Dual Currency Placement

Transcription

1 Dual Currency Placement

2 Dual Currency Placement If you have international financial interests and are prepared to accept a currency risk in exchange for the opportunity to earn a potential return, a Dual Currency Placement could be the answer. Dual Currency Placement 02

3 What is a Dual Currency Placement? A Dual Currency Placement is a complex short term foreign exchange investment that carries with it higher risks than short term savings, although it can also offer potentially greater returns. You receive an Option Premium determined by the movement in foreign currency exchange rates, potentially making your returns substantially higher. However, such returns are not certain and Dual Currency Placements do not offer the same protection as a traditional savings account as you may lose the principal sum invested. The minimum you can invest is US$20,000 or currency equivalent. You can choose your Base Currency and Alternate Currency from 3 currencies and you decide the investment Term and Strike Rate. Current Terms available are one week, two weeks and one month. You will not have access to your Initial Investment during the Term since, once a Dual Currency Placement is set up, you cannot cancel your investment and no withdrawals are allowed before the end of the Term. A Dual Currency Placement gives you an opportunity to take advantage of our expertise in international exchange markets. Your Relationship Manager will be able to help you understand the product and how it could fit with your international investment strategy. If you want to earn a potentially better return on your money, are happy to be paid in either of the currencies you choose, and understand that you may lose some of your Initial Investment if you are converted into an Alternate Currency, a Dual Currency Placement from Citi International Personal Bank could be what you are looking for. Dual Currency Placements are (i) not insured by any government agency (ii) not bank deposits and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates unless otherwise stated. They are subject to investment risks, including possible loss of principal amount invested. Details of the risks are set out in this brochure and the Citi International Personal Bank General Terms and Conditions you were provided when you opened your account with us. Some of the terms used with a Dual Currency Placement are technical, so we have used italics to highlight these and included a glossary on the back page. Dual Currency Placement 03

4 Key benefits and risks of a Dual Currency Placement A Dual Currency Placement could potentially provide an opportunity to generate greater returns than from short term cash investments. p Diversify your portfolio by gaining exposure to the foreign exchange market. p Instant, live pricing reflecting any changes in the market. p Potential to achieve a high short term Total Return. Online (non-advisory only), or through your Relationship Manager (choice of advisory or non-advisory). What are the risks of investing in a Dual Currency Placement? As with any foreign currency investment there are risks to consider and this product is not suitable for everyone. You should carefully consider your choice of currencies and timing of your decision. The risks include: p Tailor your investment to suit your view, expectation and requirements. p Select from a wide variety of currency pairs and Strike Rates. p Access to Citi s Market Research and Analysis, giving you Citi s view on future market movements. These views are provided by in-house Citi analysts, any conflict that arises between these views and activities conducted by Citi for you are dealt with in accordance with the Conflict of Interest Policy provided to you at account opening (and available on request). p Our booking times span the trading hours of a variety of markets, making it more convenient for you to take out a Dual Currency Placement. p Choose to open and manage your Dual Currency Placement either via Citi p The value of the currency in which you are paid back could decrease, as this will be at the predetermined conversion rate or Strike Rate, and Citi International Personal Bank, and not you, will choose whether to pay you in the Base Currency or the Alternate Currency. p You could receive less than your Initial Investment if, at the Expiry Date, you choose to convert the Alternate Currency back into the Base Currency, as this will be done at the prevailing exchange rate. p There may be tax implications to taking out a Dual Currency Placement. You should have good knowledge of your tax position, or seek professional tax advice. p You assume the full credit risk of Citibank N.A., London Branch, Citibank N.A., Jersey Branch or Citibank Europe plc, UK Branch (as applicable). This means that should any of these entities become insolvent or fail in any other way, you will be an unsecured creditor and might not receive back any of your Initial Investment or your Total Return. p Dual Currency Placements are not protected by the Irish Deposit Guarantee Scheme, the UK Financial Services Compensation Scheme or the Jersey Depositors Compensation Scheme as your Initial Investment and your Dual Currency Placement are not deposits. p The returns on a Dual Currency Placement are not guaranteed, and neither is the amount you initially invested. There are more risks to be aware of when considering a Dual Currency Placement. Please speak to your Relationship Manager for more information and refer to the Citi International Personal Bank General Terms and Conditions you were provided when you opened your account with us. To find out more about Dual Currency Placements please call us by using the contact details on the back cover, or visit ipb.citi.com. If you are an existing client please contact your Relationship Manager. Dual Currency Placement 04

5 Dual Currency Placement advisory service Citi International Personal Bank offers an advisory service for our Dual Currency Placements, so you can talk through the proposition in detail and get personal guidance about whether they are suitable for you. We offer this service because it is important that our clients consider all products when assessing if they want to invest in a Dual Currency Placement. Your Relationship Manager will be able to guide you through the process of taking out a Dual Currency Placement and advise you on the possible benefits and the risks. They will always carry out a suitability assessment and will never advise you to take out any products that do not fully meet your specific investment profile and circumstances. Any advice provided by us to you in relation to your entry into a Dual Currency Placement, is restricted to general advice in relation to your suitability to enter into a Dual Currency Placement but does not extend to advice on the nature and suitability of the specific details of a Dual Currency Placement to you (such as the Strike Rate and the Term) as these are decided by you as if you have negotiated and determined to enter into a specific Dual Currency Placement on a nonadvised basis. As part of our advisory service, your Relationship Manager will also talk to you about our analysts views of future currency movements, sharing our knowledge to help you to feel confident about deciding what suits you. These views are provided by in house Citi analysts, any conflict that arises between these views and activities conducted by Citi for you are dealt with in accordance with the Conflict of Interest Policy provided to you at account opening (and available on request). By receiving personal advice about Dual Currency Placements matched to your own circumstances, you can feel more involved and be better placed to make decisions. You can also choose to open and manage Dual Currency Placements entirely on your own, using Citi Online. This is on a non-advisory basis only and gives you maximum flexibility to invest how and when you like. If preferred, you may also take out a Dual Currency Placement through your Relationship Manager on a non-advisory basis. Whichever arrangement you choose, we will complete a risk profile with you before the sale to ensure you have appropriate understanding and experience of Dual Currency Placements. To find out more about Dual Currency Placements please call us by using the contact details on the back cover, or visit ipb.citi.com. If you are an existing client please contact your Relationship Manager. Dual Currency Placement 05

6 How a Dual Currency Placement works in practice A Dual Currency Placement lets you invest your funds for an agreed period of time and receive a potential return at the end of the Term. When you invest, you nominate your desired currency pair, made up of a Base Currency and an Alternate Currency. Your investment is held in the Base Currency. You nominate a threshold (Strike Rate) at which your investment could be converted from your Base Currency into your Alternate Currency. You then agree to sell a foreign Currency Option to us in return for an Option Premium. The combination of the Strike Rate, currency pair and the Term will determine the Option Premium. Your Initial Investment, plus the Option Premium are paid to you in your Base Currency if it has weakened in relation to your nominated Strike Rate at the expiry time on the Expiry Date. Otherwise, if the Base Currency has strengthened in relation to your nominated Strike Rate at the expiry time on the Expiry Date, then your Initial Investment, plus the Option Premium are converted into the Alternate Currency at the Strike Rate. If you are paid in the Alternate Currency, your Total Return will depend on how close your nominated Strike Rate is to the prevailing exchange rate at the end of your investment. At maturity, if you are paid in the Alternate Currency, you can convert the Alternate Currency back into the Base Currency. However, you would need to do so using the prevailing exchange rate, which could mean you receive less than your Initial Investment. It is important that you are happy to receive either the Base Currency or the Alternate Currency when the Dual Currency Placement becomes due for payment, so they best suit clients who already operate in more than one of the available currencies. For example, if you live in one country and work regularly in another, or if you have children studying or working in another country, a Dual Currency Placement may potentially be suitable for you. Your Relationship Manager can talk to you about other options, such as re-investing into a Dual Currency Placement. The currencies you can choose p British Pounds (GBP) p United States Dollars (USD) p Euros (EUR) p Australian Dollars (AUD) p Japanese Yen (JPY) p Swiss Francs (CHF) p Canadian Dollars (CAD) p Turkish Lira (TRY) p Russian Roubles (RUB) p Hungarian Forint (HUF) p Polish Zloty (PLN) p Romanian Leu (RON) p Czech Republic Koruna (CZK) Your Relationship Manager can advise you about the currency combinations available to you. Try our Dual Currency Placement Demo Explore how different exchange rate scenarios can affect your investment outcome on our website. Dual Currency Placement 06

7 How are Dual Currency Placements priced? A Dual Currency Placement uses the foreign exchange Options market. You sell the foreign Currency Option to Citi, for which you receive an Option Premium. This premium means you can potentially receive higher returns in comparison to a short term savings product, although the actual return will depend on your agreed Strike Rate and the position of the markets at the end of the Term. What fees are payable on a Dual Currency Placement? Where you use our non-advisory services and you decide to invest in a Dual Currency Placement, an upfront transaction fee based on your Initial Investment will be charged in addition to the amount you invest as follows: If you invest through a Relationship Manager (in branch or via telephone) a transaction fee of 0.5% will apply. Alternately, if you invest through Citi Online a transaction fee of 0.0% will apply. Please note that your first trade is always done over the phone. Where we provide you with advisory services in relation to a Dual Currency Placement, and you decide to invest in that Dual Currency Placement, an upfront advisory fee will be charged in addition to your Initial Investment. Our upfront advisory fee is made up of: (i) an advice fee of 0.05% based on your Initial Investment; and (ii) a transaction fee of 0.5% based on your Initial Investment. Further details are set out in our Fee Schedule. Please contact your Relationship Manager if you have further questions. The examples on the following pages show you how a Dual Currency Placement works in practice, illustrating two possible scenarios; one where the prevailing exchange rate strengthens and is above the Strike Rate and the other where the prevailing exchange rate weakens and is below the Strike Rate. An illustration is shown in British Pounds and also US Dollars. They are for illustrative purposes only; the actual sums you receive will be different. Dual Currency Placement 07

8 I live and earn in the UK and my children study in the US so I frequently have needs in USD and GBP. What product could potentially be suitable for me? Illustration where you choose to invest in British Pounds (GBP) Select the Base Currency and the Initial Investment amount (This must be equivalent to a minimum of US$20,000) British Pounds (GBP) 50,000 GBP appreciation Investment date Investment term : -month 9:00 AM on expiry date Select the Alternate Currency from the list of currencies available Select the investment Term Determine your Strike Rate by setting your Differential. Set your Strike Rate to be equal to the Spot Price or any other available Differentials US dollars (USD) One month GBP/USD.5900 (spot =.5800 plus positive 00 Differential) 3 GBP.5900 USD Strike Price Differential: +00Pips GBP.5800 USD Spot Rate Foreign exchange fluctuation A Based on the above selection, agree the Option Premium 8.50% p.a B 4 On the Expiry Date, we will pay you the Initial Investment plus your return in one of the two ways shown on the right.5 GBP depreciation In addition, a fee may apply for providing you with a Dual Currency Placement Scenario A Initial Investment and return will be paid in USD since GBP on Expiry Date strengthens to.6000 in relation to Strike Rate of.5900 Total earned on Expiry Date (Initial Investment + Option Premium) x Strike Rate (GBP 50, % ) x.5900 USD $80,055* Scenario B Initial Investment and return will be paid in GBP since GBP on Expiry Date weakens to.500 in relation to Strike Rate of.5900 Total earned on Expiry Date (Initial Investment + Option Premium) GBP 50, % p.a. GBP 50,349 Please note: The Option Premium can vary depending on the Base Currency and Alternate Currency, the Term, the Strike Rate and current market conditions; in this example, the Option Premium has been set by Citi International Personal Bank at 8.50%. Indicative exchange rate for illustration purposes only In Scenario B, we do not exercise our Currency Option to pay you in the Alternate Currency and we will pay your Initial Investment and return in the Base Currency. * In Scenario A, you should be aware that if you chose to convert your USD back to GBP at a lower level than the Strike Rate, you may lose a part of the amount you initially invested, i.e. you may not get back in GBP the original amount of your Initial Investment as the GBP-USD exchange rate is not in your favour. Dual Currency Placement 08

9 I am a frequent business traveller and require USD and GBP from time to time. I am indifferent to holding either of the currencies and currently have USD that I can invest. What product could potentially be suitable for me? Investment date 9:00 AM on expiry date Illustration where you choose to invest in United States Dollars (USD) USD depreciation.60 2 Investment term : -month 4 Select the Base Currency and the Initial Investment amount (This must be equivalent to a minimum of US$20,000) Select the Alternate Currency from the list of currencies available United States Dollars (USD) US$50,000 British Pounds (GBP) Spot Price GBP.5700 USD Differential: +00Pips Foreign exchange fluctuation A B 2 Select the investment Term One month.56 3 Determine your Strike Rate by setting your Differential. Set your Strike Rate to be equal to the Spot Price or any other available Differentials GBP/USD.5600 (spot =.5700 plus positive 00 Differential) 3 Strike Rate GBP.5600 USD Based on the above selection, agree the Option Premium 3.50% p.a On the Expiry Date, we will pay you the Initial Investment plus your return in one of the two ways shown on the right In addition, a fee may apply for providing you with a Dual Currency Placement.5 USD appreciation Scenario A Initial Investment and return will be paid in USD since USD on Expiry Date weakens to.6000 in relation to Strike Rate of.5600 Total earned on Expiry Date (Initial Investment + Option Premium) USD $50, % USD $50,563 Scenario B Initial Investment and return will be paid in GBP since USD on Expiry Date strengthens to.5500 in relation to Strike Rate of.5600 Total earned on Expiry Date (Initial Investment + Option Premium) USD ($50, %) /.5600 GBP 32,42* Please note: The Option Premium can vary depending on the Base Currency and Alternate Currency, the Term, the Strike Rate and current market conditions; in this example, the Option Premium has been set by Citi International Personal Bank at 3.50%. Indicative exchange rate for illustration purposes only In Scenario A, we do not exercise our Currency Option to pay you in the Alternate Currency and we will pay your Initial Investment and return in the Base Currency. * In Scenario B, you should be aware that if you chose to convert your GBP back to USD at a lower level than the Strike Rate, you may lose a part of the amount you initially invested, i.e. you may not get back in USD the original amount of your Initial Investment as the GBP-USD exchange rate is not in your favour. Dual Currency Placement 09

10 What are the tax considerations? All prospective purchasers of the Dual Currency Placement are advised to consult their own tax advisers as to the tax consequences of a purchase and holding a Dual Currency Placement. Neither Citibank N.A., London Branch, Citibank N.A., Jersey Branch or Citibank Europe plc, UK Branch nor any of their affiliates can accept responsibility for the tax treatment of any investment product, whether or not it is involved in the administration of trusts or companies by which the product is purchased. No Citi entity provides any tax advice. Please seek independent tax advice. To find out more about Dual Currency Placements please call us by using the contact details on the back cover, or visit ipb.citi.com. If you are an existing client please contact your Relationship Manager. Glossary Alternate Currency means the currency in which we buy the Base Currency from you, in the event we choose to exercise the Currency Option. Base Currency means the currency in which the Initial Investment is made. Currency Option the right (but not the obligation) for Citi to convert your Initial Investment and Option Premium into the Alternate Currency at the Strike Rate. Differential the number of Pips by which the Strike Price is placed away from the Spot Price. Differential value can be positive or negative. Please note that the selectable Differential range is subject to change without notice due to market conditions. Expiry Date means the date on which your Dual Currency Placement matures and the date on which we pay you the Initial Investment and Option Premium. General Terms and Conditions means the General Terms and Conditions issued by Citi International Personal Bank (as amended from time to time). Initial Investment means the initial principal sum invested by you (this must be at least US$20,000 or currency equivalent). Option an Option is a financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the Option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfil the transaction. Underlying asset can be a stock, a bond, a currency or a future. In Dual Currency Placements, we will buy a Currency Option from you. Option Premium means the premium payable by us to you as consideration for you granting us the Currency Option. Pip the smallest unit of foreign exchange rate movement. Strike Rate means the preagreed exchange rate of one unit of the Base Currency into the Alternate Currency. Term means the period of time from when the Dual Currency Placement begins until the Expiry Date. The Term must be less than nine (9) months and will normally be one () or two (2) weeks or one () month. Total Return the Total Return you receive. This will be a combination of the Initial Investment and the Option Premium. Dual Currency Placement 0

11 Contact details Find out how you could make the most of your capital by investing internationally To see how Dual Currency Placements work, visit our website. Here you can simulate trades with our interactive Dual Currency Placements simulator and see how easy it is to set up and manage Dual Currency Placements online with our short video demo. Alternatively you can contact us using the details below, or if you are an existing client please contact your Relationship Manager. London Level 4, Citigroup Centre 25 Canada Square London E4 5LB United Kingdom Tel: +44 (0) Fax: +44 (0) Jersey P.O. Box 04, 38 Esplanade St Helier Jersey JE4 8QB Channel Islands Tel: +44 (0) Fax: +44 (0) Important information This document has been prepared for your personal use for information purposes only and is not intended as an offer or personal recommendation for the purchase or sale of a Dual Currency Placement or any other investment. The information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, the risks, and their financial situation and their needs. Any investment decisions should be made based on a review of your particular circumstances with your financial adviser and other professional advisers as appropriate. Prior to making any investment decision, you should fully understand the economic risks and merits as well as the legal, tax and accounting characteristics and consequences of the transaction, and make your own determination that the investment is consistent with your objectives and that you are able to assume the risk. We offer Dual Currency Placements on an advised and a non-advised basis. Please ask your Relationship Manager for further details. If you are in any doubt about the suitability of a Dual Currency Placement, you should consult your financial adviser. Investment products are not insured by any government agency, not bank deposits and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates unless otherwise stated. Dual Currency Placements are subject to investment risks, including possible loss of the Initial Investment. Past performance is not indicative of future results, investments can go down as well as up. Investors investing in investment products denominated in non-local currency may be subject to risk of exchange rate fluctuations if the investment is not in your home currency, which could result in loss of principal if converted back to your home currency. We will provide you with details of any fees, penalties or surrender charges that apply to any investment you make. We will advise you whether an investment transaction has been made for you on an advised or a non-advised basis. The ultimate parent company of Citibank N.A., London Branch, Citibank Europe plc and Citibank N.A., Jersey Branch is Citigroup Inc. This information is confidential and intended solely for the use of Citibank N.A., Citigroup Inc., our affiliates and you. It is not to be reproduced or distributed to any other person except to your professional advisers. All effort has been made to ensure that information contained in this document is accurate. Citibank N.A., London Branch is authorised and regulated by the Office of the Comptroller of the Currency (USA) and authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Our firm reference number with our UK regulators is Citibank Europe plc is authorised by the Central Bank of Ireland and by the Prudential Regulation Authority. It is subject to supervision by the Central Bank of Ireland, and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. Citibank N.A., London Branch is registered as a branch in the UK at Citigroup Centre, Canada Square, Canary Wharf, London E4 5LB. Registered number BR0008. Citibank Europe plc, UK Branch is registered as a branch (registration number FC032763) in the register of companies for England and Wales. The registered address in the UK is Citigroup Centre, Canada Square, Canary Wharf, London E4 5LB. Citibank Europe plc is registered in Ireland with number 3278, with its registered office at North Wall Quay, Dublin. Citibank Europe plc is regulated by the Central Bank of Ireland. Ultimately owned by Citigroup Inc., New York, USA. Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission. Citi International Personal Bank is registered in Jersey as a business name of Citibank N.A. The address of Citibank N.A., Jersey Branch is P.O. Box 04, 38 Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A. is incorporated with limited liability in the USA. Head office: 399 Park Avenue, New York, NY 0043, USA. Citibank N.A CITI, CITI and Arc Design are registered service marks of Citigroup Inc. Calls may be monitored or recorded for training and service quality purposes Dual Currency Placement