MS STRUCTURED TILES SERIES 2006-1 Annual Report - How They Did This Year

I’ve broken down the latest report for MS STRUCTURED TILES SERIES 2006-1 into plain English. This summary helps you understand how your investment performed without the complex financial jargon.

1. What is this investment?

This is a "Special Purpose Vehicle"—a legal trust created in 2006. It doesn’t make products or provide services. Its only job is to hold $100 million in Goldman Sachs senior notes that mature in 2036. The trust collects interest from these notes and passes it to you, after subtracting administrative fees and accounting for an interest rate agreement with Morgan Stanley.

2. Financial performance

The trust doesn't earn "revenue" or "profit" like a typical business. It simply collects interest from Goldman Sachs and pays it out to you. Depending on interest rates and the Morgan Stanley agreement, you received between $0.00 and $0.05 per unit each quarter. Your investment doesn't "grow" in value; the principal is fixed, and your payouts change based on interest rates set back in 2006.

3. Major wins and challenges

The trust paid all distributions to investors on time this year. The underlying Goldman Sachs notes remained in good standing with no defaults. The trust continues to manage the administrative paperwork required to remain compliant with SEC rules, ensuring the trust remains tax-transparent for you.

4. Financial health

The trust keeps very little cash on hand because it passes almost all incoming interest to you within 30 days. It carries no debt other than what it owes to unit holders. Its health depends entirely on Goldman Sachs paying its interest on time. As of year-end, the trust’s assets were stable, and the underlying collateral remained healthy.

5. Key risks

• Credit Risk: You are essentially betting on Goldman Sachs. If they fail to pay their notes, the trust has no other assets, and your units could become worthless.
• Counterparty Risk: The interest rate agreement with Morgan Stanley is vital to your yield. If Morgan Stanley defaults on this agreement, your payouts could change or stop.
• Interest Rate Risk: Because the notes pay a floating rate, your payouts will drop if benchmark interest rates fall.

6. Leadership or strategy

There is no management team or business strategy. The trust follows the original 2006 legal agreement. A trustee handles basic administrative duties as required by the documents.

7. Future outlook

The trust will operate until the Goldman Sachs notes mature in 2036. There are no plans to expand or close early. Expect steady, variable interest payments until the notes mature or the trust liquidates.

8. Market trends

The trust is adjusting to new interest rate benchmarks as older ones like LIBOR are phased out. The trustee manages these updates. Keep an eye on the credit rating of Goldman Sachs, as it is the best indicator of your investment's long-term safety.

Final Thought for Investors: This investment is a passive income vehicle. Because it is tied directly to the credit health of Goldman Sachs and specific interest rate agreements, your primary focus should be monitoring the credit rating of Goldman Sachs and the general direction of interest rates, as these are the two factors that will dictate your future payouts.