MarketNotes
Gold's Silver Lining
The gold bullion market has seen some dramatic moves recently, but the ONE Financial Profit Lock-In Notes show the silver lining of these price gyrations. After rising to a high of $725 USD on May 12, 2006, gold prices have subsequently retracted to $569.50 (the London P.M. fixing spot gold price on June 15, 2006). Although painful for investors who bought gold at its high, the recent drop serves to effectively demonstrate the value of the ONE Financial Profit Lock-In strategy.
The ONE Financial Profit Lock-In Notes, Gold Price Class - which launched on April 10, 2006 with a NAV (Net Asset Value) of $9.305 (and an initial guarantee level of $10.00) – saw its value quickly rise to a high point of $10.54. Although the Note's value subsequently fell – along with the overall gold market (and numerous other commodities, for that matter), because of its unique Profit Lock-In structure, the high point is now guaranteed.
Even though the Note's current NAV is $8.762 (June 16, 2006), holders are guaranteed to receive $10.54 at maturity even if the price of gold and the Note's NAV never rises again. Holders that bought the notes upon issue have essentially already locked-in a guaranteed return of 5.4% on their original investment. Compared with the 20% or more drop in gold prices since gold hit its high in May, a 5.4% gain looks very attractive. With a daily lock-in of every new high watermark in each Profit Lock-In Note, ONE Financial clients can be sure that any gains their Notes achieve will be there at maturity, no matter what happens in the markets.
From inception (April 10, 2006) to June 13, 2006.
What's more, if gold rises to new highs over the term of the Notes, the value of the Gold Price Class Note and its guarantee level can rise to new heights as well.
The Family Advantage
An additional feature of the ONE Financial Profit Lock-In Family of Notes is the ability to "switch" from one note to another. "Buy low, sell high" sounds easy enough, but unfortunately, most investors don't know the answer to the necessary corollary of "How low is low, and how high is high?" However, with the ONE Financial Profit Lock-In family of notes, investors already know what the minimum future value of each Note is guaranteed to be.
Although we are still in the first 6 month blackout period on sales and switches, this is a clear indication of the arbitrage opportunities that will potentially exist over the life of the Notes. Investors can use opportunities like this, where a Note's current value is lower than its guaranteed amount, to systematically increase their guaranteed rate of return over the life of the notes, locking in gains in one asset class, and taking advantage of price declines in other sectors.
The Gold Price Class Note gives investors a very secure way to invest in gold and the Profit Lock-In feature adds significantly to that security.
Profit Lock-In Notes
The ONE Financial Profit Lock-In Notes and the ONE Financial Profit Lock-In & Cashflow Notes offer five classes of notes based on different underlying investments, including gold, baskets of high-dividend paying stocks, income trusts and stock market indexes from the G7 countries. The notes guarantee 100% of original principal as well as the highest value achieved by the note during its term, if held to maturity. ONE Financial's family of notes is guaranteed by BNP Paribas, the world's sixth largest bank.
Conclusion
The recent performance of the ONE Financial Profit Lock-In Notes, Gold Price Class note has shown the effectiveness of the Profit Lock-In strategy – locking in profits for Gold Note investors, even as the overall gold market tumbles. For money that needs to be there when it's needed – retirement savings, nest eggs – the ONE Financial Profit Lock-In Notes are the solution, providing the silver lining to market corrections.
MarketNotes is produced by ONE Financial Corporation and is written for informational purposes only. It represents ONE Financial's interpretation of market conditions at the time of publication.
†For the ONE Financial Profit Lock-In (& Cashflow) Notes, 100% of the amount by which the highest NAV of the portfolio the returns of the note are linked to (and for the Cashflow Notes, the highest NAV net of all dividends and other distributions paid by any of the Note's Underlying Investments, if any) during the term of the Notes exceeds the principal amount is locked-in and guaranteed to be paid by Maturity.
The portfolio may also include investments in notional bonds, and is subject to "Dynamic Asset Allocation" such that the performance of the Notes will not track the performance of the relevant Underlying Investment basket - see Master Information Statement (available on request). An investment in any of the Notes may not be suitable for all investors. Important details about each of the Notes are described in each product's Master Information Statement and the relevant Information Statement Supplement (the "Offering Documents"); investors should obtain and read carefully a copy of the relevant Offering Documents (available on request) prior to investing, paying particular attention to the risks associated with an investment in the relevant product. In the event of any discrepancy between the information described herein and the relevant Offering Documents, the terms of the relevant Offering Documents shall govern. This document has been prepared by ONE Financial based on information that ONE Financial believes to be fair but cannot be guaranteed as to its accuracy, and BNP Paribas shall bear no responsibility for the contents hereof. This document is for information purposes only, and does not constitute an offer to sell or a solicitation to purchase. 100% of investors' principal is guaranteed to be repaid only for Notes purchased at the Issue Price on the Issue Date and held until the Maturity Date, and there is no assurance that any additional returns will be generated. Returns on the Notes may not mimic, and may significantly underperform, returns in an otherwise identical portfolio consisting entirely of Underlying Investments invested according to the allocations described herein. No assurance can be given as to the tax treatment of investments in any of the Notes. Commissions, trailing commissions, management fees and expenses all may be associated with these investments. ONE Financial, the ONE Financial logo, "Profit Lock-In", "Profit Lock-In & Cashflow", "Guaranteed Linked Notes", "Upside Only", "We believe in better ideas" and "wealth through innovation" are trademarks of ONE Financial Corporation. BNP Paribas and the BNP Paribas logo are registered trademarks owned by BNP Paribas S.A. and used under license. ONE Financial Corporation ©2006 All rights reserved.
