Nev Godley, Vice President, at Morgan Stanley, said: “Given the ongoing uncertainty in the markets, Morgan Stanley continues to offer defensive products to cater for a broad range of market views and try to suit a wide range of investor needs. The fact that these products offer the potential for attractive positive returns, even if the underlying index falls by 10%, resonates with IFAs and investors alike.”
Morgan Stanley FTSE™ Defensive Bonus Plan 7
The Morgan Stanley FTSE™ Defensive Bonus Plan 7 is a kick out investment which offers an 8% annual coupon, payable on the first anniversary from year two onwards where the FTSE™ 100 Index is at or above 90% of its initial level. Capital is protected at maturity, as long as the FTSE™ 100 Index level has not closed at or below 50% of its initial level during the investment term.
The capital at risk barrier on the Defensive Bonus Plan 7 has been changed from a European barrier (observed at maturity only) to an American barrier (observed at daily market close throughout the term). Should the kick out feature of the Defensive Bonus Plan 7 activate, the 50% barrier will not apply.
A backtest of six-year FTSE 100-based products launched between the inception of the index in January 1984 and October 2006 with a 50% American barrier showed that a similar product breached in just 0.97% of 5,792 observation periods. Adding in the “open” periods since 2006, to include the recent financial crisis, shows that additional 1,516 observations would not have breached, bringing the overall percentage of breached barriers down to 0.77%. From those, the average capital loss was -15.58%. The worst was -27.41%*.
Morgan Stanley Defensive Digital Growth Plan 8
This six-year plan offers a fixed return of 60% at maturity, paid as long as the FTSETM 100 Index is positive, flat or has not fallen by more than 10% over the term, offering a good return for bullish to mildly bearish investors. If the final index level has fallen between 10% and 50%, capital is repaid in full. If it has fallen by 50% or more, the capital return will be reduced on a 1:1 basis in line with the negative performance of the Index.
Both plans open for investment on 7th November 2012 and close 19th December 2012, except for ISA transfers which close on 12th December 2012. The plans strike on 9th January 2013.
* Backtest data from Bloomberg as at 30th October 2012.
|Nev Godley, Vice President
+44 (0) 20 7425 1158
|Roddi Vaughan Thomas/Lianne Robinson/Lauren Willington
+44 (0) 20 7726 6111
|Product name||Morgan Stanley FTSE™ Defensive Bonus Plan 7||Morgan Stanley FTSE™ Defensive Digital Growth Plan 8|
UK Equity (FTSETM 100 Index)
6 years (potential ‘kick out’ at year 2 and each year thereafter until maturity )
New Stocks & Shares ISA, transfer of existing ISA, SIPP, SSAS, charity / company / trustee investment and direct (unwrapped) investment. Unwrapped investments are expected to be subject to CGT.
|Potential growth return||
‘Kicks out’ with a return of 8%p.a. from the first observation (annual from year 2 onwards) if the FTSE™ 100 Index is at least 90% of the level on its start date.
Offers a fixed return of 60% at maturity, paid as long as the FTSETM 100 Index is positive, flat or has not fallen by more than 10% over the term.
|Capital protection at maturity||
Capital is protected at maturity as long as the FTSE 100 Index level has not closed at or below 50% of its initial level during the investment term.
If the FTSE has fallen between 10% and 50% over the term, capital will be returned in full although no growth return will be paid. If the index has fallen by 50% or more at maturity, then capital will be reduced on a 1:1 basis.
|Securities used to provide capital protection||
Securities issued by Morgan Stanley B.V. and guaranteed by Morgan Stanley (rated A- by S&P at time of release)