Presentation on theme: "In-Cap Thematic Basket of Agriculture & Infrastructure linked stocks."— Presentation transcript:
In-Cap Thematic Basket of Agriculture & Infrastructure linked stocks
Contents In-Cap Thematic – Agriculture - Infrastructure3 Why Invest in Agriculture and Infrastructure ?4 The Basket of Stocks5 The In-Cap Thematic Mechanism10 In-Cap Thematic at a Glance11 In-Cap Thematic : Scenarios12 Historical Simulations15 Advantages and Drawbacks17 Contact Details18 Disclaimer19
In-Cap Thematic A medium-term BNP Paribas certificate (AA) – 5 years maximum – Early recall possible from year 4 10% guaranteed coupon in year 1, 2 and 3 Variable coupons with high and unlimited yearly returns Soft capital protection enabling the investor to receive coupons and to redeem 100% of initial capital even when markets are bearish Convincing historical results with a yearly return ranging between 8.16% and 35.88%
Why invest in In-Cap Thematic ? For the last 18 months, financial markets have been under stress which has significantly reduced the growth enjoyed over the last 5 years. The mix of sub-prime, credit crisis, weakened consumer confidence, steep commodities increase and high inflation has created a tenuous scenario for investors around the world. Numerous investors have returned to simple risk-free investments, i.e. bank deposits, in order to minimize losses. This trend seems adequate for short term needs, however, investors who seek to create future value for their portfolios will not benefit from long positions taken on a variety of other investment media. How can an investor take advantage of the current market skittishness and take solid positions that will secure future earnings and create value? When times are tough, it makes sense to take a ‘BACK to the BASICS’ strategy. Based on the macro-economic factors that affect all markets, this strategy dictates that the main needs of human beings drive their investments. Enforced by the factor of globalization and the tendency that the emerging markets follow the habits and trends of the developed economies, BNP Paribas has sought to identify sectors that embrace and take advantage of the people’s requirements. Agriculture and Infrastructure are two sectors that are heavily influenced by macro events and will strongly benefit in the future as demographics, growing urban population and higher quality living standards will lead to increased consumption in these sectors and subsequent ancillary sub-sectors. In-Cap Thematic exploits and takes advantage of these trends and rewards the investors with the best of the two worlds: Agriculture and Infrastructure.
The Basket of Stocks (1) In-Cap Thematic is linked to the evolution of a basket of 15 Stocks related to Agriculture and Infrastructure: Known blue chip market leaders in the Agriculture – Infrastructure sector all around the world. Strong praise by analyst consensus*: The variable coupon and the early recall depend on the evolution of the Reference Basket: The Reference basket is made up of the 5 stocks which, at each yearly observation date and from inception, have recorded the lowest performance since the outset. *Bloomberg data as of 06th August 2008
The Basket of Stocks (2) NameBloomberg Code 1MOSAIC CO/THEMOS UN EQUITY 2ARCHER-DANIELS-MIDLAND COADM UN EQUITY 3SYNGENTASYNN VX EQUITY 4POTASH CORP OF SASKATCHEWANPOT UN EQUITY 5DEERE & CODE UN EQUITY 6MONSANTO COMON UN EQUITY 7KUBOTA CORP6326 JT EQUITY 8CF INDUSTRIES HOLDINGS INCCF UN EQUITY 9YARA INTERNATIONAL ASAYAR NO EQUITY 10VEOLIA ENVIRONNEMENTVIE FP EQUITY 11WILLIAMS COS INCWMB UN EQUITY 12HYUNDAI HEAVY INDUSTRIAL KS EQUITY 13ATLANTIAATL IM EQUITY 14EXELON CORPEXC UN EQUITY 15CATERPILLAR INCCAT UN EQUITY
The Basket of Stocks (3) MOS UN Equity Mosaic Company produces and distributes crop nutrients to the agricultural communities located in North America and other countries. The Company's principal products include concentrated phosphates, potash, and nitrogen. ADM UN Equity Archer-Daniels-Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products. The Company processes oilseeds, corn, milo, oats, barley, peanuts, and wheat. Archer-Daniels-Midland also processes produce products which have primarily two end uses including food or feed ingredients. SYNN VX Equity Syngenta AG produces crop protection products and seeds. The Company produces herbicides, insecticides and fungicides, and seeds for field crops, vegetables, and flowers. POT UN Equity Potash Corporation of Saskatchewan Inc. produces potash, phosphate, and nitrogen to the agricultural and industrial industries worldwide. The Company conducts operations in Canada, Chile, the United States, Brazil, and Trinidad. DE UN Equity Deere & Company manufactures and distributes a range of agricultural, construction, and commercial and consumer equipment. The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services.
The Basket of Stocks (4) MON UN Equity Monsanto Company provides technology-based solutions and agricultural products for growers and downstream customers in the agricultural markets. The Company's herbicides, seeds, and related genetic trait products provide growers with integrated solutions to produce crops at higher yields, while controlling weeds, insects, and diseases JT Equity KUBOTA CORPORATION manufactures industrial machinery, farm machinery, and fluid piping systems. The Company's products include ductile iron pipes, engines, tractors, combine harvesters, reaper binders, rice planters, and excavators. Kubota also produces forged iron products, housing equipment, and environmental control plants. CF UN Equity CF Industries Holdings, Inc. manufactures and distributes fertilizers. The Company produces nitrogen and phosphate fertilizers. CF operates facilities in Louisiana, Florida and Alberta, and terminals and warehouses throughout the midwestern United States. YAR NO Equity Yara International ASA produces, distributes, and sells nitrogen-based mineral fertilizers and related industrial products. The Company also distributes and sells a range of phosphate and potash-based mineral fertilizers, as well as complex and specialty mineral fertilizer products. VIE FP Equity Veolia Environnement operates utility and public transportation businesses. The Company supplies drinking water, provides waste management services, manages and maintains heating and air conditioning systems, and operates rail and road passenger transportation systems.
The Basket of Stocks (5) WMB UN Equity The Williams Companies, Inc. is involved in energy-related activities. The Company through its subsidiaries explores, produces, gathers, processes and transports natural gas. Williams also manages a wholesale power business. Williams' operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, Southern California, and Eastern Seaboard KS Equity Hyundai Heavy Industries Co., Ltd. builds ships for commercial, and military purposes. The Company manufactures oil tankers, cargo and passenger vessels, and warships. Hyundai Heavy Industries also produces heavy industrial machineries, electrical components for engines and power trains, and industrial vehicles, such as cranes and bulldozers. ATL IM Equity Atlantia S.p.A. is a holding company with responsibility for portfolio strategies in the transport and communications infrastructures and network sectors. EXC UN Equity Exelon Corporation distributes electricity and gas to customers in Illinois and Pennsylvania. The Company also has holdings in infrastructure services, energy services, and telecommunications businesses. CAT UN Equity Caterpillar Inc. designs, manufactures, and markets construction, mining, agricultural, and forestry machinery. The Company also manufactures engines and other related parts for its equipment, and offers financing and insurance. Caterpillar distributes its products through a worldwide organization of dealers.
The In-Cap Thematic Mechanism In year 1 : Payout of a 10% guaranteed coupon In year 2 : Payout of a 10% guaranteed coupon In year 3 : Payout of a 10% guaranteed coupon In year 4 :Early recall with 100% capital redemption + 10% coupon + 100% positive performance of the Reference Basket if the Reference Basket is below the 60% barrier: No coupon is paid out And the product continues the following year In year 5 :The same coupon calculation as in year 4 is retained Capital protection : if the Reference Basket is above the 60% barrier: 100% capital redemption at maturity if the Reference Basket is below the 60% barrier: Redemption = Value of the Reference Basket
1 60% (Barrier) Año 3 Year 2 10% Fixed Coupon Year 5 Product continues to next year Year 4 Early Recall with 100% Capital + 10% coupon Early Recall with 100% Capital + 10% coupon + Rise of the Ref Basket Reference Basket value In-Cap Thematic at a Glance 10% Fixed Coupon Year 1Year 3 100% Capital + 10% coupon + Rise of the Ref Basket 100% Capital + 10% coupon Final Value Of Ref Basket 100% (Price at Issue) 10% Fixed Coupon
In-Cap Thematic : Scenarios (1) Favorable scenario (early recall) 40% 60% 80% 100% 120% 140% Year 1, 2 & 3 : A 10% guaranteed Coupon is paid out In Year 1, 2 and 3, the investor receives the 10% guaranteed coupon. In Year 4, the Reference Basket has risen by 32%, The investor thus redeems 100% of his capital + a coupon of 10% + Rise of Reference basket = 42% 18% annualised return 160% 10%10%10% Reference Basket 10%10% At the end of year 4 : The Reference Basket has increased by 32% Early recall : 100% Capital Return + 10% coupon + Rise of the Reference basket Total return = 42% +32%
In-Cap Thematic : Scenarios (2) Median scenario (early recall) 40% 60% 80% 100% 120% 140% Year 1, 2 & 3 : A 10% guaranteed Coupon is paid out In Year 1, 2 and 3, the investor receives the 10% guaranteed coupon. In Year 4, the Reference Basket is above the 60% barrier, at 72%, The investor thus redeems 100% of his capital + a coupon of 10% 10% annualised return 160% 10%10%10% Reference Basket 10%10% At the end of year 4 : The Reference Basket is at 72% Early recall : 100% Capital Return + 10% coupon
In-Cap Thematic : Scenarios (3) Unfavorable scenario 40% 60% 80% 100% 120% 140% Year 1, 2 & 3 : A 10% guaranteed Coupon is paid out In Year 1, 2 and 3, the investor receives the 10% guaranteed coupon. In Year 4, the investor receives no coupon, as the Reference Basket is below the 60% barrier. In Year 5, the Reference Basket is below the 60% barrier. The average Final Value of the reference basket is paid out. -2.4% annualised return 160% 10%10%10% Reference Basket 10%10% 5 58% Year 4: The Reference Basket dropped below the 60% barrier =>product continues to following year At the end of year 5 : The Reference Basket has dropped below the 60% barrier No coupon is paid out, and the capital is no longer guaranteed
Historical Simulations (1) Investment simulations on historical data have been computed. These simulations allow for testing of the product and its performance on the basis of previous results. Methodology : from 1st January 1990 to 15th April 2004, we simulate an investment of In-Cap Thematic on the basis of historical results of stocks constituting the basket. Number of simulations = 3,693 were computed from January 1990 to April 2004 Yield Minimum8.16% Average13.54% Maximum35.88% Results are outstanding : In more than 95% of all cases, the product had an early redemption in Year 4 In less than 5% of all cases, redemption was in Year 5 In-Cap Thematic would always have redeemed 100% of initial capital according to past simulations
Historical Simulations (2) Distribution of Returns 3,693 simulations were computed from January 1990 to April 2004 Results are outstanding : In 100% of cases, annual yields are more than 8% In 47% of cases, annual yields are superior to 11%
Advantages and Drawbacks Advantages: Medium-term maturity : 5 years maximum A 10% return is guaranteed the first 3 years Early recall possible from Year 4 Unlimited upside returns from Year 4 You can potentially win even when there is a market reversal (security effects) Full capital protection if the Reference Basket doesn’t drop below a 60% barrier at maturity No exchange risk Drawbacks: Yearly returns based on the 5 lowest-performing stocks (Reference Basket) Risk of capital loss at maturity Non redistribution of dividends paid out by the stocks of the basket