This is a tool that calculates the historical performance of a risky income plan and displays a wide range of calculated performance factors for ready comparison with other structured product plans. In more detail, the plan is tested at historical points, going back over a hundred years, and at each point the various performance factors are calculated. These performance factors are then averaged over all the historical tests to provide the displayed historical performance results. A description of each of the results shown is given below after the details on the input data required. In addition, for further comparison, the tool calculates the historical results of a stock market investment over the same period as the plan.

Note: If there is no risk element to the plan, please use the Protected Income Plan tool instead. If the plan doesn't generate income and cannot mature early as a result of a kick-out, please use either the Protected, or Risky, Growth Plan tool. If the plan can mature early as a result of a kick-out, please use one of the Protected, or Risky, Kick-Out Plan tools.

The information required for the historical performance calculations can be considered in seven parts, matching the layout of the tool.

The first part is the standard plan data, which is described in the following list:

The second part of the information required for the historical performance calculations is the start price (initial index level) data, which is either basic or advanced. In the basic case, it is only necessary to input a single date, on which the closing value of the market (or markets) is obtained. In the advanced case, observation over a pricing range or series of pricing points is needed in order to calculate the start price. In more detail, in the advanced case, the following information is required:

The third part of the information required for the historical performance calculations is the end price (final index level) data, which is either basic or advanced. In the basic case, it is only necessary to input a single date, on which the closing value of the market (or markets) is obtained. In the advanced case, observation over a pricing range or series of pricing points is needed in order to calculate the end price. In more detail, in the advanced case, the following information is required:

Note: If the plan has more than one price source (see below), the start and end prices are calculated for the underlying market for each price source, and the relative market performance is determined by comparing the end price to the start price for each market, and finding the average, best or worst of these comparisons. This should be taken into account when the relative market performance is mentioned below.

The fourth part of the information required for the historical performance calculations is the maturity positive return data, which is used to determine the additional return (growth) that will be received at maturity (additional to the minimum return described above). If the plan does not require this option, it can be switched off.

There are three basic types of maturity positive return data. The first type is a call return, which requires the following information:

The second positive return type is a capped call return, which requires the following information:

The third positive return type is a digital return, which requires the following information:

In addition to, or in place of, the above positive return types, a plan may have a periodic growth builder. This is a mechanism that on a periodic basis gives a locked-in return if the required condition is met, with the total of the individual returns being received at maturity. If a periodic growth builder is part of the plan, select it and enter the following information:

Finally, in the maturity positive return data part, it is possible to specify up to 5 lock-in levels. A lock-in level is required if it is possible to lock-in any observed growth during the course of plan to specify a minimum on the additional return calculated at maturity. For each required lock-in, it is necessary to provide the following information:

The fifth part of the information required for the historical performance calculations is the maturity negative return data, which is used to determine any reduction in the return (risk) that will be received at maturity (reduced from the base return described above).

There are three basic types of negative return data. The first type is a put return, which requires the following information:

The second negative return type is a floored put return, which requires the following information:

The third negative return type is a digital return, which requires the following information:

In all negative return cases, it is possible to specify a negative removal level, which is a level that if exceeded during the specified observation period, removes any negative return factor from the overall return calculation and thus cancels any possible reduction in the return that will be received at maturity. This negative removal option requires the following information:

Finally, in the maturity negative return data part, it is possible to specify negative return protection, which prevents any negative return factor being applied, and thus protects the maturity return from any possible reduction, unless the condition to remove the protection is breached. There are two types of negative return protection:

The first type is soft protection, which requires the following information:

The second type is hard protection, which requires the following information:

The sixth part of the information required for the historical performance calculations is the product income data, which specifies the income payment dates and amounts for the plan, together with the conditions that enable or prevent payments being made. The standard income data that is required is as follows:

If payments should be stopped if a barrier is breached, then the payment stop barrier should be set to Yes and the following information specified:

If payments that are stopped due to a barrier breach can be restarted, then it is necessary to enter the payment restart condition information:

If payments can only be made if a condition is met, then the payment condition flag should be set to Yes and the following information specified:

If payment income can be locked-in if a condition is met, i.e. the current and all future payments are guaranteed irrespective of any barrier breach or payment condition failure, then the payment lock-in condition flag should be set to Yes and the following information specified:

If bonus income payments are payable on bonus conditions being met, then the bonus income flag should be set to Yes and the following information specified:

The seventh part of the information required for the historical performance calculations is the price source data, which is used to specify the price source/underlying market(s) for the plan. If the product only has one underlying market (UK or US stock market), the basic price source can be used. Otherwise, the advanced option is required. In the advanced option, it is necessary to specify:

Note: In this tool, a level is only breached if the relative performance, depending on the direction, exceeds or falls below it, i.e. being equal to the level is not treated as a breach. If a particular product requires that the equals to case also counts as a level breach, there are a couple of options for handling this with the tool. The first option is to simply ignore it, as being equal to a level is an unlikely event and the effect on the overall results would thus be slight. The second option is to enter a level value that is a little bit smaller or bigger than the actual value and thus distinguish the products where being equal to a level counts as a breach from those where it does not, e.g. if the level is 100%, type in 99.999999% for the greater than or equals to case.

While not necessary for the historical performance calculations, it is also possible to attach the following additional product information to the plan by opening up the product information section:

As an addition to the full historical performance calculations, the tool also provides the possibility of running the plan data through a small number of historical tests, with an optional trace. This allows the calculations and logic used in the tool to be checked if required. To run the product in tester mode, open up the advanced options, switch the product test mode on and enter the following information:

As mentioned at the beginning of this information page, a wide range of historical performance results are calculated and displayed:

In addition, a results table is also displayed showing the average AER and average return for the worst 0.1%, 1%, 5%, 10% and 25% of results. If any of the historical tests show losses, an additional column is included, giving the percentage of results which indicated losses and the average AER and return for these loss making tests.

In addition, a results table is also displayed showing the average AER and average return for the best 0.10%, 10-20%,..., 90-100% of results.

Furthermore, depending on the plan input data, some additional historical test results are calculated and displayed:

Finally, for comparison purposes, the historical results of investing in the underlying stock markets over the plan period can be calculated and shown. Two inputs are required for this stock market investment comparison:

The stock market investment comparison results are split into three sections.

The first section shows the average return, average AER, median AER and worst return for each underlying market over all the historical tests.

The second section shows a table for each underlying market, displaying the average AER and average return for the worst 0.1%, 1%, 5%, 10% and 25% of results. If any of the historical investment tests show losses, an additional column is included, giving the percentage of results which indicated losses and the average AER and return for these loss making tests.

The third section shows the average AER and average return for the best 0.10%, 10-20%,..., 90-100% of results, for each underlying market.

Note: If you are using this tool with JavaScript disabled, it is necessary to press Calculate to open up a section for data entry after choosing the required option from a drop down, e.g. for entering advanced start price data or capped call return data.

Disclaimer: Historical performance is not necessarily a good guide to future performance. The historical data used in the calculation of the performance results has been compiled using a variety of sources and statistical techniques.

Associated tool link: http://www.coggit.com/tools/risky_income_plan.html