5-Year Capital Protected Note — MSCI World Participation

5-Year Capital Protected Note: Equity Upside Without Equity Downside

Capital protection and equity participation have long seemed mutually exclusive goals in investment markets. This structured note reshapes that trade-off: it provides access to the long-run growth of global equities while contractually committing the issuing bank to return 100% of invested capital at the end of five years, regardless of how equity markets perform. This protection is a contractual obligation of the issuer, not an absolute guarantee — it depends on the issuing bank remaining solvent (see "Capital Protection — What It Means and What It Does Not Mean" below).

The note achieves this through a well-established financial structure: the bulk of the invested capital is placed in a zero-coupon bond — a deeply discounted bond that will grow to par (100%) over five years — while the remainder purchases a long-dated option on the MSCI World Index. If global equities rise, the option participates in the gains; if they fall, only the cost of the option is lost, and the zero-coupon bond ensures full capital return.

How the Capital Protection Works

When a note is structured with 100% capital protection, the issuing bank's structuring desk allocates the investor's capital as follows (the precise split varies with prevailing interest rates):

Zero-coupon bond component: In a 5% interest rate environment, a bond paying £100 in five years costs approximately £78 today (the present value of £100 discounted at 5% for five years). This component guarantees the capital return.

Option component: The remaining approximately £22 purchases a 5-year call option on the MSCI World Index — the right to receive a percentage of any positive return in the index over the five-year period. The amount of participation in any index gain depends on how much capital is available for the option purchase, which itself depends on interest rate levels.

At current rates, the structure supports approximately 75% participation in any positive MSCI World return over five years. If the MSCI World rises 50% over the period, the investor receives 37.5% on top of their returned capital. If the MSCI World falls 30%, the investor receives their capital back in full — no gain, but no loss.

The MSCI World Index

The MSCI World Index tracks large and mid-cap equities across 23 developed markets — the United States, Japan, the United Kingdom, France, Germany, Canada, Australia, and other major economies. The index covers approximately 1,500 companies and represents approximately 85% of the free float-adjusted market capitalisation of the developed world's equity markets.

By linking to a broad index rather than a narrower sector or regional index, the note provides diversified equity market exposure across multiple economies and industries. The MSCI World has historically generated positive returns over 5-year rolling periods in the vast majority of historical instances, though this cannot be guaranteed for the specific period of this note.

Capital Protection — What It Means and What It Does Not Mean

What capital protection means: The issuing bank contractually guarantees to return 100% of the face value of the note at maturity (after five years from issuance). Regardless of MSCI World performance, the investor receives at minimum their invested capital back at the end of year five.

What it does not mean: Capital protection is a contractual obligation of the issuing bank — it is not guaranteed by the UK Government or the Financial Services Compensation Scheme (FSCS). If the issuing bank becomes insolvent before maturity, the investor would rank as an unsecured creditor and might not recover their full capital. This note is issued by an investment-grade financial institution, but this risk cannot be eliminated.

Real value: Capital protection is nominal — it guarantees return of £1 for each £1 invested, not a return maintaining purchasing power. If inflation averages 3% per annum over the five-year period, the real purchasing power of the returned capital will be approximately 14% lower than at investment, even if the nominal amount is fully protected.

Liquidity before maturity: The note can be sold before the five-year maturity at the issuer's secondary market price, which will reflect prevailing interest rates, MSCI World levels, and time to maturity. Pre-maturity prices are not guaranteed to be at or above par — selling early removes the capital protection.

Suitability

This note is well suited to investors who:

• Want exposure to global equity market growth but find the prospect of capital loss unacceptable
• Have a specific five-year capital commitment they cannot reduce (a business sale, inheritance, or property sale proceeds to be invested over medium term)
• Are approaching but not yet in retirement and want equity participation without the drawdown risk of a direct equity allocation
• Hold large cash or short-dated bond positions and are looking for a structured way to participate in any equity market recovery without taking on full equity risk

It is not appropriate for investors who need access to their capital before five years, cannot accept any issuer credit risk, or who require regular income (the note pays no coupon).

Risk Considerations

Issuer credit risk: The note is an obligation of the issuing bank. Investor recourse is to the bank alone, not to any underlying assets. FSCS protection does not apply.

Opportunity cost: In a strongly rising equity market, the 75% participation cap means the note underperforms a direct equity holding. The capital protection is paid for by giving up 25% of equity upside.

No income: The note pays no interim coupon. Investors seeking income during the five-year term should consider other products.

Inflation risk: 100% nominal capital protection does not protect against inflation erosion of purchasing power.

How to Enquire

Contact our investment team to receive the current term sheet, full key information document, and issuer credit documentation. Minimum investment £50,000. Available to retail and professional investors following suitability assessment.

Important: Capital is at risk. Past performance is not a guarantee of future returns. This is for information purposes only and does not constitute a personal recommendation. Seek independent financial advice before investing. Capital protection is subject to issuer creditworthiness. This note illustrates the type of structured product Global Investments advises on — it is not a live investment offer.