| Collateralization Mechanism |
The amount of collateralization depends on the current valuation of the COSI. The issuer
discloses in the listing prospectus which of the methods set out below (A or B) is to be
used by SIX Swiss Exchange to determine the current value of a COSI. On this basis, the required amount
of collateralization expressed in Swiss francs is then redetermined on each banking day.
Method A: Fair value procedure
The fair value procedure is essentially based on the prices of the certificates
(so-called "fair values") as calculated by third parties, which in turn are
used to determine the current value of the COSIs. After the first trading day, the
current value of the certificate is normally determined by means of the following prices:
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two fair values for the certificate as calculated by third parties; and
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the closing bid price for the certificate on the previous trading day as determined
by Scoach Switzerland Ltd (hereinafter, the "prior-day closing price").
If the prior-day closing price is the highest of these three prices, then the current value
of the certificate is always based on that price; otherwise, the middle price of the three
is used. If for some reason certain prices are not available on a given trading day, the
calculation is made on the basis of the prices that are in fact available at that time.
Method B: Bond floor procedure
The bond floor procedure is essentially based on the rules for determining the bond floor as
specified by the Swiss Federal Tax Administration in Bern (hereinafter, the
"bond floor"). The current value of the certificate always corresponds to the
bond floor, if available; otherwise, an equal or higher price is used.
The precise rules for determining the decisive current values are based on the
"Special Conditions Governing Collateral-Secured Instruments"[pdf] of SIX Swiss Exchange.
The following companies calculate independent prices in connection with the COSI service:
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