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ISIN: Security: Symbol: Life cycle
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1220 Reverse convertibles

Product type number as specified by the Swiss Structured Products Association (SSPA): 1220

Please consult the termsheet and the accompanying issue prospectus for information on the exact product functionality, product details and risks.

Market expectations

  • Sideways moving or slightly rising underlying
  • Falling volatility

Characteristics

  • If the underlying is lower than the cap level on expiry, the underlying is delivered.
  • If the underlying is at or higher than the cap level on expiry, the nominal amount is repaid.
  • The coupon is always paid out irrespective of the performance of the underlying.
  • The product involves less risk than a direct investment.
  • Several underlyings (worst of) make it possible to obtain higher coupons in exchange for greater risk.
  • The income accruing on the underlying is used for strategy purposes.
  • The profit potential is limited (cap level).

Advantages

  • The aim is to generate an excess return in sideways markets when compared to a direct investment in the underlying.
  • Lower risk of loss than that of a direct investment in the underlying.

Disadvantages

  • If the underlying rises sharply, the return compared with a direct investment is limited.

Repayment terms

  • If the price of the underlying is above the cap level on expiry, the nominal amount is paid out in cash.
  • If the price of the underlying is lower than the cap level on expiry, the number of underlyings specified at the start is delivered for each nominal amount and/or a cash settlement is paid out.
  • The coupon is always paid out irrespective of the performance of the underlying.

Pay-off diagram upon expiry

1220 Pay-off

Examples upon expiry

Product & scenarios
  Scenario 1 Scenario 2 Scenario 3
Description Rising underlying Stagnating underlying Falling underlying
Underlying value share X share X share X
Term 1 year 1 year 1 year
Nominal amount CHF 1'000 CHF 1'000 CHF 1'000
Cap Level 100% 100% 100%
Coupon 9% 9% 9%
Capital employed CHF 10'000 (10 RC a CHF 1'000) CHF 10'000 (10 RC a CHF 1'000) CHF 10'000 (10 RC a CHF 1'000)
Issue price 100% 100% 100%
Ratio 10 10 10
Share X at initial fixing CHF 100 CHF 100 CHF 100
Share X at maturity CHF 120 CHF 100 CHF 80
Performance share X 20% 0% -20%
Payoff
  Scenario 1 Scenario 2 Scenario 3 (physical delivery)
Calculation (100% + 9%) * 10'000 (100% + 9%) * 10'000 [10 RC * 10 Shares * 80 (equivalent value )] + (9% * 10'000)
Redemption CHF 10'900 CHF 10'900 CHF 8'900
Profit / Loss 9% 9% -11%
Taxes
Swiss income tax Predominantly one-off interest payments (IUP)
Swiss withholding tax No
Swiss stamp tax Yes (if physical delivery / term > 1 year)
EU tax on interest Yes
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