The Morgan Stanley FTSE protected growth plan 6 is a FTSE 100 linked guaranteed equity bond that could mature earlier than its six-year term.
The bond guarantees the return of investors' original capital regardless of the performance of the index. They will get 120 per cent of the growth in the index if the bond runs for six years, but it will mature in year three if the FTSE 100 index has risen by at least 30 per cent by September 17, 2007. Where this happens, investors will get 30 per cent growth plus their original capital. They can continue with the investment but this will depend on the terms offered at the time and they may not be offered 120 per cent growth.
To calculate the returns if the product runs full term, the closing value of the FTSE 100 is measured on September 17, 2004. It is measured against the average value of the index during the last 12 months of the term.
Premier Fund Managers and Woolwich Plan Managers are currently offering six-year FTSE 100-linked products with an early maturity feature. However, the Woolwich product is a better comparison for the Morgan Stanley product as the Premier plan has the potential to mature each year and full capital protection is not offered.
The early maturity feature of the Woolwich Capital Growth plan is the same as the Morgan Stanley product but investors must select this feature at the outset. If the product runs full term investors will get 107.5 per cent of the rise in the index, which is less than offered by Morgan Stanley. Both products calculate the returns on the same basis.