ALPHA POWER SHARES EVOLVES

It is with great pleasure that we announce the impending launch of Alpha POWER Shares – Series 3, which includes a number of strong enhancements to significantly improve resilience, upside potential and to deliver a cleaner and more accurate accounting and administration experience. We have added even more risk protection and upside potential at the same time as keeping the core concept of POWER Shares – which provides the potential for capital gain and enhanced income from your choice of well managed direct equity portfolios, with risk management and a 100% capital guarantee at maturity.

Alpha POWER Shares has demonstrably outperformed the underlying share market since inception and has added “alpha” as a result. Specifically POWER Shares has paid 23% income to investors since the launch of series 1 in December 2006, and with its unit price currently sitting at $0.71 this has provided investors with a total return value 6% below inception, well above other investments during that period.

When we launched POWER Shares we did so as part of our delivery of investments for advisers seeking to implement a “Luxury Branding” service proposition. We aimed to deliver that by providing investments that were better designed, had better quality components, were more durable and which outperformed their peers. Our design approach ensured that POWER Shares has outperformed, especially with the use of the covered call overlay to generate enhanced income, some of which was reinvested to buy put options to protect downside risk. The components endured the worst financial crisis in history, whereas many other products either failed or performed poorly.

But – to provide new investors with the confidence to use Alpha POWER Shares to establish or renew their portfolios, we have further enhanced the internal risk management within Alpha POWER Shares, as well as simplifying the way the product is administered and reported.

Specifically we have increased the internal put protection to 95% per quarter, with an innovative cost reducing mechanism which allows us to set the strike price for the call option overlay at 106% of the share price at the start of each quarter, versus the much lower 103.5% in the current series. We have backtested this new approach using real share price data prevailing for the period since we first launched POWER Shares series 1 in December 2006, and this shows that the new version will pay levels of income very similar to that paid by series 1 from inception to date.

Importantly, that backtesting shows that even at the end of last quarter, after the worst of the market falls in the last 18 months, POWER Shares series 3 would still retain an equity exposure of nearly 80% with a unit price of $0.83.

This means that advisers can safely recommend POWER Shares series 3 to clients who want the assurance that it can successfully withstand falls of the same magnitude as those experienced over the last 2 years. Unlikely as that may seem, that concern will be uppermost in most investor’s minds.

Finally, we have chosen to issue Alpha POWER Shares series 3 in the form of a unitised managed investment scheme (wrap friendly!). We have chosen not to re-engage BlackRock and in doing so, we will not be offering POWER Shares as an SMA product. We have developed an innovative mechanism to pass franking credits on dividends directly through to investors without tax being debited against them in the unit trust, and with the very low levels of turnover in Alpha POWER Shares this makes series 3 significantly more tax effective than traditional managed funds. Clients will receive simple consolidated tax reporting at the end of each tax period, distributions will promptly be paid at the end of each quarter, and applications/redemptions and client queries will be handled efficiently and quickly.

Alpha POWER Shares has been successful as the implementation vehicle for strategies designed for HNW and SMSF investors, underpinning wealth accumulation strategies for wealth accumulators using gearing, and for retirees wanting to protect their portfolios in a well managed, direct equity environment. We look forward to working with you as you grow your business and your client portfolios in this challenging – but opportunity filled – environment. We will be in touch again soon as the PDS for Alpha POWER Shares – Series 3 goes live, don’t hesitate to contact us if you have any questions prior to then.

Alpha Structured Investments