FTSE & Europe Defensive Autocall Plan July 2022

A structured product is a fixed-term contract, providing a return based on the performance of an underlying share or stock market index.  Inherently, a structured product is designed to limit investment losses while still creating a return to investors.  Some structured investments offer a degree of capital protection, while others do not.  The growth is usually not guaranteed, and you may receive no return on your investment.  Even where there is capital protection, the deduction of fees and charges could mean you get back less than you put in.

It is important to mention that a structured product is not suitable for people who require access to their money invested during the investment term.  Early redemption can be part of the whole amount invested, but investors may receive less than the original sum invested.

Please ensure you fully understand the key points and risks associated with this structured product.

Inflation was a growing problem before the war in Ukraine began and strict lockdowns in China were imposed, both of which aggravated the problem.  Inflation is contributing to reductions in forecasts for global economic and corporate profit growth.

Central banks can do little to reverse these supply-side shocks, that also include reduced labour participation rates in many economies.  However, as inflation risks becoming embedded in the global economy through higher wages, they are now raising interest rates, and unwinding their quantitative easing programs at a faster pace than had been anticipated in an effort to reduce prices by curbing demand.

Investors are understandably nervous as to the result of this monetary tightening at a time of already weakening consumer and business confidence, and some fear recession in the major economies.  However, others point to the recent easing of lockdown restrictions in Shanghai and continued strong US retail sales (despite weak confidence surveys) as indicators of a ‘soft landing’ for the US and the global economy.  They may also believe that the bad news on inflation and interest rates is already priced into financial markets, although the volatility of stock markets in recent months suggests a low level of consensus!

A cautious approach to investing seems sensible, that perhaps biases towards the UK and Eurozone stock markets on account of the predominance of so-called value stocks.  These are ‘jam tomorrow’ companies, that are cash generative and so less vulnerable to the rising cost of capital.  They are to be found in sectors such as natural resources, industrials, consumer staples, and financials.  The Eurozone brings exposure to these and some sectors that do not feature in the UK main market, such as autos and luxury goods.

In contrast to value stocks are so-called growth stocks, such as tech and other science-based sectors.  These are at particular risk from rising inflation and interest rates because they require capital to develop and grow their businesses.  We also tend to see reduced consumption by households and businesses of tech goods during periods of economic uncertainty.

We have seen the vulnerability of growth stocks compared with value stocks play out on global stock markets since January.  While the tech-heavy NASDAQ index has fallen by about a quarter, the value-heavy UK main market has risen a little.  This trend may persist if investors remain nervous of inflation, central banks’ response, and of a secular re-pricing of tech stocks.

A company called IDAD is employed on behalf of Mattioli Woods to conduct an auction with competing structured product providers.   IDAD also settles the trade with our custodian and provides all the supporting documentation required by the FCA.   To complete these tasks, IDAD charges a fee.  For the Morgan Stanley FTSE & Europe Defensive Autocall Plan IDAD’s fee is not expected to exceed 1%, with Morgan Stanley’s estimated fee of up to 0.942%. The combined total of these fees cannot exceed 1.942% and as noted, they are built-in to the return of the plan so do not reduce the amount invested.   For example, based on a monetary investment figure of £10,000 the fee would equate to £194.20.  This charge has been accounted for in arriving at the stated potential return of 8% per annum and will not be deducted from that figure when the plan matures.

Please refer to the attached guidance document:

Please refer to the attached guidance document:

While the tax rules and rates that are used within any current recommendation to you are up to date, the rules and rates can change at any time.  Mattioli Woods can accept no liability for any such changes and their potential effect on your plan.  The value to you of any tax benefits will depend on your personal tax position at the relevant time.

The value of investments and the returns from them can go down as well as up and you may not get back the amount you invested.  Past performance is not an indication of future returns and investments need to be considered as medium- to long-term holdings.  Inflation will erode the purchasing power of your money.

There is no fixed cost for exiting this plan at maturity.  Please note if you needed to sell this plan prior to maturity, the issuing bank will endeavour to provide quotes under normal market conditions for trading purposes on request, subject to a bid-offer spread of 1%.  Please ensure you read the accompanying fact sheet.  Morgan Stanley has defined the holding period as ‘the recommended holding period for the product is until 30 July 2029, which corresponds to the product’s maturity’.  Please also read the KIID in relation to this statement.

If you change your mind and do not wish to invest, please inform your Mattioli Woods contact by 29 July 2022, the start date for the structured product.  After this date you will only receive the value of the structured product when sold back to the product provider which is likely to be less than your original investment.

This product offers no FSCS protection.

ISAs are a tax-efficient wrapper with the option to save via cash and/or stocks and shares, making them ideal for investors as there is nothing to include on tax returns. Full details are included in the investment guidance booklet on our website.

As mentioned, you are able to draw funds from your ISA and replace the amount within the same tax year without losing the tax benefits or using up any further allowance in that tax year.

Specifically:

• flexi-ISAs enable investors to withdraw cash from their ISA and subsequently replace this within the same tax year without it counting towards their annual subscription allowance
• the replacement of cash must happen within the same tax year the cash is withdrawn
• any withdrawn cash not replaced before 5 April cannot be replaced and will be a new subscription counting towards the investor’s annual allowance
• payments into the flexi-ISA will be counted first as repayments of any outstanding flexible withdrawals made in the current tax year, and second as a subscription against the current year’s annual allowance
• there is no carry-over of either unused annual allowances or withdrawals between tax years
• repayments of withdrawn funds may only be made to the account from which the associated withdrawal was originally made
• the full value of the ISA may be withdrawn, but withdrawals must not exceed the total value of the ISA (overdrafts are prohibited), even when the amount available for withdrawal is less than the total of current year contributions

For over 30 years Mattioli Woods has been at the forefront of providing advice, pension administration/trusteeship, and investment products and services for clients across the country.  Its key aim is to put clients first to help them reach the objectives they set.  This is done with integrity and professionalism while maintaining a bespoke approach, and it continues with this ethos as part of its culture.

The Mattioli Woods website (www.mattioliwoods.com) provides a further history of the company and the products offered to achieve clients’ various requirements.

In terms of financial legislation, firms can be ‘independent’, or ‘restricted’, or both.

We offer our own discretionary portfolio management (DPM), self-invested personal pension (SIPP), personal pension (MW PP) and small self‑administered scheme (SSAS) services as our investment managers and consultants/client relationship managers are specialists in these areas of advice and management.  For this reason, we are classed as a ‘restricted’ advice business and, only where it is suitable and in line with your objectives, we will recommend these solutions to you.  Should your circumstances not be best served by our own propositions, we will look to the wider market to source the most appropriate solution for you.

In addition, as part of our centralised investment proposition, we offer the Custodian REIT plc, which is a real estate investment trust managed by Custodian Capital Limited, part of the Mattioli Woods Group.

Our solutions are designed to meet your needs and where appropriate we can also offer advice on pensions, investments, and non-investment insurances (protection policies) from the whole market.

Mattioli Woods is committed to ensuring the principles of ‘treating customers fairly’ set by the Financial Conduct Authority are applied with integrity throughout all aspects of our business.

Any tax-based calculations completed by Mattioli Woods are for illustrative purposes only, and we recommend you check these with your accountant or tax adviser.

Pershing Securities Limited is the administration platform we have selected to operate the service.  For further information please refer to the enclosed Pershing terms of business document.