LM Australian Structured Products Fund - Series Page

Fixed Rate Income Capital Protection1
LM Product Code: LMASPF5


The LM Australian Structured Product Fund provides a series of closed end structured product offers linked to underlying Australian indices or stocks. "Fixed Rate Income Capital Protection" offers a fixed rate income return with capital protection.1 The underlying assets are linked to shares in six Australian companies listed on the Australian Securities Exchange. This offer is now available for investment.


Investment Class: Fixed Rate Income Capital Protection

Click here to view fund documents

Product Manager & Issuer

LM Investment Management Ltd.

Fixed Income Return Net to Investor2


AUD = 12.50%pa
EUR = 10.00%pa
GBP = 9.00%pa
NZD = 11.50%pa
USD = 9.00%pa
 

Investment Term

1 Year

Underlying Assets

Six Australian companies listed on the Australian Securities Exchange. The companies are:-
Sector                            Company
Banking & Finance      Commonwealth Bank (CBA.AX)
                                         Macquarie Group Limited (MQG.AX)
Mining                             Newcrest Mining Limited (NCM.AX)
                                         Rio Tinto Limited (RIO.AX)
Metals                             Fortescue Metals Group (FMG.AX)
Retail                              Wesfarmers Limited (WES.AX)

Notes Issuer and Protection Provider

Deutsche Bank AG, London Branch (rated well by the ratings houses).

100% Capital Protection

Subject to 70% barrier. Further details outlined on this page and full details contained in the PDS.
Launch Date 27 January 2012
Close Date 30 March 2012
Minimum Investment AUD1,000 or currency equivalent
Investment Allocation 100% Investment Allocation
Secondary Market Availability provided by Deutsche Bank AG3

 

Investment into the LM Australian Structured Product Fund through the relevant series can only be made via financial advisers, intermediaries and institutions. LM will be the issuer of the product and investors should seek independent financial advice prior making any financial decisions to determine if an investment is suitable to their objectives, financial situation or needs. For complete details of the fund, those recommending the LM Funds and investors should read the: Product Disclosure Statement (PDS) Parts 1 and 2 (including any relevant Supplementary PDS).


About the Offer

Investment via the Fixed Rate Income Capital Protection provides fixed income linked to the performance of the shares of six Australian companies listed on the ASX, whilst carrying a capital protection feature from global institution, Deutsche Bank AG.

Fixed Rate Income Return2,3

Fixed rate income return is paid at maturity regardless of the stock performance.

Capital Protection1,3

As well as receiving fixed rate income, there is a capital return at maturity subject to a 70% barrier. 100% capital return at maturity, provided no single stock drops by 30% or more. During the year, if any one of the stocks drops 30% or more of its original value, then returned investment capital will equate to the value of the lowest performing stock at maturity.
 
  • Stock hold option at maturity.

How Does it Work?

Scenario 1:
Barrier Level Not Breached - Fixed Interest & 100% Return of Investment Capital at Maturity
If all of the basket trades above 70% of its original value during the investment year.
Investor Return: 100% of Capital.
Plus
Fixed Interest Net:

AUD 12.50%pa
EUR 10.00%pa
GBP 9.00%pa
NZD 11.50%pa
USD 9.00%pa


Figure 1


 
The graph above is not intended to depict any possible performance of the six shares on the Australian Securities Exchange. The graph is for illustration purposes so that example data can be assessed in context.

Scenarios 2 and 3:
Barrier Level Breached
If any or all of the shares in the basket trades below 70% of its original value.
Investor Return: Capital value is equal to the lowest stock value at maturity (capital could be taken in shares of the specific company).
Plus
Fixed Interest Net:
AUD 12.50%pa
EUR 10.00%pa
GBP 9.00%pa
NZD 11.50%pa
USD 9.00%pa

If the Barrier Level is breached it triggers different events ("Barrier Events") that may result in the Fund not receiving 100% of the initial investment capital at maturity. The income is received regardless of Barrier Events. Outlined below are details of different events that could occur at maturity if the Barrier Level of 70% of the initial share value is breached.

If any one of the underlying shares closes at 70% or below of their initial share value at any time during the investment term the Fund will receive:-
 
(a) the fixed interest amount;and
(b) a percentage of the initial investment capital determined on the lowest performing share of the six underlying shares at maturity, but will not be more than 100% of initial investment capital.

For example: six months after commencement of the investment, the Commonwealth Bank of Australia (CBA) share performance falls to 70% of the initial share value, which breaches the 70% barrier. Then at the maturity date CBA share has recovered and returned to 100% of the initial share value, but at maturity the lowest performing share is Fortescue Metals Group and its performance is 90% of the initial share value, then 90% of the initial capital investment will be paid at maturity (see Figure 2 below for illustration). If however, at maturity the performance of all six underlying shares is 100% or above the initial share value, 100% of the investment capital will be returned. The return of investment capital at maturity will never exceed 100% (see Figure 3 below for illustration).


Figure 2



The graph above is not intended to depict any possible performance of the six shares on the Australian Securities Exchange. The graph is for illustration purposes to that example data can be assessed in context.

Figure 3


 
The graph above is not intended to depict any possible performance of the six shares on the Australian Securities Exchange. The graph is for illustration purposes so that example data can be assessed in context.

Payment of Investor Income and Capital if Barrier Level Breached and Less than 100% of Capital Returned3
 


If a Barrier Event occurs and less than 100% of capital is returned, the method which Deutsche Bank AG will pay the investments proceeds at maturity changes. At maturity the fixed interest component will be paid by Deutsche Bank AG in the relevant currency of investment, and the relevant percentage of investment capital payable will be returned to the Fund by way of shares in the lowest performing company.

LM will decide, after consultation with investors, to either:-

(a) sell the shares at the current market price applicable at maturity and upon receipt of the fixed interest component and sale proceeds of the shares automatically proceed to pay investor withdrawals relevant to their unit holdings;

or

(b) LM will continue to hold the shares until such time that the value of the shares increased to 100% of their initial value or LM considers it is in the best interest of investors to sell the shares, and the maturity date of that Investment Class will be extended accordingly.

In this scenario, LM would contact investors prior to maturity and allow them to choose to continue with their investment or to redeem their investment at maturity. The final decision to proceed to hold the shares after maturity will however be determined by LM. Non-Australian dollar investors should be aware that if LM decided to continue to hold the shares after maturity, non-Australian dollar investors will be subject to currency exchange exposure when the shares are sold and withdrawal proceeds are paid by the Fund.

 

Secondary Market3


Saleable in secondary market prior to maturity, provided by Deutsche Bank AG, however neither the fixed interest or return of capital will apply and will be subject to Deutsche Bank AG being able to facilitate the buy-back and normal market conditions prevailing at the time of trade.

Currencies of Investment

AUD, EUR, GBP, NZD and USD

Who can Invest?

Investment into the LMASPF5 - Fixed Rate Income Capital Protection can only be made via financial advisers, intermediaries and institutions.

The Fund will allow for investment from:- 
 
  • Individual/joint investors, sole traders, company investors, superannuation fund/trust investors or partnership investors investing directly in the series; and
  • Operators of global platforms, global portfolio bonds
 

Investment Documents








This content is intended as general information only, not as financial product advice. LM is the product issuer, is licensed as a fund manager and not as a provider of financial product advice. LM recommends investors seek independent financial advice which takes into account their personal financial situation, objectives and needs and read and consider the Fund’s current Product Disclosure Statement (PDS), Parts 1 and 2, and any Supplementary PDS (available on 27 January 2012, at www.LMaustralia.com or by contacting LM on the below details) before making any decision about the product. The PDS documents the Fund’s cooling off provisions.
 
1For details on the capital protection mechanism, refer to the section headed “Capital Protection” included above and “Description of Capital Protection Mechanism” in Part 2 of the PDS.
 
2Fixed Income amounts are calculated on the basis that the investment is held to maturity. They are net of advisor fees, non-resident withholding tax of 10%, fund fees and expenses.
 
3The risks associated with this product (including the availability of secondary market sales and payment of coupon amount) are dependent on the performance of the underlying investment, and Deutsche Bank as the Issuer of the underlying structured product asset (Notes).

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