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Specialist Masters Programme

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4. 5. 6. 7. GROUP NUMBER:

MSc in:

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1

Group 31

Description of the product

Bonus Certificate with opportunities for double participation and conditional capital protection

General Terms

Issuer Bulls & Bears S.A. with registered offices at 2 Rue de la Poste, Luxembourg

Guarantor Bulls & Bears Inc., New York, USA

Manager Bulls & Bears International

Calculation Agent Bulls & Bears International, 108 Bunhill Row, London

Type of security Certificate

Security Codes ISIN: US1001; Symbol: ASS01

Timetable

Subscription Period Until 04 March 2015, 4:30 p.m.

Trade date 20/03/2015

Settlement Date 23/03/2015

Exercise Date 23/03/2017

Repayment Date 30/03/2017

Observation Period The period between Trade date and Exercise date

Specific Terms

Underlying Share Name Bloomberg Code Initial Underlying Level

Credit Suisse Group AG CSGN VX Equity 25.805 CHF

Settlement Currency CHF

Issue Value 100%

Nominal Amount 1,000 CHF

Capital Protection No

Min Redemption 0%

Participation 100 – 200%

Redemption

Reference: Stock Return =

Stock Final Price − Stock Original Price

Stock Original Price

Barrier level: 70% of Stock Return

Cap level: 123% of Stock Return

Return Breakdown:

Price (%) Barrier Capital Returned Calculation

≥+23% Not Applicable 𝑉𝑎𝑙𝑢𝑒 = 1,360𝐶𝐻𝐹

+10% - +23% Not Applicable 𝑉𝑎𝑙𝑢𝑒 = 1,100𝐶𝐻𝐹 + 1,000𝐶𝐻𝐹 × (𝑆𝑡𝑜𝑐𝑘 𝑅𝑒𝑡𝑢𝑟𝑛 − 110%)

-30% - +10% Not Reached 𝑉𝑎𝑙𝑢𝑒 = 1,100𝐶𝐻𝐹

-100% - +10% Reached 𝑉𝑎𝑙𝑢𝑒 = 1,000𝐶𝐻𝐹 × 𝑆𝑡𝑜𝑐𝑘 𝑅𝑒𝑡𝑢𝑟𝑛

2

Group 31

The Bonus Double Winner gives the investor the unique opportunity to earn premium on the upside performance of the selected stock, while having a conditional protection on the downside performance. Our product falls into the category “Bonus Certificate”, with an additional double participation limited to the cap. Bonus certificates guarantee a specified payout (“bonus level”) as long as the underlying doesn’t touch or fall below the safety threshold (“barrier”) during the lifetime of the certificate.

Product description With Bulls&Bears’ Bonus Double Winner certificate, investors will have their capital redeemed and obtain a bonus of 10% at the end of the maturity, if the quotation of the Credit Suisse

Group AG never loses 30% (barrier level) or more of its initial value during the observation period. Once the barrier has been touched regardless of where the underlying quotes at maturity date, the bonus will no longer exist and the invested capital is subject to potential losses. Investors are furthermore entitled to a double participation in the underlying above 110% where the certificate will be redeemed at GBP 1,360.00 maximum amount due to the cap set at 23% above the initial underlying value.

Underlying asset The underlying asset is the stock of Credit Suisse Group AG, a global financial services company. The stock is traded on the SIX Swiss Exchange. The graph demonstrates the performance of the underlying during the past 3 years.

10

15

20

25

30

35

Credit Suisse Group AG

BONUS DOUBLE WINNER 2017 Credit Suisse Group AG (CSGN VX)

Double Participation above 110%

Barrier at 70%

Maturity: 2 Years

Cap: 123%

Investor suitability: Capped bonus certificates are best suited for more risk-conscious investors, who do not expect a strong price fall of the underlying.

Market expectation of the underlying: Underlying trades sideways to slightly higher or lower.

3

Group 31

Historical performance of the note

Payout Scenarios

The table and graph respectively show possible payout scenarios and the payout level compared to the underlying (yellow dotted line).

123

60

80

100

120

1 91 181 271 361 451

Historical Product Performance

Product 2012-2014 Product 2013-2015

Barrier Cap

31.74015 -Cap

28.3855 - Bonus End

25.805 -Initial Price

18.0635 -Barrier

-100

-50

0

50

1 6 11 16 21 26 31 36

Payout

Payout

Historical scenarios

Barrier ROI Results

2012-2014

Reached 22.20% Better than underlying due to doubling at maturity and despite barrier touched.

2013-2015

Not Reached

10% Better than underlying due to bonus.

The above 2 scenarios represent hypothetical products, simulated using the historical underlying price movements for the same length of observation period and both indicate better performance than a direct investment in the underlying stock.

Stock Return at Maturity

Barrier is never reached Barrier is reached

Capital Returned

ROI Capital Returned

ROI

≥123% 136% 36% 136% 36%

115% 120% 20% 120% 20%

105% 110% 10% 105% 5%

85% 110% 10% 85% -15%

65% n/a n/a 65% -35%

0% n/a n/a 0% -100%

Risks No capital protection: The redemption amount payable to the investor at maturity date may be less than the original capital paid, as this certificate offers no capital protection.

Equities-related risk: Price of the equity of Credit Suisse Group AG may fluctuate. Such fluctuations may have an adverse effect on the payoff of the certificate.

Credit risk: Investors’ capital is subject to the credit risk of the underlying asset. In case of default of Credit Suisse Group AG, you may receive less than the amount expected or possibly receive nothing.

Issuer risk: Investors’ capital is additionally subject to the credit risk of the issuer (“Bulls and Bears”). Accordingly, if the issuer becomes insolvent, then you may receive less than the amount expected or possibly receive nothing.

Currency risk: Investors’ capital may be exposed to currency fluctuations (CHF), if the product is denominated in a currency other than the investors’ country of residence.

Inflation risk: Changes in the rate of inflation may impact the real rate of return of the invested capital over the time period of the certificate.

4

Group 31

DECOMPOSITION OF PRODUCT Our structured product is a combination of a zero strike call, one long call option, two short call options and a down & out knockout option.

The prices of each of the products can be seen on the graph below:

Long Zero Strike Call

Long call 10% OTM

2 Short Call 20% OTM

Long down& out Put Knockout 10% ITM

Price Profit

93.37% 5.71% -5.04% 5.25% 99.29% 0.71%

The main costs associated with this structured product comes from the zero strike call that provides us to the exposure to the underlying.

Normal Higher Cap (+5%) Higher Bonus (+5%) Lower Barrier (-5%)

Leg 1 24.1 24.1 24.1 24.1

Leg 2 1.47 1.47 1.18 1.47

Leg 3 -1.3 -0.4923 -1.3 -1.3

Leg 4 1.35 1.35 1.81 1.95

Total 25.62 26.4277 25.79 26.22

Total Cost of Product (%)

99.28% 102.41% 99.94% 101.61%

Profit/Loss 0.72% -2.41% 0.06% -1.61%

We tried 3 modifications to our product that would improve the profitability for the clients – increase the cap on profits, increase the return of the bonus and decrease the barrier, increasing the protection. Out of 3 modifications two showed negative return and hence deemed unfeasible. The only modification that show positive return (higher bonus) decreases our profit by 91.7% and leaves only 0.06% profit.

Delta (δ), indicates that the

price of the option will

increase by 0.9834 for every

one-point move in the price of

the underlying. Gamma (γ),

indicates that if the price of

the underlying changes by 1%

the delta will change by -

2.223%. Vega, indicates that

if there is a 1% change in

volatility the price of the

option will change by -0.17.

Theta (θ), indicates that as

time to maturity approaches

the option’s value will change

at 0.00 with each day. Rho

(ρ), indicates that the price of

the option will change by 0.00

if interest rates change by 1%.

5

Group 31

Description of the product

The Note provides accelerated exposure to the performance of the FTSE 100 Index along with a 100% principal protection at maturity. General Terms

Issuer Bulls & Bears S.A. with registered offices at 2 Rue de la Poste, Luxembourg

Guarantor Bulls & Bears Inc., New York, USA

Manager Bulls & Bears International

Calculation Agent Bulls & Bears International, 108 Bunhill Row, London

Type of security Certificate

Security Codes ISIN: US1001; Symbol: ASS01

Timetable

Trade date 24/03/2015

Settlement Date 24/03/2015

Exercise Date 24/03/2020

Repayment Date 31/03/2020

Observation Period The period between Trade date and Exercise date

Specific Terms

Underlying Name Bloomberg Code Initial Index Level

FTSE 100 UK Index

UKX 7037.67

Settlement Currency GBP

Issue Value 100%

Nominal Amount GBP 1,000 per Security

Capital Protection 100%

Ratio 1 Security entitles to one time the Settlement Amount on the Final Settlement Date

Minimum Redemption 100%

Participation 100% - 130%

Redemption1

Scenario 1: up to 10% rise in the underlying

Denomination x [100% + 100% ∗ Max [0; (𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙1 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

))]

Scenario 2: up to 20% rise in the price of the underlying

Denomination x [100% + 110% ∗ Max [(𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙1 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

) ; 𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙2 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

)]

Scenario 3: up to 30% rise in the price of the underlying

Denomination x [100% + 120% ∗ Max [(𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙2 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

) ; 𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙3 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

)]

Scenario 4: above 30% rise in the price of the underlying

Denomination x [100% + 130% ∗ Max [(𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙3 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

) ; 𝑈𝐾𝑋𝐹𝑖𝑛𝑎𝑙4 − 𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

𝑈𝐾𝑋𝐼𝑛𝑖𝑡𝑖𝑎𝑙1

)]

1 Final1 refers to 110% level in the Index, Final2 refers to 120% level in the Index, Final3 refers to 130% level in the Index

6

Group 31

Description of the product: This product gives you the opportunity to participate in the growth of the titans in the UK economy. This Capital Protected Note allows you as the investor to gain exposure to the performance of the FTSE 100 Index. If the Index continuous its upwards performance in the future your profits will grow at an accelerated pace earning up to 1.3 times of the actual performance of the index.

Description of the underlying The FTSE 100 Index consists of the 100 largest companies, in terms of market capitalization, listed on the London Stock Exchange. The index is considered as a benchmark for business that operate in the UK and it one of the most widely used stock indices in the world. The index is maintained by the FTSE Group. The index includes companies like Unilever, AstraZeneca, Burberry Group, InterContinental Hotels Group and Legal & General, Rolls-Royce Group to name a few. The graph demonstrates the performance of the FSTE 100 during the past 6 years. The index has continued to grow, passing the 7 year maximum levels, also recently surpassing the 7000 level.

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

21/03/2008 21/03/2009 21/03/2010 21/03/2011 21/03/2012 21/03/2013 21/03/2014

FTSE 100 Performance

CAPITAL PROTECTED ACCELERATING CERTIFICATE FTSE100 Index (UKX)

100% Capital Protection

Accelerating Participation

Maturity: 5 Years

Investor suitability:

Capital Protected Certificates are suitable for investors valuing 100% capital protection that want to participate in the growth of the underlying asset.

Market expectation of the underlying: Continuing growth of the Index.

7

Group 31

Payout Scenarios

The graph indicates the payoff if investment was solely in the underlying (excluding dividends) and the payoff of investing in the Capital Protected Note. The payoff of the Note is steeper due to its quality of having increased exposure in the underlying, therefore having a higher profit potential while limiting the losses to 100% of the original capital invested.

Historical Performance of the Note The table on the left indicates the potential performance of the Note against the historical performance of the Index. It demonstrates the potential returns from investing solely in the Index and the returns if investment was performed through the Capital Protected Note. The table also indicate the returns on a deposit offered by a high street bank.

Potential Performance of the Note

By investing in this product your potential return would resemble, and is not limited, to the ones demonstrated in the table above.

-50

0

50

100

60 70 80 90 100 110 120 130 140 150

Pro

fti/

Loss

Price

Profit Payoff

Profit/Loss (%) Underlying Profit

Change of FTSE100 (%)

Profit/Loss (%)

Underlying Profit

60 0 -40

70 0 -30

80 0 -20

90 0 -10

100 0 0

110 10 10

120 22 20

130 36 30

140 52 40

150 65 50

Years From FTSE

Our Strategy Annualized Profits

2008-2013 16% 18% 3.37%

2009-2014 71% 92% 13.94%

2010-2015 24% 29% 5.22%

Average 7.51%

Deposit Rate 2.70%

Change of FTSE100 (%)

Profit/Loss (%)

Profit/Loss (£)

Total Value per Note (£)

90 0 0 1000

100 0 0 1000

110 10 100 1100

120 22 220 1220

130 36 360 1360

140 52 520 1520

150 65 650 1650

Risks You are susceptible to default risk of Bulls and Bears,

the Bond Issuer, where you may lose some or all of your capital.

Higher inflation may reduce the purchasing power of your capital.

Past performance is not a guarantee of future performance. Your returns will depend on the performance of the FTSE 100. The performance of the stocks included in the Index might negatively affect its performance.

This product might be affected by unforeseen future global events that influence the performance of the Index

The tax regulations the product falls under may change at any time and vary according to your country of residence.

You should ask for professional financial advice to determine if this product is suitable for you and that you understand all the relevant and potential risks involved with it.

8

Group 31

DECOMPOSITION OF PRODUCT Our structured product is a combination of a 5 year zero coupon bond and 4 European long Calls. The pricing of the options can be seen on the picture below:

Delta (δ), indicates that the price of the options would increase by 0.3695 for every one-point move in the price of the underlying. Gamma (γ), indicates that if the price of the underlying changes by 1% the delta will change at 1.0989% rate. Vega, indicates that if there is a 1% change in volatility of the index the price of the option will change by 59.65. Theta (θ), indicates that as time to maturity approaches the option’s value will change at -0.02 with each day. Rho (ρ), indicates that the price of the option will change by 1.04 if interest rates change by 1%.

The prices of each of the products can be seen on the graph below: 5-year Zero Coupon Bond

1 ATM Long Call 0.1 Long Call 10% OTM

0.1 Long Call 20% OTM

0.1 Long Call 30% OTM

Total Price

Profit

100*e(-0.01670*5)= 91.99

457.40

7037.67= 𝟔. 𝟓𝟎

28.39

7037.67= 𝟎. 𝟒𝟎

19.04

7037.67= 𝟎. 𝟐𝟕

12.43

7037.67= 𝟎. 𝟏𝟖

99.34 0.66

The main costs associated with this structured product comes from the zero coupon bond that provides us with the 100% capital protection. In the current market situation low interest rates make the bond expensive what gives smaller opportunity for participation in options.

Normal Higher Participation (0.3)

Closer OTM

Different Underlying (SP500) (Index lvl=2108.1)

Different Product Length

Bond Price 91.99 91.99 91.99 90.71 93.90

Leg 1 457.40 457.40 457.40 363.76 389.71

Leg 2 28.39 85.17 35.98 22.72 19.49

Leg 3 19.04 57.12 28.39 15.48 10.62

Leg 4 12.43 37.29 23.40 10.24 5.43

Total 517.26 636.98 545.17 412.2 425.25

Option Price (%) 7.35 9.05 7.75 19.55 6.04

Total Cost of Product 99.34 101.04 99.74 110.26 99.94

Profit/Loss 0.66 -1.04 0.26 -10.26 0.06

We have tried several different modifications to the structured product we have developed. Increasing the participation in legs 2, 3 and 4 as well as using a different underlying Index makes the product impossible to construct from the Bulls & Bears Company perspective, as they would be unprofitable. The only possible scenarios in which the product would be more profitable to the clients is decreasing the strike prices by 5, 10 and 15% respectively for legs 2, 3 and 4. This would however decrease our company’s profit by over 60%, therefore we have decided to pursue our currently developed strategy. Same applies to using a different product length (3 years), in which case the profit decreases by over 90%. We have decided to implement accelerating participation that increases with the increase of the index value due to the fact that otherwise the options would be too expensive to construct a structured product.