Meteor Training Presentation Structured Products

8/4/2019 Meteor Training Presentation Structured Products

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This information is for professional investors only and should not be presented to, or relied upon by, private investors.

Innovative SolutionsImmaculate Service

Meteor Asset Management

Structured Products for Retail Investors

2011


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Contents

Topic Slide

Introduction to Meteor

Who we are 3

Principal Biographies 4

Product Range 6

Background to Structured Products 7

Rationale for Structured Investments 9

Active Product Example 10

Bespoke Service 12

Risk Considerations 13

Autocallable Structures Explained 15

Important Information 17


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Meteor Asset Management Limited (Meteor) was established in early 2006 to provide investors withinnovative and attractive financial solutions at a competitive price.

Our reputation as a provider of niche alternative investment solutions has seen assets undermanagement during the period grow in excess of 500 million.

Our product range offers a mix of closed ended structured products and open ended investmentfunds, providing a unique opportunity for investors to diversify their portfolio.

We also provide a popular structured product tailoring service that enables our clients to create avehicle that exactly matches their investment criteria irrespective of complexity or jurisdiction.

Meteor works closely with leading global investment banks, utilising the strong relationships the teammembers have with a large number of the worlds major financial institutions.

The Meteor Group operates two FSA regulated entities, Meteor Asset Management Ltd and Meteor

Investment Management Ltd along with a GFSC regulated company Meteor (Guernsey) Ltd. Thisstructure has been designed to provide the best possible service and maximise investor protection.

Our philosophy is to provide individual or institutional investors with first class investment solutionssupported by a first class service, unrivalled within the marketplace.

Who we are


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Graham Devile, Managing Director:

Graham has spent some 25 years working in the financial services sector, including ten years with one of thelarger UK accountancy practices. The majority of this time Graham has spent as an IFA working with high networth individuals and corporate clients, providing advice across the whole financial services spectrum. From1999 to 2006 he was Managing Director of an IFA and a structured product provider, and with the latter hewas heavily involved in the product design and marketing activities.

In 2006 Graham decided to set up a new business from scratch with a team who shared his vision of productand investment innovation and as a result they established what is now called Meteor Asset Management.

Philip Saunders, Business Development Director

Phil began his career as a Broker Consultant with Legal & General before joining an IFA business where hepioneered Guaranteed Income Bonds and created new types of income and growth investment products.

In 1984 he established a business specialising in broker funds before selling this and setting up a newbusiness in 1992 focused on the traded endowment policy market. For the last ten years he has specialised inthe structured product arena working closely with the derivatives desks at a number of leading banks anddesigning the products for the retail and corporate markets.

At Meteor he can fully exploit his wide range of banking contacts, which extend around the globe, with a viewto securing the best terms possible for our clients.

Principal Biographies


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Simon Bottomley, Finance Director:

A chartered accountant, having trained with KPMG, Simon became Finance Director of a property investmentand management firm. During this time he played a key role in a venture capital backed management buyoutand the subsequent sale of the business.

In 2001 he joined a financial services group as Finance Director. Here his activities included managing thefinances of its offshore operation and its structured product division. He brings to Meteor his knowledge ofaccounting, taxation, product development, regulatory requirements and the financial implications of operating inthe investment sector.

Susan Valler, Compliance Director:

A Fellow of the Chartered Insurance Institute and former Chairman of the Investment and Life Assurance Group(ILAG) Susan has specialised in the area of compliance for nearly 20 years.

Prior to specialising in the compliance arena she was the Administration Manager of a life assurance company.Since moving into Compliance she has developed and implemented compliance procedures, systems, control,risk mitigation and internal audit programmes in a number of different environments. Other key areas of inputinclude working with the product development and marketing departments, as well as the handling of issuesrelating to Treating Customers Fairly.

Her role on the ILAG Regulations committee means she has an excellent working relationship with andknowledge of the FSA and brings a wealth of experience to Meteor in this vital area.

Principal Biographies


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Meteor Asset Management

Fund Management Structured Products

Meteor Senior Life SettlementsSterling Fund

UK Protected Equity Funds

Meteor Clean Energy Fund

Meteor UK Property Funds:Commercial

Residential

e.g. Prima Series

Bespoke Products:LeverageProtected

AutocallableGrowthIncome

Linked to:Equities

Fixed IncomeCommodities, FX

Funds

Product Range


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Background to Structured Products

Structured products give investors the opportunity to invest in Indices and other assetclasses indirectly.

Any potential risks and rewards are pre-defined by the terms of the product.

Structured products can offer capital protection or an element of risk.

Capital at risk products generally offer enhanced returns because of the additional riskassumed. The maximum loss may be defined at outset or protection can be given in all

but extreme market conditions (e.g. fall in the underlying Index of more than 50% fromStrike level).

Products may offer Income or Growth options or both.

Investment is for a fixed term - therefore they are not as liquid as deposit accounts orinvestments in equities.


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Background to Structured Products

Origins date back to the early 1970s, but the market developed after the creation of theLondon International Financial Futures Exchange (LIFFE) in 1982.

LIFFE made the buying and selling of futures and options easier allowing purchasers to

take advantage of the movement in underlying equities or Indices without owning theunderlying themselves.

Many investors in the early 90s lost out to poorly designed Precipice Bonds whereinvestors were exposed to geared downside in the event of a market decrease e.g. for ever

1% fall, the investor lost 2%.

The reputation of structured products had been damaged due to this and other examples omis-selling.

Counterparty risk has been more prevalent since the collapse of Lehman Brothers in 2008.Counterparty risk is a key risk bourne by investors in structured products. Meteor assessesthe financial strength of any prospective counterparty before doing business with them.


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Rationale for Structured Products

Structured products can offer an investor:

Capital protection

Leveraged upside exposure

Fixed term investment

Exposure to difficult to access asset classes e.g. inflation

Exposure to a bespoke baskets of assets

The potential for income or growth

Defined returns; and

Defined risks


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Prima Growth Plan X

An autocallable structured product offering 8.5% per annum (not compounded)with 5 early maturity opportunities

Investment returns linked to the performance of the FTSE100 (the Index)

Early maturity will be triggered as long as the level of the Index is at or above itsOpening Level at any Annual Measurement Date

100% capital return provided the Index doesnt fall by more

than 50% over the term of the investment

Should the Index fall by more than 50% and not recoverby the end of the investment term there will be a capitalloss of 1% for each 1% the Final Index Level is below the

Opening Index Level

Active Product Example


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Prima Plus Plan X

An autocallable structured product offering 10% per annum (not compounded) with 5early maturity opportunities.

Investment returns linked to the performance of the FTSE100 and EURO STOXX 50

(the Indices).

Early maturity will be triggered if the levels of both Indices are at or above theirrespective Opening Levels at any Annual Measurement Date.

100% capital return provided the close of business levelof neither of the Indices falls by more than 50% from theirOpening Levels during the term of the investment.

Should the Closing of Business Level of one or bothIndices fall by more than 50% on any day and the Final

Level of one is below its Opening Level there will be acapital loss.

Active Product Example


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Bespoke Service

Our popular structured product tailoring service is a core part of our business and enablesour clients to create a vehicle that exactly matches their investment criteria irrespective ofcomplexity or jurisdiction.

Structured products offer investors a transparent diversification investment vehicle which can

be built to accommodate varying degrees of investor risk appetite, asset exposure andprotection with pre-determined return levels.

The diagram below summarises the main factors in developing a suitable structured product

Investor

Term Growth

Income

Autocallable Defined Maturity

Leverage Capital Protection

Type WrapperUnderlying Price Sensitive Factors

Issuer Rating Market Factors:

Interest Rates Volatility

Equities etc

Product Variations: Capped Upside

Floored Downside Capital Protection

Leverage Wrapper

Equities Bonds

Currencies

Commodities Hedge Funds

Mutual Funds Hybrids

For tax andRegulatory

Purposes

EMTNs

Warrants Preference

Shares

Investor

Term Growth

Income

Autocallable Defined Maturity

Leverage Capital Protection

Type WrapperUnderlying Price Sensitive Factors

Issuer Rating Market Factors:

Interest Rates Volatility

Equities etc

Product Variations: Capped Upside

Floored Downside Capital Protection

Leverage Wrapper

Equities Bonds

Currencies

Commodities Hedge Funds

Mutual Funds Hybrids

For tax andRegulatory

Purposes

EMTNs

Warrants Preference

Shares


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Risk Considerations

Credit Rating Agencies (CRAs) assign Credit Ratingsbased on their views of the worst possibilities in thevisible future for the institution. They do not base theiropinion on the past record or present status of theinstitution.

Meteor look at Long Term Ratings the agenciesopinion of the long-term financial outlook and creditrisk for the institution.

The table to the right indicates the different Long TermRatings of Standard and Poors, Moodys and Fitch.

An institution rated below the black line (below BBB-or Baa3) is considered to be non investment grade.

Institutions with the same Credit Rating from the sameagency do not necessarily have equal creditstrength/risk. Each available designation does notreflect the degrees of risk that actually exist within that

designation, or the area of the institution affected.

Credit Ratings and CDS Spreads


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Risk Considerations

Credit ratings are a recognised indicator of the financial strength of an institution, byindicating the probability of the counterparty being able to honour their obligations.

Meteor will only consider potential Counterparties with a current rating of at least A fromStandard and Poors, or a comparable credit rating agency (unless specifically requested to

consider a lower rated institution by an investor for a bespoke product).

Credit Ratings are merely opinions of an institutions overall financial capacity to meet itsfinancial commitments they do not apply to any specific financial obligation, such as theobligation to an investor in a structured product issued by that counterparty.

Credit Default Swap (CDS) spreads can also be used to assess the financial strength of acounterparty.

A CDS is basically a derivative - the buyer makes periodic payments to the seller foreffectively insuring against a debt default, and in return receives a payoff if the underlyingfinancial instrument does default.

The spread of a CDS is the premium to the risk-free interest rate that a bank can expect topay in the market for a loan from the underlying company. Companies with higher CDSspreads are considered riskier by the market than those with a lower CDS spread.

Credit Ratings and CDS Spreads


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Autocallable Structures Explained

Autocallable structures are designed to appeal to investors who have an uncertain view ona given underlying investment that is not necessarily bullish or bearish.

The product is designed to offer a pre-determined performance coupon over a specific timeperiod based on the underlying asset being above its initial strike level on any given pre-determined observation date.

Autocallable structures can be either/or capital at risk and capital protected. An attractivecoupon pay out can be achieved if capital is protected in all but extreme market conditions

For example - a 50% barrier. The underlying asset would have to fall by 50% (ormore) before any capital is put at risk.

If the barrier has been breached and, at maturity, the underlying asset has notrecovered, then the capital returned to investors will be initial investment underlyingasset performance at maturity.

If the underlying asset does recover this loss and ends up greater than 100% on anygiven observation date, the coupon payment would still be achieved (though thissituation is rare).

Autocallable structures typically comprise a bond (synthetic zero coupon bond) andderivatives.

Aside from the investment risk inherent in the structure, investors should also be aware thathe products are only as safe as the underlying bank issuing them (counterparty risk).

Product Objective


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Scenario Analysis

Start Date

Year 1

Year 2

Year 3

Fixing of the initial value Offer Price 100%

Equity Index > 50%? Payout: 100%

% Level of the Equity Index-

yesEquity Index > = initial level?

no

Equity Index > = initial level?

Equity Index > = initial level?

no

no

no

Payout: 110%

Payout: 120%

Payout: 130%

yes

yes

yes

Product Example

Autocallable Structures Explained

Underlying:

Payoff at maturity:

Equity Index

Knock In Put Barrier: 50%, only observed at maturity

Maturity: 3 years

Coupon: 10%

Example Product Terms

1. Index >= 100%: 100% + (n x Coupon), else:2. Index > 50%


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This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of

an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This information is

being delivered to IFAs and distributors in order to assist them in determining whether they have an interest in the type

of securities described herein and is solely for internal use. This information is based on or derived from informationgenerally available to the public from sources believed to be reliable. No representation or warranty can be given with

respect to the accuracy or completeness of the information, or with respect to the terms of any future offer of

transactions conforming to the terms hereof. We do not undertake to update this information. Certain assumptions may

have been made in the analysis that resulted in any information and returns/results detailed herein. Changes to the

assumptions may have a material impact on any results/returns detailed. Meteor Asset Management Limited and its

affiliates disclaim any and all liability relating to this information, including without limitation any express or implied

representations or warranties for statements contained in, and omissions from, this information. Additional information

is available on request. Meteor Asset Management Limited does not give investment, tax, accounting and legal or

regulatory advice and prospective investors should consult with their professional advisors. This memorandum is not a

product of Meteors Research Department and should not be regarded as a research report. This communication is not

directed in the UK to those persons who are retail customers (as defined in the UK Financial Services Authority's rules).

Important Information

Meteor Training Presentation Structured Products

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