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Question
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Answer
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| What are structured products? |
Structured products come in many forms and are a combination of standard financial instruments to form a single investment solution. Created to meet the specific needs of investors, structured products are inherently flexible – a solution can be found to match just about every investment objective.
Structured products can be used as an alternative to a direct investment, as part of the asset allocation process to reduce the risk profile of a portfolio or to capitalise on a current market trend.
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| What is Capital Series? |
A ‘set and forget’ investment that aims to generate capital growth and income (in some cases) over a set period. Capital Series can give you easy access to a number of asset classes and markets around the world with the benefit of capital protection1 at maturity.
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How is Capital
Series
structured?
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Capital Series is structured as a Deferred Purchase Agreement (DPA) Under a DPA, investors agree to accept the physical delivery of the Delivery Assets on the maturity date. They can also elect to sell the Delivery Assets and receive their maturity value in cash (brokerage costs apply).
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What is capital protection?
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A feature often associated with structured products, capital protection1 generally means that an investor’s initial investment amount is protected up to a certain level (e.g. 70%, 100%) if the investment is held to maturity. In a volatile environment, a capital protection1 feature may be valuable for investors who are seeking an alternative to a direct investment with a reduced level of risk.
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| Why is the product called Capital Series? |
The product aims to generate capital growth as well as provide capital protection1, hence the name “Capital Series”.
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What are the benefits?
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● You can ‘set and forget’ for 5.5 years.
● At maturity you have the choice of taking your gains as units in the SPDR S&P/ASX 200 Fund2,
or you can receive a cash payment by electing to sell your units (brokerage costs will apply).
● If the market performs badly your initial investment is capital protected to 100% at maturity
● You have the opportunity to get exposure to the Australian or selected international share
markets
● You have the potential for capital growth.
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What are the risks?
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● If you choose to accept physical delivery of units in the SPDR S&P/ASX 200 Fund at maturity,
you will have exposure to the performance of this Fund which may not be advantageous to
you.
● In respect of both Strategies, if on the Maturity Date the final value of your investment is not
higher than your Investment Amount, you will make no return on your Investment.
● Your investment amount is not capital protected if you terminate early.
● Performance and general investment risk –There is a risk that the Reference Assets may
perform poorly. Capital Series is not a listed investment.
● Market risk – Capital Series may be affected by market variables, such as uncertain
economic conditions.
● Taxation risk – changes to the tax law or interpretation could affect the value of your
Investment.
● Credit risk - the risk that Commonwealth Bank does not meet its obligations under the terms of
each transaction, which are unsecured. Investments in Capital Series are not bank deposits.
● Operational risk – the risk of Commonwealth Bank delaying or failing to execute and settle
your Investment in a timely and accurate manner.
● Legal risk – the risk that Commonwealth Bank suspends, cancels, terminates or refuses you
service due to changes in your financial circumstances or security.
● Adjustment Events – due to certain events occurring the delivery assets, reference assets
and/or relevant dates may change.
● Change in dates and times – the risk that dates and times of the Investment change.
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Who is Capital Series suitable for?
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Capital Series may or may not be suitable for you. You should seek your own independent legal, taxation and financial advice before making a decision on whether to invest in Capital Series.
Refer to Section 1.3 “Who is Capital Series suitable for?” of Part 1 of the PDS for more information. |
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What is a participation rate?
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The leverage or exposure of a product to movements in the Underlying Portfolio’s price. A participation rate of 100 per cent would generate a return exactly equal to any rise in the underlying portfolio. For example, if the underlying portfolio rises by 35 per cent, your return would also be 35 per cent.
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What happens at maturity?
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You can choose to receive the final value of your investment as either:
● units in the SPDR S&P/ASX 200 Fund, or
● a cash payment – by electing to sell the units (brokerage costs will apply)
You will receive a letter from Commonwealth Bank one month before maturity asking you to elect one of the above maturity options. If you do not advise of your preference, you will automatically receive units in the SPDR S&P/ASX 200 Fund.
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| What is a delivery asset? |
The asset which you agree to purchase at maturity. The number of units you will receive depends on the maturity value of your investment.
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| Why is capital growth capped? |
A capped level of capital growth essentially means that you receive any growth up to that particular level. The reason a cap is placed on some strategies is simply for pricing reasons. For example, by foregoing some capital growth, a 100% capital protection1 feature can be factored in.
Alternatively, strategies which do not have a cap on the capital growth usually do not offer coupons (income payments), or in some cases have a reduced level of capital protection1.
Commonwealth Bank does not receive any benefit if a strategy’s capital growth exceeds the cap level.
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What happens if I need to get my money back early?
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You can request to terminate your Capital Series investment and generally your request will be processed on the 15th day of every month (or next business day). You can obtain an indicative termination quote during the month by calling your financial adviser.
If you wish to proceed with your early termination, please submit your signed termination quote to the Commonwealth Bank at least three business days prior to the 15th of the month. Please note that the final termination amount can vary from the indicative amount. Break costs and early termination fee will apply.
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How is the strategy portfolio return calculated?
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Because each strategy has different features, there is no one formula to calculate the strategy portfolio return. You will need to refer to the PDS (Part 2) to determine the calculation relevant to your Strategy.
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What are the costs?
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The following fees apply:
Initial adviser fee – the amount paid to your adviser, as agreed between you and your adviser.
Brokerage Fee – up to 0.55% of the final value of your investment (including GST) charged to sell your delivery assets if you elect a cash payment at maturity.
Early Termination Fee – up to $500 charged if you terminate your investment before it matures. Break costs may also be applicable to you.
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| How are previous issues of Capital Series performing? |
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