These Trigger Autocallable Contingent Yield Notes (the “Securities”)
are unsecured and unsubordinated debt obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally
guaranteed by Morgan Stanley. The Securities provide a return based on the least performing underlying among the S&P
500® Index (the “SPX Index”), the Russell 2000® Index (the “RTY Index”) and the
NASDAQ-100 Index® (the “NDX Index,” and together with the SPX Index and the RTY Index, the “Underlyings”). If
the Index Closing Value of each of the SPX Index, the RTY Index and the NDX Index (each, an “Underlying”) on a quarterly
Observation Date (the “Observation Date Closing Values”) is equal to or greater than its respective Coupon Barrier, MSFL
will make a Contingent Coupon payment with respect to that Observation Date. However, if the Index Closing Value of any
of the Underlyings is below its respective Coupon Barrier, no coupon will accrue or be payable with respect to that Observation Date. In
addition, MSFL will automatically call the Securities early if the Observation Date Closing Value for each of the SPX Index, the RTY
Index and the NDX Index on any quarterly Observation Date beginning after approximately six months (June 7, 2022) is equal to or
greater than its respective Initial Underlying Value. If the Securities are called, MSFL will pay the principal amount plus
the Contingent Coupon for that Observation Date and no further amounts will be owed to you. If the Securities are not called
prior to maturity and the Final Underlying Values of each of the SPX Index, the RTY Index and the NDX Index is equal to or greater
than its respective Downside Threshold (which is the same as its respective Coupon Barrier), MSFL will make a cash payment to you at
maturity equal to the principal amount of your Securities plus the Contingent Coupon with respect to the Final Observation Date. However,
if the Final Underlying Value of any of the Underlyings is less than its respective Downside Threshold, MSFL will pay you significantly
less than the full principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate to
the decline in the value of the Underlying with the largest percentage decrease from its Initial Underlying Value to its Final Underlying
Value (the “Least Performing Underlying”), even if the other Underlyings have appreciated or have not declined as much. The
Securities may be appropriate for investors who seek an opportunity for potentially enhanced income in exchange for the risk of losing
their principal at maturity and the risk of receiving no Contingent Coupons during the term of the Securities. Your return
will be solely the Contingent Coupons, if any, and you will not participate in any appreciation of any of the Underlyings. Because
all payments on the Securities are based on the least performing underlying among the SPX Index, the RTY Index and the NDX Index, the
fact that the Securities are linked to three Underlyings does not provide any asset diversification benefits and instead means that a
decline in the value beyond the relevant Coupon Barrier and Downside Threshold of any of the SPX Index, the RTY Index, or the NDX Index
will result in no Contingent Coupon payments or a significant loss on your investment, even if the other Underlyings appreciate or do
not decline as much. Investing in the Securities involves significant risks. The Issuer will not pay a quarterly
Contingent Coupon if the Observation Date Closing Value for any of the Underlyings is below its respective Coupon Barrier. The
Issuer will not automatically call the Securities if the Observation Date Closing Value of any of the Underlyings is below its respective
Initial Underlying Value. You will lose a significant portion or all of your principal amount at maturity if the Securities are not called
and the Final Underlying Value of any of the Underlyings is below its Downside Threshold. Generally, the higher the
Contingent Coupon Rate for the Securities, the greater risk of loss on those Securities. If you sell the Securities prior
to maturity, you may receive substantially less than the principal amount even if the values of each of the Underlyings are greater than
their respective Downside Thresholds at the time of sale.
This free writing prospectus relates to Securities linked to the least
performing underlying among the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index®.
The actual Contingent Coupon Rate and the actual Initial Underlying Values, Coupon Barriers and Downside Thresholds for the SPX Index,
the RTY Index and the NDX Index will be determined on the Trade Date. The Securities are offered at a minimum investment of
$1,000 in denominations of $10 and integral multiples thereof.
(1) UBS Financial Services
Inc., acting as dealer, will receive from Morgan Stanley & Co. LLC, the agent, a fixed sales commission of $0.225 for each Security
it sells. For more information, please see “Supplemental Plan of Distribution; Conflicts of Interest” on page 27 of this
free writing prospectus.
The agent for this offering, Morgan Stanley & Co. LLC (“MS
& Co.”), is our affiliate and a wholly owned subsidiary of Morgan Stanley. See “Supplemental Plan of Distribution;
Conflicts of Interest” on page 27 of this free writing prospectus.
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by a product supplement and an index supplement) with the SEC for the offering to which this communication
relates. Before you invest, you should read the prospectus in that registration statement, the product supplement, the index supplement
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 for free by visiting EDGAR on the SEC website at.www.sec.gov.
Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in this offering will arrange to send you the prospectus,
the product supplement and index supplement if you so request by calling toll-free 1-(800)-584-6837.
You may access the accompanying product supplement, index supplement
and prospectus on the SEC website at.www.sec.gov as follows:
You should rely only on the information incorporated by reference or
provided in this free writing prospectus or the accompanying product supplement, index supplement and prospectus. We have not authorized
anyone to provide you with different information. We are not making an offer of these Securities in any state where the offer is not permitted.
You should not assume that the information in this free writing prospectus or the accompanying product supplement, index supplement and
prospectus is accurate as of any date other than the date on the front of this document.
The Issue Price of each Security is $10. This price includes
costs associated with issuing, selling, structuring and hedging the Securities, which are borne by you, and, consequently, the estimated
value of the Securities on the Trade Date will be less than $10. We estimate that the value of each Security on the Trade Date
will be approximately $9.597, or within $0.30 of that estimate. Our estimate of the value of the Securities as determined on
the Trade Date will be set forth in the final pricing supplement.
In valuing the Securities on the Trade 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.
In determining the economic terms of the Securities, including the Coupon
Barriers, the Downside Thresholds and the Contingent Coupon Rate, 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.
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 Trade Date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer
spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the
costs associated with issuing, selling, structuring and hedging the Securities are not fully deducted upon issuance, for a period of up
to 8 months following the Settlement 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. currently intends, 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.
Observation Dates(1) and Coupon Payment Dates(2)
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Observation Dates
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Coupon Payment Dates
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3/7/2022*
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3/10/2022*
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6/7/2022
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6/10/2022
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9/7/2022
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9/12/2022
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12/7/2022
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12/12/2022
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3/7/2023
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3/10/2023
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6/7/2023
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6/12/2023
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9/7/2023
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9/12/2023
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12/7/2023
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12/12/2023
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3/7/2024
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3/12/2024
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6/7/2024
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6/12/2024
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9/9/2024
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9/12/2024
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12/9/2024 (Final Observation Date)
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12/12/2024 (Maturity Date)
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* The Securities are not subject to an automatic call until the second
Observation Date, which is June 7, 2022.
(1) Subject to postponement in the event of a Market Disruption Event
or for non-Index Business Days. See “Postponement of Determination Dates” in the accompanying product supplement.
(2) If, due to a Market Disruption Event or otherwise, any Observation
Date is postponed so that it falls less than two business days prior to the scheduled Coupon Payment Date, the Coupon Payment Date will
be postponed to the second business day following that Observation Date as postponed, provided that the Coupon Payment Date with
respect to the Final Observation Date will be the Maturity Date. No additional coupon will accrue on an account of any such
postponement.
An investment in the Securities involves significant risks. The material
risks that apply to the Securities are summarized here, but we urge you to also read the “Risk Factors” section of the accompanying
prospectus and product supplement. You should also consult your investment, legal, tax, accounting and other advisers before you invest
in the Securities.
Risks Relating to an Investment in the Securities
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The
Securities do not guarantee the payment of regular interest or the return of any principal. The terms of the Securities
differ from those of ordinary debt securities in that the Securities do not guarantee the payment of regular interest or the return of
any of the Principal Amount at maturity. Instead, if the Securities have not been called prior to maturity and if the Final
Underlying Value of any of the SPX Index, the RTY Index or the NDX Index is less than its respective Downside Threshold, you will
be exposed to the decline in the value of the Least Performing Underlying from its Initial Underlying Value to its Final Underlying Value,
on a 1-to-1 basis, resulting in a significant loss of your initial investment that is proportionate to the decline of the Least Performing
Underlying over the term of the Securities, even if the other Underlyings have appreciated or have not declined as much. You could
lose your entire Principal Amount.
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The Contingent Coupon is based solely on the Observation Date Closing Values. Whether
the Contingent Coupon will be paid with respect to an Observation Date will be based on the Observation Date Closing Values of all three
Underlyings. As a result, you will not know whether you will receive the Contingent Coupon with respect to any Coupon Payment
Date until the related Observation Date. Moreover, because the Contingent Coupon is based solely on the Observation Date Closing
Values on a specific Observation Date, if the Observation Date Closing Value of any of the SPX Index, the RTY Index or the NDX Index is
less than its respective Coupon Barrier, you will not receive any Contingent Coupon with respect to such Observation Date, even if the
Index Closing Values of the Underlyings were higher on other days during the term of the Securities.
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You will not receive any Contingent Coupon for any quarterly period where
the Observation Date Closing Value of any of the SPX Index, the RTY Index or the NDX Index is less than or equal to its Coupon Barrier. A
Contingent Coupon will be paid with respect to a quarterly period only if the Observation Date Closing Value of each of the SPX Index,
the RTY Index and the NDX Index is greater than or equal to its respective Coupon Barrier. If the Observation Date Closing
Values of any of the Underlyings is below its respective Coupon Barrier, the Issuer will not pay you a Contingent Coupon for that
quarterly period. If, on each Observation Date over the term of the Securities, the SPX Index, the RTY Index or the NDX Index
closes below its respective Coupon Barrier, you will not receive any Contingent Coupons during the 3-year term of the Securities.
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Investors
will not participate in any appreciation in the values of any of the Underlyings. Investors will not participate in any
appreciation in the value of any of the Underlyings from its respective Initial Underlying Value, and the return on the Securities will
be limited to the Contingent Coupon, if any, that is paid with respect to each Observation Date on which the Observation Date Closing
Value of each of the SPX Index, the RTY Index and the NDX Index is greater than or equal to their respective Coupon Barrier prior to
maturity or an automatic call. The return on the Securities will be limited to the Contingent Coupons, if any, regardless
of the appreciation of any of the Underlyings, which could be significant. It is possible that, on most or all of the Observation Dates,
the Index Closing Values of one or more Underlyings could close below their respective Coupon Barriers so that you may receive few or
no Contingent Coupons. In addition, if the Securities are not called prior to maturity, you may be exposed to the full downside
market risk of the Least Performing Underlying and lose a significant portion or all of your investment despite not being able to participate
in any potential appreciation of any of the Underlyings. If you do not earn sufficient Contingent Coupons over the term of
the Securities, the overall return on the Securities may be less than the amount that would be paid on a conventional debt security of
ours of comparable maturity.
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You
may incur a loss on your investment if you are able to sell your Securities prior to maturity. The Downside Thresholds
are considered only at maturity. If you are able to sell your Securities in the secondary market prior to maturity, you may have to sell
them at a loss relative to your initial investment even if the Index Closing Values of all of the Underlyings are above their respective
Downside Thresholds at that time. If you hold the Securities to maturity and the Securities have not been called, MSFL will
either repay you the full principal amount per Security (possibly in addition to the Contingent Coupon for the Final Observation Date),
if the Final Underlying Values of each of the SPX Index, the RTY Index and the NDX Index are equal to or greater than their respective
Downside Thresholds, or if any of the Underlyings closes below its respective Downside Threshold on the Final Observation Date, MSFL
will repay significantly less than the Principal Amount, if anything, at maturity, resulting in a loss on your Principal Amount that
is proportionate to the decline in the value of the Least Performing Underlying from the Trade Date to the Final Observation Date.
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Early redemption risk. The term of your investment in the
Securities may be limited to as short as six months by the automatic call feature of the Securities. If the Securities are
called prior to maturity, you will not be able to receive any further Contingent Coupons for any future Observation Dates, and you may
be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or for similar returns. However,
under no circumstances will the Securities be redeemed in the first six months of the term of the Securities. Generally, the longer the
Securities have been outstanding, the less likely it is that they will be automatically called, because the level of at least one of the
Underlyings will necessarily have declined from its respective Initial Underlying Value if the Securities were not called following an
Observation Date, and there will be less time remaining until maturity in which the level(s) of such Underlying(s) can recover.
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A higher Contingent Coupon Rate and/or lower Coupon Barriers and Downside
Thresholds may reflect greater expected volatility of the Underlyings, and greater expected volatility generally indicates an increased
risk of declines in the levels of the Underlyings and, potentially, a significant loss at maturity. The economic terms
for the Securities, including the Contingent Coupon Rate, the Coupon Barriers and the Downside Thresholds, are based, in part, on the
expected volatility of the Underlyings at the time the terms of the Securities are set. “Volatility” refers to the frequency
and magnitude of changes in the levels of the Underlyings. Higher expected volatility with respect to the Underlyings as of the Trade
Date generally indicates a greater expectation as of that date that
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the Final Underlying Levels of any Underlying could ultimately
be less than its Downside Threshold on the Final Observation Date, which would result in a loss of a significant portion or all of the
Principal Amount. At the time the terms of the Securities are set, higher expected volatility will generally be reflected in a higher
Contingent Coupon Rate and/or lower Coupon Barriers and Downside Thresholds, as compared to otherwise comparable securities. Therefore,
a relatively higher Contingent Coupon Rate, which would increase the upside return if the Observation Date Closing Values are greater
than or equal to the Coupon Barriers on the quarterly Observation Dates, may indicate an increased risk that the levels of the Underlyings
will decrease substantially, which would result in few or no Contingent Coupons and a significant loss at maturity. In addition, and as
described above in "The Securities do not guarantee the payment of regular interest or the return of any principal," in general,
the higher potential return on the Securities as compared to the return payable on our ordinary debt securities with a comparable maturity
indicates the risk that you may not receive a positive return on the Securities and may lose a significant portion or all of your investment. Further,
relatively lower Downside Thresholds may not indicate that the Securities have a greater likelihood of a return of principal at maturity.
You should be willing to accept the downside market risk of the Underlyings and the potential to lose a significant portion or all of
your Principal Amount at maturity.
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The Securities are subject to our credit risk, and any actual or anticipated
changes to our credit ratings or our 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, including Contingent Coupons, if any, and any payments upon an automatic call
or at maturity, and therefore you are subject to our credit risk. If we default on our obligations under the Securities, your
investment would be at risk and you could lose some or all of your investment. As a result, the market value of the Securities
prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated
decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely
affect the market value of the Securities.
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As a finance subsidiary, MSFL has no independent operations and will have
no independent assets. As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration
of its securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims in
respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will
be limited to those available under the related guarantee by Morgan Stanley and that guarantee will rank pari passu with all other
unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley
and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that in any such proceedings
they would not have any priority over and should be treated pari passu with the claims of other unsecured, unsubordinated creditors
of Morgan Stanley, including holders of Morgan Stanley-issued securities.
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The market price of the Securities will be influenced by many unpredictable
factors. Several factors, many of which are beyond our control, will influence the value of the Securities in the secondary
market and the price at which MS & Co. may be willing to purchase or sell the Securities in the secondary market. Although we expect
that generally the Index Closing Values of the Underlyings on any day will affect the value of the Securities more than any other single
factor, other factors that may influence the value of the Securities include:
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the value and volatility (frequency and magnitude of changes in value) of the Underlyings,
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whether the Observation Date Closing Value of any Underlying has been below its Coupon Barrier on any Observation Date,
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dividend rates on the stocks comprising the Underlyings,
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interest and yield rates in the market,
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time remaining until the Securities mature,
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geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the Underlyings or equities
markets generally and which may affect the Final Underlying Values,
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the occurrence of certain events affecting any of the Underlyings that may or may not require an adjustment to its composition, and
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any actual or anticipated changes in our credit ratings or credit spreads.
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Some or all of these factors will influence
the terms of the Securities at the time of issuance and the price that you will receive if you sell your Securities prior to maturity,
as the Securities are comprised of both a debt component and a performance-based component linked to the Underlyings, and these are the
types of factors that also generally affect the values of debt securities and derivatives linked to the Underlyings. Generally, the longer
the time remaining to maturity, the more the market price of the Securities will be affected by the other factors described above. The
value of each of the Underlyings may be, and each has recently been, extremely volatile, and we can give you no assurance that the volatility
will lessen. See “Historical Information” below. You may receive less, and possibly significantly less,
than the Principal Amount per Security if you try to sell your Securities prior to maturity.
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Investing in the Securities is not equivalent to investing in the Underlyings. Investing
in the Securities is not equivalent to investing in any Underlying or the component stocks of any Underlying. Investors in
the Securities will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks
that constitute the Underlyings. Further, you will not participate in any potential appreciation of any Underlying even though
you may be exposed to its full decline at maturity. Additionally, the Underlyings are not “total return” indices,
which, in addition to reflecting the market prices of the stocks that constitute the Underlyings, would also reflect dividends paid on
such stocks. The return on the Securities will not reflect such a total return feature.
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The rate we are willing to pay for securities of this type, maturity and
issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both
the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the Securities in the Issue Price
reduce the economic terms of the Securities, cause the estimated value of the Securities to be less than the Issue Price and will adversely
affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which
dealers, including MS & Co., may be willing to purchase the Securities in secondary market transactions will likely be significantly
lower than the Issue Price, because secondary
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market prices will exclude the issuing,
selling, structuring and hedging-related costs that are included in the 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 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 8 months following
the Settlement 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.
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The estimated value of the Securities is determined by reference to our
pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price. These
pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about
future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of
securities, our models may yield a higher estimated value of the Securities than those generated by others, including other dealers in
the market, if they attempted to value the Securities. In addition, the estimated value on the Trade 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 free writing prospectus will vary based on
many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also
“The market price of the Securities will be influenced by many unpredictable factors” above.
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The Securities will not be listed on any securities exchange and secondary
trading may be limited. The Securities will not be listed on any securities exchange. Therefore, there may be
little or no secondary market for the Securities. MS & Co. currently intends, but is not obligated, to make a market in
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. Because we do not expect that other broker-dealers will participate significantly in the secondary market
for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price, if any, at which MS
& Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the Securities, it is likely
that there would be no secondary market for the Securities. Accordingly, you should be willing to hold your Securities to maturity.
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Hedging
and trading activity by our affiliates could potentially affect the value of the Securities. One or more of our affiliates
and/or third-party dealers expect to carry out hedging activities related to the Securities (and to other instruments linked to the Underlyings),
including trading in the stocks that constitute the Underlyings 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 Final Observation Date approaches. Some of our subsidiaries
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 Trade Date could
potentially increase the Initial Underlying Value and, as a result, the Coupon Barrier of any of the Underlyings, which is the level
at or above which such Underlying must close on each Observation Date in order for you to earn a Contingent Coupon, and the Downside
Threshold of any of the Underlyings, which if the Securities are not called prior to maturity, is the level at or above which such Underlying
must close on the Final Observation Date in order for you to avoid being exposed to the negative performance of the Least Performing
Underlying at maturity (in each case, depending also on the performance of the other Underlyings). Additionally, such hedging
or trading activities during the term of the Securities could potentially affect the values of the Underlyings on the Observation Dates
and, accordingly, whether the Contingent Coupon is payable or whether the Securities are automatically called prior to maturity and,
if the Securities are not called prior to maturity, the payout to you at maturity, if any (in each case, depending also on the performance
of the other Underlyings).
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The Calculation Agent, which is our affiliate, will make determinations
with respect to the Securities. As Calculation Agent, MS & Co. will determine the Initial Underlying Values, the Coupon
Barriers, the Downside Thresholds, the Observation Date Closing Levels and the Final Underlying Value of each Underlying, whether a Contingent
Coupon is payable with respect to each Observation Date, whether a Market Disruption Event has occurred and the payment that you will
receive upon a call or 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 nonoccurrence of
Market Disruption Events. These potentially subjective determinations may affect the payout to you upon a call or at maturity,
if any. For further information regarding these types of determinations, see “Description of Auto-Callable Securities—Postponement
of Determination Dates,” “—Discontinuance of Any Underlying; Alteration of Method of Calculation” and “—Calculation
Agent and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of
the Securities on the Trade Date.
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The U.S. federal income tax consequences of an investment in the Securities
are uncertain. There is no direct legal authority as to the proper treatment of the Securities for U.S. federal income
tax purposes, and, therefore, significant aspects of the tax treatment of the Securities are uncertain.
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Please
read the discussion under “What Are the Tax Consequences of the Securities” in this free writing prospectus concerning the
U.S. federal income tax consequences of an investment in the Securities. We intend to treat a Security for U.S. federal income
tax purposes as a single financial contract that provides for a coupon that will be treated as gross income to you at the time received
or accrued, in accordance with your regular method of tax accounting. Under this treatment, the ordinary income treatment
of the coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of
the Securities, could result in adverse tax consequences to holders of the Securities because the deductibility of capital losses is
subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax
treatment of the Securities, and the IRS or a court may not
agree with the tax treatment described
herein. If the IRS were successful in asserting an alternative treatment for the Securities, the timing and character of income
or loss on the Securities might differ significantly from the tax treatment described herein. For example, under one possible
treatment, the IRS could seek to recharacterize the Securities as debt instruments. In that event, U.S. Holders (as defined
below) 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 (as adjusted based on the difference, if any, between the actual and the projected amount of any contingent
payments on the Securities) and recognize all income and gain in respect of the Securities as ordinary income. 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.
Non-U.S. Holders (as defined below)
should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate
specified by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay
any additional amounts with respect to amounts withheld.
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. While it is not clear whether the Securities would be viewed as similar
to the prepaid forward contracts described in the notice, it is possible that 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. The notice focuses on a number of issues, the most relevant of which for holders of the Securities
are the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject
to withholding tax. 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.
Risks Relating to the Underlyings
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You
are exposed to the market risk of all three Underlyings. Your return on the Securities is not linked to a basket consisting
of the Underlyings. Rather, it will be contingent upon the independent performance of each of the SPX Index, the RTY Index and the NDX
Index. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated and diversified
among all of the components of the basket, you will be exposed to the risks related to each of the SPX Index, the RTY Index and the NDX
Index. Poor performance by any of the Underlyings over the term of the Securities may negatively affect your return and will not be offset
or mitigated by positive performance by the other Underlyings. For the Securities to be automatically called or to receive any Contingent
Coupon payment or contingent repayment of principal at maturity from MSFL, all three Underlyings must close at or above their respective
Initial Underlying Values, Coupon Barriers or Downside Thresholds, respectively, on the applicable Observation Date or Final Observation
Date, as applicable. In addition, if not called prior to maturity, you may incur a loss proportionate to the negative return
of the Least Performing Underlying even if the other Underlyings appreciate or do not decline as much during the term of the Securities.
Accordingly, your investment is subject to the market risk of all three Underlyings. Additionally, movements in the values
of the Underlyings may be correlated or uncorrelated at different times during the term of the Securities, and such correlation (or lack
thereof) could have an adverse effect on your return on the Securities. For example, the likelihood that one of the Underlyings will
close below its Coupon Barrier on an Observation Date or below its Downside Threshold on the Final Observation Date will increase when
the movements in the values of the Underlyings are uncorrelated. This results in a greater potential for a Contingent Coupon to not be
paid during the term of the Securities and for a significant loss of principal at maturity if the Securities are not previously called.
If the performance of the Underlyings is not correlated or is negatively correlated, the risk of not receiving a Contingent Coupon and
of incurring a significant loss of principal at maturity is greater. In addition, correlation generally decreases for each additional
Underlying to which the Securities are linked, resulting in a greater potential for a significant loss of principal at maturity.
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Because
the Securities are linked to the performance of the least performing among the SPX Index, the RTY Index and the NDX Index, you are exposed
to greater risk of receiving no Contingent Coupon payments or sustaining a significant loss on your investment than if the Securities
were linked to just the SPX Index, just the RTY Index or just the NDX Index. The risk that you will not receive any Contingent
Coupons and/or lose a significant portion or all of your initial investment in the Securities is greater if you invest in the Securities
as opposed to substantially similar securities that are linked to the performance of just the SPX Index, just the RTY Index or just the
NDX Index. With three Underlyings, it is more likely that one or more Underlyings will close below their respective Coupon Barriers on
the quarterly Observation Dates or below their respective Downside Thresholds on the Final Observation Date than if the Securities were
linked to only one of the Underlyings, and therefore it is more likely that you will not receive any Contingent Coupons or will receive
an amount in cash significantly less than the principal amount on the Maturity Date.
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The Securities are linked to the Russell 2000® Index
and are subject to risks associated with small-capitalization companies. The Russell 2000® Index consists
of stocks issued by companies with relatively small market capitalization. These companies often have greater stock price volatility,
lower trading volume and less liquidity than large-capitalization companies and, therefore, the Russell 2000® Index may
be more volatile than indices that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization companies
are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of
small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less well-established and
less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable
to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service
markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse
developments related to their products.
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Non-U.S.
securities risks with respect to the NASDAQ-100 Index®. Some of the equity securities included in the NASDAQ-100 Index®
have been issued by non-U.S. companies. Investments in securities linked to the value of non-U.S. equity securities involve risks
associated with the home countries of the issuers of those non-U.S. equity securities. The prices of non-U.S. equity securities may be
adversely affected by political, economic, financial and social factors in the home countries of the issuers of the non-U.S. companies,
including changes in those countries’ governments, economic and fiscal policies, currency exchange laws or other laws or restrictions.
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Governmental regulatory actions could result in material changes to the
composition of the Underlying and could negatively affect your return on the Securities. Governmental regulatory actions, including
but not limited to sanctions-related actions by the U.S. or foreign governments, could make it necessary or advisable for there to be
material changes to the composition of the Underlying, depending on the nature of such governmental regulatory actions and the Underlying
constituent stocks that are affected. If any governmental regulatory action results in the removal of
Underlying constituent stocks that have (or historically have had) significant weights within the Underlying, such removal, or even any
uncertainty relating to a possible removal, could have a material and negative effect on the level of the Underlying and, therefore, your
return on the Securities.
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Adjustments to the S&P 500® Index, the Russell 2000®
Index or the NASDAQ-100 Index® could adversely affect the value of the Securities. The Underlying Publisher
of each of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index®
is responsible for calculating and maintaining such Underlying. The Underlying Publisher may add, delete or substitute the
stocks constituting the relevant Underlying or make other methodological changes required by certain corporate events relating to the
stocks constituting such Underlying, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary dividends, that
could change the value of the Underlying. The Underlying Publisher may discontinue or suspend calculation or publication of
the relevant Underlying at any time. In these circumstances, the Calculation Agent will have the sole discretion to substitute
a Successor Underlying that is comparable to the discontinued Underlying, and is permitted to consider indices that are calculated and
published by the Calculation Agent or any of its affiliates. Any of these actions could adversely affect the value of any of
the Underlyings and, consequently, the value of the Securities.
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Hypothetical Payments on the Securities at Maturity
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The examples below illustrate the payment upon a call or at maturity
for a $10 Security on a hypothetical offering of the Securities, with the following assumptions (the actual terms for the Securities will
be determined on the Trade Date; amounts may have been rounded for ease of reference):
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Term: Approximately 3 years
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Hypothetical Initial Underlying Value:
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Hypothetical Contingent Coupon Rate: 11.10% per annum (or 2.775% per quarter)
(The actual Contingent Coupon Rate will be determined on the Trade Date.)
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Hypothetical Contingent Coupon: $0.2775 per quarter
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Observation Dates: Quarterly, callable after approximately 6 months
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Hypothetical Coupon Barriers:
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SPX Index: 2,400, which is 80% of the Hypothetical Initial Underlying Value of the SPX Index
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RTY Index: 1,280, which is 80% of the Hypothetical Initial Underlying Value of the RTY Index
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NDX Index: 12,000, which is 80% of the Hypothetical Initial Underlying Value of the NDX Index
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Hypothetical Downside Thresholds:
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SPX Index: 2,400, which is 80% of the Hypothetical Initial Underlying Value of the SPX Index
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RTY Index: 1,280, which is 80% of the Hypothetical Initial Underlying Value of the RTY Index
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NDX Index: 12,000, which is 80% of the Hypothetical Initial Underlying Value of the NDX Index
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Example 1 — Securities are Called on the Second Observation
Date
Date
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Index Closing Value
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Payment (per Security)
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SPX Index
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RTY Index
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NDX Index
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First Observation Date
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3,000 (at or above Coupon Barrier)
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1,300 (at or above Coupon Barrier)
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13,000 (at or above Coupon Barrier)
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$0.2775 (Contingent Coupon — Not Callable)
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Second Observation Date
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3,360 (at or above Coupon Barrier and Initial Underlying Value)
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1,700 (at or above Coupon Barrier and Initial Underlying Value)
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16,000 (at or above Coupon Barrier and Initial Underlying Value)
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$10.2775 (Settlement Amount)
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Total Payment:
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$10.555 (5.55% return)
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Each of the SPX Index, the RTY Index and NDX Index closes above its
respective Coupon Barrier on the first Observation Date and therefore a Contingent Coupon is paid on the related Coupon Payment Date. Because
each of the SPX Index, the RTY Index and the NDX Index closes above its respective Initial Underlying Value on the second Observation
Date (which is six months after the Trade Date and is the first Observation Date on which the Securities are callable), the Securities
are called after such Observation Date. MSFL will pay you on the call settlement date a total of $10.2775 per Security, reflecting
your principal amount plus the applicable Contingent Coupon. When added to the Contingent Coupon payments of $0.2775 received in respect
of the prior Observation Dates, MSFL will have paid you a total of $10.555 per Security for a 5.55% total return on the Securities. No
further amount will be owed to you under the Securities, and you do not participate in the appreciation of the Underlyings.
Example 2 — Securities are NOT Called and the Final Underlying
Value of each of the SPX Index, the RTY Index and the NDX Index is at or above its respective Coupon Barrier and Downside Threshold.
Date
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Index Closing Value
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Payment (per Security)
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SPX Index
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RTY Index
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NDX Index
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First Observation Date
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3,150 (at or above Coupon Barrier)
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1,700 (at or above Coupon Barrier)
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14,000 (at or above Coupon Barrier)
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$0.2775 (Contingent Coupon — Not Callable)
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Second Observation Date
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2,950 (at or above Coupon Barrier)
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1,400 (at or above Coupon Barrier)
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13,500 (at or above Coupon Barrier)
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$0.2775 (Contingent Coupon — Not Called)
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Third Observation Date
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2,900 (at or above Coupon Barrier)
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1,350 (at or above Coupon Barrier)
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8,000 (below Coupon Barrier)
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$0 (Not Called)
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Fourth Observation Date
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2,850 (at or above Coupon Barrier; below Initial Underlying Value)
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1,400 (at or above Coupon Barrier; below Initial Underlying Value)
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7,000 (below Coupon Barrier and Initial Underlying Value)
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$0 (Not Called)
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Fifth to Nineteenth Observation Dates
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Various (all at or above Coupon Barrier; all below Initial Underlying Value)
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Various (all at or above Coupon Barrier; all below Initial Underlying Value)
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Various (all below Coupon Barrier and Initial Underlying Value)
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$0 (Not Called)
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Final Observation Date
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3,500 (at or above Coupon Barrier and Downside Threshold)
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2,300 (at or above Coupon Barrier and Downside Threshold)
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12,500 (at or above Coupon Barrier and Downside Threshold)
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$10.2775 (Settlement Amount)
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Total Payment:
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$10.8325 (8.325% return)
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Each of the SPX Index, the RTY Index and the NDX Index closes above
its respective Coupon Barrier on the first two Observation Dates and therefore a Contingent Coupon is paid on each related Coupon Payment
Date. On each of the third and fourth Observation Dates, both the SPX Index and RTY Index close at or above their respective Coupon Barriers
(but below their respective Initial Underlying Values) but the NDX Index closes below its respective Coupon Barrier. Therefore,
no Contingent Coupon is paid on any related Coupon Payment Date. On the Final Observation Date, each of the SPX Index, the
RTY Index and the NDX Index closes above its respective Coupon Barrier and Downside Threshold. Therefore, at maturity, MSFL
will pay you a total of $10.2775 per Security, reflecting your principal amount plus the applicable Contingent Coupon. When added to the
total Contingent Coupon payments of $0.555 received in respect of the prior Observation Dates, MSFL will have paid you a total of $10.8325
per Security for a 8.325% total return on the Securities over three years. You do not participate in any appreciation of the
Underlyings.
Example 3 — Securities are NOT Called and the Final
Underlying Value of one of the Underlyings is below its respective Downside Threshold
Date
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Index Closing Value
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Payment (per Security)
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SPX Index
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RTY Index
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NDX Index
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First Observation Date
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2,600 (at or above Coupon Barrier)
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1,500 (at or above Coupon Barrier)
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13,500 (at or above Coupon Barrier)
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$0.2775 (Contingent Coupon — Not Callable)
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Second Observation Date
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2,840 (at or above Coupon Barrier)
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1,800 (at or above Coupon Barrier)
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14,000 (at or above Coupon Barrier)
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$0.2775 (Contingent Coupon — Not Called)
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Third Observation Date
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3,100 (at or above Coupon Barrier)
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1,900 (at or above Coupon Barrier)
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7,000 (below Coupon Barrier)
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$0 (Not Called)
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Fourth Observation Date
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2,950 (at or above Coupon Barrier; below Initial Underlying Value)
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1,350 (at or above Coupon Barrier; below Initial Underlying Value)
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7,500 (below Coupon Barrier and Initial Underlying Value)
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$0 (Not Called)
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Fifth to Nineteenth Observation Dates
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Various (all below Coupon Barrier and Initial Underlying Value)
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Various (all below Coupon Barrier and Initial Underlying Value)
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Various (all below Coupon Barrier and Initial Underlying Value)
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$0 (Not Called)
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Final Observation Date
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2,900 (at or above Coupon Barrier and Downside Threshold)
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1,400 (at or above Coupon Barrier and Downside Threshold)
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6,000 (below Coupon Barrier and Downside Threshold)
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$10 + [$10 × Underlying Return of the
Least Performing Underlying] =
$10 + [$10 × -60%] =
$10 - $6 =
$4 (Payment at Maturity)
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Total Payment:
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$4.555 (-54.45% return)
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Each of the SPX Index, the RTY Index and the NDX Index closes above
its respective Coupon Barrier on the first two Observation Dates, and, therefore a Contingent Coupon is paid on each related Coupon Payment
Date. On each of the third and fourth Observation Dates, both the SPX Index and the RTY Index close at or above their respective
Coupon Barriers (but below their respective Initial Underlying Values), but the NDX Index closes below its Coupon Barrier. Therefore,
no Contingent Coupon is paid on either related Coupon Payment Date. On each of the fifth to the nineteenth Observation Dates,
each of the SPX Index, the RTY Index and the NDX Index closes below its respective Coupon Barrier and thus no Contingent Coupon is paid
on any related Coupon Payment Date. On the Final Observation Date, both the SPX Index and the RTY Index close above their respective
Coupon Barriers and Downside Thresholds but the NDX Index closes below its Coupon Barrier and Downside Threshold. Therefore, at maturity,
investors are exposed to the downside performance of the Least Performing Underlying and MSFL will pay you $4 per Security, which reflects
the percentage decrease of the Least Performing Underlying from the Trade Date to the Final Observation Date. When added to
the total Contingent Coupon payments of $0.555 received in respect of the prior Observation Dates, MSFL will have paid you $4.555 per
Security, for a loss on the Securities of 54.45%.
The Securities differ from ordinary debt securities in that, among
other features, MSFL is not necessarily obligated to repay the full amount of your initial investment. If the Securities are not called
on any Observation Date, you may lose a significant portion or all of your initial investment. Specifically, if the Securities are not
called and the Final Underlying Value of any Underlying is less than its respective Downside Threshold, you will lose 1% (or a fraction
thereof) of your Principal Amount for each 1% (or a fraction thereof) that the Underlying Return of the Least Performing Underlying is
less than zero. Any payment on the Securities, including any Contingent Coupon, payment upon an automatic call or the Payment at Maturity,
is dependent on our ability to satisfy our obligations when they come due. If we are unable to meet our obligations, you may not receive
any amounts due to you under the Securities.
The Issuer will not pay a quarterly Contingent Coupon if the Observation
Date Closing Value for any of the Underlyings is below its respective Coupon Barrier. The Issuer will not automatically call
the Securities if the Observation Date Closing Value of any of the Underlyings is below its respective Initial Underlying Value. You
will lose a significant portion or all of your principal amount at maturity if the Securities are not called and the Final Underlying
Value of any of the Underlyings is below its respective Downside Threshold.
What Are the Tax Consequences of the Securities?
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Prospective investors should note that the discussion under the
section called “United States Federal Taxation” in the accompanying product supplement does not apply to the Securities issued
under this free writing prospectus and is superseded by the following discussion.
The following
is a general discussion of the material U.S. federal income tax consequences and certain estate tax consequences of the ownership and
disposition of the Securities. This discussion applies only to investors in the Securities who:
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purchase the Securities in the original offering; and
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hold the Securities as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the “Code”).
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This discussion
does not describe all of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances
or to holders subject to special rules, such as:
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certain financial institutions;
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certain dealers and traders in securities or commodities;
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investors holding the Securities as part of a “straddle,” wash
sale, conversion transaction, integrated transaction or constructive sale transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar;
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partnerships or other entities classified as partnerships for U.S. federal
income tax purposes;
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regulated investment companies;
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real estate investment trusts; or
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tax-exempt entities, including “individual retirement accounts”
or “Roth IRAs” as defined in Section 408 or 408A of the Code, respectively.
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If an entity
that is classified as a partnership for U.S. federal income tax purposes holds the Securities, the U.S. federal income tax treatment
of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partnership holding
the Securities or a partner in such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences
of holding and disposing of the Securities to you.
As the law
applicable to the U.S. federal income taxation of instruments such as the Securities is technical and complex, the discussion below necessarily
represents only a general summary. The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative
minimum tax consequences or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not
address the consequences to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of
which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the
Securities should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the
absence of statutory, judicial or administrative authorities that directly address the treatment of the Securities or instruments that
are similar to the Securities for U.S. federal income tax purposes, no assurance can be given that the IRS or a court will agree with
the tax treatment described herein. We intend to treat a Security for U.S. federal income tax purposes as a single financial
contract that provides for a coupon that will be treated as gross income to you at the time received or accrued in accordance with your
regular method of tax accounting. In the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the Securities
is reasonable under current law; however, our counsel has advised us that it is unable to conclude affirmatively that this treatment
is more likely than not to be upheld, and that alternative treatments are possible. Moreover, our counsel’s opinion is based on
market conditions as of the date of this free writing prospectus and is subject to confirmation on the Trade Date.
You should
consult your tax adviser regarding all aspects of the U.S. federal tax consequences of an investment in the Securities (including possible
alternative treatments of the Securities). Unless otherwise stated, the following discussion is based on the treatment of
each Security as described in the previous paragraph.
Tax Consequences
to U.S. Holders
This section
applies to you only if you are a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner
of a Security that is, for U.S. federal income tax purposes:
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a citizen or individual resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state thereof or the District of Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
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Tax
Treatment of the Securities
Assuming
the treatment of the Securities as set forth above is respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s
tax basis in the Securities should equal the amount paid by the U.S. Holder to acquire the Securities.
Tax Treatment of Coupon Payments. Any
coupon payment on the Securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance
with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities. Upon
a sale, exchange or settlement of the Securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the Securities sold, exchanged or settled. For
this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds attributable to an
accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term capital gain
or loss if the U.S. Holder has held the Securities for more than one year at the time of the sale, exchange or settlement, and should
be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with the
capital loss treatment of any loss recognized upon the sale, exchange or settlement of the Securities, could result in adverse tax consequences
to holders of the Securities because the deductibility of capital losses is subject to limitations.
Possible
Alternative Tax Treatments of an Investment in the Securities
Due to the
absence of authorities that directly address the proper tax treatment of the Securities, no assurance can be given that the IRS will
accept, or that a court will uphold, the treatment described above. In particular, the IRS could seek to analyze the U.S. federal income
tax consequences of owning the Securities under Treasury regulations governing contingent payment debt instruments (the “Contingent
Debt Regulations”). If the IRS were successful in asserting that the Contingent Debt Regulations applied to the Securities, the
timing and character of income thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue
into income original issue discount on the Securities every year at a “comparable yield” determined at the time of their
issuance, adjusted upward or downward to reflect the difference, if any, between the actual and the projected amount of any contingent
payments on the Securities. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange or other disposition
of the Securities would be treated as ordinary income, and any loss realized would be treated as ordinary loss to the extent of the U.S.
Holder’s prior accruals of original issue discount and as capital loss thereafter. 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.
Other alternative
federal income tax treatments of the Securities are possible, which, if applied, could significantly affect the timing and character
of the income or loss with respect to the Securities. 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 on whether to require holders of “prepaid forward contracts” and similar 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; 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; and appropriate transition
rules and effective dates. While it is not clear whether instruments such as the Securities would be viewed as similar to
the prepaid forward contracts described in the notice, 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. 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 and the issues presented by this notice.
Backup
Withholding and Information Reporting
Backup withholding
may apply in respect of payments on the Securities and the payment of proceeds from a sale, exchange or other disposition of the Securities,
unless a U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with
applicable requirements of the backup withholding rules. The amounts withheld under the backup withholding rules are not an
additional tax and may be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the
required information is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection
with payments on the Securities and the payment of proceeds from a sale, exchange or other disposition of the Securities, unless the
U.S. Holder provides proof of an applicable exemption from the information reporting rules.
Tax Consequences
to Non-U.S. Holders
This section
applies to you only if you are a Non-U.S. Holder. As used herein, the term “Non-U.S. Holder” means a beneficial
owner of a Security that is for U.S. federal income tax purposes:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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The term
“Non-U.S. Holder” does not include any of the following holders:
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a holder who is an individual present in the United States for 183 days or
more in the taxable year of disposition and who is not otherwise a resident of the United States for U.S. federal income tax purposes;
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certain former citizens or residents of the United States; or
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a holder for whom income or gain in respect of the Securities is effectively
connected with the conduct of a trade or business in the United States.
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Such holders
should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the Securities.
Although
significant aspects of the tax treatment of each Security are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder
generally at a rate of 30% or at a reduced rate specified by an applicable income tax treaty under an “other income” or similar
provision. We will not be required to pay any additional amounts with respect to amounts withheld. In order to
claim an exemption from, or a reduction in, the 30% withholding tax, a Non-U.S. Holder of the Securities must comply with certification
requirements to establish that it is not a U.S. person and is eligible for such an exemption or reduction under an applicable tax treaty. If
you are a Non-U.S. Holder, you should consult your tax adviser regarding the tax treatment of the Securities, including the possibility
of obtaining a refund of any withholding tax and the certification requirement described above.
Section 871(m) Withholding Tax
on Dividend Equivalents
Section 871(m)
of the Code 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, 2023 that do not have a delta of one
with respect to any Underlying Security. Based on the terms of the Securities and current market conditions, we expect that
the Securities will not have a delta of one with respect to any Underlying Security on the Trade Date. However, we will provide
an updated determination in the pricing supplement. Assuming 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
Section 871(m) 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.
U.S.
Federal Estate Tax
Individual
Non-U.S. Holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal
estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain
interests or powers) should note that, absent an applicable treaty exemption, the Securities may be treated as U.S.-situs property subject
to U.S. federal estate tax. Prospective investors that are non-U.S. individuals, or are entities of the type described above,
should consult their tax advisers regarding the U.S. federal estate tax consequences of an investment in the Securities.
Backup
Withholding and Information Reporting
Information
returns will be filed with the IRS in connection with any coupon payment and may be filed with the IRS in connection with the payment
at maturity on the Securities and the payment of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may
be subject to backup withholding in respect of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification
procedures to establish that it is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The
amount of any backup withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s
U.S. federal income tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished
to the IRS.
FATCA
Legislation
commonly referred to as “FATCA” generally imposes a withholding tax of 30% on payments to certain non-U.S. entities (including
financial intermediaries) with respect to certain financial instruments, unless various U.S. information reporting and due diligence
requirements have been satisfied. An intergovernmental agreement between the United States and the non-U.S. entity’s
jurisdiction may modify these requirements. FATCA generally applies to certain financial instruments that are treated as paying
U.S.-source interest or other U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”). Withholding
(if applicable) applies to payments of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement)
of certain financial instruments treated as providing for U.S.-source interest or dividends. Under proposed regulations (the
preamble to which specifies that taxpayers are permitted to rely on them pending
finalization), no withholding will apply on payments of gross proceeds
(other than amounts treated as FDAP income). While the treatment of the Securities is unclear, you should assume that any coupon
payment with respect to the Securities will be subject to the FATCA rules. If withholding applies to the Securities, we will
not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult
their tax advisers regarding the potential application of FATCA to the Securities.
The discussion
in the preceding paragraphs under “What Are the Tax Consequences of the Securities,” insofar as it purports to describe provisions
of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full opinion of Davis Polk & Wardwell
LLP regarding the material U.S. federal tax consequences of an investment in the Securities.
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected to provide
a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based on the
relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared
to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through 1943. For
additional information about the S&P 500® Index, see the information set forth under “S&P 500®
Index” in the accompanying index supplement.
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of Standard
and Poor’s Financial Services LLC. For more information, see “S&P 500® Index” in the accompanying
index supplement.
The following table sets forth the published high and low closing values,
as well as the end-of-quarter closing values, of the S&P 500® Index for each quarter in the period from January 1,
2016 through December 2, 2021. The closing value of the S&P 500® Index on December 2, 2021 was 4,577.10. We
obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical
closing values of the S&P 500® Index should not be taken as an indication of future performance, and no assurance can
be given as to the level of the S&P 500® Index on any Observation Date, including the Final Observation Date.
Quarter Begin
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Quarter End
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Quarterly High
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Quarterly Low
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Quarterly Close
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1/1/2016
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3/31/2016
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2,063.95
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1,829.08
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2,059.74
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4/1/2016
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6/30/2016
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2,119.12
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2,000.54
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2,098.86
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7/1/2016
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9/30/2016
|
2,190.15
|
2,088.55
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2,168.27
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10/1/2016
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12/31/2016
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2,271.72
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2,085.18
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2,238.83
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1/1/2017
|
3/31/2017
|
2,395.96
|
2,257.83
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2,362.72
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4/1/2017
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6/30/2017
|
2,453.46
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2,328.95
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2,423.41
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7/1/2017
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9/30/2017
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2,519.36
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2,409.75
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2,519.36
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10/1/2017
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12/31/2017
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2,690.16
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2,529.12
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2,673.61
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1/1/2018
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3/31/2018
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2,872.87
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2,581.00
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2,640.87
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4/1/2018
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6/30/2018
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2,786.85
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2,581.88
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2,718.37
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7/1/2018
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9/30/2018
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2,930.75
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2,713.22
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2,913.98
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10/1/2018
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12/31/2018
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2,925.51
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2,351.10
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2,506.85
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1/1/2019
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3/31/2019
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2,854.88
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2,447.89
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2,834.40
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4/1/2019
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6/30/2019
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2,954.18
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2,744.45
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2,941.76
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7/1/2019
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9/30/2019
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3,025.86
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2,840.60
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2,976.74
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10/1/2019
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12/31/2019
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3,240.02
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2,887.61
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3,230.78
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1/1/2020
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3/31/2020
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3,386.15
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2,237.40
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2,584.59
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4/1/2020
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6/30/2020
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3,232.39
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2,470.50
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3,100.29
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7/1/2020
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9/30/2020
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3,580.84
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3,115.86
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3,363.00
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10/1/2020
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12/31/2020
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3,756.07
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3,269.96
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3,756.07
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1/1/2021
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3/31/2021
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3,974.54
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3,700.65
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3,972.89
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4/1/2021
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6/30/2021
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4,297.50
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4,019.87
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4,297.50
|
7/1/2021
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9/30/2021
|
4,536.95
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4,258.49
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4,307.54
|
10/1/2021
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12/2/2021*
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4,704.54
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4,300.46
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4,577.10
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*Available information for the indicated
period includes data for less than the entire calendar quarter and accordingly, the “Quarterly High,” “Quarterly Low”
and “Quarterly Close” data indicated are for this shortened period only.
The graph below illustrates the performance of the S&P 500®
Index from January 1, 2008 through December 2, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and Downside Threshold, assuming the closing value of the S&P 500® Index on December 2, 2021 were its
Initial Underlying Value.
Past performance is not indicative of future results.
The Russell 2000® Index is an index calculated, published
and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated in the U.S. and
its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities that form the Russell 3000®
Index. The Russell 3000® Index is composed of the 3,000 largest U.S. companies as determined by market capitalization and
represents approximately 98% of the U.S. equity market. The Russell 2000® Index consists of the smallest 2,000 companies
included in the Russell 3000® Index and represents a small portion of the total market capitalization of the Russell 3000®
Index. The Russell 2000® Index is designed to track the performance of the small-capitalization segment of the U.S. equity
market. For additional information about the Russell 2000® Index, see the information set forth under “Russell 2000®
Index” in the accompanying index supplement.
The “Russell 2000® Index” is a trademark
of FTSE Russell. For more information, see “Russell 2000® Index” in the accompanying index supplement.
The following table sets forth the published high and low closing values,
as well as the end-of-quarter closing values, of the Russell 2000® Index for each quarter in the period from January 1,
2016 through December 2, 2021. The closing value of the Russell 2000® Index on December 2, 2021 was 2,206.333. We
obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical
closing values of the Russell 2000® Index should not be taken as an indication of future performance, and no assurance
can be given as to the level of the Russell 2000® Index on any Observation Date, including the Final Observation Date.
Quarter Begin
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Quarter End
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Quarterly High
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Quarterly Low
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Quarterly Close
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1/1/2016
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3/31/2016
|
1,114.028
|
953.715
|
1,114.028
|
4/1/2016
|
6/30/2016
|
1,188.954
|
1,089.646
|
1,151.923
|
7/1/2016
|
9/30/2016
|
1,263.438
|
1,139.453
|
1,251.646
|
10/1/2016
|
12/31/2016
|
1,388.073
|
1,156.885
|
1,357.130
|
1/1/2017
|
3/31/2017
|
1,413.635
|
1,345.598
|
1,385.920
|
4/1/2017
|
6/30/2017
|
1,425.985
|
1,345.244
|
1,415.359
|
7/1/2017
|
9/30/2017
|
1,490.861
|
1,356.905
|
1,490.861
|
10/1/2017
|
12/31/2017
|
1,548.926
|
1,464.095
|
1,535.511
|
1/1/2018
|
3/31/2018
|
1,610.706
|
1,463.793
|
1,529.427
|
4/1/2018
|
6/30/2018
|
1,706.985
|
1,492.531
|
1,643.069
|
7/1/2018
|
9/30/2018
|
1,740.753
|
1,653.132
|
1,696.571
|
10/1/2018
|
12/31/2018
|
1,672.992
|
1,266.925
|
1,348.559
|
1/1/2019
|
3/31/2019
|
1,590.062
|
1,330.831
|
1,539.739
|
4/1/2019
|
6/30/2019
|
1,614.976
|
1,465.487
|
1,566.572
|
7/1/2019
|
9/30/2019
|
1,585.599
|
1,456.039
|
1,523.373
|
10/1/2019
|
12/31/2019
|
1,678.010
|
1,472.598
|
1,668.469
|
1/1/2020
|
3/31/2020
|
1,705.215
|
991.160
|
1,153.103
|
4/1/2020
|
6/30/2020
|
1,536.895
|
1,052.053
|
1,441.365
|
7/1/2020
|
9/30/2020
|
1,592.287
|
1,398.920
|
1,507.692
|
10/1/2020
|
12/31/2020
|
2,007.104
|
1,531.202
|
1,974.855
|
1/1/2021
|
3/31/2021
|
2,360.168
|
1,945.914
|
2,220.519
|
4/1/2021
|
6/30/2021
|
2,343.758
|
2,135.139
|
2,310.549
|
7/1/2021
|
9/30/2021
|
2,329.359
|
2,130.680
|
2,204.372
|
10/1/2021
|
12/2/2021*
|
2,442.742
|
2,147.420
|
2,206.333
|
|
*
|
Available information for the indicated period includes data for less than the entire calendar quarter and accordingly, the “Quarterly
High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only.
|
The graph below illustrates the performance of the Russell
2000® Index from January 1, 2008 through December 2, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and Downside Threshold, assuming the closing value of the Russell 2000® Index on December 2, 2021 were its
Initial Underlying Value.
Past performance is not indicative of future results.
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities
of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index includes companies across a variety of major industry
groups. At any moment in time, the value of the NASDAQ-100 Index equals the aggregate value of the then-current NASDAQ-100 Index share
weights of each of the NASDAQ-100 Index component securities, which are based on the total shares outstanding of each such NASDAQ-100
Index component security, multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing
price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index value. For additional
information about the NASDAQ-100 Index® Index, see the information set forth under “NASDAQ-100 Index®”
in the accompanying index supplement.
The following table sets forth the published high and low closing values,
as well as the end-of-quarter closing values, of the NASDAQ-100 Index® for each quarter in the period from January 1, 2016
through December 2, 2021. The closing value of the NASDAQ-100 Index® on December 2, 2021 was 15,990.76. We
obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical
closing values of the NASDAQ-100 Index® should not be taken as an indication of future performance, and no assurance can
be given as to the level of the NASDAQ-100 Index® on any Observation Date, including the Final Observation Date.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
1/1/2016
|
3/31/2016
|
4,497.86
|
3,947.80
|
4,483.66
|
4/1/2016
|
6/30/2016
|
4,565.42
|
4,201.06
|
4,417.70
|
7/1/2016
|
9/30/2016
|
4,891.36
|
4,410.75
|
4,875.70
|
10/1/2016
|
12/31/2016
|
4,965.81
|
4,660.46
|
4,863.62
|
1/1/2017
|
3/31/2017
|
5,439.74
|
4,911.33
|
5,436.23
|
4/1/2017
|
6/30/2017
|
5,885.30
|
5,353.59
|
5,646.92
|
7/1/2017
|
9/30/2017
|
6,004.38
|
5,596.96
|
5,979.30
|
10/1/2017
|
12/31/2017
|
6,513.27
|
5,981.92
|
6,396.42
|
1/1/2018
|
3/31/2018
|
7,131.12
|
6,306.10
|
6,581.13
|
4/1/2018
|
6/30/2018
|
7,280.71
|
6,390.84
|
7,040.80
|
7/1/2018
|
9/30/2018
|
7,660.18
|
7,014.55
|
7,627.65
|
10/1/2018
|
12/31/2018
|
7,645.45
|
5,899.35
|
6,329.96
|
1/1/2019
|
3/31/2019
|
7,493.27
|
6,147.13
|
7,378.77
|
4/1/2019
|
6/30/2019
|
7,845.73
|
6,978.02
|
7,671.08
|
7/1/2019
|
9/30/2019
|
8,016.95
|
7,415.69
|
7,749.45
|
10/1/2019
|
12/31/2019
|
8,778.31
|
7,550.79
|
8,733.07
|
1/1/2020
|
3/31/2020
|
9,718.73
|
6,994.29
|
7,813.50
|
4/1/2020
|
6/30/2020
|
10,209.82
|
7,486.29
|
10,156.85
|
7/1/2020
|
9/30/2020
|
12,420.54
|
10,279.25
|
11,418.06
|
10/1/2020
|
12/31/2020
|
12,888.28
|
11,052.95
|
12,888.28
|
1/1/2021
|
3/31/2021
|
13,807.70
|
12,299.08
|
13,091.44
|
4/1/2021
|
6/30/2021
|
14,572.75
|
13,001.63
|
14,554.80
|
7/1/2021
|
9/30/2021
|
15,675.76
|
14,549.09
|
14,689.62
|
10/1/2021
|
12/2/2021*
|
16,573.34
|
14,472.12
|
15,990.76
|
*Available information for the indicated
period includes data for less than the entire calendar quarter and accordingly, the “Quarterly High,” “Quarterly Low”
and “Quarterly Close” data indicated are for this shortened period only.
The graph below illustrates the performance of the NASDAQ-100 Index®
from January 1, 2008 through December 2, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and Downside Threshold, assuming the closing value of the NASDAQ-100 Index® on December 2, 2021 were its
Initial Underlying Value.
Past performance is not indicative of future results.
Correlation of the Underlyings
|
The graph below illustrates the daily performance of the S&P 500®
Index, the Russell 2000® Index and the NASDAQ-100 Index® from January 1, 2008 through December 2, 2021.
For comparison purposes, each Underlying has been “normalized” to have a closing value of 100 on January 1, 2008 by dividing
the closing value of that Underlying on each Index Business Day by the closing value of that Underlying on January 1, 2008 and multiplying
by 100. We obtained the closing values used to determine the normalized closing values set forth below from Bloomberg, without independent
verification.
A closer relationship between the daily returns of two or more underlying
assets over a given period indicates that such underlying assets have been more positively correlated. Lower (or more-negative) correlation
among two or more underlying assets over a given period may indicate that it is less likely that those underlying assets will subsequently
move in the same direction. Therefore, lower correlation among the Underlyings may indicate a greater potential for one of
the Underlyings to close below its respective Coupon Barrier or Downside Threshold on an Observation Date, including the Final Observation
Date, as applicable, because there may be a greater likelihood that at least one of the Underlyings will decrease in value significantly.
However, even if the Underlyings have a higher positive correlation, one or more of the Underlyings may close below the respective Coupon
Barrier(s) or Downside Threshold(s) on an Observation Date or the Final Observation Date, as applicable, as the Underlyings may all decrease
in value. Moreover, the actual correlation among the Underlyings may differ, perhaps significantly, from their historical correlation. A
higher Contingent Coupon Rate is generally associated with lower correlation among the Underlyings, which may indicate a greater potential
for missed Contingent Coupons and/or a significant loss on your investment at maturity. See “Key Risks — You are exposed to
the market risk of all three Underlyings”, “— Because the Securities are linked to the performance of the least performing
among the SPX Index, the RTY Index and the NDX Index, you are exposed to greater risk of receiving no Contingent Coupon payments or sustaining
a significant loss on your investment than if the Securities were linked to just the SPX Index, just the RTY Index or just the NDX Index”
and “—A higher Contingent Coupon Rate and/or lower Coupon Barriers and Downside Thresholds may reflect greater expected volatility
of the Underlyings, and greater expected volatility generally indicates an increased risk of declines in the levels of the Underlyings
and, potentially, a significant loss at maturity.” herein.
Past performance and correlation of the Underlyings are not indicative
of the future performance or correlation of the Underlyings.
Additional Terms of the Securities
|
If the terms contained in this free writing prospectus differ from those
discussed in the product supplement, index supplement or prospectus, the terms contained in this free writing prospectus will control.
The accompanying product supplement refers to the Principal Amount
as the “Stated Principal Amount,” the Initial Level as the “Initial Index Value,” the Trade Date as the “Pricing
Date,” the Observation Dates as the “Determination Dates,” the Final Observation Date as the “Final Determination
Date,” the Coupon Barrier/Downside Threshold” as the “Downside Threshold Level” and the day on which any automatic
call occurs as the “Early Redemption Date.”
Index Publishers
With respect to the SPX Index, S&P Dow Jones Indices LLC or any
successor thereto.
With respect to the RTY Index, FTSE Russell or any successor thereto.
With respect to the NDX Index, Nasdaq, Inc., or any successor thereto.
“Index Closing Value” on any Index Business Day means, (i)
with respect to each of the SPX Index and NDX Index, the closing value of such Underlying, or any relevant Successor Index (as defined
under “—Discontinuance of Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement)
published at the regular weekday close of trading on that Index Business Day by the relevant Index Publisher, and (ii) with respect to
the RTY Index, the closing value of such Underlying or any Successor Index reported by Bloomberg Financial Services, or any successor
reporting service the Calculation Agent may select, on that Index Business Day. In certain circumstances, the Index Closing Value for
an Underlying will be based on the alternate calculation of such Underlying as described under “—Discontinuance of Any Underlying
Index; Alteration of Method of Calculation” in the accompanying product supplement.
Day-Count Convention
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Issuer Notice to Registered Security Holders, the Trustee and the
Depositary
In the event that the Maturity Date of the Securities is postponed due
to a postponement of the Final Observation 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 Final Observation Date
as postponed.
In the event that the Securities are subject to Automatic Call, the
Issuer shall, (i) on the Business Day following the applicable Observation Date, give notice of the Automatic Call and the applicable
automatic call payment, including specifying the payment date of the applicable amount due upon the Automatic Call, (x) to each registered
holder of the Securities by mailing notice of such Automatic Call by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) 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 (z) to the Depositary by telephone or facsimile confirmed by mailing
such notice to the Depositary by first class mail, postage prepaid and (ii) on or prior to the Automatic Call Date, deliver the aggregate
cash amount due with respect to the Securities to the Trustee for delivery to the Depositary, as holder of the securities. 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. This notice shall be given by the Issuer
or, at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer, with any such request to be accompanied
by a copy of the notice to be given.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the Depositary of the amount of cash to be delivered
as Contingent Coupon, if any, with respect to the Securities on or prior to 10:30 a.m. (New York City time) on the Business Day preceding
each Coupon Payment Date, and (ii) deliver the aggregate cash amount due, if any, with respect to the Contingent Coupon to the Trustee
for delivery to the Depositary, as holder of the Securities, on or prior to the applicable Coupon Payment 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 due with respect to the Securities, if any, to the Trustee for delivery to the Depositary, as holder of the Securities,
on or prior to the Maturity Date.
Additional Information About the 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, $10 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 Agent’s commissions and the cost of issuing, structuring
and hedging the Securities. See also “Use of Proceeds” in the accompanying prospectus.
On or prior to the Trade Date, we will hedge 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 take positions in the constituent stocks of the Underlyings, in futures or options contracts on the
Underlyings or the constituent stocks of the Underlyings, as well as in other instruments related to the Underlyings that they may wish
to use in connection with such hedging. Any of these hedging or trading activities on or prior to the Trade Date could potentially
increase the Initial Underlying Value, and, as a result, the Coupon Barrier of any of the Underlyings, which is the level at or above
which such Underlying must close on each Observation Date in order for you to earn a Contingent Coupon, and the Downside Threshold of
any of the Underlyings, which if the Securities are not called prior to maturity, is the level at or above which such Underlying must
close on the Final Observation Date in order for you to avoid being exposed to the negative performance of the Least Performing Underlying
at maturity (in each case, 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 Final Observation Date, by purchasing
and selling the stocks constituting the Underlyings, 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., including by purchasing or selling any such securities or instruments on the Final Observation Date. 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 Final Observation Date approaches. We cannot give
any assurance that our hedging activities will not affect the values of the Underlyings and, therefore, adversely affect the value of
the Securities or the payment you will receive at maturity, if any, if not previously called.
Supplemental Plan of Distribution; Conflicts of Interest
MS & Co. will act as the agent for this offering. We
will agree to sell to MS & Co., and MS & Co. will agree to purchase, all of the Securities at the issue price less the underwriting
discount indicated on the cover of this document. UBS Financial Services Inc., acting as dealer, will receive from MS &
Co. a fixed sales commission of $0.225 for each Security it sells.
MS & Co. is our affiliate 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. When
MS & Co. prices this offering of Securities, it will determine the economic terms of the Securities, including the Contingent Coupon
Rate, such that for each Security the estimated value on the Trade Date will be no lower than the minimum level described in “Additional
Information about Morgan Stanley, MSFL and the Securities” on page 2.
MS & Co. will conduct this offering in compliance with the requirements
of Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“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.
In order to facilitate the offering of the Securities, the agent may
engage in transactions that stabilize, maintain or otherwise affect the price of the Securities. Specifically, the agent may
sell more Securities than it is obligated to purchase in connection with the offering, creating a naked short position in the Securities,
for its own account. The agent must close out any naked short position by purchasing the Securities in the open market. A
naked short position is more likely to be created if the agent is concerned that there may be downward pressure on the price of the Securities
in the open market after pricing that could adversely affect investors who purchase in the offering. As an additional means
of facilitating the offering, the agent may bid for, and purchase, the Securities or the stocks constituting the Underlyings in the open
market to stabilize the price of the Securities. Any of these activities may raise or maintain the market price of the Securities
above independent market levels or prevent or retard a decline in the market price of the Securities. The agent is not required
to engage in these activities, and may end any of these activities at any time. An affiliate of the agent has entered into
a hedging transaction with us in connection with this offering of Securities. See “—Use of Proceeds and Hedging”
above.
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