Barclays European Banks and US Defensive Autocall Plan - April 2023

Please read this guidance in conjunction with the supporting fact sheet and key investor information document (KIID) enclosed.

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 product investments offer a degree of capital protection, while others do not.  The growth is usually not guaranteed, and you may not achieve a return on your investment.  Even where there is capital protection, the deduction of fees and charges could mean you receive less than you invested.

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

The Barclays European Banks and US Defensive Autocall Plan April 2023 will pay a return of 20% (10% per annum) plus initial capital if the Euro Stoxx Banks and S&P 500 indices are at or above 95% of their respective start date levels on the first observation date of 28 April 2025.  The start date for this plan is 28 April 2023.  If one or both indices is below 95% of its start level, the plan continues to the next annual observation date.  The potential return is 10% for each year that has elapsed since the start date until the plan matures or the final observation date of 30 April 2029 is reached.

The early maturity or autocall barrier level of 95% or above the index start levels applies for years two and three, reducing to 90% for the following year, 85% for the next year, until lastly 70% for the final observation on 30 April 2029.

This plan also has an element of capital security, whereby if the worst performing of the Euro Stoxx Banks and S&P 500 indices as of 30 April 2029 has not fallen by more than 40% from the start level on 28 April 2023, all the investor’s capital is returned.

The capital protection for this plan is dependent on Barclays Bank PLC fulfilling its obligations, along with the investment being held until maturity, unless there is a prior autocall.  The initial capital is used to purchase securities issued by Barclays Bank PLC that have similar characteristics to investing in corporate bonds.  In the unlikely event of default, investors will be creditors of Barclays Bank PLC.

Barclays Bank PLC has been rated ‘A‘ by Standard & Poor’s as of 23 February 2023.  Standard & Poor’s is an independent credit rating agency that uses a scale to denote creditworthiness, ranging from ‘AAA’ (highest) to ‘D’ (lowest).  Issuers within the ‘A’ rating band are described by Standard & Poor’s as having strong capacity to meet their financial commitments but more susceptible to the adverse effects of changes in circumstances and economic conditions than those issuers rated ‘AAA’ or ‘AA’.  Further information about ratings can be obtained via this website:

www.spglobal.com/ratings/en/about/understanding-credit-ratings.

Initial capital is not 100% secure with this structured product.  If at maturity on 30 April 2029 the worst performing of the Euro Stoxx Banks and S&P 500 indices are below 60% of their initial level, the initial capital being returned will be reduced by any negative performance.  For example, if the S&P 500 index was 70% below its initial strike level, the initial investment would be reduced by 70%.  Therefore, the return of the original capital invested is not guaranteed.

While the tax rules and rates that are used within any current recommendation 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 investment.  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.  Barclays has defined the holding period as ‘the recommended holding period for the product, which is until 8 May 2029 corresponding to the product’s final autocall payment date’.  Please also read the KID in relation to this statement.

Investing in multiple individual structured products exposed to the same indices increases the risk to an investor should those indices suffer severe losses.  However, this risk is spread across a wide range of index levels and future dates and will be mitigated by maturing structured products where autocall occurs.

We closely monitor this risk for existing structured products and whenever a new structured product is being considered, but should you have any concerns please contact your consultant.

If you change your mind and do not wish to invest, please inform your Mattioli Woods contact by 31 March 2023, 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.

Rising interest rates, high inflation, and economists’ predictions of weakening global economic growth this year make for an uncertain investment environment.  However, we do see opportunities in parts of the stock market and this ISP offers exposure to two of these: European banks which offer attractive valuations following a March sell-off and US defensive stocks.

As global interest rates continue to rise, the margin between what banks can borrow at, and lend at, expands.  The widening of the so-called ‘net interest margin’ (NIM) over the last year has been a key driver of profit growth for European banks.  It is a theme we expect to see continue, as central banks in the region continue to raise interest rates to tackle inflation.  This makes for an attractive investment opportunity, particularly given the relatively modest valuations of European banks relative to their US peers.  The non-performing loan problem, that dogged the eurozone banks a decade ago, has been resolved through loan write-off and recapitalisation.  Mid-sized and smaller European banks are more closely regulated their US peers, meaning liquidity mis-matches of the type that brought down several US banks recently are less likely to happen.

We are not anticipating a rapid fall to the 2% inflation target of most central banks, on account of what appears to be stubborn core inflation i.e. in services and goods, so even as headline inflation comes down sharply throughout Europe this year, as the energy price hikes of 2022 fall out of the data, interest rates are likely to remain at relatively high levels.

Technology companies, and other so-called growth sectors that promise ‘jam tomorrow’, may underperform in an era of ‘higher for longer’ inflation and interest rates.  This has led to many investors querying the outlook for US stocks in a global portfolio, given the large exposure of the main market to tech and other growth sectors, between a quarter and a third, depending on the definition used.

The US stock market also contains many world-class companies in defensive, cash-generative, ‘jam today’ sectors.  These include consumer staples, healthcare, energy, and utilities companies that have proven success in maintaining revenues during periods of inflation and economic downturns.  They tend to be able to fund their investment needs through cash flow, which makes them less sensitive to rising interest rates.  We anticipate these companies performing well over the coming years, as their relatively steady revenue and profits protect dividend payments and so attract investors.

You will note the key information document (KID) gives a risk score of 6/7 for this structured product, and this calculation is based on a snapshot calculation of the volatility and dividend positions of the underlying indices, at the time the KID was created.  All the previous structured products we have distributed to clients had a summary risk indicator (SRI) or risk score of 5/7 or lower, and this higher rating is due to the use of a sector index (the Euro Stoxx Banks Index) alongside the S&P500, instead of the one or two benchmark indices we have used for previous structured products.  The Euro Stoxx Banks Index is a more volatile index than most of the indices used previously, and higher volatility or uncertainty means a higher possibility of a negative return on this ISP.  However, our assessment of risk for the product is not based solely on that score.  The current bank crisis has indeed resulted in high volatility in banking stocks, particularly in North America but also in Europe.  We regard this as a temporary phenomenon, given the crisis is not driven by bad-quality assets held in banks’ balance sheets, but by depositors seeking better returns elsewhere as interest rates have risen.  In general, banks are well capitalised, and certainly in a generally better position than in the run up to the financial crisis of 2007/9.  The recent run on (some) deposits has created its own momentum, and exposed liquidity mis-matching of assets and liabilities at banks.  Authorities have stepped in to provide cash in exchange for quality assets, which we believe will help calm the current nervousness.  We envisage volatility on the Euro Stoxx Banks Index to fall over the coming months.

With the wider context of the marketplace and our understanding of the economic outlook for the relevant indices, coupled with a capital at risk barrier set at 60% (meaning the worst performing index must fall by more than 40% at the maturity of this structured product before any capital is lost), we feel the risk level of this structured product sits in line with our previous structured product offerings.

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 Barclays European Banks and US Defensive Autocall Plan April 2023, IDAD’s fee is not expected to exceed 1%, with Barclays’ estimated fee of up to 1.29%.  The combined total of these fees cannot exceed 2.29% 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 £229.  This charge has been accounted for in arriving at the stated potential returns and will not be deducted from that figure when the plan matures.

This product offers no FSCS protection.

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, consultants and 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 Property Income 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.

Individual savings accounts (ISAs) are tax-efficient wrappers 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 we provided you with and to which we would refer you.

As mentioned, you can 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:

• ‘Flexible’ ISAs enable investors to draw 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 drawn.
• 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 to the flexible 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 allowance 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 drawn 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.

Pershing Securities Limited is the administration platform selected to operate the service.  For further information, please refer to the enclosed Pershing Terms of Business document.