Shares and options service

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1 Rob Wilson/schutterstock.com Shares and options service Successfully playing the stock market takes time, research and discipline. The shares and options service from KBC Private Banking offers you advanced guidance for your investments.

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3 KBC Private Banking can help you with investment decisions such as: how much I should invest in shares; what regions, industries and themes I should go for; what shares offer the best promise at the best price in those regions, industries or themes; when the ideal time is to buy and sell; whether my portfolio is diversified enough to limit its volatility and the individual equity risk; what risks there are, and whether they can be hedged to any extent; which option alternatives might generate additional returns. At KBC Private Banking, we offer two kinds of shares and options service: Advisory share management, where you choose which advice you wish to follow regarding specific shares and options A formula which allows you to opt to have shares and options included in the actively managed investment fund 1, Horizon Private Banking Active Stock Selection. Discretionary Management Advisory share management 1 Fund is the common name for an undertaking for collective investment (UCI). Shares service 3

4 Advisory share management Do you prefer to decide yourself what shares to invest in but like to base your decision on advice received from specialists? Then KBC Private Banking s advisory share management service is for you. We will provide you with information and recommendations on shares and markets. This relies on research done by KBC Asset Management and KBC Securities, along with our own analyses. Our recommendations are tailored to your own investment objectives. To make this possible, we have an equity trading adviser at every branch, working closely together with your private banker. Your private banker monitors your portfolio s overall allocation and risk, while the equity trading adviser intensively tracks its shares and options. You can find our recommendations on the KBC Private Banking website, or sign up for our and text message services. Whenever we identify new buy or sell opportunities, we ll send you an and/or text to let you know, because timing your buy and sell transactions is every bit as important as your actual choice of share, and it s a big advantage to quickly have all the latest information. We can also call you proactively as and when new opportunities arise. Your private banker or equity trading adviser will give you the best possible information and advice before deciding. And, of course, we ll continue to monitor the shares we suggest.

5 Management features What shares? fundamental analysis When selecting shares, we use global stock-picking techniques. You can invest in any region, industry or theme, based on growth forecasts, valuations and risks. Your portfolio is partly put together top-down on the basis of our current investment strategy in terms of regions, industries and themes. The rest are selected from the best shares within each region, industry or theme, mainly based on a fundamental analysis, which involves extensive research into the market environment, growth and return projections, valuations and risks. The first stage in a fundamental analysis is done by analysts at KBC Securities (for the Benelux countries) and KBC Asset Management (for around 200 shares worldwide). We only advise buying a share if the analysts issue a neutral, accumulate or buy recommendation. And, if a reduction or outright sale of a position is advised, we ll also recommend selling. We also issue buy recommendations for shares that are not tracked by our analysts, but which have received appropriate endorsements from other analysts around the world. When should you buy or sell? technical analysis Recent years have shown that more value can be created in volatile markets by properly timing market entry and exit by means of a buy and hold strategy. Because we think that the next few years will also see sustained volatility, it makes good sense to exploit interim price fluctuations to the investor s advantage. In order to identify the right time to buy or sell, we use a technical analysis. Using price graphs and technical indicators, we try to gauge shortand long-term trends. The graphs express investor sentiment for a given share. By identifying a relevant trend, we re able to trade in line with the market tendency. Within a trend, we look for support and resistance levels to set buy and sell limits. Shares service 5

6 Option strategies designed to increase your return or reduce your risk Looking to further improve the risk/return ratio of your share portfolio? KBC Private Banking also advises you on (defensive) option strategies in which limited buy and sell orders are replaced by written put and call options. This allows us to limit the equity risk and/or raise your return. Buy shares at a possible discount Do you want to buy shares? If so, you might alternatively consider writing put options, under which you receive a premium in exchange for committing to buy a share at a pre-fixed price (the exercise or strike price). At the time when you have to honour your commitment (generally when the share price falls below the strike price on the relevant day), you buy the share at a discount (the premium you ve received). If the share price on exercise is below the strike price less the premium, you will make a virtual loss at that time. If the option is not exercised by the relevant day, the premium is yours to keep and you are released from your commitment.

7 Set a selling price and raise your return Do you own shares that you want to sell when a predetermined limit price is reached? In that case, you can also write call options as an alternative. In exchange for committing to sell a share at a higher, pre-fixed price, you receive a premium. This provides extra return and a buffer against any limited fall in the share price. If the share price rises above the pre-fixed price, you have to sell when exercising the option. But that was what you intended in the first place. If the share continues to appreciate, however, you miss out on the added gain because you had to sell at a price that was lower than the subsequent stock quotation. If the option is not exercised by the relevant day, the premium is yours to keep and you are released from your commitment. Protect your equity investments against price falls Many people investing in shares want to permanently safeguard a part of their assets. For them, KBC Private Banking advises on how to buy put options offering at least partial protection of their share positions. Alternatively, you can also invest the major portion of your portfolio in cash or relatively safe bonds and still incorporate stock tracking with a limited investment in call options. This allows you to benefit from a large part of the stock market s upward potential whilst limiting your risk to the purchase price of the call options you buy. Building a balanced portfolio There s a place for shares in most portfolios, though what portion of your portfolio is made up of shares depends on your risk profile, of course. Your private banker/equity trading adviser recommends that you build sufficient diversification and an acceptable degree of risk into your portfolio in line with the investment strategy and your risk profile. Each share cannot exceed 10% of the total portfolio. An evenly spread share portfolio can also help limit short-term movements in value. Shares service 7

8 Horizon Private Banking Active Stock Selection Choosing the right shares and the right times to buy and sell takes a lot of time, research and discipline. Which is why it makes sense to entrust these choices to equity selection specialists. KBC Private Banking s Horizon Private Banking Active Stock Selection 2 is an actively managed investment fund that offers you an effective solution saving you time and effort. The fund contains a selection of international shares and is managed by KBC Asset Management, which has brought in a dedicated investment committee for this purpose. This committee is made up of industry analysts from KBC Asset Management, with KBC Private Banking s equity specialists playing an advisory role. The committee is able to react quickly to changing market conditions. At least 50% of Active Stock Selection is exposed to the stock markets. In order to adequately limit risk, the fund diversifies its investments over at least 40 shares with varying individual weightings that never exceed 4%. Active Stock Selection can invest up to 30% in deposit accounts and shortterm debt instruments for short periods. The quest for an absolute return and the possibility of partially hedging against price drops Active management also means that the fund need not always invest all of its assets in shares. If market prospects take a turn for the worse, the investment committee can hedge up to 50% of the share positions in cash or derivatives pending a more favourable entry time. For the most risky shares, the fund uses alert thresholds which, when crossed, trigger a thorough reassessment and/or disposal of a share position. The fund may, for example, decide to sell index futures or purchase put options as a (partial) safeguard against price falls on its share positions. Risks This equity fund is market-sensitive (risk and reward indicator of 7 on a scale of 1 to 7). Shares do not offer a guaranteed return and may fluctuate greatly in value. The fund has an average exchange risk given that it invests in securities denominated in a currency that is different from the fund s. However, this fund s net asset value can be subject to high volatility as a result of the portfolio s composition. 2 A sub-fund of the Belgian public open-ended investment fund, Horizon. You can find the prospectus, Key Investor Information Document and latest periodic reports at www. kbcam.be/fundfinder or can obtain them free of charge from your KBC Private Banking branch. Please read the Key Investor Information Document before investing in this fund. The relevant financial services are provided by KBC Bank and CBC Banque.

9 Active management: global stock-picking with a major trading aspect The fund entails a very active form of share management based on global stock-picking, which involves selecting the most promising and attractively priced shares from the various relevant industries. The timing of buy and sell trades is optimised on the basis of changing fundamentals and indicators of sentiment. Profits are taken at regular intervals (for instance, once the target price is reached or when untoward news comes in), with a buy-back of the stock in cases of correction or arbitrage to an underperforming industry peer. Greater efficiency in trading and execution Because there is only a short time between trade decisions and actually trading, the fund can capitalise more quickly on opportunities. Share management is also somewhat more detached from the emotions of individual investors. This makes it possible to decide more rationally, for instance when profit warnings are issued or if an alert threshold is breached. There is also greater rationality when executing transactions to avoid liquidity-driven price reactions, since orders involving less-liquid shares are spread over several days. Transparent reporting of primary importance We use a variety of communication channels to keep you updated on what s happening in the fund s equity portfolio. We you and tell you the reasons for each transaction and ensure a detailed list of the portfolio s make-up is available every day as an appendix to your portfolio summary, and provide a monthly report with an evaluation of the markets, the strategy pursued and a summary of purchases and sales. The fund s net asset value is also published in the financial press (De Tijd and L Echo). Investment amount, taxes and charges The minimum amount you can invest is euros. Entry charges to this investment fund amount to 1%. The stock-market tax on capitalisation shares is 1% upon exit. The only exit charges are a 5% fee if you sell your units within one month of purchasing them. Withholding tax on distribution shares is 25%. Shares service 9

10 The information we provide to you In addition to our specific share and option recommendations, you can also ask our private bankers and equity trading advisers all kinds of general questions on shares and the financial markets. If necessary, they will call on the bank s various specialists to answer your individual queries. You will find general information on shares, options and the related risks in our Investment instruments: strengths and weaknesses brochure which you can obtain from any KBC Private Banking branch. We keep you informed of developments on the financial markets via the following media: Market Focus (by delivered each day at around 9.30 a.m.), with a summary of the previous day s markets; Market Vision (once a month by and/or two printed publications by regular post), which provides in-depth analyses of macroeconomic indicators, stock-market forecasts and share strategy; Academy News (a printed publication sent by post once a month). Lastly, we help you to get to know companies close up and bring you into contact with their management through our many share seminars, investor events and company visits. If you are interested in and would like to find out more about KBC Private Banking s shares service, please contact your private banker or equity trading adviser. They will then discuss with you the most suitable approach for your portfolio. Alternatively, take a look at the Private Banking website under your portfolio.

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