MSPI Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum)

Morgan Stanley and MSFL have filed a registration statement (including a prospectus, as supplemented by a prospectus 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 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 and the prospectus supplement if you so request by calling toll-free 1-(800)-584-6837.

You may access the accompanying prospectus 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 Yield Notes that are offered hereby. Also, references to the accompanying “prospectus” and “prospectus supplement” mean the prospectus filed by MSFL and Morgan Stanley dated November 16, 2017 and the prospectus supplement filed by MSFL and Morgan Stanley dated November 16, 2017, respectively.

You should rely only on the information incorporated by reference or provided in this pricing supplement or the accompanying prospectus 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 and prospectus is accurate as of any date other than the date on the front of this document.

If the terms discussed in this pricing supplement differ from those discussed in the prospectus supplement or prospectus, the terms contained in this pricing supplement will control.

The Issue Price of each Security is $1,000.  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 $1,000.  We estimate that the value of each Security on the Trade Date is $981.10.

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 LIBOR.  The estimated value of the Securities is determined using our own pricing and valuation models, market inputs and assumptions relating to LIBOR, instruments based on LIBOR, 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 Coupon Rate 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 LIBOR, 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.  

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.

 

Investment Timeline

	Trade Date		The Initial Reference Rate, the Downside Threshold and the Coupon Rate were determined.
	Quarterly Coupon		MSFL will pay you the applicable Quarterly Coupon.
	Maturity Date		The Final Reference Rate and the Reference Rate Return are determined on the Final Valuation Date.   If the Final Reference Rate is greater than or equal to the Downside Threshold , MSFL will pay you the $1,000 Principal Amount plus the Quarterly Coupon otherwise due.   If the Final Reference Rate is less than the Downside Threshold , in addition to the Quarterly Coupon otherwise due, MSFL will pay you an amount calculated as follows:   $1,000 + ($1,000 × Reference Rate Return)   In this case, you will lose a significant portion and could lose all of the Principal Amount by an amount proportionate to the negative Reference Rate Return from the Trade Date to the Final Valuation Date.

 

INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU WILL LOSE A SIGNIFICANT PORTION OR ALL OF YOUR PRINCIPAL AMOUNT AT MATURITY IF THE FINAL REFERENCE RATE IS LESS THAN THE DOWNSIDE THRESHOLD. IF THE FINAL REFERENCE RATE IS LESS THAN THE DOWNSIDE THRESHOLD, THE PAYMENT AT MATURITY WILL BE BASED ON THE PERCENTAGE CHANGE OF THE REFERENCE RATE FROM THE INITIAL REFERENCE RATE TO THE FINAL REFERENCE RATE, AND A VERY SMALL ABSOLUTE PERCENTAGE POINT CHANGE IN THE REFERENCE RATE CAN RESULT IN A SIGNIFICANT LOSS ON THE SECURITIES. FOR EXAMPLE, GIVEN THE INITIAL REFERENCE RATE OF 2.45063%, IF THE FINAL REFERENCE RATE WERE TO DECLINE BY ONLY 1.71544 PERCENTAGE POINTS TO 0.73519%, WHILE THE ABSOLUTE PERCENTAGE POINT CHANGE IN THE REFERENCE RATE IS ONLY 1.71544%, THAT MOVEMENT ACTUALLY REPRESENTS A DECLINE OF APPROXIMATELY 70% FROM THE INITIAL REFERENCE RATE TO THE HYPOTHETICAL FINAL REFERENCE RATE, AND YOU WOULD LOSE APPROXIMATELY 70% OF YOUR PRINCIPAL. YOU WILL LOSE ALL OF YOUR PRINCIPAL AMOUNT AT MATURITY IF THE FINAL REFERENCE RATE IS ZERO OR NEGATIVE. GENERALLY, THE HIGHER THE COUPON RATE FOR THE SECURITIES, THE GREATER RISK OF LOSS ON THOSE SECURITIES. YOUR RETURN POTENTIAL ON THE SECURITIES IS LIMITED TO THE QUARTERLY COUPONS PAYABLE ON THE SECURITIES, AND YOU WILL NOT PARTICIPATE IN ANY INCREASE IN THE REFERENCE RATE. IF YOU ARE ABLE TO SELL THE SECURITIES PRIOR TO MATURITY, YOU MAY RECEIVE SUBSTANTIALLY LESS THAN THE PRINCIPAL AMOUNT EVEN IF THE LEVEL OF THE REFERENCE RATE IS GREATER THAN THE DOWNSIDE THRESHOLD AT THE TIME OF SALE. ALL PAYMENTS ARE SUBJECT TO OUR CREDIT RISK. IF WE DEFAULT ON OUR OBLIGATIONS, YOU COULD LOSE SOME OR ALL OF YOUR INVESTMENT. THESE SECURITIES ARE NOT SECURED OBLIGATIONS AND YOU WILL NOT HAVE ANY SECURITY INTEREST IN, OR OTHERWISE HAVE ANY ACCESS TO, ANY UNDERLYING REFERENCE ASSET OR ASSETS.

An investment in the Securities involves significant risks. Some of the 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.

Any of the international, national or other proposals for reform or the general increased regulatory scrutiny of LIBOR could increase the costs and risks of administering or otherwise participating in the setting of LIBOR and complying with any such regulations or requirements.    Such factors may have the effect of discouraging market participants from continuing to administer or participate in LIBOR, trigger changes in the rules or methodologies used in LIBOR or

lead to the disappearance of LIBOR.    The disappearance of LIBOR or changes in the manner of administration of LIBOR could have materially adverse consequences in relation to the Securities.   

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.

Please read the discussion under “What Are the Tax Consequences of the Securities” in this pricing supplement 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 unit consisting of (i) an Option (as defined below under “What Are the Tax Consequences of the Securities”) written by you to us that, if exercised, requires you to pay to us an amount equal to the Deposit (as defined below under “What Are the Tax Consequences of the Securities”), in exchange for a cash amount based on the performance of the Reference Rate , and (ii) a Deposit with us of a fixed amount of cash to secure your obligation under the Option.    Alternative U.S. federal income tax treatments of the Securities are possible, and if the Internal Revenue Service (the “IRS”) were successful in asserting such an alternative tax treatment for the

Securities the timing and the character of income on the Securities might differ significantly from the tax treatment described herein.    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 herein.    Additionally, 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.

Even if a Security is properly treated as a unit consisting of an Option and a Deposit, there is uncertainty regarding whether gain or loss recognized upon settlement at maturity should be treated as short-term capital gain or loss or as ordinary income or loss (which, in the case of loss, might be treated as a non-deductible “miscellaneous itemized deduction”).

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 issued 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 (including whether the entire coupon on the Securities should be required to be included currently as ordinary income) and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax.

Non-U.S. Holders (as defined below) should note that we currently do not intend to withhold on any payments made with respect to the Securities to Non-U.S. Holders (subject to compliance by such holders with certification necessary to establish an exemption from withholding and to the discussion under “Additional Provisions ― Tax considerations—FATCA”).    However, it is possible in light of the uncertain treatment of the Securities that an applicable withholding agent will withhold on any of the payments made with respect to the Securities to Non-U.S. Holders.    Furthermore, 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 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 U.S. federal income tax consequences of an investment in the Securities, including possible alternative treatments, the issues presented by the IRS notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

These examples are based on hypothetical terms. The actual terms are set forth on the cover of this document.

The examples below illustrate the payment at maturity for a $1,000.00 Security on a hypothetical offering of the Securities, with the following assumptions (the actual terms for the Securities are listed on the cover hereof; amounts may have been rounded for ease of reference):

¹ The Reference Rate Return will not be less than -100%, even if the Final Reference Rate is negative.

² This “Return on Securities” is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $1,000 principal amount Security to the purchase price of $1,000 per Security.

Example 1 - The Reference Rate increases by 1.25000 percentage points from the Initial Reference Rate of 2.50000% to a Final Reference Rate of 3.75000%. The Reference Rate Return is greater than the Downside Threshold.

Because the Final Reference Rate is greater than or equal to the Downside Threshold, the Payment at Maturity is equal to $1,000.00 plus the Quarterly Coupon otherwise due.

The payment at maturity of $1,000 per Security (excluding Quarterly Coupons) represents a return on the Securities of 0.000%. The total payment on the Securities over their term (including Quarterly Coupons) is $1,135.00 per Security, representing a total return on the Securities of 13.500%.

Even though the Reference Rate Return is 50.000% in this example, your return is limited to the Quarterly Coupons paid over the term of the Securities. You will not participate in any increase in the Reference Rate.

Example 2 - The Reference Rate decreases by 0.50000 percentage points from the Initial Reference Rate of 2.50000% to a Final Reference Rate of 2.00000% . The Reference Rate is greater than the Downside Threshold.

Because the Final Reference Rate is greater than or equal to the Downside Threshold, the Payment at Maturity is equal to $1,000.00 plus the Quarterly Coupon otherwise due.

The payment at maturity of $1,000.00 per Security (excluding Quarterly Coupons) represents a return on the Securities of 0.000%. The total payment on the Securities over their term (including Quarterly Coupons) is $1,135.00 per Security, representing a total return on the Securities of 13.500%.

Example 3 -    The Reference Rate decreases by 1.75000 percentage points from the Initial Reference Rate of 2.50000% to a Final Reference Rate of 0.75000%. The Reference Rate Return is less than the Downside Threshold and expressed as a formula:

$1,000.00 + ($1,000.00 × Reference Rate Return)

$1,000.00 + ($1,000.00 × -70.000%) = $1,000.00 + -$700 = $300.00

Because the Final Reference Rate is less than the Downside Threshold, in addition to the Quarterly Coupon otherwise due, the payment at maturity is equal to $300.00 per Security (excluding Quarterly Coupons), resulting in a total loss on the Securities of 70.000%. The total payment on the Securities over their term (including Quarterly Coupons) is $435.00 per Security, representing a total return on the Securities of -56.500%.

As this example illustrates, if the Final Reference Rate is less than the Downside Threshold, the payment at maturity will be based on the percentage change of the Reference Rate from the Initial Reference Rate to the Final Reference Rate and a very small absolute percentage point change in the Reference Rate can result in a significant loss on the Securities. In this example, while the absolute percentage point change in the Reference Rate is only 1.75000%, that movement actually represents a 70% decline from the Initial Reference Rate to the Final Reference Rate, and investors would lose 70% of their principal amount at maturity.

If the Final Reference Rate is less than the Downside Threshold, MSFL will pay you significantly less than the full principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate to the negative Reference Rate Return.

Example 4 - The Reference Rate decreases by 3.75000 percentage points from the Initial Reference Rate of 2.50000% to a Final Reference Rate of -1.25000%. The Reference Rate Return is less than the Downside Threshold and expressed as a formula:

$1,000 + ($1,000 × Reference Rate Return)

$1,000 + ($1,000 × -100.000%) = $1,000 + -$1,000 = $0.00

Because the Final Reference Rate is less than the Downside Threshold, in addition to the Quarterly Coupon otherwise due, the payment at maturity is equal to $0.00 per Security (excluding Quarterly Coupons), resulting in a total loss on the Securities of the entire principal amount of the Securities. The total payment on the Securities over their term (including Quarterly Coupons) is $135.00 per Note, representing a total return on the Securities of -86.500%.

As this example illustrates, the Final Reference Rate may be negative, which would result in a decline from the Initial Reference Rate of more than 100%. However, the Reference Rate Return will not be less than -100%, even if the percentage decline from the Initial Reference Rate to the Final Reference Rate is greater than 100%. You will lose all of your principal at maturity if the Final Reference Rate is zero or negative.

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 is a general discussion of the material U.S. federal income tax consequences and certain estate tax consequences of ownership and disposition of the Securities.  This discussion applies only to initial investors in the Securities who:

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:

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 lack of any controlling legal authority, there is substantial uncertainty regarding the U.S. federal income tax consequences of an investment in the Securities.  We intend to treat a Security, under current law, for U.S. federal income tax purposes, as a unit consisting of the following:

Based on the treatment set forth above, we have determined that the Yield on the Deposit is 2.4315% per annum, paid quarterly, and that the remaining portion of the coupon payments on the Securities is attributable to the premium on the Option (the “Option Premium”) as set forth below:

We will allocate 100% of the issue price of the Securities to the Deposit and none to the Option.  Our allocation of the issue price between the Option and the Deposit will be binding on you, unless you timely and explicitly disclose to the Internal Revenue Service (the “IRS”) that your allocation is different from ours.  This allocation is not, however, binding on the IRS or a court.  

No statutory, judicial or administrative authority directly addresses the treatment of the Securities or instruments similar to the Securities for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to the Securities.   Significant aspects of the U.S. federal income tax consequences of an investment in the Securities are uncertain, and no assurance can be given that the IRS or a court will agree with the tax treatment described herein.   In the opinion of our counsel, Davis Polk & Wardwell LLP, the treatment of the Securities described above 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.   Accordingly, you should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Securities (including alternative treatments of the Securities).  Unless otherwise stated, the following discussion is based on the treatment and the allocation described above.

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:

Tax Treatment of the Securities

Assuming the treatment of the Securities and allocation of the issue price as set forth above are respected, the following U.S. federal income tax consequences should result.

Coupon Payments on the Securities.   Under the characterization described above under “—General,” only a portion of the coupon payments on the Securities will be attributable to the Yield on the Deposit.  The remainder of the coupon payments will represent payments attributable to the Option Premium.  The Deposit will be treated as a “short-term obligation” for U.S. federal income tax purposes. Accordingly, to the extent attributable to the Yield on the Deposit, coupon payments on the Securities will generally be taxable to a U.S. Holder as ordinary interest income. A U.S. Holder who is a cash-method taxpayer will not be required to include the Yield on the Deposit currently in income for U.S. federal income tax purposes prior to receipt of such amounts unless the holder elects to do so. A U.S. Holder who is a cash-method taxpayer and does not make such election should include the Yield on the Deposit as income upon receipt. An accrual-method U.S. Holder will be required to include the Yield on the Deposit in income as it accrues on a straight-line basis, unless the holder makes an election to accrue the Yield on the Deposit according to a constant yield method based on daily compounding.

Additionally, a cash-method U.S. Holder who does not elect to accrue the Yield on the Deposit will be required to defer deductions for interest paid on indebtedness incurred to purchase or carry the Securities until the Yield on the Deposit is included in income. The amount of deductions required to be deferred should not exceed the amount of the Yield on the Deposit the U.S. Holder would have taken into income under an election to accrue such amounts.

The Option Premium will not be taxable to a U.S. Holder upon receipt but will be accounted for as described below.

Tax Basis.   Based on our determination set forth above, the U.S. Holder’s initial tax basis in the Deposit will be 100% of the issue price.  The determination of gain or loss with respect to the Option is described below.

Taxation of the Securities at Maturity

Receipt of Stated Principal Amount in Cash upon Maturity of the Securities.   If a U.S. Holder receives the stated principal amount of a Security in cash (excluding cash attributable to coupon payments on the Security, which would be taxed as described above under “—Coupon Payments on the Securities”), the Option will be deemed to have expired unexercised. In such case, the U.S. Holder will not recognize any gain upon the return of the Deposit, but will recognize the total amount of Option Premium received by the U.S. Holder over the term of the Securities (including Option Premium received upon maturity) as gain at such time. See below under “—Character of Gain or Loss at Maturity” regarding the uncertain character of such gain.

Receipt of a Cash Amount Based on the Performance of the Reference Rate upon Maturity of the Securities.   If a U.S. Holder receives an amount of cash (excluding cash attributable to coupon payments on the Securities, which would be taxed as described above under “—Coupon Payments on the Securities”) that is less than the stated principal amount of the Securities, the Option will be deemed to have been exercised and the U.S. Holder will be deemed to have applied the Deposit toward the cash settlement of the Option.  In such case, the U.S. Holder will not recognize any gain or loss in respect of the Deposit, but will recognize gain or loss in an amount equal to the difference between (i) the amount of cash received by the U.S. Holder at maturity (excluding cash attributable to coupon payments on the Securities), plus the total Option Premium received by the U.S. Holder over the term of the Securities (including the Option Premium received at maturity) and (ii) the Deposit.  See below under “—Character of Gain or Loss at Maturity” regarding the uncertain character of such gain or loss.

Character of Gain or Loss at Maturity. Because of the lack of authority addressing the tax treatment of the Securities, there is significant uncertainty regarding whether gain or loss recognized with respect to the Option at the maturity of a Security should be treated as capital gain or loss or as ordinary income or loss. Our counsel believes it would be reasonable to treat any such gain or loss as short-term capital gain or loss. However, the IRS may assert that any gain or loss recognized by a U.S. Holder upon maturity of the Securities should be treated as ordinary income or loss. In the event of an ordinary loss to certain non-corporate U.S. Holders, any deduction arising from the loss may be treated as a non-deductible “miscellaneous itemized deduction.” You should consult your tax adviser regarding the character of gain or loss recognized upon maturity of the Securities.

Sale or Exchange of the Securities Prior to Maturity.   For the purpose of determining gain or loss on the Deposit and the Option upon sale or exchange of the Securities prior to maturity, a U.S. Holder should apportion the amount realized between the Deposit and the Option based on their respective values on the date of such sale or exchange. The amount of gain or loss on the Deposit will equal the amount realized that is attributable to the Deposit, less the U.S. Holder’s adjusted tax basis in the Deposit. Such gain will be treated as ordinary interest income to the extent of any accrued but unpaid Yield on the Deposit not previously included in income, and any remaining gain will be treated as short-term capital gain. Loss on the Deposit will be treated as short-term capital loss. The amount realized that is attributable to the Option, together with the total Option Premium received by the U.S. Holder over the term of the Security, should be treated as short-term capital gain.

If the value of the Deposit on the date of such sale or exchange exceeds the total amount realized on the sale or exchange of the Security, the U.S. Holder will be treated as having (i) sold or exchanged the Deposit for an amount equal to its value on that date and (ii) made a payment (the “Option Assumption Payment”) to the purchaser of the Security equal to the amount of such excess, in exchange for the purchaser’s assumption of the U.S. Holder’s rights and obligations under the Option.  In such a case, the U.S. Holder should recognize short-term capital gain or loss in respect of the Option in an amount equal to the total Option Premium received by the U.S. Holder over the term of the Security, less the amount of the Option Assumption Payment deemed to be made by the U.S. Holder.  

Possible Alternative Tax Treatments of an Investment in the Securities

Due to the absence of authorities that directly address the proper characterization of the Securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment described above.  If the IRS were successful in asserting an alternative treatment, the timing and/or character of income, gain or loss with respect to the Securities would be materially and adversely affected.

Under one alternative characterization, the IRS could seek to treat a Security as a unit consisting of a deposit and a “notional principal contract” instead of an option. In that event, because there are no currently effective regulations that comprehensively address the treatment of income and deductions on a notional principal contract providing for contingent payments, the timing and character of income and deductions on the notional principal contract would be unclear. A U.S. Holder would likely be required to recognize income during the term of the Securities with respect to the notional principal contract, in an amount that could differ from the portion of the coupon payments that is attributable to the notional principal contract. In addition, any income or loss recognized by a U.S. Holder at maturity of the Securities

would likely be ordinary income or loss (which, in the case of loss, might be treated as a non-deductible “miscellaneous itemized deduction”).

Alternatively, the IRS could assert that a Security is a short-term debt instrument, with the result that the timing and character of income or loss on the Securities might differ from the tax treatment described above. 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 U.S. federal income tax characterizations or treatments of the Securities are also possible, which if applied could significantly affect the timing and character of income or loss with respect to the Securities. It is possible, for example, that a Security could be treated as constituting an “open transaction” with the result that the coupon payments on the Securities might not be accounted for separately as giving rise to income to U.S. Holders until the sale, exchange or settlement of the Securities. Alternatively, the entire amount of each coupon payment on the Securities could be required to be included in income by a U.S. Holder at the time received or accrued. Accordingly, prospective purchasers should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in 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.  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 U.S. Holders of the Securities is the character and timing of income or loss realized with respect to these instruments (including whether the Option Premium might be required to be included currently as ordinary income).  Accordingly, prospective investors 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 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:

The term “Non-U.S. Holder” does not include any of the following holders:

Such holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the Securities.

General  

Assuming the treatment of the Securities as set forth above is respected and subject  to the discussion below regarding FATCA, payments with respect to a Security, and gain realized on the sale, exchange or other disposition of such Security, should not be subject to U.S. federal income or withholding tax under current law, provided that:

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.

Possible Alternative Tax Treatments of an Investment in the Securities

As described above under “—Tax Consequences to U.S. Holders—Possible Alternative Tax Treatments of an Investment in the Securities,” the IRS may seek to apply a different characterization and tax treatment from the treatment described herein. Moreover, among the issues addressed in the IRS notice described in “—Tax Consequences to U.S. Holders” is the degree, if any, to which income realized by Non-U.S. Holders should be subject to withholding tax. It is possible that any Treasury regulations or other guidance issued after consideration of this issue could materially and adversely affect the withholding tax consequences of ownership and disposition of the Securities, possibly with retroactive effect. There is substantial uncertainty regarding the proper tax treatment of the Securities. Accordingly, prospective investors 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 discussed above. Prospective investors should note that we currently do not intend to withhold on any of the payments made with respect to the Securities to Non-U.S. Holders (subject to compliance by such holders with the certification requirement described above and to the discussion below regarding FATCA). However, it is possible in light of the uncertain treatment of the Securities that an applicable withholding agent will withhold on payments made with respect to the Securities to Non-U.S. Holders. Furthermore, 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.

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 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 under “—General—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”).  Withholding (if applicable) applies to payments of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain financial instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds.  While the treatment of the Securities is unclear, you should assume that the yield on the Deposit will be subject to the FATCA rules.  It is also possible in light of this uncertainty that an applicable withholding agent will treat the entire amount of the coupon payments as being 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, 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 reference rate is LIBOR with an index maturity of 3 months and an index currency of U.S. dollars.  See the information set forth under “Additional Terms of the Securities—LIBOR” below.

Historical Information

The following graph sets forth the historical performance of the Reference Rate based on the percentage level of the Reference Rate from January 1, 2009 through June 7, 2019. The Reference Rate on June 7, 2019 was 2.45063%.

You should not take the historical values of the Reference Rate as an indication of its future performance. No assurance can be given as to the level of the Reference Rate, including on the Final Valuation Date. We obtained the information in the graph below from Bloomberg Financial Markets, without independent verification.

When reviewing the historical performance of the Reference Rate in the below graph, it is important to understand that a very small absolute percentage point change in the Reference Rate can result in a significant loss on the Securities. You will lose all of your principal at maturity if the Final Reference Rate is zero or negative.

* The dashed line indicates the Downside Threshold of 1.22532%, which is approximately 50% of the Initial Reference Rate.  

Past performance is not indicative of future results.

LIBOR

Notwithstanding the provisions set forth in the accompanying prospectus under “Description of Debt Securities—Base Rates—LIBOR Debt Securities,” “Reference Rate” or “3-Month USD LIBOR” mean, for any day with respect to which the level of such rate must be determined (each, an “interest determination date”), the arithmetic mean of the offered rates for deposits in U.S. dollars having a 3 month maturity, commencing on the second London banking day immediately following that interest determination date that appear on the Designated LIBOR Page as of approximately 11:00 a.m., London time, on that interest determination date, if at least two offered rates appear on the Designated LIBOR Page, provided that if the specified Designated LIBOR Page, as defined below, by its terms provides only for a single rate, that single rate will be used.

Notwithstanding the terms set forth elsewhere in this pricing supplement and the provisions set forth above, if LIBOR has been permanently discontinued, the Calculation Agent will use, as a substitute for LIBOR and for each future interest determination date, the alternative reference rate selected by the central bank, reserve bank, monetary authority or any similar institution (including any committee or working group thereof) in the jurisdiction of the applicable index currency that is consistent with accepted market practice (the “alternative rate”).  As part of such substitution, the Calculation Agent will, after consultation with us, make such adjustments to the alternative rate or the spread thereon, as well as the business day convention, interest determination dates and related provisions and definitions, in each case that are consistent with accepted market practice for the use of such alternative rate for obligations such as the Securities.

Postponement of Final Valuation Date and Maturity Date

If the scheduled Final Valuation Date is not a London banking day, the Final Valuation Date will be postponed to the immediately following London banking day.

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 postponed to the second business day following the Final Valuation Date, as postponed.

Acceleration Amount in case of an Event of Default

In case an event of default with respect to the Securities shall have occurred and be continuing, the amount declared due and payable per Security upon any acceleration of the Securities shall be an amount in cash equal to the value of such Security on the day that is two business days prior to the date of such acceleration, as determined by the Calculation Agent (acting in good faith and in a commercially reasonable manner) by reference to factors that the Calculation Agent considers relevant, including, without limitation: (i) then-current market interest rates; (ii) our credit spreads as of the Trade Date, without adjusting for any subsequent changes to our creditworthiness; and (iii) the then-current value of the performance-based component of such Security.    Because the Calculation Agent will take into account movements in

market interest rates, any increase in market interest rates since the Trade Date will lower the value of your claim in comparison to if such movements were not taken into account.

Notwithstanding the foregoing, if a voluntary or involuntary liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to the Issuer, then depending on applicable bankruptcy law, your claim may be limited to an amount that could be less than the default amount.

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 (as successor Trustee to JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank)).

Agent

The “agent” is MS & Co.

Calculation Agent and Calculations

The “Calculation Agent” for the Securities will be MSCS.  As Calculation Agent, MSCS will determine, among other things, the Initial Reference Rate, the Coupon Rate, the Final Reference Rate 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 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 the 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 .

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 pricing supplement, 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 “Form of Securities—The Depositary” in the accompanying prospectus supplement and “Securities Offered on a Global Basis Through the Depositary” in the accompanying prospectus.