level of each underlying is at or above its
respective downside threshold value, investors receive at maturity the stated principal amount
plus
the upside payment of
$112.50. Investors receive $1,112.50 per security at maturity and do not participate in the appreciation of any underlying. Although
each underlying has appreciated substantially, the return on the securities is limited to the stated principal amount plus the
fixed upside payment of $112.50.
EXAMPLE 2: The final level of each underlying is at or above
its respective downside threshold value, and investors therefore receive the stated principal amount
plus
the upside payment.
Final level
|
|
SX7E Index: 115
|
|
|
|
XOP Shares: $33
XBI Shares: $72
|
Performance factor
|
|
SX7E Index: 115 / 100 = 115%
XOP Shares: $33 / $30 = 110%
XBI Shares: $72 / $80 = 90%
|
Payment at maturity
|
=
|
$1,000 + upside payment
|
|
=
|
$1,000 + $112.50
|
|
=
|
$1,112.50
|
In example 2, the final level for the SX7E Index has increased
from its initial level by 15%, the final level for the XOP Shares has increased from its initial level by 10% and the final level
for the XBI Shares has decreased from its initial level by 10%. Because the final level of each underlying is at or above its respective
downside threshold value, investors receive at maturity the stated principal amount plus the upside payment of $112.50. Investors
receive $1,112.50 per security at maturity.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
EXAMPLE 3: The final level of one of the underlyings is less
than its respective downside threshold value. Investors are therefore exposed to the full decline in the worst performing underlying
from its initial level.
Final level
|
|
SX7E Index: 120
|
|
|
|
XOP Shares: $15
XBI Shares: $72
|
Performance factor
|
|
SX7E Index: 120 / 100 =
120%
XOP Shares: $15 / $30 =
50%
XBI Shares: $72 / $80 =
90%
|
Payment at maturity
|
=
|
$1,000 × performance factor of the worst performing underlying
|
|
=
|
$1,000 x 50%
|
|
=
|
$500
|
In example 3, the final
level for the SX7E Index has increased from its initial level by 20%, the final level for the XOP Shares has decreased from its
initial index value by 50% and the final level for the XBI Shares has decreased from its initial level by 10%. Because one of the
underlyings has declined below its respective downside threshold value, investors lose the benefit of the upside payment and instead
are exposed to the full negative performance of the XOP Shares, which is the worst performing underlying in this example. Under
these circumstances, investors lose 1% of the stated principal amount for every 1% decline in the value of the worst performing
underlying from its initial level. In this example, investors receive a payment at maturity equal to $500 per security, resulting
in a loss of 50%.
EXAMPLE 4
:
The
final level of each underlying is less than its respective downside threshold value. Investors are therefore exposed to the full
decline in the worst performing underlying from its initial level.
Final level
|
|
SX7E Index: 20
|
|
|
|
XOP Shares: $12
XBI Shares: $28
|
Performance factor
|
|
SX7E Index: 20 / 100 =
20%
XOP Shares: $12 / $30 =
40%
XBI Shares: $28 / $80 =
35%
|
Payment at maturity
|
=
|
$1,000 × performance factor of the worst performing underlying
|
|
=
|
$1,000 x 20%
|
|
=
|
$200
|
In example 4, the final
level for the SX7E Index has decreased from its initial level by 80%, the final level for the XOP Shares has decreased from its
initial level by 60% and the final level for the XBI Shares has decreased from its initial level by 65%. Because one or more underlyings
have declined below their respective downside threshold values, investors lose the benefit of the upside payment and instead are
exposed to the full negative performance of the SX7E Index, which is the worst performing underlying in this example. Under these
circumstances, investors lose 1% of the stated principal amount for every 1% decline in the value of the worst performing underlying
from its initial level. In this example, investors receive a payment at maturity equal to $200 per security, resulting in a loss
of 80%.
If
the final level of any of the underlyings is less than its respective downside threshold value, you will receive an amount in cash
that is significantly less than the $1,000 stated principal amount of each security by an amount proportionate to the full decline
in the level of the worst performing underlying from its level over the term of the securities, and you will lose a significant
portion or all of your investment.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement 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 the return of any principal.
The terms of the securities differ from
those of ordinary debt securities in that the securities do not pay interest or guarantee the payment of any principal 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 level of each underlying. If the final level of any underlying is less than 60% of its respective initial level, you
will lose the benefit of the upside payment and, you will receive at maturity an amount in cash that is significantly less than
the $1,000 stated principal amount of each security by an amount proportionate to the full decline in the final level of the worst
performing underlying from its initial level over the term of the securities. Under these circumstances, you will lose a significant
portion or all of your investment.
There is no minimum payment at maturity on the securities, and, accordingly, you could lose
your entire investment.
|
|
§
|
You are exposed to the price risk of each underlying.
Your return on the securities is not linked to a basket consisting
of each of the underlyings. Rather, it will be based upon the independent performance of each underlying. Unlike an instrument
with a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all the components of the
basket, you will be exposed to the risks related to each underlying. Poor performance by any underlying over the term of the securities
will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlyings. If
the final level of any underlying declines to below 60% of its respective initial level, you will be fully exposed to the negative
performance of the worst performing underlying at maturity, even if the other underlyings have appreciated or have not declined
as much.
Accordingly, your investment is subject to the price risk of each underlying.
|
|
§
|
Because the securities are linked to the performance of the worst performing underlying, you are exposed to greater risk
of sustaining a significant loss on your investment than if the securities were linked to just one underlying.
The risk that
you will suffer a significant loss on your investment is greater if you invest in the securities as opposed to substantially similar
securities that are linked to the performance of just one underlying. With three underlyings, it is more likely that the final
level of any underlying will decline to below its respective downside threshold value than if the securities were linked to only
one underlying. Therefore, it is more likely that you will suffer a significant loss on your investment.
|
|
§
|
Appreciation potential is fixed and limited.
Where the final level of each underlying is greater than or equal to its
respective downside threshold value, the appreciation potential of the securities is limited to the fixed upside payment of $112.50
per security (11.25% of the stated principal amount), even if all three underlyings have appreciated substantially.
|
|
§
|
The amount payable on the securities is not linked to the levels of the underlyings at any time other than the valuation
date.
The final levels will be the closing levels on the valuation date, subject to postponement for non-index business days,
non-trading days and certain market disruption events. Even if the level of the worst performing underlying appreciates prior to
the valuation date but then drops by the valuation date, the payment at maturity may be significantly less than it would have been
had the payment at maturity been linked to the level of the worst performing underlying prior to such drop. Although
the actual level of the worst performing underlying on the stated maturity date or at other times during the term of the securities
may be higher than its respective final level, the payment at maturity will be based solely on the final level of the worst performing
underlying on the valuation date.
|
|
§
|
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
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
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 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 values of the underlyings at any time (including
in relation to their initial levels and downside threshold values),
|
|
o
|
the volatility (frequency and magnitude of changes
in value) of each underlying and of the stocks composing the SX7E Index, the
S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
and the S&P Biotechnology Select Industry
TM
Index
,
|
|
o
|
dividend rates on the securities underlying the SX7E
Index, the
S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
and the S&P Biotechnology Select Industry
TM
Index
,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the component stocks of the underlyings or securities markets generally and which may
affect the levels of the underlyings,
|
|
o
|
the time remaining until the maturity of the securities,
|
|
o
|
the composition of the underlyings and changes in the
constituent stocks of the SX7E Index
, the S&P
®
Oil & Gas Exploration &
Production Select Industry Index
®
and the S&P Biotechnology Select Industry
TM
Index
,
|
|
o
|
the occurrence of certain events affecting the XOP
Shares and the XBI Shares that may or may not require an adjustment to an adjustment factor, and
|
|
o
|
any actual or anticipated changes in our credit ratings
or credit spreads.
|
Some or all of these factors will
influence the price you will receive if you sell your securities prior to maturity. In particular, 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 any underlying is near, at or below
its respective downside threshold value.
You cannot predict the future performance
of the underlyings based on their historical performance. If the final level of any underlying is less than 60% of its respective
initial level, you will be exposed on a 1-to-1 basis to the full decline in the final level of the worst performing underlying
from its respective initial level. There can be no assurance that the final level of each underlying will be greater than or equal
to its respective downside threshold value 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 a significant portion or all 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.
|
|
§
|
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
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk 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 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., are 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 underlyings, and to our secondary market credit spreads, it would do so based
on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price.
These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the securities may be influenced
by many unpredictable factors” above.
|
|
§
|
The securities are linked to the EURO STOXX Banks
®
Index and are subject to risks associated with investments
in securities linked to the value of foreign equity securities
. As the EURO STOXX Banks
®
Index is one of the
underlyings, the securities are linked to the value of foreign equity securities. Investments in securities linked to the value
of foreign equity securities involve risks associated with the securities markets in those countries, including risks of volatility
in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. Also, there
is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting
requirements of the United States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing
and financial reporting standards and requirements different from those applicable to U.S. reporting companies. The prices of securities
issued in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions,
including changes in government, economic and fiscal policies and currency exchange laws. Local securities markets may trade a
small number of securities and may be unable to respond
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
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 favorably or 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 stocks composing the EURO STOXX Banks
®
Index are concentrated in the banking sector.
Each of
the stocks composing the SX7E Index has been issued by a company whose business is associated with the banking sector, and so an
investment in the securities will be concentrated in this sector. The performance of bank stocks may be affected by governmental
regulation that may limit the amount and types of loans and other financial commitments that banks can make, the interest rates
and fees they can charge and the amount of capital they must maintain. Profitability is largely dependent on the availability and
cost of capital funds, and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties
of borrowers can negatively impact the banking sector. Banks may also be subject to severe price competition.
|
|
§
|
Investing in the securities exposes investors to risks associated with investments in securities with a concentration in
the oil and gas exploration and production industry
. The stocks included in the S&P
®
Oil & Gas Exploration
& Production Select Industry Index
®
and that are generally tracked by the XOP Shares are stocks of companies
whose primary business is associated with the exploration and production of oil and gas. As a result, the value of the securities
may be subject to greater volatility and may be more adversely affected by a single economic, political or regulatory occurrence
affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers or issuers
in a less volatile industry. The oil and gas industry is significantly affected by a number of factors that influence worldwide
economic conditions and oil and gas prices, such as natural disasters, supply disruptions, geopolitical events and other factors
that may offset or magnify each other, including:
|
|
o
|
worldwide and domestic supplies of, and demand for, crude oil and natural gas;
|
|
o
|
the cost of exploring for, developing, producing, refining and marketing crude oil and natural gas;
|
|
o
|
changes in weather patterns and climatic changes;
|
|
o
|
the ability of the members of Organization of Petroleum Exporting Countries (OPEC) and other producing nations to agree to
and maintain production levels;
|
|
o
|
the worldwide military and political environment, uncertainty or instability resulting from an escalation or additional outbreak
of armed hostilities or further acts of terrorism in the United States, or elsewhere;
|
|
o
|
the price and availability of alternative and competing fuels;
|
|
o
|
domestic and foreign governmental regulations and taxes;
|
|
o
|
employment levels and job growth; and
|
|
o
|
general economic conditions worldwide.
|
These or other factors or the absence
of such factors could cause a downturn in the oil and natural gas industries generally or regionally and could cause the value
of some or all of the component stocks included in the S&P
®
Oil & Gas Exploration & Production Select
Industry Index
®
to decline during the term of the securities.
|
§
|
Investing in the securities exposes investors to risks associated with investments in securities with a concentration in
the biotechnology sector.
The stocks included in the S&P Biotechnology Select Industry
TM
Index and that are
generally tracked by the SPDR
®
S&P
®
Biotech ETF are stocks of companies primarily engaged in
research, development, manufacturing and/or marketing of products based on genetic analysis and genetic engineering. Because the
value of the securities is linked to the performance of the underlying shares, an investment in the securities exposes investors
to risks associated with investments in securities with a concentration in the biotechnology sector. Industry-specific risks to
which companies in the biotechnology sector are subject may include the following:
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
o After
spending heavily on research and development, their products or services may not prove commercially successful or may become obsolete
quickly;
o The
biotechnology industry may be subject to greater governmental regulation than other industries, and changes in governmental policies
and the need for regulatory approvals may have a material adverse effect on the industry;
o Companies
in the biotechnology industry are subject to risks arising from new technologies and competitive pressures; and
o Companies
in the biotechnology industry are heavily dependent on patents and intellectual property rights. The loss or impairment of these
rights may adversely affect the profitability of these companies.
o The
XBI Shares may be subject to increased price volatility as it is 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. The price
of the XBI Shares may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen.
|
§
|
Investing in the securities is not equivalent to investing in the underlyings or the stocks composing the SX7E Index, the
S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
or the S&P Biotechnology
Select Industry
TM
Index.
Investing in the securities is not equivalent to investing in any of the underlyings or
the stocks that constitute the SX7E Index, the S&P
®
Oil & Gas Exploration & Production Select Industry
Index
®
or the S&P Biotechnology Select Industry
TM
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 underlyings or the
stocks that constitute the SX7E Index, the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
or the S&P Biotechnology Select Industry
TM
Index.
|
|
§
|
Adjustments to the SX7E Index could adversely affect the value of the securities.
The publisher of the SX7E Index can
add, delete or substitute the stocks underlying the SX7E Index, and can make other methodological changes for certain events relating
to the underlying stocks, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary dividends, that
could change the value of the SX7E Index. Any of these actions could adversely affect the value of the securities. The publisher
of the SX7E Index may also discontinue or suspend calculation or publication of the SX7E Index at any time. In these circumstances,
MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the
discontinued SX7E Index. MS & Co. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index, the payout on the securities at maturity
will be based on the closing prices on the relevant date of the stocks underlying the SX7E Index at the time of such discontinuance,
without rebalancing or substitution, computed by the calculation agent in accordance with the formula for calculating the SX7E
Index last in effect prior to the discontinuance of the SX7E Index (depending also on the performance of the other underlyings).
|
|
§
|
Adjustments to the XOP Shares or the XBI Shares or the indices tracked by such underlyings could adversely affect the value
of the securities.
The investment advisor to each of the XOP Shares and the XBI Shares, (SSGA Funds Management Inc.), seeks
investment results that correspond generally to the price and yield performance, before fees and expenses, of the relevant share
underlying index. Pursuant to its investment strategy or otherwise, the investment advisor may add, delete or substitute the stocks
composing the respective underlying. Any of these actions could adversely affect the price of the respective underlying and, consequently,
the value of the securities. The publisher of the S&P
®
Oil & Gas Exploration & Production Select Industry
Index
®
and the S&P Biotechnology Select Industry
TM
Index is responsible for calculating and maintaining
the share underlying indices. It may add, delete or substitute the securities constituting the share underlying indices or make
other methodological changes that could change the value of the share underlying indices, and, consequently, the price of the underlyings
and the value of the securities. The publisher of the share underlying indices may discontinue or suspend calculation or publication
of a 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 permitted to consider indices that
are calculated and published by the calculation agent or any of its affiliates.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
|
§
|
The performance and market price of any of the XOP Shares or the XBI Shares, particularly during periods of market volatility,
may not correlate with the performance of its respective share underlying index, the performance of the component securities of
such share underlying index or the net asset value per share of the XOP Shares or the XBI Shares.
The XOP Shares and the XBI
Shares do not fully replicate their respective share underlying indices, and each may hold securities that are different than those
included in its respective share underlying index. In addition, the performance of the XOP Shares and the XBI Shares will reflect
additional transaction costs and fees that are not included in the calculation of the share underlying indices. All of these factors
may lead to a lack of correlation between the performance of the XOP Shares or the XBI Shares and its respective share underlying
index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the XOP
Shares or the XBI Shares may impact the variance between the performance of the XOP Shares or the XBI Shares and its respective
share underlying index. Finally, because the shares of the XOP Shares and the XBI Shares are traded on an exchange and are subject
to market supply and investor demand, the market price of one share of the XOP Shares or the XBI Shares may differ from the net
asset value per share of the XOP Shares or the XBI Shares, respectively.
|
In particular, during periods of
market volatility, or unusual trading activity, trading in the securities underlying the XOP Shares or the XBI Shares may be disrupted
or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the XOP
Shares or the XBI Shares may be adversely affected, market participants may be unable to calculate accurately the net asset value
per share of the XOP Shares or the XBI Shares, and their ability to create and redeem shares of the XOP Shares or the XBI Shares
may be disrupted. Under these circumstances, the market price of shares of the XOP Shares or the XBI Shares may vary substantially
from the net asset value per share of each underlying share or the level of its respective share underlying index.
For all of the foregoing reasons,
the performance of the XOP Shares or the XBI Shares may not correlate with the performance of its respective share underlying index,
the performance of the component securities of such share underlying index or the net asset value per share of the XOP Shares or
the XBI Shares. Any of these events could materially and adversely affect the prices of each of the XOP Shares or the XBI Shares
and, therefore, the value of the securities. Additionally, if market volatility or these events were to occur on a relevant date
of calculation, 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 on the published closing
price per share of the XOP Shares or the XBI Shares on the relevant date of calculation, even if the XOP Shares or the XBI Shares
is underperforming its respective share underlying index or the component securities of such share underlying index and/or trading
below the net asset value per share of the XOP Shares or the XBI Shares, respectively.
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover
every event that can affect any of the XOP Shares and the XBI Shares.
MS & Co., as calculation agent, will adjust the adjustment
factor for the EFA Shares or the XBI Shares for certain events affecting such underlying, such as stock splits and stock dividends.
However, the calculation agent will not make an adjustment for every event or every distribution that could affect the XOP Shares
and the XBI Shares. If an event occurs that does not require the calculation agent to adjust an 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,
an adjustment factor may materially and adversely affect the value of the securities.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities.
As calculation agent, MS & Co. has determined the initial levels and the downside threshold values and
will determine the final levels and the performance factors, if applicable, and the payment that you will receive at maturity,
if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise
discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events
and the selection of a successor index or calculation of the closing value or closing price, as applicable, in the event of a market
disruption event or discontinuance of the SX7E Index, the S&P
®
Oil & Gas Exploration & Production Select
Industry Index
®
or the S&P Biotechnology Select Industry
TM
Index. 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
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
of Securities—Postponement
of Valuation Date(s),” “—Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation,”
“—Discontinuance of Any ETF Shares and/or Share Underlying Index; Alteration of Method of Calculation,” “—Alternate
Exchange Calculation in case of an Event of Default” and “—Calculation Agent and Calculations” in the accompanying
product supplement. In addition, MS & Co. has determined the estimated value of the securities on the pricing date.
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities
. One or
more of our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related
to the securities (and to other instruments linked to the underlyings, the S&P
®
Oil & Gas Exploration &
Production Select Industry Index
®
, the S&P Biotechnology Select Industry
TM
Index or their component
stocks), including trading in the XOP Shares and XBI Shares, the stocks that constitute
the SX7E
Index, the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
or the S&P
Biotechnology Select Industry
TM
Index
as well as in other instruments related to the underlyings. As a result,
these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. Some of our affiliates also trade
the stocks that constitute
the underlyings
and other financial instruments related to
the underlyings 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 level of an underlying, and, therefore, could have
increased the value at or above which such underlying must close on the valuation date so that you do not suffer a significant
loss on your initial investment in the securities (depending also on the performance of the other underlyings). Additionally, such
hedging or trading activities during the term of the securities, including on the valuation date, could adversely affect the value
of any underlying, and, accordingly, the amount of cash an investor will receive at maturity, if any (depending also on the performance
of the other underlyings).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
Please read the discussion
under “Additional Information—Tax considerations” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for Jump Securities (together, the “Tax Disclosure Sections”)
concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative treatment, the timing and character of income on the securities might differ significantly
from the tax treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original
issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize
all income 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
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
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
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
EURO STOXX Banks
®
Index Overview
The EURO STOXX Banks
®
Index is one of 19 EURO
STOXX
®
Supersector indices that compose the STOXX
®
Europe 600 Index and includes companies in the
banks supersector, which tracks companies engaged in a broad range of financial services, including retail banking, loans and money
transmissions. The EURO STOXX Banks
®
Index is reported by Bloomberg L.P. under the ticker symbol “SX7E.”
For additional information about the EURO STOXX Banks
®
Index, see the information set forth in “Annex A—The
EURO STOXX Banks
®
Index” below.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
SX7E
|
Current Index Value:
|
87.26
|
52 Weeks Ago:
|
112.31
|
52 Week High (on 7/31/2018):
|
116.73
|
52 Week Low (on 12/27/2018):
|
84.80
|
The following graph sets forth the daily closing values of the
SX7E Index for the period from January 1, 2014 through May 29, 2019. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the SX7E Index for each quarter in the same period. The closing value of the
SX7E Index on May 29, 2019 was 87.26. We obtained the information in the table and graph below from Bloomberg Financial Markets,
without independent verification. The SX7E Index has at times experienced periods of high volatility, and you should not take the
historical values of the SX7E Index as an indication of future performance.
SX7E Index Daily Closing Values
January 1, 2014 to May 29, 2019
|
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
EURO STOXX Banks
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
156.58
|
139.31
|
155.26
|
Second Quarter
|
162.81
|
145.66
|
146.52
|
Third Quarter
|
154.60
|
135.67
|
149.21
|
Fourth Quarter
|
149.39
|
129.86
|
134.51
|
2015
|
|
|
|
First Quarter
|
158.53
|
124.29
|
157.65
|
Second Quarter
|
161.70
|
148.38
|
149.91
|
Third Quarter
|
161.45
|
128.04
|
131.34
|
Fourth Quarter
|
141.12
|
123.03
|
127.87
|
2016
|
|
|
|
First Quarter
|
125.04
|
89.65
|
101.38
|
Second Quarter
|
111.28
|
79.03
|
83.25
|
Third Quarter
|
99.11
|
78.37
|
92.54
|
Fourth Quarter
|
120.34
|
91.84
|
117.67
|
2017
|
|
|
|
First Quarter
|
127.52
|
111.98
|
127.52
|
Second Quarter
|
139.87
|
118.94
|
131.16
|
Third Quarter
|
139.91
|
127.83
|
138.38
|
Fourth Quarter
|
137.82
|
129.98
|
130.48
|
2018
|
|
|
|
First Quarter
|
143.05
|
123.72
|
125.69
|
Second Quarter
|
131.97
|
109.41
|
110.45
|
Third Quarter
|
116.73
|
104.16
|
106.55
|
Fourth Quarter
|
106.08
|
84.80
|
87.04
|
2019
|
|
|
|
First Quarter
|
98.51
|
86.61
|
93.25
|
Second Quarter (through May 29, 2019)
|
103.60
|
87.26
|
87.26
|
“EURO STOXX
®
” and “STOXX
®
”
are registered trademarks of STOXX Limited. For additional information about the EURO STOXX Banks
®
Index, see the
information set forth in “Annex A—The EURO STOXX Banks
®
Index” below.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Overview
The SPDR
®
S&P
®
Oil
& Gas Exploration & Production ETF is an exchange-traded fund that seeks to provide investment results that, before fees
and expenses, correspond generally to the total return performance of publicly traded equity securities of companies included in
the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
. The SPDR
®
S&P
®
Oil
& Gas Exploration & Production ETF is managed by SPDR
®
Series Trust (the “Trust”), a registered
investment company that consists of numerous separate investment portfolios, including the SPDR
®
S&P
®
Oil
& Gas Exploration & Production ETF. Information provided to or filed with the Securities and Exchange Commission by the
Trust pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file
numbers 333-57793 and 811-08839, 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 SPDR
®
S&P
®
Oil & Gas Exploration &
Production ETF is accurate or complete.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
XOP UP
|
Current Price:
|
$26.85
|
52 Weeks Ago:
|
$41.06
|
52 Week High (on 10/3/2018):
|
$44.57
|
52 Week Low (on 12/24/2018):
|
$24.12
|
The following graph sets forth the daily closing prices of the
XOP Shares for the period from January 1, 2014 through May 29, 2019. The related table sets forth the published high and low closing
prices, as well as end-of-quarter closing prices, of the XOP Shares for each quarter in the same period. The closing price of the
XOP Shares on May 29, 2019 was $26.85. We obtained the information in the table below from Bloomberg Financial Markets, without
independent verification. The XOP Shares have at times experienced periods of high volatility, and you should not take the historical
values of the XOP Shares as an indication of future performance.
XOP Shares Daily Closing Prices
January 1, 2014 to May 29, 2019
|
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF (CUSIP:
78464A730
)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
71.83
|
64.04
|
71.83
|
Second Quarter
|
83.45
|
71.19
|
82.28
|
Third Quarter
|
82.08
|
68.83
|
68.83
|
Fourth Quarter
|
66.84
|
42.75
|
47.86
|
2015
|
|
|
|
First Quarter
|
53.94
|
42.55
|
51.66
|
Second Quarter
|
55.63
|
46.43
|
46.66
|
Third Quarter
|
45.22
|
31.71
|
32.84
|
Fourth Quarter
|
40.53
|
28.64
|
30.22
|
2016
|
|
|
|
First Quarter
|
30.96
|
23.60
|
30.35
|
Second Quarter
|
37.50
|
29.23
|
34.81
|
Third Quarter
|
39.12
|
32.75
|
38.46
|
Fourth Quarter
|
43.42
|
34.73
|
41.42
|
2017
|
|
|
|
First Quarter
|
42.21
|
35.17
|
37.44
|
Second Quarter
|
37.89
|
30.17
|
31.92
|
Third Quarter
|
34.37
|
29.09
|
34.09
|
Fourth Quarter
|
37.64
|
32.25
|
37.18
|
2018
|
|
|
|
First Quarter
|
39.85
|
32.38
|
35.22
|
Second Quarter
|
44.22
|
34.03
|
43.06
|
Third Quarter
|
44.52
|
39.10
|
43.29
|
Fourth Quarter
|
44.57
|
24.12
|
26.53
|
2019
|
|
|
|
First Quarter
|
31.61
|
27.10
|
30.74
|
Second Quarter (through May 29, 2019)
|
32.98
|
26.71
|
26.85
|
This document relates only to the securities referenced hereby
and does not relate to the XOP Shares. We have derived all disclosures contained in this document regarding the Trust
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 the Trust. Neither
we nor the agent makes any representation that such publicly available documents or any other publicly available information regarding
the Trust 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 XOP Shares (and therefore the price of the XOP 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 the Trust could affect the value received 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 XOP Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Trust. In the course of such business, we and/or our affiliates may acquire non-public information
with respect to the Trust, 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 XOP 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,
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
you should undertake an independent investigation of the Trust
as in your judgment is appropriate to make an informed decision with respect to an investment linked to the XOP Shares.
“S&P
®
”, “SPDR
®
”
and “S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
”
are trademarks of Standard & Poor’s Financial Services LLC (“S&P”), an affiliate of The McGraw-Hill Companies,
Inc. (“MGH”). The securities are not sponsored, endorsed, sold, or promoted by S&P, MGH or the Trust. S&P,
MGH and the Trust make no representations or warranties to the owners of the securities or any member of the public regarding the
advisability of investing in the securities. S&P, MGH and the Trust have no obligation or liability in connection with the
operation, marketing, trading or sale of the securities.
The S&P
®
Oil
& Gas Exploration & Production Select Industry Index
®
.
The S&P
®
Oil
& Gas Exploration & Production Select Industry Index
®
is an equal-weighted index designed to measure
the performance of the oil and gas exploration and production sub-industry portion of the S&P
®
Total Market
Index, a benchmark that measures the performance of the U.S. equity market.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
SPDR
®
S&P
®
Biotech ETF Overview
The SPDR
®
S&P
®
Biotech ETF
is an exchange-traded fund managed by SSGA Funds Management, Inc., which seeks to provide investment results that correspond generally
to the price and yield performance, before fees and expenses, of the S&P Biotechnology Select Industry
TM
Index.
SPDR
®
Series Trust (the “Trust”) is a registered investment company that consists of numerous separate
investment portfolios, including the SPDR
®
S&P
®
Biotech ETF. Information provided to or filed
with the Securities and Exchange Commission (the “Commission”) by the Trust pursuant to the Securities Act of 1933
and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-57793 and 811-08839, 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 SPDR
®
S&P
®
Biotech ETF is accurate or complete.
Information as of market close on May 29, 2019:
Bloomberg Ticker Symbol:
|
XBI UP
|
Current Price:
|
$81.27
|
52 Weeks Ago:
|
$92.47
|
52 Week High (on 6/20/2018):
|
$101.15
|
52 Week Low (on 12/24/2018):
|
$65.42
|
The following graph sets forth the daily closing prices of the
XBI Shares for the period from January 1, 2014 through May 29, 2019. The related table sets forth the published high and low closing
prices, as well as end-of-quarter closing prices, of the XBI Shares for each quarter in the same period. The closing price of the
XBI Shares on May 29, 2019 was $81.27. We obtained the information in the table below from Bloomberg Financial Markets, without
independent verification. The XBI Shares have at times experienced periods of high volatility, and you should not take the historical
values of the XBI Shares as an indication of future performance.
XBI Shares Daily Closing Prices
January 1, 2014 to May 29, 2019
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
SPDR
®
S&P
®
Biotech ETF
(CUSIP: 78464A730)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
56.90
|
42.97
|
47.49
|
Second Quarter
|
51.35
|
40.27
|
51.35
|
Third Quarter
|
54.30
|
44.87
|
51.99
|
Fourth Quarter
|
63.45
|
48.48
|
62.21
|
2015
|
|
|
|
First Quarter
|
79.33
|
61.43
|
75.17
|
Second Quarter
|
86.57
|
68.78
|
84.08
|
Third Quarter
|
90.36
|
60.02
|
62.25
|
Fourth Quarter
|
72.62
|
61.16
|
70.08
|
2016
|
|
|
|
First Quarter
|
67.83
|
45.73
|
51.66
|
Second Quarter
|
59.87
|
49.55
|
54.09
|
Third Quarter
|
68.83
|
55.11
|
66.29
|
Fourth Quarter
|
68.13
|
53.31
|
59.19
|
2017
|
|
|
|
First Quarter
|
72.32
|
59.59
|
69.34
|
Second Quarter
|
80.31
|
66.84
|
77.18
|
Third Quarter
|
86.57
|
74.47
|
86.57
|
Fourth Quarter
|
88.51
|
79.95
|
84.87
|
2018
|
|
|
|
First Quarter
|
97.03
|
85.31
|
87.73
|
Second Quarter
|
101.15
|
82.90
|
95.19
|
Third Quarter
|
100.84
|
93.08
|
95.87
|
Fourth Quarter
|
94.90
|
65.42
|
71.75
|
2019
|
|
|
|
First Quarter
|
91.92
|
71.21
|
90.54
|
Second Quarter (through May 29, 2019)
|
93.80
|
80.41
|
81.27
|
This document relates only to the securities referenced hereby
and does not relate to the XBI Shares. We have derived all disclosures contained in this document regarding the Trust 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 the Trust. Neither we nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding the Trust 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 XBI Shares (and therefore the price of the XBI 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 the Trust
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 XBI Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Trust. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to the Trust, 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 XBI 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 the Trust as in your judgment is appropriate to make an informed decision
with respect to an investment linked to the XBI Shares.
“S&P
®
”, “SPDR
®
”
and “S&P Biotechnology Select Industry
TM
Index” are trademarks of Standard & Poor’s Financial
Services LLC (“S&P”), an affiliate of The McGraw-Hill Companies, Inc. (“MGH”). The securities are
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
not sponsored, endorsed, sold, or promoted by S&P, MGH
or the Trust. S&P, MGH and the Trust make no representations or warranties to the owners of the securities or any member of
the public regarding the advisability of investing in the Securities. S&P, MGH and the the Trust have no obligation or liability
in connection with the operation, marketing, trading or sale of the securities.
The S&P Biotechnology Select
Industry
TM
Index.
The S&P Biotechnology Select Industry
TM
Index (Bloomberg
ticker SPSIBI) is managed by S&P Dow Jones Indices LLC and is a modified equally weighted index that is designed to measure
the performance of stocks in the S&P Total Market Index that are classified under the Global Industry Classification Standard
(“GICS
®
”) biotechnology sub-industry.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Additional
Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Index publisher:
|
STOXX Limited or any successor thereof
|
Share underlying indices:
|
With respect to the XOP Shares, the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
With respect to the XBI Shares, the S&P Biotechnology Select
Industry
TM
Index
|
Share underlying index publishers:
|
With respect to each of the XOP Shares and the XBI Shares, S&P Dow Jones Indices LLC, or any successor 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, if any, to be delivered with respect to the
securities, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii) deliver the
aggregate cash amount, if any, due with respect to the securities to the trustee for delivery to the depositary, as holder of the
securities, on the maturity date.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Additional Information About the Securities
Additional Information:
|
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the
securities
due to the lack of governing authority, in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a
security
should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes.
|
|
Assuming this treatment of the
securities
is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for Jump Securities, the following U.S. federal income tax consequences should result based on current law:
|
|
§
A U.S. Holder should not be required to recognize taxable income over the term of the
securities
prior to settlement, other than pursuant to a sale or exchange.
|
|
§
Upon sale, exchange or settlement of the
securities
, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the
securities
. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise.
|
|
In 2007,
the U.S. Treasury Department and the Internal Revenue Service (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.
As discussed
in the accompanying product supplement for Jump Securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and
Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty
rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain
exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more
Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”).
However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on our determination that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may
depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security.
If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You
should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
Both U.S.
and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for
Jump Securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment
in the securities, including possible alternative treatments, the issues presented by the aforementioned notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
The discussion
in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United
States Federal Taxation” in the accompanying product supplement for Jump Securities, insofar as they purport to describe
provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk
& Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described on page 2 above comprise the cost of issuing, structuring and
hedging the securities.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers. We expect
our hedging counterparties to have taken positions in the XOP Shares and XBI Shares, in stocks constituting the SX7E Index, the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
or the S&P Biotechnology Select Industry
TM
Index, stocks of the underlyings and in futures and options contracts on the underlyings and any component stocks of the underlyings
listed on major securities markets. Such purchase activity could have increased the initial level of any underlying, and, therefore,
could have increased the level at or above which such underlying must close on the valuation date so that you do not suffer a significant
loss on your initial investment in the securities (depending also on the performance of the other underlyings). In addition, through
our affiliates, we are likely to modify our hedge position throughout the term of the securities, including on the valuation date,
by purchasing and selling the XOP Shares and XBI Shares, the stocks constituting the SX7E Index, the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
or the S&P Biotechnology Select Industry
TM
Index, futures or options contracts on the underlyings or their component stocks listed on major securities markets or positions
in any other available securities or instruments that we may wish to use in connection with such hedging activities. 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. We cannot give any assurance that
our hedging activities will not affect the value of any underlying, and, therefore, adversely affect the value of the securities
or the payment you will receive at maturity, if any (depending also on the performance of the other underlyings). For further information
on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement.
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Code Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related
lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary
authority or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided
further that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction
(the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions
will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented,
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
|
in its corporate and its fiduciary capacity, by its purchase
and holding of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on
behalf of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject
to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section
4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute
or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar
Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments.
The financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy
for, individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of
any purchaser or holder of the securities.
Each purchaser or holder of any securities
acknowledges and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these securities should consult
and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest
:
|
Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $7.50 for each security they sell.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
|
MS & Co. will conduct this offering in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
|
Validity of the securities:
|
In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
|
Contact:
|
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776). All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured Investment Sales at (800) 233-1087.
|
Where you can find more information:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Jump Securities) with the Securities and Exchange Commission, or SEC,
for the offering to which this communication relates. You should read the prospectus in that registration statement, the product
supplement for Jump Securities and any other documents relating to this offering that Morgan Stanley and MSFL have filed with the
SEC for more complete information about Morgan Stanley, MSFL and this offering. You may get these documents without cost by visiting
EDGAR on the SEC web site at www.sec.gov. Alternatively, Morgan Stanley, any underwriter or any dealer participating in the offering
will arrange to send you the prospectus, the product supplement for Jump Securities if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at www.sec.gov
as follows:
Product
Supplement for Jump Securities dated November 16, 2017
Prospectus
dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for Jump Securities or in the prospectus.
|
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
Annex A—The EURO STOXX Banks
®
Index
The
EURO
STOXX Banks
®
Index (the “Index”)
is one of 19 EURO STOXX
®
Supersector indices that compose the STOXX
®
Europe 600 Index and includes
companies in the banks supersector, which tracks companies engaged in a broad range of financial services, including retail banking,
loans and money transmissions. The Index is a price return index denominated in euro, calculated, maintained and published by STOXX
Limited.
The Index was created by STOXX Limited, a joint venture between
Deutsche Börse AG and SIX Group AG. Publication of the Index began on June 15, 1998, based on an initial index value of 100
at December 31, 1991. The Index is disseminated on the STOXX Limited website, which sets forth, among other things, the country,
industrial sector and weight of each component included in the Index and updates these weightings at the end of each quarter. Information
contained in the STOXX Limited website is not incorporated by reference in, and should not be considered a part of, this free writing
prospectus.
On March 1, 2010, STOXX Limited announced the removal of the
“Dow Jones” prefix from all of its indices, including the Index.
Composition of the Index
The Index is one of 19 EURO STOXX
®
Supersector
indices that compose the STOXX
®
Europe 600 Index. The STOXX
®
Europe 600 Index contains the 600 largest
European stocks by free float market capitalization. The Index contains the companies of the Eurozone subset of the STOXX
®
Europe 600 Index that fall within the banks supersector, determined by reference to the Industry Classification Benchmark (“ICB”),
an international system for categorizing companies that is maintained by FTSE International Limited.
The composition of the Index is reviewed quarterly, together
with the STOXX
®
Europe 600 Index, based on the closing stock data on the last trading day of the month following
the last quarterly index review. The component stocks are announced on the fourth Tuesday of the month immediately prior to the
review implementation month. Changes to the component stocks are implemented on the third Friday in each of March, June, September
and December and are effective the following trading day.
Corporate actions (including mergers and takeovers, spin-offs,
sector changes, delistings and bankruptcy) that affect the STOXX
®
Europe 600 Index composition are immediately reviewed.
Any changes are announced, implemented and effective in line with the type of corporate action and the magnitude of the effect.
Computation of the Index
The Index is calculated with the “Laspeyres formula,”
which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating
the index value of the Index at any time can be expressed as follows:
Index value
|
=
|
free float market capitalization
of the Index
divisor
|
The “free float market capitalization of the Index”
is equal to the sum of the products of the price, number of shares and free float factor for each component stock as of the time
the Index is being calculated. The free float factor reduces the number of shares outstanding to the actual amount available on
the market. All fractions of the total number of shares that are larger than 5% and whose holding is of a long-term nature are
excluded from the index calculation. The free float factor typically excludes cross-ownership (stock owned either by the company
itself or other companies), government ownership, private ownership, and restricted shares that cannot be traded during a certain
period or have a foreign ownership restriction. Block ownership is not applied for holdings of custodian nominees, trustee companies,
mutual funds, investment companies with short-term investment strategies, pension funds and similar entities.
The free float factors and outstanding number of shares used
to calculate the Index are reviewed, calculated and implemented on a quarterly basis and are fixed until the next quarterly review.
Extraordinary adjustments may occur from certain corporate actions, depending on the magnitude of the change.
The Index is also subject to a divisor, which is adjusted to
maintain the continuity of index values despite changes due to corporate actions. All corporate actions and dividends are implemented
at the effective date (ex-date);
i.e.
, with corporate actions where cash or other corporate assets are distributed to shareholders,
the price of the stock will drop on the ex-date.
Morgan Stanley Finance LLC
Enhanced Trigger Jump Securities Based on the Value of the Worst Performing of the EURO STOXX Banks
®
Index, the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF and the SPDR
®
S&P
®
Biotech ETF due June 10, 2020
Principal at Risk Securities
The following is a summary of the adjustments to any component
stock made for corporate actions and the effect of such adjustment on the divisor, where shareholders of the component stock will
receive “B” number of shares for every “A” share held (where applicable). If the new shares have a dividend
disadvantage —
i.e.
, the new shares have a different dividend from that paid on the old shares — the price for
these new shares will be adjusted according to the gross dividend amount. The divisor may increase, decrease or be held constant.
The securities are not sponsored, endorsed, sold or promoted
by STOXX Limited. STOXX Limited makes no representation or warranty, express or implied, to the owners of the securities or any
member of the public regarding the advisability of investing in securities generally or in the securities particularly. The EURO
STOXX
®
Banks Index is determined, composed and calculated by STOXX Limited without regard to Morgan Stanley or the
securities. STOXX Limited has no obligation to take the needs of Morgan Stanley or the owners of the securities into consideration
in determining, composing or calculating the the EURO STOXX
®
Banks Index. STOXX Limited is not responsible for and
has not participated in the determination of
the timing of, prices at, or quantities of the securities to
be issued or in the determination or calculation of the equation by which the securities are to be converted into cash. STOXX Limited
has no obligation or liability in connection with the administration, marketing or trading of the securities.
STOXX LIMITED DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE EURO STOXX
®
BANKS INDEX OR ANY DATA INCLUDED THEREIN AND STOXX LIMITED SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. STOXX LIMITED MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED
BY MORGAN STANLEY, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE EURO STOXX
®
BANKS
INDEX OR ANY DATA INCLUDED THEREIN. STOXX LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE EURO STOXX
®
BANKS
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STOXX LIMITED HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY
THEREOF.