Bonus Certificate

What is a Bonus Certificate?

Bonus Certificates are derivative financial instruments belonging to the category of Conditionally Capital Protected Certificates. They can be used to invest in underlying financial assets such as shares, a stock index, a currency, a commodity or an interest rate. The peculiarity of this type of tool is the ability to provide the investor a return at maturity through the payment of a premium, the Bonus, even in event of a moderate fall of the underlying asset. For this type of Certificate, usually, the capital protection at maturity is conditional on the underlying asset reaching a specified price, called the Barrier Level.

Who are Bonus Certificates suitable for?

This type of Certificate is designed for investors with a propensity toward high risk, having an expectation of relative stability, moderate rise or fall of a given financial asset. The capital protection is guaranteed as long as the underlying financial asset does not fall below a certain threshold level called Barrier; in this case the investor may be subject to significant losses and the final payoff would reflect the performance of the underlying asset.

Investment products that give the possibility to receive a premium at maturity: the Bonus

Listing and trading of Bonus Certificates

Bonus Certificates are financial instruments that can be bought or sold, in Italy, either on SeDeX or EuroTLX, Multilateral Trading Facilities of the Italian Exchange. Methods and trading hours of such multilateral trading facilities are specified in the relevant Rule books, available on the website of the Italian Exchange. For example, trading in the continuous phase may take place on the open market days from 9:05am to 5:30pm on SeDex and from 9:00am to 5:30pm on EuroTLX

Features of Bonus Certificate

UNDERLYING: a share, stock index, currency, commodity or any other financial or real asset on which the value of the Certificate depends.
INITIAL EVALUATION VALUE or STRIKE PRICE: the value of the underlying asset at the date of initial evaluation;
FINAL REFERENCE PRICE
MATURITY: the date on which the Certificate ceases to exist or 'matures'
ISSUER: the financial institution that issued the Certificate;
MINIMUM LOT: the minimum number of certificates that can be bought or sold;
ISIN: the alphanumeric code that uniquely identifies the financial instrument;
BARRIER LEVEL the value of the underlying asset under which investors lose capital protection of the certificate.
BONUS: the premium paid to the investor if the underlying asset performs positively or if the trend is negative and does not trigger the Barrier Event;
CAP: the possible maximum share in the profits of the Underlying that the issuer recognises, at maturity, to the holder of the Certificate;
MULTIPLIER: the number of underlying assets controlled by each Certificate and the ratio between the subscription price at the time of issue of the Certificate and the Initial Reference Value.

Operation and pay-off of Bonus Certificates

The Bonus Certificate allows the investor to obtain a return on capital invested called Bonus even in the event of an eventual decline of the underlying asset. The ability to achieve the Bonus is guaranteed unless the value of the underlying asset reaches a predetermined level and is expressed in percentage terms and called the Barrier level. The evaluation of the Barrier may take place at maturity, or during the lifetime of the Certificate. If the Barrier level is reached, the investor receives a Settlement Amount at maturity related to the performance of the underlying asset. On expiry of the Bonus Certificate there are two possible scenarios the holder of the Certificate may incur:

If the value of the underlying has not reached the Barrier Level, the investor will receive the higher of:

The value of the invested capital plus the performance of the underlying on the due date;
The Bonus which represents a percentage greater than 100% of the issue price.

If the value of the underlying has reached the Barrier, the investor will receive a settlement amount which corresponds to the performance of the underlying.

Example of operation

Assuming a Bonus Certificate having as underlying asset Intesa Sanpaolo shares with the following characteristics:

Maturity	2 years
Issue Price	100 Eur
Date of initial value	21/07/2014
Initial reference value	1,3 Eur
Final evaluation date	21/07/2016
Bonus	120% (1,56 Eur)
Barrier Level	0,91 Eur (equal to 70% of the Initial Reference Value)

Below are two possible scenarios that the expiry of the Bonus Certificate can present to the investor:

intesa Sanpaolo shares at the close of July 21, 2016 are worth 1,40 Eur. The final evaluation price is greater than the Barrier Level placed to 0,91 Eur. The investor collects the 100 Eur of the issue value of Certificate plus the 20 Eur Bonus (120%);
intesa Sanpaolo shares, at the close of July 21, 2016, are worth 0,80 Eur. The value of the final price is below the Barrier Level of 0,91 Eur. The investor loses the capital protection and registers a loss commensurate with the performance of the underlying value of the financial asset and the liquidation value equal to:
Liquidation value = Final reference value x Multiplier x minimum lot traded
Inserting the data into this example shows:
Liquidation value = 0,80 x 76,9231 x1 = 61,54 Eur

Graph showing an example of pay-off Bonus Certificate

For further information on the terms you can consult the appropriate section GLOSSARY

In order to have access to the documentation and the information included herein relating to the financial instruments (the "Securities"), please represent, warrant and accept without reserve or exception the entire Terms of Use and confirm what follows.

The offer of the Securities (the "Offer") is made to the general public in a specific jurisdiction and any offer, solicitation of an offer, distribution of marketing material relating to the Securities will not be made in the United States of America, Canada, Australia, Japan or any other country where such acts are forbidden without specific exemptions or authorizations from the relevant competent authorities (the "Other Countries").

No Offer may be made in the United States of America, or to any citizen, resident, taxable person in the United States of America ("U.S. Person" or "United States Person" within the meaning of U.S. Securities Laws or other relevant local regulations, a US Person) and no distribution of any documents relating to the Offer may be made in the United States of America. The Securities have not been and will not be registered nor under the United States Securities Act of 1993, as from time to time amended, neither under any financial rules applicable in the United States of America. Neither the Securities and Exchange Commission ("SEC") nor any other supervisory authorities in the United States of America has approved or has not approved the issuance and/or the Offer of the Securities or has taken any position as to the accuracy or inaccuracy of the Prospectus and/or the Final Terms/Condizioni Definitive of the Securities. According to the provisions of the United States Commodity Exchange Act, trading in the Securities has not been approved by the United States Commodity Futures Trading Commission ("CFTC").

The Securities have not been and will not be registered under the existing Securities rules applicable in Canada, Japan, Australia or in the Other Countries, and therefore they may not be, directly or indirectly, offered, sold or otherwise delivered in Canada, Japan, Australia and in the Other Countries or to any citizen, resident, taxable person in Canada, Japan, Australia and the Other Countries and the documentation relating to the Offer may not be distributed in Canada, Japan, Australia and the Other Countries. In any event no person, being US Person under the US Securities Laws or under any other local applicable rule or resident in Canada, Japan, Australia and the Other Countries, may join the Offer.
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I hereby declare that I have read and fully understood and that I agree to comply with the above selling restrictions and undertake not to transmit, directly or indirectly, any document relating to the Offer of the Securities in the United States of America, Canada, Australia, Japan or in the Other Countries.

WARNING: the above declarations constitute self-certification pursuant to Decree by the President of the Republic No. 445 of 28 December 2000, as subsequently amended. False declarations are punishable by law.

I hereby declare that I am not an US Person nor a citizen, a resident or a taxable person of the United States of America or Canada, Australia, Japan or of the Other Countries, nor will I purchase on behalf of or for the benefit of one or more of such persons and I will be responsible for any consequences of such declaration. I hereby further declare that I am not physically present in the United States of America or Canada, Australia, Japan or in the Other Countries.

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