Structured bonds are one of the youngest financial instruments available on the Polish capital market. Structured bonds are usually issued by financial institutions, such as banks or brokerage houses. They usually combine two principal features:

• a fixed income security (bond)
• an underlying instrument affecting the value of capital – such as other bonds, shares, indices, investment funds, currencies, options, contracts, etc.

The primary benefit associated with investing in products of such type is to ensure protection of capital while simultaneously obtaining an opportunity to participate in above-average profits. Protection of invested capital is usually ensured by specifying the guaranteed amount that is to be paid out to the Client at end of the investment term. This could equal 100% of the invested amount, or be somewhat higher or lower. Usually, this will be profit just slightly higher than income generated from investing into safe financial instruments. Above-average profit is generated by investing the remaining part into financial instrument(s) with high investment risk, i.e. those into which the Client would not normally invest because of this high risk involved. However, attaining of above-average profit depends on many market factors affecting price of the underlying financial instrument, which is to generate such above-average profit. In summary, when buying a structured bond, the Client acquires the possibility of attaining better than average profits after conditions set forth in the prospectus or investment memorandum occur, but occurrence of such circumstances is not guaranteed by the Issuer. The Issuer will guarantee only return of a specified amount after end of the investment term.

Dom Maklerski Banku Handlowego S.A. intermediates in sale of structured bonds of issuers with whom it has executed an appropriate agreement. Issuers of structured bonds will usually be either banks or other financial institutions.