Morgan Stanley to price auto-callable notes linked to basket of financial stocks

By Angela McDaniels

Tacoma, Wash., Feb. 27 - Morgan Stanley plans to price 0% auto-callable securities due April 12, 2011 linked to the common stocks of the Goldman Sachs Group, Inc., JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., according to a 424B2 filing with the Securities and Exchange Commission.

If the closing share price of each stock exceeds its initial share price on a determination date, the securities will be called. The redemption amount will be 116.75% to 117.75% of par if the notes are called on Oct. 3, 2008, 133.5% to 135.5% of par if called on April 3, 2009, 150.25% to 153.25% of par if called on Oct. 5, 2009, 167% to 171% of par if called on April 5, 2010, 183.75% to 188.75% of par if called on Oct. 5, 2010 and 200.05% to 206.5% of par if called on April 5, 2011. The exact redemption amounts will be determined at pricing.

If the notes are not called, the payout at maturity will be 200.05% to 206.5% of par if the final return of each stock is positive.

If the final return of any stock is flat or negative, the payout at maturity will be par of $10 if none of the stocks has traded at or below its trigger price - 50% of its initial share price - during the life of the notes. Otherwise, the payout will be par minus the final return of the worst-performing stock.

The notes will price and settle in March.

Morgan Stanley and Co. Inc. will be the agent.

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