Free Writing Prospectus No. 5,195
Registration Statement Nos. 333-250103; 333-250103-01
Dated May 19, 2022
Filed Pursuant to Rule 433
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Morgan Stanley Finance LLC Trigger
Callable Contingent Yield Notes (With Daily Coupon Observation)
Linked to the least performing underlying
among the Dow Jones Industrial AverageSM, the Russell 2000® Index and the EURO STOXX 50® Index
due August 25, 2025
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
These Trigger Callable 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 Dow Jones Industrial
AverageSM (the “INDU Index”), the Russell 2000® Index (the “RTY Index”) and the EURO
STOXX 50® Index (the “SX5E Index,” and together with the INDU Index and the RTY Index, the “Underlyings”).
If the Index Closing Value of each of the INDU Index, the RTY Index and the SX5E Index is equal to or greater than its respective
Coupon Barrier on each Index Business Day during a Quarterly Observation Period, MSFL will make a Contingent Coupon payment with
respect to that Quarterly Observation Period. However, if the Index Closing Value of any of the Underlyings is below its respective
Coupon Barrier on any Index Business Day during a Quarterly Observation Period, no coupon will accrue or be payable with respect
to that Quarterly Observation Period. In addition, beginning on August 24, 2022, MSFL will call the Securities on any quarterly Call Date
if and only if the output of a risk neutral valuation model on a Business Day that is at least 2 but no more than 5 Business Days prior
to such Call Date, based on the inputs indicated in the Call Feature section below, indicates that calling on such date is economically
rational for us as compared to not calling on such date. If the Securities are called, MSFL will pay you the principal amount plus
any Contingent Coupon otherwise due with respect to the relevant Quarterly Observation Period, and no further amounts will be owed to
you. Any early redemption of the Securities will not automatically occur based solely on the performance of the Underlyings. If the Securities
are not called prior to maturity and the Final Underlying Value of each of the INDU Index, the RTY Index and the SX5E Index is
equal to or greater than its respective Downside Threshold, MSFL will make a cash payment to you at maturity equal to the principal amount
of your Securities and, if payable, the Contingent Coupon with respect to the final Quarterly Observation Period. 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 enhanced income in exchange for the risk of losing their principal
at maturity, the risk of receiving no Contingent Coupons during the term of the Securities and the risk of an early redemption 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 INDU Index, the RTY Index and
the SX5E 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 of any of the Underlyings beyond the relevant Coupon Barrier on any Index Business Day during the relevant
Quarterly Observation Period or beyond the Downside Threshold on the Final Valuation Date will result in no Contingent Coupon payments
or a significant loss on your investment, respectively, 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 Index Closing Value for any
of the Underlyings is below its respective Coupon Barrier on any Index Business Day during a Quarterly Observation Period. The Issuer
may call the Securities early based on the output of a risk neutral valuation model. 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 Underlying 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 all Underlyings are greater than
their respective Downside Thresholds at the time of sale.
All payments are subject to our credit risk. If we default on our
obligations, you could lose some or all of your investment. These Securities are not secured obligations and you will not have any security
interest in, or otherwise have any access to, any underlying reference asset or assets.
q Call Feature: Beginning
August 24, 2022, an early redemption, in whole but not in part, will occur on a quarterly Call Date if and only if the output of a risk
neutral valuation model on a Business Day that is at least 2 but no more than 5 Business Days prior to such Call Date, as selected by
the Calculation Agent (the “Determination Date”), taking as input: (i) prevailing reference market levels, volatilities and
correlations, as applicable and in each case as of the Determination Date and (ii) Morgan Stanley’s credit spreads as of the Trade
Date, indicates that calling on such date is economically rational for us as compared to not calling on such date. If
the Securities are called, MSFL will pay you the principal amount plus any Contingent Coupon otherwise due with respect to the
relevant Quarterly Observation Period and no further amounts will be owed to you. If the Securities are not called, investors will have
the potential for downside equity market risk at maturity.
q
Contingent Coupon: If
the Index Closing Value of each of the INDU Index, the RTY Index and the SX5E Index on each Index Business Day during the
applicable Quarterly Observation Period is equal to or greater than its respective Coupon Barrier, MSFL will make a Contingent Coupon
payment with respect to that Quarterly Observation Period. Otherwise, no coupon will be payable with respect to that Quarterly Observation
Period.
q
Contingent Downside Market Exposure at Maturity: If, by maturity, the Securities have not been called and the Final Underlying
Value of each of the INDU Index, the RTY Index and the SX5E Index is greater than or equal to its respective Downside Threshold
on the Final Valuation Date, MSFL will pay you the principal amount per Security at maturity and, if payable, the Contingent Coupon with
respect to the Final Valuation Date. However, if the Final Underlying Value of any of the Underlyings is less than its Downside
Threshold, 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 Valuation
Date. If you sell the Securities prior to maturity, you may receive substantially less than the principal amount even if the values of
all three Underlyings are greater than their respective Downside Thresholds at the time of sale. Any payment on the Securities is subject
to our creditworthiness.
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Trade Date |
May 20, 2022 |
Settlement Date |
May 25, 2022 (3 business days |
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after the Trade Date) |
Coupon Payment Dates** |
Quarterly, callable beginning August 24, 2022. |
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See “Coupon Payment Dates” on page 6 for details. |
Final Valuation Date** |
August 20, 2025 |
Maturity Date** |
August 25, 2025 |
* Expected.
In the event that we make any change to the expected Trade Date and Settlement Date, we may change the Coupon Payment Dates, the Final
Valuation Date and/or the Maturity Date so that the stated term of the Securities remains the same.
** Subject to postponement
in the event of a Market Disruption Event or for non-Index Business Days. See “Postponement of Quarterly Observation End-Dates and
Coupon Payment Dates (including the Call Date and the Maturity Date)” under “Additional Terms of the Securities” below.
NOTICE TO INVESTORS: THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN
CONVENTIONAL DEBT INSTRUMENTS. THE SECURITIES DO NOT GUARANTEE THE REPAYMENT OF THE FULL PRINCIPAL AMOUNT AT MATURITY, AND THE SECURITIES
WILL HAVE DOWNSIDE MARKET RISK SIMILAR TO THE LEAST PERFORMING OF THE THREE UNDERLYINGS, SUBJECT TO THE RESPECTIVE DOWNSIDE THRESHOLDS
AT MATURITY. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING OUR DEBT OBLIGATIONS. YOU SHOULD NOT PURCHASE THE
SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE SECURITIES. THE SECURITIES
WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY
RISKS” BEGINNING ON PAGE 8 BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES,
COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU MAY LOSE A SIGNIFICANT PORTION OR ALL OF YOUR PRINCIPAL
AMOUNT.
This free writing prospectus relates to Securities linked to the least
performing Underlying among the Dow Jones Industrial AverageSM, the Russell 2000® Index and the EURO STOXX 50®
Index. The actual Initial Underlying Values, Coupon Barriers and Downside Thresholds for the Underlyings and the actual Contingent Coupon
Rate 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.
Underlying |
Initial Underlying Value |
Coupon Barrier |
Downside Threshold |
Contingent Coupon Rate |
CUSIP |
ISIN |
Dow Jones Industrial AverageSM |
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70% of the Initial Underlying Value |
50% of the Initial Underlying Value |
At least 13.00% per annum |
61774B143 |
US61774B1439 |
Russell 2000® Index |
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70% of the Initial Underlying Value |
50% of the Initial Underlying Value |
EURO STOXX 50® Index |
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70% of the Initial Underlying Value |
50% of the Initial Underlying Value |
See “Additional Information about Morgan Stanley, MSFL and
the Securities” on page 2. The Securities will have the terms set forth in the accompanying prospectus, prospectus supplement and
index supplement and this free writing prospectus.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these Securities or passed upon the adequacy or accuracy of this free writing prospectus or the accompanying
prospectus supplement, index supplement or prospectus. Any representation to the contrary is a criminal offense. The Securities are not
deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality,
nor are they obligations of, or guaranteed by, a bank.
Estimated value on the Trade Date |
Approximately $9.872 per Security, or within $0.30 of that estimate. See “Additional Information about Morgan Stanley, MSFL and the Securities” on page 2. |
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Price to Public |
Underwriting Discount(1) |
Proceeds to Us(2) |
Per Security |
$10.00 |
$0.10 |
$9.90 |
Total |
$ |
$ |
$ |
(1) UBS Financial Services
Inc., acting as dealer, will receive from Morgan Stanley & Co. LLC, the agent, a fixed sales commission of $0.10 for each Security
it sells. For more information, please see “Supplemental Plan of Distribution; Conflicts of Interest” on page 30 of this free
writing prospectus.
(2) See “Use of Proceeds and Hedging” on page 30.
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 30 of this free writing prospectus.
Morgan Stanley |
UBS Financial Services Inc. |
Additional Information about Morgan Stanley, MSFL and the Securities |
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by a prospectus 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 prospectus 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 prospectus supplement and the index supplement if you so request by calling toll-free 1-(800)-584-6837.
You may access the accompanying prospectus supplement, index supplement
and prospectus on the SEC website at.www.sec.gov as follows:
References to “MSFL” refer to only
MSFL, references to “Morgan Stanley” refer to only Morgan Stanley and references to “we,” “our” and
“us” refer to MSFL and Morgan Stanley collectively. In this document, the “Securities” refers to the Trigger
Callable Contingent Yield Notes that are offered hereby. Also, references to the accompanying “prospectus”, “prospectus
supplement” and “index supplement” mean the prospectus filed by MSFL and Morgan Stanley dated November 16, 2020, the
prospectus supplement filed by MSFL and Morgan Stanley dated November 16, 2020 and the index supplement filed by MSFL and Morgan Stanley
dated November 16, 2020, respectively.
You should rely only on the information incorporated by reference or
provided in this free writing prospectus or the accompanying prospectus 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 prospectus 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 $9.872, 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.
What goes into the estimated value on the Trade Date?
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.
What determines the economic terms of the Securities?
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.
What is the relationship between the estimated value on the Trade
Date and the secondary market price of the Securities?
The price at which MS & Co. purchases the Securities in the secondary
market, absent changes in market conditions, including those related to the Underlyings, may vary from, and be lower than, the estimated
value on the 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 4 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.
Investor Suitability |
The Securities may be suitable for you if: |
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The Securities may not be suitable for you if: |
t
You fully understand the risks inherent in an investment in the
Securities, including the risk of loss of your entire initial investment.
t
You can tolerate a loss of all or a substantial portion of your investment
and are willing to make an investment that will have the same downside market risk, subject to the respective Downside Thresholds at maturity,
as the Least Performing Underlying.
t
You are willing to accept the individual market risk of each Underlying
on each Index Business Day during the Quarterly Observation Periods and on the Final Valuation Date.
t
You understand and accept the risks associated with the Underlyings.
t
You accept that you may not receive a Contingent Coupon on some or
all of the Coupon Payment Dates.
t
You understand that the linkage to three Underlyings does not provide any
portfolio diversification benefits and instead means that a decline in the value beyond the relevant Coupon Barrier or Downside Threshold
of any of the Underlyings will result in no Contingent Coupon payments or a significant loss on your investment, respectively, even if
the other Underlyings appreciate.
t
You understand and accept that you will not participate in any appreciation
in the values of the Underlyings and that your potential return is limited to the Contingent Coupons, if any.
t
You can tolerate fluctuations in the value of the Securities prior
to maturity that may be similar to or exceed the downside value fluctuations of the Least Performing Underlying.
t
You would be willing to invest in the Securities if the Contingent
Coupon Rate was set to the minimum Contingent Coupon Rate indicated on the cover hereof (the actual Contingent Coupon Rate will be determined
on the Trade Date).
t
You do not seek guaranteed current income from this investment and
are willing to forgo dividends paid on the stocks comprising the Underlyings.
t
You are willing to invest in securities that may be called early based
on the output of a risk neutral valuation model and you are otherwise willing to hold such securities to maturity, as set forth on the
cover of this free writing prospectus.
t
You accept that there may be little or no secondary market for the
Securities and that any secondary market will depend in large part on the price, if any, at which MS & Co. is willing to trade the
Securities.
t
You are willing to assume our credit risk, and understand that
if we default on our obligations you may not receive any amounts due to you and could lose your entire investment.
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t
You do not fully understand the risks inherent in an investment
in the Securities, including the risk of loss of your entire initial investment.
t
You cannot tolerate a loss of all or a substantial portion of your
investment, or are unwilling to make an investment that will have the same downside market risk, subject to the respective Downside Thresholds
at maturity, as the Least Performing Underlying.
t
You are unwilling to accept the individual market risk of each Underlying
on each Index Business Day during the Quarterly Observation Periods and on the Final Valuation Date.
t
You require an investment designed to provide a full return of principal
at maturity.
t
You do not understand and accept the risks associated with the Underlyings.
t
You do not accept that you may not receive a Contingent Coupon on some
or all of the Coupon Payment Dates.
t
You are not comfortable with an investment linked to three Underlyings
such that a decline in the value beyond the relevant Coupon Barrier or Downside Threshold of any of the INDU Index, the RTY Index or the
SX5E Index will result in no Contingent Coupon payments or a significant loss on your investment, respectively, even if the other Underlyings
appreciate.
t
You seek an investment that participates in the appreciation in the values
of the Underlyings or that has unlimited return potential.
t
You cannot tolerate fluctuations in the value of the Securities prior
to maturity that may be similar to or exceed the downside value fluctuations of the Least Performing Underlying.
t
You would not be willing to invest in the Securities if the Contingent
Coupon Rate was set to the minimum Contingent Coupon Rate indicated on the cover hereof (the actual Contingent Coupon Rate will be determined
on the Trade Date).
t
You prefer the lower risk, and therefore accept the potentially lower
returns, of fixed income investments with comparable maturities and credit ratings.
t
You seek guaranteed current income from this investment or prefer to
receive the dividends paid on the stocks comprising the Underlyings.
t
You are unable or unwilling to invest in securities that may be called
early based on the output of a risk neutral valuation model, or you are otherwise unable or unwilling to hold such securities to maturity,
as set forth on the cover of this free writing prospectus, or you seek an investment for which there will be an active secondary market.
t
You are not willing to assume our credit risk for all payments under
the Securities, including any repayment of principal.
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The investor suitability considerations identified above are not
exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances, and you should
reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the
suitability of an investment in the Securities in light of your particular circumstances. You should also review “Key Risks”
on page 8 of this free writing prospectus and “Risk Factors” beginning on page 7 of the accompanying prospectus for risks
related to an investment in the Securities. For additional information about the Underlyings, see the information set forth under “The
Dow Jones Industrial AverageSM” on page 19, “The Russell 2000® Index” on page 21 and “The
EURO STOXX 50® Index” on page 23.
Issuer |
Morgan Stanley Finance LLC |
Guarantor |
Morgan Stanley |
Issue Price |
$10.00 per Security. The Securities are offered at a minimum investment of 100 Securities. |
Underlyings |
The Dow Jones Industrial AverageSM (the “INDU Index”), the Russell 2000® Index (the “RTY Index”) and the EURO STOXX 50® Index (the “SX5E Index”) |
Principal Amount |
$10.00 per Security |
Term |
3.25 years, unless earlier called by the Issuer |
Call Feature |
Beginning on August 24, 2022, an early redemption, in whole but not
in part, will occur on a quarterly Coupon Payment Date (the date on which the Securities are called, the ”Call Date”) if and
only if the output of a risk neutral valuation model on a Business Day that is at least 2 but no more than 5 Business Days prior to such
Call Date, as selected by the Calculation Agent (the “Determination Date”), taking as input: (i) prevailing reference market
levels, volatilities and correlations, as applicable and in each case as of the Determination Date and (ii) Morgan Stanley’s credit
spreads as of the Trade Date, indicates that calling on such date is economically rational for us as compared to not calling on such date.
If MSFL calls the Securities, MSFL will give you notice at least 2 Business Days before the Call Date specified in the notice.
If the Securities are called, MSFL will pay you on the Call Date the
Principal Amount plus any Contingent Coupon otherwise due with respect to the related Quarterly Observation Period (such payment
upon an early redemption, the “Settlement Amount”), and no further payments will be made on the Securities.
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Contingent Coupon |
If the Index Closing Value of each of the INDU Index, the RTY Index
and the SX5E Index is equal to or greater than its respective Coupon Barrier on each Index Business Day during a Quarterly
Observation Period, we will pay you the Contingent Coupon for that Quarterly Observation Period on the relevant Coupon Payment Date.
If the Index Closing Value of any of the Underlyings is less
than its Coupon Barrier on any Index Business Day during a Quarterly Observation Period, the Contingent Coupon for that Quarterly
Observation Period will not accrue or be payable and that Contingent Coupon payment will be lost.
Each Contingent Coupon will be a fixed amount based on equal quarterly
installments at the Contingent Coupon Rate, which is a per-annum rate. The Contingent Coupon amount of at least $0.325 for each Security
(based on the per-annum rate of at least 13.00%) (the actual Contingent Coupon Rate will be determined on the Trade Date) would be applicable
to each Quarterly Observation Period for which the Index Closing Values of each of the INDU Index, the RTY Index and the SX5E Index
is greater than or equal to its respective Coupon Barrier on each Index Business Day during the applicable Quarterly Observation
Period.
Contingent Coupon payments on the Securities are not guaranteed.
MSFL will not pay you the Contingent Coupon for any Quarterly Observation Period on which the Index Closing Value of any of the INDU Index,
the RTY Index or the SX5E Index is less than its respective Coupon Barrier on any Index Business Day during the applicable Quarterly Observation
Period.
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Contingent Coupon Rate |
The Contingent Coupon Rate will be at least 13.00% per annum (to be determined on the Trade Date). |
Quarterly Observation Period |
With respect to each Coupon Payment Date, the period from but excluding the immediately preceding Quarterly Observation End-Date (or in the case of the first Coupon Payment Date, from but excluding the Trade Date) to and including the relevant Quarterly Observation End-Date. The Quarterly Observation End-Dates are as set forth below under “Quarterly Observation End-Dates, Coupon Payment Dates and Call Dates” on page 6. |
Trade Date |
May 20, 2022 |
Settlement Date |
May 25, 2022 |
Final Valuation Date |
August 20, 2025* |
Maturity Date |
August 25, 2025* |
Coupon Payment Dates |
With respect to each Quarterly Observation Period as set forth under “Quarterly Observation Periods and Coupon Payment Dates” on page 6. |
Payment at Maturity (per Security) |
If the Securities have not been called prior to maturity, MSFL will
pay you a cash payment on the Maturity Date linked to the performance of the Least Performing Underlying during the term of the Securities,
as follows:
If the Securities have not been called and the Final Underlying Value
of each of the INDU Index, the RTY Index and the SX5E Index is equal to or greater than its respective Downside Threshold, MSFL
will pay you the $10 Principal Amount and, if payable, the Contingent Coupon otherwise due on the Maturity Date.
If the Securities have not been called by MSFL prior to maturity and
the Final Underlying Value of any of the Underlyings is less than its respective Downside Threshold, MSFL will pay you an
amount calculated as follows:
$10 × (1 + Index Return of the Least
Performing Underlying)
In this case, you will lose a significant portion and could lose all
of the Principal Amount in an amount proportionate to the decline of the Least Performing Underlying from the Trade Date to the Final
Valuation Date, even if the other Underlyings have appreciated or have not declined as much.
|
Least Performing Underlying |
The Underlying with the largest percentage decrease from the Initial Underlying Value to the Final Underlying Value. |
Index Return |
With respect to each Underlying,
Final Underlying Value – Initial Underlying
Value
Initial Underlying Value
|
*Subject to postponement in the event of a Market Disruption Event or for non-Index Business Days. |
Initial Underlying Value |
With respect to each Underlying, the Index Closing Value of such Underlying on the Trade Date |
Final Underlying Value |
With respect to each Underlying, the Index Closing Value of such Underlying on the Final Valuation Date |
Downside Threshold |
With respect to each Underlying, 50% of the Initial Underlying Value of such Underlying |
Coupon Barrier |
With respect to each Underlying, 70% of the Initial Underlying Value of such Underlying |
Record Date |
The record date for each Contingent Coupon shall be the date one business day prior to such scheduled Coupon Payment Date; provided, however, that any Contingent Coupon payable at maturity or upon a call shall be payable to whom the Payment at Maturity or the payment upon a call, as the case may be, shall be payable. |
Trustee |
The Bank of New York Mellon |
Calculation Agent |
MS & Co. |
Investing in the Securities
involves significant risks. You may lose YOUR ENTIRE principal amount. Any payment on the Securities is subject to OUR CREDITWORTHINESS.
If we were to default on our payment obligations, you may not receive any amounts owed to you under the Securities and you could lose
your entire investment.
The Issuer will not pay a
quarterly Contingent Coupon if the Index Closing Value for any of the Underlyings is below its respective Coupon Barrier ON ANY INDEX
BUSINESS DAY DURING A QUARTERLY OBSERVATION PERIOD. The Issuer may call the Securities early based on the output of a risk neutral valuation
model. 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.
Quarterly Observation End-Dates,(1) Coupon Payment Dates and Call Dates(2) |
Quarterly Observation End-Dates |
Coupon Payment Dates / Call Dates |
8/22/2022 |
8/24/2022 |
11/21/2022 |
11/23/2022 |
2/21/2023 |
2/23/2023 |
5/22/2023 |
5/24/2023 |
8/21/2023 |
8/23/2023 |
11/20/2023 |
11/22/2023 |
2/20/2024 |
2/22/2024 |
5/20/2024 |
5/22/2024 |
8/20/2024 |
8/22/2024 |
11/20/2024 |
11/22/2024 |
2/20/2025 |
2/24/2025 |
5/20/2025 |
5/22/2025 |
8/20/2025 (Final Valuation Date) |
Maturity Date* |
* The Securities are not callable on the Maturity Date.
(1) Subject to postponement in the event of a Market Disruption Event
or for non-Index Business Days. See “Postponement of Quarterly Observation End-Dates and Coupon Payment Dates (including the Call
Dates and the Maturity Date)” under “Additional Terms of the Securities” below.
(2) If, due to a Market Disruption Event or otherwise, any Quarterly
Observation End-Date is postponed so that it falls less than two Business Days prior to the scheduled Coupon Payment Date / Call Date,
the Coupon Payment Date / Call Date will be postponed to the second Business Day following that Quarterly Observation End-Date as postponed,
provided that the Coupon Payment Date with respect to the Final Valuation Date will be the Maturity Date. No additional coupon
will accrue on an account of any such postponement.
Trade
Date |
The Initial Underlying Value, Downside Threshold and Coupon Barrier of each of the INDU Index, the RTY Index and the SX5E Index are determined. The Contingent Coupon Rate is set. |
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Quarterly
|
If the Index Closing Value of each of the INDU Index, the RTY Index
and the SX5E Index is equal to or greater than its respective Coupon Barrier on each Index Business Day during a Quarterly Observation
Period, MSFL will pay you a Contingent Coupon on the related Coupon Payment Date. However, if the Index Closing Value of any Underlying
is below its Coupon Barrier on any Index Business Day during a Quarterly Observation Period, no coupon will be payable on the related
Coupon Payment Date.
Beginning on August 24, 2022, MSFL will call the Securities on any quarterly
Call Date if and only if the output of a risk neutral valuation model on a Business Day that is at least 2 but no more than 5 Business
Days prior to such Call Date, based on the inputs indicated in the Call Feature section above, indicates that calling on such date is
economically rational for us as compared to not calling on such date. If the Securities are called, MSFL will pay you the Principal Amount
plus any Contingent Coupon otherwise due with respect to the related Quarterly Observation Period ending on the applicable Quarterly
Observation End-Date, and no further payments will be made on the Securities.
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Maturity Date |
The Final Underlying Values are determined as of the Final Valuation
Date.
If the Securities have not been called and the Final Underlying Value
of each of the INDU Index, the RTY Index and the SX5E Index is equal to or greater than its respective Downside Threshold, at maturity,
MSFL will pay you the $10 Principal Amount and, if payable, the Contingent Coupon otherwise due on the Maturity Date.
However, if the Final Underlying Value of any of the Underlyings
is less than its Downside Threshold, MSFL will pay you an amount calculated as follows:
$10 × (1 + Index Return of the Least Performing Underlying) per
Security
This will be significantly less than the $10 Principal Amount by
an amount proportionate to the negative Index Return of the Least Performing Underlying, and you could lose your entire investment.
|
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. 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
| t | 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 by MSFL prior to maturity and if the Final Underlying Value of any of the Underlyings is less than its 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 and such payment will result 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. |
| t | You will not receive any Contingent Coupon for any Quarterly Observation
Period if the Index Closing Value of any of the Underlyings is less than or equal to its Coupon Barrier on any Index Business Day during
that Quarterly Observation Period. Whether the Contingent Coupon will be made with respect to a Quarterly Observation Period will
be based on the Index Closing Values of all three Underlyings on every Index Business Day during that Quarterly Observation Period. As
a result, you will not know whether you will receive the Contingent Coupon with respect to any Coupon Payment Date until the end of the
related period. Moreover, because the Contingent Coupon is based on the Index Closing Values on each Index Business Day during the applicable
Quarterly Observation Period, if the Index Closing Value of any of the Underlyings is less than its Coupon Barrier on any Index Business
Day during the applicable Quarterly Observation Period, you will not receive any Contingent Coupon with respect to such Quarterly
Observation Period, even if the Index Closing Values of the Underlyings were higher on other days during the term of the Securities. |
| t | The Securities are subject to early redemption. The term of the Securities,
and thus your opportunity to earn a potentially above-market coupon if the Index Closing Value of each of the Underlyings is greater than
or equal to its respective Coupon Barrier on every Index Business Day during a Quarterly Observation Period, may be limited if
MSFL calls the Securities based on the output of a risk neutral valuation model on any quarterly Call Date beginning August 24, 2022.
The term of your investment in the Securities may be limited to as short as approximately three months. In accordance with the risk neutral
valuation model determination noted herein, it is more likely that MSFL will call the Securities when it would otherwise be advantageous
for you to continue to hold the Securities. As such, MSFL will be more likely to call the Securities when the Index Closing Value of each
of the Underlyings is at or above its respective Coupon Barrier, which would otherwise result in an amount of interest payable on the
Securities that is greater than instruments of a comparable maturity and credit rating trading in the market. In other words, MSFL will
be more likely to call the Securities at a time when the Securities are paying an above-market coupon. If the Securities are called prior
to maturity, you will receive no more Contingent Coupons, you may be forced to invest in a lower interest rate environment and you may
not be able to reinvest at comparable terms or returns. |
On the other hand, MSFL will be less likely
to call the Securities when the Index Closing Value of any Underlying is below its Coupon Barrier Level and/or when the Final Underlying
Value of any Underlying is expected to be below its Downside Threshold, such that you will receive no Contingent Coupons and/or that you
will suffer a significant loss on your initial investment in the Securities at maturity. Therefore, if MSFL does not call the Securities,
it is more likely that you will receive few or no Contingent Coupons and suffer a significant loss at maturity.
| t | 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 that is paid with respect to each
Quarterly Observation Period on which the Index Closing Value of each of the INDU Index, the RTY Index and the SX5E Index is greater than
its respective Coupon Barrier on every Index Business Day in the applicable Quarterly Observation Period prior to maturity or a
call by MSFL. If called, the return on the Securities will be limited to any Contingent Coupons regardless of the appreciation of any
of the Underlyings, which could be significant. It is also possible that, on any Index Business Day during most or all of the Quarterly
Observation Periods, the Index Closing Values of one or more Underlyings could be below their 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. |
| t | 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 (plus, if payable, the Contingent Coupon
for the final Quarterly Observation Period), if the Final Underlying Values of the RTY Index, the INDU and the SX5E 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 Valuation 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
Valuation Date. |
| t | 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 the Final Underlying Levels of any Underlying could
ultimately be less than its Downside Threshold on the Final Valuation 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 Index Closing Values are greater than or equal
to the Coupon Barriers on every Index Business Day during the Quarterly Observation Periods, 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.
| t | 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 a 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. |
| t | 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 MSFL and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of MSFL.
Holders will have recourse only to a single claim against MSFL 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 MSFL, including holders of MSFL-issued securities. |
| t | The market price of the Securities may be influenced by many unpredictable
factors. Several factors, many of which are beyond our control, will influence the value of the Securities in the secondary market
and the price at which MS & Co. may be willing to purchase or sell the Securities in the secondary market. 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: |
| o | the value and volatility (frequency and magnitude of changes in value) of the Underlyings, |
| o | whether the Index Closing Value of any Underlying has been below its Coupon Barrier on any Index Business Day during a Quarterly
Observation Period, |
| o | dividend rates on the stocks comprising the Underlyings, |
| o | interest and yield rates in the market, |
| o | time remaining until the Securities mature, |
| o | 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, |
| o | the occurrence of certain events affecting any of the Underlyings that may or may not require an adjustment to its composition, and |
| o | any actual or anticipated changes in our credit ratings or credit spreads. |
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. 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.
| t | 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. |
| t | 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, 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. |
| t | 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 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 4 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.
| t | 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 may be influenced by many unpredictable factors” above. |
| t | 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 Valuation 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 Index Business Day during a
Quarterly Observation Period 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 Valuation 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 each Index Business Day during the Quarterly Observation Periods and on the
Final Valuation Date and, accordingly, whether the Contingent Coupon is payable and, if 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). |
| t | 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 Index Closing Value of each Underlying on every Index Business Day during the Quarterly Observation Periods
and the Final Underlying Value of each Underlying, 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 “Additional Terms of the Securities—Postponement of Quarterly Observation End-Dates
and Coupon Payment Dates (including the Call Date and the Maturity Date),” “—Discontinuance of Any Underlying; Alteration
of Method of Calculation” and “—Calculation Agent and Calculations”. In addition, MS & Co. has determined
the estimated value of the Securities on the Trade Date. |
| t | Potentially inconsistent research, opinions or recommendations by Morgan
Stanley, UBS or our or their respective affiliates. Morgan Stanley, UBS and our or their respective affiliates may publish research
from time to time on financial markets and other matters that may influence the value of the Securities, or express opinions or provide
recommendations that are inconsistent with purchasing or holding the Securities. Any research, opinions or recommendations expressed by
Morgan Stanley, UBS or our or their respective affiliates may not be consistent with each other and may be modified from time to time
without notice. Investors should make their own independent investigation of the merits of investing in the Securities and the Underlyings
to which the Securities are linked. |
| t | 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. |
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
| t | You are exposed to the price risk of all three Underlyings, with respect
to both the Contingent Coupons, if any, and the Payment at Maturity, if any. Your return on the Securities is not linked to a basket
consisting of the Underlyings. Rather, it will be contingent upon the performance of each of the INDU Index, the RTY Index and the SX5E
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 INDU Index, the RTY Index and the SX5E 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. To receive any Contingent Coupon payment or contingent repayment of principal
at maturity from Morgan Stanley, all three Underlyings must close at or above their respective Coupon Barriers on each Index Business
Day during the applicable Quarterly Observation Period. In addition, if the Securities are 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 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 any Index Business Day during the applicable Quarterly Observation Period 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 significant loss of principal at maturity. |
| t | Because the Securities are linked to the performance of the least performing
among the INDU Index, the RTY Index and the SX5E 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 one of the Underlyings. 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 one of the Underlyings.
With three Underlyings, it is more likely that one or more Underlyings will close below their respective Coupon Barriers on any Index
Business Day during the applicable Quarterly Observation Period and below their respective Downside Thresholds on the Final Valuation
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 and will receive an amount in cash significantly less than the principal amount on the Maturity Date. |
| t | 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. |
| t | The Securities are linked to the EURO STOXX 50® Index and
are subject to risks associated with investments in securities linked to the value of foreign equity securities. The Securities are
linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities involve risks
associated with the securities markets in those countries, including risks of volatility in those markets, governmental intervention in
those markets and cross-shareholdings in companies in certain countries. Although the equity securities included in the EURO STOXX 50®
Index are traded in foreign currencies, the value of your Securities (as measured in U.S. dollars) will not be adjusted for any exchange
rate fluctuations. Also, there is generally less publicly available information about foreign companies than about U.S. companies that
are subject to the reporting requirements of the United States Securities and Exchange Commission, and foreign companies are subject to
accounting, auditing and financial reporting standards and requirements different from those applicable to U.S. reporting companies. The
prices of securities issued in foreign markets may be affected by political, economic, financial and social factors in those countries,
or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Local securities markets
may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt
liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably
from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payment positions. |
| t | Governmental regulatory actions could result in material changes to the
composition of the Underlyings 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 Underlyings, 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 applicable Underlying, such removal, or even any uncertainty relating to
a possible removal, could have a material and negative effect on the level of the applicable Underlying and, therefore, your return on
the Securities. |
| t | Adjustments to the Dow Jones Industrial AverageSM, the Russell
2000® or the EURO STOXX 50® Index could adversely affect the value of the Securities. The Index Publisher
of each of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the EURO STOXX 50®
Index is responsible for calculating and maintaining such index. The Index 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 Index 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 Index 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. |
Hypothetical Payments on the Securities at Maturity |
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):
| t | Hypothetical Initial Underlying Value: |
| t | Hypothetical Contingent Coupon Rate: 13.00% per annum (or 3.25% per quarter)
(The actual Contingent Coupon Rate will be determined on the Trade Date.) |
| t | Hypothetical Contingent Coupon: $0.325 per quarter |
| t | Quarterly Observation Periods |
| t | Hypothetical Coupon Barriers: |
| o | INDU Index: 21,000, which is 70% of the Hypothetical Initial Underlying Value of the INDU Index |
| o | RTY Index: 1,050, which is 70% of the Hypothetical Initial Underlying Value of the RTY Index |
| o | SX5E Index: 2,520, which is 70% of the Hypothetical Initial Underlying Value of the SX5E Index |
| t | Hypothetical Downside Thresholds: |
| o | INDU Index: 15,000, which is 50% of the Hypothetical Initial Underlying Value of the INDU Index |
| o | RTY Index: 750, which is 50% of the Hypothetical Initial Underlying Value of the RTY Index |
| o | SX5E Index: 1,800, which is 50% of the Hypothetical Initial Underlying Value of the SX5E Index |
Example 1 — Securities are Called on the Second Coupon Payment
Date
Date |
Lowest Index Closing Value during the relevant Quarterly Observation Period |
Payment (per Security) |
INDU Index |
RTY Index |
SX5E Index |
First Quarterly Observation Period |
31,800 (at or above Coupon Barrier) |
1,600 (at or above Coupon Barrier) |
3,000 (at or above Coupon Barrier) |
$0.325 (Contingent Coupon — Not Called) |
Second Quarterly Observation Period |
32,000 (at or above Coupon Barrier) |
1,800 (at or above Coupon Barrier) |
4,050 (at or above Coupon Barrier) |
$10.325 (Settlement Amount) |
|
|
|
Total Payment: |
$10.65 (6.50% return) |
Each of the INDU Index, the RTY Index and the SX5E Index closes above
its respective Coupon Barrier on each Index Business Day during the first Quarterly Observation Period, and therefore a Contingent
Coupon is paid on the related Coupon Payment Date. MSFL calls the Securities on the second Coupon Payment Date. On the Call Date, MSFL
will pay you a total of $10.325 per Security, reflecting your principal amount plus the applicable Contingent Coupon otherwise
due with respect to the relevant Quarterly Observation Period. When added to the Contingent Coupon payment of $0.325 received in respect
of the prior Quarterly Observation Period, MSFL will have paid you a total of $10.65 per Security for a 6.50% total return over the 6-month
term of 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 INDU Index, the RTY Index and the SX5E Index is at or above its respective Downside Threshold
Date |
Lowest Index Closing Value during the relevant Quarterly Observation Period |
Payment (per Security) |
INDU Index |
RTY Index |
SX5E Index |
First Quarterly Observation Period |
26,100 (at or above Coupon Barrier) |
1,200 (at or above Coupon Barrier) |
3,000 (at or above Coupon Barrier) |
$0.325 (Contingent Coupon — Not Called) |
Second Quarterly Observation Period |
24,950 (at or above Coupon Barrier) |
1,120 (at or above Coupon Barrier) |
2,880 (at or above Coupon Barrier) |
$0.325 (Contingent Coupon — Not Called) |
Third Quarterly Observation Period |
27,000 (at or above Coupon Barrier) |
1,180 (at or above Coupon Barrier) |
1,500 (below Coupon Barrier) |
$0 (Not Called) |
Fourth Quarterly Observation Period |
28,150 (at or above Coupon Barrier) |
1,100 (at or above Coupon Barrier) |
1,500 (below Coupon Barrier) |
$0 (Not Called) |
Fifth to Twelfth Quarterly Observation Periods |
Various (all at or above Coupon Barrier) |
Various (at or above Coupon Barrier) |
Various (all below Coupon Barrier) |
$0 (Not Called) |
|
|
|
|
|
Final Quarterly Observation Period |
29,250 (at or above Coupon Barrier and Downside Threshold) |
1,100 (at or above Coupon Barrier and Downside Threshold) |
2,700 (at or above Coupon Barrier and Downside Threshold) |
|
|
|
Final Index Value |
|
$10.325 (Settlement Amount) |
|
25,250 |
1,100 |
2,700
|
Total Payment:
$10.975 (9.75% return)
|
In this example, MSFL does not call the Securities based on the output
of a risk neutral valuation model prior to maturity. Each of the INDU Index, the RTY Index and the SX5E Index closes above its respective
Coupon Barrier on each Index Business Day during the first two Quarterly Observation Periods, and therefore a Contingent Coupon
is paid on each related Coupon Payment Date. During each of the third to twelfth Quarterly Observation Periods, the INDU Index and the
RTY Index close at or above their respective Coupon Barriers on every Index Business Day, but the SX5E Index closes below its Coupon
Barrier on at least one Index Business Day during each such Quarterly Observation Period. Therefore, no Contingent Coupon is paid on any
related Coupon Payment Date. On the Final Valuation Date, each of the INDU Index, the RTY Index and the SX5E Index closes above its Downside
Threshold, and each of the INDU Index, the RTY Index and the SX5E Index closes above its Coupon Barrier on every Index Business Day
during the final Quarterly Observation Period. Therefore, at maturity, MSFL will pay you a total of $10.325 per Security, reflecting your
principal amount plus the applicable Contingent Coupon. When added to the total Contingent Coupon payments of $0.65 received in
respect of prior Quarterly Observation Periods, MSFL will have paid you a total of $10.975 per Security for a 9.75% total return on the
Securities over 3.25 years. You do not participate in any appreciation of the Underlyings.
Example 3 — Securities are NOT Called and the Final Underlying
Value of at least one of the Underlyings is below the Downside Threshold
Date |
Lowest Index Closing Value during the relevant Quarterly Observation Period |
|
INDU Index |
RTY Index |
SX5E Index |
Payment (per Security) |
|
First Quarterly Observation Period |
27,400 (at or above Coupon Barrier) |
1,100 (at or above Coupon Barrier) |
3,150 (at or above Coupon Barrier) |
$0.325 (Contingent Coupon — Not Called) |
|
Second Quarterly Observation Period |
28,300 (at or above Coupon Barrier) |
1,100 (at or above Coupon Barrier) |
3,000 (at or above Coupon Barrier) |
$0.325 (Contingent Coupon — Not Called) |
|
Third Quarterly Observation Period |
27,250 (at or above Coupon Barrier) |
850 (below Coupon Barrier) |
1,500 (below Coupon Barrier) |
$0 (Not Called) |
|
Fourth Quarterly Observation Period |
25,350 (at or above Coupon Barrier) |
825 (below Coupon Barrier) |
1,500 (below Coupon Barrier) |
$0 (Not Called) |
|
Fifth to Twelfth Quarterly Observation Periods |
Various (all below Coupon Barrier) |
Various (all below Coupon Barrier) |
Various (all below Coupon Barrier) |
$0 (Not Called) |
|
Final Quarterly Observation Period |
28,200 (at or above Coupon Barrier and Downside
Threshold)
28,200
|
700 (below Coupon Barrier and Downside
Threshold)
Final Index Value
700
|
1,440 (below Coupon Barrier and Downside
Threshold)
1,440
|
$10 + [$10 × Index Return of the Least
Performing Underlying] =
$10 + [$10 × -60%] =
$10 - $6 =
$4 (Payment at Maturity) |
|
|
|
|
|
Total Payment:
$4.65 (-53.50% return) |
|
In this example, MSFL does not call the Securities based on the output
of a risk neutral valuation model prior to maturity. Each of the INDU Index, the RTY Index and the SX5E Index closes above its respective
Coupon Barrier on each Index Business Day during the first two Quarterly Observation Periods, and therefore a Contingent Coupon
is paid on each related Coupon Payment Date. During each of the third and fourth Quarterly Observation Periods, the INDU Index closes
at or above its Coupon Barrier on every Index Business Day but the RTY Index and the SX5E Index close below their respective Coupon Barriers
on at least one Index Business Day during each such Quarterly Observation Period. Therefore, no Contingent Coupon is paid on either related
Coupon Payment Date. During each of the fifth to the twelfth Quarterly Observation Periods, each of the INDU Index, the RTY Index and
the SX5E Index closes below its respective Coupon Barrier on at least one Index Business Day during each such Quarterly Observation Period
and thus no Contingent Coupon is paid on any related Coupon Payment Date. On the Final Valuation Date, the INDU Index closes above its
Coupon Barrier and Downside Threshold, but the RTY Index and the SX5E Index close below their respective Coupon Barriers and Downside
Thresholds. Therefore, at maturity, investors are exposed to the downside performance of the Least Performing Underlying (which, in this
example, is the SX5E Index), 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 Valuation Date. When added to the total Contingent Coupon payments of $0.65 received in respect of prior
Quarterly Observation Periods, MSFL will have paid you $4.65 per Security for a loss on the Securities of 53.50%.
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 Coupon Payment 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 Downside Threshold, you will lose 1% (or a fraction thereof)
of your principal amount for each 1% (or a fraction thereof) that the Index Return of the Least Performing Underlying is less than zero.
Any payment on the Securities, including any Contingent Coupon, payment upon a call or the Payment at Maturity, is dependent on our ability
to satisfy our obligations when they come due. If we are is 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 Index
Closing Value for any of the Underlyings is below its respective Coupon Barrier on any Index Business Day during the relevant Quarterly
Observation Period. The Issuer may call the Securities based on the output of a risk neutral valuation model on any quarterly Call Date,
beginning August 24, 2022. 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.
What Are the Tax Consequences of the Securities? |
Prospective investors should note that the discussion under the section
called “United States Federal Taxation” in the accompanying prospectus 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:
| t | purchase the Securities in the original offering; and |
| t | hold the Securities as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the “Code”). |
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:
| t | certain financial institutions; |
| t | certain dealers and traders in securities or commodities; |
| t | investors holding the Securities as part of a “straddle,” wash
sale, conversion transaction, integrated transaction or constructive sale transaction; |
| t | U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar; |
| t | partnerships or other entities classified as partnerships for U.S. federal
income tax purposes; |
| t | regulated investment companies; |
| t | real estate investment trusts; or |
| t | tax-exempt entities, including “individual retirement accounts”
or “Roth IRAs” as defined in Section 408 or 408A of the Code, respectively. |
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:
| t | a citizen or individual resident of the United States; |
| t | 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 |
| t | an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source. |
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:
| t | an individual who is classified as a nonresident alien; |
| t | a foreign corporation; or |
| t | a foreign estate or trust. |
The term “Non-U.S. Holder” does not include any of the following
holders:
| t | 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;
|
| t | certain former citizens or residents of the United States; or |
| t | 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. |
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 Dow Jones Industrial AverageSM |
The Dow Jones Industrial AverageSM is a price-weighted
index composed of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark of
CME Group Inc., as representative of the broad market of U.S. industry. For additional information about the Dow Jones Industrial AverageSM,
see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying index supplement.
“Dow Jones,” “Dow Jones Industrial Average,”
“Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. For more information, see
“Dow Jones Industrial AverageSM” 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 Dow Jones Industrial AverageSM for each quarter
in the period from January 1, 2017 through May 17, 2022. The closing value of the Dow Jones Industrial AverageSM on May 17,
2022 was 32,654.59. We obtained the information in the table below from Bloomberg Financial Markets, without independent verification.
The historical closing values of the Dow Jones Industrial AverageSM should not be taken as an indication of future performance,
and no assurance can be given as to the level of the Dow Jones Industrial AverageSM on any Index Business Day during a Quarterly
Observation Period, including the Final Valuation Date.
Quarter Begin |
Quarter End |
Quarterly High |
Quarterly Low |
Quarterly Close |
1/1/2017 |
3/31/2017 |
21,115.55 |
19,732.40 |
20,663.22 |
4/1/2017 |
6/30/2017 |
21,528.99 |
20,404.49 |
21,349.63 |
7/1/2017 |
9/30/2017 |
22,412.59 |
21,320.04 |
22,405.09 |
10/1/2017 |
12/31/2017 |
24,837.51 |
22,557.60 |
24,719.22 |
1/1/2018 |
3/31/2018 |
26,616.71 |
23,533.20 |
24,103.11 |
4/1/2018 |
6/30/2018 |
25,322.31 |
23,644.19 |
24,271.41 |
7/1/2018 |
9/30/2018 |
26,743.50 |
24,174.82 |
26,458.31 |
10/1/2018 |
12/31/2018 |
26,828.39 |
21,792.20 |
23,327.46 |
1/1/2019 |
3/31/2019 |
26,091.95 |
22,686.22 |
25,928.68 |
4/1/2019 |
6/30/2019 |
26,753.17 |
24,815.04 |
26,599.96 |
7/1/2019 |
9/30/2019 |
27,359.16 |
25,479.42 |
26,916.83 |
10/1/2019 |
12/31/2019 |
28,645.26 |
26,078.62 |
28,538.44 |
1/1/2020 |
3/31/2020 |
29,551.42 |
18,591.93 |
21,917.16 |
4/1/2020 |
6/30/2020 |
27,572.44 |
20,943.51 |
25,812.88 |
7/1/2020 |
9/30/2020 |
29,100.50 |
25,706.09 |
27,781.70 |
10/1/2020 |
12/31/2020 |
30,606.48 |
26,501.60 |
30,606.48 |
1/1/2021 |
3/31/2021 |
33,171.37 |
29,982.62 |
32,981.55 |
4/1/2021 |
6/30/2021 |
34,777.76 |
33,153.21 |
34,502.51 |
7/1/2021 |
9/30/2021 |
35,625.40 |
33,843.92 |
33,843.92 |
10/1/2021 |
12/31/2021 |
36,488.63 |
34,002.92 |
36,338.30 |
1/1/2022 |
3/31/2022 |
36,799.65 |
32,632.64 |
34,678.35 |
4/1/2022 |
5/17/2022* |
35,160.79 |
31,730.30 |
32,654.59 |
* 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 Dow Jones
Industrial AverageSM from January 1, 2008 through May 17, 2022, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the INDU Index on May 17,
2022 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,
2017 through May 17, 2022. The closing value of the Russell 2000® Index on May 17, 2022 was 1,840.298. 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 Index Business Day during a Quarterly Observation Period, including the Final Valuation
Date.
Quarter Begin |
Quarter End |
Quarterly High |
Quarterly Low |
Quarterly Close |
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 |
12/31/2021 |
2,442.742 |
2,139.875 |
2,245.313 |
1/1/2022 |
3/31/2022 |
2,272.557 |
1,931.288 |
2,070.125 |
4/1/2022 |
5/17/2022* |
2,095.440 |
1,718.144 |
1,840.298 |
* 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 May 17, 2022, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the RTY Index on May 17,
2022 were its Initial Underlying Value.
Past performance is not indicative
of future results.
The EURO STOXX 50® Index was created by STOXX Limited,
a part of Qontigo, which is a wholly owned subsidiary of Deutsche Börse AG. Publication of the EURO STOXX 50® Index
began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The EURO STOXX 50® Index is
composed of 50 component stocks of market sector leaders among the 20 STOXX supersectors, which includes stocks selected from the Eurozone.
The component stocks have a high degree of liquidity and represent the largest companies across all market sectors. For additional information
about the EURO STOXX 50® Index, see the information set forth under “EURO STOXX 50® Index” in
the accompanying index supplement.
“EURO STOXX 50®” and “STOXX®”
are registered trademarks of STOXX Limited. For more information, see “EURO STOXX 50® 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 EURO STOXX 50® Index for each quarter in the period from January 1,
2017 through May 17, 2022. The closing value of the EURO STOXX 50® Index on May 17, 2022 was 3,741.51. We obtained the
information in the table below from Bloomberg Financial Markets, without independent verification. The historical closing values of the
EURO STOXX 50® Index should not be taken as an indication of future performance, and no assurance can be given as to the
level of the EURO STOXX 50® Index on any Index Business Day during a Quarterly Observation Period, including the Final
Valuation Date.
Quarter Begin |
Quarter End |
Quarterly High |
Quarterly Low |
Quarterly Close |
1/1/2017 |
3/31/2017 |
3,500.93 |
3,230.68 |
3,500.93 |
4/1/2017 |
6/30/2017 |
3,658.79 |
3,409.78 |
3,441.88 |
7/1/2017 |
9/30/2017 |
3,594.85 |
3,388.22 |
3,594.85 |
10/1/2017 |
12/31/2017 |
3,697.40 |
3,503.96 |
3,503.96 |
1/1/2018 |
3/31/2018 |
3,672.29 |
3,278.72 |
3,361.50 |
4/1/2018 |
6/30/2018 |
3,592.18 |
3,340.35 |
3,395.60 |
7/1/2018 |
9/30/2018 |
3,527.18 |
3,293.36 |
3,399.20 |
10/1/2018 |
12/31/2018 |
3,414.16 |
2,937.36 |
3,001.42 |
1/1/2019 |
3/31/2019 |
3,409.00 |
2,954.66 |
3,351.71 |
4/1/2019 |
6/30/2019 |
3,514.62 |
3,280.43 |
3,473.69 |
7/1/2019 |
9/30/2019 |
3,571.39 |
3,282.78 |
3,569.45 |
10/1/2019 |
12/31/2019 |
3,782.27 |
3,413.31 |
3,745.15 |
1/1/2020 |
3/31/2020 |
3,865.18 |
2,385.82 |
2,786.90 |
4/1/2020 |
6/30/2020 |
3,384.29 |
2,662.99 |
3,234.07 |
7/1/2020 |
9/30/2020 |
3,405.35 |
3,137.06 |
3,193.61 |
10/1/2020 |
12/31/2020 |
3,581.37 |
2,958.21 |
3,552.64 |
1/1/2021 |
3/31/2021 |
3,926.20 |
3,481.44 |
3,919.21 |
4/1/2021 |
6/30/2021 |
4,158.14 |
3,924.80 |
4,064.30 |
7/1/2021 |
9/30/2021 |
4,246.13 |
3,928.53 |
4,048.08 |
10/1/2021 |
12/31/2021 |
4,401.49 |
3,996.41 |
4,298.41 |
1/1/2022 |
3/31/2022 |
4,392.15 |
3,505.29 |
3,902.52 |
4/1/2022 |
5/17/2022* |
3,951.12 |
3,526.86 |
3,741.51 |
*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 EURO STOXX
50® Index from January 1, 2008 through May 17, 2022, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the SX5E Index on May 17,
2022 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 Russell 2000®
Index, the Dow Jones Industrial AverageSM and the EURO STOXX 50® Index from January 1, 2008 through May 17,
2022. 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 on any Index Business Day during an applicable
Quarterly Observation Period 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) on any Index Business Day during the applicable Quarterly Observation Period or below the Downside Threshold on the Final Valuation
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 — Because the Securities are linked to the performance of the least performing among the INDU
Index, the RTY Index and the SX5E 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 one of the Underlyings” 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 discussed in this free writing prospectus differ from those
discussed in the prospectus supplement, index supplement or prospectus, the terms contained in this free writing prospectus will control.
Some Definitions
We have defined some of the terms that we use frequently in this free
writing prospectus below:
| t | “Index Closing Value” on any Index Business Day
means (i) with respect to the INDU Index or the SX5E Index, the closing value of such Underlying, or any relevant Successor Index (as
defined under “—Discontinuance of an Underlying; Alteration of Method of Calculation” below) 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 will be based on the alternate calculation
of such Underlying as described under “—Discontinuance of an Underlying; Alteration of Method of Calculation.” |
The closing value of the RTY Index reported
by Bloomberg Financial Services may be lower or higher than the official closing value of the Underlying published by the Index Publisher.
| t | “Index Publisher” means, with respect to the
INDU Index, S&P Dow Jones Indices LLC or any successor thereto; with respect to the RTY Index, FTSE Russell or any successor thereto;
and with respect to the SX5E Index, STOXX Limited or any successor thereto. |
| t | “Index Business Day” means a day, for any Underlying,
as determined by the Calculation Agent, on which trading is generally conducted on each of the Relevant Exchange(s) for such Underlying,
other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday
closing price. |
| t | “Market Disruption Event” means, with respect
to any Underlying: |
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material limitation
of trading of securities then constituting 20 percent or more of the value of such Underlying (or any relevant Successor Index (as defined
below under “—Discontinuance of an Underlying; Alteration of Method of Calculation”)) on the Relevant Exchange for such
securities for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session
on such Relevant Exchange, or
(b) a breakdown or failure in the price
and trade reporting systems of any Relevant Exchange as a result of which the reported trading prices for securities then constituting
20 percent or more of the value of such Underlying (or a Successor Index) during the last one-half hour preceding the close of the principal
trading session on such Relevant Exchange are materially inaccurate, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds related
to such Underlying (or a Successor Index) for more than two hours of trading or during the one-half hour period preceding the close of
the principal trading session on such market,
in each case as determined by the Calculation
Agent in its sole discretion; and
(ii) a
determination by the Calculation Agent in its sole discretion that any event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with respect to
the Securities.
For the purpose of determining whether a Market Disruption
Event exists at any time, if trading in a security included in such Underlying is materially suspended or materially limited at that time,
then the relevant percentage contribution of that security to the value of such Underlying shall be based on a comparison of (x) the portion
of the value of such Underlying attributable to that security relative to (y) the overall value of such Underlying, in each case immediately
before that suspension or limitation.
For the purpose of determining whether
a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular business hours of the Relevant Exchange or market, (2) a decision to permanently
discontinue trading in the relevant futures or options contract or exchange-traded fund will not constitute a Market Disruption Event,
(3) a suspension of trading in futures or options contracts or exchange-traded funds on such Underlying by the primary securities market
trading in such contracts or funds by reason of (a) a price change exceeding limits set by such securities exchange or market, (b) an
imbalance of orders relating to such contracts or funds, or (c) a disparity in bid and ask quotes relating to such contracts or funds
will constitute a suspension, absence or material limitation of trading in futures or options contracts or exchange-
traded funds related to the Index and (4)
a “suspension, absence or material limitation of trading” on any Relevant Exchange or on the primary market on which futures
or options contracts or exchange-traded funds related to such Underlying are traded will not include any time when such securities market
is itself closed for trading under ordinary circumstances.
| t | “Relevant Exchange” means, with respect to any
Underlying, the primary exchange(s) or market(s) of trading for (i) any security then included in such Underlying, or any relevant Successor
Index, and (ii) any futures or options contracts related to such Underlying or to any security then included in such Underlying. |
Postponement of Quarterly Observation End-Dates and Coupon Payment
Dates (including the Call Dates and the Maturity Date)
If any scheduled Quarterly Observation End-Date, including the Final
Valuation Date, is not an Index Business Day with respect to any Underlying, or if there is a Market Disruption Event on such day with
respect to any Underlying, the relevant Quarterly Observation End-Date solely with respect to that affected Underlying shall be the next
succeeding Index Business Day with respect to that Underlying on which there is no Market Disruption Event with respect to that Underlying;
provided that if a Market Disruption Event with respect to that Underlying has occurred on each of the five Index Business Days
with respect to that Underlying immediately succeeding the relevant scheduled Quarterly Observation End-Date, then (i) such fifth succeeding
Index Business Day shall be deemed to be the relevant Quarterly Observation End-Date with respect to that affected Underlying, notwithstanding
the occurrence of a Market Disruption Event with respect to that Underlying on such day, and (ii) with respect to any such fifth Index
Business Day on which a Market Disruption Event occurs with respect to that Underlying, the Calculation Agent shall determine the Index
Closing Value on such fifth Index Business Day in accordance with the formula for and method of calculating that Underlying last in effect
prior to the commencement of the Market Disruption Event, using the closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension
or limitation) at the close of the principal trading session of the Relevant Exchange on such Index Business Day of each security most
recently constituting that affected Underlying without any rebalancing or substitution of such securities following the commencement of
the Market Disruption Event.
If any scheduled Coupon Payment Date (including a scheduled Call Date)
is not a Business Day, that Contingent Coupon, if any, (or the Settlement Amount, if applicable), shall be paid on the next succeeding
business day; provided that the Contingent Coupon, if any, with respect to the Final Valuation Date shall be paid on the Maturity
Date; provided further that if, due to a Market Disruption Event or otherwise, any Quarterly Observation End-Date with respect
to any Underlying is postponed so that it falls less than two business days prior to the scheduled Coupon Payment Date, Call Date or Maturity
Date, as applicable, the Coupon Payment Date, Call Date or Maturity Date, as applicable, shall be postponed to the second business day
following the Quarterly Observation End-Date as postponed, by which date the Index Closing Value of each Underlying has been determined.
In any of these cases, no adjustment shall be made to any Contingent Coupon payment made on that postponed date.
Alternate Exchange Calculation in case of an Event of Default
If an event of default with respect to the Securities shall have occurred
and be continuing, the amount declared due and payable upon any acceleration of the Securities (the “Acceleration Amount”)
will be an amount, determined by the Calculation Agent in its sole discretion, that is equal to the cost of having a Qualified Financial
Institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to the Securities
as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent
economic value to you with respect to the Securities. That cost will equal:
| o | the lowest amount that a Qualified Financial Institution would
charge to effect this assumption or undertaking, plus |
| o | the reasonable expenses, including reasonable attorneys’
fees, incurred by the holders of the Securities in preparing any documentation necessary for this assumption or undertaking. |
During the Default Quotation Period for the Securities, which we describe
below, the holders of the Securities and/or we may request a Qualified Financial Institution to provide a quotation of the amount it would
charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other party in writing of the
quotation. The amount referred to in the first bullet point above will equal the lowest—or, if there is only one, the only—quotation
obtained, and as to which notice is so given, during the Default Quotation Period. With respect to any quotation, however, the party not
obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the Qualified Financial
Institution providing the quotation and notify the other party in writing of those grounds within two business days after the last day
of the Default Quotation Period, in which case that quotation will be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary liquidation,
bankruptcy or insolvency of, or any analogous proceeding is filed with respect to Morgan Stanley or MSFL, then depending on applicable
bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the Securities is accelerated because of an event
of default as described above, we shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York
office, on which notice the Trustee may conclusively
rely, and to the Depositary of the Acceleration Amount and the aggregate
cash amount due, if any, with respect to the Securities as promptly as possible and in no event later than two business days after the
date of such acceleration.
Default Quotation Period
The Default Quotation Period is the period beginning on the day the
Acceleration Amount first becomes due and ending on the third business day after that day, unless:
| o | no quotation of the kind referred to above is obtained, or |
| o | every quotation of that kind obtained is objected to within
five business days after the due date as described above. |
If either of these two events occurs, the Default Quotation Period will
continue until the third business day after the first business day on which prompt notice of a quotation is given as described above.
If that quotation is objected to as described above within five business days after that first business day, however, the Default Quotation
Period will continue as described in the prior sentence and this sentence.
In any event, if the Default Quotation Period and the subsequent two
business day objection period have not ended before the Final Valuation Date, then the Acceleration Amount will equal the principal amount
of the Securities.
Qualified Financial Institutions
For the purpose of determining the Acceleration Amount at any time,
a Qualified Financial Institution must be a financial institution organized under the laws of any jurisdiction in the United States or
Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and rated
either:
| o | A-2 or higher by Standard & Poor’s Ratings Services
or any successor, or any other comparable rating then used by that rating agency, or |
| o | P-2 or higher by Moody’s Investors Service or any successor,
or any other comparable rating then used by that rating agency. |
Discontinuance of an Underlying; Alteration of Method of Calculation
If the Index Publisher of an Underlying discontinues publication of
such Underlying and the Index Publisher or another entity (including MS & Co.) publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to such discontinued Underlying (such index being referred to herein
as a “Successor Index”), then any subsequent Index Closing Value of such Underlying will be determined by reference to the
published value of such Successor Index at the regular weekday close of trading on any date on which the Index Closing Value is to be
determined, and, to the extent the value of the Successor Index differs from the value of the relevant Underlying at the time of such
substitution, proportionate adjustments will be made by the Calculation Agent to the relevant Initial Underlying Value, Coupon Barrier
and Downside Threshold.
Upon any selection by the Calculation Agent of a Successor Index, the
Calculation Agent will cause written notice thereof to be furnished to the Trustee, to us and to the Depositary, as holder of the Securities,
within three business days of such selection. We expect that such notice will be made available to you, as a beneficial owner of such
Securities, in accordance with the standard rules and procedures of the Depositary and its direct and indirect participants.
If the Index Publisher discontinues publication of an Underlying prior
to, and such discontinuance is continuing on, any day on which an Index Closing Value must be determined and the Calculation Agent determines,
in its sole discretion, that no Successor Index is available at such time, then the Calculation Agent will determine the Index Closing
Value of such Underlying for each such date. The Index Closing Value of such Underlying will be computed by the Calculation Agent in accordance
with the formula for and method of calculating such Underlying last in effect prior to such discontinuance, using the closing price (or,
if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price
that would have prevailed but for such suspension or limitation) at the close of the principal trading session of the Relevant Exchange
on each such date of each security most recently constituting such Underlying without any rebalancing or substitution of such securities
following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication of an Underlying may
adversely affect the value of the Securities.
If at any time the method of calculating an Underlying or Successor
Index, or the value thereof, is changed in a material respect, or if such Underlying or Successor Index is in any other way modified so
that such index does not, in the opinion of the Calculation Agent, fairly represent the value of such index had such changes or modifications
not been made, then, from and after such time, the Calculation Agent will, at the close of business in New York City on each date on which
the Index Closing Value is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation
Agent, may be necessary in order to arrive at a value of a stock index comparable to such Underlying or Successor Index, as the case may
be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Value with reference
to such Underlying or Successor Index, as adjusted. Accordingly, if the method of calculating such Underlying or Successor Index is modified
so that the value of such index is a fraction of what it would have been if it had not been modified
(e.g., due to a split in the index), then the Calculation Agent will
adjust such index in order to arrive at a value of such Underlying or Successor Index as if it had not been modified (e.g., as if such
split had not occurred).
Trustee
The “Trustee” for each offering of notes issued under our
Senior Debt Indenture, including the Securities, will be The Bank of New York Mellon, a New York banking corporation.
Agent
The “agent” is MS & Co.
Calculation Agent and Calculations
The “Calculation Agent” for the Securities will be MS &
Co. As Calculation Agent, MS & Co. will determine, among other things, the Initial Underlying Values, the Index Closing Values on
each Index Business Day during the Quarterly Observation Periods, the Final Underlying Values, whether a Contingent Coupon is payable
with respect to any Quarterly Observation Period and the Payment at Maturity, if any.
All determinations made by the Calculation Agent will be at the sole
discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on you, the
Trustee and us.
All calculations with respect to the Contingent Coupon, payment upon
a call, and Payment at Maturity, if any, will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward
(e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the amount of cash payable per Security, if
any, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up
to .7655); and all dollar amounts paid on the aggregate number of Securities will be rounded to the nearest cent, with one-half cent rounded
upward.
Because the Calculation Agent is our affiliate, the economic interests
of the Calculation Agent and its affiliates may be adverse to your interests, as an owner of the Securities, including with respect to
certain determinations and judgments that the Calculation Agent must make in determining the Final Level or whether a Market Disruption
Event has occurred. See “—Discontinuance of an Underlying; Alteration of Method of Calculation,” and the definition
of Market Disruption Event. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using
its reasonable judgment.
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 postponement of the Final Valuation Date, the Issuer shall give notice of such postponement and, once it has been determined, of the
date to which the Maturity Date has been rescheduled (i) to each registered holder of the Securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the Trustee by facsimile, confirmed by mailing such notice to the Trustee by first class mail, postage prepaid, at its New York office
and (iii) to The Depository Trust Company (the “Depositary”) by telephone or facsimile confirmed by mailing such notice to
the Depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the Securities in the manner
herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder
receives the notice. The Issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of
postponement of the Maturity Date, the Business Day immediately preceding the scheduled Maturity Date and (ii) with respect to notice
of the date to which the Maturity Date has been rescheduled, the Business Day immediately following the Final Valuation Date as postponed.
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, on or prior to 10:30 a.m. (New
York City time) on the Business Day preceding each Coupon Payment Date, of the amount of cash, if any, to be delivered with respect to
each Principal Amount of the Securities 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 Coupon Payment Date.
The
Issuer shall, or shall cause the Calculation Agent to, (i) provide written notice to the Trustee, on which notice the Trustee may conclusively
rely, and to the Depositary, on or prior to 10:30 a.m. (New York City time) on the Business Day preceding the Call Date or the Business
Day preceding the Maturity Date, as applicable, of the amount of cash, if any, to be delivered with respect to each Principal Amount of
the Securities, 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 Call Date or Maturity Date, as applicable.
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 Index Business Day during a Quarterly Observation Period 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 Valuation 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 Valuation 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 Valuation 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 Valuation 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 $0.10 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.
Form of Securities
The Securities will be issued in the form of one or more fully registered
global securities which will be deposited with, or on behalf of, the Depositary and will be registered in the name of a nominee of the
Depositary. The Depositary’s nominee will be the only registered holder of the Securities. Your beneficial interest in the Securities
will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant
in the Depositary. In this free writing prospectus, all references to payments or notices to you will mean payments or notices to the
Depositary, as the registered
holder of the Securities, for distribution to participants in accordance
with the Depositary’s procedures. For more information regarding the Depositary and book entry notes, please read “Forms of
Securities—The Depositary” and “Securities Offered on a Global Basis Through the Depositary” in the accompanying
prospectus.
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