New Issue: Morgan Stanley prices $6.72 million knock-out notes tied to Telefonica

By Jennifer Chiou

New York, March 2 - Morgan Stanley priced $6.72 million of 0% knock-out notes due Aug. 30, 2012 linked to the ordinary shares of Telefonica, SA, according to a 424B2 filing with the Securities and Exchange Commission.

If Telefonica stock closes below the initial share price by more than 25% on any day during the life of the notes, the payout at maturity will be par plus the stock return, which could be positive or negative. Otherwise, the payout will be par plus the greater of the stock return and 20.6%.

J.P. Morgan Securities LLC is the lead agent with Morgan Stanley & Co. Inc. as co-agent.

Issuer:	Morgan Stanley
Issue:	Knock-out notes
Underlying stock:	Telefonica, SA (NYSE: TEF)
Amount:	$6.72 million
Maturity:	Aug. 30, 2012
Coupon:	0%
Price:	Par
Payout at maturity:	If Telefonica stock closes below initial share price by more than 25% on any day during life of notes, par plus stock return, with exposure to losses; otherwise, par plus greater of stock return and 20.6%
Initial share price:	€18.28
Pricing date:	Feb. 25
Settlement date:	March 4
Agents:	J.P. Morgan Securities LLC (lead), Morgan Stanley & Co. Inc.
Fees:	1.25%
Cusip:	617482RU0

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