Morgan Stanley to price autocallable knock-out notes linked to Russell 2000 via JPMorgan

By Marisa Wong

Milwaukee, April 6 - Morgan Stanley plans to price 0% autocallable knock-out notes due May 12, 2011 linked to the Russell 2000 index, according to an FWP filing with the Securities and Exchange Commission.

If the index closes at or above 107% of its initial level on the first business day of any week beginning April 19, the notes will be automatically called at 107% of par.

If the notes are not called and the index falls below 80% of its initial level on any day during the life of the notes, the payout at maturity will be par plus the index return on May 9, 2011, which could be positive or negative. Otherwise, the payout will be par plus the greater of the index return on that day and 0%.

Because the valuation date, May 9, 2011, is also a review date, the notes may be automatically called on that day. As a result, the maximum return on the notes is limited to the call premium of 7%.

The notes are expected to price April 7 and settle April 14.

JPMorgan Chase Bank, NA and J.P. Morgan Securities Inc. are the agents.

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