The Infiniti Capital Foundation Note

The Infiniti Capital Foundation Note (the Foundation Note) is an 8 year, 100% capital protected note issued by an AA Rated (Standard & Poor’s) UK Bank (the Bank). The return on the Foundation Note is linked to an index (the Protected Index) that initially tracks the performance of a 100% notional investment in the Proprietary Matrix 10 Portfolio, a fund managed on a performance-fee-only basis by Infiniti Capital AG (Infiniti Capital). Over the life of the Foundation Note, the composition of the Protected Index may change to include leverage, provided through a notional borrowing, or a notional investment in zero coupon bonds.

The Foundation Note aims to achieve a 3% annual coupon equating to a total maximum income of 24% over the life of the Foundation Note. The coupons will only be paid out of performance of the Proprietary Matrix 10 Portfolio and will therefore not erode capital. Provided the Foundation Note is held to maturity, The Bank will provide principal protection to ensure that investors will receive the highest of 100% of the principal amount of the Foundation Note, or 80% of the highest value attained by the Foundation Note over the 8 year term.

• 100% capital protection from AA Rated (Standard & Poor’s) UK Bank

  The Bank (AA rating by Standard & Poor’s, Aa1 by Moody’s and AA+ by Fitch) ensures that investors will be paid a minimum of 100% of the principal amount of the Foundation Note on the maturity date. The Bank will employ a ‘dynamic asset allocation mechanism’* in respect of the allocation of the components within the Protected Index to provide the principal protection

  *Click here for more information on Dynamic Asset Allocation Mechanism

  80% rising protection

  Through the provision of a look back facility, the Bank ensures that investors will receive, on the maturity date, a minimum of 80% of the highest value achieved by the Foundation Note over the 8 year term. This feature removes the need to time markets and consistently locks in a percentage of profits irrespective of any subsequent falls in the value of the Foundation Note

  3% performance related coupon

  Every year, the Foundation Note aims to achieve a 3% coupon* out of performance of the Proprietary Matrix 10 Portfolio. To ensure that capital is not eroded, the coupons will only be paid if the Foundation Note, as measured every year in October, is at least 104% above its initial value. Therefore, Investors may potentially receive a 24% income over the life of the Foundation Note - a higher income than would be received on an asset yielding current USD cash deposit rates.

  *The coupon amount actually received by investors may be slightly above or below 3% depending on changes in the net asset value (NAV) of the Proprietary Matrix 10 Portfolio in the months preceding the day the coupon is paid out.

  Monthly liquidity and early redemption

  Although the Foundation Note should be viewed as a long-term investment, under normal market conditions investors may redeem their investment on a monthly basis subject to any applicable redemption penalty and notice periods.

  Further Foundation Notes may also be purchased on a monthly basis at their prevailing market value

  15-20% per annum targeted annual returns

  The Foundation Note is linked to the performance of the Proprietary Matrix 10 Portfolio, a unit trust that provides investors access to Infiniti Capital’s exclusive family office investment programme. The Foundation Note has an initial notional allocation to the Proprietary Matrix 10 Portfolio of 100%, which may be increased up to 150% by way of a notional borrowing over time, thereby enhancing the return on the Foundation Note. A back test of the performance of the Foundation Note, using pro-forma data based on an existing investment programme run by Infiniti Capital for the Proprietary Matrix 10 Portfolio, shows a 19.12% per annum return with 7.07% volatility from May 1999 to July 2004 net of all fees.

  The Proprietary Matrix 10 Portfolio is a conservatively managed and highly diversified portfolio of hedge funds that allocates to up to 150 individual strategies. Infiniti Capital includes a significant allocation to emerging managers, which provides better performance and lower volatility than other funds of funds.

  Performance-fee-only investment management from Infiniti Capital AG

  Infiniti Capital, headquartered in Zurich, Switzerland, pioneered the concept of performance-only fees in the fund industry. Infiniti Capital charges no annual management fee on the Proprietary Matrix 10 Portfolio – its sole basis for remuneration being the generation of new profits for its investors. In the event of negative performance of the Proprietary Matrix 10 Portfolio, no fees are payable to Infiniti Capital until all previous losses are recovered. Infiniti Capital currently advises on over US$1.6 Billion in client assets—including the family office, current open and closed funds, structured notes, private managed accounts, and private equity/venture capital funds

  Risk monitoring by the Bank

  A subsidiary of The Bank acts as risk monitor of the Proprietary Matrix 10 Portfolio to ensure that it conforms to strict strategy, liquidity, and other investment parameters at all times

  USD CLOSES DECEMBER 15th 2004

  EUR CLOSES JANUARY 8th 2005

US Dollar/EURO denominated. Minimum investment $100,000

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