Distributors Training Guide

Transcription

1 Note Based Investment This is a Capital at Risk Product. Product providers for financial advisors Blue Chip Kick Out Note 8 Distributors Training Guide For Professional Advisors Only

2 BLUE CHIP KICK OUT NOTE 8 - PRODUCT KEY FEATURES Product Type Product Issuer Product Guarantor Term Investment Objective Potential Returns Capital Protection Kick Out Note issued as a Preference Share Linked Note SG Issuer Société Générale Maximum 5 years Capital growth If on any observation date, the closing level of all of the underlyings are above or equal to 85% of their starting level, the Note will kick out and return a conditional quarterly coupon of 2.825% (11.3% p.a.) Soft Return of initial capital Star Effect: 100% Initial Capital Return, provided that: No underlying has fallen by more than 50% from its starting level, OR The final level of at least one of the underlyings is equal to or above its starting level This is a capital-at-risk product. In the event that the worst performing Underlying falls by more than 50% at the Maturity Date and all other Underlyings are below their starting levels you could lose some or all of the money you invested. The amount of money that you would lose will be the percentage by which the closing level of the worst performing underlying compared to its start level. If the closing level of the worst performing underlying is at least equal to 50% of its start level you will receive a full return of your initial investment. Capital protection is also dependent on the solvency of the Issuer and Guarantor. Underlying Basket Equally weighted basket of: Rio Tinto PLC Société Génerale SA Vodafone Group PLC Siemens AG Observation Dates 02 Jan Mar Jun Sept Jan Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 2022 Base Prospectus Listing Broker Commission The Note is for distribution by way of a Public Offer in Ireland. A copy of the Base Prospectus associated with this Note is available free of charge from the offices of Wealth Options Ltd. Irish Stock Exchange 2.5% broker commission will be paid to you on this investment. Reinvestment of commission options are available on a one for one basis. SUGGESTED TARGET MARKET As the financial broker you are responsible for ensuring that the bond is suitable for your clients however our Investment Committee have put together a suggested target market to assist you. This investment could be appropriate as part of an investment portfolio for: Clients who have high attitude to risk Clients who understand soft capital protection Clients who want a medium investment term Clients who have some liquidity requirements Clients who have medium financial knowledge and experience Clients who have medium capability for loss Clients who have received investment advice

3 ABOUT THE STRUCTURE: STRUCTURED KICK OUT NOTE A Kick-Out Note is an investment which has a maximum term but has the potential to mature early and payout a predefined investment return on any of the investment s observation dates, depending on the terms of the product. If, on the observation date, the criteria is not met for the investment to kick out, it will continue on to the next observation date or it reaches the end of the investment term. These investment types are usually capital-at-risk products. The Blue Chip Kick Out Note 8 is a capital-at-risk product which has a maximum 5 year investment term and is designed to repay your client s initial capital and deliver an investment return if all the underlyings are equal or above 85% of their starting level at any observation date during the investment term. CAPITAL AT RISK AND THE CAPITAL PROTECTION BARRIER A Structured Capital at Risk Note is an investment which has defined risk and reward features. What this means is that in order to potentially gain the reward of the potential returns, there is a risk that the initial capital invested may be lost if the underlying underperforms. The return of initial capital invested is usually dependent on the performance of the underlying asset and the extent of any protection barrier. If the protection barrier is breached at maturity, investors will lose some or all of their initial capital investment (usually at a 1% loss of capital for every 1% the underlying asset has fallen below its starting level). A Structured Capital at Risk Note usually offers investors a higher return than other structured products due to the potential loss of capital based on market conditions. Essentially the investor is being paid a premium for taking a greater risk. One of the benefits this product type offers is the degree of capital protection they can offer in adverse market conditions. However, all protection is subject to the ongoing solvency of the Issuer & Guarantor. Generally these products aim to return investor s initial capital at maturity provided that the underlying asset has not dropped by a specified percentage (barrier level) at the final valuation date. For the Blue Chip Kick Out Note 8, if, on any observation date during the investment term, the Note kicks out (i.e. matures early) your client s initial return will be paid along with an investment return. At maturity, if any of the underlyings are above or equal to their starting level then your client will receive 100% of their initial capital back. This Blue Chip Kick Out Note 8 has an European Barrier of 50%. If, at the final observation date on 14 December 2022, the Note has not kicked out and in the event that the worst performing Underlying falls by more than 50% at the Maturity Date and all other Underlyings are below their starting levels then your client s capital will be at risk and the amount of initial capital due to be returned will be reduced by 1% for every 1% fall in the performance of the worst performing underlying. An example of how the return of initial capital is calculated is illustrated in the table below: Initial Investment Amount Initial capital returned based on the performance of the worst performing underlying -20% -40% -60% -80% -100% 20,000 20,000 20,000 8,000 4, ,000 30,000 30,000 12,000 6, ,000 50,000 50,000 20,000 10,000 0 SOFT CAPITAL PROTECTION Soft Capital Protection protects initial capital at maturity from the volatility of the underlying assets by building a capital protection barrier. This barrier essentially defines how much the price of the underlying asset can move before it affects investors capital.

4 AUTO-CALL BARRIER & STAR EFFECT Some investment products are designed with an auto-call barrier which attempts to maximise the chances of an investment return. The Blue Chip Kick Out Note 8 was designed with an auto-call barrier of 85%. What this means is that the performance of the underlyings can decrease by a predefined percentage (15%) and the Note still has the potential to kick out (mature early) at each observation date. In addition this investment was designed with the "Star Effect" feature which means that if any one of the four underlyings are equal to or above their starting level at the Final Valuation Date, 100% of the investors capital will be returned irrespective of the performance of the other three stocks. The Blue Chip Kick Out Note 8 is a capital at risk, kick out investment with a 50% European Barrier. The illustration below sets out a series of events which may happen throughout its investment term and the outcomes of these events: Event If on any observation date any of the underlyings close at or above 85% of their starting level At the Final Valuation Date the value of any one of the underlyings is above its starting level At the Final Valuation Date the value of underlyings have fallen by no more than 50% At the Final Valuation Date the value of worst performing underlying has fallen by more than 50% If the counterparty defaults at any stage throughout the investment term Outcome = Return of initial capital plus a 11.3% gain for every year the Investment in force If not = Return of initial capital only If not = Return of initial capital only If not = 1% loss of capital for every 1% the underlying asset has fallen below its starting level In addition = Return of any capital is subject to insolvency proceedings RISK RATING All investment products carry a level of risk. In order to assist financial brokers in assessing the risk of this product a risk score has been calculated by using the risk buckets that are outlined by the European Securities and Markets Authority (ESMA). These buckets define a 1 to 7 risk score based on volatility. The risk score for a structured product allows advisers to calibrate the risk of a structured product versus the risk of a fund. Although the method of calculation is different (the volatility of funds is calculated using historic daily returns) the risk score in this product has been designed to be comparable. Having carried out stress test scenario analysis on the Blue Chip Kick Out Note 8 a volatility of 26.9% was calculated. This stress test volatility classify Note as below: Volatility Range 0.50% - 2% 2% - 5% 5% - 10% 10% - 15% 15% - 25% 25% + Risk Score Blue Chip Kick Out Certificate 8 Source: Bloomberg, 17 November 2017

5 COUNTERPARTY RISK BNP Paribas, the Issuer, will be responsible for the payment of any return of capital and any investment return due from the investment. Counterparty risk is not included in the risk rating process and should be assessed independently as the return of capital is dependent on the ability of the issuing counterparty being in a position to do so. Long term credit rating and outlook for BNP Paribas: Agency Rating Outlook S&P A Stable Moody s A2 Stable Fitch A+ Stable Source: Bloomberg, as of 7 November 2017 BNP Paribas are on the Wealth Options list of approved counterparty s and we believe that their financial strength is of sufficient grade that the risk of default is minimal. For further information, refer to the 'Risks' section of the brochure. ABOUT THE UNDERLYINGS The performance of this Note is dependent on the performance of four Blue Chip Stocks: Blue Chip Stock Societe Generale SA BP PLC Vodafone Group PLC Siemens AG-REG Bloomberg Ticker GLE FP BP/LN VOD LN SIE GY Societe Generale SA* Societe Generale SA attracts deposits and offers commercial, retail, investment, and private banking services. The Bank offers consumer credit, vehicle lease financing, information technology equipment leasing, life and non-life insurance, custodian services, trade and project financing, currency exchange, treasury services, and financial and commodities futures brokerage services. ANALYST RECOMMENDATIONS^ Buys M Target Price Last Price % 33.3% 8% 13.3% Buys 53.3% Buys 54% *Source: Bloomberg, as of 7 November 2017 ^ Please note these analyst recommendations have been sourced from Bloomberg and are for informational purposes only. They do not constitute financial advice or predictions of any sort and are subject to change at any stage.

6 Rio Tinto PLC Rio Tinto plc is an international mining company. The Company has interests in mining for aluminum, borax, coal, copper, gold, iron ore, lead, silver, tin, uranium, zinc, titanium dioxide feedstock, diamonds, talc and zircon. Dually-listed company with RIO AU. ANALYST RECOMMENDATIONS^ Buys M Target Price Last Price % 10.3% Buys 58.2% Vodafone Group PLC* Vodafone Group PLC is a mobile telecommunications company providing a range of services, including voice and data communications. The Company operates in Continental Europe, the United Kingdom, the United States, Asia Pacific, Africa, and the Middle East through its subsidiaries, associates, and investments. ANALYST RECOMMENDATIONS^ Buys M Target Price Last Price % 10.3% Buys 58.6% Siemens AG-REG* Siemens AG is an engineering and manufacturing company. The Company focuses on areas of electrification, automation, and digitalization. Siemens also provides engineering solutions in automation and control, power, transportation, and medical diagnosis. ANALYST RECOMMENDATIONS^ Buys % 53.3% Buys 46.7% 12M Target Price Last Price *Source: Bloomberg, 7 November 2017 ^ Please note these analyst recommendations have been sourced from Bloomberg and are for informational purposes only. They do not constitute financial advice or predictions of any sort and are subject to change at any stage.

7 HISTORICAL BACK TEST AND STRESS TEST SIMULATION Past performance is not a reliable guide to future performance, but let s take a look at what might have happened: We conducted comprehensive historical performance testing in order to determine how this Note would have performed if it had been brought to market in the past. The period we back tested was from the 04 January 1993 to 17 November 2017 (c. 25 years), from which the following results were produced: The Note would have kicked out early with an investment return for investors 84% of the time The Note would have returned 100% of investors initial capital invested (with no investment return) 4% of the time The Note would have generated a loss in initial capital 12.00% of the time The Note would have kicked out after 1 year 41.6% of the time Date Range 04/01/ /09/2017 Stress Test Back Test Probability of Strict Gain 78.2% 84% Probability of no gain or loss 3.6% 4.0% Volatility 26.9% 23.5% Source: Bloomberg, 17 November 2017 Warning: Please note that past performance is not a reliable guide to future performance and the value of your client's investment may go down as well as up. Warning: These figures are estimates only. Simulated past performance is not a reliable guide to future performance. WHAT DO THESE FIGURES MEAN? Target Price: A stock valuation at which a trader is willing to buy or sell a stock. Target pricing: The price at which a seller projects that a buyer will buy a product Probability of Strict Gain: expressed as a percentage, the likelihood an investment will provide a positive investment return over the term Probability of No Gain or Loss: expressed as a percentage, the likelihood an investment will not provide an investment return over the term and/or the likelihood that the performance of the investment will result in a capital loss for the investor Volatility: Volatility refers to the amount of uncertainty or risk about the size of changes in the strategy's value. A high volatility means that the value of the strategy has been changing dramatically over a short time period in either direction. Volatility is an indicator of the level of risk of an asset TAX The investment is held in the form of a listed Preference Share Linked Note and all investment returns will be paid gross. Based on our understating of rates of tax, current legislation, regulations and practice, any investment return is subject to Capital Gains Tax. Tax rates are likely to change in the future and may be applied retrospectively. This is a general guide only.any gains made from the investment by SSAPs, SIPPs, PRBs, ARFs, and Charities will usually be free of tax. The taxation of any gains on investments in the Note made by companies, partnerships or other businesses will depend on the tax position of the organisation. COMPENSATION ARRANGEMENTS The Note will not be covered by any compensation scheme should the Issuer become insolvent during the investment term. FURTHER QUESTIONS If you have any further questions in relation to this investment please talk to your Broker Development Manager who has been fully trained on this product. Terms & Conditions Apply. Please refer to the product brochure for full information.

8 Product providers for financial advisors Address: Unit 1C Elm House Tel: Millennium Park Fax: Naas Registered in Ireland No: Co. Kildare Website: Wealth Options Limited is regulated by the Central Bank Of Ireland.