EuroStoxx50_Multiplier_ Presentation_Slides.pdf

Euro Stoxx 50 Multiplier

Background

• The Euro Stoxx 50 Multiplier is designed to provide the investor with geared returns in what may

be a moderate growth period in the Euro Zone

• Investors will receive a highly geared return on a positive move in the index

o i.e.10 times the growth of the index to a cap of 10%

o If the Index goes up more than 10% the investor receives the maximum return of 100%

• This product is an onshore Rand denominated product i.e. no currency implications

• The index would need to increase by more than 100% over the investment period to beat

investing directly into the Euro Stoxx 50 Index

• The client will receive principal protection unless:

o The index drops by more than 50% at some point over the life of the investment and the

index ends negative at maturity

• Potential tax benefits should you hold this investment longer than 3 years

• Trade Date: 25th Feb 2015

• Last day to deposit funds: 20th Feb 2015

2

Product Features • 3.75 year investment linked to the

performance of the Euro Stoxx 50 Index

(share code SX5E)

• Product is Rand Denominated, no currency

impact

• Principal protection provided the index does

not fall by more than 50% over the life of the

investment

• 10 times geared to a cap of 10% – client

receives 10 times the growth in the index

• Maximum return 10 x 10% = 100% (20.29%

annualised return)

• Minimum cash investment: R10,000

• Product is credit linked to Investec Bank Ltd

and Investec Bank PLC

• Investec will act as market maker and provide

liquidity should you need to exit your

investment before maturity (1% mid to bid

fee is charged on MTM).

• 100% allocation i.e. if you invest R100,000,

you will receive R100,000 worth of Multiplier

shares

3

Scenarios

4

Example of Euro Stoxx 50

(SX5E) returns **

Capital Amount Invested

Return of the ESP @ 10 times

the growth in the index to a max return of 100%*

Investment value at

expiry

Index returns 150%

(Investor receives the maximum return)

R100,000

100%

R200,000

Index returns 51%

(Investor receives the maximum return)

R100,000

100%

R200,000

Index returns 6%

R100,000

60%

R160,000

Index returns 2.3%

R100,000

23%

R123,000

Index returns -10%

(Index hasn’t dropped below -50% over investment period)

R100,000

0%

R100,000

Index returns -10%

(Index has dropped below -50% over investment period)

R100,000

-10%

R90,000

Working Examples: Index up 15% at Maturity

5

Index up 15%

Investor receives

Max return 100%

3.75

Years

Initial Index level

100%

Barrier level 50%

Initial Index Level:

3,146.43

Final Index Level:

3,618.39

• Client deposits R100,000 into their

stockbroking account for their Euro

Stoxx 50 Multiplier Investment

• On Trade date (25th Feb 2015), the

Euro Stoxx 50 Index Level is 3,146.43.

This becomes the clients initial index

level used to calculate the growth of

their investment

• In 3 years and 9 months time, at

maturity, the Final Index Level is

3,618.39

• The growth in the Euro Stoxx 50 Index

is as follows:

(3,618.39 – 3,146.43) / 3,146.43 = 15%

• The index growth is 15%, but the

Multiplier is capped at 10%. We

therefore apply the 10 times gearing to

the 10% index growth as follows:

• R100,000 * 10% * 10 = R100,000,

• Client therefore receives R200,000 at

maturity

Index up 2.5% at Maturity

6

Index up 2.5%

Investor receives

a 25% return

3.75

Years

Initial Index level

100%

Barrier level 50%


3,146.43

Final Index Level:

3,225.09








their investment



3,225.09


is as follows:

• (3,225.09 – 3,146.43)/3,146.43 =

2.5%

• The index growth is 2.5%. We then

apply the 10 times gearing to the 2.5%

index growth as follows:

• R100,000 * 2.5% * 10 = R25,000

• Client receives R125,000 at maturity

Index down 20% at Maturity (without having dropped

below 50% of starting index level)

7


3,146.43

Final Index Level:

2,517.14








their investment



2,517.14


is calculated as follows:

• (2,517.14 – 3,146.43)/3,146.43 = -20%

• The index has decreased by 20%. We

look back to see if the index has ever

dropped more than 50% from the Initial

Index Level, in this instance it hasn’t

• R100,000 * 0% * 10 = R0.00


3.75

Years

Initial Index level

100%

Barrier level

Index Down 20%

100% Capital

returned

50%

Index down 30% at Maturity (having dropped below

50% of starting index level)

8


3,146.43

Final Index Level:

2,202.50








their investment

• In 3 years and 9 months time at


2,202.50


is calculated as follows:

• (2,202.50 – 3,146.43)/3,146.43 = -30%

• The index has decreased by 30%. We

look back to see if the index has ever

dropped more than 50% from the Initial

Index Level, in this instance it has

• Clients return = R100,000 * - 30% = -

R30,000.00


3.75

Years

Initial Index level

100%

Barrier level 50%

Index Down

30%

70% Capital

returned

Index Falls by more

than 50% of Initial Index Level

Protection falls away

In summary – what will your product return?

9

Index up15%

Investor receives

Max return 100%

3.75

Years

Initial Index level

100%

Barrier level

Capital

at risk

100% Capital

returned

50%

1

2

3

• Scenario 1: If the Index ends positive at

maturity, what will you receive?

o Client receives their initial capital

investment plus 10 times the growth in

the index to max return of 100%

• Scenario 2: If the Index ends negative at

maturity but has never fallen by 50% or more

during the life of the investment, what will you

receive?

o Client receives full principal protection

i.e. receives their initial capital

investment back at maturity

• Scenario 3: If the Index ends negative at

maturity and has fallen by 50% or more over

the life of the investment , what will you

receive?

o Client will lose capital i.e.

o if the index ends down 10% (from

inception level), client will lose

10% of their initial capital

investment.

o if the index ends down 60% (from

inception level), client will lose

60% of their initial capital

investment.

Initial Index

Level

Final Index

Level

Taxation

10

• Section 9C of the Income Tax Act (“Act”) deems receipts and accruals arising from the disposal of a

Qualifying Share to be of a capital nature if the taxpayer was the owner of the Qualifying Share for a

continuous period of at least 3 years immediately prior to the sale;

• Investec has obtained advice that the shares referred to herein will be a Qualifying Share as defined in the

Act if the investor remains the owner of such shares for a continuous period of 3 years before any disposal

and that any profit realized from a sale of such shares will be subject to Capital Gains Tax in the hands of the

investor;

• The tax consequences for investors who elect to sell the shares before a period of 3 years has elapsed will

be dependent upon the individual circumstances of such investors and any profit realised from the sale may

be subject to Income Tax;

• It is recommended that potential investors seek independent professional legal, tax and accounting advice so

as to consider the investment in the light of the investor’s particular circumstances. No responsibility is

accepted by Investec for the treatment of any court of law, tax, banking or other authority in any jurisdiction of

the investment and no undertaking, warranty or representation is given with regard to the outcome of any

such investment.

Benefits / Risks

11

Benefits Risks

Diversification benefits of the Euro Stoxx 50 Index

Investor is exposed to possible losses should the

Index fall more than 50% over the life of the

investment

Investor is protected for a fall of the index provided

the index does not fall by more than 50% over the

term of the investment

The investor is exposed to the performance of the

Euro Stoxx 50 Index which can be negative, or

increase beyond the cap level

Geared Participation (10x) in the growth potential

of the Euro Stoxx 50 Index, to the Cap level

Investor is exposed to credit risk on Investec Ltd

and Investec PLC

Potential Tax benefits should investors hold for the

full term

Principal protection is only given at maturity and not for early unwinds

Transparency via daily pricing and monthly

valuations via stockbroking accounts

Early unwinds or sales of the ESP may result in the investor being liable to pay income tax on any profit

Ability to get access to the European market with

no currency risk implications

Liquidity provided by a market maker during the

investment term

THANK YOU!

Documents

EuroStoxx50_Multiplier_ Presentation_Slides.pdf