Morgan Stanley plans contingent annual interest notes on 20 stocks

By Toni Weeks

San Diego, July 27 - Morgan Stanley plans to price contingent annual interest notes due Aug. 31, 2016 linked to a basket of 20 stocks, according to a 424B2 filing with the Securities and Exchange Commission.

The equally weighted basket includes Abbott Laboratories, Altria Group, Inc., Bristol-Myers Squibb Co., Consolidated Edison, Inc., Duke Energy Corp., FirstEnergy Corp., Frontier Communications Corp., Johnson & Johnson, Kraft Foods Inc., Lockheed Martin Corp., McDonald's Corp., Merck & Co., Inc., Pepco Holdings, Inc., Pfizer Inc., Pitney Bowes Inc., PPL Corp., Sysco Corp., TECO Energy, Inc., Verizon Communications Inc. and Windstream Corp.

In August of each year, the notes will pay a coupon equal to the sum of the basket components' weighted returns, with a floor of zero. On any valuation date, if an individual component's stock performance has remained the same or appreciated, it will be given a fixed stock return of 11% to 13% that will be set at pricing. If a stock return has declined, its component return will equal the stock return, subject to a floor of negative 20%.

The payout at maturity will be par.

The notes (Cusip: 617482WU4) are expected to price Aug. 26 and settle Aug. 31.

Morgan Stanley & Co. LLC is the agent.

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