New Invest Ideas

Three new notes for you:


2Y USD Participation Note on 5G, Cap 130%, 70% EU KI

5G is the cutting-edge technological overhaul that is set to transform and disrupt the cellular telecommunications sector. Through new standards and hardware, 5G will increase tenfold the data transfer rates. Companies that are likely in line to benefit from the 5G transition along the coming decade are Telecommunications companies (AT&T, Verizon, American Tower), Semiconductors and Network Systems Manufacturers (Qualcomm, Intel, Skyworks Solutions and Micron) and the Network Gear Manufacturers (Apple)

Commercial implementation will be in embryonic commercial stage during 2019-2020, with the first modules developed and applied to the consumer market. This will be followed by an overall upgrade in the infrastructure that will roll out for 5-10 years, until it’s estimated to achieve 90% population coverage (in developed countries)

The enclosed strategy is suitable for qualified investors believing in the above stocks (or the industry as a whole) should benefit from the 5G revolution on a short/medium-term horizon. The structure offers 100% exposure to an equally weighted performance of a basket of the below 8 shares with a max return of 30% in 2 years and a European barrier at 70% (downside of -30%)

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 2 Years
Underlying (EW) Verizon, Intel, Qualcomm, American Tower, Micron, Apple, AT&T, Skyworks
Participation 100%
European barrier 70%
Cap 130%
Investor Profile Bullish speculative
Alternatives 1) Different basket EW on Qualcomm, Cisco, Nokia, Motorola, Fujitsu, 70% EU KI, Cap 140%;
2) Different structure 2Y USD Phoenix memo WO on Verizon, Micron, American Tower, Quarterly, AC Trigger 100%, Coupon trigger 75%, EU KI 50%, 16.32% p.a. memory coupon

Mechanism

Scenario 1:At maturity, basket is up 25% (below cap level)
Payoff:Qualified investors get 100% capital back + 25% participation

Scenario 2:At maturity, basket is up 36% (above cap level)
Payoff:Qualified investors get 100% capital back + 30% participation (capped)

Scenario 3:At maturity, basket is down 20% (above European barrier)
Payoff:Qualified investors get 100% capital back

Scenario 4:At maturity, basket is down 35% (below European barrier)
Payoff:Qualified investors get 65% capital back in cash

The following graph represents the performance of the underlying over the last 5 years:

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6Y EUR Athena Airbag on French stocks, 18.10% p.a. memo

It has been a difficult start of the year for France. The French movement ‘yellow vests' seen at the turn of the year negatively affected the French economic, particularly in retail sales. Looking at the broad French market through the CAC40 on a technical basis, the current YTD rally seems stretched on a daily and weekly basis, meaning a correction in the short-term is likely. The technical bias seems bullish and yearend target on the CAC40 (PX1) is expected by few analysts to be around 5,926 (~10% upside). Some qualified investors would prefer to wait for a pullback before getting a long exposition in French stocks, others could consider a structured product as a solution to accumulate future returns (see below returns in EUR, GBP, CHF) and benefit from a conditional protection on the capital

In the enclosed strategy 3 French stocks were picked up representing 3 sectors: Publicis (Advertising), Kering (Luxury) and Sanofi (Pharmaceutical). The same strategy could work on other French stocks such as LVMH, Safran, Hermes and Vinci

Publicis showed some weakness in the recent years and saw its stock dropping dramatically by nearly 15% in February this year. Sanofi has recently and successfully issued an EU 2bn bond, the Regeneron/Sanofi winning the US approval for expanded use of skin drugs could also help the company grow more. Finally, Kering a growing luxury group, owning brands such as Saint Laurent, Gucci, Boucheron etc, generated for 67% of its revenues outside of France

The strategy can be built on 4 or 6 years offering exits every six months. We are targeting an annualised return around 20% with memory effect. In the enclosed main idea, the investors benefit from an Airbag at 55% after 6 years (unless earlier called)

Product Parameters

Issuer rating A3 (rated by Moody's)
Currency EUR
Maturity 6Y unless called
Underlyings (WO) Kering, Publicis, Sanofi
Observations Semi-Annually
Memory coupon 18.10% p.a.
Autocall trigger decreasing From 100% (-3% per quarter)
Last observation trigger 55%
European barrier 55%
Investor Profile Balance Sophisticated
Alternatives 6Y USD, 21.70% p.a. memory; 4Y USD, 18.50% p.a. memory; 4Y EUR, 14.18% p.a. memory

Mechanism

Scenario 1:On S1, WO is up 2% (above 100% AC trigger)
Payoff:Qualified investors get 100% capital back + 9.05% coupon (18.10% p.a.). Product early redeemed

Scenario 2:On S4, WO is down 10% (below 91% AC trigger)
Payoff:No coupon paid, product continues

Scenario 3:At maturity, WO is down 25% (above 55% European barrier & AC trigger)
Payoff:Qualified investors get 100% capital back + 12 * 9.05% coupon (18.10% p.a.) = 208.60%

Scenario 4:At maturity, WO is down 60% (below 55% European barrier & AC trigger)
Payoff:Qualified investors get 40% capital back. No coupon paid

The following graph represents the performance of the 3 underlyings over the last 5 years:

m32

18M USD Autocall BRC on Gold and Silver, 6.20% p.a. guaranteed, 80% EU KI

With the ongoing global political and economic uncertainty, precious metals could work as a diversifier despite a good start of the year for equities. Since the 20th of February Gold and Silver respectively lost 3.50% and 6.25%, creating a potentially good entry point
China announced in February a small increase in its central bank gold holdings (for the first time in 2 years) and the country represents 27% of the worldwide demand
The structure runs for 18 months with quarterly exits (from Q2), offering a guaranteed return of 6.20% p.a. The European barrier observed at maturity is relatively low, respectively $1,043 and $12.51 for Gold and Silver

Product Parameters

Issuer rating BBB (rated by S&P)
Currency USD
Maturity 18 Months unless called
Underlyings (WO) Gold, Silver
Observations Quarterly
Autocall trigger 100% from Q2
Coupon 6.20% p.a. guaranteed
European barrier 80%
Max payout 109.30%
Investor Profile Neutral-bullish
Delivery Cash

Сценарии развития событий

Scenario 1:On Q2, WO up by 5% (above AC trigger)
Payoff:Qualified investors get 100% capital back + 1.55% coupon (6.20% p.a.) = 101.55%. Product early redeemed

Scenario 2:On Q3, WO down by 6% (below AC trigger)
Payoff:Qualified investors get 1.55% coupon (6.20% p.a.). Product continues

Scenario 3:At maturity, WO down 10% (above European barrier)
Payoff:Qualified investors get 100% capital back + 1.55% coupon (6.20% p.a.) = 101.55%

Scenario 4:At maturity, WO down 25% (below European barrier)
Payoff:Qualified investors get 75% capital back + 1.55% coupon (6.20% p.a.) = 76.55%

The following graph represents the performance of the underlying over the last 5 years and the forward and forecast curves:

m33


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New Invest Ideas

Three new notes for you:

1.5Y USD, BRC on HP, 8% guaranteed coupon

On 27th of February HP Inc missed its Q1 revenues target by USD 150 M. On the other hand, the company beat slightly its earning per share. As a result, the stock heavily dropped by 16.94% on the 27th of February. Still the company reiterates its FY19 guidance with EPS from USD 2.12 to USD 2.22. After the recent results, Bank of America downgraded HP Inc from Buy to Underperform and lowering the target from $ 30 to $19

Some investors believe that the stock drop was exaggerated, that the company should still have a good potential betting on the growth of the 3D printing industry (referred to by HP Inc CEO as the “Fourth industrial revolution). Qualified investors with some conviction on the stock and the industry could consider the recent peak of volatility as an opportunity to gain exposure to HP Inc either directly or via a structured strategy

The structure runs for 18 months, offering a guaranteed return of 8% p.a. The structure offers a capital protection thanks to a European barrier at 73% (equivalent at USD 16.95). Other alternatives are available (see below) on other names such as Tesla, Kraft… which have seen their stocks dropping last week

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 1.5 Year
Underlying HP inc. (HPQ UN)
Frequency Quarterly payment
Guaranteed coupon 8% p.a.
European barrier 72.84%
Investor Profil Neutral
Delivery Cash or Physical
Alternatives 1Y, Kraft, EU KI 70.92%, 8.00% p.a. guaranteed; 1Y, Tesla, EU KI 50%, 13.26% p.a. guaranteed; 1Y, WO: Tesla, HP, EU KI 50%, 14.52% p.a. guaranteed

Mechanism

Scenario 1:At maturity, HP up by 10%
Payoff:Qualified investors get 100% capital back + 2% coupon (8% p.a.). 10% coupon has already been paid (payout = 112%)

Scenario 2:At maturity, HP down by 5%
Payoff:Qualified investors get 100% capital back + 2% coupon (8% p.a.). 10% coupon has already been paid (payout = 112%)

Scenario 3:At maturity, HP down by 30%
Payoff:Qualified investors get 70% capital back + 2% coupon (8% p.a.). 10% coupon has already been paid (payout = 82%)

The following graph represents the performance of the underlying over the last 5 years:

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9M USD Outperformance on Coffee, 175% participation, Max redemption 152.50%

Large companies such as Coca-Cola, Starbucks, Nestle and others such as JAB (a German family-owned company with major shareholding stake in JDE) look to build a coffee empire. In 2018, the estimated total demand for coffee has been around 9.7 M tons, whereas the estimated coffee production (Robusta and Arabic) for 2018 has been estimated at 10.01 M tons. On the other hand, given the historical wobbliness of the supply side, this year will likely see Brazil produce another large coffee crop (3.60 M tons), and world production and inventories stabilise

The possibility of China and India starting to consume coffee like other developed nations, should have positive effects on coffee prices. Despite this price increase, coffee demand is pretty inelastic and shouldn't be negatively impacted in developed countries. Also, if the US dollar starts to lose ground against LatAm currencies, local farmers should be disincentivized to exporting extra amounts of coffee (the case in 2018), causing the supply to further contract

For qualified investors looking to have an exposure on the commodity, the enclosed strategy offers a leverage exposure of 1.75 times on the upside over 9 months with a maximum payout at 152.50%. Investors could also look at alternatives such as investing in a strategy offering exposure to Coca-Cola, Nestle, Starbucks, McDonald's, the second investment strategy offers a leveraged exposure at 1.77 times on the upside, could also be interesting

Product Parameters

Issuer rating BBB (rated by S&P)
Currency USD
Maturity December 2019
Underlying Coffee (KCZ9 Comdty)
Downside 100%
Upside 175% on call spread 100-130%
Max redemption amount 152.50%
Strike 100%
Investor Profile Bearish Speculative
Alternatives 1Y, Outperf on (EW) Starbucks, Mc Donald's, Coca-Cola, Nestle, 177.40% upside participation, no cap

Mechanism

Scenario 1:At maturity, Coffee is up 25%
Payoff:Qualified investors get 100% capital back + 43.75% participation (25% * 175%)

Scenario 2:At maturity, Coffee is up 37%
Payoff:Qualified investors get 100% capital back + 52.50% (cap is reached)

Scenario 3:At maturity, Coffee is down 20%
Payoff:Qualified investors get 80% capital back

The following graph represents the performance of the underlying over the last 5 years:

222

2Y USD 3x Leveraged CLN on Egypt, 8% p.a. coupon

On the eve of the January 25, 2011 revolution, Egypt held a relatively comfortable 21st place on risk rankings, with a credit default spread (CDS) of 234 basis points. The CDS spread on Egypt’s debt shot up in the summer of 2013, climbing above 700 during the lead up to the overthrow of former President Mohamed Morsi, and peaking above 900 basis points when the military-backed interim government took over. In 2015, Bank of America stated that Egypt has the fifth riskiest sovereign debt in the world”. Since then the CDS has dropped from 408.335 in 2015 to 234.500 today

The enclosed strategy offers a coupon of 8.00% p.a. paid annually (the equivalent structure without leverage offers a 3.45% p.a. coupon and according to the issuer the equivalent bond 1Y and 3Y offer respectively 4.70% p.a. and 5.50% p.a. returns). The difference is justified by the leverage of 3x in case of credit event (floored at 0%)

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 2 Years
Exposure Arab Republic of Egypt (EGYPT CDS USD SR 2Y D14)
Egypt Rating B
CDS Value 234 bps
Leverage 3x
Recovery Market recovery paid at maturity
Coupon 8.00% p.a. (not accrued in case of credit event, 30/360)
Frequency Annually
Trigger 500 bps
Investor Profile Sophisticated

Mechanism

Scenario 1:In Y1, no credit event occurred and trigger is not reached
Payoff:Qualified investors get 8.00% p.a. coupon

Scenario 2:In Y1, no credit event occurred, trigger is reached
Payoff:The product unwinds at Mark to market (floored at 0%)

Scenario 3:At maturity, no credit event occurred and trigger is not reached
Payoff:Qualified investors get 100% capital back + 8.00% p.a. coupon

Scenario 4:At maturity, a credit event occurred
Payoff:Market recovery determined by ISDA. Qualified investors get Max[100% - 3 * (100% - Market recovery); 0%]

Credit Event:If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the underlying over the last 5 years:

333


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New Invest Ideas

Three new notes for you:

5Y USD 100% KG Callable Step Up Note, 3.18%-3.98% p.a.

The yield curve at the end of last year inverted between the 2-5 years maturities and compressed transversely. The yield topology expressed usually the increase of recession fears which the FED cannot ignore. The recent tightening path spilled globally and slowed economic activity, and the FED should be aware not to provoke recession
The enclosed strategy offers a guarantee of the capital initially invested, in 5 years’ unless earlier called. The qualified investor will receive a guaranteed first coupon of 3.18% after one year, if not called in the follower years the coupon steps up by 20 bps every year. This strategy should fit qualified investors with a neutral view of rates with potentially rates going down overtime. The callability of the investment is at the discretion of the issuer and callability usually happens if rates have gone down
In terms of timing, if qualified investors think the interest rates could still go up then better to wait to invest in this strategy later. If not, then it could be better to strike sooner than later to at least secure a 3.18% return over 1 year

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 5 Years unless issuer called
Capital protection 100% at maturity
Guaranteed coupon Y1 3.18% p.a.
Guaranteed coupon Y2 to Y5 3.38%, 3.58%, 3.78%, 3.98% (0.20% step up per year, until maturity, unless issuer called)
Frequency Annually (30/360 basis)
Max payout 117.90%
Comparable 5Y USD swap rate (spot 2.527%)
Investor Profile Conservative
Delivery Cash

Mechanism

Scenario 1:After 1 year, rates are higher than today (comparable is 5Y Annual Swap USD)
Payoff:The issuer will probably not call the Note and qualified investors get 3.18% coupon. Investment continues

Scenario 2:After 3 years, rates are lower than today (comparable is 5Y Annual Swap USD)
Payoff:The issuer will probably call the Note and qualified investors get 100% capital back + 3.58% coupon = 103.58% (6.56% already paid)

Scenario 3:At maturity, if the note has not been called by the issuer
Payoff:Qualified investors get 100% capital back + 3.98% coupon = 103.98% (13.92% already paid)

The following graph represents the performance of the level of 5Y Annual Swap USD over the last 5 years:

 gr21

5Y USD CLN Hybrid Brazil, USD 3m Libor, 6.04% p.a.

Since Bolsonaro was elected on the 28th of October 2018 for a term of 4 years, markets have shown confidence in the intendent reforms of Brazil's new president - placing a pro-business American style aura in the country. The recent change in credit risk for the Federative Republic of Brazil, as can be observed risk conditions have softened

The enclosed strategy offers a potential enhancement of yield when comparing to investing into Brazilian sovereign debt over 5 years. The annual coupon of 6.04% p.a. paid quarterly is dependent not only on a possible credit event of Brazil but also depends on the 3 months USD Libor ($3mL) daily movement. The coupon is daily accrued as long as $3mL is in the range [2% - 5%]. If $3mL trades within this range then the qualified investor cashes in the full coupon, otherwise coupon level can be lower

In terms of timing, such strategy could pay less return if the Brazilian CDS continues tightening and if the forwards on $3mL flatten a bit

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 5Y
Exposure credit Brazil Sovereign CDS (level 173.032)
Exposure rates USD 3m Libor (spot 2.76)
Market recovery At maturity
Conditional coupon 6.04% p.a. * n/N
Convention Quarterly, 30/360 basis, accrued unless credit event
Investor Profile Neutral sophisticated
Where n = # of days where $3mL is in the range [2% - 5%] N = # of days in the period
Pricing Date 24/01/2019

Mechanism

Scenario 1:During Q1, $3mL traded daily within the range [2% - 5%] and there was no credit event on Brazil
Payoff:Qualified investors get 1.51% coupon (6.04% p.a.), the investment continues

Scenario 2:At the end of Q8, $3mL traded 10 days out of the range and no credit event occurred
Payoff:Qualified investors get 1.34% coupon (1.51% p.q. * 80/90), the investment continues

Scenario 3:At the end of Q12, a credit event occurred, regardless of how $3mL traded
Payoff:Market recovery determined by ISDA. No coupon paid
Scenario 4:At maturity, during Q20, $3mL traded daily within the range [2% - 5%] and there was no credit event on Brazil
Payoff:Market recovery determined by ISDA. No coupon paid

The following graph represents the performance of the Brazil Sovereign CDS and USD 3m Libor over the last 5 years:

r2

18M USD 55% Low Strike DRA on French Banks, 10% p.a.

European broad fiscal stimulus combined with a healthy wage growth throughout the Euro Area and mild financial conditions should support credit demand in European Banks. French banks such as BNP Paribas and Societe Generale’ s exposure to Italy and the recent losses incurred by Natixis trading desks meant a peak in volatility and stock prices under pressure (BNP Paribas -36.42%, Credit Agricole -32.50%, Societe Generale -35.55%, Natixis -38.30% in 2018). Except for Societe Generale (-7.44% YTD), the YTD performances of these stocks show a slight recovery with +6.51% for Natixis, +2.94% for Credit Agricole and +1.27% for BNP Paribas

The enclosed strategy offers a return of 10% p.a. paid quarterly and accrued daily as long as the 4 banks, do not lose more than 25% from their initial level. The strategy offers quarterly exits from month 6, so qualified investors could get cash back earlier than 18 months. If for any reasons the stocks enter a sever bear trend, the product will provide extra safety with a leveraged put at 55%

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 18 Months unless called
Underlyings (WO) BNP, Credit Agricole, Societe Generale, Natixis
Low strike (leveraged put) 55%
Frequency Quarterly (Non-call 6 months)
Autocall trigger 100%
Coupon trigger 75%
Coupon 10% p.a. daily accrued
Investor Profile Aggressive Sophisticated
Delivery Physical
Alternative EUR, 6% p.a. daily accrued coupon

Mechanism

Scenario 1:In Q3, WO is up 3% (above the Autocall trigger) and the 4 stocks traded every day above 75% from their initial level
Payoff:Qualified investors get 100% capital back + 2.50% coupon (10% p.a. daily accrued). Investment early redeemed

Scenario 2:In Q4, WO is down 10% (below the Autocall trigger), and 1 stock traded 10 days below 75% from initial level
Payoff:Qualified investors get 2.22% (2.50% p.q. * 80/90). Investment continues

Scenario 3:At maturity, investment not early redeemed. WO is down 15% and the 4 stocks traded every day above 75% from their initial level
Payoff:Qualified investors get 100% capital back + 2.50% coupon (10% p.a. daily accrued)
Scenario 4:At maturity, WO is down 60% and the WO traded 10 days below 75% from initial level
Payoff:Qualified investors get 72.73% capital back (40%/55%) + 2.22% coupon (2.50% p.q. * 80/90)

The following graph represents the performance of the 4 underlyings over the last 5 years and the products payoff:

r3

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New Invest Ideas

Three new notes for you:

7Y USD TARN CLN 5.55% on Italy and CMS 30-2Y, 17% Target

The Credit Default Swap (CDS) of the Republic of Italy increased by 11.48% since the beginning of the year (it jumped to its highest level since 2013 in November 2018 - 302.165). The cost of insuring exposure to Italian government debt continued to surge since the new government is not reassuring for investors
The enclosed investmentstrategy offers a fixed guaranteed of 5.55% p.a. in years 1, 2 and 3 (total 16.65%) and isautocalled at 17.00% cumulative coupon from year 4 to 7. Qualified investors would be missing 35 bps (exposed to USD CMS 30-2Y). The issuer expects aduration of 4 to 5 years. Currently, the spread is at 18 bps and with a historic tendency to increase sharply in the coming 2-5 years, making it very likely to autocall on year 4
The investmentstrategy offers such an attractive yield because it has either incorporated acredit risk on Italy (ITALY CDS USD SR 7Y D14) and a rate risk on USD CMS 30-2Y This strategy is quite structured and is only suitable for qualified investors with a deep understanding of rates and credit risks

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity Max 7 Years, Min 4 Years
Underlying Republic of Italy (ITALY CDS USD SR 7Y D14), USD CMS 30-2Y
Republic of Italy Rating BBB (rated by S&P)
CDS Value (Pricing Date) 245 bds
Recovery Market recovery
Coupon Y1-Y3 5.55% p.a.
Coupon Y4-Y7 Max [0%; 200% x (USD CMS 30-2Y)], fixing in arrears
Target coupon 17% (product is autocalled when cumulative target coupon is paid)
Frequency Annually
Investor profile Sophisticated

Mechanism

Scenario 1: At the end of Y1, 2 and 3, no credit event occurred on Italy
Payoff: Qualified investors get 5.55% p.a. (30/360 basis, cumulative if no credit event: 16.65%)

Scenario 2: At the end of Y4, no credit event occurred and CMS 30-2Y spread is 0.752
Payoff: Qualified investors get Min[17% - 16.65%; 200% x 0.752] = 0.35% p.a. coupon (30/360 basis). Investment early redeems, qualified investors get 100% capital back

Scenario 3: At the end of Y5, investment not early redeemed, no credit event occurred and CMS 30-2Yspread is -0.152
Payoff: No coupon paid. Investment continues
Scenario 4: At the beginning of Y3, a credit event occurred on Italy
Payoff: Market recovery determined by ISDA. 5.50% p.a. coupon paid on Y1 & Y2, no further coupon payment and no autocall
Credit Event: If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the CDS Italy 7Y over the last 5 years:

n31

1Y USD LS 85% RC on USD 3 Month Libor, 8.20% p.a. Guaranteed

The recent market selloff in US equities and slowdown in the FED hiking cycle has led the term structure to invert in the shorter-end. Qualified investors who believe $3mL will either remain range bound, or rise gradually could consider the enclosed investment strategy guarantee a return, while having conditional capital protection
Thisstrategy is suitable for qualified investors with a view on US rates over one-year horizon. The capital is at risk if the $ 3mL trades in one year below 2.278 (15% lower than current level). The annualguaranteed return is at 8.20% (current $3mL 2.68 but not guaranteed in the future) with conditional capital protection, thanks to a 85% low strike put (2.278)

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 1Y
Underlying USD 3m Libor (US0003M Index)
Spot 2,68
Low Strike (leverage put) 85% (strike: 2.278)
Floor 0%
Coupon 8.20% p.a. paid at maturity
Investor Profile Bearish Speculative
Alternatives Maturity: 3M, USD 5.15% p.a.; Maturity:12M, EUR 4.35% p.a.

Mechanism

Scenario 1: At maturity, $3mL fixed at 2.71 (+1.12% from initial level)
Payoff: Qualified investors get 100% capital back + 8.20% p.a. coupon = 108.20%

Scenario 2: At maturity, $3mL fixed at 2.30 (-14.18% from initial level)
Payoff: Qualified investors get 100% capital back + 8.20% p.a. coupon = 108.20%

Scenario 3: At maturity, $3mL fixed at 2.11 (-21.27% from initial level)
Payoff: Qualified investors get 83.20% capital back + 8.20% p.a. coupon = 91.40%

The following graph represents the performance of the underlying over the last 5 years:

n32

4Y USD LS 55% Phoenix memo on EM ETFs, 12.24% p.a.

Emerging markets are increasingly becoming economies that rely heavily on external trade and financing. Today, these economies seem better placed to weather negative shocks than they were in the past. For the most part, external debt ratios in emerging-market economies havestabilised since the onset of the global financial crisis, while current account deficits are less pronounced. Last year, most Emerging Markets' (EM) performances were negative (Brazil ETF -8.35%, Russia ETF -13.19%, India ETF -11.52%, China ETF -18.19%), creating an interesting entry point
Qualified investors might prefer to gain exposure to someEmerging markets equities ETFs via a structured solution offering semi-annual returns and exits. EM assets are usually more volatile than developed markets’ assets and so this could allow for morefavourable pricing of yield enhancements auto-callable solutions
Thisstrategy enables qualified investors to generate an annual income of 12.24% p.a.over 4 years (total potential returns 48.96%), if none of the ETFs on Brazil, Russia, India and China drops more than 25% every six months. The solution offers liquidity viadescending triggers mechanism to increase the possibility of an earlier redemption for the strategy. On the downside, the qualified investor is exposed to aLeveraged Strike Put on the WO (55%)

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity Max 4 Years, Min 6 Months
Underlyings (WO) Brazil ETF (EWZ UP); Russia ETF (RSX UP); India ETF (EPI UP; China ETF (FXI UP)
Frequency Semi-Annual
Autocall trigger 95%, 95%, 90%, 90%, 85% up to maturity
Coupon trigger 75%
Coupon 12.24% p.a. memory
Low strike 55%
Settlement Cash or Physical
Investor Profile Neutral Sophisticated
Alternatives 3Y, USD 11% p.a. coupon; 4Y, GBP 8.32% p.a. coupon; 4Y, EUR 6.78% p.a. coupon

Mechanism

A qualified investor invests USD 1M on this structure:

Scenario 1:
 At the end of S1, WO is down 10% (from its initial level and below 95% AC trigger)
Payoff: Qualified investor gets 12.24% p.a. coupon (USD 122.4k). Investment continues

Scenario 2: At the end of S3, WO is down 30% (from its initial level and below 90% AC trigger)
Payoff: No coupon paid, but memory effect

Scenario 3: At the end of S4, WO is up 15% (from its initial level and above 90% AC trigger)
Payoff: Qualified investors get 100% capital back + 12.24% p.a. coupon (+ any previous memory coupons) = 1,122.4k min. Product early redeems

Scenario 4: At maturity, WO is down 18% (from its initial level and above 55% leveraged put)
Payoff: Qualified investors get 100% capital back + 12.24% p.a. coupon (+ any previous memory coupons) = 1,122.4k min

Scenario 5: At maturity, WO is down 60% (from its initial level and below 55% leveraged put)
Payoff: Qualified investors get 72.73% capital back ((100-60) / 55) or the equivalent in physical (thanks to conversion ratio)

The following graph represents the performance of the 4 underlyings over the last 5 years and the products payoff:

n33


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Corporate events
Stock indexes
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