Five hypothetical Prosper Notes back tests illustrate annualised returns between 11.61% – 17.13%*.
Background
Savings & Loans Superannuation and Investments Limited is
a funds management organisation with a focus on providing
Securities that are:
Kauri Notes – High targeted returns
Five hypothetical Prosper Notes back tests illustrate annualised
returns between 11.61% – 17.13%*.
Regular quarterly coupon payments
Kauri Notes are an interest bearing debt security designed to provide
investors with a regular coupon rate of 9.50% per annum return paid
quarterly, over the 7 year 3 month term of the Kauri Notes.
Interest guarantee in respect of the first eight coupon
payments from the Prosper Notes – Series II
As well as the capital guarantee, the payment of the first eight
quarterly interest payments of the Kauri Notes are supported by
a Prosper Notes coupon interest guarantee from Merrill Lynch
& Co., Inc which is rated AA-. Subsequent coupon payments are
subject to the performance of the Permal Financials & Futures
portfolio of funds into which Merrill Lynch invests the proceeds
of Prosper Notes. To pay each subsequent quarterly coupon the
net asset value of Prosper Notes must be above $1.02375 for each
$1 invested. If not the coupon is deferred 90 days until the next
coupon date and the asset value is sufficient to make the payment.
This means the actual rate of return achieved by Kauri Note
investors could be higher or lower than 9.5% pa.
Higher Returns through Uncapped Redemption Premium
potential
The opportunity for higher returns is provided by payment
of a redemption premium at maturity. In the event that the
performance of the Prosper Notes generates annualised interest
returns for Savings & Loans Securities in excess of 9.50% per
annum then it will pay to the Kauri Noteholders 100% of this
excess as a redemption premium at the maturity.
Merrill Lynch will generate these returns by implementing a
constant proportional portfolio insurance mechanism ("CPPI")
which is designed to maximise the exposure to the Permal FX,
Financials & Futures portfolio of funds at the same time as
ensuring that the principal and first eight coupon payments
are always protected. This mechanism enables investors to gain
the benefit of up to a maximum exposure of 200% of their
investment to the Permal portfolio of Funds (subject to the funds
performance) through Merrill Lynch lending the additional
amount at 0.5% over interbank interest rates. Where the Permal
portfolio achieves good returns additional amounts are invested in
the fund. If performance declines the investment is de-leveraged
and amounts are notionally invested in risk free bank deposits.
Secondary market Sell Back facility
Kauri Notes can be sold back to Savings & Loans early by
Noteholders each month, subject to certain circumstances.
The
size of the Permal fund, the very liquid instruments in which
the Fund managers invest and Merrill Lynch International's
secondary market trading experience all assist in making this sell
back feature possible.
Sell back prices will be linked to the net asset value of the
Prosper Notes.
If a net asset value premium (or discount) above (or below)
issue price has been generated, the sell back price will include
this net asset value adjustment.
A diversified investment in the Permal FX, Financials &
Futures Limited portfolio (the Permal Fund)
The net proceeds raised from the issue of the Prosper Notes
– Series II will be invested in the flagship Permal portfolio of funds.
The US$ 7.9 billion Permal Fund portfolio is diversified
across more than 50 different managers. Investments are
made in the global marketplace with exposure to the financial,
metal, energy, agricultural, currency and other markets. The
Permal Fund also achieves diversification through the range of
investment styles and trading strategies in numerous U.S. and
international currency, futures, options, forward and other liquid
markets.
This Permal fund does not invest in either illiquid sub-prime
or high-yield debt securities. It is specifically designed not to be
correlated to debt and equity returns in order to maximise its
diversification value to an investor.
The Permal portfolio of Funds, which has been operating
successfully since 1992, has been selected for its long history of
delivering real returns to investors in all market conditions, for
its resilience to past market shocks over a 15 year period and for
the liquidity of the instruments in which its managers invest.
Permal's role is to continually monitor risk and to optimise
the whole portfolio of managers based on their current
performance by adding and removing managers.
The Permal fund has a Standard & Poor's AA rating.
Track Record of the Investment Manager
Permal the Investment Manager of the Permal portfolio of
funds is a subsidiary of Legg Mason's Wealth Management
Division a company listed on the New York Stock exchange.
It has over 33 years of experience and as of January 2007 has
approximately US$30 billion of funds under management. Legg
Mason is a global funds management firm with over US$969
billion of funds under management around the world as at 31
March 2007.
Merrill Lynch & Co., Inc the Guarantor rated AA
Merrill
Lynch is one of the world's leading wealth management,
capital markets and advisory companies, with offices in
37 countries and territories and total client funds under
management of approximately US$1.6 trillion.
Merrill Lynch is ranked number 22 in the Fortune 500 (being
the list of the 500 largest public corporations in the United
States by gross revenues aggregated by Fortune magazine).
Merrill Lynch & Co., Inc, the guarantor has a AA-, AA-/A-1+,
Aa3 credit rating (Fitch Ratings, S&P's, Moody's respectively).
Investors Interests protected through appointment of
Trustee
The Perpetual Trust is acting in a trustee role on behalf of Kauri
Notes investors. The Trustee holds a security deed over the Merrill
Lynch Prosper Notes in favour of the Kauri Noteholders.
The initial value on the date of allotment of the Kauri Notes
will be $1.00 per Kauri Note.
Brokerage
Savings & Loans will pay to advisors 1.5% brokerage on all client
subscriptions.
Further Information
To receive further information, an investment statement and
prospectus can be obtained from www.kaurinotes.co.nz or call
0800 728464 (0800 Savings).
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