Step-Up Jump Notes with Auto-Callable Feature due November 1, 2033

Based on the Performance of the Morgan Stanley Amplitude Index™

Headline Simulation Results

14.56%

Expected Annualized Return

0.00%

Probability of a Negative Return

0.00%

99% Confidence VaR (1-Year)

Metric	Result
Expected annualized return	14.56%
Probability of a negative return	0.00%
99% confidence VaR (1-year)	0.00%
Expected holding period	≈ 1.63 years (≈ 19.6 months)
Expected total return over the realized holding period	21.39%

The note is principal protected: in none of the 10,000 simulated paths did an investor receive back less than the $1,000 stated principal. The worst-case outcome is a 0% return, and the 1-year 99% VaR is therefore 0.00%. The flip side is that the strong headline expected return is driven by a high chance of an early (year-1) autocall and by the assumption of a positive equity risk premium; individual holding periods are short, so annualized figures should be read together with the total-return and holding-period figures.

Basic Product Information

Item	Detail
Issuer / Guarantor	Morgan Stanley Finance LLC / Morgan Stanley (full guarantee)
Underlier	Morgan Stanley Amplitude Index™ (a single, proprietary Morgan Stanley index)
Principal amount	$1,000 per note (issue price $1,000)
Term	≈ 7 years (issue Oct 30, 2026 → maturity Nov 1, 2033)
Coupon	None — the notes pay no interest
Early redemption	Annual autocall, years 1–6
Downside	Principal protected (floor = 100% of principal)
Upside	100% participation at maturity (uncapped); autocall payment caps returns in years 1–6

How it works (in plain terms)

You buy a 7-year note for $1,000. There are no interest payments. Instead:

Annual "call" check. On each anniversary (years 1 through 6), if the index is at or above a threshold that starts at 100.75% of its starting level and steps up by 0.75% each year, the note is automatically redeemed and pays you a fixed, pre-set amount that grows each year — about 15.50% per year on a simple basis ($1,155 in year 1, $1,310 in year 2, … up to $1,930 in year 6). After that, the note is done.
If it is never called. At maturity you get your $1,000 back plus 100% of any rise in the index. If the index is flat or down, you simply get your $1,000 back.

So the note trades away large upside (in strong rallies it is called early for a modest fixed amount) in exchange for full protection of principal and a very attractive fixed rate when the index is even slightly positive at a check date.

Key Statistics

Metric	Structured Product	Underlying (total return*)
Expected annualized return	14.56%	14.26%
Expected annualized volatility	2.90%	10.49%
Probability of loss	0.00%	2.21%
99% confidence VaR (1-year)	0.00%	−4.34%
Expected holding period	1.63 years	—

* Underlying proxy = S&P 500 price index; total return adds the dividend yield (≈ 0.98%).

The structured product delivers a higher expected return at roughly one-quarter of the volatility of the underlying over the simulated horizon, with no simulated loss of principal. This asymmetry is the core appeal of the structure — but it is a direct consequence of the autocall feature capping upside and of assuming a positive forward equity drift.

Charts

1. Simulation outcomes — product vs underlying

Scatter of product vs underlying final returns

Each point is one simulation. Points sit on a flat band at 0% product return (the maturity floor when the index finishes at or below its start) and on horizontal bands at 15.50 / 31.00 / 46.50 / 62.00 / 77.50 / 93.00 (the six autocall payments). For any underlying outcome above a call threshold the product return is capped at the corresponding step-up payment — this is the "give-up" versus the 1:1 line.

2. Underlying (S&P 500 proxy) — annualized return distribution

Histogram of underlying annualized returns

3. Structured product — annualized return distribution

The product's distribution is entirely non-negative, with a dominant cluster around 15.50% (year-1 autocalls, 74.91% of paths) and a small mass at 0% (principal-only maturity, 2.65% of paths).

4. Scenario probabilities

Worst case (≤ 0% return): 2.65% — the note matures with the index at or below its start; principal is returned.
Best case (> 10% annualized): 96.22%
Outperforms the risk-free rate (3.78%): 96.36%

5. Risk / return positioning

6. Annualized return distribution — box plot comparison

7. Holding-period distribution

Because 74.91% of paths autocall at the very first determination date, the expected holding period is only ~1.63 years — meaning most investors' capital is returned quickly, but the upside over a full multi-year rally is forgone.

Outcome Distribution

Outcome	Probability	Product return (index points)
Autocall — year 1	74.91%	115.50
Autocall — year 2	11.23%	131.00
Autocall — year 3	4.54%	146.50
Autocall — year 4	2.76%	162.00
Autocall — year 5	1.76%	177.50
Autocall — year 6	1.02%	193.00
Matured (index ≤ start)	2.65%	100.00
Matured (index > start)	1.13%	100 + upside

Investment Commentary

Points in favor of the structure

Principal protection. The note's worst simulated outcome is return of principal (0% return); there is no scenario in which the investor loses nominal capital at maturity.
Favourable risk-adjusted profile. Over the simulated horizon the product shows a higher expected return than the underlying (14.56% vs 14.26% total return) with about a quarter of the volatility (2.90% vs 10.49%).
Attractive fixed accrual. When called, the note pays a simple 15.50% per year — well above the ≈ 3.78% risk-free rate — so 96.36% of simulated paths beat cash.
High probability of a quick, positive cash exit. ~75% of paths are called after the first year, returning capital plus a 15.50% gain.

Points of caution

Upside is capped in years 1–6. Any strong, early index rally is "called away" for the fixed step-up payment; the 1:1 line shows the substantial return given up in those scenarios.
Maturity upside is diluted by the long 7-year wait. If the note survives all six call dates it only pays off well if the index finishes meaningfully above its start after seven years; the 1.13% of paths that mature with a positive index return produce low annualized figures.
Opportunity cost when the index is flat/down. 2.65% of paths return only principal (0%), which is below the risk-free rate.
Issuer/credit risk. All payments depend on Morgan Stanley's ability to pay; the notes are unsecured obligations.
Valuation / cost drag. The estimated value of the notes on the pricing date (~$874.80 per $1,000) is below the issue price, reflecting embedded structuring, hedging and distribution costs borne by the investor.

Notes on Methodology and Assumptions (summary)

Underlying simulated over an 84-month horizon with 10,000 Monte-Carlo paths (GJR-GARCH / Student-t).
The Morgan Stanley Amplitude Index is proprietary with no public price history; the S&P 500 index (^GSPC) is used as a proxy for the underlying and benchmark, with dividends approximated at ≈ 0.98%.
Risk-free rate = 1-year average 1-year US Treasury yield = 3.78%.
Figures are simulation estimates, not forecasts; actual results will differ.