Relevant
Exchange
|
|
The
primary exchange(s) or market(s) of trading for (i) any security then included in the Index, or any Successor Index, and (ii)
any futures or options contracts related to the Index or to any security then included in the Index.
|
Book
Entry Security or
|
|
|
Certificated
Security
|
|
Book
Entry. The Warrants will be issued in the form of one or more fully registered global warrants, which will be deposited
with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be
the only registered holder of the Warrants. Your beneficial interest in the Warrants will be evidenced solely by
entries on the books of the Warrants intermediary acting on your behalf as a direct or indirect participant in DTC. In
this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to
actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices
to you will mean payments or notices to DTC, as the registered holder of the Warrants, for distribution to participants in
accordance with DTC’s procedures. For more information regarding DTC and book-entry warrants, please read
“Forms of Securities—The Depositary,” “Securities Offered on a Global Basis Through the Depositary—Book-Entry,
Delivery and Form” and “Securities Offered on a Global Basis Through the Depositary—Global Clearance and
Settlement Procedures” in the accompanying prospectus.
|
Warrant
Agent
|
|
The
Bank of New York Mellon, a New York banking corporation
|
Agents
|
|
J.P.
Morgan Securities LLC and JPMorgan Chase Bank, N.A.
|
Calculation
Agent
|
|
MS
& Co. and its successors
|
All
determinations made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the Warrant Agent and us.
All
calculations with respect to the Cash Settlement Amount, if any, will be made by the Calculation Agent and will be rounded to
the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per Warrant, if any, will be rounded to the nearest ten-thousandth,
with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid, if
any, on the aggregate number of Warrants will be rounded to the nearest cent, with one-half cent rounded upward.
Because
the Calculation Agent is our affiliate, the economic interests of the Calculation Agent and its affiliates may be adverse to your
interests as an investor in the Warrants, including with respect to certain determinations and judgments that the Calculation
Agent must make in determining the Initial Index Level or the Final Index Level. See “—Discontinuance of the Index;
Alteration of Method of Calculation” below. MS & Co. is obligated to carry out its duties and functions as Calculation
Agent in good faith and using its reasonable judgment.
Market
Disruption Event
|
|
Market
Disruption Event means, with respect to the Index:
|
(i) the
occurrence or existence of any of:
(a) a
suspension, absence or material limitation of trading of securities then constituting 20 percent or more of the level of the Index
(or the Successor Index (as defined below under “—Discontinuance of the Index; Alteration of Method of Calculation”))
on the Relevant Exchange for such securities for more than two hours of trading or during the one-half hour period preceding the
close of the principal trading session on such Relevant Exchange, or
(b)
a breakdown or failure in the price and trade reporting systems of any Relevant Exchange
as a result of which the reported trading prices for securities then constituting 20 percent or more of the level of the Index
(or the Successor Index) during the last one-half hour preceding the close of the principal trading session on such Relevant Exchange
are materially inaccurate, or
(c)
the suspension, material limitation or absence of trading on any major U.S. securities
market for trading in futures or options contracts or exchange-traded funds related to the Index (or the Successor Index) for
more than two hours of trading or during the one-half hour period preceding the close of the principal trading session on such
market,
in
each case, as determined by the Calculation Agent in its sole discretion; and
(ii) a
determination by the Calculation Agent in its sole discretion that any event described in clause (i) above materially interfered
with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with
respect to the Warrants.
For
the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in the Index
is materially suspended or materially limited at that time, then the relevant percentage contribution of that security to the
level of the Index shall be based on a comparison of (x) the portion of the value of the Index attributable to that security relative
to (y) the overall value of the Index, 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 Index by the primary securities market trading in such contracts or funds by reason of (a) a price
change exceeding limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds,
or (c) a disparity in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or
material
limitation of trading in futures or options contracts or exchange-traded funds related to the Index and (4) a “suspension,
absence or material limitation of trading” on any Relevant Exchange or on the primary market on which futures or options
contracts or exchange-traded funds related to the Index are traded will not include any time when such securities market is itself
closed for trading under ordinary circumstances.
Discontinuance
of the Index;
|
|
|
Alteration
of Method of Calculation
|
|
If
the Index Publisher discontinues publication of the Index and the Index Publisher or another entity (including MS & Co.)
publishes a successor or substitute index that MS & Co., as the Calculation Agent, determines, in its sole discretion,
to be comparable to the discontinued Index (such index being referred to herein as a “Successor Index”), then
any subsequent Index Closing Value will be determined by reference to the published value of such Successor Index at the regular
weekday close of trading on any Index Business Day that the Index Closing Value is to be determined, and, to the extent the
Index Closing Value of the Successor Index differs from the Index Closing Value of the Index at the time of such substitution,
proportionate adjustments will be made by the Calculation Agent to the Initial Index Level, Strike Level and Barrier Level.
|
Upon
any selection by the Calculation Agent of a Successor Index, the Calculation Agent will cause written notice thereof to be furnished
to the Warrant Agent, to us and to DTC, as holder of the Warrants, within three Business Days of such selection. We expect that
such notice will be made available to you, as a beneficial owner of the Warrants, in accordance with the standard rules and procedures
of DTC and its direct and indirect participants.
If
the Index Publisher discontinues the publication of the Index prior to, and such discontinuance is continuing on, any Averaging
Date and the Calculation Agent determines, in its sole discretion, that no Successor Index is available at such time, then the
Calculation Agent will determine the Index Closing Value for such date. The Index Closing Value will be computed by the Calculation
Agent in accordance with the formula for calculating the Index 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 such date of each security most recently constituting the Index without any rebalancing or substitution
of such securities following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication
of the Index may adversely affect the value of the Warrants.
If
at any time the method of calculating the Index or a Successor Index, or the value thereof, is changed in a material respect,
or if the Index or a Successor Index is in any other way modified so that such index does not, in the sole opinion of MS &
Co., as the Calculation Agent, fairly represent the value of the Index or such Successor Index had such changes or modifications
not been
made,
then, from and after such time, the Calculation Agent will, at the close of business in New York City on each date on which the
Index Closing Value is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation
Agent, may be necessary in order to arrive at a value of a stock index comparable to the Index or such Successor Index, as the
case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing
Value with reference to the Index or such Successor Index, as adjusted. Accordingly, if the method of calculating the Index or
such Successor Index is modified so that the value of such index is a fraction of what it would have been if it had not been modified
(
e.g.
, due to a split in the index), then the Calculation Agent will adjust such index in order to arrive at a value of
the Index or such Successor Index as if it had not been modified
(
e.g.
, as if such split had not occurred).
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|
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The
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.
|
Historical
Information
|
|
The
following table sets forth the published high and low Index Closing Values, as well as end-of-quarter Index Closing Values,
of the Index for each quarter in the period from January 1, 2014 through July 19, 2019. The Index Closing Value
on July 19, 2019 was 2,976.61. The graph following the table sets forth the historical performance of the Index for each day
during the same period. We obtained the information in the table below from Bloomberg Financial Markets, without
independent verification.
|
The
historical values of the Index should not be taken as an indication of future performance, and no assurance can be given as to
the Index Closing Value on any Averaging Date. The Final Index Level may be at or above the Strike Level so that the Warrants
expire worthless on the Expiration Date.
We
cannot give you any assurance that the Bearish Index Return will be greater than the Warrant Premium Percentage so that you will
not lose money on your investment, or that it will be positive so that you will not lose your entire investment in the Warrants.
S&P
500
®
Index
|
High
|
Low
|
Period
End
|
2014
|
|
|
|
First
Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second
Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third
Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth
Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First
Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second
Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
S&P
500
®
Index
|
High
|
Low
|
Period
End
|
Third
Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth
Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First
Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second
Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third
Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth
Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First
Quarter
|
2,395.96
|
2,238.83
|
2,362.72
|
Second
Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third
Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth
Quarter
|
2,690.16
|
2,519.36
|
2,673.61
|
2018
|
|
|
|
First
Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second
Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third
Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth
Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First
Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second
Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third
Quarter (through July 19, 2019)
|
3,014.30
|
2,964.33
|
2,976.61
|
|
|
Historical
Daily Index Closing Values of the S&P 500
®
Index
January
1, 2014 through July 19, 2019
|
Use
of Proceeds and Hedging
|
|
The
proceeds from the sale of the Warrants will be used by us for general corporate purposes. We will receive, in aggregate,
$21.70 per Warrant issued, because, when we enter into hedging transactions in order to meet our obligations under the Warrants,
our hedging counterparty will reimburse the cost of the Agent’s commissions. The costs of the Warrants borne
by you and described beginning on PS-3 above comprise the Agent’s commissions and the cost of issuing, structuring and
hedging the Warrants. See also “Use of Proceeds” in the accompanying prospectus.
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On
or prior to the Pricing Date, we will hedge our anticipated exposure in connection with the Warrants by entering into hedging
transactions with our affiliates and/or third-party dealers. We expect our hedging counterparties to take positions in the securities
constituting the Index, in futures and/or options contracts on the Index or its component securities listed on major securities
markets, or positions in any other available warrants or
instruments
that they may wish to use in connection with such hedging. Such purchase activity could potentially affect the Initial Index Level,
and therefore could affect the value below which the Index must close on the Averaging Dates so that you do not lose your entire
initial investment in the Warrants. In addition, through our affiliates, we are likely to modify our hedge position throughout
the term of the Warrants, including on the Averaging Dates, by purchasing and selling the securities underlying the Index, futures
and/or options contracts on the Index or its component securities listed on major securities markets or positions in any other
available warrants or instruments that we may wish to use in connection with such hedging activities. As a result, these entities
may be unwinding or adjusting hedge positions during the term of the Warrants, and the hedging strategy may involve greater and
more frequent dynamic adjustments to the hedge as the Averaging Dates approach. We cannot give any assurance that our hedging
activities will not affect the value of the Index, and, therefore, adversely affect the value of the Warrants or the payment you
will receive on the Cash Settlement Date, if any.
Governing
Law
|
|
The
Warrants are governed by, and construed in accordance with, the laws of the State of New York.
|
In
the event MSFL or Morgan Stanley becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (together, the “
U.S. Special Resolution Regimes
”), the transfer
of the Warrants, the Warrant Agreement and the related Morgan Stanley guarantee (together, the “
Relevant Agreements
”),
and any interest and obligation in or under the Relevant Agreements, from MSFL or Morgan Stanley, respectively, will be effective
to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if the Relevant Agreements, and
any interest and obligation in or under the Relevant Agreements, were governed by the laws of the United States or a state of
the United States. In the event MSFL or Morgan Stanley, or any of their affiliates, becomes subject to a U.S. Special Resolution
Regime, default rights against MSFL or Morgan Stanley with respect to the Relevant Agreements are permitted to be exercised to
no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if the Relevant Agreements
were governed by the laws of the United States or a state of the United States.
Supplemental
Information Concerning
|
|
|
Plan
of Distribution
|
|
Under
the terms and subject to the conditions contained in the U.S. distribution agreement referred to in the prospectus supplement
under “Plan of Distribution (Conflicts of Interest),” the Agent, acting as principal for its own account, has
agreed to purchase, and we have agreed to sell, the aggregate premium amount of Warrants set forth on the cover of this pricing
supplement. J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents for the Warrants
and will receive a fee from us that will not exceed $1.30 per $21.70 Premium Amount of each Warrant, but will forgo any fees
for sales to certain fiduciary accounts.
|
When
we price this offering of Warrants, we will determine the economic terms of the Warrants such that for each Warrant the estimated
value on the Pricing Date will be no lower than the level described in “Summary of Pricing Supplement” beginning on
PS-3.
General
No
action has been or will be taken by us, the Agent or any dealer that would permit a public offering of the Warrants or possession
or distribution of this pricing supplement or the accompanying index supplement, prospectus supplement or prospectus in any jurisdiction,
other than the United States, where action for that purpose is required. No offers, sales or deliveries of the Warrants, or distribution
of this pricing supplement or the accompanying index supplement, prospectus supplement or prospectus or any other offering material
relating to the Warrants, may be made in or from any jurisdiction except in circumstances which will result in compliance with
any applicable laws and regulations and will not impose any obligations on us, the Agent or any dealer.
The
Agent has represented and agreed, and each dealer through which we may offer the Warrants has represented and agreed, that it
(i) will comply with all applicable laws and regulations in force in each non-U.S. jurisdiction in which it purchases, offers,
sells or delivers the Warrants or possesses or distributes this pricing supplement and the accompanying index supplement, prospectus
supplement and prospectus and (ii) will obtain any consent, approval or permission required by it for the purchase, offer or sale
by it of the Warrants under the laws and regulations in force in each non-U.S. jurisdiction to which it is subject or in which
it makes purchases, offers or sales of the Warrants. We shall not have responsibility for the Agent’s or any dealer’s
compliance with the applicable laws and regulations or obtaining any required consent, approval or permission.
In
addition to the selling restrictions set forth in “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement, the following selling restrictions also apply to the Warrants:
Brazil
The
Warrants have not been and will not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities
Commission). The Warrants may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not
constitute a public offering or distribution under Brazilian laws and regulations.
Chile
The
Warrants have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly
in Chile. No offer, sales or deliveries of the Warrants or distribution of this pricing supplement or the accompanying prospectus
supplement, index supplement or prospectus, may be
made
in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.
Mexico
The
Warrants have not been registered with the National Registry of Securities maintained by the Mexican National Banking and Securities
Commission and may not be offered or sold publicly in Mexico. This pricing supplement, the accompanying prospectus supplement,
the accompanying index supplement and the accompanying prospectus may not be publicly distributed in Mexico.
Benefit
Plan Investor Considerations
|
|
Each
fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), which we refer to as a “plan,” should consider the fiduciary
standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in these Warrants.
Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be consistent with the documents and instruments governing the plan.
|
In
addition, we and certain of our affiliates, including MS & Co., may each be considered “parties in interest” within
the meaning of ERISA or “disqualified persons” within the meaning of the Code with respect to many plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if these Warrants are acquired by or with the assets of a plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the Warrants are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The
U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive
relief for direct or indirect prohibited transactions resulting from the purchase or holding of these Warrants. Those class exemptions
are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company separate accounts) and PTCE 84-14 (for certain transactions determined by
independent qualified asset managers). In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption
for the purchase and sale of Warrants and the related lending transactions,
provided
that neither the issuer of the Warrants nor any of its affiliates has or exercises any discretionary authority or control or renders
any investment advice with respect to the assets of any plan involved in the transaction and provided further that the plan pays
no more than adequate consideration in connection with the transaction (the so-called “service provider” exemption).
There can be no assurance that any of these class or statutory exemptions will be available with respect to transactions involving
these Warrants.
Because
we may be considered a party in interest with respect to many plans, unless otherwise specified in the applicable prospectus supplement,
these Warrants may not be purchased, held or disposed of by any plan, any entity whose underlying assets include “plan assets”
by reason of any plan’s investment in the entity (a “plan asset entity”) or any person investing “plan
assets” of any plan, unless such purchase, holding or disposition is eligible for exemptive relief, including relief available
under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding or disposition is otherwise
not prohibited. Unless otherwise specified in the applicable prospectus supplement, any purchaser, including any fiduciary purchasing
on behalf of a plan, transferee or holder of these Warrants will be deemed to have represented, in its corporate and its fiduciary
capacity, by its purchase and holding thereof that either (a) it is not a plan or a plan asset entity, is not purchasing such
Warrants on behalf of or with “plan assets” of any plan, or with any assets of a governmental or church plan that
is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA
or Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these Warrants will not
constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate
any Similar Law.
Due
to the complexity of these rules and the penalties that may be imposed upon persons involved in nonexempt prohibited transactions,
it is particularly important that fiduciaries or other persons considering purchasing these Warrants on behalf of or with “plan
assets” of any plan consult with their counsel regarding the availability of exemptive relief.
The
Warrants are contractual financial instruments. The financial exposure provided by the Warrants is not a substitute or proxy for,
and is not intended as a substitute or proxy for, individualized investment management or advice for the benefit of any purchaser
or holder of the Warrants. The Warrants have not been designed and will not be administered in a manner intended to reflect the
individualized needs and objectives of any purchaser or holder of the Warrants.
Each
purchaser or holder of any Warrants acknowledges and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the
purchaser
or holder with respect to (A) the design and terms of the Warrants, (B) the purchaser or holder’s investment in the Warrants,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the Warrants;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the
Warrants and (B) all hedging transactions in connection with our obligations under the Warrants;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each
purchaser and holder of these Warrants has exclusive responsibility for ensuring that its purchase, holding and disposition of
the Warrants do not violate the prohibited transaction rules of ERISA or the Code or any Similar Law. The sale of any of these
Warrants to any plan or plan subject to Similar Law is in no respect a representation by us or any of our affiliates or representatives
that such an investment meets all relevant legal requirements with respect to investments by plans generally or any particular
plan, or that such an investment is appropriate for plans generally or any particular plan. In this regard, neither this discussion
nor anything provided in this document is or is intended to be investment advice directed at any potential Plan purchaser or at
Plan purchasers generally and such purchasers of these Warrants should consult and rely on their own counsel and advisers as to
whether an investment in these Warrants is suitable.
However,
individual retirement accounts, individual retirement annuities and Keogh plans, as well as employee benefit plans that permit
participants to direct the investment of their accounts, will not be permitted to purchase or hold the Warrants if the account,
plan or annuity is for the benefit of an employee of Morgan Stanley or a family member and the employee receives any compensation
(such as, for example, an addition to bonus) based on the purchase of the Warrants by the account, plan or annuity.
Client
accounts over which Morgan Stanley or any of its subsidiaries have investment discretion are not permitted to purchase the Warrants,
either directly or indirectly.
United
States Federal Taxation
|
|
In
the opinion of Davis Polk & Wardwell LLP, under current law, each Warrant should be treated as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion
is based in part on
|
|
|
|
market
conditions as of the date of this document, it is subject to confirmation on the pricing date.
Assuming
this treatment of the Warrants is respected, a U.S. Holder should not be required to recognize taxable income over the term of
the Warrants prior to settlement, other than pursuant to a sale or exchange. Any gain or loss recognized upon sale, exchange,
lapse or settlement of the Warrants should generally be short-term capital gain or loss. For a detailed discussion of the U.S.
federal income tax consequences to U.S. Holders of the ownership and disposition of the Warrants, U.S. Holders should read the
sections of the accompanying prospectus supplement entitled “United States Federal Taxation—Tax Consequences to U.S.
Holders—Warrants” and “United States Federal Taxation—Tax Consequences to U.S. Holders—Backup Withholding
and Information Reporting.”
Section
871(m) Withholding Tax on Dividend Equivalents
Section
871(m) of the Internal Revenue Code of 1986, as amended, 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.
In
light of the economic terms of the Warrants, payment on the Warrants to Non-U.S. Holders should not be subject to Section 871(m).
Both
U.S. and non-U.S. investors considering an investment in the Warrants should read the section of the accompanying prospectus supplement
entitled “United States Federal Taxation” and consult their tax advisers regarding all aspects of the U.S. federal
income tax consequences of an investment in the Warrants, and any tax consequences arising under the laws of any state, local,
or non-U.S. taxing jurisdiction. A holder who has made a separate investment the return of which is based on or linked to the
performance of the underlying (including any component thereof) should discuss with its tax adviser the U.S. federal income tax
consequences of an investment in the Warrants (including the potential application of the “straddle” rules).
The
discussion in the preceding paragraphs under “United States Federal Taxation” and the discussion contained in the
section entitled “United States Federal Taxation” in the accompanying prospectus supplement, insofar as they purport
to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion
of Davis Polk & Wardwell LLP regarding the
material
U.S. federal income tax consequences of an investment in the Warrants.