Since the Securities are called on the third Observation Date (which
is approximately 9 months after the Trade Date), MSFL will pay you on the call settlement date a total of $10.3195 per Security, reflecting
your principal amount plus the Contingent Coupon. When added to the total Contingent Coupon payments of $0.639 received in respect
of prior Observation Dates, MSFL will have paid you a total of $10.9585 per Security for a 9.585% total return on the Securities over
a 9-month term. No further amount will be owed to you under the Securities, and you will not participate in any appreciation of the Underlying
Shares.
Since the Securities are not called and the Final Price is greater than
or equal to the Downside Threshold, at maturity, MSFL will pay you a total of $10.3195 per Security, reflecting your principal amount
plus the Contingent Coupon. When added to the Contingent Coupon payment of $0.3195 received in respect of prior Observation Dates,
MSFL will have paid you a total of $10.639 per Security for a 6.39% total return on the Securities over the 1-year term. You will not
participate in any appreciation of the Underlying Shares.
Example 4 — Securities are NOT Called and the Final Price of
the Underlying Shares is below the Downside Threshold
Date |
Closing Price |
Payment (per Security) |
First Observation Date |
$24 (at or above Coupon Barrier; below Initial Price) |
$0.3195 (Contingent Coupon — Not Called) |
Second Observation Date |
$28 (at or above Coupon Barrier; below Initial Price) |
$0.3195 (Contingent Coupon — Not Called) |
Third Observation Dates |
$16 (below Coupon Barrier and Initial Price) |
$0.00 (Not Called) |
Final Observation Date |
$9 (below Downside Threshold and Coupon Barrier; below Initial Price) |
$10 + [$10 × Share Return] =
$10 + [$10 × -70%] = $3 (Payment at Maturity) |
|
Total Payment: |
$3.639 (-63.61% return) |
Since the Securities are not called and the Final Price of the Underlying
Shares is below the Downside Threshold, at maturity MSFL will pay you $3.00 per Security. When added to the total Contingent Coupon payments
of $0.639 received in respect of prior Observation Dates, MSFL will have paid you $3.639 per Security over the 1-year term, for a loss
on the Securities of 63.61%.
The Securities differ from ordinary debt securities in that, among
other features, MSFL is not necessarily obligated to repay the full amount of your initial investment. If the Securities are not called
on any Observation Date, you may lose a significant portion or all of your initial investment. Specifically, if the Securities are not
called and the Final Price is less than the Downside Threshold, you will lose 1% (or a fraction thereof) of your principal amount for
each 1% (or a fraction thereof) that the Share Return is less than zero. Any payment on the Securities, including any payment upon an
automatic call, any Contingent Coupon or the Payment at Maturity, is dependent on our ability to satisfy our obligations when they come
due. If we are unable to meet our obligations, you may not receive any amounts due to you under the Securities.
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 product supplement does not apply to the Securities issued under
this free writing prospectus and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal income
tax consequences and certain estate tax consequences of the ownership and disposition of the Securities. This discussion applies only
to investors in the Securities who:
| 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 | dealers and certain 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, 2025 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.
Information
About the Underlying Shares |
The Underlying Shares are registered under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Information provided to or filed with the Securities and Exchange Commission by
the Underlying Issuer pursuant to the Exchange Act can be located by reference to the Securities and Exchange Commission file number listed
below through the Securities and Exchange Commission’s website at www.sec.gov. In addition, information regarding the Underlying
Issuer may be obtained from other publicly available sources.
This document relates only to the Securities offered hereby and does
not relate to the Underlying Shares or other securities of the Underlying Issuer. We have derived all disclosures contained in this document
regarding the Underlying Shares from the publicly available documents described in the preceding paragraph. In connection with the offering
of the Securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with
respect to the Underlying Issuer. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding the Underlying Issuer is accurate or complete. Furthermore, we cannot give any assurance that
all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described in the preceding paragraph) that would affect the trading price of the Underlying Shares (and therefore the price
of the Underlying Shares at the time we price the Securities) have been publicly disclosed. Subsequent disclosure of any such events or
the disclosure of or failure to disclose material future events concerning the Underlying Issuer could affect whether a Contingent Coupon
is payable on any Coupon Payment Date, whether the Securities will be called following an Observation Date and/or the value received at
maturity with respect to the Securities, and, therefore, the trading prices of the Securities.
Included on the following pages is (i) a brief
description of the Underlying Issuer, (ii) a table listing the published high and low Closing Prices and the end-of-quarter Closing Prices
of the related Underlying Shares for each quarter in the period from January 1, 2018 through March 28, 2023, and (iii) a graph showing
the daily Closing Prices from January 1, 2008 through March 28, 2023.
We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. Neither Morgan Stanley, MSFL nor any of its affiliates makes any representation to
you as to the performance of the Underlying Shares. The historical Closing Prices should not be taken as an indication of future performance,
and no assurance can be given as to the price of the Underlying Shares on the Final Observation Date or during the term of the Securities.
We make no representation as to the amount of dividends, if any, that the Underlying Issuer may pay in the future. In any event, as an
investor in the Securities, you will not be entitled to receive dividends, if any, that may be payable on the Underlying Shares.
Intel Corporation designs, manufactures and sells computer components
and related products. The underlying stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission by Intel Corporation pursuant to the Exchange Act can be
located by reference to the Securities and Exchange Commission file number 000-06217 through the Securities and Exchange Commission’s
website at www.sec.gov. The Closing Price of the Common Stock of Intel Corporation on March 28, 2023 was $29.29, and the graph below indicates
the Coupon Barrier/Downside Threshold of 60% of the Closing Price. Intel Corporation’s common stock is listed on the NYSE under
the ticker symbol “INTC.”
Quarter Begin |
Quarter End |
Quarterly High ($) |
Quarterly Low ($) |
Quarterly Close ($) |
1/1/2018 |
3/31/2018 |
52.48 |
42.50 |
52.08 |
4/1/2018 |
6/30/2018 |
57.08 |
48.76 |
49.71 |
7/1/2018 |
9/30/2018 |
52.43 |
44.93 |
47.29 |
10/1/2018 |
12/31/2018 |
50.13 |
42.42 |
46.93 |
1/1/2019 |
3/31/2019 |
54.64 |
44.49 |
53.70 |
4/1/2019 |
6/30/2019 |
58.82 |
43.46 |
47.87 |
7/1/2019 |
9/30/2019 |
53.01 |
44.96 |
51.53 |
10/1/2019 |
12/31/2019 |
60.08 |
49.39 |
59.85 |
1/1/2020 |
3/31/2020 |
68.47 |
44.61 |
54.12 |
4/1/2020 |
6/30/2020 |
64.34 |
51.88 |
59.83 |
7/1/2020 |
9/30/2020 |
61.15 |
47.73 |
51.78 |
10/1/2020 |
12/31/2020 |
54.58 |
44.11 |
49.82 |
1/1/2021 |
3/31/2021 |
65.78 |
49.67 |
64.00 |
4/1/2021 |
6/30/2021 |
68.26 |
53.62 |
56.14 |
7/1/2021 |
9/30/2021 |
56.87 |
52.01 |
53.28 |
10/1/2021 |
12/31/2021 |
56.00 |
47.89 |
51.50 |
1/1/2022 |
3/31/2022 |
55.91 |
44.40 |
49.56 |
4/1/2022 |
6/30/2022 |
49.20 |
36.97 |
37.41 |
7/1/2022 |
9/30/2022 |
40.61 |
25.77 |
25.77 |
10/1/2022 |
12/31/2022 |
30.71 |
25.04 |
26.43 |
1/1/2023 |
3/28/2023* |
30.32 |
24.90 |
29.29 |
* 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.
Past performance is not
indicative of future results.
Additional Terms of the Securities |
If the terms described herein are inconsistent with those described
in the accompanying product supplement or prospectus, the terms described herein shall control.
The product supplement refers to the Principal Amount as “Stated
Principal Amount,” the Underlying Issuer as the “Underlying Company,” the Initial Price as the “Initial Share
Price,” the Trade Date as the “Pricing Date,” the Observation Dates as the “Determination Dates,” the Final
Observation Date as the “Final Determination Date,” the Coupon Barrier/Downside Threshold” as the “Downside Threshold
Level” and the day on which any automatic call occurs as the “Early Redemption Date.”
The following replaces in its entirety the portion of the section
entitled “Antidilution Adjustments” in the accompanying product supplement from the start of paragraph 5 to the end of such
section.
5. If (i) there occurs any reclassification or change of the Underlying
Shares, including, without limitation, as a result of the issuance of any tracking stock by the Underlying Issuer, (ii) the Underlying
Issuer or any surviving entity or subsequent surviving entity of the Underlying Issuer (the “Successor Corporation”) has been
subject to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of the Underlying
Issuer or any Successor Corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) the Underlying Issuer
is liquidated, (v) the Underlying Issuer issues to all of its shareholders equity securities of an issuer other than the Underlying Issuer
(other than in a transaction described in clause (ii), (iii) or (iv) above) (a “Spin-Off Event”) or (vi) a tender or exchange
offer or going-private transaction is consummated for all the outstanding shares of the Underlying Shares (any such event in clauses (i)
through (vi), a “Reorganization Event”), the method of determining whether the Securities will be automatically called and
the amount payable upon an automatic call or at maturity for each Security will be as follows:
| t | Upon
any Observation Date following the effective date of a Reorganization Event and prior to the Final Observation Date: If the Exchange
Property Value (as defined below) is greater than or equal to the Initial Share Price, the Securities will be automatically redeemed
for a payment per Security equal to the Principal Amount plus the Contingent Coupon with respect to the applicable Observation
Date. |
| t | Upon
the Final Observation Date, if the Securities have not previously been automatically redeemed: |
| o | If the Exchange Property Value on the Final Observation Date is greater than or equal to the Downside Threshold, the payment at maturity
per Security will be equal to: (i) the Stated Principal Amount plus (ii) the Contingent Coupon with respect to the Final Observation
Date. |
| o | If the Exchange Property Value on the Final Observation Date is less than the Downside Threshold, the payment at maturity per Security
will be equal to: the cash value of the Exchange Property as of the Final Observation Date, which is defined collectively as: securities,
cash or any other assets distributed to holders of the Underlying Shares in or as a result of any such Reorganization Event, including
(A) in the case of the issuance of tracking stock, the reclassified share of the Underlying Shares, (B) in the case of a Spin-Off Event,
the share of the Underlying Shares with respect to which the spun-off security was issued, and (C) in the case of any other Reorganization
Event where the Underlying Shares continues to be held by the holders receiving such distribution, the Underlying Shares; in an amount
equal to the Exchange Property delivered with respect to a number of shares of the Underlying Shares equal to the exchange ratio (which
is equal to the Principal Amount divided by the Initial Share Price) times the Adjustment Factor, each determined at the time of the Reorganization
Event. |
Following the effective date of a Reorganization Event, the Contingent
Coupon will be payable for each Observation Date on which the Exchange Property Value is greater than or equal to the Coupon Barrier to
and including the Maturity Date or the date of automatic call, if any.
If Exchange Property includes a cash component, investors will not receive
any interest accrued on such cash component. In the event Exchange Property consists of securities, those securities will, in turn, be
subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not the Exchange Property Value
is less than the Initial Share Price, Coupon Barrier or Downside Threshold, “Exchange Property Value” means (x) for any cash
received in any Reorganization Event, the value, as determined by the Calculation Agent, as of the date of receipt, of such cash received
for one Underlying Share, as adjusted by the Adjustment Factor at the time of such Reorganization Event, (y) for any property other than
cash or securities received in any such Reorganization Event, the market value, as determined by the Calculation Agent in its sole discretion,
as of the date of receipt, of such Exchange Property received for one Underlying Share, as adjusted by the Adjustment Factor at the time
of such Reorganization Event and (z) for any security received in any such Reorganization Event, an amount equal to the closing price,
as of the day on which the Exchange Property Value is determined, per share of such security multiplied by the quantity of such security
received for each Underlying Share, as adjusted by the Adjustment Factor at the time of such Reorganization Event.
For purposes of paragraph 5 above, in the case of a consummated tender
or exchange offer or going-private transaction involving consideration of particular types, Exchange Property shall be deemed to include
the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an amount determined on the basis of
the rate of exchange in such tender or exchange offer or going-private transaction). In the event of a tender or exchange offer or a going-private
transaction with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property shall
be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash.
Following the occurrence of any Reorganization Event referred to in
paragraph 5 above, all references in the offering document and the related product supplement to the “Underlying Shares” shall
be deemed to refer to the Exchange Property and references to a “share” or “shares” of the Underlying Shares shall
be deemed to refer to the applicable unit or units of such Exchange Property, unless the context otherwise requires.
No adjustment to the Adjustment Factor will be required unless such
adjustment would require a change of at least 0.1% in the Adjustment Factor then in effect. The Adjustment Factor resulting from any of
the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward. Adjustments
to the Adjustment Factor will be made up to the close of business on the Final Observation Date.
No adjustments to the Adjustment Factor or method of calculating the
Adjustment Factor will be required other than those specified above. The adjustments specified above do not cover all events that could
affect the closing price or the Final Share Price of the Underlying Shares, including, without limitation, a partial tender or exchange
offer for the Underlying Shares.
The Calculation Agent shall be solely responsible for the determination
and calculation of any adjustments to the Adjustment Factor or method of calculating the Adjustment Factor and of any related determinations
and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection
with any corporate event described in paragraphs 1 through 5 above, and its determinations and calculations with respect thereto shall
be conclusive in the absence of manifest error.
The Calculation Agent will provide information as to any adjustments
to the Adjustment Factor or to the method of calculating the amount payable at maturity of the Securities made pursuant to paragraph 5
above upon written request by any investor in the Securities.
Day-Count Convention
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Issuer Notice to Registered Security Holders, the Trustee and the
Depositary
In the event that the Maturity Date of the Securities is postponed due
to a postponement of the Final Observation Date, the Issuer shall give notice of such postponement and, once it has been determined, of
the date to which the Maturity Date has been rescheduled (i) to each registered holder of the Securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the Trustee by facsimile confirmed by mailing such notice to the Trustee by first class mail, postage prepaid, at its New York office
and (iii) to The Depository Trust Company (the “Depositary”) by telephone or facsimile confirmed by mailing such notice to
the Depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the Securities in the manner
herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder
receives the notice. The Issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of
postponement of the Maturity Date, the Business Day immediately preceding the scheduled Maturity Date and (ii) with respect to notice
of the date to which the Maturity Date has been rescheduled, the Business Day immediately following the Final Observation Date as postponed.
In the event that the Securities are subject to Automatic Call, the
Issuer shall, (i) on the Business Day following the applicable Observation Date, give notice of the Automatic Call and the applicable
automatic call payment, including specifying the payment date of the applicable amount due upon the Automatic Call, (x) to each registered
holder of the Securities by mailing notice of such Automatic Call by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) to the Trustee by facsimile confirmed by mailing such notice to the Trustee
by first class mail, postage prepaid, at its New York office and (z) to the Depositary by telephone or facsimile confirmed by mailing
such notice to the Depositary by first class mail, postage prepaid and (ii) on or prior to the Automatic Call Date, deliver the aggregate
cash amount due with respect to the Securities to the Trustee for delivery to the Depositary, as holder of the securities. Any notice
that is mailed to a registered holder of the Securities in the manner herein provided shall be conclusively presumed to have been duly
given to such registered holder, whether or not such registered holder receives the notice. This notice shall be given by the Issuer or,
at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer, with any such request to be accompanied by
a copy of the notice to be given.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the Depositary of the amount of cash to be delivered
as Contingent Coupon, if any, with respect to the Securities on or prior to 10:30 a.m. (New York City time) on the Business Day preceding
each Coupon Payment Date, and (ii) deliver the aggregate cash amount due, if any, with respect to the Contingent Coupon to the Trustee
for delivery to the Depositary, as holder of the Securities, on or prior to the applicable Coupon Payment Date.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee and to the Depositary of the amount of cash, if any, to be delivered with respect to the Securities, on
or prior to 10:30 a.m. (New York City time) on the Business Day preceding the Maturity Date, and (ii) deliver the aggregate cash amount
due with respect to the Securities, if any, to the Trustee for delivery to the Depositary, as holder of the Securities, on or prior to
the Maturity Date.
Additional Information About the Securities |
Use of Proceeds and Hedging
The proceeds from the sale of the Securities will be used by us for
general corporate purposes. We will receive, in aggregate, $10 per Security issued, because, when we enter into hedging transactions in
order to meet our obligations under the Securities, our hedging counterparty will reimburse the cost of the Agent’s commissions.
The costs of the Securities borne by you and described on page 2 above comprise the Agent’s commissions and the cost of issuing,
structuring and hedging the Securities. See also “Use of Proceeds” in the accompanying prospectus.
On or prior to the Strike 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 Underlying Shares, in futures or options contracts on the Underlying Shares, or positions
in any other securities or instruments that they may wish to use in connection with such hedging. Any of these hedging or trading activities
on or prior to the Strike Date could potentially increase the Initial Price, and, as a result, the Coupon Barrier and Downside Threshold
of the Underlying Shares, which is the price at or above which such Underlying Shares must close on each Observation Date in order for
you to earn a Contingent Coupon, or, if the Securities are not called prior to maturity, is the price at or above which the Underlying
Shares must close on the Final Observation Date so that you do not suffer a significant loss on your initial investment in the Securities.
In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the Securities, including on the
Final Observation Date, by purchasing and selling the Underlying Shares, futures or options contracts on the Underlying Shares, or any
other securities or instruments that we may wish to use in connection with such hedging activities, including by purchasing or selling
any such securities or instruments on the Final Observation Date. As a result, these entities may be unwinding or adjusting hedge positions
during the term of the Securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the Final Observation Date approaches. We cannot give any assurance that our hedging activities will not affect the value of the Underlying
Shares on the Observation Dates, and, therefore, adversely affect the value of the Securities, whether the Contingent Coupon is payable
or whether the Securities are called prior to maturity and, if not, the payment you will receive at maturity, if any.
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 $0.15 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 Underlying Shares in the open market to stabilize the price of the Securities.
Any of these activities may raise or maintain the market price of the Securities above independent market levels or prevent or retard
a decline in the market price of the Securities. The agent is not required to engage in these activities, and may end any of these activities
at any time. An affiliate of the agent has entered into a hedging transaction with us in connection with this offering of Securities.
See “—Use of Proceeds and Hedging” above.
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