KNOCKOUT Series 1 is a brand new fund brought to you by Liontamer Investments. It’s the first launch of a knockout fund in the New Zealand market – a concept that has proven hugely popular with investors all across Europe. As with our other funds, it is based on market performance, but this time the objective is to provide a high potential coupon, which will be paid even if a particular sharemarket has low or zero growth. Plus there is an opportunity for the fund to mature early, in each year of the five year term. Liontamer designed KNOCKOUT Series 1 specifically for New Zealand investors as a new and exciting way to enhance portfolio returns in an otherwise low return environment.
Key Features
Status
Closed to new investment
Structure
Australian unit trust (only open to New Zealand residents and investors in countries outside of Australia)
Index
Dow Jones EURO STOXX 50 Index. This is the leading blue chip index for Western Europe, and provides a good representation of the leading companies in that area. The index covers 50 stocks from 12 European countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. It currently includes such well-known giants as Nokia, AXA, L’Oreal, Suez, Total, and Unilever.
How does it work?
Investors have the potential to earn a 12% coupon rate which builds up over the five year term of the investment (not compounded). Payment of the coupon is dependent on the performance of a basket of Europe’s 50 leading blue chip companies, as measured by the Dow Jones EURO STOXX 50 Index. If the level of the index is the same or higher than its starting level in a year’s time, you will earn the 12% coupon. Even better, the fund will close early (that’s the ‘knockout’) with a full return of capital.
If the index doesn’t maintain its value, you simply stay invested for another year and the same test applies. Each year we compare the index to its starting level on the day the fund began. You get five opportunities (one each year) to earn the high coupon and achieve a knockout (maturity of the fund). If this happens at the end of Year 2 the coupon jumps to 24%, if it happens at the end of Year 3, it’s a 36% coupon, Year 4 is 48% and Year 5 is 60%. For each year you stay invested, the coupon jumps up in value to compensate for the longer term.
Growth
The coupon payment is dependent on the performance of the Dow Jones EURO STOXX 50 Index. It is triggered by the application of the following process:
Each year on a set date in October, the index level is compared to its original level when the Trust commenced.
If the index level is the same or greater than when the
Trust commenced, the Trust is wound up and the coupon
will be paid.
If the index level is lower than when the Trust commenced, the coupon is not paid and the Trust continues for a
further year.
The test is repeated on the next anniversary and the coupon payable on maturity increases by 12% each year the Trust continues (not compounded).
As a result, if the Trust matures early in years one to four of the term, or reaches final maturity, the coupon payment will be (as a percentage of the investment amount):
Year one:
12%
- fund matures early
Year two:
24% - fund matures
early
Year three:
36% - fund matures
early
Year four:
48% - fund matures
early
Year five:
60% - maturity.
Only one coupon can be earned during the life of the Trust. As soon as the coupon payment is triggered, the Trust matures, the jumper units will be repaid and there is a full return of capital plus payment of the applicable coupon.
Capital protection
100% capital protected when a coupon is paid (i.e. where the coupon is payable at the Final Maturity Date, or following an Early Maturity Event, there is a full repayment of the investment amount as well as the coupon payment on the winding up of the Trust).
If the index level on the maturity of the Trust is less than the index level when the Trust commences, there is no coupon payment and the extent of capital protection depends on the performance of the Dow Jones EURO STOXX 50 Index as follows:
The Trust is fully protected from index falls of up to 50%. This is known as the 'Capital Protection Threshold'. So long as the Index remains at or above half of its original level during the life of the Trust (measured monthly over the five years) the 100% capital protection remains in place.
If the Index breaks the Capital Protection Threshold when measured, there is no capital protection and the Trust is exposed to fluctuations in the Index. The return of capital tracks the performance of the Index. The percentage loss of capital will be proportionate to the decline in the Index.
Term
5 years, but subject to early maturity
Minimum investment
$5,000
Entry fee
(this is a fee paid by you)
No entry fee
Brokerage
(this is a fee paid by Liontamer)
2% fee paid by Liontamer to your financial adviser
No on-going annual brokerage is paid
Management fee
No annual management fee
Early maturity feature
When the coupon payment is triggered, the jumper units will be repaid. If this occurs at the end of years one, two, three or four, this will give rise to an ‘Early Maturity Event’. There will be a full repayment of capital as well as the applicable coupon payment.
Maturity Information
Investment date
3 October 2008
Starting index level
3067.35 (rebased to 100)
Maturity date
1st year anniversary: 2810.46 (No knockout)
2nd year anniversary: 1 October 2010
3rd year anniversary: 3 October 2011
4th year anniversary: 1 October 2012
Final maturity date: 3 October 2013
Hold to maturity values
$1.00 Units
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Hold to Maturity Value
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
DJ EURO STOXX 50 Index
90.529
88.952
95.560
91.834
85.098
83.894
89.398
85.512
Note: all levels are at month-end, unless otherwise specified.
Valuation Tools
Note: this chart shows the hold-to-maturity values only. Please see a definition
of this below. The values are not market values or exit values. Please remember
that past performance should not be used as a guide to the future, and final valuations
are subject to market movements between now and the relevant maturity date.
Important information
Hold-to maturity values
The hold-to-maturity values shown on the table above are not a market value or a value at which investors can exit the fund. They represent what the value of each unit would be assuming it was maturing today and had been held for the full term. By making these assumptions, we can provide a hypothetical value which reflects the relevant level of capital protection plus the formula of returns which apply at maturity. We calculate this by adding together the accrued annual return and any growth in the underlying index, since the start date of investment. We take into account the participation rate of each fund when making the calculation i.e. the level of exposure the fund has to the index. The hold-to-maturity value gives investors an indication of how their investment is performing at the time the calculation is made.
Values prior to maturity
As capital protection only applies at maturity, the value of units prior to this date is a maximum of $1.00, less a 2% exit fee and any break costs involved in selling the investments held by the fund. Based on the restrictions imposed on the transferability of the units, a reasonable view is that the ‘market value’ of each unit can be determined and it will not exceed $1.00 before maturity.
Early exits
Early exits are possible from all Liontamer funds. Quarterly exits are available for this fund at the end of January, April, July and October.
The early repayment value of the units will mirror the value of the assets of the fund, capped at a maximum value of $1.00, less a 2% exit fee. If the value of the assets of the fund is less than $1.00 then you will receive that lesser amount less a 2% exit fee. By withdrawing early you will get back less than you invested. As capital protection only applies at maturity, choosing to leave the fund early can result in you receiving back less than your investment amount (due to the break costs of the underlying investments held by the fund) as well as paying the exit fee.
Exceptional circumstances
If the reason that you need to exit from the fund is ‘exceptional’, it may be possible to exit at a unit price which is higher than $1.00 per unit (at Liontamer’s discretion). Examples of exceptional circumstances would include death, serious illness or severe financial hardship. In these situations, we will need details of your circumstances in writing – your financial adviser or broker can assist you or your family with this process.
Transfers to other investors
Transfers are possible between immediate family members or between family trusts and their beneficiaries. Transfers can only take place at a maximum value of $1.00. Please contact your financial adviser or broker to arrange a transfer. If you don’t have an adviser or broker, contact Liontamer Investor Relations on 0800 210 451 or email us at info@liontamer.com
This should be sent to our Registrar at the following address:
Link Market Services
PO Box 91976
Auckland 1142
New Zealand
Disclaimer
*Capital protection at maturity means you will receive back 100% of the combined amount invested and early bird interest (earned during the offer period) less any entry fee charged (3%) and any exit fee. Capital protection only applies at maturity. Early withdrawals may result in investors receiving back significantly less than they put in, due to market movements, the exit fee and the fund’s establishment costs. There is a more detailed description of the capital protection in the Investment Statement and the limited circumstances when capital protection may not be available. A copy of the prospectus is available upon request from Liontamer Investor Relations on 0800 210 451.
Neither KBC Bank N.V. nor KBC Group N.V. guarantees repayment of the investment amount or any returns on the investment nor do either of them accept any liability to investors. However, as the Fund Asset Provider, KBC Bank is legally liable to pay to Liontamer as trustee of the Trust an amount equivalent to the Investment Amount and the Index Linked Return. Neither KBC Group N.V. nor any other member of the KBC Group guarantees the obligations of KBC Bank.
