The Morgan Stanley FTSE 100 Income Plan. Investor Pack

Transcription

1 The Morgn Stnley FTSE 100 Income Pln Investor Pck

2 The Morgn Stnley FTSE 100 Income Pln Introduction The current low interest rte environment mkes it very difficult for investors to find products tht offer ttrctive hedline income levels whilst mintining known level of risk to their cpitl. The FTSE Income Pln hs been designed with these considertions in mind. Key Fetures 6.50% nnul income over the life of the Pln. Return of cpitl is linked to the performnce of FTSE 100 Index. If the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level (ll s defined in Cpitl Return on pge 3). You could, therefore, lose ll of your cpitl. The return of your initil cpitl t mturity is not gurnteed nd could be less thn the initil investment in the Pln. You could, therefore, lose ll of your cpitl. Pln mnged by Morgn Stnley & Co. Interntionl Limited ( MSIL ), uthorised nd regulted by the Finncil Services Authority. Three yer investment term. If you sell your investment before its mturity dte you my get bck less thn your initil investment. The Pln invests in Preference Shres issued by Guernsey investment compny, which re listed on the Irish Stock Exchnge. The investment compny will use the net proceeds to invest in ssets issued by, nd in contrcts entered into with, MSIL nd/or finncil institutions rted A or better by Stndrd & Poor s or the equivlent rting by Moody s Investor Services Limited. These ssets nd contrcts will provide the returns for the Pln. In the event of these finncil institutions going into liquidtion or filing to comply with the terms of the bonds or contrcts, you my lose money nd get bck less thn you invested. It is not gurnteed investment. Pre-investment interest pid t 0.5% below bse rtes. Open for ISA/PEP nd Direct Investment, including SIPPs nd SSASs. PEP/ISA trnsfers dedline is 17 October Direct investment (including SIPP/SSAS) dedline is 31 October Pln income pyments re subject to tx t the rtes of 10% for bsic rte txpyers nd 32.5% for higher rte txpyers, bsed on current legisltion. The Morgn Stnley FTSE Income Pln would be considered to be "High Income Product" by the FSA. High income products cn help you improve the mount of income you get from your cpitl but you need to feel comfortble with the risks to cpitl involved. A copy of the FSA s fctsheet on High Income Products should be included in the investor pck which you will receive from your Independent Finncil Adviser. 1

3 Pln Overview The FTSE 100 Income Pln is three yer investment which is designed to provide investors with high level of income over the three yer term of the product. The Pln lso provides investors with predetermined methodology for clculting the cpitl return dependent on the performnce of the FTSE 100 Index. Pln Returns Initil Investment Your money will be invested in Preference Shres issued by Guernsey investment compny, which re listed on the Irish Stock Exchnge. The investment compny will use the net proceeds to invest in ssets issued by, nd in contrcts entered into with Morgn Stnley & Co. Interntionl Limited nd/ or finncil institutions rted A or better by Stndrd & Poor s or the equivlent rting by Moody s Investor Services Limited. The Preference Shres will be purchsed by the Pln Mnger on 18 November 2003 which is the Pln Strt Dte. Any subscription money invested by you in the Pln before this dte will ccrue interest in client bnk ccount t rte of 0.5% below bnk bse rtes (net of 20% deduction to be pid to the Inlnd Revenue s tx on interest on csh held pending ISA investments). Your Initil Investment for the purposes of the Pln will equl the sum of your subscription money plus ny ccrued interest. Your Initil Investment will be rounded down to the nerest 1.00 The Pln Returns will be equl to the Cpitl Return t mturity plus the Income Pyments, subject to the Product Risks nd Risk Fctors (on pges 5 nd 7 respectively). If you sell your investment before its mturity dte you my get bck less thn your initil investment. Income Pyments You will receive income pyments of 6.50% on n nnul bsis. Plese see the Product Risks on pge 5 for more detiled description of how Pln Returns re provided. It is very importnt to understnd tht in order to chieve these ttrctive rtes of return n investor s invested cpitl is subject to significntly more risk thn the risk involved in trditionl fixed income or bond investment. If you hve ny questions bout this investment product you must spek to your Independent Finncil Adviser. You should lso red the FSA fctsheet on High-Income Products. Whilst you should expect to receive the income mounts set out bove, the mount of your invested cpitl tht will be returned is linked to the performnce of the FTSE 100 Index s set out in the Cpitl Return section below nd in the Prospectus. The following tble shows the income pyments you should receive for different investment mounts; Amount Income Invested Ech Yer Over the 3 yer life of the Pln 10, ,950 2

4 Cpitl Return The return of your Initil Investment t mturity is linked to the performnce of the FTSE 100 Index. It is not gurnteed nd could be zero. If the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. You could, therefore, lose ll of your cpitl. Plese see the Product Risks on pge 5 for more detiled description of how Pln Returns re provided. The Pln should provide full return of your Initil Investment if: The FTSE 100 Index does not fll by 30% or more t ny time during the life of the Pln from the Initil Index Level. A reduced level of your initil cpitl will be returned if: The FTSE 100 Index flls by 30% or more t ny time during the life of the Pln. In this cse the mximum cpitl returned to you will be 90% of your Initil Investment. Your reduced Cpitl Return will lso further be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. Where: Index Vlution Dtes include every dte from 18 November 2003 to 18 November 2006 (inclusive) Initil Index Level is the officil closing level of the FTSE 100 Index on 18 November 2003 Finl Index Level is the officil closing level of the FTSE 100 Index on 18 November 2006 The following tble is worked exmple designed to show potentil py-off scenrios for n Initil Investment of 10,000. Finl Index Level Compred to Initil Index Level (% Chnge) -100% -80% -60% -40% -20% 0% +20% +40% +60% +80% +100% Cpitl Return if Index hs fllen by 30% or more on ny Index Vlution Dte 0 1,000 3,000 5,000 7,000 9,000 9,000 9,000 9,000 9,000 9,000 Cpitl Return if Index hs not fllen by 30% or more on ny Index Vlution Dte N/A N/A N/A N/A 10,000 10,000 10,000 10,000 10,000 10,000 10,000 3

5 Exmple Pln Returns The Pln Return = Income Pyments + Cpitl Return The following re some worked exmples designed to show potentil py-off scenrios for n Initil Investment of 10,000. 1) The Index never reches level 30% lower thn the Initil Index Level. Vlue Income Returns 1,950 Cpitl Returns 10,000 Pln Returns 11,950 2) The Index reches level 30% lower thn the Initil Index Level on one or more Index Vlution Dtes. The Finl Index Level is higher thn the Initil Index Level. Vlue Income Returns 1,950 Cpitl Returns 9,000 Pln Returns 10,950 3) The Index reches level 30% lower thn the Initil Index Level on one or more Index Vlution Dtes. The Finl Index Level is 75% of the Initil Index Level. Vlue Income Returns 1,950 Cpitl Returns 6,500 Pln Returns 8,450 4) The Index reches level 30% lower thn the Initil Index Level on one or more Index Vlution Dtes. The Finl Index Level is 50% of the Initil Index Level. Vlue Income Returns 1,950 Cpitl Returns 4,000 Pln Returns 5,950 5) The Index reches level 30% lower thn the Initil Index Level on one or more Index Vlution Dtes. The Finl Index Level is 25% of the Initil Index Level. Vlue Income Returns 1,950 Cpitl Returns 1,500 Pln Returns 3,450 4

6 Product Risks Your money is invested in Preference Shres issued by Guernsey investment compny, which re listed on the Irish Stock Exchnge. The investment compny will use the net proceeds to invest in ssets issued by, nd in contrcts entered into with Morgn Stnley & Co. Interntionl Limited nd/or finncil institutions rted A or better by Stndrd & Poor s or the equivlent rting by Moody s Investor Services Limited. These ssets nd contrcts will provide the cpitl protection nd return for your investment. In the event of these finncil institutions going into liquidtion or filing to comply with the terms of the bonds or contrcts, you my lose money nd get bck less thn you invested. It is not gurnteed investment. If the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. You could, therefore, lose ll of your cpitl. The product hs mturity of 3 yers nd is intended s medium term investment. If you sell your investment before its mturity dte you my get bck less thn your initil investment. Prior to mturity, limited liquidity in the secondry mrket for the Preference Shres will be provided. This mens tht it my not lwys be possible to sell the Preference Shres t certin times nd tht the price chieved my be less thn the originl investment. The returns of the Pln re bsed on the price performnce of the FTSE 100 Index nd does not include ny return from dividend income or prticiption in corporte ctions, s would be the cse if you invested in the FTSE 100 Index directly. MSIL does not give investment dvice. If you re in ny doubt bout the suitbility of this investment, you must contct your Independent Finncil Adviser. The levels nd bsis of txtion nd reliefs from txtion cn chnge t ny time. For more extensive description of the Risk Fctors, see pge 7 of the Key Fetures section of this brochure. The Morgn Stnley FTSE Income Pln Three wys to Invest 1. ISA s for 2003/04 Invest 3,000 per person into Mini Stocks nd Shres ISA or Invest 7,000 per person into Mxi ISA for 2003/04. Income pyments mde within n ISA re completely free of ny tx, under current legisltion. However, the tx fee sttus of ISAs is lwys subject to chnges in legisltion. 2. ISA nd PEP trnsfers The Pln ccepts trnsfers of existing Mini stocks nd shres ISAs, Mxi ISAs nd PEPs. Considertion prior to trnsfers should include exit nd ssocited chrges of encshing your existing investments nd the potentil for loss of income or growth whilst the trnsfer is pending. 3. Direct Investments You cn invest directly in the Pln. The Pln is open for SIPP nd SSAS pplictions. The current txtion of direct investments hs number of beneficil fetures: Pln income pyments re subject to tx t the rtes of 10% for bsic rte txpyers nd 32.5% for higher rte txpyers. Income from the Pln will be distributed gross of ny tx. You must declre this income through your nnul tx return. 5

7 * Plese note: The txtion tretment of Investors is dependent on their individul circumstnces nd my be subject to chnges in tx regultions. Potentil Investors re dvised to consult their professionl dvisers regrding the txtion consequences of investing in the Pln. The published rtes of txtion re correct t the time of publiction. Levels of, nd relief from, txtion re subject to chnge. How to invest This brochure lso contins Key Fetures section including Terms & Conditions, ll of which should be red before investing. Min Appliction Form for ISA nd Direct Investment If you re pplying for Direct Investment or n ISA in 2003/04, you should complete sections 1-3 on the front of the form nd section 4 on the bck of the Appliction Form for ISA nd/or Direct Investment. Appliction Form for PEP/ISA Trnsfers If you re pplying for PEP or ISA trnsfer, you should complete sections 1-3 on the front of the form nd section 4 on the bck of the Appliction Form for PEP or ISA trnsfer. Appliction Forms for second pplicnts For second pplicnts there is n dditionl ISA/Direct Investment form. For dditionl pplictions simply photocopy the ppliction forms. Your cheque It is only necessry to send one cheque for the totl mount tht ech individul wishes to invest (e.g. one cheque for 15,000 cn cover n ISA investment of 7,000 nd Direct Investment in shres of 8,000). Seprte pplictions (e.g. from husbnd nd wife) require two cheques. Cheques should be mde pyble to Morgn Stnley FTSE Income Pln Client A/C. If your cheque is from building society, it should reference your nme. (For exmple Morgn Stnley FTSE Income Pln Client A/C Reference A Johnson ). Wht to do with your completed ppliction Check tht ll sections hve been completed s necessry nd tht the ppliction hs been signed. Return the completed ppliction nd your cheque to your finncil dviser, who will be required to complete the pproprite verifiction of identity checks nd sign the ppliction. Your finncil dviser should then send the completed ppliction pckge to Morgn Stnley & Co. Interntionl Limited, Administrtion Office, Income Pln, Floor 8, Fountin House, 2 Queen's Wlk, Reding, RG1 7QF Key Events nd Dtes Offer Periods ISA nd PEP Trnsfers 15th September 2003 to 17th October 2003 ISAs, Direct Investments 15th September 2003 to 31st October 2003 FTSE 100 Index Observtion Dtes Initil Index Level Officil closing level on 18th November 2003 Finl Index Level Officil closing level on 18th November 2006 Pln Pyments Coupon Pyment Dtes 18th November 2004, 18th November 2005 nd 18th November 2006 Mturity Pyment Dte 30 November 2006 *In the event tht ny of the bove dtes re not London business dys, the relevnt dte will be moved forwrd to become the first business dy immeditely following the dte in question. 6

8 Key Fetures of the Morgn Stnley FTSE Income Pln Investment Options Investment cn be mde in the following wys: Vi Mxi ISA Vi Mini Stocks nd Shres ISA By trnsferring n existing PEP (Generl nd/or Single Compny) or ISA By mking Direct Investment We ve described the Morgn Stnley FTSE Income Pln in these Key Fetures. For your informtion, in respect of PEP nd ISA trnsfers, the current issue of this Pln will be closed to investments on 17 October Objectives The objectives of the Morgn Stnley FTSE Income Pln ( the Pln ) re s follows: To provide Income Returns over the life of the Pln. To provide return of your Initil Investment t mturity of the Pln, depending on the performnce of the FTSE 100 Index. Your money is invested in Preference Shres issued by Guernsey investment compny, which re listed on the Irish Stock Exchnge. Morgn Stnley & Co. Interntionl Limited ( the Account Mnger ), subsidiry of Morgn Stnley nd regulted by the FSA, will be the Sponsor nd Investment Mnger for the issue of the Preference Shres. The investment compny will use the net proceeds to invest in ssets issued by, nd in contrcts entered into with Morgn Stnley & Co. Interntionl Limited nd/or finncil institutions rted A or better by Stndrd & Poor s or the equivlent rting by Moody s Investor Services Limited. These ssets nd contrcts re designed to provide the cpitl protection nd return for your investment nd will generte the income pyments scheduled to be pid under the Pln. You should note tht, in the event of these finncil institutions going into liquidtion or filing to comply with the terms of the bonds or contrcts, you my lose money nd get bck less thn you invested. It is not gurnteed investment. Mking n Investment Subscription is only vilble by wy of lump sum investment. The minimum is 3,000 for Mini Stocks & Shres ISA nd 5,000 for Mxi ISA or Direct Investment. If investing vi Mxi ISA, you must not subscribe to nother ISA (other thn Tess only ISA) in the sme tx yer tht you subscribe to this Mxi ISA. PEP or ISA trnsfers re subject to minimum investment mount of 5,000. Risk Fctors The Morgn Stnley FTSE Income Pln would be considered to be "High Income Product" by the FSA. High income products cn help you improve the mount of income you get from your cpitl but you need to feel comfortble with the risks involved. A copy of the FSA s fctsheet on High Income Products should be included in the investor pck which you receive from your Independent Finncil Adviser. If the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. You could, therefore, lose ll of your cpitl. For these resons, this Pln is only suitble if you cn fford significnt element of risk to your cpitl. The Pln hs mturity of three yers nd is intended s medium term investment. If you sell your investment before its mturity dte you my get bck less thn your Initil Investment. Prior to mturity, limited liquidity for the Preference Shres will be provided in the secondry mrket. This mens tht it my not lwys be possible to sell the Preference Shres t certin times nd tht the price chieved my be less thn the originl investment. 7

9 The returns under the Pln depend on the Investment Compny entering into trnsctions with Morgn Stnley & Co. Interntionl Limited nd / or cquiring securities issued by number of Approved Finncil Institutions ( AFIs ). Ech AFI will, t the time the Investment Compny enters into such trnsction or cquires such security, hve rting of t lest A by Stndrd & Poor s or the equivlent rting by Moody s Investor Services Limited. If, on or prior to the Pln mturity dte, n AFI becomes insolvent nd/or fils to comply with the terms of such trnsctions nd/or Preference Shres, the Investment Compny my not receive ll or ny of the expected pyments (income or cpitl) from tht investment. In these circumstnces you my receive less thn the mount you invest in the Pln. This my lso be the cse if there is chnge of lw, level or bsis of txtion, or ny exceptionl expenses or libilities tht re incurred by the Investment Compny. The Investment Compny will issue further series of Preference Shres. The Investment Mnger hs greed with the Investment Compny tht it will rrnge derivtive contrcts for the Investment Compny to enter into in respect of such further series of Preference Shres only on limited recourse bsis. Morgn Stnley & Co. Interntionl Limited, which lso cts s sponsor (the Sponsor ) to the Investment Compny, hs greed to py certin of the Investment Compny s fees, expenses, nd libilities. If the Sponsor fils for ny reson to mke such pyments, the mounts pyble under the Preference Shres, nd hence the Pln, could be reduced. If you hve invested vi n ISA nd subsequently decide to withdrw, it my not be possible to invest in nother ISA for tx yer 2003/2004 if your cncelltion period hs expired. Your circumstnces could chnge, forcing you to withdrw nd relise your investment erly. If this hppens, you my get bck substntilly less thn the mount you originlly invested. The formul under which the return on the Pln is likely to be clculted provides tht in certin circumstnces clcultion of the return my be djusted to tke ccount of mrket disruption events interfering with determintion of the level of the FTSE 100 Index. A relevnt mrket disruption would be suspension or limittion of trding on the London Stock Exchnge of mteril proportion of the shres included in the FTSE 100 Index, which would dely or prevent clcultion of the officil Index level. Should this occur, the return on the Pln will be ffected nd my be more or less thn would otherwise hve been the cse. Pyments scheduled to be mde in respect of the Preference Shres in which the Pln will invest your money my be delyed where mrket disruption events occur (s described bove), cusing dely to the vilbility of published index levels for the FTSE 100 Index, nd potentilly therefore delys to pyments. In the event tht ny such pyments re delyed, corresponding djustments will be mde to the scheduled dtes for pyments under the Pln. Pst performnce is not necessrily guide to future performnce nd should not be used to ssess the risks ssocited with this investment. The levels nd bsis of txtion nd reliefs from txtion cn chnge t ny time. The vlue nd vilbility of ny tx relief depends on individul circumstnces. The fvourble tx tretment of ISAs nd PEPs my not be mintined throughout the term of the ISA, nd is subject to chnges in legisltion. Tx ssumptions re bsed on our understnding of current legisltion nd prctice t the time of print nd my be subject to future chnge. The returns of the Pln re bsed on the price performnce of the FTSE 100 Index nd do not include ny return from dividend income or prticiption in corporte ctions, s would be the cse if you invested in the shres comprising the FTSE 100 Index directly. 8

10 Frequently Asked Questions Wht is the Morgn Stnley FTSE Income Pln? It is n investment pln, which cn be ccessed in one or more wys: by using your nnul Mini Stocks nd Shres ISA llownce of 3,000, your Mxi ISA subscription llownce of up to 7,000, by ISA or PEP trnsfer or s Direct Investment. The Pln follows n investment strtegy designed to ensure tht scheduled pyments re met nd tht the risks of the investment correspond to the risks described bove. The Pln is n investment in qulifying Preference Shres, denominted in sterling nd listed on n pproved stock exchnge. You cn trck the performnce of your investment through the Pln price, which is vilble on request from the Pln Mnger. Who is eligible to invest? UK investors ged 18 nd over re eligible to invest in the Pln vi n ISA or by using the Direct Investment option. Investments cn lso be mde through the Direct Investment option on behlf of person under the ge of 18. Wht hppens to my subscription money? Prior to the Pln Strt Dte your subscription money will be pid into client bnk ccount nd your money will be held in ccordnce with FSA s client money rules. Interest will ccrue on money in the client bnk ccount t rte equl to UK bnk bse rtes minus 0.5%. Interest will ccrue from the dte the cheque is clered until the Pln Strt Dte. All such interest with respect to this money will be invested into your ISA net of 20% deduction tht is required to be pid to the Inlnd Revenue. Wht is my Initil Investment? For the purposes of the Pln your Initil Investment is equl to ny subscription money you py into the Pln s client bnk ccount plus ny interest ccrued on your subscription money, less ny pplicble deductions (see bove). Your Initil Investment will be rounded down to the nerest Wht hppens on the Pln Strt Dte? At the Pln Strt Dte the Pln Mnger will use the ggregte Initil Investment mount to purchse Preference Shres with fetures tht mtch the pyment objectives of the Pln. The Pln Strt Dte is 18 November Wht Income Return cn I expect? The Pln provides for n nnul pyment of 6.50% gross commencing 18 November 2004 until 18 November Income Returns re subject to the Risk Fctors on pge 7. How cn the Pln offer such high income? The Compny into which you invest enters into number of investment trnsctions in order to produce the dvertised returns; this strtegy puts your cpitl t risk. Plese red section entitled Cpitl Return on pge 3 where there is full explntion of your cpitl repyment. You should only invest if you re comfortble with this risk to your cpitl. The Morgn Stnley FTSE Income Pln would be considered to be "High Income Product" by the FSA. High income products cn help you improve the mount of income you get from your cpitl but you need to feel comfortble with the risks involved. A copy of the FSA s fctsheet on High Income Products should be included in the investor pck which you receive from your Independent Finncil Adviser. Wht Cpitl Return cn I expect? The Pln should provide full return of your Initil Investment if the FTSE 100 Index does not fll by 30% or more t ny time during the life of the Pln from the Initil Index Level. A reduced level of your initil cpitl will be returned if the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln. In this event, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. You could, therefore, lose ll of your cpitl. For these resons, this Pln is only suitble if you cn fford n element of risk to your cpitl. Index Vlution Dtes include every dte from 18 November 2003 to 18 November 2006 (inclusive) Initil Index Level is the officil closing level of the FTSE 100 Index on 18 November 2003 Finl Index Level is the officil closing level of the FTSE 100 Index on 18 November 2006 This investment is not likely to be suitble when n investor cnnot fford n element of risk s some or ll of the investors cpitl could be lost. Wht is the FTSE 100 Index? The FTSE 100 Index is n index compiled nd clculted by FTSE Interntionl Limited ( FTSE ). The Index is comprised of the 100 lrgest compnies listed on the London Stock Exchnge by mrket cpitlistion. The dily published level of the Index is derived by FTSE from the closing price of Shres in ech of those 100 compnies, weighted ccording to their reltive mrket cpitlistions. Cn I withdrw before the end of the three yer term? Yes. However, should you withdrw t ny time during the three yer investment period, the csh vlue is not gurnteed nd will depend on previling mrket conditions including, but not limited to, interest rtes, demnd for Preference Shres in the secondry mrket nd the levels of the FTSE 100 Index to which your investment is linked. As ll chrges re reflected in the terms offered, the vlue of your investment in Pln is likely to be less thn the mount originlly invested in it for substntil prt of the investment period. The investment protection is only vlid if you remin invested for the full three yer investment period. Will my return be txed? For n investor who is UK resident individul, ll returns from ISA nd PEP investments re currently free of Income Tx nd Cpitl Gins Tx. If you hve invested vi the Direct Investment option, 9

11 income is pid gross without ny deduction for tx nd is subject to 10% income tx for bsic rte txpyers nd 32.5% income tx for higher rte txpyers. The mount of tx you py will depend on your individul circumstnces. This sttement is bsed on current legisltion, regultions nd prctice, ll of which my chnge. If I m considering PEP or ISA trnsfer, is there nything else I should know? Your existing PEP or ISA must be trnsferred in csh, which mens tht your existing Pln Mnger will sell your investment holdings. Your existing Pln Mnger my chrge you n exit or trnsfer fee. There is the potentil for loss of income or growth if mrkets should rise while your trnsfer remins pending. Plese note tht to ensure the funds re received from your existing Pln Mnger in timely mnner, we hve n erly cut-off dte for PEP nd ISA trnsfers of 17 October Wht if I wnt to close or trnsfer my Pln? You my only terminte or trnsfer the Pln in whole by wy of written notifiction. Deling normlly tkes plce t the end of ech month; your investment(s) will be sold t the next prcticble deling dy following the request. We nticipte tht MSIL will be the only deler in the Pln Preference Shres. Pyment will then be mde within seven working dys. Prtil withdrwls will not be permitted. How will chrges nd expenses ffect my investment? With the exception of 100 plus VAT chrge in the event tht you subsequently wish to trnsfer your Pln to nother Pln Mnger, there re no explicit initil or ongoing chrges. All other chrges re tken into ccount in setting the terms offered over the investment period nd the returns shown re net of ll chrges nd expenses. The terms offered lso tke into ccount ll the costs of setting up the Pln, dministering it nd conducting the investment mngement of your Pln. How much will the dvice cost? MSIL does not provide investment dvice. If you hve ny doubts s to the suitbility of this pln, plese consult your finncil dviser. If you require personl finncil dvice you should consult n independent dviser. If you receive dvice from n independent dviser he will give you detils bout the cost. If you re not receiving ny dvice, commission my still be pyble to n independent dviser. Commission is expected to be pid by the Pln Mnger to independent finncil dvisers through whom pplictions for the Pln re received. The mount of commission will depend on the mount you invest. The mount will lso be included in your welcome letter. Commission is lredy ccounted for in the terms offered nd does not ffect the return shown. Will you keep me updted? Within 5 dys of receipt of your ppliction by us, we will send you forml cknowledgement s well s informtion on your right to cncel, grnted under the terms of the Pln, nd copy of the Prospectus issued by the Guernsey Investment Compny in respect of the Preference Shres in which your money will be invested. If you cncel within the pplicble 14 dy cncelltion period you will entitled to the repyment of the mount you hve invested plus ny ccrued interest, less ny necessry dministrtion or other costs. After the Pln Strt Dte on 18 November 2003, we will send you n opening sttement detiling your holdings within your Pln. At the end of every yer, we will send you n nnul sttement nd vlution. Wht hppens to my investment if I die? Upon deth, ssets will then be trnsferred to Direct Investment, which forms prt of your estte for Inheritnce Tx purposes. If relevnt, the PEP or ISA sttus of the investment will then be lost. Once suitble documenttion is received, the investments will be trnsferred to your personl representtives within seven working dys. Your ccount cn then be terminted erly in ccordnce with its terms or held to mturity, t the discretion of your personl representtive. Wht re CAT stndrds nd do they pply to this Pln? These re voluntry stndrds for ISAs introduced by the Government. The stndrds cover levels of chrges, ccess to svings nd fir terms. These re not gurntee of performnce nd do not imply tht n ISA hs been pproved by the Government. It is not considered useful or pproprite to structure this Pln in ccordnce with CAT stndrds. The Pln is not in ny wy sponsored, endorsed, sold or promoted by FTSE Interntionl Limited ( FTSE ) or by the London Stock Exchnge plc (the Exchnge ) or by The Finncil Times Limited ( FT ) nd none of FTSE nor Exchnge nor FT mkes ny wrrnty or representtion whtsoever, expressly or impliedly, either s to the results to be obtined from the use of the Index nd/or the figure t which the sid Index stnds t ny prticulr time on ny prticulr dy or otherwise. The Index is compiled nd clculted by FTSE. However, none of FTSE nor Exchnge nor FT shll be lible (whether in negligence or otherwise) to ny person for ny error in the Index nd none of FTSE nor Exchnge nor FT shll be under ny obligtion to dvise ny person of ny error therein. FTSE ccepts no libility in connection with the trding of ny products on the Index. All copyright in the Index vlues nd constituent list vests in FTSE. Morgn Stnley & Co Interntionl Limited. Hs obtined full license from FTSE to use such copyright for the Pln. FTSE, FT-SE nd Footsie re trdemrks of the Exchnge nd FT nd re used by FTSE under license. 10

12 Terms nd Conditions 1. Definitions: In these terms the following words hve the following menings: Pln Mnger Morgn Stnley & Co. Interntionl Limited, which is Authorised nd regulted by the Finncil Services Authority ( FSA ). Appliction Form The form tht must be completed to enble your Pln to be opened, substntilly in the form shown t the end of these Terms & Conditions. Pln Strt Dte 18 November 2003 Investment Compny Sienn Investment Compny Limited Investment Mnger Morgn Stnley & Co. Interntionl Limited ISA Mini Stocks nd Shres nd/or Mxi Individul Svings Account. MSIL Morgn Stnley & Co. Interntionl Limited. PEP Personl Equity Pln. Pln ISA, PEP or Direct Investment s held under these Terms & Conditions. Preference Shres The Series 5 Preference Shres described in the Prospectus to be issued by the Investment Compny nd which re to be listed on the Irish Stock Exchnge. Prospectus The Principl Memorndum nd the Series 5 Supplementl Memorndum, ech issued by the Investment Compny nd together describing importnt chrcteristics of the Investment Compny nd the Terms of the Preference Shres, nd on the bsis of which ny investment in the Pln is required to be mde. Regultions Personl Equity Pln Regultions 1989 nd Individul Svings Account Regultions 1998 s mended from time to time. We, us & our Pln Mnger. You nd your An investor who pplies to open n ISA (or Direct Investment) or in the cse of PEP (or ISA) Trnsfer, n investor who pplies to trnsfer their PEP (or ISA) on these Terms & Conditions. 2. Your Pln: () To open Pln, you must submit to the Pln Mnger fully completed Appliction Form. In the cse of n ISA investment, you must lso provide the initil subscription mount. In the cse of n ISA or PEP trnsfer, we will mnge your Pln upon receipt of the proceeds of your previous Pln from your previous Pln Mnger. The Appliction Form is prt of these terms nd conditions nd if the terms differ, those contined in the Appliction Form will previl. (b) Subject to the Regultions we my open n ISA Pln provisionlly where the informtion which you hve supplied is insufficient. In respect of n ISA, where we open Pln on provisionl bsis you must supply the missing informtion within 30 dys of the ppliction, otherwise the Pln must be voided in ccordnce with Inlnd Revenue requirements. (c) If pplicble you my open more thn one Pln, subject to completion of n Appliction Form for ech Pln. (d) The Pln Mnger reserves the right to reject n ppliction for ny reson. 3. Cncelltion: () You will hve the right to cncel your Pln within 14 dys of receiving from us notice of your right to cncel. (b) f you exercise your right to cncel, but we do not receive your notice to cncel until on or fter the Pln Strt Dte when the investment in the Preference Shres hs been mde, nd the vlue of the Preference Shres hs fllen in tht time, n mount equivlent to the fll in vlue of the Preference Shres will be deducted from the mount of your subscription repid to you. (c) If you exercise your right to cncel the purchse of Preference Shres following PEP or ISA trnsfer, the proceeds will be pid direct to you nd you will irrevocbly lose ny fvourble tx tretment ssocited with PEP or ISA holding. 4. Subscriptions: () Subscriptions to the Pln my only be mde with your own csh or by trnsfer of csh from n existing ISA. (b) If you re investing into PEP Pln, investment my only be mde by trnsfer of csh from n existing PEP. (c) Trnsfers of existing PEPs nd ISAs will normlly be rrnged with the existing PEP or ISA mnger. Once the PEP or ISA hs been trnsferred, your PEP or ISA Pln will be subject to the Terms & Conditions set out here. 5. Tretment of Csh held within your Pln: () Csh will be held by us in ccordnce with the Client Money Rules of the FSA in pooled Client Account with bnk (which is not n ssocite of the Pln Mnger). Interest will ccrue on money deposited in the Client Account t rte equl to bnk bse rtes minus 0.5%. (b) Interest ccrued on csh deposits will be credited to your Pln immeditely prior to investment in the Pln Preference Shres, nd will be rounded down to the nerest whole pound. (c) Within n ISA or PEP, csh cn only be held pending n investment nd if held in csh over prolonged period there is risk tht the Inlnd Revenue my void your ISA or PEP. 6. Permitted Investments: () All csh received by us for investment in your Pln will be pplied to purchse the Preference Shres. The Preference Shres re structured with the im of meeting the investment return objectives of the relevnt option of Pln. (b) Investment will be mde on or before the Pln Strt Dte. The Account Mnger will be cting s your gent in rrnging, nd will be responsible for, ll purchses nd sles of investments for your Pln. (c) As stted in the Prospectus relting to the Preference Shres, the offer of the Preference Shres is conditionl upon certin conditions being stisfied or wived. In the event tht ny of these conditions re not stisfied or wived no Preference Shres will be llotted by the Investment Compny nd your subscription will be returned to you. (d) It is not possible to switch between Plns t ny time. (e) The Pln Mnger my ggregte ny trnsction for n investor with one or more trnsctions for other investors, even though this my result in less fvourble price thn if it hd been crried out seprtely. The Pln Mnger will tke ll resonble steps to ensure tht ny ggregted trnsction is crried out on the best terms generlly vilble in the mrket t tht time for trnsctions of similr type nd size. (f) You hve right to inspect copies of contrct Preference Shres, vouchers nd entries in the Pln Mnger s book, or computerised records relting to trnsctions crried out for your ccount. These records will be kept for t lest six yers. 11

13 7. Pln Returns: () You will receive your Income Pyments on the 18 November 2004, 18 November 2005 nd 18 November Your Cpitl Return will be pid on the 30 November 2006, subject to stted risks. (b) Pln Returns consist of the sum of the Pln Income Returns nd the Pln Cpitl Returns. (c) The Pln Income Returns will be s described in the Brochure on pge 2, subject to the Risk Fctors on pge 7. (d) The Pln Cpitl Return will be less thn the full return of n investors Initil Investment. If the FTSE 100 Index flls by 30% or more t ny time during the life of the Pln, you will lose 10% of your Initil Investment regrdless of wht subsequently hppens to the Index. Your Initil Investment will lso be reduced by n dditionl 1% for ech 1% tht the Finl Index Level is below the Initil Index Level. You could, therefore, lose ll of your cpitl. This is explined in the Brochure under the Cpitl Return section on pge 3. (e) For Investors who re resident in the UK for tx purposes the bove pyments mde in respect of Pln which is held s n ISA or PEP will not be subject to either UK Income Tx or UK Cpitl Gins Tx. Any gins or losses on your investment will be disregrded for the purposes of Income Tx or Cpitl Gins Tx. For Investors who re resident in the UK for tx purposes, in respect of Pln which is held s Direct Investment ll returns in excess of the initil investment t mturity my be lible to Cpitl Gins Tx. This sttement is bsed on current legisltion, regultions nd prctice, ll of which my chnge. If you hve ny doubts concerning your tx sttus, you should consult your own tx dviser. 8. How Investments re held: () Preference Shres will be held in the nme of Keydt Investment Product Nominees Limited, or such other nominee pproved by us, nd will be beneficilly owned by you. We ccept full responsibility for ny loss tht might rise directly s result of ny defult by ny nominee compny in whose nme the Preference Shres re held. Preference Shres cnnot be held by you outside of the Pln. (b) All interests in your Pln will be, nd must t ll times remin, in your beneficil ownership, nd must not be used s security for lon. None of the interests my be lent to or deposited by wy of collterl with ny third prty, nor my you crete ny chrge or security over ny interests. We my not lend ny of your interests to third prty, nor my we borrow ginst its security. 9. Documenttion: () We will cknowledge in writing, where pplicble: (i) your ppliction to open n ISA; (ii) your request to trnsfer PEP or ISA to us; or (iii) your ppliction to open Direct Investment Pln. (b) You will receive n nnul sttement prepred on the bsis of vlutions tken on 27th November ech yer. This will show detils of ll trnsctions effected during the previous twelve months nd includes vlution of your Pln. The sttement will be prepred in ccordnce with the rules of the FSA nd will be issued within 25 business dys of the vlution dte nd will not include ny mesure of comprtive performnce. (c) We my produce consolidted sttement covering where pplicble: (i) ll ISAs tht re held with us; (ii) n investment sttement covering ll PEPs held with us; (iii) n investment sttement covering ll Direct Investments held with us. On request, you re entitled to receive copies of ny informtion issued to holders of Preference Shres in which you invest. On request you will be invited to exercise voting rights in respect of Preference Shres held. If you wish to ttend Preference Shreholder meetings in person we will seek to rrnge this. We reserve the right to mke resonble chrge for providing these dditionl services. (d) Where certificte or other document evidencing title to permitted investment is issued, it will be held by us or s we my direct. 10.Prtil Withdrwls: No prtil withdrwls re permitted from your Pln. 11.Trnsfers to nother Mnger: () Subject to the Regultions, you hve the right t ny time to trnsfer your ISA to nother ISA Mnger, or s the cse my be, your PEP to nother PEP Mnger. Your investment protection is only vlid if you remin invested for the full six yer investment period. As such, if you trnsfer your ISA or PEP you my not receive trnsfer vlue equl to your initil investment. (b) To effect trnsfer you must submit to us written instruction nd/or letter of cceptnce from your new ISA (or s the cse my be PEP) Mnger. We only effect the trnsfer in csh following the sle of ll Preference Shres held by you. It is not possible to trnsfer the Preference Shres within ny of the Plns directly into nother ISA or PEP. (c) In ccordnce with the Regultions, if you wish to trnsfer n ISA for the current yer the trnsfer must be effected in respect of ll the subscriptions mde tht yer. In reltion to ISAs nd PEPs opened in respect of previous yer the trnsfer must be effected in respect of ll holdings held in tht yer s Pln. (d) No prtil trnsfers will be llowed. 12.Termintion: () You my terminte the Pln t ny time by giving written notice to the Pln Mnger tht you wish to terminte your Pln. Following receipt the Pln Mnger will then sell your investments t the next prcticble deling dte. On termintion, the Pln Mnger will ccount to you for the proceeds of investments nd will be entitled to retin ny csh or investments required to settle ny trnsctions lredy initited on your behlf nd ny outstnding fees. You will py to the Pln Mnger ny fees nd trnsction chrges ccrued to the dte of termintion. (b) The Pln my be terminted by the Pln Mnger in the following circumstnces; (i) immeditely on giving written notice to you if, in its opinion, it is impossible to dminister the Pln in ccordnce with the Regultions or you re in brech of the Regultions. (The ISA or PEP Pln will terminte utomticlly if it fils to stisfy the provisions of the Regultions with immedite effect. The Pln Mnger will notify you in writing if, by reson of ny filure to stisfy the provisions of the Regultions n ISA or PEP Pln ceses to qulify s n ISA or PEP); (ii) on one month s written notice if you fil to py ny money due; (iii) on three month s written notice if you re in brech of ny of these Terms & Conditions. In these circumstnces ny ssets of the Pln will be sold nd the proceeds trnsferred to you, subject to our right to retin csh in respect of fees nd trnsction chrges s set out in () bove. (c) It is nticipted tht MSIL will be the only deler in the Pln Preference Shres. 12

14 13.Deth: In the event of your deth, your ISA nd/or PEP will cese to be exempt from tx, with investments then being held in Direct Investment. The Direct Investment forms prt of your estte for Inheritnce Tx purposes, nd ccordingly the Pln Mnger would then wit further instructions from your personl representtives. 14.Chrges: () Where Pln is trnsferred to nother Pln Mnger, we will deduct n dministrtion chrge of 100 plus VAT from your Pln proceeds. (b) However, we reserve the right to introduce dditionl chrges in the future to cover ny dditionl expenses incurred by us s result of mteril chnge in Regultions. Should it ever become necessry to introduce such chrge, you will be given three months notice. 15.Records of Your Pln: We will undertke to do the following: () mintin ll such records relting to your Pln; (b) mke pproprite returns to the Inlnd Revenue for the purposes of txtion; (c) provide ll txtion detils to you, s my be required under the Regultions. 16.Delegtion of Functions: We my ppoint third prty to ct in respect of ny function relevnt to dministrtion of your Pln. Should we ppoint third prty, we will stisfy ourselves tht ny such third prty is competent to crry out those functions or responsibilities. We shll tke full responsibility for the ctions nd omissions of ny such third prty. 17.Assignment: We my ppoint nother compny to be the Pln Mnger of your Pln under these Terms & Conditions on giving you one month s notice. The new Pln Mnger must be pproved to ct s PEP nd/or ISA Mnger (s pplicble) by the Commissioners of the Inlnd Revenue. 18.Complints: Any complint should be ddressed to Morgn Stnley & Co. Interntionl Limited, Complince Deprtment, 25 Cbot Squre, Cnry Whrf, London E14 4QA in the first instnce. If you re not stisfied with the mnner in which the mtter is ddressed you cn refer complints relting to the dministrtion of your Pln to The Finncil Ombudsmn Service t South Quy Plz, 183 Mrsh Wll, London E14 9SR. Mking complint will not prejudice your right to tke legl proceedings. A sttement describing our complints hndling procedure is vilble on request. 19.Compenstion: If we cnnot meet our finncil obligtions to you, you my be entitled to compenstion under the Finncil Services Compenstion Scheme estblished under the Finncil Services nd Mrkets Act Detils of your rights under this scheme re vilble from us on request, nd further informtion is vilble from the Finncil Services Authority nd the Finncil Services Compenstion Scheme. A sttement describing your rights to compenstion is vilble on request. 20.Commission: When you subscribe to our Pln through n Independent Finncil Adviser we will usully py commission which will be detiled in correspondence with you. Plese inform us of ny chnge in your Adviser to enble us to keep our records up to dte. 21.Dt Protection: () The informtion you provide on your ppliction form (or subsequently) will be held nd processed by us s dt controller for the purposes of the Dt Protection Act (b) We my hold nd process informtion for the dministrtion of the service(s) for which you re currently pplying or my pply for in the future, for the opertion of your investment in Preference Shres (including e.g. for registrtion nd distribution purposes), for the purposes of sttisticl nlysis, nd the mrketing of goods or services by this compny or other compnies in the Morgn Stnley group. We my trnsfer informtion to other compnies in the Morgn Stnley group nd to third prty gents of such compnies or of this compny for ny of the bove purposes. (c) Where finncil dviser cts on your behlf, we will disclose informtion concerning your investment to tht finncil dviser. (d) Sve s noted bove, we will not provide to ny other third prty ny informtion relting to you, unless you hve given your consent or unless we re required to do so by lw. 22.Money Lundering: All trnsctions relting to products provided by us re covered by the Money Lundering Requirements (Criminl Justice Act 1993, the Money Lundering Regultions 1993 nd 2000, FSA Rules nd ny relevnt guidnce Preference Shres). This mens tht we re responsible for complince with these regultions. As consequence, you my be required to provide proof of identity when buying or selling your investment. 23.Telephone Recordings: For your security telephone converstions my be recorded. 24.Telephone nd/or Internet Deling: We reserve the right to introduce fcility for telephone nd/or Internet deling in respect of your Pln. In the event tht we introduce these fcilities, we will reserve the right not to ccept ny deling instruction unless we re stisfied tht ll informtion which we require t the time of deling hs been ccurtely provided. 25.Exclusion of Libility: Your ttention is drwn to the Key Fetures documenttion nd the Risk Fctors therein. No wrrnty is given by us s to the performnce or profitbility of the Pln. You must be wre tht the price of Preference Shres cn go down s well s up nd tht there is degree of risk ttched to stockmrket investments. You my not get bck the mount invested. You re reminded tht pst performnce is no gurntee of future returns. In the event of ny filure, interruption or dely in the performnce of its obligtions resulting from ny event or circumstnce not resonbly within its control, the Pln Mnger shll not be lible or hve ny responsibility of ny kind for ny loss or dmge you incur or suffer s result. 26.Amendment to Terms & Conditions: We my from time to time chnge these Terms & Conditions by giving not less thn ten business dys written notice to you of ny chnge. 27.Governing Lw nd Jurisdiction: These terms re governed by English lw nd re subject to the non-exclusive jurisdiction of the High Court of Englnd nd Wles. 13

15 Issued nd pproved by: Morgn Stnley & Co. Interntionl Limited, 25 Cbot Squre, Cnry Whrf, London E14 4QA

16 /2003

17 The Morgn Stnley FTSE 100 Income Pln Appliction Form ISA nd/or Direct Investment (continued) Closing Dte 31 October Declrtion & Authority Applicble to Direct Investment Applicnts only Joint holder if pplicble (Direct Investment only): I declre I m 18 yers of ge or over nd tht I m not resident, Signture X nor m I cting on behlf of, resident of the United Sttes; nd tht I will not ssist ny person who is so resident to invest in this pln. Further I gree to inform you immeditely should I become resident of the United Sttes. Dte Applicble to ll ISA Applicnts I declre tht: Investors should be wre tht the vlue of investments nd the income from them cn fll s well s rise, nd tht pst performnce is not necessrily guide to the future performnce. 1. All subscriptions mde, nd to be mde, belong to me; 2. I m 18 yers of ge or over; 3. If I m pplying for Mini Stocks nd Shres ISA; I hve not subscribed nd will not subscribe to Mxi ISA or nother Mini Stocks nd Shres ISA in the sme yer tht I subscribe to this Mini Stocks nd Shres ISA. If I m pplying for Mxi ISA, I hve not subscribed nd will not subscribe to nother ISA, other thn TESSA-only ISA, in the sme yer tht I subscribe to this ISA; 4. I m resident nd ordinrily resident in the UK for tx purposes, or non-resident but performing duties which by virtue of section 132(4)() of the Income nd Corportion Txes Act 1988 re treted s being performed in the UK, or I m mrried to person who performs such duties nd tht I will immeditely inform Morgn Stnley & Co. Interntionl Limited if I cese to be so resident nd ordinrily resident or to perform such duties, or be mrried to person who performs such duties. For ll Applicnts I uthorise Morgn Stnley & Co. Interntionl Limited: 1. To hold my csh subscription, Direct investments, ISA investments, (s pplicble), interest, dividends nd other rights or proceeds in respect of those investments nd ny csh or other proceeds; 2. To mke on my behlf ny clims to relief from tx in respect of ISA investments; 3. On my request to trnsfer or py to me, s the cse my be, Direct investments, ISA investments, interest, dividends, rights or other proceeds in respect of such investments, ny csh or other proceeds nd; 4. To supply n nnul sttement. I hve red nd understood the Morgn Stnley FTSE TM 100 Income Pln Pln contining the Key Fetures nd Terms & Conditions I cknowledge nd gree to the terms under which my investments will be mnged. I understnd tht Morgn Stnley does not provide investment dvice in reltion to the Pln nd confirm tht I either do not require such dvice or hve received dvice on the Pln from n Independent Finncil Adviser. I declre tht this ppliction form hs been completed to the best of my knowledge nd belief. Signture X Notes: When completed this ppliction form should be returned to your finncil dviser. MONEY LAUNDERING REGULATIONS 1993: Under the regultions, there is legl requirement to prove the identity of people who wish to mke n investment. You my therefore be sked for some evidence of your identity. This will normlly be pssport or similr form of identity check together with proof of ddress from gs bill, electricity bill or similr. Morgn Stnley & Co. Interntionl Limited will store informtion tht we hold bout you for dministrtion nd mrketing. We my contct you bout our services, nd the services of compnies with whom we hve reltionship, in the future. If you would prefer not to receive such informtion plese mrk this box. The interim vlue of the underlying ssets of the Pln do not directly impct the benefits generted. Hence, the periodic sttement shll be issued on n nnul bsis nd not more frequently. Issued by Morgn Stnley & Co. Interntionl Limited, which is regulted by the Finncil Services Authority. Finncil Adviser Detils Finncil Adviser: FSA Number: Money Lundering I confirm tht I hve completed the pproprite verifiction of identity checks nd ttch the Verifiction of Identity Certificte. Either certified copies of the underlying documentry evidence received or certified note of the reference numbers nd other detils of the evidence obtined re enclosed with this certificte. I hve sighted the originl documents nd tht ny requiring signture were pre-signed. Dte Finncil Adviser Signture: