Recently, Citrine Global Finance launched their Agriculture Booster Notes. The sponsor of the issue is Merrill Lynch with Citibank, OCBC Securities and Standard Chartered Bank as the main distributors.
With agriculture being the current fad now, it’s not surprising to see another product that offers investors a chance to invest into this hot sector.
Without going into the complex mechanism behind the notes, here’s a layman explanation of how the performance is derived.
The notes are linked to the performance of 6 commodity indices, namely:
The 80% and 90% level of the initial closing price of the indices will be called the lower and upper coupon barrier respectively.
On each index calculation day (denotes open trading days), you will accrue interest at the rate of 8%pa (S$ issue) and 12% (US$ issue) if all the 6 indices close above the upper coupon barrier. If all the 6 indices close above the lower coupon barrier but there is at least one which is less than the upper coupon barrier, you will only receive 4% pa (S$) and 6% ($US). If any of the indice falls below the lower coupon barrier, you will not receive any interest for that day.
Every 2 months (this is called the observation period), the accrued interest will be paid out and the process repeats.
The end of the observation period is also known as the observation date. If the value of the 6 indices are above their initial closing level on the observation date, the issuer will terminate the notes and return 100% of your capital plus any accrued interest.
Personally, I do not really like this product for a few reasons:
You can see that the risk of this product is high. If I’m bullish about agriculture commodities, I would rather invest via an index fund or unit trust.
For more information about the Citrine Agriculture Booster Notes, you can refer to the prospectus of the Citrine Agriculture Booster Notes.