Glossary

Averaging

It is a common, but not universal, feature for the final index/asset price reading to be averaged in some way. For example, an index may be averaged monthly, weekly or daily over the last nine months of an investment period. Averaging the initial index/asset level is much less common. Averaging has positive and negative implications. It reduces the impact of a sharp downturn shortly before the end of the investment period. However, a sharp rise in the final few months is diluted by averaging.

Capital protection

Unlike other investment alternatives, Structured Products usually carry some form of capital protection. Often this is in the form of ‘hard’ protection – which aims for investors to receive back 100% of their invested capital at maturity no matter how an index or underlying asset class has performed; or ‘soft’ protection, where the capital return depends on the index or underlying asset’s level at maturity.

Capital-at-risk

For a product to give an investor the potential for higher return, we have introduced an element of risk to their capital. This means that under certain circumstances investors may lose some of their initial investment. See Capital protection.

Close date

The date on which we close a product to new investor subscriptions/orders.

DMTN

An issuance vehicle used by Absa where the returns generated are income taxable. The full details of detailed in programme memorandum of Absa Bank Limited’s ZAR 30,000,000,000 Domestic Medium-Term Note (“DMTN") Programme.

Early redemption

If an investor wants to relinquish an investment prior to the maturity date, this is termed early redemption. Generally, the proceeds the investor receives in this case will not correspond to the payoff the client signed up to initially. Normally the payoff (including any capital protection) as described in the product brochure only relates to maturity.

Gearing

Products sometimes offer geared exposure to a chosen asset. For example, a geared stock market product might offer 200% of the increase in a chosen index. However in general, more return equates to more risk or less capital protection.

LEIPS

Long-Equity Investment Plan. This is an over the counter contract between Absa and the Investors and was the primary issuance vehicle between October 2010 and September 2011, and replaced by the LEIP Security

LEIPS Security

.“LEIP Security”means the Long-Equity Investment Plan Securities, which are listed securities issued under the Absa Warrants and/or Structured Investments programme and is issued to an Investor. This is our primary issuance vehicle from September 2011 onward.

Maturity date

The date on which we calculate returns on an investment. We usually pay proceeds within two weeks after maturity date.

Open date

The date on which we open a product for investor subscriptions/orders.

Participation

Another word for gearing. If an investment has 100% participation, it means that at maturity, if the index is 40% higher, the investor will have a 40% return on initial capital.

Plan

Simply, this is what the investor signs up to when investing in a retail solution. It may include more than one investment or asset. Taken as a whole, they deliver to the investor the payoff as outlined in the brochure.

Soft protection

See Capital protection.

Start date

The date from which we link the investor’s capital to the advertised payoff.

 

Contact Us

For technical and product related queries please email us at structuredproducts@absacapital.com or call us on:

+27 (0)11 895 5528