The agent for this offering, Morgan Stanley & Co. LLC, is our affiliate
and a wholly owned subsidiary of Morgan Stanley. See “Supplemental Plan of Distribution; Conflicts of Interest” on page 23
of this pricing supplement.
Additional Information about Morgan Stanley, MSFL and the Securities |
Morgan Stanley and MSFL have filed a registration
statement (including a prospectus, as supplemented by a prospectus supplement and an index supplement) with the SEC for the offering to
which this communication relates. In connection with your investment, you should read the prospectus in that registration statement, the
prospectus supplement, the index supplement and any other documents relating to this offering that Morgan Stanley and MSFL have filed
with the SEC for more complete information about Morgan Stanley, MSFL and this offering. You may get these documents for free by visiting
EDGAR on the SEC website at.www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter or any
dealer participating in this offering will arrange to send you the prospectus, the prospectus supplement and the index supplement if you
so request by calling toll-free 1-(800)-584-6837.
You may access the accompanying prospectus supplement,
index supplement and prospectus on the SEC website at.www.sec.gov as follows:
References to “MSFL” refer to only
MSFL, references to “Morgan Stanley” refer to only Morgan Stanley and references to “we,” “our” and
“us” refer to MSFL and Morgan Stanley collectively. In this document, the “Securities” refers to the Trigger Absolute
Return Step Securities that are offered hereby. Also, references to the accompanying “prospectus,” “prospectus supplement”
and “index supplement” mean the prospectus filed by MSFL and Morgan Stanley dated November 16, 2020, the prospectus supplement
filed by MSFL and Morgan Stanley dated November 16, 2020 and the index supplement filed by MSFL and Morgan Stanley dated November 16,
2020, respectively.
You should rely only on the information incorporated
by reference or provided in this pricing supplement or the accompanying prospectus supplement, index supplement and prospectus. We have
not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this pricing supplement or the accompanying prospectus supplement,
index supplement and prospectus is accurate as of any date other than the date on the front of this document.
The Issue Price of each Security is $10. This price
includes costs associated with issuing, selling, structuring and hedging the Securities, which are borne by you, and, consequently, the
estimated value of the Securities on the Trade Date is less than $10. We estimate that the value of each Security on the Trade Date is
$9.510.
What goes into the estimated value on the Trade
Date?
In valuing the Securities on the Trade Date, we
take into account that the Securities comprise both a debt component and a performance-based component linked to the Underlying. The estimated
value of the Securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the Underlying,
instruments based on the Underlying, volatility and other factors including current and expected interest rates, as well as an interest
rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades
in the secondary market.
What determines the economic terms of the Securities?
In determining the economic terms of the Securities,
including the Step Return, the Step Barrier and the Downside Threshold, we use an internal funding rate, which is likely to be lower than
our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by
you were lower or if the internal funding rate were higher, one or more of the economic terms of the Securities would be more favorable
to you.
What is the relationship between the estimated
value on the Trade Date and the secondary market price of the Securities?
The price at which MS & Co. purchases the Securities
in the secondary market, absent changes in market conditions, including those related to the Underlying, may vary from, and be lower than,
the estimated value on the Trade Date, because the secondary market price takes into account our secondary market credit spread as well
as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because
the costs associated with issuing, selling, structuring and hedging the Securities are not fully deducted upon issuance, for a period
of up to 12 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 Underlying, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value. We expect that those higher values will also be reflected in your brokerage account
statements.
MS & Co. currently intends, but is not obligated,
to make a market in the Securities, and, if it once chooses to make a market, may cease doing so at any time.
The Securities may be suitable for you if:
| ¨ | You fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment. |
| ¨ | You can tolerate a loss of all or a substantial portion of your Principal Amount and are willing to make an investment that may have
the same downside market risk as the Underlying. |
| ¨ | You are willing to hold the Securities to maturity, as set forth on the cover of this pricing supplement, and accept that there may
be little or no secondary market for the Securities. |
| ¨ | You understand and accept the risks associated with the Underlying. |
| ¨ | You believe the Underlying will appreciate over the term of the Securities and you are willing to invest in the Securities based on
the Step Return of 34.00%. |
| ¨ | You understand and accept that your potential positive return from the Contingent Absolute Return feature is limited by the Downside
Threshold. |
| ¨ | You can tolerate fluctuations of the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations
in the level of the Underlying. |
| ¨ | You do not seek current income from your investment and are willing to forgo dividends paid on the stocks included in the Underlying. |
| ¨ | You are willing to assume our credit risk, and understand that if we
default on our obligations you may not receive any amounts due to you including any repayment of principal. |
The Securities may not be suitable for you if:
| ¨ | You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial
investment. |
| ¨ | You cannot tolerate a loss of all or a substantial portion of your Principal Amount, and you are not willing to make an investment
that may have the same downside market risk as the Underlying. |
| ¨ | You require an investment designed to provide a full return of principal at maturity. |
| ¨ | You are unable or unwilling to hold the Securities to maturity, as set forth on the cover of this pricing supplement, or you seek
an investment for which there will be an active secondary market. |
| ¨ | You do not understand and accept the risks associated with the Underlying. |
| ¨ | You believe that the level of the Underlying will decline during the term of the Securities and is likely to close below the Downside
Threshold on the Final Valuation Date. |
| ¨ | You are unwilling to invest in the Securities based on the Step Return of 34.00%. |
| ¨ | You do not understand and accept that your potential positive return from the Contingent Absolute Return feature is limited by the
Downside Threshold. |
| ¨ | You prefer the lower risk, and therefore accept the potentially lower returns, of conventional debt securities with comparable maturities
issued by us or another issuer with a similar credit rating. |
| ¨ | You seek current income from your investment or prefer to receive the dividends paid on the stocks included in the Underlying. |
| ¨ | You are not willing or are unable to assume the credit risk associated
with us, for any payment on the Securities, including any repayment of principal. |
The investor suitability considerations identified
above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances,
and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully
considered the suitability of an investment in the Securities in light of your particular circumstances. You should also review “Key
Risks” on page 5 of this pricing supplement and “Risk Factors” beginning on page 7 of the accompanying prospectus for
risks related to an investment in the Securities. For additional information about the Underlying, see the information set forth under
“The S&P 500® Index” on page 17.
Issuer |
Morgan Stanley Finance LLC |
Guarantor |
Morgan Stanley |
Issue Price (per Security) |
$10.00 per Security |
Principal Amount |
$10.00 per Security |
Term |
5 years |
Underlying |
S&P 500® Index |
Downside Threshold |
3,319.38, which is 75% of the Initial Level. |
Payment at Maturity (per Security) |
If the Final Level is greater than or equal to the Step
Barrier, MSFL will pay you an amount calculated as follows:
$10 + [$10 × (the greater of (i) the Step Return
and (ii) the Underlying Return)]
If the Final Level is less than the Step Barrier and the
Final Level is greater than or equal to the Downside Threshold, MSFL will pay you a cash payment of:
$10 + ($10 x Contingent Absolute Return)
If the Final Level is less than the Downside Threshold,
MSFL will pay you an amount calculated as follows:
$10 + ($10 ×
Underlying Return)
In this case, the Contingent Absolute Return will not apply,
and you will lose a significant portion or all of your Principal Amount in an amount proportionate to the negative Underlying Return.
|
Underlying Return
|
Final Level – Initial Level
Initial Level |
Step Return |
34.00% |
Contingent Absolute Return |
The absolute value of the Underlying Return. For example, if the Underlying Return is -5.00%, the Contingent Absolute Return will be 5.00%. |
Initial Level |
4,425.84, which is the Closing Level of the Underlying on the Trade Date. |
Final Level |
The Closing Level of the Underlying on the Final Valuation Date. |
Step Barrier |
4,425.84, which is 100% of the Initial Level |
Trade Date |
June 15, 2023 |
Settlement Date |
June 21, 2023 |
Final Valuation Date* |
June 15, 2028 |
Maturity Date* |
June 21, 2028 |
CUSIP / ISIN |
61774W543 / US61774W5435 |
Calculation Agent |
Morgan Stanley & Co. LLC |
* Subject to postponement in the event of a Market Disruption Event or for non-Index Business Days. See “Postponement of Final Valuation Date and Maturity Date” under “Additional Terms of the Securities.” |
|
The Closing Level of the Underlying (Initial Level) was observed, the Downside Threshold was determined and the Step Return was set. |
The Final Level and Underlying Return are determined on the Final Valuation
Date.
If the Final Level is greater than or equal to the Step Barrier,
MSFL will pay you a cash payment per Security equal to:
$10 + [$10 × (the greater of (i) the Step Return and (ii) the
Underlying Return)]
If the Final Level is less than the Step Barrier and greater than
or equal to the Downside Threshold on the Final Valuation Date, MSFL will pay you a cash payment per Security equal to:
$10 + (10 x Contingent Absolute Return)
If the Final Level is less than the Downside Threshold on the Final
Valuation Date, MSFL will pay you a cash payment at maturity equal to:
$10 + ($10 × Underlying Return)
Under these circumstances,
the Contingent Absolute Return will not apply, and you will lose a significant portion, and could lose all, of your Principal Amount.
|
INVESTING IN THE SECURITIES
INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE YOUR ENTIRE PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES IS SUBJECT TO OUR CREDITWORTHINESS.
IF WE WERE TO DEFAULT ON OUR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE
YOUR ENTIRE INVESTMENT.
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
in connection with your investment in the Securities.
Risks Relating to an Investment
in the Securities
| ¨ | The Securities do not guarantee any return of principal –
The terms of the Securities differ from those of ordinary debt securities in that MSFL is not necessarily obligated to repay any of the
Principal Amount at maturity. If the Final Level is less than the Downside Threshold (which is 75% of the Initial Level), the Contingent
Absolute Return will not apply, you will be exposed to the full negative Underlying Return and the payout owed at maturity by MSFL will
be an amount in cash that is at least 25% less than the $10 Principal Amount of each Security, resulting in a loss proportionate to the
decrease in the value of the Underlying from the Initial Level to the Final Level. There is no minimum payment at maturity on the Securities,
and, accordingly, you could lose all of your Principal Amount in the Securities. |
| ¨ | You may incur a loss on your investment if you sell your
Securities prior to maturity – The Downside Threshold is observed on the Final Valuation Date, the Contingent Absolute Return
and any contingent repayment of principal apply only at maturity. If you are able to sell your Securities in the secondary market prior
to maturity, you may have to sell them at a loss relative to your initial investment even if the Closing Level of the Underlying is above
the Downside Threshold at that time. |
| ¨ | The Step Return applies only if you hold the Securities to
maturity – You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity
in the secondary market, the price you receive will likely not reflect the full economic value of the Step Return or the Securities themselves,
and the return you realize may be less than the Underlying's return even if such return is positive. You can receive the full benefit
of the Step Return from MSFL only if you hold your Securities to maturity. |
| ¨ | The potential for a positive return if the Underlying depreciates
is limited – Any positive return on the Securities if the Underlying depreciates will be limited by the Downside Threshold,
because the Contingent Absolute Return feature will apply only if the Final Level is greater than or equal to the Downside Threshold.
If the Final Level is less than the Downside Threshold, you will not receive a Contingent Absolute Return and will instead lose a substantial
portion or all of your investment. |
| ¨ | The Securities are subject to our credit risk, and any actual
or anticipated changes to our credit ratings or our credit spreads may adversely affect the market value of the Securities –
You are dependent on our ability to pay all amounts due on the Securities at maturity, if any, and therefore you are subject to our credit
risk. If we default on our obligations under the Securities, your investment would be at risk and you could lose some or all of your
investment. As a result, the market value of the Securities prior to maturity will be affected by changes in the market’s view
of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in our credit spreads charged by the market
for taking our credit risk is likely to adversely affect the market value of the Securities. |
| ¨ | As a finance subsidiary,
MSFL has no independent operations and will have no independent assets – As a finance subsidiary, MSFL has no independent operations
beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders of
MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any
recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee will rank
pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single
claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that
in any such proceedings they would not have any priority over and should be treated pari passu with the claims of other unsecured,
unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities. |
| ¨ | The Securities do not pay interest –
MSFL will not pay any interest with respect to the Securities over the term of the Securities. |
| ¨ | The
market price of the Securities may be influenced by many unpredictable factors – Several
factors, many of which are beyond our control, will influence the value of the Securities in the secondary market and the price at which
MS & Co. may be willing to purchase or sell the Securities in the secondary market (if at all), including: |
| o | the value of the Underlying at any time, |
| o | the volatility (frequency and magnitude of changes in value) of the Underlying, |
| o | dividend rates on the securities included in the Underlying, |
| o | interest and yield rates in the market, |
| o | geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the
Underlying or stock markets generally and which may affect the Final Level, |
| o | the time remaining until the Securities mature, and |
| o | any actual or anticipated changes in our credit ratings or credit spreads. |
Some or
all of these factors will influence the terms of the Securities at the time of issuance and the price that you will receive if you are
able to sell your Securities prior to maturity, as the Securities are comprised of both a debt component and a performance-based component
linked to the Underlying, and these are the types of factors that also generally affect the values of debt securities and derivatives
linked to the Underlying. Generally, the longer the time remaining to maturity, the more the market price of the Securities will be affected
by the other factors described above. For example, you may have to sell your Securities at a substantial discount from the principal
amount of $10 per Security if the value of the Underlying at the time of sale is at, below or moderately above its Initial Level, and
especially if it is near or below the Downside Threshold, or if market interest rates rise. You cannot predict the future performance
of the Underlying based on its historical performance.
| ¨ | The
amount payable on the Securities is not linked to the level of the Underlying at any time other than the Final Valuation Date
– The Final Level will be based on the Closing Level of the Underlying
on the Final Valuation Date, subject to postponement for non-Index Business Days and certain Market Disruption Events. Even if the level
of the Underlying appreciates prior to the Final Valuation Date but then drops by the Final Valuation Date, the Payment at Maturity may
be significantly less than it would have been had the Payment at Maturity been linked to the level of the Underlying prior to such drop.
Although the actual level of the Underlying on the stated Maturity Date or at other times during the term of the Securities may be higher
than the Final Level, the Payment at Maturity will be based solely on the Closing Level of the Underlying on the Final Valuation Date
as compared to the Initial Level. |
| ¨ | Investing
in the Securities is not equivalent to investing in the Underlying or the stocks composing the Underlying – Investing in the
Securities is not equivalent to investing in the Underlying or the stocks that constitute the Underlying. Investors in the Securities
will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the stocks that
constitute the Underlying. Additionally, the Underlying is not a “total return” Underlying, which, in addition to reflecting
the market prices of the stocks that constitute the Underlying, would also reflect dividends paid on such stocks. The return on the Securities
will not include such a total return feature. |
| ¨ | The
rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate implied by our
secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated with issuing, selling,
structuring and hedging the Securities in the Issue Price reduce the economic terms of the Securities, cause the estimated value of the
Securities to be less than the Issue Price and will adversely affect secondary market prices – Assuming
no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing
to purchase the Securities in secondary market transactions will likely be significantly lower than the Issue Price, because secondary
market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the Issue Price and borne
by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer spread that any dealer
would charge in a secondary market transaction of this type as well as other factors. |
The inclusion
of the costs of issuing, selling, structuring and hedging the Securities in the Issue Price and the lower rate we are willing to pay
as issuer make the economic terms of the Securities less favorable to you than they otherwise would be.
However,
because the costs associated with issuing, selling, structuring and hedging the Securities are not fully deducted upon issuance, for
a period of up to 12 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 Underlying, 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.
| ¨ | The
estimated value of the Securities is determined by reference to our pricing and valuation models, which may differ from those of other
dealers and is not a maximum or minimum secondary market price – These
pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about
future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities,
our models may yield a higher estimated value of the Securities than those generated by others, including other dealers in the market,
if they attempted to value the Securities. In addition, the estimated value on the Trade Date does not represent a minimum or maximum
price at which dealers, including MS & Co., would be willing to purchase your Securities in the secondary market (if any exists)
at any time. The value of your Securities at any time after the date of this pricing supplement will vary based on many factors that
cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also “The market price
of the Securities may be influenced by many unpredictable factors” above. |
| ¨ | The
Securities will not be listed on any securities exchange and secondary trading may be limited – The
Securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the Securities. MS
& Co. currently intends, but is not obligated, to make a market in the Securities and, if it once chooses to make a market, may cease
doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at prices
based on its estimate of the current value of the Securities, taking into account its bid/offer spread, our credit spreads, market volatility,
the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood
that it will be able to resell the Securities. Even if there is a secondary market, it |
may
not provide enough liquidity to allow you to trade or sell the Securities easily. Since other broker-dealers may not participate significantly
in the secondary market for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price,
if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the Securities,
it is likely that there would be no secondary market for the Securities. Accordingly, you should be willing to hold your Securities to
maturity.
| ¨ | Hedging
and trading activity by our affiliates could potentially adversely affect the value of the Securities – One
or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the Securities, including trading
in the constituent stocks of the Underlying, in futures or options contracts on the Index or the constituent stocks of the Underlying,
as well as in other instruments related to the Underlying. 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. MS & Co. and some of our other affiliates also trade the constituent stocks of the Underlying,
in futures or options contracts on the constituent stocks of the Underlying, as well as in other instruments related to the Underlying,
on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior
to the Trade Date could potentially increase the Initial Level of the Underlying, and, therefore, could increase the Downside Threshold,
which is the level at or above which the Underlying must close on the Final Valuation Date so that investors do not suffer a significant
loss on their initial investment in the Securities. Additionally, such hedging or trading activities during the term of the Securities,
including on the Final Valuation Date, could adversely affect the Closing Level of the Underlying on the Final Valuation Date and, accordingly,
the amount of cash payable at maturity, if any. |
| ¨ | Potential
conflict of interest – As Calculation Agent, MS & Co. will determine the Initial Level, the Downside Threshold, the Step
Return, the Final Level and whether any Market Disruption Event has occurred, and will calculate the amount payable at maturity, if any.
Moreover, certain determinations made by MS & Co., in its capacity as Calculation Agent, may require it to exercise discretion and
make subjective judgments, such as with respect to the occurrence or non-occurrence of Market Disruption Events and the selection of
a Successor Underlying or calculation of the Final Level in the event of a discontinuance of the Underlying or a Market Disruption Event.
These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding
these types of determinations, see “Additional Terms of the Securities—Postponement of Final Valuation Date and Maturity
Date,” “—Discontinuance of the Underlying; Alteration of Method of Calculation” and “—Calculation
Agent and Calculations” below. In addition, MS & Co. has determined the estimated value of the Securities on the Trade Date. |
| ¨ | Potentially
inconsistent research, opinions or recommendations by Morgan Stanley, UBS or our or their respective affiliates – Morgan Stanley,
UBS and our or their respective affiliates may publish research from time to time on financial markets and other matters that may influence
the value of the Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities.
Any research, opinions or recommendations expressed by Morgan Stanley, UBS or our or their respective affiliates may not be consistent
with each other and may be modified from time to time without notice. Investors should make their own independent investigation of the
merits of investing in the Securities and the Underlying to which the Securities are linked. |
| ¨ | The
U.S. federal income tax consequences of an investment in the Securities are uncertain – Please note that the discussions in
this pricing supplement concerning the U.S. federal income tax consequences of an investment in the Securities supersede the discussions
contained in the accompanying prospectus supplement. |
Subject
to the discussion under “What Are the Tax Consequences of the Securities” in this pricing supplement, 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, Davis Polk & Wardwell LLP (“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.
If the
Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment for the Securities, the timing
and character of income 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 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. We do not
plan to request a ruling from the IRS regarding the tax treatment of the Securities, and the IRS or a court may not agree with the tax
treatment described in this pricing supplement.
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; the degree, if any, to which income (including
any mandated accruals) realized by Non-U.S. Holders
(as defined below) should be subject to withholding tax; 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.
Both U.S. and Non-U.S.
Holders should read carefully the discussion under “What Are the Tax Consequences of the Securities” in this pricing supplement
and consult their tax advisers regarding all aspects of the U.S. federal tax consequences of an investment in the Securities as well as
any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Risks Relating to the Underlying
| ¨ | The probability that the Final Level will be less than the
Downside Threshold will depend on the volatility of the Underlying – “Volatility” refers to the frequency and magnitude
of changes in the level of the Underlying. Higher expected volatility with respect to the Underlying as of the Trade Date generally indicates
a greater chance as of that date that the Final Level will be less than the Downside Threshold, which would result in a loss of a significant
portion or all of your investment at maturity. However, the Underlying’s volatility can change significantly over the term of the
Securities. The level of the Underlying could fall sharply, resulting in a significant loss of principal. You should be willing to accept
the downside market risk of the Underlying and the potential loss of a significant portion or all of your investment at maturity. |
| ¨ | Governmental regulatory actions could result in material
changes to the composition of the Underlying and could negatively affect your return on the Securities – Governmental regulatory
actions, including but not limited to sanctions-related actions by the U.S. or foreign governments, could make it necessary or advisable
for there to be material changes to the composition of the Underlying, depending on the nature of such governmental regulatory actions
and the Underlying constituent stocks that are affected. If any governmental regulatory action results in the removal of Underlying constituent
stocks that have (or historically have had) significant weights within the Underlying, such removal, or even any uncertainty relating
to a possible removal, could have a material and negative effect on the level of the Underlying and, therefore, your return on the Securities. |
| ¨ | Adjustments
to the Underlying could adversely affect the value of the Securities – The
Underlying Publisher of the Underlying is responsible for calculating and maintaining the Underlying. The Underlying Publisher may add,
delete or substitute the stocks constituting the Underlying or make other methodological changes required by certain corporate events
relating to the stocks constituting the Underlying, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary
dividends, that could change the value of the Underlying. The Underlying Publisher may discontinue or suspend calculation or publication
of the Underlying at any time. In these circumstances, the Calculation Agent will have the sole discretion to substitute a Successor
Underlying that is comparable to the discontinued Underlying, and is permitted to consider indices that are calculated and published
by the Calculation Agent or any of its affiliates. Any of these actions could adversely affect the value of the Underlying and, consequently,
the value of the Securities. |
Scenario Analysis and Examples at Maturity |
These examples are based
on hypothetical terms. The actual terms are set forth on the cover of this pricing supplement.
The below scenario analysis and
examples are provided for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible
scenario concerning increases or decreases in the level of the Underlying relative to the Initial Level. We cannot predict the Final Level
on the Final Valuation Date. You should not take the scenario analysis and these examples as an indication or assurance of the expected
performance of the Underlying. The numbers appearing in the examples below have been rounded for ease of analysis. The following scenario
analysis and examples illustrate the payment at maturity for a $10.00 security on a hypothetical offering of the Securities, with the
following assumptions*:
Investment term: |
5 years |
Hypothetical Initial Level: |
4,500 |
Hypothetical Downside Threshold: |
3,375 (75% of the hypothetical Initial Level) |
Step Return: |
34.00% |
Hypothetical Step Barrier: |
4,500, which is 100% of the hypothetical Initial Level |
* The actual Initial
Level, Downside Threshold and Step Barrier are specified on the cover of this pricing supplement.
Example 1— The level of
the Underlying increases from an Initial Level of 4,500 to a Final Level of 5,175. The Final Level is greater than or equal
to the Step Barrier but the Underlying Return is less than the Step Return of 34.00%:
Underlying Return = (5,175 –
4,500) / 4,500 = 15.00%
Payment at Maturity = $10 + [$10
x the greater of (i) 34.00% and (ii) 15.00%] = $13.40
Because the Final Level is greater than or equal to
the Step Barrier but the Underlying Return is less than the Step Return of 34.00%, the Payment at Maturity is equal to $13.40 per $10.00
Principal Amount of Securities, resulting in a total return on the Securities of 34.00%.
Example 2— The level of
the Underlying increases from an Initial Level of 4,500 to a Final Level of 7,875. The Final Level is greater than or equal
to the Step Barrier and the Underlying Return is greater than the Step Return of 34.00%:
Underlying Return = (7,875 –
4,500) / 4,500 = 75.00%
Payment at Maturity = $10 + [$10
x the greater of (i) 34.00% and (ii) 75.00%] = $17.50
Because the Final Level is greater than or equal to
the Step Barrier and the Underlying Return is greater than the Step Return of 34.00%, the Payment at Maturity is equal to $17.50 per $10.00
Principal Amount of Securities, resulting in a total return on the Securities of 75.00%.
Example 3— The level of the Underlying
decreases from an Initial Level of 4,500 to a Final Level of 3,825. The Final Level is less than the Step Barrier but greater
than or equal to the Downside Threshold:
Underlying Return = (3,825 –
4,500) / 4,500 = -15.00%
Payment at Maturity = $10 + ($10
x Contingent Absolute Return)
Payment at Maturity = ($10 + ($10
x 15.00%)
= $11.50
Because the Final Level is less than the Step Barrier
but greater than or equal to the Downside Threshold on the Final Valuation Date, the Contingent Absolute Return will apply and MSFL will
pay you a Payment at Maturity equal to $11.50 per $10.00 Principal Amount of Securities, resulting in a 15.00% percent return on the Securities.
Example 4— The level of the Underlying
decreases from an Initial Level of 4,500 to a Final Level of 2,700. The Underlying Return is less than the Downside Threshold
and expressed as a formula:
Underlying Return = (2,700 –
4,500) / 4,500 = -40.00%
Payment at Maturity = $10 + ($10
× -40.00%) = $6.00
Because the Final Level is less than the Downside Threshold
on the Final Valuation Date, the Contingent Absolute Return will not apply and the Securities will be fully exposed to any decline in
the level of the Underlying as of the Final Valuation Date. Therefore, the Payment at Maturity is equal to $6.00 per $10.00 Principal
Amount of Securities, resulting in a total loss on the Securities of 40.00%.
If the Final Level is below the Downside Threshold
on the Final Valuation Date, the Contingent Absolute Return will not apply, the Securities will be fully exposed to any decline in the
Underlying, and you will lose more than 25%, and possibly all, of your Principal Amount at maturity.
Scenario Analysis – Hypothetical Payment
at Maturity for each $10.00 Principal Amount of Securities.
Performance
of the Underlying* |
Performance
of the Securities |
Final Level |
Underlying
Return |
Payment at
Maturity |
Return on
Securities Purchased at $10.00 (1) |
9,000.00 |
100.00% |
$20.00 |
100.00% |
8,550.00 |
90.00% |
$19.00 |
90.00% |
8,100.00 |
80.00% |
$18.00 |
80.00% |
7,650.00 |
70.00% |
$17.00 |
70.00% |
7,200.00 |
60.00% |
$16.00 |
60.00% |
6,750.00 |
50.00% |
$15.00 |
50.00% |
6,300.00 |
40.00% |
$14.00 |
40.00% |
6,030.00 |
34.00% |
$13.40 |
34.00% |
5,850.00 |
30.00% |
$13.40 |
34.00% |
5,400.00 |
20.00% |
$13.40 |
34.00% |
4,950.00 |
10.00% |
$13.40 |
34.00% |
4,500.00 |
0.00% |
$13.40 |
34.00% |
4,050.00 |
-10.00% |
$11.00 |
10.00% |
3,600.00 |
-20.00% |
$12.00 |
20.00% |
3,375.00 |
-25.00% |
$12.50 |
25.00% |
3,330.00 |
-26.00% |
$7.40 |
-26.00% |
3,150.00 |
-30.00% |
$7.00 |
-30.00% |
2,700.00 |
-40.00% |
$6.00 |
-40.00% |
2,250.00 |
-50.00% |
$5.00 |
-50.00% |
1,800.00 |
-60.00% |
$4.00 |
-60.00% |
1,350.00 |
-70.00% |
$3.00 |
-70.00% |
900.00 |
-80.00% |
$2.00 |
-80.00% |
450.00 |
-90.00% |
$1.00 |
-90.00% |
0.00 |
-100.00% |
$0.00 |
-100.00% |
*. The Underlying excludes cash dividend
payments on stocks included in the Underlying.
(1) The “Return on Securities”
is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $10 Principal Amount Security to the
purchase price of $10 per Security.
What are the tax consequences of the Securities? |
Prospective investors should note that the discussion
under the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the
Securities issued under this pricing supplement and is superseded by the following discussion.
The following summary is a general discussion of the principal U.S.
federal income tax consequences and certain estate tax consequences of the ownership and disposition of the Securities. This discussion
applies only to investors in the Securities who:
| t | purchase the Securities in the original offering; and |
| t | hold the Securities as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the “Code”). |
This discussion does not describe all of the tax consequences that may
be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as:
| t | certain financial institutions; |
| t | dealers and certain traders in securities or commodities; |
| t | investors holding the Securities as part of a “straddle,” wash
sale, conversion transaction, integrated transaction or constructive sale transaction; |
| t | U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar; |
| t | partnerships or other entities classified as partnerships for U.S. federal
income tax purposes; |
| t | regulated investment companies; |
| t | real estate investment trusts; or |
| t | tax-exempt entities, including “individual retirement accounts”
or “Roth IRAs” as defined in Section 408 or 408A of the Code, respectively. |
If an entity that is classified as a partnership for U.S. federal income
tax purposes holds the Securities, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner
and the activities of the partnership. If you are a partnership holding the Securities or a partner in such a partnership, you should
consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the Securities to you.
In addition, we will not attempt to ascertain whether any issuer of
any shares to which a Security relates (such shares hereafter referred to as “Underlying Shares”) is treated as a “passive
foreign investment company” (“PFIC”) within the meaning of Section 1297 of the Code or as a “U.S. real property
holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. If any issuer of Underlying Shares were
so treated, certain adverse U.S. federal income tax consequences might apply, to a U.S. Holder in the case of a PFIC and to a Non-U.S.
Holder (as defined below) in the case of a USRPHC, upon the sale, exchange or settlement of the Securities. You should refer to information
filed with the Securities and Exchange Commission or other governmental authorities by the issuers of the Underlying Shares and consult
your tax adviser regarding the possible consequences to you if any issuer is or becomes a PFIC or USRPHC.
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 of this pricing supplement, 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.
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:
| t | a citizen or individual resident of the United States; |
| t | a corporation, or other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state thereof or the District of Columbia; or |
| t | an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source. |
Tax Treatment of the Securities
Assuming the treatment of the Securities as set forth above is respected,
the following U.S. federal income tax consequences should result.
Tax 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.
Subject to the discussion above regarding the possible application of Section 1297 of the Code, 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. 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 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 the
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:
| t | an individual who is classified as a nonresident alien; |
| t | a foreign corporation; or |
| t | a foreign estate or trust. |
The term “Non-U.S. Holder” does not include any of the following
holders:
| t | a holder who is an individual present in the United States for 183 days or
more in the taxable year of disposition and who is not otherwise a resident of the United States for U.S. federal income tax purposes; |
| t | certain former citizens or residents of the United States; or |
| t | a holder for whom income or gain in respect of the Securities is effectively
connected with the conduct of a trade or business in the United States. |
Such holders should consult their tax advisers regarding the U.S. federal
income tax consequences of an investment in the Securities.
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 discussions below concerning backup withholding
and the possible application of Section 871(m) of the Code and the discussion above concerning the possible application of Section
897 of the Code, 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 discussions regarding the possible application of Sections
871(m) and 897 of the Code and 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:
| t | 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; |
| t | the Non-U.S. Holder is not a controlled foreign corporation related, directly
or indirectly, to Morgan Stanley through stock ownership; |
| t | the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A)
of the Code, and |
| t | the certification requirement described below has been fulfilled with respect
to the beneficial owner. |
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 discussions
regarding Sections 871(m) and 897 of the Code and 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”). Subject to certain exceptions, Section 871(m) generally applies to securities that
substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable
Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to securities
issued before January 1, 2025 that do not have a delta of one with respect to any Underlying Security. Based on our determination 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 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 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
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 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 income
tax consequences of an investment in the Securities.
The S&P 500® Index |
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.
|
Historical Information |
The following table sets forth the published high and low Closing Levels,
as well as the end-of-quarter Closing Levels, of the S&P 500® Index for each quarter in the period from January 1,
2018 through June 15, 2023. The Closing Level of the S&P 500® Index on June 15, 2023 was 4,425.84. We obtained the
information in the table below from Bloomberg Financial Markets, without independent verification. The historical Closing Levels 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
Closing Level of the S&P 500® Index on the Final Valuation Date.
Quarter Begin |
Quarter End |
Quarterly High |
Quarterly Low |
Quarterly Close |
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 |
9/30/2021 |
4,536.95 |
4,258.49 |
4,307.54 |
10/1/2021 |
12/31/2021 |
4,793.06 |
4,300.46 |
4,766.18 |
1/1/2022 |
3/31/2022 |
4,796.56 |
4,170.70 |
4,530.41 |
4/1/2022 |
6/30/2022 |
4,582.64 |
3,666.77 |
3,785.38 |
7/1/2022 |
9/30/2022 |
4,305.20 |
3,585.62 |
3,585.62 |
10/1/2022 |
12/31/2022 |
4,080.11 |
3,577.03 |
3,839.50 |
1/1/2023 |
3/31/2023 |
4,179.76 |
3,808.10 |
4,109.31 |
4/1/2023 |
6/15/2023* |
4,425.84 |
4,055.99 |
4,425.84 |
* 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 June 15, 2023, based on information from Bloomberg. Past performance of the S&P 500®
Index is not indicative of the future performance of the S&P 500® Index.
Additional Terms of the Securities |
If the terms contained in this pricing supplement
differ from those contained in the prospectus supplement, index supplement or prospectus, the terms contained in this pricing supplement
will control.
Some Definitions
We have defined some of the terms that we use frequently
in this pricing supplement below:
| t | “Closing Level” means, on any Index Business
Day for the Underlying, the closing value of the Underlying, or any Successor Underlying (as defined under “—Discontinuance
of the Underlying; Alteration of Method of Calculation” below) published at the regular weekday close of trading on that Index Business
Day by the Underlying Publisher. In certain circumstances, the Closing Level will be based on the alternate calculation of the Underlying
as described under “—Discontinuance of the Underlying; Alteration of Method of Calculation.” |
| t | “Underlying Publisher” means S&P
Dow Jones Indices LLC or any successor thereto. |
| t | “Index Business Day” means a day, for
the Underlying, as determined by the Calculation Agent, on which trading is generally conducted on each of the Relevant Exchange(s) for
the 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: |
(i) the
occurrence or existence of any of:
(a) a suspension, absence
or material limitation of trading of stocks then constituting 20 percent or more of the value of the Underlying (or the Successor Underlying
(as defined below under “—Discontinuance of the 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 stocks then constituting
20 percent or more of the value of the Underlying (or the Successor Underlying) 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 the Underlying (or the Successor Underlying) 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 the Underlying is materially suspended or materially
limited at that time, then the relevant percentage contribution of that security to the value of the Underlying shall be based on a comparison
of (x) the portion of the value of the Underlying attributable to that security relative to (y) the overall value of the 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 the 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 Underlying 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 the Underlying are traded will not include
any time when such securities market is itself closed for trading under ordinary circumstances.
| t | “Relevant Exchange” means, with respect
to the Underlying, the primary exchange(s) or market(s) of trading for (i) any security then included in the Underlying, or any Successor
Underlying, and (ii) any futures or options contracts related to the Underlying or to any security then included in the Underlying. |
Postponement of Final Valuation Date and Maturity
Date
If the scheduled Final Valuation Date is not an
Index Business Day or if a Market Disruption Event with respect to the Underlying occurs on such date, the Closing Level for such date
will be determined on the immediately succeeding Index Business Day on which no Market Disruption Event shall have occurred; provided
that the Closing Level with respect to the Final Valuation Date will not be determined on a date later than the fifth scheduled Index
Business Day after the scheduled Final Valuation Date, and if such date is not an Index Business Day or if there is a Market Disruption
Event on such date, the Calculation Agent will determine the Closing Level of the Underlying on such date in accordance with the formula
for calculating such Underlying last in effect prior to the commencement of the Market Disruption Event (or prior to the non-Index Business
Day), without rebalancing or substitution, 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, limitation or non-Index
Business Day) on such date of each security most recently constituting the Underlying.
If the Final Valuation Date is postponed so that
it falls less than two business days prior to the scheduled Maturity Date, the Maturity Date will be the second business day following
the Final Valuation Date, as postponed.
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 MSFL or Morgan Stanley, 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 the Underlying; Alteration
of Method of Calculation
If the Underlying Publisher of the Underlying discontinues
publication of the Underlying and the Underlying 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 the discontinued Underlying (such index being
referred to herein as a “Successor Underlying”), then any subsequent Closing Level of the Underlying will be determined by
reference to the published value of such Successor Underlying at the regular weekday close of trading on any Index Business Day that the
Closing Level is to be determined, and, to the extent the Closing Level of the Successor Underlying differs from the Closing Level of
the Underlying at the time of such substitution, proportionate adjustments will be made by the Calculation Agent to the Initial Level,
Step Barrier and Downside Threshold.
Upon any selection by the Calculation Agent of a Successor
Underlying, 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 Underlying Publisher discontinues publication
of the Underlying prior to, and such discontinuance is continuing on, the Final Valuation Date and the Calculation Agent determines, in
its sole discretion, that no Successor Underlying is available at such time, then the Calculation Agent will determine the Closing Level
of the Underlying for such date. The Closing Level of the Underlying will be computed by the Calculation Agent in accordance with the
formula for and method of calculating the 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 the Final
Valuation Date of each security most recently constituting the Underlying without any rebalancing or substitution of such securities following
such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication of the Underlying may adversely
affect the value of the Securities.
If at any time the method of calculating the Underlying
or Successor Underlying, or the value thereof, is changed in a material respect, or if the Underlying or Successor Underlying 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 Closing Level 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 the Underlying or Successor Underlying,
as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level
with reference to the Underlying or Successor Underlying, as adjusted. Accordingly, if the method of calculating the Underlying or Successor
Underlying 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 the Underlying or Successor
Underlying 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 Level, the Downside Threshold,
the Step Return, the Final Level, the Underlying Return and the Payment at Maturity.
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 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 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
the 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 a 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 and to the Depositary of the amount of cash, if any, to be delivered
with respect to each stated principal amount of the Securities, on or prior to 10:30 a.m. (New York City time) on the Business Day preceding
the Maturity Date, and (ii) deliver the aggregate cash amount due with respect to the Securities, if any, to the Trustee for delivery
to the Depositary, as holder of the Securities, on the Maturity Date.
Additional Information About the Securities |