RETAIL RETAIL STRUCTURED SOLUTIONS

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1 RETAIL STRUCTURED SOLUTIONS RETAIL Structured Solutions. You have a right to expect stability and excellence from product providers. Since 1995 we have managed all aspects of structured products. This is the expertise we bring to looking after over 250,000 customers. This is not a consumer advertisement. It is intended for professional financial advisers and should not be relied upon by private investors or any other persons.

2 2 RETAIL STRUCTURED SOLUTIONS Legal & General Group. Legal & General is a leading provider of risk, savings and investment management products in the UK. We have been around since 1836, the same year that London gained its first railway terminus and Charles Darwin returned to England with some new ideas. Like the railways and the theory of evolution we too grew in popularity and currently we have over seven million customers in the UK, as well as operations internationally. We re proud to say that the Group is thriving and that Legal & General s double-digit sales growth in 2012 broke records again, demonstrating that customers value our insurance, savings and investment propositions. As well as being a successful business, we do our very best to think about the things that matter to people every day, taking a stand on the issues that matter to us as a business, to our customers and to broader society. What do Legal & General RETAIL STRUCTURED SOLUTIONS do? Customer facing: Legal & General Retail Structured Solutions are responsible for the plan management, client servicing and marketing of Legal & General s structured products. We offer structured deposits and structured investments. Dedicated support: Our teams are here to support customers throughout the life of the products, from the day the products start through to maturity. We re also here to support intermediaries by giving you the tools you need to help your clients. Thoughtful design: With extensive experience in the structured product market, we re adept at designing and distributing structured products that work for both intermediaries and customers. We understand the market and are constantly working with other financial institutions to ensure we have competitive and fair value products available.

3 RETAIL STRUCTURED SOLUTIONS 3 An overview of structured products. Structured products are fixed term products, which pay a defined return at a set point in time. The return can be linked to one or more indices or other assets, such as shares of a company. Our products offer a variety of different returns within different structures and tax wrappers. They also offer different levels of capital protection. Structured products can be useful financial tools as part of a broader investment strategy. They can provide returns linked to different asset classes for customers with different attitudes to risk and investment objectives. Structured products fit into two broad categories: structured deposits and structured investments. How do Structured Deposits and Structured Investments differ? Structured deposits Structured investments Underlying structure Customers money is placed on deposit with a deposit taker, who agrees to pay back the original deposit plus the stated return. Customers money is used to buy securities from a financial institution (usually a bank) which provides the stated return. How is it taxed? Subject to income tax unless purchased within a cash ISA wrapper. Subject to income or capital gains tax unless purchased within a stocks and shares ISA wrapper. What are the risks of these products? If the deposit taker can t pay back what they owe then customers could lose some, or all, of their original deposit and any applicable return. The customer is covered by the Financial Services Compensation Scheme (FSCS) up to their personal allowance of 85,000. If the securities provider can t meet their commitments then customers could lose some, or all, of their original investment and any applicable return. For a Structured Capital at Risk Product (SCARP), if the level of the index used falls below a set level customers could lose some or all of their original investment. The customer is not covered by the FSCS in the event that the securities provider cannot meet their commitments. How can it be bought? Investments can be made direct or through a financial intermediary. Investments must be made through a financial intermediary. As such, you are responsible for assessing appropriateness or providing full advice.

4 4 RETAIL STRUCTURED SOLUTIONS Why CHOOSE US for Structured Solutions? The Legal & General Retail Structured Solutions team is responsible for the development, design, administration and governance of our structured product range. In-house management. We do this because we re keen to keep control of all the elements, ranging from UK-based plan management to administration. We re here to stay. We ve been in the structured product market since 1995 and we have successfully launched over 170 products to date. With over 4 billion in assets under administration and over 250,000 customers, we re highly committed to the market and here to stay. Product range. We offer both structured investments and structured deposits, whilst our strength in the marketplace allows us to offer products through a number of Independent Financial Advisers (IFAs), Strategic Partnerships, via our own business partners and Legal & General Financial Solutions sales force network as well as direct to consumers. A leader in corporate governance. It is the size, scale and the flexibility of our business that allows us to negotiate with many leading financial institutions and offer quality products with fair value for customers. How we design and develop our products. Our products offer a variety of different returns within different structures and tax wrappers. They also offer different levels of capital protection. In developing each structured product, we pay careful attention to: Assessing the target market Product risk assessments Stress testing Design principles of the products Approving our counterparties Product structures/returns Approved indices/underlyings Fair value methodology Each product has its own governance plan which is reviewed and approved by the Product and Risk Directors. Each product is then approved before launch by the Managing Director. We have introduced a framework we call Product Lifecycle Management (PLM) for all products across the Legal & General Group. This framework has been implemented for structured products and a series of new policies have been introduced to ensure product launches meet the needs of the customer and provide enhanced governance for this product line. PLM is supported by generic target market research, risk assessments and stress testing, which will be maintained independently of the individual products. All products operate within a governance framework of approved policies relating to the design principles; counterparties; structures; indices; methodologies and delegated authorities. Ongoing review. We continually review our products from launch right through to maturity. As well as monitoring the counterparties, the indices and operational performance, we also keep a keen eye on any concerns raised by our customers. This approach helps us to ensure that our products are operating as customers expect. We also use this input to adapt and monitor future launches, and aim to continually improve our customer service and the customer journey.

5 RETAIL STRUCTURED SOLUTIONS 5 What research do we do into the target market? We regularly invest in research in order to ensure that we always have products that are a good fit for your customers. We recently commissioned an extensive research programme to identify the target market for our range of structured products. There remains a broad target market for structured products. The research demonstrated to us that structured products can contribute towards a range of customer needs including boosting retirement funds, investing for specified goals or general investment for growth. How do we ensure fair value? Legal & General will assess the fair value of approved return structures by reference to past performance, forward forecasting and reviewing product performance and likelihood of capital loss where applicable. How do we manage our counterparties? Each counterparty is evaluated against high standards. We take into account credit ratings provided by third party agencies such as Standard & Poor s, Moody s and Fitch. To evaluate these we use the approach followed by regulators such as the Federal Reserve (FED) and Financial Conduct Authority (FCA). This is called a CAMEL approach: Capital: Quality and quantum of capital Asset quality: Profile of loan book, including level of non-performing loans and loan-loss reserves Management: track record, depth of management team, risk management skills Earnings: net interest margin, earning composition, cost efficiency and loan losses Liquidity: liquid assets/total assets and wholesale funding ratio. Any new counterparties (deposit takers or securities providers) will be subject to initial approval by board level committees. We ll also continue to review the counterparty throughout the lifetime of the product. Each counterparty is assessed and must receive ongoing approval.

6 6 RETAIL STRUCTURED SOLUTIONS What Support Services do WE provide? Advisers Clients At launch Key Features (printed and download) Application forms (printed and download) Commission disclosure sheets (structured deposits only) Product profiles During product lifetime Annual statements Barrier breach notifications (SCARPs only) Latest credit rating information Current valuations for early withdrawals At maturity Warm-up mailings for all maturing products including early kick outs Maturity mailings (including client listings for advisers) Literature Making life easy for you and your clients is important to us. We commission external, independent research to help ensure that our literature clearly explains the risks and features of our products. Communications Throughout the lifetime of the product we will provide regular information in a clear and understandable format. At maturity, or early maturity, we have a robust communication process to help you and your client understand the available options. telephone support We have a dedicated team based in Cardiff, which administers Legal & General s structured products and retail unit trusts. We have an efficient processing centre with dedicated operational teams. We also offer comprehensive support to you at maturity, to give you the tools to help your clients make an informed choice when their structured product closes.

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8 We would really like to work with you and appreciate your feedback. Our team are always on hand to talk to you about your needs, with a dedicated Structured Solutions team to support your strategy and future goals. We appreciate that turbulent markets have meant that professional investors such as yourselves are keener than ever to work with a stable, established company, who can offer you the assurance you need. CONTACT US Please contact your Legal & General representative or the Retail Structured Solutions team at structured.team@landg.com. Details of our latest products can be found at This document should not be taken as an invitation to deal in any Legal & General investment including the stated investment. If investors cash in any or all of their investment early then they may get back less than they invest. Legal & General (Portfolio Management Services) Limited Registered in England No Registered office: One Coleman Street, London EC2R 5AA Authorised and regulated by the Financial Conduct Authority. CW /13 H142530