1 SBR002 Presentation 5-YEAR STANDARD BANK RETAIL DEPOSIT NOTE PAYING 3-MONTH JIBAR + 0.15% (8.263%) 0.35% brokerage on Retail Notes August / September 2006
Overview 2 1. Introduction 2. SBR002 indicative termsheet 3. Comparative pricing 4. Value proposition 5. Floating rate note mechanics 6. Performance of SBR001 7. Primary offer process and trading 8. Additional information 9. Contacts 10. Disclaimer
Introduction 3
Introduction 4 May 2004 National Treasury launched the RSA Government retail bonds Standard Bank launched STANDARD BANK RETAIL DEPOSIT NOTES ( Retail Notes ) with the debut SBR001 issue in February 2006 The initial SBR001 3-year issue was used as a pilot to test the distribution strategy and trading platform and to give the market confidence in the liquidity of the Retail Notes Standard Bank is encouraged by the success of SBR001, with an issue size of R175 million and a very positive response from the market, media and Government The Retail Notes have traded successfully in the secondary market with Standard Bank showing strong support as market maker Based on the success of SBR001, SBR002 is being launched in August/ September 2006 SBR002 has been refined to further enhance the offering (higher interest rate, reduced brokerage and tighter bid-offer spread) Standard Bank intends to periodically launch new notes with different features and maturities and/or increase the issue size of existing notes Besides offering investors good rates of interest it does not require their money to be locked up for years In terms of interest-rate risk it is probably as immunised as you can get Standard Bank launches its tradeable retail bond, Sunday Business Times, 19 February 2006
SBR002 indicative termsheet 5
SBR002 indicative termsheet 6 Issue amount: Unlimited Issuer: The Standard Bank of South Africa Limited ( SBSA ) Issuer credit rating: AA+ (zaf) Status: Deposit (senior debt) Maturity: 5 years Interest: 3-month Jibar + 0.15%, paid quarterly in arrears Interest rate*: 8.263% (NACQ), or 8.523% (NACA) 3-month floating 9.090% (NACQ), or 9.405% (NACA) 5-year fixed equivalent Pricing at issue: 100% of par Listing: JSE (SBR002) and BESA (SBR002) Trading: JSE Documentation: SBSA s DMTN Programme and Pricing Supplement Market making: Indicatively, SBSA will post a bid of 25 bps on the theoretical price (99.75 100.00) Minimum deposit on primary offering: R10,000 (100 Notes) Minimum trading denomination: R100 Broker commission: 25 bps excluding VAT paid to JSE brokers (T+10) on the nominal value of deposits accepted in the bookbuild and settled (subject to receipt of invoice) Additional information: www.standardbank.co.za Note: *All rates as at 16 August 2006
Comparative pricing 7
Comparative retail fixed income products 8 Product Term Cost Rate type Bank deposits Call to 60 mths Bank fees, withdrawal penalties Floating and Fixed Online investment/brokerage accounts Call account Management fee depending on amount Floating Money-market unit trusts Undated Annual management fee Floating Bond funds Undated Front-end and annual management fee Floating and Fixed Preference shares Perpetual Brokerage fee and bid offer spread Prime floating Government retail bonds 2, 3 and 5 years No charge (withdrawal penalty) Fixed JSE Trustees Pty Ltd Call account Brokerage management fee Floating Property Loan Stock ( PLS ) Perpetual Brokerage fee Floating Source: Standard Bank
SBR002 comparative pricing 9 Comparative pricing YTM (fixed rate) Comparative pricing spread to JIBAR 9.50% 9.00% 8.50% Retail product Standard Bank Retail Note SBR002 5 yr Government Retail Bond Fixed Money Market Call Account***** Standard Bank MM Unit Trust**** Standard Bank Fixed Deposit Fixed Return 3- mth JIBAR + 15 bps 3- mth JIBAR - 4 bps 3- mth JIBAR 82 bps 3- mth JIBAR 105 bps 3- mth JIBAR 109 bps 8.00% 7.50% 2 year 3 year 5 year Standard Bank Retail Notes showing considerable value vs. alternative investments Standard Bank Retail Note* Standard Bank Deposit*** Government Retail Bond** Notes: 1. All rates as at 16 August 2006 2. All rates quoted NACA * 3-year bank swap rate (JIBAR fixed rate equivalent) at mid 9.201%. 5-year bank swap rate + 0.15% (Jibar + 0.15% fixed rate equivalent) at mid 9.405% ** 3-year RSA Government Retail Bond (8.94%), 5-year RSA Government Retail Bond (9.20%) *** Standard Bank ordinary fixed deposit rates R10k to R99k (36 mth to under 48 mth 8.08%) (48 mth to under 60 mth 8.08%) **** Standard Bank Money Market unit trust ( 7.25%) ***** Money market call account (7.50%)
Trading cost 10 Standard Bank launches 0.35%* brokerage on all Retail Notes Worst case with SBSA bid spread Best case no bid spread Assumptions Brokerage* 0.35% Bid spread as % of dirty price 0.25% Trade volume R 100,000.00 Sell Bid spread R 250.00 Brokerage R 350.00 Investor protection levy R 0.30 STRATE R 10.92 VAT R 50.57 Total rand value R 661.79 Total cost as a % of initial investment 0.662% Annualised costs as a percentage** 0.168% Assumptions Brokerage* 0.35% Bid spread as % of dirty price 0.00% Trade volume R 100,000.00 Sell Bid spread R 0.00 Brokerage R 350.00 Investor protection levy R 0.30 STRATE R 10.92 VAT R 50.57 Total rand value R 411.79 Total cost as a % of initial investment 0.412% Annualised costs as a percentage** 0.105% *Online Share Trading (operated by Standard Financial Markets (Pty) Ltd) for all clients trading Retail Notes **Assuming 5 year holding period
Value proposition 11
Value proposition 12 Retail Notes are Standard Bank deposits that pay wholesale returns and are tradeable Better return than bank deposits but no greater credit risk The Notes offer an alternative asset class to retail investors looking to maximise their returns over the medium term, and manage portfolios diversified by asset class Stable interest income paid regularly As a floating rate instrument, reduce interest rate risk and reduce erosion of capital risk Tradable on the JSE - ease of access to the instrument Liquidity ensured by Standard Bank Any person over 18 years or any legal entity can invest Low minimum investment of R10,000 No maximum restriction on the amount invested No uncertificated securities tax ( UST ) No fees / charges on the primary offering to investor No annual management fees Use tax allowance Using tax free interest allowance Under 65 years R16.5 k assuming 8.263% interest rate, then individual can invest R200 k Over 65 years R24.5 k assuming 8.263% interest rate, then individual can invest R297 k
Floating rate note mechanics 13
Floating rate mechanics 14 What is JIBAR? Johannesburg interbank agreed rate (JIBAR) is the average interest rate at which banks buy and sell money. It is a floating rate and is quoted in 1, 3, 6 and 12 month terms. The rate is calculated daily by SAFEX and can be viewed on Reuters What is a floating rate note? The interest on a floating rate note, as opposed to interest on a conventional fixed rate note is linked to a prevailing interest rate (or the reference rate, 3-month Jibar in the case of this offer) Therefore, at reset dates (quarterly in the case of this offer), the interest rate that will apply over the next interest period is determined The note should trade at par on reset dates and close to par between reset dates; and therefore The interest risk (sensitivity to changes in interest rates) of a floating rate note is relatively small (compared to other fixed rate instruments) Interest rate for a period is determined from reference rate level at reset date i.e. at start date in this case Interest is received on principal at each reset date value of note at each reset date should pull to par Start date Interest Interest Interest Interest + principal Interest period Interest period Interest period Interest period set reset reset reset Full term or maturity of deposit
Performance of SBR001 15
SBR001 secondary market performance 16 R175 million was placed in the primary offer Secondary market trade of R52 million 227 trades Average trade size of R225k Standard Bank has been an active market maker (buyer or seller in most of the trades) Average bid/offer spread by Standard bank of 25 bps (99.75 100.00)
Primary offer and trading process 17
Primary offer and trading process 18 ISSUER: JOHANNESBURG SECURITIES EXCHANGE STRATE LTD Primary offer: Retail investor places order through stockbroker. Broker collates orders with Standard Bank in the bookbuild process. Settlement takes place through JSE and STRATE BROKER NETWORK RETAIL MARKET Secondary trading: Retail investor places buy or sell order through stockbroker. Best bid and offer matched through JSE system. Standard Bank has undertaken to always ensure a bid price on the JSE. Settlement takes place through JSE and STRATE
Primary offer key dates 19
Primary offer key dates* 20 AUGUST 21 Aug SEPTEMBER 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 SAT SUN SAT 1 1 2 3 SUN SAT SUN 1 21 August - 12 September 2006 Book open 2 12 September 2006 Bookbuild - Orders may be submitted at any time from 21 August. Book closes at 12h00 on 12 September 2006** 3 15 September 2006 Settlement and listing (T+ 3) 3 15 September 2006 Trading on the JSE * Dates and times subject to change ** Stockbrokers may have earlier cut off times for submission of orders
Additional information 21
Additional information 22 Standard Bank company information: Retail Note information: Information on market rates: Standard Bank deposit rates: JSE prices: Standard Bank prices: www.standardbank.co.za www.standardbank.co.za (under the Product and Services section) or www.securities.co.za www.interestrates.co.za www.standardbank.co.za - Reuters - Bloomberg - I-Net Bridge - Moneyweb -etc Reuters page SBID Online Share Trading: Call centre: 0860121161
Thank you 23
Disclaimer 24
Disclaimer 25 The Standard Bank of South Africa Limited ( SBSA ) has made every effort to ensure the accuracy and completeness of the information contained in this document. The information is not intended as advice and no warranty express or implied is made as to the accuracy, correctness or completeness of the information, which is subject to change at any time after publication without notice. Should the information lead you to consider entering into any transaction in relation to a financial product of any sort whatsoever including but not limited to deposits with SBSA ( the product ) you must take note of the following: There are intrinsic risks involved in transacting in any products. No guarantee is provided for the investment value in a product. Any forecasts based on hypothetical data are not guaranteed and are for illustrative purposes only. Returns may vary as a result of their dependence on the performance of underlying assets and other variable market factors. Past performances are not necessarily indicative of future performances. Unless a financial needs analysis has been conducted to assess the appropriateness of the product, investment or structure to your unique particular circumstances, SBSA cautions you that there may be limitations on the appropriateness of the information for your purposes and you should take particular care to consider the implications of entering into the transaction, either on your own or with the assistance of an investment professional. There may be various tax implications to consider when investing in the product and you must be aware of these implications before investing. SBSA does not accept liability for the tax treatment by any court or by any authorities in any jurisdiction in relation to any transaction based on the information. It is strongly recommended that individual tax advice be sought before entering into any such transaction. Authorised financial services provider The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 810356 11/05