FCN (Fixed Coupon Note)

FCN (Fixed Coupon Note)
A Fixed Coupon Note (FCN) is a non-principal-protected structured product that provides investors with fixed coupon payments at predetermined intervals throughout the investment period. The performance and final payout of the product are linked to one or more selected underlying stocks.
Depending on whether the FCN includes a knock-out mechanism, different scenarios may apply at maturity or during the investment term.
For FCNs with a Knock-out Mechanism

Scenario A: Knock-out Event Occurs
The product is terminated in advance. The investor receives the full principal plus any accrued coupons up to the knock-out date.
Scenario B: Full Principal Returned at Maturity
If no knock-out event occurs and, on the final valuation date, the worst-performing stock closes at or above the strike price, the investor receives the full principal.
Scenario C: Physical Delivery at Maturity
If no knock-out event occurs and, on the final valuation date, the worst-performing stock closes below the strike price, the investor receives physical delivery of the worst-performing stock, purchased at the strike price using the full principal amount.
For FCNs without a Knock-out Mechanism:
Scenario A: Full Principal Returned at Maturity
If, on the final valuation date, the worst-performing stock closes at or above the strike price, the investor receives the full principal.
Scenario B: Physical Delivery at Maturity
If, on the final valuation date, the worst-performing stock closes below the strike price, the investor receives physical delivery of the worst-performing stock, purchased at the strike price using the full principal amount.

Underlying Stocks and the Worst-Performing Stock
The performance of the product is closely tied to the price movements of the underlying stocks throughout the investment period.
If physical delivery is triggered at maturity, the investor may be required to purchase the worst-performing stock, defined as the underlying stock that has experienced the largest percentage decline from its initial price over the tenor of the product.
Initial Price of the Underlying Stock
The initial price of each linked stock is determined as follows:

If the underlying stock is already open for trading when the order is received, the initial price is the price at which the issuer executes the order on a best-effort basis between the time of order receipt and market close.
If the underlying stock has not yet opened for trading when the order is received, the initial price is determined based on the price achieved by the issuer, on a best-effort basis, between market open and market close on the same trading day.
Once the order has been executed, the initial price of each underlying stock will be available on the product details page and the term sheet.

Knock-out Event
If the investor selects a fixed-coupon note with a knock-out mechanism, the product may be terminated early if a knock-out event occurs.
A knock-out event is triggered when, on any knock-out observation date, the closing prices of all underlying stocks are greater than or equal to their respective knock-out prices.
Knock-out Barrier
The knock-out barrier is a predetermined percentage of the initial price of each linked stock. It is used to calculate the knock-out price.
Knock-out Price = Initial Price × Knock-out Barrier
Non-Call Period
The non-call period refers to the initial timeframe during which no knock-out observation is conducted. Knock-out observations will only begin after the non-call period has ended.
For example:
If the non-call period is 2 months, knock-out conditions will start to be monitored from the beginning of the third month.
Knock-out Observation Frequency
After the non-call period, knock-out conditions are monitored according to the specified observation frequency.
For example:

Daily: Knock-out conditions are checked each day following the end of the non-call period.
Monthly: Knock-out conditions are checked on a monthly basis after the non-call period.

Strike Level
The strike level determines the strike price for each underlying stock.
Strike Price = Initial Price × Strike Level
At maturity, if the closing price of any underlying stock is below its strike price, the investor will be subject to physical delivery of the worst-performing stock.
Annualized Coupon
Coupons are paid at a fixed frequency throughout the life of the product.
The annualized coupon refers to the annualized rate of return derived from periodic coupon payments.
Nominal Value
The nominal value serves as the basis for calculating investment returns.
For example, if the nominal value is $50,000 and an investor subscribes for $100,000, it is deemed that the investor holds 2 notes. Investment returns will be calculated based on the total nominal amount held.
Currency
This refers to the currency in which the product is priced and settled.
For example, if the currency is USD, the investor must subscribe to the product using US dollars and will receive all coupon payments in USD as well.