Both the MXEF Index and the RTY Index close above their respective
Coupon Barriers on the first Observation Date and therefore a Contingent Coupon is paid on the related Coupon Payment Date. Because both
the MXEF Index and the RTY Index close above their respective Initial Underlying Values on the second Observation Date (which is six
months after the Trade Date and is the first Observation Date on which the Securities are callable), the Securities are called after
such Observation Date. MSFL will pay you on the call settlement date a total of $10.15 per Security, reflecting your principal amount
plus the applicable Contingent Coupon. When added to the Contingent Coupon payment of $0.15 received in respect of the prior Observation
Date, MSFL will have paid you a total of $10.30 per Security for a 3.00% total return on the Securities. No further amount will be owed
to you under the Securities, and you do not participate in the appreciation of the Underlyings.
Example 2 — Securities are Called on the Fourth Observation
Date
Date
|
Index Closing Value
|
Payment (per Security)
|
MXEF Index
|
RTY Index
|
First Observation Date
|
1,000 (at or above Coupon
Barrier)
|
1,200 (at or above Coupon
Barrier)
|
$0.15 (Contingent Coupon —
Not Callable)
|
Second Observation Date
|
900 (at or above Coupon Barrier)
|
1,100 (at or above Coupon Barrier)
|
$0.15 (Contingent Coupon — Not Called)
|
Third Observation Date
|
950 (at or above Coupon Barrier)
|
1,350 (at or above Coupon Barrier)
|
$0.15 (Contingent Coupon — Not Called)
|
Fourth Observation Date
|
1,400 (at or above Coupon Barrier and
Initial Underlying Value)
|
1,700 (at or above Coupon Barrier and
Initial Underlying Value)
|
$10.15 (Settlement Amount)
|
|
|
Total Payment:
|
$10.60 (6.00% return)
|
Both the MXEF Index and RTY Index close above their respective Coupon
Barriers on the first three Observation Dates and therefore a Contingent Coupon is paid on each related Coupon Payment Date. Because
both the MXEF Index and the RTY Index close above their respective Initial Underlying Values on the fourth Observation Date (which is
one year after the Trade Date), the Securities are called after such Observation Date. MSFL will pay you on the call settlement date
a total of $10.15 per Security, reflecting your principal amount plus the applicable Contingent Coupon. When added to the total Contingent
Coupon payments of $0.45 received in respect of the prior Observation Dates, MSFL will have paid
you a total of $10.60 per Security for a 6.00% total return on the
Securities. No further amount will be owed to you under the Securities, and you do not participate in the appreciation of the Underlyings.
Example 3 — Securities are NOT Called and the Final Underlying
Values of both the MXEF Index and the RTY Index are at or above their respective Coupon Barriers and Downside Thresholds.
Date
|
Index Closing Value
|
Payment (per Security)
|
MXEF Index
|
RTY Index
|
First Observation Date
|
1,000 (at or above Coupon
Barrier)
|
1,150 (at or above Coupon
Barrier)
|
$0.15 (Contingent Coupon —
Not Callable)
|
Second Observation Date
|
900 (at or above Coupon Barrier)
|
1,200 (at or above Coupon Barrier)
|
$0.15 (Contingent Coupon — Not Called)
|
Third to Eleventh Observation Dates
|
Various (all at or above Coupon Barrier;
all below Initial Underlying Value)
|
Various (all below Coupon Barrier and
Initial Underlying Value)
|
$0 (Not Called)
|
Final Observation Date
|
1,500 (at or above Coupon Barrier and
Downside Threshold)
|
1,600 (at or above Coupon Barrier and
Downside Threshold)
|
$10.15 (Settlement Amount)
|
|
|
Total Payment:
|
$10.45 (4.50% return)
|
Both the MXEF Index and the RTY Index close above their respective
Coupon Barriers on the first two Observation Dates and therefore a Contingent Coupon is paid on each related Coupon Payment Date. On
each of the third to eleventh Observation Dates, the MXEF Index closes at or above its Coupon Barrier (but below its Initial Underlying
Value) but the RTY Index closes below its Coupon Barrier. Therefore, no Contingent Coupon is paid on any related Coupon Payment Date.
On the Final Observation Date, both the MXEF Index and the RTY Index close above their respective Coupon Barriers and Downside Thresholds.
Therefore, at maturity, MSFL will pay you a total of $10.15 per Security, reflecting your principal amount plus the applicable Contingent
Coupon. When added to the total Contingent Coupon payments of $0.30 received in respect of the prior Observation Dates, MSFL will have
paid you a total of $10.45 per Security for a 4.50% total return on the Securities over three years. You do not participate in any appreciation
of the Underlyings.
Example 4 — Securities are NOT Called and the Final Underlying
Value of one of the Underlyings is below its respective Downside Threshold
Date
|
Index Closing Value
|
Payment (per Security)
|
MXEF Index
|
RTY Index
|
First Observation Date
|
1,000 (at or above Coupon
Barrier)
|
1,500 (at or above Coupon
Barrier)
|
$0.15 (Contingent Coupon —
Not Callable)
|
Second Observation Date
|
900 (at or above Coupon Barrier)
|
750 (below Coupon Barrier)
|
$0 (Not Called)
|
Third to Eleventh Observation Dates
|
Various (all below Coupon Barrier and
Initial Underlying Value)
|
Various (all below Coupon Barrier and
Initial Underlying Value)
|
$0 (Not Called)
|
Final Observation Date
|
1,100 (at or above Coupon Barrier and
Downside Threshold)
|
600 (below Coupon Barrier and Downside
Threshold)
|
$10 + [$10 × Underlying Return of
the Least Performing Underlying] =
$10 + [$10 × -60%] =
$10 - $6 =
$4 (Payment at Maturity)
|
|
|
Total Payment:
|
$4.15 (-58.50% return)
|
Both the MXEF Index and the RTY Index close above their respective
Coupon Barriers on the first Observation Date, and, therefore a Contingent Coupon is paid on the related Coupon Payment Date. On the
second Observation Date, the MXEF Index closes at or above its Coupon Barrier (but below its Initial Underlying Value), but the RTY Index
closes below its Coupon Barrier. Therefore, no Contingent Coupon is paid on the related Coupon Payment Date. On each of the third to
eleventh Observation Dates, both the MXEF Index and the RTY Index close below their respective Coupon Barriers and thus no Contingent
Coupon is paid on any related Coupon Payment Date. On the Final Observation Date, the MXEF Index closes above its Coupon Barrier and
Downside Threshold but the RTY Index closes below its Coupon Barrier and Downside Threshold. Therefore, at maturity, investors are exposed
to the downside performance of the Least Performing Underlying and MSFL will pay you $4 per Security, which reflects the percentage decrease
of the Least Performing Underlying from the Trade Date to the Final Observation Date. When added to the Contingent Coupon payment of
$0.15 received in respect of the prior Observation Dates, MSFL will have paid you $4.15 per Security, for a loss on the Securities of
58.50%.
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 Observation Date, you may lose a significant portion or all of your initial investment. Specifically, if the Securities are not
called and the Final Underlying Value of either Underlying is less than its respective Downside Threshold, you will lose 1% (or a fraction
thereof) of your Principal Amount for each 1% (or a fraction thereof) that the Underlying Return of the Least Performing Underlying is
less than zero. Any payment on the Securities, including any Contingent Coupon, payment upon an automatic call or the Payment at Maturity,
is dependent on our ability to satisfy our obligations when they come due. If we are unable to meet our obligations, you may not receive
any amounts due to you under the Securities.
The Issuer will not pay a quarterly Contingent Coupon if the Observation
Date Closing Value for either of the Underlyings is below its respective Coupon Barrier. The Issuer will not automatically call the Securities
if the Observation Date Closing Value of either of the Underlyings is below its respective Initial Underlying Value. You will lose a
significant portion or all of your principal amount
at maturity if the Securities are not called and the Final Underlying
Value of either of the Underlyings is below its respective 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 product supplement does not apply to the Securities
issued under this free writing prospectus and is superseded by the following discussion.
The following is a general discussion of the material
U.S. federal income tax consequences and certain estate tax consequences of the ownership and disposition of the Securities. This discussion
applies only to investors in the Securities who:
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purchase
the Securities in the original offering; and
|
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t
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hold
the Securities as capital assets within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the “Code”).
|
This discussion does not describe all of the tax
consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special
rules, such as:
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certain
financial institutions;
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t
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certain
dealers and traders in securities or commodities;
|
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t
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investors
holding the Securities as part of a “straddle,” wash sale, conversion transaction,
integrated transaction or constructive sale transaction;
|
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U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
|
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partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
|
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regulated
investment companies;
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real
estate investment trusts; or
|
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tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs”
as defined in Section 408 or 408A of the Code, respectively.
|
If an entity that is classified as a partnership
for U.S. federal income tax purposes holds the Securities, the U.S. federal income tax treatment of a partner will generally depend on
the status of the partner and the activities of the partnership. If you are a partnership holding the Securities or a partner in such
a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the
Securities to you.
As the law applicable to the U.S. federal income
taxation of instruments such as the Securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences or
consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences to
taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any
of which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the Securities
should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative
authorities that directly address the treatment of the Securities or instruments that are similar to the Securities for U.S. federal
income tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend
to treat a Security for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated
as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In the opinion of our
counsel, Davis Polk & Wardwell LLP, this treatment of the Securities is reasonable under current law; however, our counsel has advised
us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative treatments
are possible. Moreover, our counsel’s opinion is based on market conditions as of the date of this free writing prospectus and
is subject to confirmation on the Trade Date.
You should consult your tax adviser regarding
all aspects of the U.S. federal tax consequences of an investment in the Securities (including possible alternative treatments of the
Securities). Unless otherwise stated, the following discussion is based on the treatment of each Security as described in the previous
paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S.
Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a Security that is, for U.S. federal income tax
purposes:
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a
citizen or individual resident of the United States;
|
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t
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a
corporation, or other entity taxable as a corporation, created or organized in or under the
laws of the United States, any state thereof or the District of Columbia; or
|
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t
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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:
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an
individual who is classified as a nonresident alien;
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a
foreign corporation; or
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a
foreign estate or trust.
|
The term “Non-U.S. Holder” does not
include any of the following holders:
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a
holder who is an individual present in the United States for 183 days or more in the taxable
year of disposition and who is not otherwise a resident of the United States for U.S. federal
income tax purposes;
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certain
former citizens or residents of the United States; or
|
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a
holder for whom income or gain in respect of the Securities is effectively connected with
the conduct of a trade or business in the United States.
|
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 recently 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 MSCI Emerging
Markets IndexSM
|
The MSCI Emerging Markets IndexSM is a stock index
calculated, published and disseminated daily by MSCI Inc. (“MSCI”) and is intended to provide performance benchmarks for
certain emerging equity markets including Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and
United Arab Emirates. For additional information about the MSCI Emerging Markets IndexSM, see the information set
forth under “MSCI Emerging Markets IndexSM” 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 MSCI Emerging Markets IndexSM for each quarter in the period from January
1, 2016 through April 13, 2021. The closing value of the MSCI Emerging Markets IndexSM on April 13, 2021 was 1,323.95. We
obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical closing
values of the MSCI Emerging Markets IndexSM should not be taken as an indication of future performance, and no assurance can
be given as to the level of the MSCI Emerging Markets IndexSM on any Observation Date, including the Final Observation Date.
Quarter Begin
|
Quarter End
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
1/1/2016
|
3/31/2016
|
836.80
|
688.52
|
836.80
|
4/1/2016
|
6/30/2016
|
853.69
|
781.84
|
834.10
|
7/1/2016
|
9/30/2016
|
927.29
|
819.19
|
903.46
|
10/1/2016
|
12/31/2016
|
918.68
|
838.96
|
862.27
|
1/1/2017
|
3/31/2017
|
973.08
|
861.88
|
958.37
|
4/1/2017
|
6/30/2017
|
1,019.11
|
952.92
|
1,010.80
|
7/1/2017
|
9/30/2017
|
1,112.92
|
1,002.48
|
1,081.72
|
10/1/2017
|
12/31/2017
|
1,158.45
|
1,082.97
|
1,158.45
|
1/1/2018
|
3/31/2018
|
1,273.07
|
1,142.85
|
1,170.88
|
4/1/2018
|
6/30/2018
|
1,184.13
|
1,046.71
|
1,069.52
|
7/1/2018
|
9/30/2018
|
1,092.36
|
1,003.33
|
1,047.91
|
10/1/2018
|
12/31/2018
|
1,046.40
|
934.80
|
965.78
|
1/1/2019
|
3/31/2019
|
1,070.95
|
949.57
|
1,058.13
|
4/1/2019
|
6/30/2019
|
1,096.39
|
984.81
|
1,054.86
|
7/1/2019
|
9/30/2019
|
1,064.63
|
960.81
|
1,001.00
|
10/1/2019
|
12/31/2019
|
1,118.61
|
989.20
|
1,114.66
|
1/1/2020
|
3/31/2020
|
1,146.83
|
758.20
|
848.58
|
4/1/2020
|
6/30/2020
|
1,014.62
|
827.26
|
995.10
|
7/1/2020
|
9/30/2020
|
1,121.60
|
1,001.08
|
1,082.00
|
10/1/2020
|
12/31/2020
|
1,291.26
|
1,081.71
|
1,291.26
|
1/1/2021
|
3/31/2021
|
1,444.93
|
1,288.42
|
1,316.43
|
4/1/2021
|
4/13/2021*
|
1,346.91
|
1,322.31
|
1,323.95
|
*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 MSCI Emerging
Markets IndexSM from January 1, 2008 through April 13, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and Downside Threshold, assuming the closing value of the MSCI Emerging Markets IndexSM on April 13, 2021 were
its Initial Underlying Value.
Past performance is not indicative of future results.
The Russell 2000® Index is
an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies
incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities
that form the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000 largest U.S.
companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The Russell 2000® Index
consists of the smallest 2,000 companies included in the Russell 3000® Index and represents a small portion of the total
market capitalization of the Russell 3000® Index. The Russell 2000® Index is designed to track
the performance of the small-capitalization segment of the U.S. equity market. For additional information about the Russell 2000® Index,
see the information set forth under “Russell 2000® Index” in the accompanying index supplement.
The “Russell 2000® Index”
is a trademark of FTSE Russell. For more information, see “Russell 2000® Index” in the accompanying index
supplement.
The following table sets forth the published high and low closing values,
as well as the end-of-quarter closing values, of the Russell 2000® Index for each quarter in the period from January 1,
2016 through April 13, 2021. The closing value of the Russell 2000® Index on April 13, 2021 was 2,228.923. We obtained
the information in the table below from Bloomberg Financial Markets, without independent verification. The historical closing values
of the Russell 2000® Index should not be taken as an indication of future performance, and no assurance can be given as
to the level of the Russell 2000® Index on any Observation Date, including the Final Observation Date.
Quarter Begin
|
Quarter End
|
Quarterly
High
|
Quarterly
Low
|
Quarterly
Close
|
1/1/2016
|
3/31/2016
|
1,114.028
|
953.715
|
1,114.028
|
4/1/2016
|
6/30/2016
|
1,188.954
|
1,089.646
|
1,151.923
|
7/1/2016
|
9/30/2016
|
1,263.438
|
1,139.453
|
1,251.646
|
10/1/2016
|
12/31/2016
|
1,388.073
|
1,156.885
|
1,357.130
|
1/1/2017
|
3/31/2017
|
1,413.635
|
1,345.598
|
1,385.920
|
4/1/2017
|
6/30/2017
|
1,425.985
|
1,345.244
|
1,415.359
|
7/1/2017
|
9/30/2017
|
1,490.861
|
1,356.905
|
1,490.861
|
10/1/2017
|
12/31/2017
|
1,548.926
|
1,464.095
|
1,535.511
|
1/1/2018
|
3/31/2018
|
1,610.706
|
1,463.793
|
1,529.427
|
4/1/2018
|
6/30/2018
|
1,706.985
|
1,492.531
|
1,643.069
|
7/1/2018
|
9/30/2018
|
1,740.753
|
1,653.132
|
1,696.571
|
10/1/2018
|
12/31/2018
|
1,672.992
|
1,266.925
|
1,348.559
|
1/1/2019
|
3/31/2019
|
1,590.062
|
1,330.831
|
1,539.739
|
4/1/2019
|
6/30/2019
|
1,614.976
|
1,465.487
|
1,566.572
|
7/1/2019
|
9/30/2019
|
1,585.599
|
1,456.039
|
1,523.373
|
10/1/2019
|
12/31/2019
|
1,678.010
|
1,472.598
|
1,668.469
|
1/1/2020
|
3/31/2020
|
1,705.215
|
991.160
|
1,153.103
|
4/1/2020
|
6/30/2020
|
1,536.895
|
1,052.053
|
1,441.365
|
7/1/2020
|
9/30/2020
|
1,592.287
|
1,398.920
|
1,507.692
|
10/1/2020
|
12/31/2020
|
2,007.104
|
1,531.202
|
1,974.855
|
1/1/2021
|
3/31/2021
|
2,360.168
|
1,945.914
|
2,220.519
|
4/1/2021
|
4/13/2021*
|
2,264.886
|
2,223.051
|
2,228.923
|
*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 April 13, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and Downside Threshold, assuming the closing value of the Russell 2000® Index on April 13, 2021 were its
Initial Underlying Value.
Past performance is not indicative of future results.
Correlation
of the Underlyings
|
The graph below illustrates the daily performance of the MSCI Emerging
Markets IndexSM and the Russell 2000® Index from January 1, 2008 through April 13, 2021. For comparison purposes,
each Underlying has been “normalized” to have a closing value of 100 on January 1, 2008 by dividing the closing value of
that Underlying on each Index Business Day by the closing value of that Underlying on January 1, 2008 and multiplying by 100. We obtained
the closing values used to determine the normalized closing values set forth below from Bloomberg, without independent verification.
A closer relationship between the daily returns of two or more underlying
assets over a given period indicates that such underlying assets have been more positively correlated. Lower (or more-negative) correlation
among two or more underlying assets over a given period may indicate that it is less likely that those underlying assets will subsequently
move in the same direction. Therefore, lower correlation among the Underlyings may indicate a greater potential for one of the
Underlyings to close below its respective Coupon Barrier or Downside Threshold on an Observation Date, including the Final Observation
Date, as applicable, because there may be a greater likelihood that at least one of the Underlyings will decrease in value significantly.
However, even if the Underlyings have a higher positive correlation, one or both of the Underlyings may close below the respective Coupon
Barrier(s) or Downside Threshold(s) on an Observation Date or the Final Observation Date, as applicable, as the Underlyings may both
decrease in value. Moreover, the actual correlation among the Underlyings may differ, perhaps significantly, from their historical
correlation. A higher Contingent Coupon Rate is generally associated with lower correlation among the Underlyings, which may indicate
a greater potential for missed Contingent Coupons and/or a significant loss on your investment at maturity. See “Key Risks —
You are exposed to the market risk of both Underlyings”, “—Because the Securities are linked to the performance of
the least performing between the MXEF Index and the RTY Index, you are exposed to greater risk of receiving no Contingent Coupon payments
or sustaining a significant loss on your investment than if the Securities were linked to just the MXEF Index or just the RTY Index”
and “—A higher Contingent Coupon Rate and/or lower Coupon Barriers and Downside Thresholds may reflect greater expected volatility
of the Underlyings, and greater expected volatility generally indicates an increased risk of declines in the levels of the Underlyings
and, potentially, a significant loss at maturity.” herein.
Past performance and correlation of the Underlyings are not indicative
of the future performance or correlation of the Underlyings.
Additional
Terms of the Securities
|
If the terms described herein are inconsistent with those described
in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
The accompanying product supplement refers to the Principal Amount
as the “Stated Principal Amount,” the Initial Level as the “Initial Index Value,” the Trade Date as the “Pricing
Date,” the Observation Dates as the “Determination Dates,” the Final Observation Date as the “Final Determination
Date,” the Coupon Barrier/Downside Threshold” as the “Downside Threshold Level” and the day on which any automatic
call occurs as the “Early Redemption Date.”
Index Publishers
With respect to the MXEF Index, MSCI Inc., or any successor thereto.
With respect to the RTY Index, FTSE Russell, or any successor thereto.
“Index Closing Value” on any Index Business Day means,
with respect to each Underlying, the closing value of such Underlying or any Successor Index reported by Bloomberg Financial Services,
or any successor reporting service the Calculation Agent may select, on that Index Business Day. In certain circumstances, the Index
Closing Value for an Underlying will be based on the alternate calculation of such Underlying as described under “—Discontinuance
of Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement.
Day-Count Convention
Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Issuer Notice to Registered Security Holders, the Trustee and the
Depositary
In the event that the Maturity Date of the Securities is postponed
due to a postponement of the Final Observation Date, the Issuer shall give notice of such postponement and, once it has been determined,
of the date to which the Maturity Date has been rescheduled (i) to each registered holder of the Securities by mailing notice of such
postponement by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry
books, (ii) to the Trustee by facsimile confirmed by mailing such notice to the Trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “Depositary”) by telephone or facsimile confirmed by mailing
such notice to the Depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the
Securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or
not such registered holder receives the notice. The Issuer shall give such notice as promptly as possible, and in no case
later than (i) with respect to notice of postponement of the Maturity Date, the Business Day immediately preceding the scheduled Maturity
Date and (ii) with respect to notice of the date to which the Maturity Date has been rescheduled, the Business Day immediately following
the Final Observation Date as postponed.
In the event that the Securities are subject to Automatic Call, the
Issuer shall, (i) on the Business Day following the applicable Observation Date, give notice of the Automatic Call and the applicable
automatic call payment, including specifying the payment date of the applicable amount due upon the Automatic Call, (x) to each registered
holder of the Securities by mailing notice of such Automatic Call by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) to the Trustee by facsimile confirmed by mailing such notice to the Trustee
by first class mail, postage prepaid, at its New York office and (z) to the Depositary by telephone or facsimile confirmed by mailing
such notice to the Depositary by first class mail, postage prepaid and (ii) on or prior to the Automatic Call Date, deliver the aggregate
cash amount due with respect to the Securities to the Trustee for delivery to the Depositary, as holder of the securities. Any
notice that is mailed to a registered holder of the Securities in the manner herein provided shall be conclusively presumed to have been
duly given to such registered holder, whether or not such registered holder receives the notice. This notice shall be given by the Issuer
or, at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer, with any such request to be accompanied
by a copy of the notice to be given.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the Depositary of the amount of cash to be delivered
as Contingent Coupon, if any, with respect to the Securities on or prior to 10:30 a.m. (New York City time) on the Business Day preceding
each Coupon Payment Date, and (ii) deliver the aggregate cash amount due, if any, with respect to the Contingent Coupon to the Trustee
for delivery to the Depositary, as holder of the Securities, on or prior to the applicable Coupon Payment Date.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee and to the Depositary of the amount of cash, if any, to be delivered with respect to the Securities, on
or prior to 10:30 a.m. (New York City time) on the Business Day preceding the Maturity Date, and (ii) deliver the aggregate cash amount
due with respect to the Securities, if any, to the Trustee for delivery to the Depositary, as holder of the Securities, on or prior to
the Maturity Date.
Additional
Information About the Securities
|
Use of Proceeds and Hedging
The proceeds from the sale of the Securities will be used by us for
general corporate purposes. We will receive, in aggregate, $10 per Security issued, because, when we enter into hedging transactions
in order to meet our obligations under the Securities, our hedging counterparty will reimburse the cost of the Agent’s commissions.
The costs of the Securities borne by you and described on page 2 above comprise the Agent’s commissions and the cost of issuing,
structuring and hedging the Securities. See also “Use of Proceeds” in the accompanying prospectus.
On or prior to the Trade Date, we will hedge our anticipated exposure
in connection with the Securities, by entering into hedging transactions with our affiliates and/or third-party dealers. We expect our
hedging counterparties to take positions in the constituent stocks of the Underlyings, in futures or options contracts on the Underlyings
or the constituent stocks of the Underlyings, as well as in other instruments related to the Underlyings that they may wish to use in
connection with such hedging. Any of these hedging or trading activities on or prior to the Trade Date could potentially increase the
Initial Underlying Value, and, as a result, the Coupon Barrier of either of the Underlyings, which is the level at or above which such
Underlying must close on each Observation Date in order for you to earn a Contingent Coupon, and the Downside Threshold of either of
the Underlyings, which if the Securities are not called prior to maturity, is the level at or above which such Underlying must close
on the Final Observation Date in order for you to avoid being exposed to the negative performance of the Least Performing Underlying
at maturity (in each case, depending also on the performance of the other Underlying). In addition, through our affiliates, we are likely
to modify our hedge position throughout the term of the Securities, including on the Final Observation Date, by purchasing and selling
the stocks constituting the Underlyings, futures or options contracts on the Underlyings or their component stocks listed on major securities
markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities.,
including by purchasing or selling any such securities or instruments on the Final Observation Date. As a result, these entities may
be unwinding or adjusting hedge positions during the term of the Securities, and the hedging strategy may involve greater and more frequent
dynamic adjustments to the hedge as the Final Observation Date approaches. We cannot give any assurance that our hedging activities will
not affect the values of the Underlyings and, therefore, adversely affect the value of the Securities or the payment you will receive
at maturity, if any, if not previously called.
Supplemental Plan of Distribution; Conflicts of Interest
We are also offering, pursuant to Free Writing Prospectus No. 1,348,
a separate issuance of securities, being sold only to fee-based advisory accounts, with terms substantially similar to, but somewhat
different than, those of this issuance.
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 indicated on the cover of
this document. UBS Financial Services Inc., acting as dealer, will receive from MS & Co. a fixed sales commission of $0.20 for each
Security it sells.
MS & Co. is our affiliate and a wholly owned subsidiary of Morgan
Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the Securities.
When MS & Co. prices this offering of Securities, it will determine the economic terms of the Securities, including the Contingent
Coupon Rate, such that for each Security the estimated value on the Trade Date will be no lower than the minimum level described in “Additional
Information about Morgan Stanley, MSFL and the Securities” on page 2.
MS & Co. will conduct this offering in compliance with the requirements
of Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“FINRA”), regarding a FINRA member firm’s distribution
of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in
this offering to any discretionary account.
In order to facilitate the offering of the Securities, the agent may
engage in transactions that stabilize, maintain or otherwise affect the price of the Securities. Specifically, the agent may sell more
Securities than it is obligated to purchase in connection with the offering, creating a naked short position in the Securities, for its
own account. The agent must close out any naked short position by purchasing the Securities in the open market. A naked short position
is more likely to be created if the agent is concerned that there may be downward pressure on the price of the Securities in the open
market after pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering,
the agent may bid for, and purchase, the Securities or the stocks constituting the Underlyings in the open market to stabilize the price
of the Securities. Any of these activities may raise or maintain the market price of the Securities above independent market levels or
prevent or retard a decline in the market price of the Securities. The agent is not required to engage in these activities, and may end
any of these activities at any time. An affiliate of the agent has entered into a hedging transaction with us in connection with this
offering of Securities. See “—Use of Proceeds and Hedging” above.
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