Certificates

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• CECExt Winner – guarantee certificate

  CECExt Winner provides 85-95% participation in the average positive development of the CECExt index and combines the possibility of maximizing profit with 100% principal value guarantee.
  
  
  
  
  

• SBI TOP – index certificate

  SBI TOP is a price index that incorporates the most liquid shares of the Ljubljana Stock Exchange. The index is officially published and calculated in euros by the Ljubljana Stock Exchange.
  
  
  
  

What are certificates?

Certificates are financial derivatives, and the movement of their price depends on the movement of one or more instruments (the underlying instrument) they are tied to. They are issued by business banks and can be tied to a share, a basket of shares, indexes, raw material prices, currency exchange rates, etc.

There are several types of certificates. Roughly, they can be divided int:

• Non-leverage certificates, and
• Leverage certificates.

They are classified as debt securities, whereby guarantee for payment is assumed by the issuer. Certificates are freely transferable and they can be traded, like shares or bonds, on the stock exchange.

Development of the certificates market in Germany

Certificates are a very young financial product. In 1989, the Dresdner Bank issued the first index certificate. The explosion, however, began after the year 2000. At the end of 2005, the market capitalization of certificates issued in Germany amounted to approximately 100 billion euros.

In the EUWAX segment of the Stuttgart Stock Exchange there are currently more than 70,000 issued financial derivatives listed. On the Stuttgart Stock Exchange web page you can monitor the movement of SBI TOP and CECExt Winner exchange rates daily.

The best feature of certificates is the diversity of possible investments tied to various instruments and strategies which makes it possible to create profit :

• On the growing market
• On the sideways market
• On the falling market.

Product category	Certificate type	Market movement	Risk
Category 1: Risk lower than market risk	Guarantee certificates	Growing, sideways	100 % principal value guarantee
	Bonus certificates	Growing, sideways	Partial principal value guaran
	Discount certificates	Growing, sideways	Risk protection
Category 2 Risk equal to market risk	Investment certificates	Growing	Market risk
	Certificates tied to a basket of instruments	Growing	Market risk
Category 3 Risk greater than market risk	Turbo long certificates	Growing	Leverage
	Turbo short certificates	Falling	Leverage
	Warrants call	Growing	Leverage
	Warrants put	Falling	Leverage

Category 1 Risk lower than market risk

This category includes:

• Guarantee certificates
• Bonus certificates
• Discount certificates.

Guarantee certificates provide investors with 100% protection of the principal value at maturity. At the same time, they offer either participation in the development of the instrument the certificate is tied to or the option of investors being paid interest rates that are higher than the market average.

Bonus certificates, because of their conditional guarantee, are suitable for investors who are looking for a low-risk investment and participation in sideways movement of the underlying instrument.

Discount certificates are perfect for investors who are expecting sideways trends in the exchange rate development of the instrument the certificate is tied to.

Category 2 Risk equal to market risk

Investment certificates include:

• index certificates,
  Price index certificate (dividends not included)
  Performance index certificate (dividends included)
• Certificates tied to a basket of instruments.

In a 1:1 ratio, they reflect market development and the level of risk with regard to the underlying instrument. Therefore, exchange rates of these certificates closely follow the movement of exchange rates of the instruments they are tied to. These products are suitable for investors who are looking for investments in the mid- or long term.

Category 3 Risk greater than market risk

Leverage instruments include:

• Turbo certificates
• Option warrants.

The exchange rate movement of the certificate with particular leverage reflects the exchange rate movement of the underlying instrument the certificate is tied to.

These certificates are speculative products and are usually intended for short-term investments. They include a high level of risk; in some circumstances loss of the funds invested is also possible.