The information in this pricing supplement
is not complete and may be changed. We may not deliver these securities until a final pricing supplement is delivered. This pricing supplement
and the accompanying prospectus and prospectus supplement do not constitute an offer to sell these securities and we are not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Preliminary
Pricing Supplement dated April 21, 2021
PROSPECTUS Dated November 16, 2020
|
Pricing Supplement No. 1,373 to
|
PROSPECTUS SUPPLEMENT Dated November 16, 2020
|
Registration Statement Nos. 333-250103; 333-250103-01
|
|
Dated April , 2021
|
Rule 424(b)(2)
$
Morgan Stanley Finance LLC
GLOBAL MEDIUM-TERM NOTES, SERIES A
Senior Notes
Buffered Autocallable Securities due April
28, 2023
Based on the Performance of West Texas Intermediate
Light Sweet Crude Oil Futures Contracts
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Buffered Autocallable Securities due April 28, 2023 Based on
the Performance of West Texas Intermediate Light Sweet Crude Oil Futures Contracts, which we refer to as the securities, are unsecured
obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. Unlike
ordinary debt securities, the securities do not pay interest and provide for the minimum payment at maturity of only 9% of the principal
amount. If the price of West Texas Intermediate light sweet crude oil futures contracts (“WTI crude oil”), which we refer
to as the underlying commodity, on either of the two review dates is at or above the initial commodity price, the securities will be automatically
called for a fixed cash payment per security, which we refer to as the call price, that will vary depending on the review date. At maturity,
if the securities have not previously been called and the final commodity price is at or above the initial commodity price, investors
will receive a payment at maturity of $1,200 per security. If the securities have not previously been called and the final commodity price
is less than the initial commodity price but has not decreased by an amount greater than the specified buffer amount, investors will receive
a payment at maturity of $1,000 per security. However, if the securities have not previously been called and the final commodity price
is less than the initial commodity price by an amount greater than the specified buffer amount, investors will lose 1% for every 1% decline
of the underlying commodity beyond the specified buffer amount, subject to the minimum payment at maturity of 9% of the stated principal
amount. Accordingly, you must be willing to accept the risk of losing up to 91% of your initial investment in the securities if the
underlying commodity declines by an amount greater than the buffer amount. The securities are for investors who are willing to risk
their principal and forgo current income and participation in the appreciation of the underlying commodity in exchange for the possibility
of receiving a call price or payment at maturity that is greater than the stated principal amount, if the commodity price on a review
date or the final commodity price, as applicable, is at or above the initial commodity price, and, if the securities have not been called,
in exchange for the buffer feature that applies only to a limited range of performance of the underlying commodity. Investors will not
participate in any appreciation of the underlying commodity. The securities are notes issued as part of Morgan Stanley Finance LLC’s
Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default on
our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not have any
security interest in, or otherwise have any access to, any underlying reference asset or assets.
|
•
|
The stated principal amount and original issue price of each security is $1,000.
|
|
•
|
We will not pay interest on the securities.
|
|
•
|
If, on either of the two review dates, the commodity price is at or above the initial commodity
price, the securities will be automatically called on the third business day following such review date for the applicable call price,
which will vary depending on the applicable review date, as follows:
|
|
º
|
First Review Date, April 25, 2022: $1,100 (corresponding to 110.00% of the stated principal amount);
or
|
|
º
|
Second Review Date, October 25, 2022: $1,150 (corresponding to 115.00% of the stated principal amount).
|
|
•
|
At maturity, if the securities have not previously been called, you will receive for each security
that you hold an amount of cash equal to:
|
|
º
|
if the final commodity price is at or above the initial commodity price: $1,200 (corresponding
to 120.00% of the stated principal amount),
|
|
º
|
if the final commodity price is less than the initial commodity price but is greater than or equal
to 91% of the initial commodity price, which means it has not declined by more than the buffer amount of 9% from the initial
commodity price: the $1,000 stated principal amount of the securities, or
|
|
º
|
if the final commodity price is less than 91% of the initial commodity price, which means it has
declined by more than the buffer amount of 9% from the initial commodity price: $1,000 × (commodity performance factor + 9%).
This amount will be less than the stated principal amount of $1,000. However, under no circumstances will the payment at maturity
be less than the minimum payment at maturity of $90 per security.
|
|
•
|
The buffer amount is 9%. As a result of the buffer amount of 9%, the price at or above which the
underlying commodity must be on the final determination date so that investors do not suffer a loss on their initial investment is $ ,
which is 91% of the initial commodity price.
|
|
•
|
The minimum payment at maturity is $90 per security (9% of the stated principal amount).
|
|
•
|
The initial commodity price is $ , which is the commodity price on April 23, 2021, which is the day
we price the securities for initial sale to the public, which we refer to as the pricing date.
|
|
•
|
The final commodity price will equal the commodity price on the final determination date.
|
|
•
|
The final determination date is April 25, 2023.
|
|
•
|
The review date and the final determination date are each subject to postponement for non-trading
days and certain market disruption events.
|
|
•
|
The commodity performance factor is equal to: final commodity price / initial commodity price; provided
that the commodity performance factor will not be less than zero.
|
|
•
|
Investing in the securities is not equivalent to investing directly in WTI crude oil or in futures
contracts or forward contracts on WTI crude oil.
|
|
•
|
The securities will not be listed on any securities exchange.
|
|
•
|
The estimated value of the securities on the pricing date is approximately $966.30 per security,
or within $26.30 of that estimate. See “Summary of Pricing Supplement” beginning on PS-2.
|
|
•
|
The CUSIP number for the securities is 61771VUJ7. The ISIN for the securities is US61771VUJ78.
|
You should read the more detailed description of the securities
in this pricing supplement. In particular, you should review and understand the descriptions in “Summary of Pricing Supplement”
and “Description of Securities.”
The securities are riskier than ordinary debt securities. Securities
linked to the performance of a single commodity are subject to the volatility and other risks associated with that commodity. See “Risk
Factors” beginning on PS-9.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this pricing supplement is truthful or complete. Any representation
to the contrary is a criminal offense.
PRICE $1,000 PER SECURITY
|
Price
to public
|
Agent’s
commissions(1)
|
Proceeds
to us(2)
|
Per security
|
$1,000
|
$17.50
|
$982.50
|
Total
|
$
|
$
|
$
|
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, MS & Co.,
a fixed sales commission of $17.50 for each security they sell. See “Description of Securities—Supplemental Information Concerning
Plan of Distribution; Conflicts of Interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)”
in the accompanying prospectus supplement.
|
|
(2)
|
See “Description of Securities—Use of Proceeds and Hedging” beginning on PS-25.
|
The agent for this offering, Morgan Stanley & Co. LLC, is
an affiliate of MSFL and a wholly-owned subsidiary of Morgan Stanley. See “Description of Securities—Supplemental Information
Concerning Plan of Distribution; Conflicts of Interest” in this pricing supplement.
The securities are not deposits or savings accounts and are not
insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of,
or guaranteed by, a bank.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
DESCRIPTION OF SECURITIES
Terms not defined herein have the meanings given to such terms in the
accompanying prospectus supplement. The term “Security” refers to each $1,000 Stated Principal Amount of our Buffered Autocallable
Securities due April 28, 2023 Based on the Performance of West Texas Intermediate Light Sweet Crude Oil Futures Contracts.
Aggregate Principal Amount
|
|
$
|
|
|
|
Pricing Date
|
|
April 23, 2021
|
|
|
|
Original Issue Date (Settlement Date)
|
|
April 28, 2021 (3 Business Days after the Pricing Date).
|
|
|
|
Maturity Date
|
|
April 28, 2023, subject to extension in accordance with the following paragraph.
|
|
|
|
If, due to a Market Disruption Event
or otherwise, the scheduled Final Determination Date is postponed so that it falls less than two Business Days prior to the scheduled
Maturity Date, the Maturity Date will be postponed to the second Business Day following such Final Determination Date as postponed. See
“––Final Determination Date” below.
Interest Rate
|
|
None
|
|
|
|
Specified Currency
|
|
U.S. dollars
|
|
|
|
Stated Principal Amount
|
|
$1,000 per Security
|
|
|
|
Original Issue Price
|
|
$1,000 per Security
|
|
|
|
CUSIP Number
|
|
61771VUJ7
|
|
|
|
ISIN
|
|
US61771VUJ78
|
|
|
|
Denominations
|
|
$1,000 and integral multiples thereof
|
|
|
|
Underlying Commodity
|
|
West Texas Intermediate light sweet crude oil futures contracts
|
|
|
|
Automatic Early Call
|
|
If, on either of the two Review Dates, the Commodity Price is at or above the Initial Commodity Price, we will call the Securities, in whole and not in part, for the applicable Call Price on the third Business Day following such Review Date (as may be postponed under “––Review Dates” below) (the applicable “Call Date”).
|
|
|
|
In the event that the Securities are
subject to Automatic Early Call, we will, or will cause the Calculation Agent to, (i) on the Business Day following the applicable Review
Date (as may be postponed under “––Review Dates” below), give notice of the Automatic Early Call of the Securities
and the applicable Call Price, including specifying the payment date of the applicable amount due upon the Automatic Early Call (the applicable
Call Date), to the Trustee, upon which notice the Trustee may conclusively rely, and to The Depository Trust Company, which we refer to
as DTC, and (ii) deliver the aggregate cash amount due with respect to the Securities to the Trustee for delivery to DTC, as holder of
the Securities, on or prior to the applicable Call Date. See “—Book-Entry Note or Certificated Note” below, and
see “Forms of Securities—The
Depositary” in the accompanying prospectus.
Call Price
|
|
The Call Price will equal:
|
|
|
|
|
·
|
$1,100 (corresponding to 110.00% of the Stated Principal Amount), if the Automatic Early Call occurs with
respect to the first Review Date; or
|
|
·
|
$1,150 (corresponding to 115.00% of the Stated Principal Amount), if the Automatic Early Call occurs with
respect to the second Review Date.
|
Payment at Maturity
|
|
If the Securities have not been automatically called prior to maturity, you will receive for each $1,000 Stated Principal Amount of Securities that you hold a Payment at Maturity equal to:
|
|
|
|
|
•
|
if the Final Commodity Price is at or above the Initial Commodity Price, $1,200 (corresponding
to 120.00% of the Stated Principal Amount),
|
|
•
|
if the Final Commodity Price is less than the Initial Commodity Price but is greater than or equal to
91% of the Initial Commodity Price, which means it has not declined by more than the Buffer Amount of 9% from the Initial
Commodity Price, the $1,000 Stated Principal Amount, or
|
|
•
|
if the Final Commodity Price is less than 91% of the Initial Commodity Price, which means it has declined
by more than the Buffer Amount of 9% from the Initial Commodity Price,
|
$1,000 × (Commodity
Performance Factor + 9%).
This amount will
be less than the Stated Principal Amount of $1,000. However, under no circumstances will the Payment at Maturity be less than the Minimum
Payment at Maturity of $90 per Security.
We will, or will cause
the Calculation Agent to, (i) provide written notice to the Trustee, upon which notice the Trustee may conclusively rely, and to DTC of
the amount of cash to be delivered with respect to each $1,000 Stated Principal Amount of 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
to the Trustee for delivery to DTC, as holder of the Securities, on or prior to the Maturity Date. We expect such amount of cash will
be distributed to investors on the Maturity Date in accordance with the standard rules and procedures of DTC and its direct and indirect
participants. See “—Book-Entry Note or Certificated Note” below, and see “Forms of Securities—The Depositary”
in the accompanying prospectus.
Buffer Amount
|
|
9%. As a result of the Buffer Amount of 9%, the price at or above which the Underlying Commodity must be on the Final Determination Date so that investors do not suffer a loss on their
|
initial investment
in the Securities is $ , which is 91% of the Initial Commodity Price.
Minimum Payment at Maturity
|
|
$90 per Security (9% of the Stated Principal Amount)
|
|
|
|
Commodity Performance Factor
|
|
A fraction, the numerator of which is the Final Commodity Price and the denominator of which is the Initial Commodity Price, as described by the following formula; provided that such Commodity Performance Factor will not be less than zero:
|
|
|
|
Commodity Performance Factor
|
=
|
Final Commodity
Price
|
|
Initial Commodity Price
|
|
Commodity Price
|
|
The Commodity Price for the Underlying Commodity on any Trading Day will be determined by the Calculation Agent and will equal the official settlement price per barrel of West Texas Intermediate light sweet crude oil on the Relevant Exchange of the first nearby month futures contract, stated in U.S. dollars, as made public by the Relevant Exchange on such date; provided that if such date falls on the last trading day of such futures contract (all pursuant to the rules of the Relevant Exchange), then the second nearby month futures contract on such date.
|
|
|
|
Reuters, Bloomberg and various other
third-party sources may report prices of the Underlying Commodity. If any such reported price differs from that as published by the Relevant
Exchange for the Underlying Commodity, the price as published by such Relevant Exchange will prevail.
Initial Commodity Price
|
|
The Commodity Price on the Pricing Date; provided that if the Pricing Date is not a Trading Day with respect to the Underlying Commodity or if a Market Disruption Event occurs on the Pricing Date, the Initial Commodity Price will be determined on the immediately succeeding Trading Day on which no Market Disruption Event occurs; provided further that if a Market Disruption Event has occurred on each of the five consecutive Trading Days immediately succeeding the Pricing Date, the Calculation Agent will determine the Initial Commodity Price on such fifth succeeding Trading Day by requesting the principal office of each of the three leading dealers in the relevant market, selected by the Calculation Agent, to provide a quotation for the relevant price. If such quotations are provided as requested, the Initial Commodity Price shall be the arithmetic mean of such quotations. If fewer than three quotations are provided as requested, the Initial Commodity Price shall be determined by the Calculation Agent in its sole and absolute discretion (acting in good faith) taking into account any information that it deems relevant.
|
|
|
|
If the Initial Commodity Price as
finally published by the Relevant Exchange differs from the relevant Initial Commodity Price specified in the pricing supplement, we will
include the definitive Initial Commodity Price in an amended pricing supplement.
Final Commodity Price
|
|
The Commodity Price on the Final Determination Date, as determined by the Calculation Agent.
|
Review Dates
|
|
April 25, 2022 (first Review Date) and October 25, 2022 (second Review Date); provided that if either scheduled Review Date is not a Trading Day with respect to the Underlying Commodity or if a Market Disruption Event occurs on either scheduled Review Date, such Review Date will be postponed and the Commodity Price will be determined on the immediately succeeding Trading Day on which no Market Disruption Event occurs. The Commodity Price as of either Review Date will not be determined on a date later than the fifth scheduled Trading Day following the relevant scheduled Review Date. If such date is not a Trading Day with respect to the Underlying Commodity or if there is a Market Disruption Event on such date, the Calculation Agent will determine the Commodity Price as of the relevant Review Date on such fifth scheduled Trading Day by requesting the principal office of each of the three leading dealers in the relevant market, selected by the Calculation Agent, to provide a quotation for the relevant price. If such quotations are provided as requested, the Commodity Price will be the arithmetic mean of such quotations. If fewer than three quotations are provided as requested, such Commodity Price as of the relevant Review Date shall be determined by the Calculation Agent in its sole and absolute discretion (acting in good faith) taking into account any information that it deems relevant.
|
|
|
|
Final Determination Date
|
|
April 25, 2023; provided that if the scheduled Final Determination Date is not a Trading Day with respect to the Underlying Commodity or if a Market Disruption Event occurs on the scheduled Final Determination Date, such Final Determination Date will be postponed and the Commodity Price will be determined on the immediately succeeding Trading Day on which no Market Disruption Event occurs. The Commodity Price will not be determined on a date later than the fifth scheduled Trading Day following the scheduled Final Determination Date. If such date is not a Trading Day with respect to the Underlying Commodity or if there is a Market Disruption Event on such date, the Calculation Agent will determine the Commodity Price on such fifth scheduled Trading Day by requesting the principal office of each of the three leading dealers in the relevant market, selected by the Calculation Agent, to provide a quotation for the relevant price. If such quotations are provided as requested, the Commodity Price will be the arithmetic mean of such quotations. If fewer than three quotations are provided as requested, such Commodity Price shall be determined by the Calculation Agent in its sole and absolute discretion (acting in good faith) taking into account any information that it deems relevant.
|
|
|
|
Market Disruption Event
|
|
Market Disruption Event means any of Price Source Disruption, Disappearance of Commodity Reference Price, Trading Disruption or Tax Disruption, as determined by the Calculation Agent.
|
|
|
|
Price Source Disruption
|
|
Price Source Disruption means the temporary or permanent failure of the Relevant Exchange to announce or publish the Commodity Price.
|
|
|
|
Disappearance of Commodity Reference Price
|
|
Disappearance of Commodity Reference Price means either (i) the failure of trading to commence, or the permanent discontinuance of trading, in the Underlying Commodity or futures contracts related to the Underlying Commodity on the Relevant Exchange or (ii) the disappearance of, or of trading in, the Underlying Commodity.
|
|
|
|
Trading Disruption
|
|
Trading Disruption means the material suspension of, or material limitation imposed on, trading in the Underlying Commodity or futures contracts related to the Underlying Commodity on the Relevant Exchange.
|
|
|
|
Tax Disruption
|
|
Tax Disruption means the imposition of, change in or removal of an excise, severance, sales, use, value-added, transfer, stamp, documentary, recording or similar tax on, or measured by reference to, the Underlying Commodity (other than a tax on, or measured by reference to, overall gross or net income) by any government or taxation authority after the Pricing Date, if the direct effect of such imposition, change or removal is to raise or lower the Commodity Price of the Underlying Commodity on any Trading Day that would otherwise be a Review Date or the Final Determination Date from what it would have been without that imposition, change or removal.
|
|
|
|
Business Day
|
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
|
|
|
Relevant Exchange
|
|
Relevant Exchange means the NYMEX Division, or its successor, of the New York Mercantile Exchange, Inc. (the “NYMEX Division”) or, if the NYMEX Division is no longer the principal exchange or trading market for the Underlying Commodity, such exchange or principal trading market for the Underlying Commodity that serves as the source of prices for the Underlying Commodity and any principal exchanges where options or futures contracts on the Underlying Commodity are traded.
|
|
|
|
Trading Day
|
|
Trading Day means a day, as determined by the Calculation Agent, that is a day on which the Relevant Exchange is open for trading during its regular trading session, notwithstanding any such Relevant Exchange closing prior to its scheduled closing time.
|
|
|
|
Book Entry Note or
|
|
|
Certificated Note
|
|
Book Entry. The Securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be the only registered holder of the Securities. Your beneficial interest in the Securities will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in DTC. In this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices to you will mean payments or notices to DTC, as the registered holder of the
|
Securities,
for distribution to participants in accordance with DTC’s procedures. For more information regarding DTC and book-entry securities,
please read “Forms of Securities—The Depositary” and “Forms of Securities—Global Securities—Registered
Global Securities” in the accompanying prospectus.
Senior Note or Subordinated Note
|
|
Senior
|
|
|
|
Trustee
|
|
The Bank of New York Mellon, a New York banking corporation
|
|
|
|
Agent
|
|
MS & Co. and its successors
|
|
|
|
Calculation Agent
|
|
MSCG and its successors.
|
|
|
|
All determinations made by the Calculation
Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes
and binding on you, the Trustee, us and the Guarantor.
All calculations and determinations
with respect to the Automatic Early Call and the Payment at Maturity will be made by the Calculation Agent and will be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per Security will be rounded to the nearest ten-thousandth, with five one
hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate number
of Securities will be rounded to the nearest cent, with one-half cent rounded upward.
Because the Calculation Agent is our
affiliate, the economic interests of the Calculation Agent and its affiliates may be adverse to your interests as an investor in the Securities,
including with respect to certain determinations and judgments that the Calculation Agent must make in determining the Initial Commodity
Price, the Commodity Price on each Review Date, the Final Commodity Price, whether the Commodity Price on either of the Review Dates is
at or above the Initial Commodity Price and therefore whether the Securities will be called following such Review Date, whether a Market
Disruption Event has occurred, and, if the Securities are not called prior to maturity, the Payment at Maturity. MSCG is obligated to
carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment. See also “Risk Factors––The
calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.”
Alternate Exchange Calculation
|
|
|
in Case of an Event of Default
|
|
In case an Event of Default with respect to the Securities will have occurred and be continuing, the amount declared due and payable per Security upon any acceleration of the Securities will be an amount in cash equal to the value of such Securities on the day that is two business days prior to the date of such acceleration, as determined by the Calculation Agent (acting in good faith and in a commercially reasonable manner) by reference
|
to factors that
the Calculation Agent considers relevant, including, without limitation: (i) then-current market interest rates; (ii) our credit spreads
as of the Pricing Date, without adjusting for any subsequent changes to our creditworthiness; and (iii) the then-current value of the
performance-based component of such Securities. Because the Calculation Agent will take into account movements in market interest rates,
any increase in market interest rates since the Pricing Date will lower the value of your claim in comparison to if such movements were
not taken into account.
Notwithstanding
the foregoing, if a voluntary or involuntary liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect
to MSFL, then depending on applicable bankruptcy law, your claim may be limited to an amount that could be less than this amount.
Historical Information
|
|
The following table sets forth the published high and low daily prices of the Underlying Commodity, as well as the end-of-quarter prices of the Underlying Commodity, for each calendar quarter in the period from January 1, 2016 to April 19, 2021. The Commodity Price on April 19, 2021 was $63.38. The graph following the table sets forth the daily prices of the Underlying Commodity for the same period. We obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The Commodity Price of the Underlying Commodity on each day on which such price must be determined, including the Pricing Date, the Review Dates and the Final Determination Date, will be determined with reference to the prices published by the Relevant Exchange in accordance with the provisions set forth herein, rather than the prices published by Bloomberg Financial Markets on such dates. The historical performance of the Underlying Commodity set out in the table and graph below should not be taken as an indication of its future performance, and no assurance can be given as to the Commodity Price on any date, including the Review Dates, or as to the Final Commodity Price. If the Securities are not automatically called prior to maturity and if the Final Commodity Price has declined by more than the Buffer Amount of 9% from the Initial Commodity Price, you will lose some, and up to 91%, of your initial investment at maturity. We cannot give you any assurance that the Securities will be called prior to maturity or that, if the Securities are not called, the Final Commodity Price will not have declined by an amount greater than the Buffer Amount so that at maturity you will not lose some or a significant portion of your initial investment in the Securities. The price of the Underlying Commodity may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen.
|
|
|
|
The prices of
WTI crude oil futures contracts may be near zero, zero or negative, which can occur rapidly and unexpectedly. In April 2020, crude
oil futures contracts traded below zero. See “Risk Factors—Investments linked to a single commodity are subject to sharp fluctuations
in commodity prices,
and the price of
WTI crude oil futures contracts may change unpredictably and affect the value of the securities in unforeseeable ways.”
West Texas Intermediate Light Sweet
Crude Oil Futures Contracts
High and Low Daily Closing Prices
and
End-of-Quarter Prices
January 1, 2016 through April 19,
2021
(stated in U.S. dollars per barrel)
West Texas Intermediate Light Sweet Crude Oil Futures Contracts
|
High ($)
|
Low ($)
|
Period End
($)
|
2016
|
|
|
|
First Quarter
|
41.45
|
26.21
|
38.34
|
Second Quarter
|
51.23
|
35.70
|
48.33
|
Third Quarter
|
48.99
|
39.51
|
48.24
|
Fourth Quarter
|
54.06
|
43.32
|
53.72
|
2017
|
|
|
|
First Quarter
|
54.45
|
47.34
|
50.60
|
Second Quarter
|
53.40
|
42.53
|
46.04
|
Third Quarter
|
52.22
|
44.23
|
51.67
|
Fourth Quarter
|
60.42
|
49.29
|
60.42
|
2018
|
|
|
|
First Quarter
|
66.14
|
59.19
|
64.94
|
Second Quarter
|
74.15
|
62.06
|
74.15
|
Third Quarter
|
74.14
|
65.01
|
73.25
|
Fourth Quarter
|
76.41
|
50.29
|
50.29
|
2019
|
|
|
|
First Quarter
|
60.14
|
46.54
|
60.14
|
Second Quarter
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66.30
|
51.14
|
58.47
|
Third Quarter
|
62.90
|
51.09
|
54.07
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Fourth Quarter
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61.72
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52.45
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61.06
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2020
|
|
|
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First Quarter
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63.27
|
20.09
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20.48
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Second Quarter
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40.46
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-37.63
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39.27
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Third Quarter
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43.39
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36.76
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40.22
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Fourth Quarter
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49.10
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35.79
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48.52
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2021
|
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First Quarter
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66.09
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47.62
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59.16
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Second Quarter (through April 19, 2021)
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63.46
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58.65
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63.38
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West Texas
Intermediate Light Sweet Crude Oil Futures Contracts
Daily Closing
Prices
January
1, 2016 to April 19, 2021
Use of Proceeds and Hedging
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The proceeds from the sale of the Securities will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per Security issued, because, when we enter into hedging transactions in order to meet our obligations under the Securities, our hedging counterparty will reimburse the cost of the Agent’s commissions. The costs of the Securities borne by you and described beginning on PS-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.
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On or prior to the Pricing Date, we
expect to 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 futures contracts on the Underlying Commodity or positions
in any other available securities or instruments that they may wish to use in connection with such hedging. Such purchase activity could
potentially increase the Initial Commodity Price, and, as a result, increase (i) the price at or above which the Underlying Commodity
must close on either of the two Review Dates so that the Securities are automatically called prior to maturity for the applicable Call
Price and (ii) the price at or above which the Underlying Commodity must close on the Final Determination Date so that investors do not
suffer a significant loss on their initial investment in the Securities. 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 Determination Date approaches. Additionally, our hedging activities, as well as our other trading activities, during the term
of the Securities could potentially affect the price of the Underlying Commodity, including on the Review Dates or the Final Determination
Date, and, accordingly, whether the Securities are
automatically called prior to maturity
or the payment you will receive at maturity.
Supplemental Information Concerning
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Plan of Distribution; Conflicts of Interest
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Selected dealers, which may include our affiliates, and their financial advisors will collectively receive from the agent a fixed sales commission of $17.50 for each Security they sell.
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MS & Co. is
an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling,
structuring and, when applicable, hedging the Securities. When MS & Co. prices this offering of Securities, it will determine the
economic terms of the Securities such that for each Security the estimated value on the Pricing Date will be no lower than the minimum
level described in “Summary of Pricing Supplement” beginning on PS-2.
MS & Co. will conduct this offering
in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred
to as FINRA, regarding a FINRA member firm’s distribution of the Securities of an affiliate and related conflicts of interest. MS
& Co. or any of our other affiliates may not make sales in this offering to any discretionary account.
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
after the offering. A naked short position in the Securities 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 futures contracts
or other instruments on the Underlying Commodity 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 prices 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 in connection with this offering of the Securities. See “—Use
of Proceeds and Hedging” above.
United States Federal Taxation
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Prospective investors should note that the discussion under the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the Securities issued under this pricing supplement and is superseded by the following discussion.
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The following summary 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 initial investors in the Securities who:
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purchase the Securities in the original offering; and
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hold the Securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
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This discussion does not describe all
of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject
to special rules, such as:
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certain financial institutions;
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certain dealers and traders in securities or commodities;
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investors holding the Securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or
constructive sale transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
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regulated investment companies;
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real estate investment trusts; or
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tax-exempt entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or
408A of the Code, respectively.
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If an entity that is classified as a
partnership for U.S. federal income tax purposes holds the Securities, the U.S. federal income tax treatment of a partner will generally
depend on the status of the partner and the activities of the partnership. If you are a partnership holding the Securities or a partner
in such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing
of the Securities to you.
As the law applicable to the U.S. federal
income taxation of instruments such as the Securities is technical and complex, the discussion below necessarily represents only a general
summary. Moreover, 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.
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
Although there is uncertainty regarding
the U.S. federal income tax consequences of an investment in the Securities due to the lack of governing authority, in the opinion of
our counsel, under current law, and based on current market conditions, each Security should be treated as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes. Moreover, our counsel’s opinion is based on market
conditions as of the date of this preliminary pricing supplement and is subject to confirmation on the pricing date.
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 Internal Revenue Service (the “IRS”) or a court will
agree with the tax treatment described herein. Accordingly, 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 the Securities as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you
are a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a Security that is, for U.S. federal
income tax purposes:
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a citizen or individual resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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Tax Treatment of the Securities
Assuming the treatment of the Securities
as set forth above is respected, the following U.S. federal income tax consequences should result.
Tax Treatment Prior to Settlement.
A U.S. Holder should not be required to recognize taxable income over the term of the Securities prior to settlement, other than pursuant
to a sale or exchange as described below.
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.
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. Any gain or loss recognized upon the sale, exchange or settlement of the
Securities should be long-term capital
gain or loss if the U.S. Holder has held the Securities for more than one year at such time, and short-term capital gain or loss otherwise.
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. There is a risk that the IRS may seek to treat all or a portion of the gain on the Securities
as ordinary income. For example, there is a risk that 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 the contingent payment 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 generally 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 also 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 in particular on whether
to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related
topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject
to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying
property to which the instruments are linked; and whether these instruments are or should be subject to the “constructive ownership”
rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge.
While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues
could materially and adversely affect the tax consequences of an investment in the Securities, possibly with retroactive effect. 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 issues presented by this notice.
Backup Withholding and Information
Reporting
Backup withholding may apply in respect
of the payment on the Securities at maturity 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 may be filed with the IRS in connection with the payment on the Securities
and the payment of proceeds from a sale, exchange or other disposition of the Securities, unless the U.S. Holder provides proof of an
applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you
are a Non-U.S. Holder. As used herein, the term “Non-U.S. Holder” means a beneficial owner of a Security that is, for U.S.
federal income tax purposes:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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The term “Non-U.S. Holder”
does not include any of the following holders:
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a holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
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certain former citizens or residents of the United States; or
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a holder for whom income or gain in respect of the Securities is effectively connected with the conduct of a trade or business in
the United States.
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Such holders should consult their tax
advisers regarding the U.S. federal income tax consequences of an investment in the Securities.
Tax Treatment upon Sale, Exchange
or Settlement of the Securities
In general. Assuming the treatment
of the Securities as set forth above is respected, and subject to the discussion below
concerning backup withholding, a Non-U.S.
Holder of the Securities generally will not be subject to U.S. federal income or withholding tax in respect of amounts paid to the Non-U.S.
Holder.
Subject to the discussion below regarding
FATCA, if all or any portion of a Security were recharacterized as a debt instrument, any payment made to a Non-U.S. Holder with respect
to the Securities would not be subject to U.S. federal withholding tax, provided that:
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the Non-U.S. Holder does not own, directly or by attribution, ten percent or more of the total combined voting power of all classes
of Morgan Stanley stock entitled to vote;
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the Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to Morgan Stanley through stock ownership;
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the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code, and
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the certification requirement described below has been fulfilled with respect to the beneficial owner.
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Certification Requirement.
The certification requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a Security (or a financial
institution holding a Security on behalf of the beneficial owner) furnishes to the applicable withholding agent an IRS Form W-8BEN (or
other appropriate form) on which the beneficial owner certifies under penalties of perjury that it is not a U.S. person.
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. Among the issues addressed in the notice is the degree, if any, to which any income with respect to instruments
such as the Securities should be subject to U.S. withholding tax. It is possible that any Treasury regulations or other guidance promulgated
after consideration of this issue could materially and adversely affect the withholding tax consequences of ownership and disposition
of the Securities, possibly on a retroactive basis. Non-U.S. Holders should note that we currently do not intend to withhold on any payment
made with respect to the Securities to Non-U.S. Holders (subject to compliance by such holders with the certification requirement described
above and to the discussion below regarding FATCA). However, in the event of a change of law or any formal or informal guidance by the
IRS, the U.S. Treasury Department or Congress, we may decide to withhold on payments made with respect to the Securities to Non-U.S. Holders,
and we will not be required to pay any additional amounts with respect to amounts withheld. Accordingly, Non-U.S. Holders should consult
their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the Securities, including the
possible implications of the notice referred to 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”). Because the Securities reference a commodity that
is not treated for U.S. federal income tax purposes as an Underlying Security, payment on the Securities to Non-U.S. Holders should not
be subject to Section 871(m).
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 may be filed with the IRS in connection
with the payment on the Securities at maturity as well as in connection with the payment of proceeds from a sale, exchange or other disposition
of the Securities. 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. Compliance with the certification procedures described above under “―Tax Treatment
upon Sale, Exchange or Settlement of the Securities ― Certification Requirement” will satisfy the certification requirements
necessary to avoid backup withholding as well. 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”). If the Securities were
recharacterized as debt instruments, FATCA would apply to any payment of amounts treated as interest and to payments of gross proceeds
of the disposition (including upon retirement) of the Securities. However, 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). If withholding were to apply to the Securities, we would 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,
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 income tax consequences of an investment in the Securities.