(1) Subject to postponement in the event of a Market Disruption Event
or for non-Index Business Days. See “Postponement of Quarterly Observation End-Dates and Coupon Payment Dates (including the Call
Dates and the Maturity Date)” under “Additional Terms of the Securities” below.
(2) If, due to a Market Disruption Event or otherwise, any Quarterly
Observation End-Date is postponed so that it falls less than two Business Days prior to the scheduled Coupon Payment Date / Call Date,
the Coupon Payment Date / Call Date will be postponed to the second Business Day following that Quarterly Observation End-Date as postponed,
provided that the Coupon Payment Date with respect to the Final Valuation Date will be the Maturity Date. No additional coupon
will accrue on an account of any such postponement.
An investment in the Securities involves significant risks. The material
risks that apply to the Securities are summarized here, but we urge you to also read the “Risk Factors” section of the accompanying
prospectus. You should also consult your investment, legal, tax, accounting and other advisers before you invest in the Securities.
On the other hand, MSFL will be less likely
to call the Securities when the Index Closing Value of any Underlying is below its Coupon Barrier Level and/or when the Final Underlying
Value of any Underlying is expected to be below its Downside Threshold, such that you will receive no Contingent Coupons and/or that you
will suffer a significant loss on your initial investment in the Securities at maturity. Therefore, if MSFL does not call the Securities,
it is more likely that you will receive few or no Contingent Coupons and suffer a significant loss at maturity.
time the terms of the Securities are set. “Volatility”
refers to the frequency and magnitude of changes in the levels of the Underlyings. Higher expected volatility with respect to the Underlyings
as of the Trade Date generally indicates a greater expectation as of that date that the Final Underlying Levels of any Underlying could
ultimately be less than its Downside Threshold on the Final Valuation Date, which would result in a loss of a significant portion or all
of the Principal Amount. At the time the terms of the Securities are set, higher expected volatility will generally be reflected in a
higher Contingent Coupon Rate and/or lower Coupon Barriers and Downside Thresholds, as compared to otherwise comparable securities. Therefore,
a relatively higher Contingent Coupon Rate, which would increase the upside return if the Index Closing Values are greater than or equal
to the Coupon Barriers on every Index Business Day during the Quarterly Observation Periods, may indicate an increased risk that
the levels of the Underlyings will decrease substantially, which would result in few or no Contingent Coupons and a significant loss at
maturity. In addition, and as described above in "The Securities do not guarantee the payment of regular interest or the return of
any principal," in general, the higher potential return on the Securities as compared to the return payable on our ordinary debt
securities with a comparable maturity indicates the risk that you may not receive a positive return on the Securities and may lose a significant
portion or all of your investment. Further, relatively lower Downside Thresholds may not indicate that the Securities have a greater likelihood
of a return of principal at maturity. You should be willing to accept the downside market risk of the Underlyings and the potential to
lose a significant portion or all of your Principal Amount at maturity.
Some or all of these factors will influence
the terms of the Securities at the time of issuance and the price that you will receive if you sell your Securities prior to maturity,
as the Securities are comprised of both a debt component and a performance-based component linked to the Underlyings, and these are the
types of factors that also generally affect the values of debt securities and derivatives linked to the Underlyings. The value of each
of the Underlyings may be, and each has recently been, extremely volatile, and we can give you no assurance that the volatility will lessen.
See “Historical Information” below. You may receive less, and possibly significantly less, than the Principal Amount per Security
if you try to sell your Securities prior to maturity.
The inclusion of the costs of issuing,
selling, structuring and hedging the Securities in the Issue Price and the lower rate we are willing to pay as issuer make the economic
terms of the Securities less favorable to you than they otherwise would be.
However, because the costs associated with
issuing, selling, structuring and hedging the Securities are not fully deducted upon issuance, for a period of up to 4 months following
the Settlement Date, to the extent that MS & Co. may buy or sell the Securities in the secondary market, absent changes in market
conditions, including those related to the Underlyings, and to our secondary market credit spreads, it would do so based on values higher
than the estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
Please read the discussion under “What Are the Tax
Consequences of the Securities” in this free writing prospectus concerning the U.S. federal income tax consequences of an investment
in the Securities. We intend to treat a Security for U.S. federal income tax purposes as a
single financial contract that provides for a coupon that
will be treated as gross income to you at the time received or accrued, in accordance with your regular method of tax accounting. Under
this treatment, the ordinary income treatment of the coupon payments, in conjunction with the capital loss treatment of any loss recognized
upon the sale, exchange or settlement of the Securities, could result in adverse tax consequences to holders of the Securities because
the deductibility of capital losses is subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the
“IRS”) regarding the tax treatment of the Securities, and the IRS or a court may not agree with the tax treatment described
herein. If the IRS were successful in asserting an alternative treatment for the Securities, the timing and character of income or loss
on the Securities might differ significantly from the tax treatment described herein. For example, under one possible treatment, the IRS
could seek to recharacterize the Securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue
into income original issue discount on the Securities every year at a “comparable yield” determined at the time of issuance
(as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on the Securities)
and recognize all income and gain in respect of the Securities as ordinary income. The risk that financial instruments providing for buffers,
triggers or similar downside protection features, such as the Securities, would be recharacterized as debt is greater than the risk of
recharacterization for comparable financial instruments that do not have such features.
In 2007, the U.S. Treasury Department and the IRS released
a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
While it is not clear whether the Securities would be viewed as similar to the prepaid forward contracts described in the notice, it is
possible that any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the Securities, possibly with retroactive effect. The notice focuses on a number of issues,
the most relevant of which for holders of the Securities are the character and timing of income or loss and the degree, if any, to which
income realized by non-U.S. investors should be subject to withholding tax. Both U.S. and Non-U.S. Holders should consult their tax advisers
regarding the U.S. federal income tax consequences of an investment in the Securities, including possible alternative treatments, the
issues presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
The examples below illustrate the payment upon a call or at maturity
for a $10 Security on a hypothetical offering of the Securities, with the following assumptions (the actual terms for the Securities will
be determined on the Trade Date; amounts may have been rounded for ease of reference):
Example 1 — Securities are Called on the Second Coupon Payment
Date
Date
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Lowest Index Closing Value during the relevant Quarterly Observation Period
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Payment (per Security)
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SPX Index
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RTY Index
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NDX Index
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First Quarterly Observation Period
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2,800 (at or above Coupon Barrier)
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1,600 (at or above Coupon Barrier)
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10,000 (at or above Coupon Barrier)
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$0.2125 (Contingent Coupon — Not Called)
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Second Quarterly Observation Period
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3,000 (at or above Coupon Barrier)
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1,800 (at or above Coupon Barrier)
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10,500 (at or above Coupon Barrier)
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$10.2125 (Settlement Amount)
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Total Payment:
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$10.425 (4.25% return)
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Each of the SPX Index, the RTY Index and the NDX Index closes above
its respective Coupon Barrier on each Index Business Day during the first Quarterly Observation Period, and therefore a Contingent
Coupon is paid on the related Coupon Payment Date. MSFL calls the Securities on the second Coupon Payment Date. On the Call Date, MSFL
will pay you a total of $10.2125 per Security, reflecting your principal amount plus the applicable Contingent Coupon otherwise
due with respect to the relevant Quarterly Observation Period. When added to the Contingent Coupon payment of $0.2125 received in respect
of the prior Quarterly Observation Period, MSFL will have paid you a total of $10.425 per Security for a 4.25% total return over the 6-month
term of the Securities. No further amount will be owed to you under the Securities, and you do not participate in the appreciation of
the Underlyings.
Example 2 — Securities are NOT Called and the Final Underlying
Value of each of the SPX Index, the RTY Index and the NDX Index is at or above its respective Downside Threshold
Date
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Lowest Index Closing Value during the relevant Quarterly Observation Period
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Payment (per Security)
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SPX Index
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RTY Index
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NDX Index
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First Quarterly Observation Period
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1,975 (at or above Coupon Barrier)
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1,200 (at or above Coupon Barrier)
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10,000 (at or above Coupon Barrier)
|
$0.2125 (Contingent Coupon — Not Called)
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Second Quarterly Observation Period
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1,950 (at or above Coupon Barrier)
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1,120 (at or above Coupon Barrier)
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9,600 (at or above Coupon Barrier)
|
$0.2125 (Contingent Coupon — Not Called)
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Third Quarterly Observation Period
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2,000 (at or above Coupon Barrier)
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1,150 (at or above Coupon Barrier)
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5,000 (below Coupon Barrier)
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$0 (Not Called)
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Fourth Quarterly Observation Period
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2,000 (at or above Coupon Barrier)
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1,175 (at or above Coupon Barrier)
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5,000 (below Coupon Barrier)
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$0 (Not Called)
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Fifth to Twelfth Quarterly Observation Periods
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Various (all at or above Coupon Barrier)
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Various (at or above Coupon Barrier)
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Various (all below Coupon Barrier)
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$0 (Not Called)
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Final Quarterly Observation Period
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2,250 (at or above Coupon Barrier and Downside Threshold)
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1,200 (at or above Coupon Barrier and Downside Threshold)
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7,500 (at or above Coupon Barrier and Downside Threshold)
|
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Final Index Value
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$10.2125 (Settlement Amount)
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2,250
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1,200
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7,500
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Total Payment:
$10.6375 (6.375% return)
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In this example, MSFL does not call the Securities based on the output
of a risk neutral valuation model prior to maturity. Each of the SPX Index, the RTY Index and the NDX Index closes above its respective
Coupon Barrier on each Index Business Day during the first two Quarterly Observation Periods, and therefore a Contingent Coupon
is paid on each related Coupon Payment Date. During each of the third to twelfth Quarterly Observation Periods, the SPX Index and the
RTY Index close at or above their respective Coupon Barriers on every Index Business Day, but the NDX Index closes below its Coupon
Barrier on at least one Index Business Day during each such Quarterly Observation Period. Therefore, no Contingent Coupon is paid on any
related Coupon Payment Date. On the Final Valuation Date, each of the SPX Index, the RTY Index and the NDX Index closes above its Downside
Threshold, and each of the SPX Index, the RTY Index and the NDX Index closes above its Coupon Barrier on every Index Business Day
during the final Quarterly Observation Period. Therefore, at maturity, MSFL will pay you a total of $10.2125 per Security, reflecting
your principal amount plus the applicable Contingent Coupon. When added to the total Contingent Coupon payments of $0.425 received
in respect of prior Quarterly Observation Periods, MSFL will have paid you a total of $10.6375 per Security for a 6.375% total return
on the Securities over 3.25 years. You do not participate in any appreciation of the Underlyings.
Example 3 — Securities are NOT Called and the Final Underlying
Value of at least one of the Underlyings is below the Downside Threshold
Date
|
Lowest Index Closing Value during the relevant Quarterly Observation Period
|
|
|
SPX Index
|
RTY Index
|
NDX Index
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Payment (per Security)
|
First Quarterly Observation Period
|
2,400 (at or above Coupon Barrier)
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1,175 (at or above Coupon Barrier)
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10,500 (at or above Coupon Barrier)
|
$0.2125 (Contingent Coupon — Not Called)
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Second Quarterly Observation Period
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2,300 (at or above Coupon Barrier)
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1,175 (at or above Coupon Barrier)
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10,000 (at or above Coupon Barrier)
|
$0.2125 (Contingent Coupon — Not Called)
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Third Quarterly Observation Period
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2,250 (at or above Coupon Barrier)
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850 (below Coupon Barrier)
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5,000 (below Coupon Barrier)
|
$0 (Not Called)
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Fourth Quarterly Observation Period
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2,350 (at or above Coupon Barrier)
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825 (below Coupon Barrier)
|
5,000 (below Coupon Barrier)
|
$0 (Not Called)
|
Fifth to Twelfth Quarterly Observation Period
|
Various (all below Coupon Barrier)
|
Various (all below Coupon Barrier)
|
Various (all below Coupon Barrier)
|
$0 (Not Called)
|
Final Quarterly Observation Period
|
2,200 (at or above Coupon Barrier and Downside
Threshold)
2,200
|
700 (below Coupon Barrier and Downside Threshold)
Final Index Value
700
|
3,600 (below Coupon Barrier and Downside
Threshold)
3,600
|
$10 + [$10 × Index Return of the Least
Performing Underlying] =
$10 + [$10 × -60%] =
$10 - $6 =
$4 (Payment at Maturity)
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Total Payment:
$4.425 (-55.75% return)
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In this example, MSFL does not call the Securities based on the output
of a risk neutral valuation model prior to maturity. Each of the SPX Index, the RTY Index and the NDX Index closes above its respective
Coupon Barrier on each Index Business Day during the first two Quarterly Observation Periods, and therefore a Contingent Coupon
is paid on each related Coupon Payment Date. During each of the third and fourth Quarterly Observation Periods, the SPX Index closes at
or above its Coupon Barrier on every Index Business Day but the RTY Index and the NDX Index close below their respective Coupon Barriers
on at least one Index Business Day during each such Quarterly Observation Period. Therefore, no Contingent Coupon is paid on either related
Coupon Payment Date. During each of the fifth to the twelfth Quarterly Observation Periods, each of the SPX Index, the RTY Index and the
NDX Index closes below its respective Coupon Barrier on at least one Index Business Day during each such Quarterly Observation Period
and thus no Contingent Coupon is paid on any related Coupon Payment Date. On the Final Valuation Date, the SPX Index closes above its
Coupon Barrier and Downside Threshold, but the RTY Index and the NDX Index close below their respective Coupon Barriers and Downside Thresholds.
Therefore, at maturity, investors are exposed to the downside performance of the Least Performing Underlying (which, in this example,
is the NDX Index), and MSFL will pay you $4 per Security, which reflects the percentage decrease of the Least Performing Underlying from
the Trade Date to the Final Valuation Date. When added to the total Contingent Coupon payments of $0.425 received in respect of prior
Quarterly Observation Periods, MSFL will have paid you $4.425 per Security for a loss on the Securities of 55.75%.
The Securities differ from ordinary debt securities in that, among
other features, MSFL is not necessarily obligated to repay the full amount of your initial investment. If the Securities are not called
on any Coupon Payment Date, you may lose a significant portion or all of your initial investment. Specifically, if the Securities are
not called and the Final Underlying Value of any Underlying is less than its Downside Threshold, you will lose 1% (or a fraction thereof)
of your principal amount for each 1% (or a fraction thereof) that the Index Return of the Least Performing Underlying is less than zero.
Any payment on the Securities, including any Contingent Coupon, payment upon a call or the Payment at Maturity, is dependent on our ability
to satisfy our obligations when they come due. If we are is unable to meet our obligations, you may not receive any amounts due to you
under the Securities.
The Issuer will not pay a quarterly Contingent Coupon if the Index
Closing Value for any of the Underlyings is below its respective Coupon Barrier on any Index Business Day during the relevant Quarterly
Observation Period. The Issuer may call the Securities based on the output of a risk neutral valuation model on any quarterly Call Date,
beginning October 27, 2021. You will lose a
significant portion or all of your principal amount at maturity if
the Securities are not called and the Final Underlying Value of any of the Underlyings is below its Downside Threshold.
What
Are the Tax Consequences of the Securities?
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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 free writing prospectus and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal income
tax consequences and certain estate tax consequences of the ownership and disposition of the Securities. This discussion applies only
to investors in the Securities who:
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purchase the Securities in the original offering; and
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hold the Securities as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the “Code”).
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This discussion does not describe all of the tax
consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special
rules, such as:
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certain financial institutions;
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certain dealers and traders in securities or commodities;
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investors holding the Securities as part of a “straddle,” wash
sale, conversion transaction, integrated transaction or constructive sale transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar;
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partnerships or other entities classified as partnerships for U.S. federal
income tax purposes;
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regulated investment companies;
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real estate investment trusts; or
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tax-exempt entities, including “individual retirement accounts”
or “Roth IRAs” as defined in Section 408 or 408A of the Code, respectively.
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If an entity that is classified as a partnership for
U.S. federal income tax purposes holds the Securities, the U.S. federal income tax treatment of a partner will generally depend on the
status of the partner and the activities of the partnership. If you are a partnership holding the Securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the Securities to you.
As the law applicable to the U.S. federal income taxation
of instruments such as the Securities is technical and complex, the discussion below necessarily represents only a general summary. The
effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences or consequences
resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences to taxpayers subject
to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of
which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the Securities
should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the Securities or instruments that are similar to the Securities for U.S. federal income tax purposes,
no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend to treat a Security for
U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated as gross income to you
at the time received or accrued in accordance with your regular method of tax accounting. In the opinion of our counsel, Davis Polk &
Wardwell LLP, this treatment of the Securities is reasonable under current law; however, our counsel has advised us that it is unable
to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative treatments are possible. Moreover,
our counsel’s opinion is based on market conditions as of the date of this free writing prospectus and is subject to confirmation
on the Trade Date.
You should consult your tax adviser regarding all aspects of the
U.S. federal tax consequences of an investment in the Securities (including possible alternative treatments of the Securities). Unless
otherwise stated, the following discussion is based on the treatment of each Security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S.
Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a Security that is, for U.S. federal income tax
purposes:
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a citizen or individual resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state thereof or the District of Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
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Tax Treatment of the Securities
Assuming the treatment of the Securities as set forth
above is respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax
basis in the Securities should equal the amount paid by the U.S. Holder to acquire the Securities.
Tax Treatment of Coupon Payments. Any coupon
payment on the Securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance with the
U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities.
Upon a sale, exchange or settlement of the Securities, a U.S. Holder should recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the Securities sold, exchanged or settled.
For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds attributable to
an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term capital gain or loss
if the U.S. Holder has held the Securities for more than one year at the time of the sale, exchange or settlement, and should be short-term
capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with the capital loss treatment of
any loss recognized upon the sale, exchange or settlement of the Securities, could result in adverse tax consequences to holders of the
Securities because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of an
Investment in the Securities
Due to the absence of authorities that directly address the proper tax
treatment of the Securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment described
above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the Securities under Treasury regulations
governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the IRS were successful in asserting
that the Contingent Debt Regulations applied to the Securities, the timing and character of income thereon would be significantly affected.
Among other things, a U.S. Holder would be required to accrue into income original issue discount on the Securities every year at a “comparable
yield” determined at the time of their issuance, adjusted upward or downward to reflect the difference, if any, between the actual
and the projected amount of any contingent payments on the Securities. Furthermore, any gain realized by a U.S. Holder at maturity or
upon a sale, exchange or other disposition of the Securities would be treated as ordinary income, and any loss realized would be treated
as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue discount and as capital loss thereafter. The
risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the Securities, would
be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of
the Securities are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect
to the Securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether to require holders of
“prepaid forward contracts” and similar instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments
should be subject to any such accrual regime; the relevance of factors such as the exchange–traded status of the instruments and
the nature of the underlying property to which the instruments are linked; whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose
an interest charge; and appropriate transition rules and effective dates. While it is not clear whether instruments such as the Securities
would be viewed as similar to the prepaid forward contracts described in the notice, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the Securities, possibly
with retroactive effect. U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment
in the Securities, including possible alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments
on the Securities and the payment of proceeds from a sale, exchange or other disposition of the Securities, unless a U.S. Holder provides
proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited
against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
In addition, information returns will be filed with the IRS in connection with payments on the Securities and the payment of proceeds
from a sale, exchange or other disposition of the Securities, unless the U.S. Holder provides proof of an applicable exemption from the
information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder. As used
herein, the term “Non-U.S. Holder” means a beneficial owner of a Security that is for U.S. federal income tax purposes:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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The term “Non-U.S. Holder” does not
include any of the following holders:
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a holder who is an individual present in the United States for 183 days or
more in the taxable year of disposition and who is not otherwise a resident of the United States for U.S. federal income tax purposes;
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certain former citizens or residents of the United States; or
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a holder for whom income or gain in respect of the Securities is effectively
connected with the conduct of a trade or business in the United States.
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Such holders should consult their tax advisers regarding the U.S. federal
income tax consequences of an investment in the Securities.
Although significant aspects of the tax treatment of each Security are
uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified by
an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any additional
amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding tax, a Non-U.S.
Holder of the Securities must comply with certification requirements to establish that it is not a U.S. person and is eligible for such
an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult your tax adviser regarding
the tax treatment of the Securities, including the possibility of obtaining a refund of any withholding tax and the certification requirement
described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated thereunder
(“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid
or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S.
equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities that
substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable
Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to securities
issued before January 1, 2023 that do not have a delta of one with respect to any Underlying Security. Based on the terms of the Securities
and current market conditions, we expect that the Securities will not have a delta of one with respect to any Underlying Security on the
Trade Date. However, we will provide an updated determination in the pricing supplement. Assuming that the Securities do not have a delta
of one with respect to any Underlying Security, our counsel is of the opinion that the Securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may disagree
with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether
you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we will not be required
to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding the potential application
of Section 871(m) to the Securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which is potentially
includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers) should note that, absent an applicable treaty exemption,
the Securities may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective investors that are non-U.S. individuals,
or are entities of the type described above, should consult their tax advisers regarding the U.S. federal estate tax consequences of an
investment in the Securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection with any
coupon payment and may be filed with the IRS in connection with the payment at maturity on the Securities and the payment of proceeds
from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts paid to the Non-U.S.
Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a U.S. person for U.S. federal
income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from a payment to a Non-U.S. Holder will
be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability and may entitle the Non-U.S. Holder to a
refund, provided that the required information is timely furnished to the IRS.
FATCA
Legislation commonly referred to as “FATCA” generally imposes
a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to certain financial
instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An intergovernmental agreement
between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA generally applies to certain
financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed or determinable annual or periodical”
income (“FDAP income”). Withholding (if applicable) applies to payments of U.S.-source FDAP income and to payments of gross
proceeds of the disposition (including upon retirement) of certain financial instruments treated as providing for U.S.-source interest
or dividends. Under proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending
finalization), no withholding will apply on payments of gross proceeds (other than amounts treated as FDAP income). While the treatment
of the Securities is unclear, you should assume that any coupon payment with respect to the Securities will be subject to the FATCA rules.
If withholding applies to the Securities, we will not be required to pay any additional amounts with respect to amounts withheld. Both
U.S. and Non-U.S. Holders should consult their tax advisers regarding the potential application of FATCA to the Securities.
The discussion in the preceding paragraphs under “What Are
the Tax Consequences of the Securities,” insofar as it purports to describe provisions of U.S. federal income tax laws or legal
conclusions with respect thereto, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax
consequences of an investment in the Securities.
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected to provide
a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based on the relative
value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared to the
aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through 1943. For additional
information about the S&P 500® Index, see the information set forth under “S&P 500® Index”
in the accompanying index supplement.
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of Standard
and Poor’s Financial Services LLC. For more information, see “S&P 500® Index” in the accompanying
index supplement.
The following table sets forth the published high
and low closing values, as well as the end-of-quarter closing values, of the S&P 500® Index for each quarter in the
period from January 1, 2016 through July 21, 2021. The closing value of the S&P 500® Index on July 21, 2021 was 4,358.69.
We obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical closing
values of the S&P 500® Index should not be taken as an indication of future performance, and no assurance can be given
as to the level of the S&P 500® Index on any Index Business Day during a Quarterly Observation Period, including the
Final Valuation Date.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
1/1/2016
|
3/31/2016
|
2,063.95
|
1,829.08
|
2,059.74
|
4/1/2016
|
6/30/2016
|
2,119.12
|
2,000.54
|
2,098.86
|
7/1/2016
|
9/30/2016
|
2,190.15
|
2,088.55
|
2,168.27
|
10/1/2016
|
12/31/2016
|
2,271.72
|
2,085.18
|
2,238.83
|
1/1/2017
|
3/31/2017
|
2,395.96
|
2,257.83
|
2,362.72
|
4/1/2017
|
6/30/2017
|
2,453.46
|
2,328.95
|
2,423.41
|
7/1/2017
|
9/30/2017
|
2,519.36
|
2,409.75
|
2,519.36
|
10/1/2017
|
12/31/2017
|
2,690.16
|
2,529.12
|
2,673.61
|
1/1/2018
|
3/31/2018
|
2,872.87
|
2,581.00
|
2,640.87
|
4/1/2018
|
6/30/2018
|
2,786.85
|
2,581.88
|
2,718.37
|
7/1/2018
|
9/30/2018
|
2,930.75
|
2,713.22
|
2,913.98
|
10/1/2018
|
12/31/2018
|
2,925.51
|
2,351.10
|
2,506.85
|
1/1/2019
|
3/31/2019
|
2,854.88
|
2,447.89
|
2,834.40
|
4/1/2019
|
6/30/2019
|
2,954.18
|
2,744.45
|
2,941.76
|
7/1/2019
|
9/30/2019
|
3,025.86
|
2,840.60
|
2,976.74
|
10/1/2019
|
12/31/2019
|
3,240.02
|
2,887.61
|
3,230.78
|
1/1/2020
|
3/31/2020
|
3,386.15
|
2,237.40
|
2,584.59
|
4/1/2020
|
6/30/2020
|
3,232.39
|
2,470.50
|
3,100.29
|
7/1/2020
|
9/30/2020
|
3,580.84
|
3,115.86
|
3,363.00
|
10/1/2020
|
12/31/2020
|
3,756.07
|
3,269.96
|
3,756.07
|
1/1/2021
|
3/31/2021
|
3,974.54
|
3,700.65
|
3,972.89
|
4/1/2021
|
6/30/2021
|
4,297.50
|
4,019.87
|
4,297.50
|
7/1/2021
|
7/21/2021*
|
4,384.63
|
4,258.49
|
4,358.69
|
* Available information for
the indicated period includes data for less than the entire calendar quarter and accordingly, the “Quarterly High,” “Quarterly
Low” and “Quarterly Close” data indicated are for this shortened period only.
The graph below illustrates the performance of the S&P
500® Index from January 1, 2008 through July 21, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the SPX Index on July 21,
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 July 21, 2021. The closing value of the Russell 2000® Index on July 21, 2021 was 2,234.042. We obtained the
information in the table below from Bloomberg Financial Markets, without independent verification. The historical closing values of the
Russell 2000® Index should not be taken as an indication of future performance, and no assurance can be given as to the
level of the Russell 2000® Index on any Index Business Day during a Quarterly Observation Period, including the Final Valuation
Date.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
1/1/2016
|
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
|
6/30/2021
|
2,343.758
|
2,135.139
|
2,310.549
|
7/1/2021
|
7/21/2021*
|
2,329.359
|
2,130.680
|
2,234.042
|
* 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 July 21, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the RTY Index on July 21,
2021 were its Initial Underlying Value.
Past performance is not indicative
of future results.
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities
of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index® includes companies across a variety
of major industry groups. At any moment in time, the value of the NASDAQ-100 Index® equals the aggregate value of the then-current
NASDAQ-100 Index® share weights of each of the NASDAQ-100 Index® component securities, which are based on
the total shares outstanding of each such NASDAQ-100 Index® component security, multiplied by each such security’s
respective last sale price on NASDAQ (which may be the official closing price published by NASDAQ), and divided by a scaling factor, which
becomes the basis for the reported NASDAQ-100 Index® value. For additional information about the NASDAQ-100 Index®,
see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement.
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index®”
in the accompanying index supplement.
The following table sets forth the published high and low closing values,
as well as the end-of-quarter closing values, of the NASDAQ-100 Index® for each quarter in the period from January 1, 2016
through July 21, 2021. The closing value of the NASDAQ-100 Index® on July 21, 2021 was 14,842.63. We obtained the information
in the table below from Bloomberg Financial Markets, without independent verification. The historical closing values of the NASDAQ-100
Index® should not be taken as an indication of future performance, and no assurance can be given as to the level of the
NASDAQ-100 Index® on any Index Business Day during a Quarterly Observation Period, including the Final Valuation Date.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
1/1/2016
|
3/31/2016
|
4,497.86
|
3,947.80
|
4,483.66
|
4/1/2016
|
6/30/2016
|
4,565.42
|
4,201.06
|
4,417.70
|
7/1/2016
|
9/30/2016
|
4,891.36
|
4,410.75
|
4,875.70
|
10/1/2016
|
12/31/2016
|
4,965.81
|
4,660.46
|
4,863.62
|
1/1/2017
|
3/31/2017
|
5,439.74
|
4,911.33
|
5,436.23
|
4/1/2017
|
6/30/2017
|
5,885.30
|
5,353.59
|
5,646.92
|
7/1/2017
|
9/30/2017
|
6,004.38
|
5,596.96
|
5,979.30
|
10/1/2017
|
12/31/2017
|
6,513.27
|
5,981.92
|
6,396.42
|
1/1/2018
|
3/31/2018
|
7,131.12
|
6,306.10
|
6,581.13
|
4/1/2018
|
6/30/2018
|
7,280.71
|
6,390.84
|
7,040.80
|
7/1/2018
|
9/30/2018
|
7,660.18
|
7,014.55
|
7,627.65
|
10/1/2018
|
12/31/2018
|
7,645.45
|
5,899.35
|
6,329.96
|
1/1/2019
|
3/31/2019
|
7,493.27
|
6,147.13
|
7,378.77
|
4/1/2019
|
6/30/2019
|
7,845.73
|
6,978.02
|
7,671.08
|
7/1/2019
|
9/30/2019
|
8,016.95
|
7,415.69
|
7,749.45
|
10/1/2019
|
12/31/2019
|
8,778.31
|
7,550.79
|
8,733.07
|
1/1/2020
|
3/31/2020
|
9,718.73
|
6,994.29
|
7,813.50
|
4/1/2020
|
6/30/2020
|
10,209.82
|
7,486.29
|
10,156.85
|
7/1/2020
|
9/30/2020
|
12,420.54
|
10,279.25
|
11,418.06
|
10/1/2020
|
12/31/2020
|
12,888.28
|
11,052.95
|
12,888.28
|
1/1/2021
|
3/31/2021
|
13,807.70
|
12,299.08
|
13,091.44
|
4/1/2021
|
6/30/2021
|
14,572.75
|
13,001.63
|
14,554.80
|
7/1/2021
|
7/21/2021*
|
14,900.44
|
14,549.09
|
14,842.63
|
*Available information for the indicated period includes data for less
than the entire calendar quarter and accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close”
data indicated are for this shortened period only.
The graph below illustrates the performance of the NASDAQ-100
Index® from January 1, 2008 through July 21, 2021, based on information from Bloomberg.
* The dotted line indicates the hypothetical
Coupon Barrier and the solid line indicates the hypothetical Downside Threshold, assuming the closing value of the NDX Index on July 21,
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 Russell 2000®
Index, the S&P 500® Index and the NASDAQ-100 Index® from January 1, 2008 through July 21, 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 on any Index Business Day during an applicable
Quarterly Observation Period because there may be a greater likelihood that at least one of the Underlyings will decrease in value significantly.
However, even if the Underlyings have a higher positive correlation, one or more of the Underlyings may close below the respective Coupon
Barrier(s) on any Index Business Day during the applicable Quarterly Observation Period or below the Downside Threshold on the Final Valuation
Date, as applicable, as the Underlyings may all decrease in value. Moreover, the actual correlation among the Underlyings may differ,
perhaps significantly, from their historical correlation. A higher Contingent Coupon Rate is generally associated with lower correlation
among the Underlyings, which may indicate a greater potential for missed Contingent Coupons and/or a significant loss on your investment
at maturity. See “Key Risks — Because the Securities are linked to the performance of the least performing among the SPX Index,
the RTY Index and the NDX Index, you are exposed to greater risk of receiving no Contingent Coupon payments or sustaining a significant
loss on your investment than if the Securities were linked to just one of the Underlyings” and “— A higher Contingent
Coupon Rate and/or lower Coupon Barriers and Downside Thresholds may reflect greater expected volatility of the Underlyings, and greater
expected volatility generally indicates an increased risk of declines in the levels of the Underlyings and, potentially, a significant
loss at maturity.” herein.
Past performance and correlation of the Underlyings are not indicative
of the future performance or correlation of the Underlyings.
Additional Terms of the Securities
|
If the terms discussed in this free writing prospectus differ from those
discussed in the prospectus supplement, index supplement or prospectus, the terms contained in this free writing prospectus will control.
Some Definitions
We have defined some of the terms that we use frequently in this free
writing prospectus below:
|
t
|
“Index Closing Value” on any Index Business Day
means (i) with respect to the SPX Index or the NDX Index, the closing value of such Underlying, or any relevant Successor Index (as defined
under “—Discontinuance of an Underlying; Alteration of Method of Calculation” below) published at the regular weekday
close of trading on that Index Business Day by the relevant Index Publisher, and (ii) with respect to the RTY Index, the closing value
of such Underlying or any Successor Index reported by Bloomberg Financial Services, or any successor reporting service the Calculation
Agent may select, on that Index Business Day. In certain circumstances, the Index Closing Value will be based on the alternate calculation
of such Underlying as described under “—Discontinuance of an Underlying; Alteration of Method of Calculation.”
|
The closing value of the RTY Index reported
by Bloomberg Financial Services may be lower or higher than the official closing value of the Underlying published by the Index Publisher.
|
t
|
“Index Publisher” means, with respect to the
SPX Index, S&P Dow Jones Indices LLC or any successor thereto; with respect to the RTY Index, FTSE Russell or any successor thereto;
and with respect to the NDX Index, Nasdaq, Inc. or any successor thereto.
|
|
t
|
“Index Business Day” means a day, for any Underlying,
as determined by the Calculation Agent, on which trading is generally conducted on each of the Relevant Exchange(s) for such Underlying,
other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday
closing price.
|
|
t
|
“Market Disruption Event” means, with respect
to any Underlying:
|
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material limitation
of trading of securities then constituting 20 percent or more of the value of such Underlying (or any relevant Successor Index (as defined
below under “—Discontinuance of an Underlying; Alteration of Method of Calculation”)) on the Relevant Exchange for such
securities for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session
on such Relevant Exchange, or
(b) a breakdown or failure in the price
and trade reporting systems of any Relevant Exchange as a result of which the reported trading prices for securities then constituting
20 percent or more of the value of such Underlying (or a Successor Index) during the last one-half hour preceding the close of the principal
trading session on such Relevant Exchange are materially inaccurate, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds related
to such Underlying (or a Successor Index) for more than two hours of trading or during the one-half hour period preceding the close of
the principal trading session on such market,
in each case as determined by the Calculation
Agent in its sole discretion; and
(ii) a
determination by the Calculation Agent in its sole discretion that any event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with respect to
the Securities.
For the purpose of determining whether a Market Disruption
Event exists at any time, if trading in a security included in such Underlying is materially suspended or materially limited at that time,
then the relevant percentage contribution of that security to the value of such Underlying shall be based on a comparison of (x) the portion
of the value of such Underlying attributable to that security relative to (y) the overall value of such Underlying, in each case immediately
before that suspension or limitation.
For the purpose of determining whether
a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular business hours of the Relevant Exchange or market, (2) a decision to permanently
discontinue trading in the relevant futures or options contract or exchange-traded fund will not constitute a Market Disruption Event,
(3) a suspension of trading in futures or options contracts or exchange-traded funds on such Underlying by the primary securities market
trading in such contracts or funds by reason of (a) a price change exceeding limits set by such securities exchange or market, (b) an
imbalance of orders relating to such contracts or funds, or (c) a disparity in bid and ask quotes relating to such contracts or funds
will constitute a suspension, absence or material limitation of trading in futures or options contracts or exchange-
traded funds related to the Index and (4)
a “suspension, absence or material limitation of trading” on any Relevant Exchange or on the primary market on which futures
or options contracts or exchange-traded funds related to such Underlying are traded will not include any time when such securities market
is itself closed for trading under ordinary circumstances.
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“Relevant Exchange” means, with respect to any
Underlying, the primary exchange(s) or market(s) of trading for (i) any security then included in such Underlying, or any relevant Successor
Index, and (ii) any futures or options contracts related to such Underlying or to any security then included in such Underlying.
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Postponement of Quarterly Observation End-Dates and Coupon Payment
Dates (including the Call Dates and the Maturity Date)
If any scheduled Quarterly Observation End-Date, including the Final
Valuation Date, is not an Index Business Day with respect to any Underlying, or if there is a Market Disruption Event on such day with
respect to any Underlying, the relevant Quarterly Observation End-Date solely with respect to that affected Underlying shall be the next
succeeding Index Business Day with respect to that Underlying on which there is no Market Disruption Event with respect to that Underlying;
provided that if a Market Disruption Event with respect to that Underlying has occurred on each of the five Index Business Days
with respect to that Underlying immediately succeeding the relevant scheduled Quarterly Observation End-Date, then (i) such fifth succeeding
Index Business Day shall be deemed to be the relevant Quarterly Observation End-Date with respect to that affected Underlying, notwithstanding
the occurrence of a Market Disruption Event with respect to that Underlying on such day, and (ii) with respect to any such fifth Index
Business Day on which a Market Disruption Event occurs with respect to that Underlying, the Calculation Agent shall determine the Index
Closing Value on such fifth Index Business Day in accordance with the formula for and method of calculating that Underlying last in effect
prior to the commencement of the Market Disruption Event, using the closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension
or limitation) at the close of the principal trading session of the Relevant Exchange on such Index Business Day of each security most
recently constituting that affected Underlying without any rebalancing or substitution of such securities following the commencement of
the Market Disruption Event.
If any scheduled Coupon Payment Date (including a scheduled Call Date)
is not a Business Day, that Contingent Coupon, if any, (or the Settlement Amount, if applicable), shall be paid on the next succeeding
business day; provided that the Contingent Coupon, if any, with respect to the Final Valuation Date shall be paid on the Maturity
Date; provided further that if, due to a Market Disruption Event or otherwise, any Quarterly Observation End-Date with respect
to any Underlying is postponed so that it falls less than two business days prior to the scheduled Coupon Payment Date, Call Date or Maturity
Date, as applicable, the Coupon Payment Date, Call Date or Maturity Date, as applicable, shall be postponed to the second business day
following the Quarterly Observation End-Date as postponed, by which date the Index Closing Value of each Underlying has been determined.
In any of these cases, no adjustment shall be made to any Contingent Coupon payment made on that postponed date.
Alternate Exchange Calculation in case of an Event of Default
If an event of default with respect to the Securities shall have occurred
and be continuing, the amount declared due and payable upon any acceleration of the Securities (the “Acceleration Amount”)
will be an amount, determined by the Calculation Agent in its sole discretion, that is equal to the cost of having a Qualified Financial
Institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to the Securities
as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent
economic value to you with respect to the Securities. That cost will equal:
o the lowest amount
that a Qualified Financial Institution would charge to effect this assumption or undertaking, plus
o the reasonable expenses,
including reasonable attorneys’ fees, incurred by the holders of the Securities in preparing any documentation necessary for this
assumption or undertaking.
During the Default Quotation Period for the Securities, which we describe
below, the holders of the Securities and/or we may request a Qualified Financial Institution to provide a quotation of the amount it would
charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other party in writing of the
quotation. The amount referred to in the first bullet point above will equal the lowest—or, if there is only one, the only—quotation
obtained, and as to which notice is so given, during the Default Quotation Period. With respect to any quotation, however, the party not
obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the Qualified Financial
Institution providing the quotation and notify the other party in writing of those grounds within two business days after the last day
of the Default Quotation Period, in which case that quotation will be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary liquidation,
bankruptcy or insolvency of, or any analogous proceeding is filed with respect to Morgan Stanley or MSFL, then depending on applicable
bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the Securities is accelerated because of an event
of default as described above, we shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York
office, on which notice the Trustee may conclusively
rely, and to the Depositary of the Acceleration Amount and the aggregate
cash amount due, if any, with respect to the Securities as promptly as possible and in no event later than two business days after the
date of such acceleration.
Default Quotation Period
The Default Quotation Period is the period beginning on the day the
Acceleration Amount first becomes due and ending on the third business day after that day, unless:
o no quotation of
the kind referred to above is obtained, or
o every quotation
of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the Default Quotation Period will
continue until the third business day after the first business day on which prompt notice of a quotation is given as described above.
If that quotation is objected to as described above within five business days after that first business day, however, the Default Quotation
Period will continue as described in the prior sentence and this sentence.
In any event, if the Default Quotation Period and the subsequent two
business day objection period have not ended before the Final Valuation Date, then the Acceleration Amount will equal the principal amount
of the Securities.
Qualified Financial Institutions
For the purpose of determining the Acceleration Amount at any time,
a Qualified Financial Institution must be a financial institution organized under the laws of any jurisdiction in the United States or
Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and rated
either:
o A-2 or higher by
Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating agency, or
o P-2 or higher by
Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
Discontinuance of an Underlying; Alteration of Method of Calculation
If the Index Publisher of an Underlying discontinues publication of
such Underlying and the Index Publisher or another entity (including MS & Co.) publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to such discontinued Underlying (such index being referred to herein
as a “Successor Index”), then any subsequent Index Closing Value of such Underlying will be determined by reference to the
published value of such Successor Index at the regular weekday close of trading on any date on which the Index Closing Value is to be
determined, and, to the extent the value of the Successor Index differs from the value of the relevant Underlying at the time of such
substitution, proportionate adjustments will be made by the Calculation Agent to the relevant Initial Underlying Value, Coupon Barrier
and Downside Threshold.
Upon any selection by the Calculation Agent of a Successor Index, the
Calculation Agent will cause written notice thereof to be furnished to the Trustee, to us and to the Depositary, as holder of the Securities,
within three business days of such selection. We expect that such notice will be made available to you, as a beneficial owner of such
Securities, in accordance with the standard rules and procedures of the Depositary and its direct and indirect participants.
If the Index Publisher discontinues publication of an Underlying prior
to, and such discontinuance is continuing on, any day on which an Index Closing Value must be determined and the Calculation Agent determines,
in its sole discretion, that no Successor Index is available at such time, then the Calculation Agent will determine the Index Closing
Value of such Underlying for each such date. The Index Closing Value of such Underlying will be computed by the Calculation Agent in accordance
with the formula for and method of calculating such Underlying last in effect prior to such discontinuance, using the closing price (or,
if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price
that would have prevailed but for such suspension or limitation) at the close of the principal trading session of the Relevant Exchange
on each such date of each security most recently constituting such Underlying without any rebalancing or substitution of such securities
following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication of an Underlying may
adversely affect the value of the Securities.
If at any time the method of calculating an Underlying or Successor
Index, or the value thereof, is changed in a material respect, or if such Underlying or Successor Index is in any other way modified so
that such index does not, in the opinion of the Calculation Agent, fairly represent the value of such index had such changes or modifications
not been made, then, from and after such time, the Calculation Agent will, at the close of business in New York City on each date on which
the Index Closing Value is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation
Agent, may be necessary in order to arrive at a value of a stock index comparable to such Underlying or Successor Index, as the case may
be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Value with reference
to such Underlying or Successor Index, as adjusted. Accordingly, if the method of calculating such Underlying or Successor Index is modified
so that the value of such index is a fraction of what it would have been if it had not been modified
(e.g., due to a split in the index), then the Calculation Agent will
adjust such index in order to arrive at a value of such Underlying or Successor Index as if it had not been modified (e.g., as if such
split had not occurred).
Trustee
The “Trustee” for each offering of notes issued under our
Senior Debt Indenture, including the Securities, will be The Bank of New York Mellon, a New York banking corporation.
Agent
The “agent” is MS & Co.
Calculation Agent and Calculations
The “Calculation Agent” for the Securities will be MS &
Co. As Calculation Agent, MS & Co. will determine, among other things, the Initial Underlying Values, the Index Closing Values on
each Index Business Day during the Quarterly Observation Periods, the Final Underlying Values, whether a Contingent Coupon is payable
with respect to any Quarterly Observation Period and the Payment at Maturity, if any.
All determinations made by the Calculation Agent will be at the sole
discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on you, the
Trustee and us.
All calculations with respect to the Contingent Coupon, payment upon
a call, and Payment at Maturity, if any, will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward
(e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the amount of cash payable per Security, if
any, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up
to .7655); and all dollar amounts paid on the aggregate number of Securities will be rounded to the nearest cent, with one-half cent rounded
upward.
Because the Calculation Agent is our affiliate, the economic interests
of the Calculation Agent and its affiliates may be adverse to your interests, as an owner of the Securities, including with respect to
certain determinations and judgments that the Calculation Agent must make in determining the Final Level or whether a Market Disruption
Event has occurred. See “—Discontinuance of an Underlying; Alteration of Method of Calculation,” and the definition
of Market Disruption Event. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using
its reasonable judgment.
Issuer Notice to Registered Security Holders, the Trustee and the
Depositary
In the event that the Maturity Date of the Securities is postponed due
to postponement of the Final Valuation Date, the Issuer shall give notice of such postponement and, once it has been determined, of the
date to which the Maturity Date has been rescheduled (i) to each registered holder of the Securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the Trustee by facsimile, confirmed by mailing such notice to the Trustee by first class mail, postage prepaid, at its New York office
and (iii) to The Depository Trust Company (the “Depositary”) by telephone or facsimile confirmed by mailing such notice to
the Depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the Securities in the manner
herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder
receives the notice. The Issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of
postponement of the Maturity Date, the Business Day immediately preceding the scheduled Maturity Date and (ii) with respect to notice
of the date to which the Maturity Date has been rescheduled, the Business Day immediately following the Final Valuation Date as postponed.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the Depositary, on or prior to 10:30 a.m. (New
York City time) on the Business Day preceding each Coupon Payment Date, of the amount of cash, if any, to be delivered with respect to
each Principal Amount of the Securities and (ii) deliver the aggregate cash amount due with respect to the Securities, if any, to the
Trustee for delivery to the Depositary, as holder of the Securities, on or prior to the Coupon Payment Date.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the Depositary, on or prior to 10:30 a.m. (New
York City time) on the Business Day preceding the Call Date or the Business Day preceding the Maturity Date, as applicable, of the amount
of cash, if any, to be delivered with respect to each Principal Amount of the Securities, and (ii) deliver the aggregate cash amount due
with respect to the Securities, if any, to the Trustee for delivery to the Depositary, as holder of the Securities, on or prior to the
Call Date or Maturity Date, as applicable.
Additional Information About the Securities
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Use of Proceeds and Hedging
The proceeds from the sale of the Securities will be used by us for
general corporate purposes. We will receive, in aggregate, $10 per Security issued, because, when we enter into hedging transactions in
order to meet our obligations under the Securities, our hedging counterparty will reimburse the cost of the Agent’s commissions.
The costs of the Securities borne by you and described on page 2 above comprise the Agent’s commissions and the cost of issuing,
structuring and hedging the Securities. See also “Use of Proceeds” in the accompanying prospectus.
On or prior to the Trade Date, we will hedge our anticipated exposure
in connection with the Securities, by entering into hedging transactions with our affiliates and/or third-party dealers. We expect our
hedging counterparties to take positions in the constituent stocks of the Underlyings, in futures or options contracts on the Underlyings
or the constituent stocks of the Underlyings, as well as in other instruments related to the Underlyings that they may wish to use in
connection with such hedging. Any of these hedging or trading activities on or prior to the Trade Date could potentially increase the
Initial Underlying Value, and, as a result, the Coupon Barrier of any of the Underlyings, which is the level at or above which such Underlying
must close on each Index Business Day during a Quarterly Observation Period in order for you to earn a Contingent Coupon, and the Downside
Threshold of any of the Underlyings, which if the Securities are not called prior to maturity, is the level at or above which such Underlying
must close on the Final Valuation Date in order for you to avoid being exposed to the negative performance of the Least Performing Underlying
at maturity (in each case, depending also on the performance of the other Underlyings). In addition, through our affiliates, we are likely
to modify our hedge position throughout the term of the Securities, including on the Final Valuation Date, by purchasing and selling the
stocks constituting the Underlyings, futures or options contracts on the Underlyings or their component stocks listed on major securities
markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities.,
including by purchasing or selling any such securities or instruments on the Final Valuation Date. As a result, these entities may be
unwinding or adjusting hedge positions during the term of the Securities, and the hedging strategy may involve greater and more frequent
dynamic adjustments to the hedge as the Final Valuation Date approaches. We cannot give any assurance that our hedging activities will
not affect the values of the Underlyings and, therefore, adversely affect the value of the Securities or the payment you will receive
at maturity, if any, if not previously called.
Supplemental Plan of Distribution; Conflicts of Interest
MS & Co. will act as the agent for this offering. We will agree
to sell to MS & Co., and MS & Co. will agree to purchase, all of the Securities at the issue price less the underwriting discount
indicated on the cover of this document. UBS Financial Services Inc., acting as dealer, will receive from MS & Co. a fixed sales commission
of $0.10 for each Security it sells.
MS & Co. is our affiliate and a wholly owned subsidiary of Morgan
Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the Securities.
When MS & Co. prices this offering of Securities, it will determine the economic terms of the Securities, including the Contingent
Coupon Rate, such that for each Security the estimated value on the Trade Date will be no lower than the minimum level described in “Additional
Information about Morgan Stanley, MSFL and the Securities” on page 2.
MS & Co. will conduct this offering in compliance with the requirements
of Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“FINRA”), regarding a FINRA member firm’s distribution
of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in
this offering to any discretionary account.
In order to facilitate the offering of the Securities, the agent may
engage in transactions that stabilize, maintain or otherwise affect the price of the Securities. Specifically, the agent may sell more
Securities than it is obligated to purchase in connection with the offering, creating a naked short position in the Securities, for its
own account. The agent must close out any naked short position by purchasing the Securities in the open market. A naked short position
is more likely to be created if the agent is concerned that there may be downward pressure on the price of the Securities in the open
market after pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering,
the agent may bid for, and purchase, the Securities or the stocks constituting the Underlyings in the open market to stabilize the price
of the Securities. Any of these activities may raise or maintain the market price of the Securities above independent market levels or
prevent or retard a decline in the market price of the Securities. The agent is not required to engage in these activities, and may end
any of these activities at any time. An affiliate of the agent has entered into a hedging transaction with us in connection with this
offering of Securities. See “—Use of Proceeds and Hedging” above.
Form of Securities
The Securities will be issued in the form of one or more fully registered
global securities which will be deposited with, or on behalf of, the Depositary and will be registered in the name of a nominee of the
Depositary. The Depositary’s nominee will be the only registered holder of the Securities. Your beneficial interest in the Securities
will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant
in the Depositary. In this free writing prospectus, all references to payments or notices to you will mean payments or notices to the
Depositary, as the registered
holder of the Securities, for distribution to participants in accordance
with the Depositary’s procedures. For more information regarding the Depositary and book entry notes, please read “Forms of
Securities—The Depositary” and “Securities Offered on a Global Basis Through the Depositary” in the accompanying
prospectus.
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