ADDITIONAL INFORMATION
ABOUT THE BUFFERED PLUS
Interest Rate |
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None |
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Book Entry Note or Certificated Note |
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Book Entry. The Buffered PLUS will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be the only registered holder of the Buffered PLUS. Your beneficial interest in the Buffered PLUS will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in DTC. In this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices to you will mean payments or notices to DTC, as the registered holder of the Buffered PLUS, for distribution to participants in accordance with DTC’s procedures. For more information regarding DTC and book entry notes, please read “Forms of Securities—The Depositary” and “Forms of Securities—Global Securities—Registered Global Securities” in the accompanying prospectus. |
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Procter & Gamble Stock; Public Information |
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The Procter & Gamble Company manufactures and markets consumer products in the laundry and cleaning, paper, beauty care, food and beverage, and health care segments. Procter & Gamble Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by The Procter & Gamble Company pursuant to the Exchange Act can be located by reference to Commission file number 001-00434. In addition, information regarding The Procter & Gamble Company may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information. |
This pricing supplement relates only
to the Buffered PLUS referenced hereby and does not relate to Procter & Gamble Stock or other securities of The Procter & Gamble
Company. We have derived all disclosures contained in this pricing supplement regarding The Procter & Gamble Company from the publicly
available documents described in the preceding paragraph. In connection with the offering of the Buffered PLUS, neither we nor the Agent
has participated in the preparation of such documents or made any due diligence inquiry with respect to The Procter & Gamble Company
in connection with the offering of the Buffered PLUS. Neither we nor the Agent makes any representation that such publicly available documents
are or any
other publicly available information
regarding The Procter & Gamble Company is accurate or complete. Furthermore, we cannot give any assurance that all events occurring
prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described
in the preceding paragraph) that would affect the trading price of Procter & Gamble Stock (and therefore the price of Procter &
Gamble Stock at the time we priced the Buffered PLUS) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning The Procter & Gamble Company could affect the value received at maturity
with respect to the Buffered PLUS and therefore the value of the Buffered PLUS.
Neither we nor any of our affiliates
makes any representation to you as to the performance of Procter & Gamble Stock.
We and/or our affiliates may presently
or from time to time engage in business with The Procter & Gamble Company, including extending loans to, or making equity investments
in, The Procter & Gamble Company or providing advisory services to The Procter & Gamble Company, including merger and acquisition
advisory services. In the course of such business, we and/or our affiliates may acquire non-public information with respect to The Procter
& Gamble Company, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or
more of our affiliates may publish research reports with respect to The Procter & Gamble Company, and the reports may or may not recommend
that investors buy or hold Procter & Gamble Stock. As a purchaser of the Buffered PLUS, you should undertake an independent investigation
of The Procter & Gamble Company as in your judgment is appropriate to make an informed decision with respect to an investment linked
to Procter & Gamble Stock.
Coca-Cola Stock; Public Information |
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The Coca-Cola Company is a beverage company. Coca-Cola Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by The Coca-Cola Company pursuant to the Exchange Act can be located by reference to Commission file number 001-02217. In addition, information regarding The Coca-Cola Company may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information. |
This pricing supplement relates only
to the Buffered PLUS referenced hereby and does not relate to Coca-Cola Stock or other
securities of The Coca-Cola Company.
We have derived all disclosures contained in this pricing supplement regarding The Coca-Cola Company from the publicly available documents
described in the preceding paragraph. In connection with the offering of the Buffered PLUS, neither we nor the Agent has participated
in the preparation of such documents or made any due diligence inquiry with respect to The Coca-Cola Company in connection with the offering
of the Buffered PLUS. Neither we nor the Agent makes any representation that such publicly available documents are or any other publicly
available information regarding The Coca-Cola Company is accurate or complete. Furthermore, we cannot give any assurance that all events
occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents
described in the preceding paragraph) that would affect the trading price of Coca-Cola Stock (and therefore the price of Coca-Cola Stock
at the time we priced the Buffered PLUS) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or
failure to disclose material future events concerning The Coca-Cola Company could affect the value received at maturity with respect to
the Buffered PLUS and therefore the value of the Buffered PLUS.
Neither we nor any of our affiliates
makes any representation to you as to the performance of Coca-Cola Stock.
We and/or our affiliates may presently
or from time to time engage in business with The Coca-Cola Company, including extending loans to, or making equity investments in, The
Coca-Cola Company or providing advisory services to The Coca-Cola Company, including merger and acquisition advisory services. In the
course of such business, we and/or our affiliates may acquire non-public information with respect to The Coca-Cola Company, and neither
we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more of our affiliates may publish
research reports with respect to The Coca-Cola Company, and the reports may or may not recommend that investors buy or hold Coca-Cola
Stock. As a purchaser of the Buffered PLUS, you should undertake an independent investigation of The Coca-Cola Company as in your judgment
is appropriate to make an informed decision with respect to an investment linked to Coca-Cola Stock.
Costco Stock; Public Information |
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Costco Wholesale Corporation operates a chain of membership warehouses that offer a limited selection of nationally branded and private-label products. Costco Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by Costco Wholesale Corporation pursuant to the |
Exchange Act can
be located by reference to Commission file number 000-20355. In addition, information regarding Costco Wholesale Corporation may be obtained
from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make
no representation or warranty as to the accuracy or completeness of such information.
This pricing supplement relates only
to the Buffered PLUS referenced hereby and does not relate to Costco Stock or other securities of Costco Wholesale Corporation. We have
derived all disclosures contained in this pricing supplement regarding Costco Wholesale Corporation from the publicly available documents
described in the preceding paragraph. In connection with the offering of the Buffered PLUS, neither we nor the Agent has participated
in the preparation of such documents or made any due diligence inquiry with respect to Costco Wholesale Corporation in connection with
the offering of the Buffered PLUS. Neither we nor the Agent makes any representation that such publicly available documents are or any
other publicly available information regarding Costco Wholesale Corporation is accurate or complete. Furthermore, we cannot give any assurance
that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described in the preceding paragraph) that would affect the trading price of Costco Stock (and therefore the price of Costco
Stock at the time we priced the Buffered PLUS) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning Costco Wholesale Corporation could affect the value received at maturity with
respect to the Buffered PLUS and therefore the value of the Buffered PLUS.
Neither we nor any of our affiliates
makes any representation to you as to the performance of Costco Stock.
We and/or our affiliates may presently
or from time to time engage in business with Costco Wholesale Corporation, including extending loans to, or making equity investments
in, Costco Wholesale Corporation or providing advisory services to Costco Wholesale Corporation, including merger and acquisition advisory
services. In the course of such business, we and/or our affiliates may acquire non-public information with respect to Costco Wholesale
Corporation, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more of
our affiliates may publish research reports with respect to Costco Wholesale Corporation, and the reports may or may not recommend that
investors buy or hold Costco Stock. As a purchaser of the Buffered PLUS, you should undertake an independent investigation of Costco Wholesale
Corporation as in your judgment is appropriate to make an informed decision with respect to an investment linked to Costco Stock.
Historical Information |
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The following tables set forth the published high and low Closing Prices, as well as end-of-quarter Closing Prices, of Procter & Gamble Stock, Coca-Cola Stock and Costco Stock for each quarter in the period from January 1, 2020 through February 6, 2023. The graphs following each Underlying Stock’s historical table set forth the historical performance of the respective Underlying Stock for the same period. On February 6, 2023, the Closing Price for the Procter & Gamble Stock was $141.40, the Closing Price for the Coca-Cola Stock was $60.17 and the Closing Price for the Costco Stock was $515.59. We obtained the information in the tables and graphs below from Bloomberg Financial Markets, without independent verification. The historical prices of the Underlying Stocks should not be taken as an indication of future performance, and no assurance can be given as to the Closing Prices of the Underlying Stocks on the Valuation Date. The price of the Worst Performing Underlying Stock may decrease below 90% of its respective Initial Share Price so that you will receive a Payment at Maturity that is less than the stated principal amount of the Buffered PLUS. In addition, you will not benefit from any increase in the Final Share Price of the worst preforming underlying stock above 104.00% of its Initial Share Price because of the Maximum Payment at Maturity. |
If the Final Share Price of any Underlying
Stock is less than 90% of its respective Initial Share Price, you will lose some, and up to 90%, of your investment.
The Procter & Gamble Company
Historical High, Low and Period End
Closing Prices
January 1, 2020 through February
6, 2023
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High ($) |
Low ($) |
Period End ($) |
2020 |
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First Quarter |
127.14 |
97.70 |
110.00 |
Second Quarter |
124.69 |
109.33 |
119.57 |
Third Quarter |
140.51 |
119.98 |
138.99 |
Fourth Quarter |
144.49 |
135.51 |
139.14 |
2021 |
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First Quarter |
140.16 |
122.15 |
135.43 |
Second Quarter |
138.43 |
131.18 |
134.93 |
Third Quarter |
145.68 |
135.24 |
139.80 |
Fourth Quarter |
164.19 |
138.79 |
163.58 |
2022 |
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First Quarter |
164.21 |
143.22 |
152.80 |
Second Quarter |
163.65 |
132.36 |
143.79 |
Third Quarter |
149.93 |
126.25 |
126.25 |
Fourth Quarter |
153.95 |
123.76 |
151.56 |
2023 |
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First Quarter (through February 6, 2023) |
153.92 |
140.57 |
141.40 |
The following graph shows the daily Closing Prices of Procter
& Gamble Stock from January 1, 2018 through February 6, 2023. We obtained the information in the graph below from Bloomberg Financial
Markets, without independent verification. The
historical Closing Prices of Procter & Gamble Stock may
have been adjusted for stock splits and other corporate events. The historical Closing Prices should not be taken as an indication of
future performance, and no assurance can be given as to the Closing Price on the Valuation Date.
Historical Daily
Closing Prices of Procter & Gamble Stock
January 1, 2018 through February
6, 2023
The Coca-Cola Company
Historical High, Low and Period End
Closing Prices
January 1, 2020 through February
6, 2023
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High ($) |
Low ($) |
Period End ($) |
2020 |
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First Quarter |
60.13 |
37.56 |
44.25 |
Second Quarter |
49.85 |
42.12 |
44.68 |
Third Quarter |
51.19 |
43.91 |
49.37 |
Fourth Quarter |
54.84 |
47.96 |
54.84 |
2021 |
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First Quarter |
53.85 |
48.15 |
52.71 |
Second Quarter |
56.24 |
52.51 |
54.11 |
Third Quarter |
57.48 |
52.47 |
52.47 |
Fourth Quarter |
59.21 |
52.30 |
59.21 |
2022 |
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First Quarter |
62.85 |
57.88 |
62.00 |
Second Quarter |
66.21 |
59.07 |
62.91 |
Third Quarter |
65.22 |
56.02 |
56.02 |
Fourth Quarter |
64.35 |
54.39 |
63.61 |
2023 |
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First Quarter (through February 6, 2023) |
63.40 |
59.72 |
60.17 |
The following graph shows the daily Closing Prices of Coca-Cola
Stock from January 1, 2018 through February 6, 2023. We obtained the information in the graph below from Bloomberg Financial Markets,
without independent verification. The historical Closing Prices of Coca-Cola Stock may have been
adjusted for stock splits and other corporate events. The
historical Closing Prices should not be taken as an indication of future performance, and no assurance can be given as to the Closing
Price on the Valuation Date.
Historical Daily Closing Prices of
Coca-Cola Stock
January 1, 2018 through February
6, 2023
Costco Wholesale Corporation
Historical High, Low and Period End
Closing Prices
January 1, 2020 through February
6, 2023
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High ($) |
Low ($) |
Period End ($) |
2020 |
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First Quarter |
324.08 |
279.85 |
285.13 |
Second Quarter |
321.56 |
286.78 |
303.21 |
Third Quarter |
358.86 |
304.75 |
355.00 |
Fourth Quarter |
391.77 |
355.01 |
376.78 |
2021 |
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First Quarter |
380.15 |
311.42 |
352.48 |
Second Quarter |
398.79 |
354.94 |
395.67 |
Third Quarter |
467.75 |
394.53 |
449.35 |
Fourth Quarter |
567.77 |
440.14 |
567.70 |
2022 |
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First Quarter |
576.47 |
477.32 |
575.85 |
Second Quarter |
608.05 |
416.43 |
479.28 |
Third Quarter |
560.96 |
466.40 |
472.27 |
Fourth Quarter |
539.25 |
452.99 |
456.50 |
2023 |
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First Quarter (through February 6, 2023) |
523.43 |
450.19 |
515.59 |
The following graph shows the daily Closing Prices of Costco
Stock from January 1, 2018 through February 6, 2023. We obtained the information in the graph below from Bloomberg Financial Markets,
without independent verification. The historical Closing Prices of Costco Stock may have been adjusted for stock splits and other corporate
events. The historical Closing
Prices should not be taken as an indication of future performance,
and no assurance can be given as to the Closing Price on the Valuation Date.
Historical Daily Closing Prices of
Costco Stock
January 1, 2018 through February
6, 2023
Use of Proceeds and Hedging |
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The proceeds from the sale of the Buffered PLUS will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per Buffered PLUS issued, because, when we enter into hedging transactions in order to meet our obligations under the Buffered PLUS, our hedging counterparty will reimburse the cost of the Agent’s commissions. The costs of the Buffered PLUS borne by you and described beginning on PS-2 above comprise the Agent’s commissions and the cost of issuing, structuring and hedging the Buffered PLUS. See also “Use of Proceeds” in the accompanying prospectus. |
On or prior to the day on which the
Initial Share Price of each Underlying Stock is determined, we expect to hedge our anticipated exposure in connection with the Buffered
PLUS by taking positions in the Underlying Stocks or in options contracts on the Underlying Stocks that are listed on major securities
markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging. Such purchase
activity could potentially increase the Initial Share Price of any Underlying Stock, and therefore could increase the price at or above
which such Underlying Stock must close so that you do not suffer a loss on your initial investment in the Buffered PLUS (depending also
on the performance of the other Underlying Stocks). In addition, through our affiliates, we are likely to modify our hedge position throughout
the term of the Buffered PLUS by purchasing and selling the Underlying Stocks, futures or options contracts on the Underlying Stocks that
are listed on major securities markets or positions in any other available securities or instruments that we may wish to use in
connection with such hedging activities,
including by selling any such securities or instruments on the Valuation Date. As a result, these entities may be unwinding or adjusting
hedge positions during the term of the Buffered PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the Valuation Date approaches. We cannot give any assurance that our hedging activities will not affect the value of any
Underlying Stock and, therefore, adversely affect the value of the Buffered PLUS or the payment you will receive at maturity (depending
also on the performance of the other Underlying Stocks).
Supplemental Information Concerning
Plan of Distribution; Conflicts of Interest |
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MS & Co. expects to sell all of the Buffered PLUS that it purchases from us to an unaffiliated dealer at a price of $997.50 per Buffered PLUS, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per Buffered PLUS. MS & Co. will not receive a sales commission with respect to the Buffered PLUS. |
MS & Co. is an affiliate of MSFL
and a wholly owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and,
when applicable, hedging the Buffered PLUS.
MS & Co. will conduct this offering
in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred
to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS
& Co. or any of our other affiliates may not make sales in this offering to any discretionary account.
In order to facilitate the offering
of the Buffered PLUS, the Agent may engage in transactions that stabilize, maintain or otherwise affect the price of the Buffered PLUS.
Specifically, the Agent may sell more Buffered PLUS than it is obligated to purchase in connection with the offering, creating a naked
short position in the Buffered PLUS for its own account. The Agent must close out any naked short position by purchasing the Buffered
PLUS in the open market after the offering. A naked short position in the Buffered PLUS is more likely to be created if the Agent is concerned
that there may be downward pressure on the price of the Buffered PLUS in the open market after pricing that could adversely affect investors
who purchase in the offering. As an additional means of facilitating the offering, the Agent may bid for, and purchase, the Buffered PLUS
in the open market to stabilize the price of the Buffered PLUS. Any of these activities may raise or maintain the market price of the
Buffered PLUS above independent market prices or prevent or retard a decline in the market price of the Buffered PLUS. The Agent is not
required to engage in these activities, and may end any of these activities at any time. An affiliate of the Agent has entered into a
hedging transaction in connection with this offering of the Buffered PLUS. See “—Use of Proceeds and Hedging” above.
Validity of the Buffered PLUS |
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In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the Buffered PLUS offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such Buffered PLUS will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the Buffered PLUS and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2020, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2020. |
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United States Federal Taxation |
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Prospective investors should note that the discussion under the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the Buffered PLUS 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 the ownership and disposition of the Buffered
PLUS. This discussion applies only to investors in the Buffered PLUS who:
| · | purchase the Buffered PLUS in the original offering; and |
| · | hold the Buffered PLUS 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:
| · | certain financial institutions; |
| · | dealers and certain traders in securities or commodities; |
| · | investors holding the Buffered PLUS as part of a “straddle,” wash sale, conversion transaction, integrated transaction
or constructive sale transaction; |
| · | U.S. Holders (as defined below) whose functional currency is not the U.S. dollar; |
| · | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; |
| · | regulated investment companies; |
| · | real estate investment trusts; or |
| · | 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 Buffered PLUS, 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 Buffered PLUS 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 Buffered PLUS to you.
In addition, we will not attempt to ascertain
whether any issuer of the shares to which a Buffered PLUS relates (such shares hereafter referred to as “Underlying Shares”)
is treated 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 Non-U.S. Holder
(as defined below) upon the sale, exchange or settlement of the Buffered PLUS. 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 USRPHC.
As the law applicable to the U.S. federal
income taxation of instruments such as the Buffered PLUS 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 Buffered PLUS 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 Buffered PLUS due to the lack of governing authority, in the opinion
of our counsel, under current law, and based on current market conditions, a Buffered PLUS 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 Buffered PLUS or instruments that are similar to the Buffered
PLUS 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 Buffered PLUS (including possible alternative treatments of the Buffered PLUS). Unless
otherwise stated, the following discussion is based on the treatment of the Buffered PLUS 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 Buffered PLUS that is, for U.S. federal
income tax purposes:
| · | a citizen or individual resident of the United States; |
| · | 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 |
| · | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
Tax Treatment of the Buffered PLUS
Assuming the treatment of the Buffered
PLUS 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 Buffered PLUS 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 Buffered PLUS should equal the amount paid by the U.S. Holder to acquire the Buffered PLUS.
Sale, Exchange or Settlement of
the Buffered PLUS. Upon a sale, exchange or settlement of the Buffered PLUS, 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 Buffered
PLUS sold, exchanged or settled. Any gain or loss recognized upon the sale, exchange or settlement of the Buffered PLUS should be long-term
capital gain or loss if the U.S. Holder has held the Buffered PLUS 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 Buffered PLUS
Due to the absence of authorities that
directly address the proper tax treatment of the Buffered PLUS, 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 Buffered PLUS 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 Buffered PLUS, 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 Buffered PLUS 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 Buffered PLUS.
Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange or other disposition of the Buffered PLUS 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 Buffered PLUS, 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 Buffered PLUS are also possible, which, if applied, could significantly affect the timing and character of the income
or loss with respect to the Buffered PLUS. 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 Buffered
PLUS, 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 Buffered PLUS, 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 Buffered PLUS at maturity and the payment of proceeds from a sale, exchange or other disposition of the Buffered
PLUS, 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 Buffered
PLUS and the payment of proceeds from a sale, exchange or other disposition of the Buffered PLUS, 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 Buffered PLUS that is, for
U.S. federal income tax purposes:
| · | an individual who is classified as a nonresident alien; |
| · | a foreign corporation; or |
| · | a foreign estate or trust. |
The term “Non-U.S. Holder”
does not include any of the following holders:
| · | 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; |
| · | certain former citizens or residents of the United States; or |
| · | a holder for whom income or gain in respect of the Buffered PLUS 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 Buffered PLUS.
Tax Treatment upon Sale, Exchange
or Settlement of the Buffered PLUS
In general. Assuming the treatment
of the Buffered PLUS 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 Buffered PLUS 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 Buffered PLUS were recharacterized
as a debt instrument, any payment made to a Non-U.S. Holder with respect to the Buffered PLUS would not be subject to U.S. federal withholding
tax, provided that:
| · | 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; |
| · | the Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to Morgan Stanley through stock ownership; |
| · | the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code, and |
| · | 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 Buffered PLUS (or a financial
institution holding a Buffered PLUS 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 Buffered PLUS 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 Buffered PLUS, 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
Buffered PLUS to Non-U.S. Holders (subject
to compliance by such holders with the certification requirement described above and to the discussions below regarding Section 871(m)
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 Buffered PLUS 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 Buffered PLUS, 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 Buffered PLUS do not have a delta of one with respect to any Underlying Security, our counsel is of
the opinion that the Buffered PLUS should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the
IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances,
including whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required,
we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding
the potential application of Section 871(m) to the Buffered PLUS.
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 Buffered PLUS 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 Buffered PLUS.
Backup Withholding and Information
Reporting
Information returns may be filed with
the IRS in connection with the payment on the Buffered PLUS at maturity as well as in connection with the payment of proceeds from a sale,
exchange or other disposition of the Buffered PLUS. 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 Buffered PLUS – 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 Buffered PLUS 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
Buffered PLUS. 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 Buffered PLUS, 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 Buffered PLUS.
The discussion in the preceding paragraphs
under “United States Federal Taxation,” 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 Buffered PLUS.