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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%

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

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
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Scenarios
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 hasnt 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

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

Initial Index Level:


3,146.43

Final Index Level:


3,618.39
3.75
Years

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:

Index up 15%
Investor receives
Max return 100%
100%
Initial Index level

(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

50%
Barrier level

Index up 2.5% at Maturity

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

Initial Index Level:


3,146.43

3.75
Years

In 3 years and 9 months time, at


maturity, the Final Index Level is
3,225.09
The growth in the Euro Stoxx 50 Index
is as follows:

(3,225.09
2.5%

The index growth is 2.5%. We then


apply the 10 times gearing to the 2.5%
index growth as follows:

3,146.43)/3,146.43

R100,000 * 2.5% * 10 = R25,000

Client receives R125,000 at maturity

Final Index Level:


3,225.09

Index up 2.5%
Investor receives
a 25% return
100%
Initial Index level

50%
Barrier level

Index down 20% at Maturity (without having dropped


below 50% of starting index level)

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
2,517.14

The growth in the Euro Stoxx 50 Index


is calculated as follows:

Initial Index Level:


3,146.43

Final Index Level:


2,517.14
3.75
Years

100%
Initial Index level

(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 hasnt

R100,000 * 0% * 10 = R0.00

Client receives R100,000 at maturity

Index Down 20%


100% Capital
returned
50%
Barrier level

Index down 30% at Maturity (having dropped below


50% of starting index level)

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
2,202.50

The growth in the Euro Stoxx 50 Index


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

Client receives R70,000 at maturity

Initial Index Level:


3,146.43

Final Index Level:


2,202.50
3.75
Years

100%
Initial Index level

Index Down
30%
70% Capital
returned

50%
Barrier level

Index Falls by more


than 50% of Initial Index Level
Protection falls away

In summary what will your product return?

Scenario 1: If the Index ends positive


maturity, what will you receive?
o

Final Index
Level

Initial Index
Level

Client receives their initial capital


investment plus 10 times the growth in
the index to max return of 100%

3.75
Years

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

at

Client receives full principal protection


i.e. receives their initial capital
investment back at maturity

Index up15%
Investor receives
Max return 100%

100%
Initial Index level

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?

100% Capital
returned

Capital
at risk

3
50%

Client will lose capital i.e.


o

Barrier level

if the index ends down 10% (from


inception level), client will lose
10% of their initial capital
investment.
if the index ends down 60% (from
inception level), client will lose
60% of their initial capital
investment.

Taxation

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 investors 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.

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Benefits / Risks
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

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THANK YOU!