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Product Overview:

While most bonds offer a fixed rate of interest, Structured Notes’ returns can be variable as interest payment is linked to the performance of a selected underlying asset. Structured securities have cash flow characteristics that are based on the cash flow characteristics of a pool of underlying assets. The cash flow characteristics could depend on one or more indices or have embedded forwards or options. The underlying assets can include: equity indices, stocks or Exchange Traded Funds (ETFs), Commodities or Foreign currency.

Structured Products are synthetic instruments that combine derivatives and financial instruments to create securities that have significant risk/return profiles that may not be otherwise achievable in the marketplace and are tied to an investor’s specific market expectation. They may combine traditional fixed income benefits (principal protection, coupon, payments) with the performance of underlying securities (shares, bonds, indices) linked to derivatives (options, forwards, swaps).

Structured Products arose from the needs of companies which want to issue debt more often and more cheaply. Traditionally, one of the ways to do this was to issue convertible bonds where under certain circumstances they could convert to equity in the company. Structured Products add features to the basic convertible issue debt more often and more cheaply. Traditionally, one of the ways to do this was to issue bond where increased income or enhanced returns within an investment may be possible in exchange for limits on the convertibility of the stock, or principal protection. While there are numerous types of structured products, four of the more common types are:

• Principal Protected Structured Notes – These notes offer 100% principal protection. Performance can either be derived from the performance of a selected index or multiple underlying indices (U.S., foreign or both). The underlying assets also could be commodities, currency, or stocks. These notes are for “buy and hold” investors and have terms ranging from two to seven years.
• Booster-Plus Notes – are Principal Protected Notes that may be appropriate for investors caught in very uncertain markets. The Booster-Plus Note works well in a bull market, and may also perform well in a flat to bearish market. They typically offer an above-average return up to a certain barrier on the upside, while also providing a limited return based upon the downside performance.
• Absolute Return Principal Protected Structured Notes – with this type of note, the investor may gain a return whether the price goes up or down (within certain parameters). These are short-term notes (usually 1-2 years). They are built with a combination of put and call options and thus may perform well in very uncertain markets. They may be a good investment for someone with an interest in a particular market who is not will to risk any of his or her principal.
• Buffered Notes – Unlike Principal Protected Notes, this type of note offers a limited amount of downside protection. For example, a Buffered Note may protect the investor for the first 25% of erosion of the underlying asset and any decline in value beyond that is not protected. However, this note typically offers increased upside potential versus the more Principal Protected Note as determined by the closing prices of the associated index, commodity, currency or basket of stocks.

Issuance:

Structured Notes are issued by domestic or foreign banks to help fund their lending programs. These notes are accessed through some of the world’s leading investment-derivatives desks, providing an array of opportunities for you to structure a uniquely suitable investment strategy.

Structured Notes are investment vehicles issued as either registered securities, non-registered securities, or as certificates of deposit. Registered securities are filed with the SEC as medium term notes. Non-registered securities are exempt from SEC registration and are typically issued by foreign-based banks via their U.S. branch offices using a 3A2 exemption. CDs are insured by the FDIC to a maximum of $100,000 per depositor or up to $250,000 for qualifying retirement accounts.

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Bonds involve risk and are not suitable for all investors.   Fixed income investments are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, corporate events, tax ramifications, and other factors.   This is not an offer or solicitation for brokerage services or other products or services in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the securities laws or other local laws and regulations of that jurisdiction.

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