23% Fixed Return Bond

Transcription

1 CAPITAL AT RISK 23% Fixed Return Bond Financial Broker Training Guide - Fixed Return of 23% (3.833% per annum) - Soft Capital Protection - Investment in International Equity Indices - Access to Capital During the Term - Summary Risk Indicator 3 Warning: This Bond is not Capital Protected. If you invest in this Bond you can lose some or all of the money you invest. Warning: This document is a Training Guide for Financial Broker firms and should not be provided to any potential investors. MARCH 2018 MMPI Limited trading as Broker Solutions is regulated by the Central Bank of Ireland.

2 Features of the 23% Fixed Return Bond The 23% Fixed Return Bond is an innovative new Investment Solution designed for investors seeking an elevated level of Fixed Investment Return and investors seeking a risk reducing mechanism to provide a degree of protection from normal stock market risk. The Bond is suitable as part of the process of constructing a genuinely diversified investment portfolio. Soft Capital Protection Access to Capital Leading International Counterparty Bank UDERLIG IVESTMETS: EuroStoxx 50 Index S&P 500 Index FTSE 100 Index ikkei 225 Index SUMMAR RISK IDICATOR 3 23% FIXED RETUR 3.833% PAID OUT EACH EAR 6 EAR TERM 2

3 1. Summary of Key Features The 23% Fixed Return Bond (the Bond) is an innovative new Investment Solution designed for investors seeking an elevated level of Fixed Investment Return and investors seeking a risk reducing mechanism to provide a degree of protection from normal stock market risk. The Bond is suitable as part of the process of constructing a genuinely diversified investment portfolio. The Bond pays a Fixed Return of 23% (3.833% paid out at the end of each year) regardless to the performance of the Underlying Investments. The Bond has a Soft Capital Protection feature. Investors will receive back their initial investment in the event that none of the 4 Indices have fallen by -35% or more at the Final Valuation Date. If any of the 4 Indices has fallen by -35% or more at the Final Valuation Date, investors will receive the performance of the worst performing Index, no matter how much it has fallen. Investors in the Bond have their Capital at Risk. This means that you may lose some or all of the capital invested in this Bond. Broker Solutions considers the Bond to have a Summary Risk Indicator of 3 on its risk scale. The Underlying Investments of the Bond are 4 major international stock market indices as follows: EuroStoxx 50 Index S&P 500 Index FTSE 100 Index ikkei 225 Index Minimum Investment Return: 23%. Maximum Investment Return: 23% The Bond has a 6 year term. The Bond will be listed on the Irish Stock Exchange. Daily liquidity will be provided to investors that wish to sell the Bond prior to maturity under normal market conditions and at the discretion of Banco Bilbao Vizcaya Argentaria SA (BBVA). The Minimum Investment in the Bond is 25,000. The Closing Date for applications is 20 April Taxation: Our understanding is that the returns will be subject to Income Tax in the case of Personal Investors and exempt from taxation in the case of Pension and Post Retirement Investors. Warning: All of the terms outlined in this document are indicative and subject to change. The final terms will not be known until 27 April

4 2. Investment Rationale The investment rationale for investing in Equities and in Stock Market Indices can be summarised as follows:- 1. An Elevated Level of Fixed Annual Return: Investors will receive a fixed annual return of 3.833% paid out each year regardless to the performance of the Underlying Investments. This fixed return compares favourably with the current prevailing very low or negative deposit interest rates and bond yields. 2. Equities (shares) as a long term investment: Although investing in equities (shares) involves a degree of investment risk and there will be volatile periods along the way, over time, equities tend to outperform other assets like bonds, property, cash etc. Investors in the Bond adopt a medium term approach, which can mitigate the risks and short term volatility associated with stock market investment. Investors in the Bond benefit from a Soft Capital Protection feature that can act as a risk-reducing mechanism to provide a degree of protection from normal stock market risk. The Underlying Investments of the Bond are 4 Large International Stock Market Indices as follows: 1. EuroStoxx 50 Index 2. S&P 500 Index 3. FTSE 100 Index 4. ikkei 225 Index Stock Market Indices are designed to act as benchmarks for the returns from equity markets in a given region or sector. In this case, these indices have been selected as a benchmark for the performance of the equity markets in 4 of the world s largest economic regions: the Eurozone (EuroStoxx 50 Index), the US (S&P 500 Index), the UK (FTSE 100 Index) and Japan (ikkei 225 Index). A summary of the characteristics of each index is outlined below. The EuroStoxx 50 Index The EuroStoxx 50 Index, Europe's leading Blue-chip index for the Eurozone, provides a Blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the etherlands, Portugal and Spain. The EuroStoxx 50 Index is licensed to financial institutions to serve as underlying for a wide range of investment products such as Exchange Traded Funds (ETF), Futures and Options, and structured products worldwide. Source: The S&P 500 Index The S&P 500 is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Source: The FTSE 100 Index The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the "Footsie" is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. It is seen as a gauge of prosperity for businesses regulated by UK company law. The index is maintained by the FTSE Group, a subsidiary of the London Stock Exchange Group. Source: The ikkei 225 Index The ikkei Stock Average, the ikkei 225 is used around the globe as the premier index of Japanese stocks. More than 60 years have passed since the commencement of its calculation, which represents the history of Japanese economy after the World War II. Because of the prominent nature of the index, many financial products linked to the ikkei 225 have been created are traded worldwide while the index has been sufficiently used as the indicator of the movement of Japanese stock markets. The ikkei 225 is a price-weighted equity index, which consists of 225 stocks in the 1st section of the Tokyo Stock Exchange. Source: x=nk

5 3. Target Market Broker Solutions has targeted the Bond at Investors with characteristics indicated with a es () in the table below: Investor Type Knowledge & Experience Risk Tolerance Ability to bear losses Retail Professional Eligible Counterparty Basic Investor Informed Investor Advanced Investor Summary Risk Indicator o Capital Loss Limited Capital Loss Capital at Risk Investor Return Capital Protection Objectives Profile Capital Growth Time Horizon Income/Fixed Return Other Recommended Holding Period Investment Term Distribution Strategy Execution Only Mandatory Early Maturity Feature Investment Advice Discretionary Managed Portfolio ES () / O() 3 /A 6 EARS MEDIUM Definitions: = es: product is targeted at investors of this type, with this knowledge & experience, risk tolerance, ability to bear loss or investment objective. = o: product is not targeted at investors of this type, with this knowledge & experience, risk tolerance, ability to bear loss or investment objective. Knowledge & Experience Basic Investor: Investors with one or more of the following characteristics: Limited knowledge of the financial markets and investment instruments (a basic investor can make an informed investment decision based on the advice of a Financial Broker or other regulated Advisor). o Investment Experience (a first time investor). Informed Investor: Investors with one or more of the following characteristics: Average knowledge of the financial markets and investment instruments (an informed investor can make an informed investment decision based on the advice of a Financial Broker or other regulated Advisor). Some Investment Experience (made previous investments). Advanced Investor: Investors with one or more of the following characteristics: Good knowledge of the financial markets and investment instruments (an advanced investor can make an informed investment decision based on own knowledge and the advice of a Financial Broker or other regulated Advisor). Financial Industry Experience, extensive Investment Experience (made multiple previous investments) or in receipt of discretionary portfolio management service. Ability to bear losses o Capital Loss: 100% Capital Protected Limited Capital Loss: Some capital can be lost but losses mitigated by one or more of the following: Partial Hard Capital Protection (e.g. 80%, 90% or 95% Capital Protection), A Fixed Investment Return (not performance dependent) other mitigating characteristics of a particular product that are described in that product s documentation. Capital at Risk: Potential for some or all of the initial capital to be lost but losses cannot be more than the initial capital amount invested. 5

6 Summary Broker Solutions has targeted the Bond at investors who: Have received advice from a Financial Broker and for whom this Bond is appropriate and suitable. Are Retail Clients within the meaning contained in the Markets in Financial Instruments Directive (MiFID). Have prior knowledge of investing in complex investments with capital at risk and/or have been advised by a Financial Broker regarding the risks and rewards of this type of Bond. Are able to bear loss of some or all of the capital invested. Are able to invest for the chosen term of 6 years. Expect the Underlying Investments to achieve moderately negative to moderately positive returns during the term. Have a risk appetite consistent with the Summary Risk Indicator of 3. Can invest a minimum of 25,000. Understand that inflation will erode the future value of the amount invested and the fixed investment return. Understand that the return of the initial investment amount is dependent on the creditworthiness of BBVA and on the performance of the Underlying Investments. Understand that the payment of the fixed investment return is dependent on the creditworthiness of BBVA. Understand that the opportunity cost of an investment in this Bond is the interest foregone as a result of not placing the investment amount in an interest bearing deposit account. Broker Solutions does not consider the Bond suitable for and has not targeted the Bond at investors who: Have not received advice from a qualified Financial Broker firm or have little prior knowledge of investing in complex investments with capital at risk. Are seeking an investment that is Capital Protected i.e. are not prepared to lose some or all of their original investment. Are unable to invest for a term of 6 years. Are seeking the potential for capital growth from their investment. Cannot invest a minimum of 25,000. Are uncomfortable that the taxation treatment of the Bond could change in the future and have an adverse effect on the return on the investment. The points above are not a complete list of all the considerations for each investor when making a decision to invest in this Bond. Each investor should consult with their Financial Broker who will assist in assessing if this Bond is suitable and appropriate for the investor concerned. 6

7 4. Back Testing We back tested 3,441 6 year periods between 5 January 1998 and 5 January A summary of the back testing results are as follows: Worst Return %* Best Return +23% Average Return % umber of times investors received negative returns umber of times investors received positive returns 488 (14.18% of all 6 year periods tested) 2,953 (85.82% of all 6 year periods tested) Source: Bloomberg, BBVA (February 2018) *ikkei 225 Index fell by % at the Final Valuation Date (6 year period 12 January 2006 to 12 January 2012). Bond return % when the +23% Fixed Return is taken into account. Warning: Past Performance is not a reliable guide to future performance. 5. Summary Risk Indicator The Summary Risk Indicator (SRI) is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because BP Paribas is not able to pay the Investor. The risk indicator assumes the product is held until maturity. We have classified this product as 3 out of 7 which is a medium-low risk class: The actual risk can vary significantly if the Investor encashes prior to maturity. Investors may not be able to sell this product easily or may have to sell at a price that significantly impacts on how much the Investor gets back. The Summary Risk Indicator of 3 rates the potential losses from future performance at a medium-low level, and poor market conditions are very unlikely to impact BBVA s capacity to pay Investors. Investors will receive payments in the product's currency, which may be different from Investor s domestic currency. In this case, be aware of currency risk. The final return Investors will get depends on the exchange rate between the two currencies. This risk is not considered in the indicator shown above. This product does not include any protection from future market performance so you could lose some or all of your investment. If BBVA is not able to pay you what is owed, you could lose your entire investment. For detailed information about all risks please refer to the risk sections of the Base Prospectus. Warning: If you invest in this Bond you may lose some or all of the money you invest. Warning: The value of your investment can go down as well as up. 7

8 6. Fees & Charges The Fees & Charges associated with the Bond are fully reflected in the terms. This means that they are built into the price paid for the Bond. The parties involved in the Bond are expected to receive the following indicative commissions: 1. Broker Solutions: 4.7%. 2. Financial Brokers: Out of this commission amount, Broker Solutions will pay 2.5% of the amount invested to its appointed Financial Brokers for introducing clients to the Bond. The total indicative commission payable to the parties involved in the Bond is 4.7% of the amount initially invested (based on market conditions on 8 January 2018). This commission amount will be reflected in the quoted price of the Bond if sold prior to maturity. Broker Solutions pays Merrion Stockbrokers Limited s Account Opening, execution and safe custody fees from its commission. Pension and Post Retirement investors via a Friends First Self Directed Plan will have a transaction fee of 75 deducted from their plan when investing in the Bond. Key Information Document Costs Illustration The Reduction in ield (RI) shows what impact the total costs you pay will have on the investment return you might get. The total costs take into account the BBVA fees, one-off, ongoing and incidental costs. Costs over time The amounts shown here are the cumulative costs of the product itself, for three different holding periods. They include potential early exit penalties. The figures assume you invest 10,000. The figures are estimates and may change in the future: Investment 10,000 Scenarios If you cash in after 1 year If you cash in after 3 years If you cash in at the end of the recommended holding period Total costs Impact on return (RI) per year 5.10% 1.68% 0.82% Composition of Costs The table below shows: the impact each year of the different types of costs on the investment return you might get at the end of the recommended holding period; the meaning of the different cost categories. This table shows the impact on return per year One-off costs Entry costs 0.82% The impact of the costs you pay when entering your investment. This is the most you will pay, and you could pay less. The impact of the costs already included in the price. Exit costs 0.00% The impact of the costs of exiting your investment when it matures. Ongoing costs Portfolio transaction costs 0.00% The impact of the costs of us buying and selling underlying investments for the product Other ongoing costs 0.00% The impact of the costs that we take each year for managing your investment. Warning: Deductions for charges and expenses are not made uniformly throughout the life of the Bond, but are loaded disproportionately onto the early period. If an investor sells the Bond prior to the end of the 6 year term, the practice of front-end loading will impact on the amount of money that the investor receives. The investor may not get back the full amount they invested. 8

9 7. About BBVA BBVA is a customer-centric global financial services group founded in The Group is the largest financial institution in Spain and Mexico and it has leading franchises in South America and the Sunbelt Region of the United States; and it is also the leading shareholder in Garanti, Turkey s biggest bank for market capitalization. Its diversified business is focused on high-growth markets and it relies on technology as a key sustainable competitive advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long- term vision and applies the best practices. 9

10 8. Availability Personal Investors: Via a Merrion Stockbrokers Limited Account Pension & Post Retirement Investors: Friend First Self Directed Plans Self Administered Plans Companies & Trusts etc.: Via a Merrion Stockbrokers Limited Account 10

11 4 The Concourse, Beacon Court, Sandyford, D18 X4A4 MMPI Limited trading as Broker Solutions is regulated by the Central Bank of Ireland. Warning: This document is a Training Guide for Financial Broker firms and should not be provided to any potential investors.