Use of Proceeds and Hedging

The proceeds from the sale of the leveraged index-linked securities will be used by us for general corporate purposes. We will receive, in aggregate, the issue price per leveraged index-linked security issued, because, when we enter into hedging transactions in order to meet our obligations under the leveraged index-linked securities, our hedging counterparty will reimburse the cost of the agent’s commissions. The costs of the leveraged index-linked securities borne by you and described in the applicable pricing supplement comprise the agent’s commissions and the cost of issuing, structuring and hedging the leveraged index-linked securities. See also “Use of Proceeds” in the accompanying prospectus.

On or prior to the pricing date, we expect to hedge our anticipated exposure in connection with the leveraged index-linked securities 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 underlying index or indices, in futures or options contracts on the underlying index or indices or its component stocks listed on major securities markets or positions in any other available securities or instruments that they may wish to use in connection with such hedging. Such purchase activity on or prior to the pricing date or any basket component setting date could potentially increase the value of the underlying index or indices on the pricing date, and, therefore the value at or above which the underlying index or indices must close on the observation date or on the averaging dates so that you do not suffer a loss on the leveraged index-linked securities. In addition, through our affiliates, we are likely to modify our hedge position throughout the life of the leveraged index-linked securities, including on the observation date or averaging dates, by purchasing and selling the securities constituting the underlying index or indices, futures or options contracts on the underlying index or indices or its component stocks listed on major securities markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities, including by selling any such securities or instruments on the observation date or on the specified averaging dates. These entites may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the observation date approaches. We cannot give any assurance that our hedging activities will not affect the value of the underlying index or indices, and, therefore, adversely affect the value of the leveraged index-linked securities or the payment you will receive at maturity, if any.

Leveraged Index-Linked Securities Offered on a Global Basis

If we offer the leveraged index-linked securities on a global basis, we will so specify in the applicable pricing supplement. The additional information contained in the accompanying prospectus under “Securities Offered on a Global Basis Through the Depositary,” “—Book-Entry, Delivery and Form” and “—Global Clearance and Settlement Procedures” will apply to every offering on a global basis. The additional provisions described under “Securities Offered on a Global Basis Through the Depositary”, “—Tax Redemption” and “—Payment of Additional Amounts” will apply to leveraged index-linked securities offered on a global basis only if we so specify in the applicable pricing supplement.

Benefit Plan Investor Considerations

General Fiduciary Matters

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”) (a “Plan”), should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing an investment in the leveraged index-linked securities. 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.

Prohibited Transaction Issues

In addition, we and certain of our subsidiaries and affiliates, including MS & Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person” within the meaning of the Internal Revenue Code of 1986, as amended (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 the leveraged index-linked securities 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 or disqualified person, unless the leveraged index-linked securities are acquired pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules could result in excise tax and other penalties and liabilities under ERISA and/or Section 4975 of the Code for parties in interest or disqualified persons who engaged in the prohibited transaction, unless exemptive relief is available under an applicable statutory or administrative exemption. In addition, fiduciaries of the Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code.

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 the leveraged index-linked securities. 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 professional asset managers). In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code may provide an exemption for the purchase and sale of securities and the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the transaction, and provided further that the Plan pays no more, and receives no less, 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 the leveraged index-linked securities.

Because we may be considered a party in interest or disqualified person with respect to many Plans, the leveraged index-linked securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include “plan assets” of any Plan 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. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the leveraged index-linked securities on behalf of or with “plan assets” of any Plan consult with their counsel regarding the availability of exemptive relief.

Non-ERISA Arrangements

Certain governmental plans (as defined in Section 3(32) of ERISA), church plans (as defined in Section 3(33) of ERISA) and non-U.S. plans (as described in Section 4(b)(4) of ERISA) (“Non-ERISA Arrangements”) are not subject to these “prohibited transaction” rules of ERISA or Section 4975 of the Code, but may be subject to similar rules under other applicable laws or regulations (“Similar Laws”). Fiduciaries of Non-ERISA Arrangements should consult with their counsel regarding the potential consequences of an investment in the leveraged index-linked securities under any applicable Similar Laws before purchasing the leveraged index-linked securities on behalf of or with assets of any Non-ERISA Arrangement.

Representations

Any purchaser, including any fiduciary purchasing on behalf of a Plan, Plan Asset Entity or Non-ERISA Arrangement, transferee or holder of the leveraged index-linked securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the leveraged index-linked securities that either (a) it is not a Plan, Plan Asset Entity or Non-ERISA Arrangement and is not purchasing such leveraged index-linked securities on behalf of or with the assets of any Plan or Non-ERISA Arrangement or (b) its purchase, holding and disposition of these leveraged index-linked securities 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.

The leveraged index-linked securities are contractual financial instruments. The financial exposure provided by the leveraged index-linked securities 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 leveraged index-linked securities. The leveraged index-linked securities 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 leveraged index-linked securities.

Each purchaser or holder of any leveraged index-linked securities 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 any of our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and terms of the leveraged index-linked securities, (B) the purchaser or holder’s investment in the leveraged index-linked securities, or (C) the exercise of or failure to exercise any rights we or the purchaser or holder has under or with respect to the leveraged index-linked securities;

(ii) we and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the leveraged index-linked securities and (B) all hedging transactions in connection with our obligations under the leveraged index-linked securities;

(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 the leveraged index-linked securities has exclusive responsibility for ensuring that its purchase, holding and disposition of the leveraged index-linked securities do not violate the prohibited transaction rules of ERISA or the Code or any Similar Law. The sale of any of the leveraged index-linked securities to any Plan, Plan Entity or Non-ERISA Arrangement 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, Plan Entities or Non-ERISA Arrangements generally or any particular Plan, Plan Entity or Non-ERISA Arrangement, or that such an investment is appropriate for Plans, Plan Entities or Non-ERISA Arrangements generally or any particular Plan, Plan Entity or Non-ERISA Arrangement. In this regard, neither this discussion nor anything provided in this product supplement is or is intended to be investment advice directed at any potential Plan,

Plan Entity or Non-ERISA Arrangement purchaser or at such purchasers generally and such purchasers of these leveraged index-linked securities should consult and rely on their own counsel and advisers as to whether an investment in these leveraged index-linked securities is suitable.

United States Federal Taxation

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 leveraged index-linked securities.

The discussion below assumes that the leveraged index-linked securities will not pay any stated interest. The U.S. federal tax consequences of an investment in a leveraged index-linked security that provides for stated interest will be set forth in the applicable pricing supplement.

This discussion applies only to initial investors in the leveraged index-linked securities who:

Subject to any additional discussion in the applicable pricing supplement, it is expected, and the discussion below assumes, that, for U.S. federal income tax purposes, the issue price of a security is equal to its stated issue price indicated in the applicable pricing supplement.

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 leveraged index-linked 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 leveraged index-linked 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 leveraged index-linked securities to you.

We will not attempt to ascertain whether any issuer of any shares to which a leveraged index-linked security relates (such shares hereafter referred to as “Underlying Shares”) is treated as a “passive foreign investment company” (“PFIC”) within the meaning of Section 1297 of the Code or as a “United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. If any issuer of Underlying Shares were so treated, certain adverse U.S. federal income tax consequences might apply, to a U.S. Holder in the case of a PFIC and to a Non-U.S. Holder (as defined below) in the case of a USRPHC, upon the sale, exchange or settlement of a leveraged index-linked security. You should refer to information filed with the Securities and Exchange Commission or other governmental authorities by the issuers of the Underlying Shares and consult your tax adviser regarding the possible consequences to you if any issuer is or becomes a PFIC or USRPHC.

As the law applicable to the U.S. federal income taxation of instruments such as the leveraged index-linked securities is technical and complex, the discussion below necessarily represents only a general summary. Moreover,

the effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences or consequences resulting from the Medicare tax on investment income.

This discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the leveraged index-linked 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.

This discussion is subject to any additional discussion regarding U.S. federal income taxation contained in the applicable pricing supplement. Accordingly, you should also consult the applicable pricing supplement for any additional discussion of U.S. federal income taxation with respect to the specific leveraged index-linked securities offered thereunder.

General

Except as otherwise provided in the applicable pricing supplement and based on certain representations that will be confirmed at or prior to the pricing date with respect to each offering, under current law, each leveraged index-linked security should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. Due to the absence of statutory, judicial or administrative authorities that directly address the treatment of the leveraged index-linked securities or instruments that are similar to the leveraged index-linked securities for U.S. federal income tax purposes, no assurance can be given that the Internal Revenue Service (the “IRS”) or a court will agree with the 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 leveraged index-linked securities (including possible alternative treatments of the leveraged index-linked securities). Unless otherwise stated, the following discussion is based on the treatment of each leveraged index-linked security as 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 leveraged index-linked security that is for U.S. federal income tax purposes:

Tax Treatment of the Leveraged Index-Linked Securities

Tax Treatment Prior to Settlement. Subject to the discussions below under “—Possible Taxable Events” and “—Possible Application of Section 1256 of the Code,” a U.S. Holder should not be required to recognize taxable income over the term of the leveraged index-linked securities prior to settlement, other than pursuant to a sale or exchange as described below.

Tax Basis. Subject to the discussions below under “—Possible Taxable Events” and “—Possible Application of Section 1256 of the Code,” a U.S. Holder’s tax basis in a leveraged index-linked security should equal the amount paid by the U.S. Holder to acquire the leveraged index-linked security.

Sale, Exchange or Settlement of the Leveraged Index-Linked Securities. Upon a sale, exchange or settlement of a leveraged index-linked security, 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 leveraged index-linked security sold, exchanged or settled. Subject to the discussion above regarding the possible application of the PFIC

rules and the discussions below regarding the possible application of Sections 1260 and 1256 of the Code and under “—Possible Taxable Events,” any gain or loss recognized should be long-term capital gain or loss if the U.S. Holder has held the leveraged index-linked security for more than one year at the time of the sale, exchange or settlement, and short-term capital gain or loss otherwise.

Possible Taxable Events

In the event of a change in the methodology by which an underlying index is calculated, a change in the components of an underlying index, the discontinuance of an underlying index, the designation of a successor underlying index or other similar circumstances resulting in a material change to an underlying index or a component, it is possible that a leveraged index-linked security could be treated, in whole or in part, as terminated and reissued for U.S. federal income tax purposes. In that case, a U.S. Holder might be required to recognize gain or loss (subject to the possible application of the wash sale rules) with respect to the leveraged index-linked security.

Possible Application of Section 1260 of the Code

If a leveraged index-linked security is linked to an equity interest in one of a specified list of entities (“Pass-Thru Entities”), including an exchange-traded fund or other regulated investment company, a real estate investment trust, a partnership or a PFIC, there is a substantial risk that an investment in the leveraged index-linked security will be treated as a “constructive ownership transaction,” as defined in Section 1260 of the Code. If an investment in the leveraged index-linked security is treated as a constructive ownership transaction, all or a portion of any long-term capital gain recognized by a U.S. Holder in respect of the leveraged index-linked security could be recharacterized as ordinary income (the “Recharacterized Gain”). In addition, an interest charge would be imposed on any deemed underpayment of tax for each year that the constructive ownership transaction was outstanding. The amount of the interest charge is determined by treating any Recharacterized Gain as having accrued such that the gain in each successive year is equal to the gain in the prior year increased by the applicable federal rate (determined as of the date of sale, exchange or settlement of the leveraged index-linked security) during the term of the constructive ownership transaction.

The amount of the Recharacterized Gain (if any) that would be treated as ordinary income in respect of the leveraged index-linked security equals the excess of (i) any long-term capital gain recognized by the U.S. Holder in respect of the leveraged index-linked security over (ii) the “net underlying long-term capital gain” (as defined in Section 1260 of the Code). Even if an investment in the leveraged index-linked security is treated as a constructive ownership transaction, the amount of net underlying long-term capital gain, and therefore the amount of Recharacterized Gain, is unclear. It is possible, for example, that the net underlying long-term capital gain is equal to the aggregate net capital gain that the U.S. Holder would have had if the Underlying Shares had been acquired for fair market value on the issue date of the leveraged index-linked security and sold for fair market value upon the date of sale, exchange or settlement of the leveraged index-linked security (which would reflect the percentage increase, without any multiple, in the value of the Underlying Shares over the term of the leveraged index-linked security). However, the net underlying long-term capital gain could alternatively be calculated using a number of Underlying Shares that reflects the multiple upon which any gain on the leveraged index-linked security will be calculated, in which case the amount of Recharacterized Gain would generally be zero. Moreover, other features of a leveraged index-linked security (such as a security linked to multiple Pass-Thru Entities or a Pass-Thru Entity and one or more indices which do not contain any Pass-Thru Entity), may also give rise to uncertainty about the proper method for calculating the amount of Recharacterized Gain. Under Section 1260 of the Code, the amount of net underlying long-term capital gain is treated as zero unless otherwise “established by clear and convincing evidence.” Furthermore, if a Pass-Thru Entity holds certain commodities, the long-term capital gain that a U.S. Holder would otherwise recognize in respect of the leveraged index-linked security up to the amount of the net underlying long-term capital gain could, if the U.S. Holder is an individual or other non-corporate investor, be subject to tax at the higher rates applicable to “collectibles” instead of the general rates that apply to long-term capital gain.

Unless otherwise provided in the applicable pricing supplement, due to the lack of governing authority, our counsel expects to be unable to opine as to whether or how Section 1260 of the Code applies to leveraged index-linked securities linked to Pass-Thru Entities. U.S. Holders should consult their tax advisers regarding the potential application of the “constructive ownership” rule to the leveraged index-linked securities.

Possible Application of Section 1256 of the Code

Special rules will apply if a leveraged index-linked security constitutes, in whole or in part, a “Section 1256 Contract” under Section 1256 of the Code. Section 1256 Contracts include, among others, “listed options.” Accordingly, if a leveraged index-linked security is listed on (or subject to the rules of) an exchange, board of trade or market, it is possible that the leveraged index-linked security may be treated, in whole or in part, as a Section 1256 Contract. If Section 1256 of the Code were to apply to a leveraged index-linked security, U.S. Holders would be required (i) to mark to market all or a portion of the leveraged index-linked security as if it were sold at its fair market value on the last business day of each year it is held, and (ii) to recognize any gain or loss in respect of the portion of the leveraged index-linked security that is treated as a Section 1256 Contract as 40% short-term capital gain or loss and 60% long-term capital gain or loss. U.S. Holders should consult their tax advisers regarding the potential application of Section 1256 of the Code to the leveraged index-linked securities.

Possible Alternative Tax Treatments of an Investment in the Leveraged Index-Linked Securities

Due to the absence of authorities that directly address the proper tax treatment of the leveraged index-linked securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment described above. The IRS could, for instance, seek to treat a leveraged index-linked security as a debt instrument. The risk that financial instruments providing for buffers, triggers or similar downside protection features would be recharacterized, for U.S. federal income tax purposes, as debt instruments giving rise to ordinary income, rather than as open transactions, is greater than the risk of recharacterization for comparable financial instruments that do not have such features.

If a leveraged index-linked security that matures (after taking into account the last possible date that the leveraged index-linked security could be outstanding under its terms) more than one year from its date of issuance were treated as a debt instrument, it would be subject to 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 a leveraged index-linked security, 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 (“OID”) on the leveraged index-linked security every year at a “comparable yield” determined at the time of issuance of the leveraged index-linked security. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale or other disposition of the leveraged index-linked security 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 OID and as capital loss thereafter.

If a leveraged index-linked security that matures (after taking into account the last possible date that the leveraged index-linked security could be outstanding under its terms) one year or less from its date of issuance (a “Short-term leveraged index-linked security”) were treated as a debt instrument, the timing and character of income thereon would be significantly affected. Among other things, gain realized by a U.S. Holder upon settlement of a Short-term leveraged index-linked security at maturity would be treated as ordinary income. In addition, such a Short-term leveraged index-linked security would be treated as issued with OID. Moreover, (1) gain recognized by a U.S. Holder upon the sale or other disposition of the Short-term leveraged index-linked security (other than at maturity) would be treated as ordinary income to the extent of any accrued OID not yet included in income, and (2) accrual-method U.S. Holders (and cash-method U.S. Holders that elect to apply an accrual method of tax accounting to the Short-term leveraged index-linked security) might be required to accrue into income OID over the term of the Short-term leveraged index-linked security before maturity. However, the amount of accrued OID would be unclear because the amount payable at maturity of the Short-term leveraged index-linked security would not be known as of the issue date.

Even if the Contingent Debt Regulations or short-term debt treatment do not apply to the leveraged index-linked securities, other alternative U.S. federal income tax treatments of the leveraged index-linked securities are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the leveraged index-linked securities. It is possible, for example, that a leveraged index-linked security could be treated as a unit consisting of a loan and a forward contract, in which case a U.S. Holder might be required to accrue OID into income on a current basis.

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 (as discussed above under “—Possible Application of Section 1260 of the Code”). 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 leveraged index-linked securities, possibly with retroactive effect. Accordingly, prospective investors should consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the leveraged index-linked securities, including the possible implications of this notice.

Backup Withholding and Information Reporting

Backup withholding may apply in respect of the payment on the leveraged index-linked securities and the payment of proceeds from a sale, exchange or other disposition of the leveraged index-linked securities, unless a U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. In addition, information returns may be filed with the IRS in connection with the payment on the leveraged index-linked securities and the payment of proceeds from a sale, exchange or other disposition of the leveraged index-linked 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 leveraged index-linked 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 leveraged index-linked securities.

Tax Treatment upon Sale, Exchange or Settlement of a Leveraged Index-Linked Security

Assuming the treatment of the leveraged index-linked securities as set forth above under “—General” is respected, and subject to the discussions regarding backup withholding, the possible application of Sections 871(m) and 897 of the Code and FATCA, a Non-U.S. Holder of the leveraged index-linked securities 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 leveraged index-linked security were treated as a debt instrument, any payment

made to a Non-U.S. Holder with respect to the leveraged index-linked security would not be subject to U.S. federal withholding tax, provided that:

Certification Requirement. The certification requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a leveraged index-linked security (or a financial institution holding the leveraged index-linked security on behalf of the beneficial owner) furnishes to the applicable withholding agent an applicable IRS Form W-8, 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 these instruments should be subject to U.S. 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 leveraged index-linked securities, possibly on a retroactive basis. Non-U.S. Holders should note that we currently do not intend to withhold on payments made with respect to the leveraged index-linked securities to Non-U.S. Holders (subject to compliance by such holders with the certification requirement described above and to the discussions below regarding the possible application of Section 871(m) of the Code and FATCA). However, in the event of a change of law or any formal or informal guidance by the IRS, the U.S. Treasury Department or Congress, we may decide to withhold on payments made with respect to the leveraged index-linked securities to Non-U.S. Holders, and we will not be required to pay any additional amounts with respect to amounts withheld. Accordingly, Non-U.S. Holders should consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the leveraged index-linked securities, including the possible implications of the notice referred to above.

Possible Application of Section 871(m) of the Code

Section 871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) impose a withholding tax of 30% (or lower treaty rate applicable to dividends) on certain “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. Subject to the discussion below concerning leveraged index-linked securities issued before January 1, 2023, a leveraged index-linked security linked to U.S. equities or indices that include U.S. equities (a “U.S. equity linked security”) will generally be subject to the Section 871(m) withholding regime if at issuance it (i) has a “delta” of 0.80 or higher with respect to the underlying U.S. equity or (ii) substantially replicates the economic performance of the underlying U.S. equity, as determined by a “substantial equivalence” test that, among other factors, takes into account the initial number of shares of the underlying U.S. equity needed to hedge the transaction fully. The tests described above are set forth in the regulations, and the applicable test will depend on the terms of the relevant U.S. equity linked security. Under these rules, withholding may apply even where the relevant U.S. equity linked security does not provide for any payment that is explicitly linked to a dividend. The regulations provide for certain exceptions to the withholding requirements, in particular for instruments linked to certain broad-based indices (a “qualified index”) that meet standards set forth in the regulations, as well as certain securities that track a qualified index.

Under an IRS notice, Section 871(m) will not apply to a leveraged index-linked security issued before January 1, 2023 that does not have a “delta” of one with respect to any U.S. equity. If the terms of a U.S. equity linked security are subject to a “significant modification,” the U.S. equity linked security will generally be treated as reissued at the time of the significant modification.

The calculations of “delta” are generally made at the “calculation date,” which is the earlier of (i) the time of pricing of the leveraged index-linked security, i.e., when all material terms have been agreed on, and (ii) the issuance of the leveraged index-linked security. However, if the time of pricing is more than 14 calendar days before the issuance of the leveraged index-linked security, the calculation date is the date of the issuance of the leveraged index-linked security. In those circumstances, information regarding our final determinations for purposes of Section 871(m) may be available only after the issuance of the leveraged index-linked security. As a result, a Non-U.S. Holder should acquire such a leveraged index-linked security only if it is willing to accept the risk that the leveraged index-linked security is treated as subject to withholding.

The amount of a “dividend equivalent” is equal to, for a “simple” contract, the product of (a) the per-share dividend amount, (b) the number of shares of the underlying U.S. equity referenced in the U.S. equity linked security and (c) the delta, and, for a “complex” contract, the product of (a) the per-share dividend amount and (b) the initial hedge.

The dividend equivalent amount will be determined on the earlier of (a) the record date of the dividend and (b) the day prior to the ex-dividend date. The dividend equivalent amount will include the amount of any actual or, under certain circumstances, estimated dividend. If a U.S. equity linked security is subject to withholding in respect of dividend equivalents, withholding will, depending on the applicable withholding agent’s circumstances, generally be required either (i) on the underlying dividend payment date or (ii) when cash payments are made on the relevant U.S. equity linked security or upon the date of maturity, lapse or other disposition thereof by the Non-U.S. Holder.

We will determine whether a U.S. equity linked leveraged index-linked security is subject to withholding under Section 871(m). If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld.

The regulations provide that Non-U.S. Holders of a potential Section 871(m) transaction are entitled to receive certain information in respect thereof. The applicable pricing supplement will provide further guidance on how Non-U.S. Holders may obtain such information.

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 the Non-U.S. Holder’s particular circumstances. For example, the application of Section 871(m) may be affected if a Non-U.S. Holder enters into another transaction in connection with the acquisition of a U.S. equity linked security. Accordingly, Non-U.S. Holders should consult their tax advisers regarding the potential application of Section 871(m) to the leveraged index-linked securities in their particular circumstances.

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 leveraged index-linked 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 leveraged index-linked securities.

Backup Withholding and Information Reporting

Information returns may be filed with the IRS in connection with the payment on the leveraged index-linked securities at maturity as well as in connection with the payment of proceeds from a sale, exchange or other disposition of the leveraged index-linked securities. A Non-U.S. Holder may be subject to backup withholding in respect of amounts paid to the Non-U.S. Holder, unless the 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 a Leveraged Index-Linked Security” 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 dividends or other U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”). If the leveraged index-linked securities were recharacterized as debt instruments, as described above under “—Tax Consequences to U.S. Holders—Possible Alternative Tax Treatments of an Investment in the Leveraged Index-Linked Securities,” FATCA would apply to any payment of U.S.-source FDAP income and any payment of gross proceeds of the disposition (including upon retirement) of the leveraged index-linked securities. However, under proposed Treasury regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization) no withholding will apply to payments of gross proceeds (other than amounts treated as FDAP income). Even if the leveraged index-linked securities are not recharacterized as debt instruments, FATCA may apply to payments of dividend equivalents under Section 871(m) of the Code, as described above under “—Tax Consequences to Non-U.S. Holders—Possible Application of Section 871(m) of the Code.” If withholding applies to the leveraged index-linked 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 leveraged index-linked securities.