Sequoia Income Enhancer 5
The Sequoia Income Enhancer – Series 5 Units (“Income Enhancer 5” or “Units”) is a Series of Units which offer investors the potential to receive fixed income returns, linked to a basket of global shares (“Reference Basket”).
The Reference Basket is comprised of a notional basket of one share (each a “Component Share”) in each of the following companies:
- Nike Inc.
- Lululemon Athletica Inc.
- LVMH Moett Hennessy Louis Vuitton SE;
- Alphabet Inc.
- Apple Inc.
- Walt Disney Co
Income Enhancer 5 may appeal to investors who:
- want an investment with Fixed Coupons of 2.5% payable at the end of each quarter (10% p.a. not compounded). The Fixed Coupons are payable every quarter up until the earlier of the Maturity Date or the first Auto Call Date on which ALL the Component Shares are above their respective Auto Call Levels (“Auto Call Event”);
- have a view that the price of none of the Component Shares will fall by 35% or more relative to the Starting Price by the Maturity Date. If the Closing Price of any of the Component Shares is 35% or more below the Starting Price at the Maturity Date, then a Kick-In Event will occur. Please refer to Section 1 “Term Sheet” below for a description of the effect of a Kick-In Event;
- are comfortable with the risk that they will have exposure to the Lowest Performing Component Share at Maturity if a Kick-In Event occurs at Maturity. In this case the Final Value of the Units will reflect the performance of the Lowest Performing Component Share; and are comfortable with the investment maturing early on the first Auto Call Date on which ALL the Component Shares are above their respective Auto Call Levels (in this case the Investor will be paid the Issue Price in addition to the Fixed Coupon);
For Series 5, the Auto Call Level is 100% of the respective Starting Price of each of the Component Shares comprising the Reference Basket at the end of Quarters 3, 4, 5, 6, and 7. There is no potential for any Auto Call Event at Maturity. Please refer to the table below.
- Starting Price
- Kick in Price (65% of starting prices)
- 21 September 2020
- 21 December 2020
- 21 December 2020
- 21 June 2021
- 20 September 2021
Key risks include:
- Capital invested in the Units is at risk. There is no capital protection or guarantee of financial return in respect of your investment in the Units. The value of the Units is calculated by reference to the performance of the Component Shares. Depending on the performance of the Component Shares during the Investment Term, you may incur a loss of all or part of your total Investment Amount. You may lose the entire amount you have invested in the Units. You will lose your entire total initial Investment Amount if the Maturity Price of the Lowest Performing Component Share is zero (however this will not affect your Fixed Coupons). The risk of a loss of your total Investment Amount means that, in order to recover and realise a return upon their investment, Investors must generally be correct about the direction, timing and magnitude of an anticipated change in the value of the Component Shares over the Investment Term.;
- Kick-In Event – On the Settlement Date, you will receive a Delivery Parcel the value of which is calculated by reference to the definition of Final Value in this Term Sheet PDS. If a Kick-In Event does not occur and an Auto Call Event does not occur throughout the Investment Term, this will be equal to the Issue Price of $1.00 per Unit. This means that at Maturity the value of your Units will not be adversely affected by a fall in the Closing Price of the Lowest Performing Component Share down to (but not including or below) the Kick-In Price. If a Kick-In Event occurs at any time during the Investment Term (and an Auto Call Event has not occurred beforehand), Investors will be exposed to the Performance of the Lowest Performing Component Share at Maturity. Please note there is NO overall principal protection in this product. Hence you may lose all of your total Investment Amount if a Kick-In Event occurs (however this will not affect your Fixed Coupons). Also note Investors who purchase Units in the Secondary Offer Period at an Issue Price greater than the initial Issue Price of $1.00 will receive a lower overall return, or make a greater loss, as the exposure to the Performance of the Lowest Performing Component Share following a Kick-In Event are applied to the Issue Price of $1.00 and not the Investor’s Secondary Issue Price. You will not receive any Delivery Assets if the Final Value is zero.
- Performance of the Component Shares. Historical prices of the Component Shares should not be taken as an indication of the future performance of the Component Shares during the Investment Term. It is impossible to determine with certainty whether the Component Shares will rise or fall. Investors should consider all appropriate publicly available information in relation to the Component Shares. These factors include, but are not limited to, movements in international financial markets, interest rates, currency rates and global economic, political, technological and environmental factors. In particular, as the Final Value depends on whether a Kick-In Event has occurred in respect of any Component Share at Maturity, the Final Value may be less than an Investor’s Issue Price if a Kick-In Event has occurred in respect of only one Component Share, even if the other Component Shares have increased in value. The Units are a speculative investment and may produce less returns than other investments, or no return at all. Investors should not expect the return on their investment to be the same as a return on the equivalent investment in the Component Shares. In many cases, the Component Shares will not be perfectly correlated with an investment in the actual asset or market.
- Kick-in Price Closing Price at Maturity
- Component Share price. The performance of the Component Shares reflects the movements in the price of the Component Shares on the Relevant Exchange and does not take into account dividends, interest or other income paid on those shares
- Value of the Units before the Maturity Date. The Final Value of the Units is calculated by reference to whether a Kick-In Event has occurred at Maturity, and if a Kick-In Event has occurred, by reference to the value of the Performance of the Lowest Performing Component Share on the Maturity Date. The market value of the Units before the Maturity Date will be determined by many factors. These include: value of each of the underlying Component Shares; volatility of each of the underlying Component Shares; time to Maturity; interest rates; general market risks, including but not limited to, general index movements, macroeconomic risks and supply and demand; fees and costs; and perceived creditworthiness of the Hedge Counterparty. Investors should be aware the Units are designed to be held to Maturity and are not designed to be a trading instrument.
- Acquisition of Units during the Secondary Offer Period – Investors who acquire Units during the Secondary Offer Period at a Secondary Issue Price above the initial Issue Price will receive a lower overall return, or make a greater loss, as the Final Value is calculated by reference to the initial Issue Price
- Early Maturity – The Units may mature early following an Early Maturity Event, including as a result of an Auto Call Event, Adjustment Event or Market Disruption Event or if your request for an Issuer Buy-Back is accepted. If the Units are subject to Early Maturity for any reason other than in the case of Auto Call Event, you will not be entitled to a refund of the Issue Price for each Unit and the amount that the Issuer receives from the Hedge Provider may be significantly less than would have otherwise occurred had the Investment reached Maturity. In the case of an Auto Call Event, the Investor will receive the Delivery Asset at Maturity, unless an Investor elects the Agency Sale Option in the relevant annual Notice of Maturity.
- Hedge Risks – the following risks may affect the Hedge Agreement, and in turn affect the value of your Units or result in an Early Maturity Event:
- The occurrence of any event that prevents, restricts or delays the Hedge Counterparty from converting or delivering relevant currencies or otherwise leads to a delayed and/or reduced payment under the Hedge Agreement.
- The Hedge Counterparty may make certain modifications to the Hedge without the consent of the Issuer.
- Foreign tax legislation may impose taxes on payments made by the Hedge Counterparty, received by the Hedge Counterparty or on payments made under the Hedge.
- Withdrawals and liquidity risk – There is no established market for the Units. The Issuer has the right to accept or reject redemptions in its absolute discretion. Generally, the Issuer would only reject or defer an Issuer Buy-Back request if it is unable to adequately unwind its hedging arrangements.
- Custodian risk – The Custodian is a related party to the Issuer. The primary role of the Custodian is to hold the beneficial interest in the Delivery Asset and arrange for the sale of the Delivery Asset if the Agency Sale Option is elected by the Investor at Maturity. The role of the Custodian is set out in the Custody Deed. There is a risk that the Custodian may be unable to perform its obligations under the Custody Deed and that Investors may not receive the Sale Monies or other amounts or assets due to them when due under the Terms.
- Default under Hedge for another Series risk – There is a separate Hedge for each Series and, except in the case of an insolvency event, the right to set off and net payments applies separately to the Hedge for each Series. However, if there is an insolvency event (in relation to either the Issuer or the Hedge Counterparty) under a Hedge, then the Hedges for all Series may terminate and the relevant. Hedge Counterparty and the Issuer will have the right to set off and net the amounts payable on termination across the Hedges for all Series (where the Hedge Counterparty is the counterparty). Please refer to Section 2 “Risks” of the Master PDS for more information