SHARE DEALING. Income GeneratoR. Halifax Structured Products

Transcription

1 SHARE DEALING Income GeneratoR Halifax Structured Products

2 Contents Page 1. Who is involved in the Income Generator? 3 2. Product Overview 4 3. How does the Income Generator work? 6 4. Is the Income Generator right for me? 7 5. Tax, ISAs and SIPPs 8 6. Frequently Asked Questions 9 Capitalised terms used in this document have the meaning as defined under the Key Dates and Key Facts sections on page 5. This brochure is a promotional document and not a prospectus and is intended to convey the overall terms of the Note. Full details of the terms of the Note are contained in the Base Prospectus of the Lloyds TSB Bank plc programme for the issuance of Euro Medium Term Notes ( Base Prospectus ), any supplement thereto and the final terms of the Note ( Final Terms ) which details the terms that are specific to the Note. The Base Prospectus, any supplement thereto and the Final Terms are, or will be, available on You should read all such documents before making a decision to purchase the Note. Please note that no investment, legal or tax advice is being given in this document. If you are unsure whether investing in the Income Generator is suitable for you, you should consult your financial adviser before making an investment decision. 2

3 1. Who is involved in the Income Generator? Lloyds TSB Bank plc will act as the issuer of the Note. Lloyds TSB Bank plc is regulated by the Financial Services Authority. Halifax Share Dealing Limited (HSDL) is one of the UK s leading execution-only stock brokers and acts as distributor, ISA Manager and administrator of the Note described in this brochure. Halifax Share Dealing Limited has been approved as an ISA Manager by HM Revenue & Customs and will hold your Note in custody in accordance with its standard terms and conditions. HSDL is regulated by the Financial Services Authority. 3

4 2. Product Overview Summary In today s enduring low interest rate environment (the official Bank of England Bank Rate is 0.5% as of the most recent Monetary Policy Committee meeting on 12 January 2012) investors may find it difficult to generate attractive levels of income. This Note therefore offers an attractive enhanced annual income for investors who are prepared to accept risk to their capital. Key Features The Income Generator is a sterling denominated Note with a five year term (the Term, as more specifically defined under the Key Dates section on the next page). It has been designed to provide annual income payments equivalent to 7.45% p.a. gross. Repayment of your initial capital at the end of the Term is subject to the performance of the major stock market index of UK listed shares - the FTSE 100 Index (the Index ) as determined by comparing the closing level of the Index on the Final Reference Date (the Final Index Level ) with the closing level of the Index on the Initial Reference Date (the Initial Index Level ). It is eligible to be held within a Stocks and Shares ISA and SIPPs. The minimum investment is 3,000 with a denomination of 1,000 thereafter. Important considerations to note prior to investing It is possible to lose all your capital when you invest in this Note even if you hold it until maturity. If the Final Index Level is lower than 50% of the Initial Index Level, your capital will be reduced by the percentage amount by which the Final Index Level is lower than the Initial Index Level. It is possible that Lloyds TSB Bank plc could become bankrupt or be unable to make payments (including income payments and capital repayments) under the Income Generator when due. If this happens you may get back less than you are owed or nothing at all. Please refer to the paragraph entitled What risks may affect the Note? for further details. The Income Generator is designed for investors who can leave their initial capital invested for the full Term of 5 years. You can sell your Note prior to maturity but you must sell your entire holding and the amount that you get back may be significantly less than your original investment. Please refer to the paragraph entitled Can I sell my Note back to Lloyds TSB Bank plc before it matures? for further details. The Note is not a deposit account. Unlike a deposit account, the Note is not covered by the Financial Services Compensation Scheme (see the paragraph entitled What compensation arrangements are in place? for further details). If Lloyds TSB Bank plc were unable to pay the benefits due or repay capital due to you, you would not have a claim under the scheme. The Initial Index Level is the level of the Index at close of business on the Initial Reference Date and not the level of the Index on the day that you place your order. The level of the Index may vary between these two dates. 4

5 Key Dates Offer Period: 20 January 2012 to midnight on 31 January We may close the Offer Period early without notice. Furthermore, we may withdraw the offer at our discretion before the Initial Reference Date. In this scenario your account will not be debited for any funds. Initial Reference Date: 2 February The day on which we observe the Initial Index Level. Issue Date: 9 February The day on which the Note is issued. Annual Income Payment Date: 9 February in each year commencing on 9 February 2013 up to and including 9 February We will pay income by direct credit to your Halifax Share Dealing Account within five Business Days of the Annual Income Payment Date. Final Reference Date: 2 February The day on which we observe the Final Index Level. Maturity Date: 9 February The day on which the Note matures. Repayment Date: 3 Business Days after the Maturity Date. Term: The period from, and including, the Issue Date to, and including, the Maturity Date. Key Facts Issuer: Lloyds TSB Bank plc (Standard and Poor s S&P A, Moody s A1, Fitch A as at 19 January 2012). ISA Manager: Halifax Share Dealing Limited. Index: FTSE 100 Index. Initial Index Level: The closing level of the Index on the Initial Reference Date. The Initial Index Level of the Note is the closing level of the Index on 2 February 2012 and not the level of the Index on the day you place your order. Please be aware that the level of the Index may vary between these two dates. Final Index Level: The closing level of the Index on the Final Reference Date. Minimum Investment Amount: 3,000. Denomination: 1,000. The minimum increment in principal amount in which the Note can be transacted. Business Day: Any day other than a Saturday, Sunday, bank holiday or other public holiday in the United Kingdom. Where a day on which the Index is due to be observed or an Annual Income Payment Date is not a Business Day, such observation will be taken on the next Business Day. Listing: London Stock Exchange. 5

6 3. How does the Income Generator work? Example of annual income payment The Income Generator is an investment with a five year Term designed to provide investors with a fixed annual income equivalent to 7.45% p.a gross. The table below outlines the income levels you can expect to receive. Capital invested 3, , , ,000 1, ,000 1, Annual income Income is due to be paid on each Annual Income Payment Date. If any of the Annual Income Payment Dates do not fall on a Business Day, then the relevant income will be paid on the next Business Day. We will credit this payment directly to your Halifax Share Dealing Account within five Business Days of the Annual Income Payment Date. The Note is designed as an income paying investment and there is no facility to reinvest income payments. You may not receive some or all of your income if Lloyds TSB Bank plc becomes bankrupt or is otherwise unable to make payments of income. Please refer to the paragraph entitled What risks may affect the Note? for further details. Risk to your capital The Income Generator is designed to pay back your initial capital at maturity provided that at close of business on the Final Reference Date, the Final Index Level is at a level equal to, or higher than, 50% of the Initial Index Level. If, at close of business on the Final Reference Date, the Final Index Level is at a level lower than 50% of the Initial Index Level, the amount of capital repaid to you will be reduced by the percentage amount by which the Final Index Level is lower than the Initial Index Level. This means that you will get back less than you invested. The table below, based on a 3,000 investment, shows the amount of your initial capital that will be repaid at maturity (excluding any income paid during and at the end of the Term) in a variety of scenarios. Change in the Index from the Initial Index Level to the Final Index Level No change or positive 3,000-10% 3,000-30% 3,000-50% 3,000-70% % % 0 What you could receive back at maturity The above figures are examples only and changes in the level of the Index have been chosen to demonstrate the potential amount of capital repayable under the Note only. If you sell the Note before the Maturity Date you might not receive the full amount you originally invested. In addition, you may not receive some or all of your initial capital if Lloyds TSB Bank plc becomes bankrupt or is otherwise unable to make payments of capital on or after the Maturity Date. Please refer to the paragraph entitled What risks may affect the Note? for further details. 6

7 4. Is the Income Generator right for me? Before purchasing this Note, please ensure you understand all the risks and benefits associated and the commitment you are making. If you have any doubts as to whether the Income Generator is appropriate for you, please take independent advice from an appropriately qualified Independent Financial Adviser. To help you decide if this Note is right for you, here is a summary of some of the key points you should consider: Yes, investing may be appropriate for me because: No, investing certainly isn t appropriate for me because: I understand the potential risk to lose some or all of my capital if the Final Index Level falls to a level lower than 50% of the Initial Index Level on the Final Reference Date. I understand the potential risk to all of my capital if Lloyds TSB Bank plc, fails to meet its obligations under the Note. I want to receive the fixed level of income each year over the five year Term of the investment. I don t want to risk losing any of my capital which is possible even if I hold the Note to maturity. I do not want to risk losing some or all of the money that I have invested if Lloyds TSB Bank plc is unable to make payments under the Note when due. I don t want to miss out on the dividends or capital growth I might get if I invested in shares or similar investments. I have a lump sum of a minimum of 3,000 to invest. I will not need access to my initial capital for a five year period. I may need access to my initial capital during the Term, as I have inadequate provision for unexpected emergencies, and cannot risk getting back less than I originally invested if I sell my Note before the Maturity Date. I understand that if I choose to sell the Note before maturity, I may get back substantially less than my initial capital. I want to know the Initial Index Level, on which the investment is based, prior to making my investment decision. I want a potentially tax efficient investment if I use my ISA allowance or invest via a SIPP. I am happy that this investment constitutes part of my well diversified investment portfolio and that it does not mean that my portfolio is over concentrated in any one type of investment or asset class. I want to add to my investment on a regular basis. I don t want to invest in a product that pays a fixed annual income as I would rather my investment pays a return at maturity. I do not want my portfolio to be overly concentrated in any one type of investment or asset class and making an investment in this product would mean that a significant amount of my investable assets would be exposed to structured products or products of a similar nature. 7

8 5. Tax, ISAs and SIPPs It is important to note that levels and bases of taxation, and relief from taxation, are subject to Government legislation and may change during the Term of the Note and the amount of tax you pay will depend on your individual circumstances. All references to taxation are to UK taxation and are based on our current understanding of UK laws and HM Revenue & Customs published practice. No tax advice is given in this document and the following information is of a general nature only. If you have any doubts or concerns regarding the tax treatment of an investment in the Note, you should seek independent advice. Direct investment Income from the Note will be paid gross of tax; we will not deduct any taxes. You will therefore be liable to income tax on the income paid. For 2011/12 the tax rate is 20% for a basic rate tax payer, 40% for a higher rate tax payer and 50% for an additional rate tax payer. The income paid will need to be declared to HMRC and any tax liability arising will need to be dealt with by you or your tax advisor. If you are a non-tax payer there should be no tax liability subject to you remaining within your personal allowance limits when adding the income received to your other income. SIPP If you invest via a SIPP there will be no further obligation on you to pay tax as investment returns on all SIPP investments are tax free for the investor. ISA An Individual Savings Account (ISA) is a savings vehicle set up by the Government. There are two types of ISA: a Cash ISA and a Stocks and Shares ISA. Under ISA Regulations all eligible investors* can only open one Stocks and Shares ISA and one Cash ISA in a tax year. The annual ISA allowance for the 2011/2012 tax year is 10,680 of which a maximum of 5,340 can be invested into a Cash ISA with the balance being available for investment in a Stocks and Shares ISA. This Note is eligible to be held in a Stocks and Shares ISA. If you invest via a Stocks and Shares ISA there will be no personal tax liability in respect of any income or growth arising on the Note. Once you have used your full allowance in a tax year, you cannot make any further investments even if you withdraw some, or all, of the amount invested. Therefore if you decide to close your ISA in the same tax year that you invested, you will not be able to re-invest the proceeds into another ISA in the same tax year. The tax position described above and the favourable tax treatment of ISAs and SIPPs might not continue in future. The value of any tax relief will depend on your individual circumstances. * You must be resident and ordinarily resident in the UK for tax purposes, or perform duties as a crown employee serving overseas, or be married or in a civil partnership with such a person. If you are unsure about your status please seek independent financial advice. You must be 18 or over to hold a Stocks and Shares ISA. 8

9 6. Frequently Asked Questions What is the Index? The FTSE 100 Index measures the performance of the shares of the 100 largest companies listed in the UK and has been published since As at 18 January 2012 an example of some constituent stocks are: AstraZeneca plc, Centrica plc, Diageo plc, Legal & General Group plc, Sainsbury plc, Vodafone Group plc. The chart shows the performance of the FTSE 100 Index from 18 January 2002 to 18 January and highlights that the Index may go down as well as up. FTSE 100 Index performance (capital return only*) What is a Note? A Note is a type of corporate bond; effectively a loan made by the investor to Lloyds TSB Bank plc as issuer of the Note. However, unlike a typical loan, the principal amount of the Note is not necessarily repaid in full on maturity (please refer to the paragraph entitled Risk to your capital in section 3 of this document). Are commissions and fees payable? All manufacturing and administration costs payable in relation to the Note have already been incorporated as a percentage of your initial capital. The total of these costs is expected to be around 2% of your initial capital, in which case, if your investment is 3,000, the amount of these costs would be 60. However, the amount of such costs will not affect the total amount payable to you on maturity of the Note /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/ /07/ /01/2012 Source: Bloomberg Please note that: past performance of the Index is not a guide to the future performance of the Index * the Index only measures the capital value of the shares included; no allowance is made for dividends paid on the shares this product is not the same as investing directly in the underlying shares of the Index; you will not receive any dividends from the underlying shares and you will not have any ownership rights in relation to the shares comprising the Index. this product is designed to pay a fixed annual income during the Term so you will not participate in any growth in the Index during the Term. What is the Minimum Investment Amount? The Minimum Investment Amount is 3,000. The denomination is 1,000 (which represents the minimum increment in principal amount in which the Note can be transacted). When will my account be debited? Your account will be debited, for the amount that you wish to subscribe to the Note, on the Business Day immediately preceding the Initial Reference Date. Can I change my mind and cancel? You can change your mind between placing the order and midnight on the last day of the Offer Period. After this day there is no cancellation process. However, you may have the opportunity to sell your entire investment in the Note, back to Lloyds TSB Bank plc, weekly on a Tuesday (the Sell-Back Date ), although you may get back less than your original capital. What will I receive when I invest? Once the product is launched, we will send you an allocation confirmation containing the details of your investment which will be posted to the Important Notifications section of your account. You should keep your confirmation for future reference. 9

10 Can I sell my Note back to Lloyds TSB Bank plc before it matures? You may be able to sell your entire investment in the Note back to Lloyds TSB Bank plc prior to maturity. A weekly Sell-Back Date may be offered meaning that you will have the opportunity, once a week, to sell your entire holding to Lloyds TSB Bank plc. No sales of part of your investment in the Note are permitted. Should you wish to sell your Note to Lloyds TSB Bank plc before maturity, Halifax Share Dealing Limited must receive your instruction by 10:30 a.m. on the weekly Sell-Back Date (Tuesday) to ensure execution that week. A weekly opportunity to sell your Note to Lloyds TSB Bank plc will be available in normal market conditions only and Lloyds TSB Bank plc has the right to declare conditions normal or abnormal. Abnormal market conditions may arise if, for example, in Lloyds TSB Bank plc s opinion, market volatility increases significantly or if the liquidity in the underlying market becomes limited. If you sell your Note to Lloyds TSB Bank plc, prior to the Maturity Date, you will receive the market value of the Note issued by Lloyds TSB Bank plc on the day that we process your order (weekly on a Tuesday), and not the market value prevailing on the day that your sale instruction is received. The market value of the Note will be determined by Lloyds TSB Bank plc and influenced, among other things, by the following factors; (i) whether it is an increasing or decreasing interest rate environment and the movement of interest rates since the Initial Reference Date; (ii) the movement in the level of the Index since the Initial Reference Date; (iii) the period left until the Maturity Date; (iv) the levels at which Lloyds TSB Bank plc lends to and borrows from other banks and financial institutions; (v) market perception of Lloyds TSB Bank plc s ability to pay its commitments as and when they fall due. The impact of these factors may mean that if you sell the Note to Lloyds TSB Bank plc before the Maturity Date the amount that you receive may be less than, or more than, the amount you originally invested. How do I obtain an indication of the progress of my investment? Should you wish to obtain a current indicative price for your Note, please look at your online portfolio at dealing_home.asp. Your structured product will be priced daily at close of business; therefore it does not represent a live trading price. Can I transfer my investment to another custodian? Yes, your Note is transferable. We will transfer your Note to another custodian on request. Please be aware that if you transfer your Note to another custodian you will need to liaise with that custodian in relation to the maturity proceeds of the Note. Please note that you may only transfer your entire investment in the Note, and not part of it only. Can I hold my Note in joint names? Yes, if you are holding the Note directly outside of an ISA. Please refer to the terms of your Halifax Share Dealing Account for further details. Notes held within an ISA must be held in an individual name. What happens if I die during the Term? If you should die before the Maturity Date, your personal representatives should contact Halifax Share Dealing Limited and tell us how they wish your Note to be dealt with as part of the probate process. What happens when the Note matures? The final payment amount is calculated on the Maturity Date and any proceeds payable to you will be credited to your Halifax Share Dealing Limited Account or third party account (if you have transferred the Note) by the Repayment Date. Please note that there is no trading market in the Notes and you will only have the opportunity to sell your Note back to Lloyds TSB Bank plc as described in the paragraphs above. 10

11 What risks may affect the Note? Lloyds TSB Bank plc failure to pay sums due under the Note The issuer of the Note is Lloyds TSB Bank plc. If Lloyds TSB Bank plc, fails to meet its commitments when due, you may get back less than is due to you or you may receive nothing at all. Lloyds TSB Bank plc is rated S&P A, Moody s A1 and Fitch A as at 19 January Standard and Poor s, Moody s and Fitch are independent ratings agencies that use their own research to provide a credit rating for an issuer of securities. Credit ratings can be a useful indication to investors about how capable an issuer is of meeting any payments due to holders of its securities (such as the Note). The ratings scale for each of the three providers are summarised below, with further information also provided on the next page. Anything rated BBB and above (S&P), Baa2 and above (Moody s) and BBB and above (Fitch) is considered investment grade indicating that an issuer possesses an adequate capacity to pay interest and repay capital. Credit rating agencies review ratings on a regular basis and ratings are subject to change. Ratings agency Most secure rating (most likely to meet payments when due) Definition S&P AAA Extremely strong capacity to meet financial commitments. Highest rating. Moody s Aaa Obligations are judged to be of the highest quality, with minimal credit risk. Fitch AAA Denotes the lowest expectation of default risk. Assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is unlikely to be adversely affected by foreseeable events. Most risky rating (least likely to make payments when due) D C D Definition Payment default on financial commitments. Obligations are the lowest rated class of bonds and are typically in default with little prospect of recovery of principal or interest. Issuer has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business. 11

12 On the scales below the arrow represents where Lloyds TSB Bank plc s credit rating ranks on the full rating scale as at 19 January S&P Rating Most risky rating Most secure rating D CC -CCC+ -B+ -BB+ -BBB+ -A+ -AA+ AAA Moody s Rating Most risky rating Most secure rating C Ca Caa 321 B 321 Ba 321 Baa 321 A 321 Aa 321 Aaa Fitch Rating Most risky rating Most secure rating D RD C CC CCC -B+ -BB+ -BBB+ -A+ -AA+ AAA The ability of an issuer to meet its obligations will affect the market value of a security (such as the Note) over its Term. 12

13 Adjustments The terms of the Note permit Lloyds TSB Bank plc, as issuer of the Note, to delay, reduce or withhold payments in certain circumstances. This is not intended to bypass what is legally due to investors but is intended to cover unforeseen events which affect income payments and capital repayment. Lloyds TSB Bank plc does not control the Index. A third party is responsible for controlling or calculating the Index (the Index Sponsor ). Should the Index Sponsor fail to calculate the level of the Index, or make a material change to the way it calculates the Index (or the price of any of the individual shares that make up the Index), or if the Index ceases to exist, Lloyds TSB Bank plc will look to find a replacement index which essentially replicates the Index (and its underlying shares) as closely as possible. Lloyds TSB Bank plc may even try to calculate the Index itself. If this is impossible for Lloyds TSB Bank plc to achieve, it has the right to redeem or cancel the Note early and calculate the level of capital repayment and income payable as if the Note was being sold before the Maturity Date. This would mean that you may lose some or all of your initial capital. Capital-at-risk investments This Note is a structured product. Structured products are built to offer an income or growth return whilst varying the degree of risk to an investor s original capital. Some structured products are built to ensure that an investor s capital is repaid in full at maturity. However, others expose investors to the potential loss of some or all of their original capital. Such investments are known as capital-at-risk investments. Capital-at-risk investments offer either enhanced income or enhanced growth profiles in return for investors bearing the risk that they may lose some or all of their original capital. This Note is a capital-at-risk enhanced income Note. How can I get a copy of the prospectus? The Base Prospectus, any supplement thereto and the Final Terms are or will be available on You should read all such documents before making a decision to purchase the Note. What compensation arrangements are in place? Any failure by Lloyds TSB Bank plc to meet its liabilities under the Note (for example, a failure to pay income or to repay your capital on maturity) would not of itself give rise to any claim for compensation solely on the grounds of such a failure. In the event that you suffer a loss as a result of Halifax Share Dealing Limited failing to meet any of its obligations, it is possible that you may have a claim against the Financial Services Compensation Scheme but Halifax Share Dealing Limited will not itself be liable to pay amounts due under the Note. Further details can be obtained from: The Financial Services Compensation Scheme 7 th Floor Lloyds Chambers 1 Portsoken Street London E1 8BN. Tel: and enquiries@fscs.org.uk Website: fscs.org.uk How do I make a complaint? We aim to provide the highest level of customer service possible. However, if you experience a problem we will always seek to resolve this as quickly and efficiently as possible. If you have a complaint, please contact: Customer Services Manager Halifax Share Dealing Limited Lovell Park Road Leeds LS1 1NS customercare.hsdl@halifax.co.uk Full details of our complaints procedures will be provided on request from the above contact details. If you are not satisfied with how we reply to your complaint, you may refer it to the Financial Ombudsman Service at: South Quay Plaza 183 Marsh Wall London E14 9SR Tel: and If you would like to know more about complaining to the Financial Ombudsman Service, you can go to their website call them on the numbers above or them at complaint.info@financial-ombudsman.org.uk. Please note that making a complaint will not prejudice any other rights that you may have. 13

14 Index Disclaimer The Notes are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited ( FTSE ) or by the London Stock Exchange Plc (the Exchange ) or by The Financial Times Limited ( FT ) and neither FTSE nor Exchange nor FT makes any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE 100 (the Index ) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, neither FTSE nor the Exchange nor FT shall be liable (whether in negligence or otherwise) to any person for any error in the Index and neither FTSE or Exchange or FT shall be under any obligation to advise any person of any error therein. FTSE, FT-SE and Footsie are trade marks of the Exchange and FT and are used by FTSE under licence. All-World, All-Share and All-Small are trade marks of FTSE. 14 Halifax Share Dealing Limited. Registered in England No Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.