principal protected notes ping hu matt neeve olena olenchuk
Post on 19-Dec-2015
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PRINCIPAL PROTECTED NOTESPing Hu
Matt NeeveOlena Olenchuk
Principal Protected Notes - what are they?
• An investment that guarantees a percentageof the principle at maturity
i.e. the minimum return will equal the initial investment
• Payoff at maturity - no coupons, principal + appreciation
Principal Protected Notes - what are they?
• Principal protection
• High growth potential
• Enhanced income potential
• Weekly liquidity
• The opportunity to invest in a broad range of investments
• Potential for leveraged returns
• Capital protection regardless of what happens in the markets
• Maturity 6-8 years
Principal Protected Notes - what are they?
Benefits to the Issuer:
• Liquidity• Financial leverage• “Callability” strategy – reduced debt when needed
Global Equity Index Linked Note
• Issued by the Business Development Bank of Canada
• Variable interest promissory
• Equally weighted in three indexes:
S&P 500
Dow Jones ERUO STOXX 50
Nikkei 225
Global Equity Index Linked Note
• Dec 2000 issues – minimum issue of 10 million dollars with a 7- year maturity.
• Each note is valued at 10 dollars (at the time of issue)
Risks:
• Market Risk
• Inflation Risk
Global Blue-Chip RainbowDeposit Notes, Series 1
• A portfolio of 5 Basketsof shares
• Each Basket consists of3 shares, equally-weighted within the Basket.
• Note term is 7 years
• The return is linked to the performance of the portfolio
• Amounts payable at the maturity consist of
1. The principal amount - $100/note regardlessof the portfolio performance
2. Variable interest – 100 * portfolio return
• The Deposit Notes will not be listed on any exchange
• Tax consideration
Global Blue-Chip RainbowDeposit Notes, Series 1
Global Blue-Chip RainbowDeposit Notes, Series 1
Nikkei 225 Index Note, Series 1
• Linked to Nikkei 255 Index – Tokyo Stock Exchange, Japan
• Note term - 7 years
• $100 denominated
• Minimum subscription - 50
• Not listed - trade on secondary markets
• Callable if Index Return equals or exceeds applicable Call Trigger
• Call feature – risk
• 2006 – 2007 Index Return 3.06%
Nikkei 225 Index Note, Series 1
Nikkei 225 Index Note, Series 1
Index Performance
Nikkei 225 Index Note, Series 1
Nikkei 225 vs. S&P 500, Dow and NASDAQ
Principal Protected Notes
Risks:• Suitability of Deposit Notes for Investment• Non-Conventional Investment• No Interest May Be Payable• No Ownership of, or Recourse to, Shares• Equity Risk• Secondary Market• Market Disruption or Extraordinary Event• Special Circumstances – Market disruption• Economic and Regulatory Issues
PPNs - Who would use them?
• Risk adverse investors that want to protect their investment, but still capitalize on positive changes in the market.
• Investors that are confident in the market, but still believe that there is speculation
Questions?