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Morgan Stanley bring out bond duo

Morgan Stanley has brought out two capital-protected bonds linked to the FTSE 100 index for a term of six years.

The FTSE capital plus plan 5 offers a full capital return at the end of the term, plus the greater of 30 per cent of the original investment or 60 per cent of the growth in the index. To calculate the returns, the closing level of the FTSE 100 index is recorded on May 11, 2007 and compared with the average of monthly readings taken over the last year of investment.

The FTSE protected growth plan 16 has an early maturity feature in the third year, so that if the index has risen by at least 30 per cent, investors will receive a full capital return plus 30 per cnet of their original investment. Alternatively, they can choose to continue with the investment on terms that are available at that time.

If the early maturity feature is not triggered by the performance of the index, the bond will run full term. In these circumstances, investors will receive a full capital return plus 150 per cent of the rise in the index at the end of the term. To calculate the returns, the closing level of the FTSE 100 index is recorded on May 11, 2007 and compared with the average of monthly readings taken over the last year of investment.

According to the Structured Retail Products adviser website, similar six-year FTSE 100 linked products are available from Legal & General and Barclays. The Barclays minimum return plan P4 provides the greater of 28 per cent of the original investment or 50 per cent of the rise in the index, which is lower than Morgan Stanley’s FTSE Capital Plus Plan 5.

Legal & General’s growth investment plan plus 7 has an early maturity feature in the third year. If the index rises by at least 15 per cent at that point, investors will receive 25 per cent growth or if it continues, 125 per cent of the growth in the index. While the return under the early kickout is lower than the Morgan Stanley’s FTSE protected growth plan, the level the index must reach is also lower which potentially makes it more likely to kick out early. If investments run full term, the Morgan Stanley product would be the better option, as the return is 25 per cent higher than Legal & General’s.

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