Terms used but not otherwise defined in this Schedule shall have the same meanings ascribed to them in the Standard Customer Agreement.
An investment in any financial instrument involves risks, and you could lose all or part of your investment. Your investments in structured notes are subject to certain risks, including the risks set out in the relevant term sheets, offering documents, and as noted below. You should not invest in any structured note unless you fully understand the nature of such structured note, the nature of the contractual relationship which you are entering into and the extent of your exposure to risk. You should carefully consider whether trading in such Financial Product is appropriate in light of your experience, objectives, financial resources, and other relevant circumstances.
In addition to the risks set out in Schedule 1 – General Risk Disclosure Statement, investments in structured notes are subject to the following risks:
Issuer risk: Investors bear the issuer risk. The value of structured notes is dependent on the creditworthiness of the issuer, which may vary over the term of the structured notes. If the issuer fails or becomes insolvent, holders of the structured notes will become unsecured creditors of the structured notes, the market value (or the termination value) of the structured notes may render holders of structured notes to suffer a substantial mark-to-market loss and there is a risk that the structured notes may become valueless. If this happens, the noteholders could lose some or all of their investment.
The structured notes may be unsecured obligations: The structured notes may not be secured. If the issuer becomes unable to pay amounts owed to investors under the structured notes, such investors would not have recourse to the underlying asset, any asset comprised in the underlying asset, or any other security or collateral and may not receive any payments under the structured notes.
Limited liquidity: There can be no assurance that a secondary market for the structured notes will develop or, if a secondary market does develop, that it will provide the holders of the notes with liquidity of investment or that it will continue for the life of the notes. Neither the issuer nor its affiliates are required to make a market in the structured notes. Prospective investors that may need to liquidate any of the structured notes before their maturity may have to sell the notes at a substantial discount from the outstanding principal amount. Prospective investors should be willing to hold the notes until their maturity.
Market value of the structured notes: The market value of the structured notes is expected to fluctuate according to various factors including but not limited to the performance of the underlying asset or any asset comprised in the underlying asset, economic and market conditions, interest rates, currency exchange rates, inflation rates in Singapore and other countries and areas and time remaining to maturity. Such conditions may cause market volatility or such volatility could have an adverse effect on the value of the structured notes.
Unless the performance of the structured notes meets or exceeds the rate of inflation, the effective value of the structured notes will go down.
Investors in the structured notes are exposed to the risk that subsequent changes in the interest rates may adversely affect the value of the structured notes. A variety of factors influence interest rates such as macroeconomic, governmental, speculative and market segment factors.
The structured notes are not ordinary debt securities: The structured notes may not pay interest and upon redemption, they may return less than the amount invested or nothing. Structured notes are designed to track the price of the underlying asset or any asset comprised in the underlying asset. If the performance of such underlying does not move in the anticipated direction or if the issuer thereof becomes insolvent, the structured notes will be adversely affected and, in a worst-case scenario, may become worthless.
Tax: Although any payments are made gross of tax, transactions involving structured notes may have tax consequences for potential purchasers which may depend, amongst other things, upon the status of the potential purchaser and laws relating to transfer and registration taxes. Potential purchasers who are in any doubt about the tax consequences of purchasing any structured notes should consult and rely on their own tax advisers.
Calculation agent's discretion: Calculation of the interest payments (if applicable) and/or redemption amount at scheduled maturity, as appropriate, may be by reference to certain specified screen rates, or if any such rate is not displayed at the relevant time, a rate determined by the calculation agent in its sole and absolute discretion. The structured notes may be redeemable prior to their scheduled maturity in certain circumstances at an amount determined by the calculation agent which may be less than their nominal amount. Investors should be aware that, in circumstances where the issuer of the structured notes has entered into hedging arrangements (or otherwise), the exercise of its discretionary powers as calculation agent under the conditions of the structured notes, or as calculation agent under its related hedge (if applicable), may have an adverse impact on the performance of the structured notes, which may result in a lower return, or no return at all. The calculation agent may delegate to an affiliate some or all of its functions, powers, duties and obligations as it deems appropriate without the prior consent of the holders of the structured notes.
Fees: It is possible that the issuer may pay to distributors of the structured notes (which may include affiliates of the issuer) such commissions or fees as such parties may agree (including in the form of a discount to the purchase price of such structured notes). Details of the fee arrangement may be available upon request.
Potential loss of principal: The repayment of any amount invested in structured notes and any return on investment is variable and not guaranteed. The redemption amount payable by the issuer of the structured notes is dependent on the performance of the underlying asset and fluctuations in the underlying asset will affect the value of the structured notes. Each investor should conduct such independent appraisal of the performance and rules relating to the underlying asset to evaluate the merits and risk of an investment in a structured note linked to the underlying asset.
Investors should note that the participation in the positive performance (if any) of the underlying asset is limited. This means that holders of structured notes may receive a lesser return than if they had invested directly in the underlying asset.
Early redemption: The structured notes may be subject to early redemption in certain circumstances, including pursuant to force majeure, for tax reasons and upon the occurrence of an event of default. Upon the occurrence of such an early redemption prior to the maturity date of the structured notes, there is no guarantee that holders of the notes will receive the principal amount. Any early redemption amount will be an amount determined by the calculation agent to be its fair market value less the cost to the issuer of the notes and/or any affiliates of unwinding any underlying related hedging arrangements, such amount may vary considerably due to market conditions and will likely be valued at a considerable discount to its par value. Investors may therefore suffer a loss or some or of all of their investment and will forego any future interest payments.
If specified in the term sheet or other relevant offer documents, the structured notes may also be subject to automatic call/early redemption upon the specified conditions as set out in the term sheet or relevant offer documents being satisfied. Upon the occurrence of such automatic call/early redemption event, the structured notes will be early redeemed at such specified amount as set out in the term sheet or relevant offer documents.
No ownership rights: Holders of the structured notes will have no direct interest or right in the underlying asset or any asset comprised in the underlying asset.
Market Disruption Events (in respect of structured notes linked to listed shares): In the case of early closure of the relevant exchange, disruption of such exchange or suspension of trading on such exchange ("Market Disruption Events"), postponement or adjustment of valuations in case of a Market Disruption Event in respect of such structured notes may have an adverse effect on the value of such structured notes.
Occurrence of certain disruption events, adjustment events and extraordinary events: Prospective investors should note that following the occurrence of certain disruption events, extraordinary events, adjustment events and/or such other events as referenced under the terms of the structured notes, the calculation agent may determine in its discretion whether or not the structured notes shall continue and, if so, determine in its discretion, any adjustments to be made to the structured notes. If the calculation agent determines in its discretion that the structured notes shall be terminated, then depending on the terms of the notes, the issuer of structured notes may pay the holder of each structured note an amount determined by the calculation agent. Holders of structured notes may suffer a loss of some or of all of their investment and will forego any future appreciation in the relevant underlying asset that may occur following such redemption.
Possible delay in payments under the structured notes: Prospective investors should note that the valuation of the underlying asset, and accordingly the payment of the interest amount and/or redemption amount (as applicable) on the interest payment date, at maturity or upon an early redemption (as applicable) may be postponed.
Risks specific to fixed coupon notes (“FCNs”)
Principal at Risk Equity-linked Notes linked to the worst performing underlying share within a basket of underlying shares (in respect of structured notes linked to a basket of underlying shares): FCNs are a type of equity-based structured note where holders of the FCNs may be obliged to buy the worst performing stock in the basket at the strike price if the final price of the worst performing underlying share is below the strike price. Prospective investors should understand that they are exposed to the risks of the basket of underlying shares especially the underlying share having the worst performance. The final redemption amount under the FCN therefore depends on the performance of worst performing underlying share, and investors could lose some or all of their principal.