Please note that there are several options to make payments under a structured ILP to the policy owner: (a) Death Benefits: if the policy owner dies while the policy is still in service, the greater the amount of life insurance for the policy; or the cash value for the policy; is paid to the stated beneficiary. When the death benefit is paid the policy is discontinued and there will be no further payout. (b).Maturity / Survival Benefits: If the policy owner survives to maturity, the insurance term expires and the policy owner is paid the maturity value.

Please know that variables such as interest rates , inflation, exchange rates, product prices and so on can cause fluctuations in prices as they directly affect profitability. Consider , for example, the stock price of an company. As interest rates rise, the cost of borrowing rises, and profits decline. When a local currency appreciates, after conversion, the cost of imported materials becomes cheaper, and the profit increases if the goods are sold locally at the same price.

It should be recognized that the way to handle collateral risk is to maintain an appropriate level of collateral needed, and provide additional collateral after its value has been depreciated. Since most organized goods are non-standard OTC contracts, the sum of collateral is subject to private bargaining.

It should be remembered that not all risky investments offer high potential for yield. There are bad investments that offer low payoff for the high risk. In the same way, it is possible but unlikely, that low-risk opportunities deliver high returns. The investment firm is to correctly determine the risk-return profile of each opportunity and to assess if the risk-return ratio is acceptable.

A security’s market price is the current price the security can buy or sell at. Market price is, in theory, the present value of future profits for the issuer. Profitability-related considerations-existing and future-impact the current market price. In reality, supply and demand are, to a large degree, dictated by the market price.

It is claimed that, at the expiry date, a sudden decline in the value of the underlying assets that wipe out the entire cumulative benefit over the contract period. There is no way for the buyer to ride out the inevitable downturn as the contract expires after expiry. This is unlike a direct investment in stocks, where investors can opt to keep stocks in the hope of price recovery at a later date.

It is stated that if an investment is considered to be of high risk, it means that the probability of the expected return that might not be achieved is greater than other investments. It also means the principal can be lost in whole or in part. Of course, investors are demanding proper compensation for the risk they take on. This is the reason why investors expect higher returns from risky investments, i.e. compensate for the higher probability that the returns may not materialize.

A CIS’s assets are held by a custodian of third parties such as the trustee. Therefore, investors in structured funds do not need to be worried about the product issuer’s credit risk, although they are also subject to CIS investment default risk. By comparison, investors in structured deposits and structured notes are general creditors of financial institutions selling the securities in the event of bankruptcy.

It is to be acknowledged that the financial background and literacy of the client influence what is considered “clear”. Explaining a complicated product in plain language isn’t easy. One way of achieving the Fair Dealing Outcome is to explain the product features by presenting a range of possible product outcomes.

Please learn that the risk drivers for the derivatives component are linked to the derivatives contracts’ underlying assets, as the price movement of the derivatives contracts follows the price movement of the underlying assets, whether it is an equity index or a specific commodity, or a stock or currency basket. The price of the derivatives is often determined by the counterpart’s creditworthiness.

It is to be learned that the price of the derivatives is also determined by counterparty creditworthiness. The price of the derivative contract goes down when there is uncertainty as to the willingness of the counterparty to fulfill its contractual obligation. Another risk factor is the foreign exchange rate, insofar as foreign currencies are involved in either part.

It is to be learnt that the payment netting is also commonly used to reduce the risk of counterparties for both OTC and traded exchange products. Payment netting minimizes the need for funds and shares to change hands, increasing the probability that each party will get what it is expected to get at the end of the day.

It is stated that buying calls is appealing for aggressive investors because of the leverage. Assume Michael has a strong sense that a particular stock is about to move higher. His cash outlay if he buys the stock is S$1,000 for every 100 shares and his overall loss is S$1,000. When he buys a call he charges S$100 (100 shares X S$1 per right), and his risk is limited to S$100. We see leverage working here-the call is just 10 percent of the S$1,000 needed to buy the stock directly.

Please note that a barrier option is employed in the Barrier Certificates. In this option the exercise option depends on a crossing or attainment at a specified barrier of the underlying properties. There are four variations of these options as follows: – Up-and-out: The spot price begins below the barrier level and the knock-out alternative has to climb to the barrier level– Down-and-out: Spot prices start above the barrier level and have to drop down to the barrier level for the knock-out option;
– Up-and-in: the spot price begins below the barrier level and has to go up to the barrier level
– Down-and-in: the spot price begins above the barrier level and has to descend to the barrier level to enable it.

Please learn that the options and warrants are close. Both entitle to buy (“call” contract) or sell the underlying security (“put” contract):
· By specified quantity;
. At a given price (called the “exercise price” or “strike price”)
. On or before a given date (referred to as the “expiry date”) Options and warrants give the right to purchase or sell the underlying content, but not the obligation. The warrant holder or the alternative will determine whether or not he exercises the contractual rights.

Please note that the Choice Fund is a closed fund with a fixed maturity date. At least the Secure Value maturity value is equal to. It aims at ensuring long-term capital appreciation and producing the best possible outcome such that at least the secure price is equal to the payout of each unit on the maturity date.

Please learn that due to the initial payments, the fund will receive at least 5 percent for breakeven only. It should be remembered that the underlying investments in the six stocks are NOT. The six stocks are only used as a reference benchmark to determine annual payout levels and early redemption occurrences.

It is to be acknowledged that a typical life insurance policy has an element of protection and an element of savings/investment. Part of the premium insurance is used to provide protection from death or other misfortunes, such as a disability or terminal illness. The balance of the premium is invested, payable at the policy maturity, early termination of the policy or other occasions in accordance with policy conditions.

It is stated that price of opportunity means an investor loses the ability to spend it elsewhere by bringing money into an ILP. There’s no guarantee of course that putting capital somewhere would yield better returns. Another source of cost of opportunity is from fund diversification. The very nature of diversification means that the good performance of a single security or a single asset class is dragged down by others in the same portfolio.

It is to be acknowledged that before making an investment decision an investor should have sufficient information and be kept up-to-date on the performance of his investments. Communication with customers is continuous, divided into the product life cycle into three stages:
 disclosure at the point of sale;
 disclosure at policy inception; and
 ongoing disclosure after policy inception.

Please note that the aim of the provision of a PHS is to highlight the main characteristics and risks inherent in the ILP sub-fund. Prospective policy-makers will first read product overview, obtain a clear understanding of product functionality, and then read PHS in question-and-answer format to answer any questions they might have. There should be no details in the PHS which is not in the product summary.

An ILP offers two ways of charging fees and charges. One approach is by deducting prime or unit cancellation. For example, before the balance is invested in the underlying ILP subfunds, the upfront sales commission is deducted from the single premiumh. The other way is via payment directly from the ILP subfund ‘s assets. For example, fund management charges and auditor fees are deducted from the net asset value of the fund, before determining the unit price. Marketing and advertising costs can NOT be charged out of the sub-funds.

Please note that the insurer shall send a ‘Semi-Annual Report’ and a ‘Related Audit Report’ for each of the ILP subfunds. The Semi-Annual Report will include: (a) market value of investments; (b) top 10 market value holdings; and (c) market value of derivatives exposure. All values shall be shown in both dollar amounts and Net Asset Value (NAV) percentage.

Please note that in terms of form, a reverse convertible bond consists of a bond containing the annual interest payments (if any) and the par value at maturity; and a signed put option (i.e. the holder buys a put option), offering the securities at maturity instead of the par value if the kick-in price is infringed.

It is to be acknowledged that financial institutions are expected to train their Advisors on the characteristics and risk-return profile of any investment products they suggest. While the financial institutions have the responsibility to provide the preparation, the Advisors are responsible for product information. All financial products show trade in risk and return.

Please note that knowledge transparency contributes a great deal to the comprehension of a financial product by the consumer. The Fair Dealing Guidelines allow consumer statements to be in plain language, avoiding technical and deceptive words and delivered in a simple-to-read and easy-to-understand format.The client’s financial experience and literacy affect what is deemed “clear”.

This is suggested that advisors will assist clients on the basis of their personal circumstances and risk appetites in deciding their investment objectives. The pool of structured goods is broad enough to match most combinations of health, income, and development goals. However, most structured goods are not liquid and the “fair” market value can hardly be calculated.

Please learn that one way to counter this is to use publicly-traded derivatives. If the transaction takes place at an exchange, the risk of the counterparty is minimized because the exchange provides the guarantee that contractual obligations are satisfied by the policy of the central clearing party. Note that there is still a risk that the exchange itself can default although the risk may be small. For non-publicly traded derivatives products, i.e. over the counter ( OTC), it is becoming increasingly common to require counterparties to put up collateral to support the promises.

From the viewpoint of an organization, liquidity refers to insufficient cash to fulfill their cash flow requirements. This may be a temporary issue, and may not suggest a structural problem. For example, market declines may lead to marginal calls for futures contracts, causing a temporary cash crunch for the institution. . A financially strong institution is able to borrow money or sell assets to meet a temporary surge in demand for cash payment or collateral.

Bonus certificates are tracker certificates with the pre-determined barrier conditional downside defense. These are built to give protection to the downside only at barrier point. So long as the price of the underlying asset does not fall below the threshold, the payout on maturity to the buyer is no less than an negotiated sum (the “bonus”).