PRECIOUS METALS: A TIMELESS ALLURE EUR INDIVIDUALLY CAPPED PERFORMANCE NOTE ON GOLD, SILVER, PLATINUM AND PALLADIUM (3Y)
The 3-year Individually Capped Performance Note offers exposure to some of the most important precious metal commodities: gold, silver platinum and palladium. Precious metals have traditionally been viewed as a store of value and a safe haven in uncertain times, but they also play an essential role in many areas of science and industry. The note offers:- Exposure to gold, silver, platinum and palladium Full participation in the positive performance of each commodity, up to a preset cap level for each commodity 1% capital protection at maturity Euro-denominated note with no currency risk for investors MORGAN STANLEY YOUR PARTNER IN COMMODITIES Morgan Stanley is a leading player in Commodities. Our activities range from trading and risk management solutions to active participation in the physical commodity markets. This in-depth involvement allows us to offer exposure to the broadest range of commodities.
precious metals A TIMELESS ALLURE Precious metals have long been prized for their beauty, rareness and durability. They have been used as a medium of exchange and as a store of value for centuries. Today, they retain their attraction as fi nancial assets but are equally valued for their applications in science and technology. With current concerns about infl ation and the global economy, precious metals could be an alluring investment opportunity. A HAVEN FOR INVESTORS Precious metals are often seen as a safe haven. In times of uncertainty or instability, such as war, economic downturn or high inflation, demand can increase. In the uncertain market conditions since August 27, gold, silver, platinum and palladium have all returned more than 3%, compared with fl at or negative returns in the global equity market 1. Gold and other precious metals are still an important component of central bank reserves, with particular demand from fast-growing economies like Russia and the Middle East. Moreover, the advent of Exchange Traded Funds (ETFs) linked to gold and silver and, more recently, to platinum and palladium have made precious metals accessible to a broader range of investors. JEWELLERY: ADORNMENT AND INVESTMENT Economic growth in emerging markets has triggered new demand for precious metal commodities for the making of jewellery. Across much of Asia, jewellery is regarded as an investment and store of family wealth as well as an adornment. India is the world s largest retail market for gold jewellery. According to the World Gold Council, China moved into second place in 27, ahead of the US. ESSENTIAL TO MODERN TECHNOLOGY Owing to their unique physical and chemical properties, precious metals have some very specialised industrial and scientifi c applications. Platinum and, increasingly, palladium are used in catalytic converters for the auto industry. With rising demand for cars from emerging markets, and more widespread regulation on emissions, demand for both metals could potentially accelerate. Both platinum and palladium also have application in hydrogen fuel cells, perhaps the next development in renewable energy. Gold and silver are used in medical nanotechnology and have numerous uses in electronics due to their high conductivity, durability and resistance to corrosion. A LIMITED SUPPLY The balance of supply and demand is key to commodity prices. Although precious metal prices have generally risen over the past few years, production has not increased in response. Precious metals are not just scarce. A high proportion of the world s resources is in regions where political instability and disruptions are an ongoing risk. Much of the global supply of gold, platinum and palladium is mined in South Africa, where rising costs, labour problems and power shortages could all potentially disrupt supplies. For example, in the fi rst quarter of 2, power disruptions and mining accidents significantly impacted South Africa s platinum output. Platinum and palladium are particularly vulnerable to supply disruption as, unlike gold and silver, there is little aboveground inventory that can be injected into the market if mining supplies dry up. 1 As at 3 May 2. Equity market comparison is based on the MSCI World Index. Prices for the precious metals are based on spot prices. Past performance is no guide to future performance.
commodity details GOLD 125 Gold has been used for centuries as both an international currency 1 75 25 3 4 5 7 and a financial asset. It has been regarded as both a safe-haven and a hedge against infl ation and fl uctuations in the US dollar. Today, gold remains a major component of many central bank reserves. Sources of demand include jewellery (estimated to account for at least two-thirds of global demand) and electrical products, especially in telecommunications, information technology and safety critical applications. The world s largest producers in 27 were Australia, South Africa and the USA 2. SILVER 2 Compared with other precious metals, silver is the most abundant and 2 1 1 3 4 5 7 least expensive. Its physical properties make it desirable for both decorative and industrial uses. It is renowned for its high electrical and thermal conductivity. Today, industrial applications are the most important component of global silver demand. These include batteries, switches, circuit boards and solar cells, Silver is also used in photography, though this use has declined with the growth of digital photography, and jewellery. The largest producers of mined silver in 27 were Peru, Mexico and China 3. PLATINUM 2 Platinum s unique properties, its scarcity and its labour-intensive 2 1 1 3 4 5 7 extraction process make it one of the most expensive commodities. As well as its use in fi ne jewellery, platinum has many specialist technical applications owing to its hardness, resistance to corrosion and effi ciency as a catalyst. Half of all demand is for catalytic converters in cars. It is also used as a catalyst in hydrogen fuel cells. Platinum mining is concentrated in very few regions among only a few mining companies. South Africa is by far the largest producer, representing just under 8% of 27 production. 4 PALLADIUM 75 Palladium is a soft, silver-white metal. It shares many of platinum s useful 25 3 4 5 7 chemical and physical properties but has a lower melting point and is less dense. It also has the rare capability to absorb hydrogen at room temperature, giving it a valuable role in the purifi cation and storage of hydrogen, with application in the semi-conductor industry and in fuel cell technology. Palladium can be used as an alternative to platinum in catalytic converters and electrical hardware. It is also used in jewellery, either by itself or as a component of white gold. Over 8% of world production is mined in Russia and South Africa 5. 2,3,4,5 Source: U.S. Geological Survey, January 2 Source for all charts: Morgan Stanley / Bloomberg as at 31 May 2. Prices shown are for spot prices. Past performance is no guide to future performance.
individually capped performance note The Individually Capped Performance Note is a 3-year euro-denominated Note offering exposure to four precious metal commodities: gold, silver, platinum, and palladium. The Note offers 1% capital protection at maturity. HOW IS THE RETURN CALCULATED? 6 At maturity, investors receive 1% of the principal, plus a return based on the performance of the basket of commodities over the 3-year investment term. The return is the average performance of the four commodities in the basket, except that the performance of each individual commodity is capped. This cap will be fi xed on the 27 June 2 and is indicatively set between 5% and 65%. The table shows example redemption amounts in a range of scenarios, assuming an initial investment of EUR 1, and a performance cap of 55% for each commodity. Where the performance of an individual commodity is 55% or more (the shaded squares), a fi xed 55% is used in the calculation of the fi nal redemption amount. The minimum redemption is 1% of the initial investment. The maximum redemption is 155% (if the performance of each commodity is 55% or greater). Basket component performance Final Redemption Gold Silver Platinum Palladium Amount at Maturity 1 8% 95% 6% 86% EUR 1,55 INVESTMENT CONSIDERATIONS: Returns could be zero, if the performance of the basket is fl at or negative The maximum return is limited by caps on the performance of each of the individual commodities. Commodities can be volatile. Sudden price movements in any of the underlying commodities could significantly impact the return of the Notes. Results achieved in the past are no guarantee of future results. Scenario 2 2% 6% 7% 4% EUR 1,425 3 1% 3% 75% -15% EUR 1,2 4 5% -1% % -5% EUR 1, For example: In scenario 3, all the commodities except platinum have performance less than 55%. In the calculation, platinum contributes a fixed 55% and the other components contribute their actual performance. The return is the average of (1% + 3% + 55% - 15%) = 2%, and the fi nal redemption amount is EUR 1,2. Commodity markets are subject to temporary disruptions due to factors including the lack of liquidity in the market, the participation of speculators and government regulation and intervention. These circumstances could impact the return of the Notes. Capital protection is provided at maturity only. If the Notes are sold prior to the maturity date, or if the Issuer redeems the Notes early for reasons stated in the prospectus, the fi nal proceeds may be less than the full principal invested. Investors may also be subject to transaction costs including a bid-offer spread. There may be no relationship between the prices of precious metal commodities and the economic, infl ationary and other trends described in the brochure. Investors are exposed to the credit risk of the issuer 6 All examples are based on gross returns and do not take into account any costs or taxes. Examples are provided for illustrative purposes only. Morgan Stanley makes no representation or warranty in respect of the future performance of the Note.
Product Information Issuer: Morgan Stanley Issuer Rating: Aa3 (Moody s) / A+ (Standard & Poor s) Issue Price: 1% Issue Date: 7 July 2 Maturity Date: 7 July 211 Subscription Period: 2 June 2 up to and including 26 June 2. The issuer has the right to close the subscription period early. Denominations: EUR 1, Underlying: An equally weighted basket of precious metal commodities: gold, silver, platinum and palladium (all referencing the spot price) Minimum Redemption: 1% at maturity Liquidity: Daily. Under normal market conditions and subject to internal policies and applicable laws and regulations, Morgan Stanley & Co. International plc will use reasonable efforts to quote bid and offer prices but will not be legally obliged to do so. ISIN: XS368739651 Valor: 4289451 Distribution: Public offer in Switzerland, the Netherlands and Luxembourg Important Information Any investment decision should be made only based on the terms of the base prospectus and final terms for the product (if any) including the risk factors (the Offering Documents ), which is the only binding document and the terms of which will supersede the terms herein. Copies of the Offering Documents dated 2 June 2 will be available at Morgan Stanley & Co. International plc, 25 Cabot Square, Canary Wharf, London E14 4QA. This information is not an offer or a solicitation to buy or sell the product and has been prepared solely for information purposes. Past performance is not necessarily indicative of future results. All prices or values are indicative only, and may vary signifi cantly from executable prices or from prices obtained from elsewhere. The product may only be offered or sold in jurisdictions in which such offer or distribution is permitted. In particular, the product may not be offered, sold, transferred or delivered directly or indirectly in the United States to, or for the account or benefi t of, any U.S. Person (as defi ned in Regulation S under the United States Securities Act 1933). This document may only be distributed and published in jurisdictions in which such distribution and publication is permitted. In the UK it is directed only to those persons who are eligible counterparties or professional clients and must not be acted on or relied upon by retail clients (each as defi ned in the UK Financial Services Authority s rules). No representation or warranty is given with respect to the accuracy or completeness of the information herein. Morgan Stanley does not give investment, tax, accounting, legal, regulatory or other advice; prospective investors should consult their own professional advisors. Morgan Stanley and its affi liates may make discretionary determinations or be engaged in transactions, including hedging activities and proprietary trading involving underlying instruments, that could affect the value of the Note. In such cases, the interests of Morgan Stanley may confl ict with the interests of investors and Morgan Stanley will not be required to consider the interests of investors. This information is a marketing communication; it is not a product of Morgan Stanley s Research Department and should not be regarded as a research recommendation. Morgan Stanley does not intend the information contained herein to have legal effect or to give rise to any form of legal relationship with any person whatsoever. Any reference (whether express or implied) to the contrary in this document is an error and is superseded by the terms of this disclaimer. The Notes are not collective investment schemes as per the Swiss Federal Act on Collective Investment Schemes ( CISA ) and are not subject to approval or supervision by the Swiss Federal Banking Commission. A simplifi ed prospectus pursuant to article 5 CISA will be available on 2 June 2 and can be obtained free of charge from Bank Morgan Stanley AG, Bahnhofstrasse 92, CH-823 Zurich, Switzerland and on the website www.morganstanleyiq.ch. Investors bear the issuer risk. The value of the Notes is dependent not only on the development of the underlying(s), but also on the creditworthiness of the issuer, which may vary over the term of the Notes. This information is not an issue prospectus as that term is understood pursuant to article 652a or article 1156 of the Swiss Federal Code of Obligations and, according to Article 5 paragraph 4 CISA, the prospectus requirement is therefore not applicable. This document constitutes an advertisement within the meaning of article 15 of Directive 23/17/EC and article 17 of the Luxembourg Act dated 1 July 25 (that applies to prospectuses for securities) implementing Directive 23/17/EC into Luxembourg law. 2 Morgan Stanley. All rights reserved. MORGAN STANLEY & CO INTERNATIONAL PLC 25 CABOT SQUARE CANARY WHARF LONDON E14 4QA TEL: +44 () 2 7677 888 FAX: +44 () 2 756 44 EMAIL: INFO@MORGANSTANLEYIQ.COM WWW.MORGANSTANLEYIQ.COM 2 June 2. Ref: 265.