Morgan Stanley Finance LLC Launches Three-Year Callable Contingent Income Securities Linked to Worst-Performing Index Component

Multi-Underlier Structure Centered on Worst-Performing Asset

The securities issued by Morgan Stanley Finance LLC are structured around three market-linked underliers: the broad S&P 500 Index, and two sector-specific ETFs—Financial Select Sector SPDR ETF (XLF) and Technology Select Sector SPDR ETF (XLK). Returns and payment calculations depend on the worst-performing underlier among these three, meaning a significant decline in any one will determine the overall return for investors.

This structure creates an asymmetry in outcomes, as holding multiple underliers does not provide diversification benefits. Instead, weakness in any single underlier negatively impacts returns regardless of the others’ performance. Investors do not benefit from appreciation in any underlier but are exposed to downside risk through the worst performer. If any underlier falls below its coupon barrier on an observation date, no interest payments are made for that period, regardless of other underliers' performance.

Contingent Coupon Payments and Interest Rate Risks

Coupon payments are contingent upon all three underliers closing at or above their respective coupon barrier levels on observation dates. The exact coupon rates and barrier percentages are detailed in the product supplement and related documents. If any underlier closes below its coupon barrier on an observation date, no coupon is paid for that period, even if the other two underliers remain above their barriers.

This contingent coupon structure introduces significant interest-rate risk. Investors may experience extended periods without receiving coupon payments, including potentially the entire three-year term, in exchange for the chance to earn above-market interest rates.

Principal-at-Risk Maturity Terms and Downside Thresholds

At maturity on July 27, 2029, payoffs depend on the worst-performing underlier’s final level relative to a downside threshold. If each underlier’s final level is at or above its downside threshold, investors receive the full $1,000 principal plus any final contingent coupon. The specific downside threshold levels are outlined in supplementary materials.

If any underlier closes below its downside threshold, principal is reduced on a 1:1 basis corresponding to the decline of the worst-performing underlier. For example, a 10% decline results in a 10% loss of principal. The payment at maturity could be significantly less than the principal or even zero, representing a total loss. The final observation date is July 24, 2029, subject to adjustment for non-trading days or market disruptions.

Early Redemption Feature Based on Risk-Neutral Valuation Model

Beginning July 30, 2027, Morgan Stanley Finance LLC may exercise early redemption on monthly redemption dates if a risk-neutral valuation model indicates it is economically advantageous. The model uses inputs such as market levels, volatilities, correlations, and Morgan Stanley’s credit spreads as of the pricing date. Early redemption is not automatic based on underlier performance but is driven by Morgan Stanley’s economic interests.

Notice of early redemption will be provided no later than the observation date prior to the redemption date. Once called, no further payments will be made on the securities.

Credit Guarantee and Unsecured Status

The securities are fully and unconditionally guaranteed by Morgan Stanley, the parent company of Morgan Stanley Finance LLC. They are unsecured obligations of the issuer and are not backed by any underlying reference assets. This guarantee covers all principal and contingent coupon payments but does not eliminate the principal-at-risk tied to underlier performance.

Investors have no security interest in the underlying assets. These securities are not bank deposits or savings accounts, are not insured by the FDIC or any governmental agency, and are not bank obligations. While Morgan Stanley’s guarantee reduces counterparty risk compared to an unrated issuer, it does not protect against principal loss or missed interest payments inherent in the structure.

Issue Price, Estimated Value, and Targeted Investor Base

The securities are offered at a stated issue price of $1,000 each, with the original issue date of July 29, 2026. The estimated value on the pricing date, July 24, 2026, was approximately $975.20 per security, reflecting a $24.80 difference due to embedded costs including options pricing and distribution expenses. Further details on estimated value are available in the pricing supplement.

The offering is limited to investors purchasing through fee-based advisory accounts. Morgan Stanley & Co. acts as distribution agent, selling securities to unaffiliated dealers for resale in fee-based advisory accounts at the $1,000 public price. Selected dealers and advisors may receive structuring fees up to $6.25 per security, and a third-party data analytics provider may receive $0.50 per security sold at the request of involved dealers.

Sector Exposure via ETF Underliers and Market Risks

The Financial Select Sector SPDR ETF (XLF) and Technology Select Sector SPDR ETF (XLK) provide concentrated exposure to the financial services and technology sectors, respectively. XLF is sensitive to interest rates, credit conditions, and regulation, while XLK is influenced by innovation cycles, competition, and macroeconomic factors. Combined with the broad S&P 500 Index, the portfolio structure is subject to worst-performer risk, negating diversification benefits.

For example, a sharp decline in the Financial Select Sector due to rising interest rates could trigger coupon losses and principal erosion, even if the other two underliers remain stable or positive. The filing stresses that multiple underliers do not provide diversification; a decline in any one beyond coupon barrier or downside threshold levels adversely impacts returns.

Risk Disclosure and Intended Investor Profile

The securities are designed for investors seeking potentially above-market interest rates while accepting substantial risks, including significant principal loss, no coupon payments during the term, and early redemption risks based on Morgan Stanley’s valuation model. Investors will not benefit from any appreciation of the underliers, limiting upside potential despite positive market performance.

Investors must be prepared to lose their entire initial investment depending on underlier performance. These securities carry risks distinct from traditional debt instruments and are classified as "principal at risk securities." They are part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program, reflecting their structured investment nature.

Registration and Distribution Details

The pricing supplement was filed as a 424(b)(2) document under SEC registration numbers 333-293641 and 333-293641-01. The preliminary filing dated July 20, 2026, includes product, index, tax supplements, and prospectus documents accessible via hyperlinks. These materials should be reviewed together for full details on terms, risks, and tax considerations.

Morgan Stanley & Co., an affiliate and wholly owned subsidiary of Morgan Stanley Finance LLC, serves as distribution agent. The filing discloses potential conflicts of interest due to this affiliation. Certain dealers and advisors may receive structuring fees, while the agent does not earn traditional sales commissions, consistent with the fee-based advisory account distribution model. The SEC and state regulators have neither approved nor disapproved the securities or verified the accuracy of disclosure documents.