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What are zero certs™ ?
 
RBS Zero Certs™ (or Zero-Strike Participation Certificates) are a liquid, transparent, non-leverage and low-cost product that offer investors exposure to exotic and emerging markets and focused themes like Climate Change Technologies.
 
Investors can make use of Zero Certs™ to gain exposure to overseas markets that are not easily accessible due to foreign market trading restrictions and settlement intricacies.
 
Purchasing any of these index-linked certs is equivalent to buying into a basket of index component stocks of a particular country or particular theme. By tracking the movement of their underlying at gearing ratio of 1, Zero Certs™ replicate the performance and pay the full return price of the underlying.
 
Key features of Zero Certs™
• Basket of stocks
• Provides access to emerging markets & growing themes
• Low cost
• No sales charge or management fees
 
 
How to trade zero certs™ ?
 
Zero Certs™ are listed on the SGX and traded through the usual channels i.e. brokers or online-trading. Usual transaction terms including regular brokerage fees and T+3 settlement period apply. The Zero Certs™ will be held in your CDP account similar to stocks and warrants.
 
Liquidity is ensured with RBS making market and providing tight bid-offer spread for the Zero Certs™ during normal trading hours.
 
How Zero Certs™ behave in the market
At any time, the value of any Zero Cert™ can be computed easily:
 
Zero Cert™ = (Underlying Index x Forex Rate)/ Exercise Amount*
 
*the exercise amount is simply a pre-determined number set by the issuer that allows Zero Certs™ to be priced suitably for investment. The Exercise Amount for each Zero Cert™ is different but will remain fixed for that Zero Cert™ until it matures.
 
EXAMPLE:
 
The price or value of a Zero Cert™ that tracks the RBS Thailand SET50® Index* will change according to any changes in performance in the underlying indexand/or the Forex Rate.
 
*The Thailand SET 50 Index® is a capitalisation weighted index based on the top 50 stocks listed on the Stock Exchange of Thailand, with the highest capitalisation and liquidity.
 
8 June 20078 August 2007
Underlying index = 532.16Underlying Index = 595.22
FX Rate = THB/SGD 0.0475FX Rate = THB/SGD 0.0495
 
Exercise amount = 23
 
Value of Zero Cert™ on 8 June 2007=(532.16 x 0.0475) / 23
=1.10
Market making (bid-offer spread) at 1.10/1.11
 
Value of Zero Cert™ on 8 August 2007=(595.22. x 0.0495) / 23
=1.28
Market making (bid-offer spread) at 1.28/1.29
 
Performance from 8 June – 8 August 2007
 
Index Performance=(595.22–532.16) / 532.16 = 11.9%
Currency Performance=(0.0495–0.0475) / 0.0475 = 4.2%
Zero Cert™ Performance=(1.29–1.11) / 1.11= 16.2%
 
The investor’s return would therefore be roughly equivalent to the percentage gain/loss in the index level and the forex rates.