Capital ProtectedSeries 1

Summary of the key features

The Solactive Alpha Mutual Fund VT Index

The Index is an excess return index designed to track the extent to which performance of the Basket of Underlying Funds exceeds the USD Secured Overnight Financing Rate (“USD SOFR”) subject to a 4.5% target volatility mechanism, 150% maximum participation rate and 1% p.a. decrement fee. In other words, the index aims to capture the “alpha” generated by the Basket of Underlying Funds above the USD SOFR.

Please refer attached link for further information including access to the underlying rules of the Index.

https://www.solactive.com/Indices/?index=DE000SL0LF04

The key features of the Index include:

• Alternative source of return: The Index captures the investment return of 4 alternative underlying funds which are managed by experienced global fund managers;
• Diversified mix of investment style: The underlying funds include a diversified range of different investment styles – see below table;
• Long/Short: Each of the underlying funds have the flexibility to take either long and short positions within their respective portfolios. As such, they have the ability to generate positive returns irrespective of the direction of the relevant underling market;
• Low Correlation to Global Equities: At the time of the Index being launched in February 2024 it has historically exhibited a low correlation of approximately 0% to the S&P500; and
• Pricing efficiency: The index has been designed to allow efficient pricing of structured products such as Sequoia Alpha Series 3.

On a daily basis, in order to limit negative performance in extreme market conditions, a risk control mechanism is used inside the Index. It ensures that the volatility of the Index will remain close to the 4.5% target by reducing the Index’s exposure to the Basket of Underlying Funds in situations where the annualised realized volatility of the Basket of Underlying Funds exceeds 4.5%. The maximum level of exposure is 150% and the minimum level of exposure is 0%.

In addition to the volatility target mechanism, the Index also includes a 1% p.a. decrement fee which is accrued on a daily basis and deducted from the performance of the Basket of Underlying Funds when calculating the level of the index. This decrement fee is included by the Index Administrator since it allows for efficient pricing of structured products such as Sequoia Capital Protected Series 1.

The volatility control mechanism may provide some protection against decreases in the prices of the Basket of Underlying Funds however it may also limit the Index’s (and the Unit’s) exposure to increases in the unit prices of the Basket of Underlying Funds being tracked by the Index. This means there is a risk that the volatility control mechanism could result in a lower Performance Coupon being payable relative to if the Index did not include a volatility control mechanism.

For further details on how this is calculated, please contact the Issuer at Email: specialistinvestments@sequoia.com.au

Downloads

To find out more, and to download a copy of the Termsheet IM and Master IM, please click on the links below

Key risks include:

• Any Performance Coupons is affected by the performance of the Index. There is no guarantee that the Reference Asset will perform well during the Investment Term.
• There will be no Performance Coupons payable if the Index Performance is negative at a Coupon Determination Date. Further, if a Performance Coupon has already been paid during the Investment Term, no further Performance Coupons will be paid unless the Index Performance has further increased as at any subsequent Performance Coupon Determination Date. i.e. if the index subsequently falls or remains the same then no further Performance Coupons will be paid.
• Investor’s capital is at risk in the case an Investor makes an Issuer Buy-Back Request or if the Units are subject to an Early Maturity event. Therefore, the amount received by an Investor may be less than the Issue Price even if the Reference Asset has performed positively between the Commencement date, or previous Coupon Determination Date and the date that the Investor makes an Issuer Buy-Back request or any date on which the Units become subject to an Early Maturity event.
• Investors are subject to counterparty credit risk with respect to the Issuer and the Hedge Counterparty. If the Issuer goes into liquidation or receivership or statutory management or is otherwise unable to meet its debts as they fall due, the Investor could receive none, or only some, of the amount invested. However, the Issuer is a special purpose vehicle that only Issues Deferred Purchase Agreement or other structured products and has put in place a corporate structure which is designed to give Investors security over the Issuer’s rights against the relevant Hedge Counterparty (through the Hedge Security Deed and Security Trust Deed) in the event of the Issuer becoming insolvent.
• The Units include a risk of capital loss in part or in whole, in the event the Hedge Provider fails to meet its obligations under the Notes issued to the Issuer. If this occurs before Maturity it is likely to cause an Early Maturity Event. The Final Value and/or the Coupons of the Units will depend on whether an Early Maturity Event has occurred.
• Investors should be aware that credit ratings do not constitute a guarantee of the quality of the Units, the Reference Asset, or the Hedge Provider. The rating assigned to the Hedge Provider by the rating agencies, if any, is based on the Hedge Provider’s current financial condition and reflects only the rating agencies’ opinions. In respect of the Hedge Provider, rating agencies do not evaluate the risks of fluctuation in market value but attempt to assess the likelihood of principal and/or interest payments being made. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning agency. Nevertheless, the rating agencies may fail to make timely changes in credit ratings in response to subsequent events so that a Hedge Provider’s current financial condition may be better or worse than a rating indicates. Accordingly, a credit rating issued in relation to the issuer of the Notes acquired by the Issuer as a hedge may not fully reflect the true credit risks under the Units.
• the Units may mature early following an Early Maturity Event, including an Adjustment Event, Market Disruption Event or if the Issuer accepts your request for an Issuer Buy-Back;
• Investors who purchase Units in the Secondary Offer Period at an Issue Price greater than the Initial Issue Price of $1.00 per unit will receive a lower overall return, as the Final Value and Coupons are calculated with respect to the Initial Issue Price of $1.00 per Unit. Additionally, if there is an Early Maturity Event, an Investor who purchased Units at an Issue Price greater than the Initial Issue Price of $1.00 will incur a greater loss as the recovery of funds in an Early Maturity Event would be based on the Initial Issue Price of $1.00 per Unit;
• Default Event (by the Hedge Provider). The Units may mature early (Early Maturity Event) following an event occurring in relation to the Hedge Provider or the Reference Asset, which may be caused by the Hedge Provider or any guarantors of the Hedge Provider;

Please refer to Section 2 “Risks” of the Master PDS for more information.

Units in Capital Protected Series 1 are issued by Sequoia Specialist Investments Pty Ltd (ACN 145 459 936) (the “Issuer”) and arranged by Sequoia Asset Management Pty Ltd (ACN 135 907 550, AFSL 341506) (the “Arranger”). Investments in the Capital Protected Series 1 can only be made by completing an Application Form attached to the Term Sheet IM, after reading the Term Sheet IM dated 19 March 2024, the Master IM dated 14 March 2024 and submitting it to Sequoia. A copy of the Termsheet IM and Master IM can be obtained by contacting Sequoia Asset Management or contacting your financial adviser. You should consider the Term Sheet & Master before deciding whether to invest in Units in Capital Protected Series 1. Capitalised terms on the webpage have the meaning given to them in Section 10 “Definitions” of the Master IM.