OTC Products

Over-the-Counter (OTC) investment products are traded between two parties (bilateral negotiation) without going through an exchange or any other intermediaries. OTC products are usually traded via dealer network including Funds, Structured Products, Accumulator, Decumulator and OTC Options.

  • Funds:
    An investment fund is a supply of capital belonging to numerous investors. The capital is used to collectively invest in a wide range of assets while investors retain ownership and control of their own shares. An investment fund provides a broader selection of investment opportunities and the diversifying asset investment can help spread the risk and smooth returns over time.
  • Structured Products:
    Structured products are investment instruments designed to facilitate highly customized risk-return objectives. They are a combination of basic traditional assets (equities, bonds, currencies or funds) into one securitized instrument.
  • Accumulator:
    Accumulator is a financial derivative product sold by an issuer (seller) to investors (the buyer) that requires the buyers to buy shares of some underlying security at a predetermined strike price, settled periodically.
  • Decumulator:
    The reverse of an accumulator. More specifically, it is a structured product that involves investors taking on the obligation to sell a certain number of shares or currency on a regular basis at a fixed price.
  • OTC Options:
    OTC options are exotic options traded in the over-the-counter market rather than on a formal exchange. OTC options are transacted directly between buyer and seller with no secondary market and no standardization of strike prices and expiration dates.

Benefits of OTC Products

OTC markets are more cost-efficient than traditional stock exchanges and offer the chance for investors to buy large quantities of a particular security at an early stage of a company's growth.

Investors may access to investment products that are not widely offered by formal exchanges and opt for what suit their investment goals from a wide range of markets, topics and investment categories.

OTC products can be customized to fit many different risk profiles or market views. These customizable instruments can offer specifications not available through exchange-traded contracts (e.g. non-standard quantities, strike prices, expiration dates, etc.) and can be tailored to meet each investor's individual needs.

Trade Now with UOB Kay Hian

We have a team of specialists providing professional services and support on OTC products trading, including night trading service.

There is a broad selection of OTC products available for you to grab every investment opportunity.

We are committed to delivering customised and best-in-class financial solutions to meet your unique needs based on your financial goals and risk appetite.

Generic risk warning and disclaimer

Investment involves risk. As a general rule, you should only trade in financial products that you are familiar with and understand the risk associated with them. The risk warning described in each financial product below is not exhaustive, you should carefully consider your investment experience, financial situation, investment objective, risk tolerance level and consult your independent financial adviser as to the suitability of your situation prior making any investment. It does not constitute any offer or solicitation of offer to subscribe, transact or redeem any investment product.

Investment in Hedge Funds involve substantial risks including market risk, liquidity risk and the risk that the issuer will be unable to satisfy its obligations under Hedge Funds. Do not invest in the Hedge Funds unless you fully understand and are willing to assume the risks associated with it. You should consider carefully whether Hedge Funds are suitable for you in light of your experience, objectives, financial position and other relevant circumstances. The performance of the Hedge Fund will be affected by a number of risk factors, including but not limited to the following, Investor should read the relevant offering document carefully for further Hedge Fund details including risk factors.

GENERAL RISK FACTORS
Market Risk

The Fund's investments are subject to the risks inherent in all securities i.e. the value of holdings may fall as well as rise. In addition, the Fund may be subject to investment holding limits imposed on investors by certain markets in which the Fund invests. Investment involves risks. Past performance is no guide to future performance of the funds.

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell. A Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk.

Currency Risk

The Fund may be denominated in foreign currency for example US dollars. The assets in which it is invested and the income from them will or may be quoted in other currencies. The performance of the Fund's assets will therefore be affected by movements in the exchange rate between the currencies in which the assets are held and the US dollars. Since the Manager and the Investment Manager aim to maximise returns in US dollars terms, investors whose base currency is not US dollars may be exposed to additional currency risk. The performance of the Fund's holdings may also be affected by changes in exchange control regulations.

Exchange Rate Control Risk

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected or no interest or principal.

Not a Time Deposit

The Investment Product is not equivalent to time deposit and is not protected by the Deposit Protection Scheme in Hong Kong.

Not SFC Authorized Products

If this product is not SFC Authorized Products, only the Professional Investors defined under SFO may invest.

Event Risk

The product credit rating might be downgraded if there are some major event happen to the issuer.

Lack of Transparency

Most Investment Products are traded over-the-counter, not exchange traded products, so the price of Investment Products are lacking of transparency compared with exchange traded products. In addition, the liquidity risk for OTC trading products is much higher than the exchange traded products.

Credit Risk

A Fund could lose money if the issuer or guarantor of a Fixed Income Security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honour its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer's ability to make payments of principal and/or interest.

Geopolitical Risk

Geopolitical conditions can also affect the product price and yield. Terrorist acts and threats and the response of governments in the UK, the U.S.A. and elsewhere to them could affect the level of economic activity.

Concentration Risk

This Fund is highly specialised. Even though the portfolio is well diversified in terms of the number of holdings, investors should be aware that this Fund is likely to be more volatile than a broad-based fund, such as a global equity fund, as it is more susceptible to fluctuations in value resulting from adverse conditions in the sectors in which it invests.

Risk of Investment Products

Hedge fund is using securities and derivatives financial products to earn the absolute return, the common gearing effect will imply high risk, but also provide the possibility of high return. The investment products may be non-exchange traded transactions which are over-the counter / prime broker, etc. As a result, the investment products may be illiquid and difficult to sell for cash, may become non-executable due to the creditability of the counterparty, and the investment in Hedge Funds will be associated with the risk of capital loss.

Hedging Risk

The Manager and the Investment Manager are permitted, but not obliged, to use hedging techniques to attempt to offset market and currency risks. There is no guarantee that hedging techniques will achieve the desired result.

Derivatives Risk

Participation in warrants, futures, options and forward contracts involves potential investment returns which the Fund would not receive, and risks of a type, level or nature to which the Fund would not be subject, in the absence of using these instruments. If the direction of movement of the securities or money markets is for or against the prediction of the Manager and/or the Investment Manager, the Fund may be placed in a position which is better or worse than that in which it would have been if these instruments had not been used.

Reliance on the Profession of Fund Manager

Compared with the traditional funds, fund manager of hedge funds has sufficient authority and flexibility to invest the funds, the performance of the fund relies on the Profession of Fund Manager and his ability to analyse the market trends and the viewpoint on the impact of events, etc. Various investment strategies of hedge fund will make the Performance of the Fund has direct relationship with the Performance of the Fund Manager.

Suspension of Share Dealing Risk

Investors are reminded that in certain circumstances their right to redeem or switch Shares may be suspended. Investors should read the relevant offering document carefully for further fund details including risk factors.

Political, Economic and Social Risk

All financial markets may at times be adversely affected by changes in political, economic and social conditions.

Legal, Tax and Regulatory Risk

Legal, tax and regulatory changes could occur during the term of the Fund which may adversely affect it. If any of the laws and regulations currently in effect should change or any new laws or regulations should be enacted, the legal requirements to which the Fund and the investors may be subject could differ materially from current requirements and may materially and adversely affect the Fund and the investors.

Custodial Risk

The Trustee may appoint directly or indirectly custodians or sub-custodians in local markets for the purposes of safekeeping of assets in those markets. The Trustee's liability shall not be affected by the fact that it has entrusted to a third party some or all of the assets in its safekeeping. The Trustee must exercise care and diligence in the selection and appointment of a custodian or sub-custodian as a safekeeping agent so as to ensure that the custodian or sub-custodian has and maintains the expertise, competence and standing appropriate to discharge the responsibilities concerned and the Trustee must maintain an appropriate level of supervision over the custodian or sub-custodian and make appropriate enquiries from time to time to confirm that the obligations of the custodian or sub-custodian continue to be competently discharged. The Trustee will not however be responsible for any loss suffered by the Fund by reason only of the liquidation, bankruptcy or insolvency of any such custodian or sub-custodian which are not member of the group of companies to which the Trustee belongs. Where the Fund invests in markets where custodial and/or settlement systems are not fully developed, the assets of the Fund which are traded on such markets and which have been entrusted to custodians or sub-custodians, in circumstances where the use of custodian or sub-custodians is necessary, may be exposed to custodial risk and the Trustee shall have no liability in respect of such risks. The Trustee will endeavour to register the Fund's assets in the name of the Trustee or the Fund and seek to recover losses of securities and investments arising from the default of the third party appointed by the Trustee. The Trustee will not however be responsible for any cash, securities and/or other assets comprising the assets of the Fund which are not deposited with or held to the Trustee's order. In particular, the Trustee will not be responsible for any cash, securities and/or other assets placed with co-custodians, brokers or any other party outside the Trustee's global custodian network.

FIXED INCOME RELATED RISK
Issuer Risk

The value of a security may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer's goods or services. 

Interest Rate Risk

As nominal interest rates rise, the value of Fixed Income Securities held by a Fund is likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Inflation-indexed securities decline in value when real interest rates rise. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, inflation-indexed securities may experience greater losses than other fixed income securities with similar durations.

Investment in Mutual Funds and Unit Trusts involve substantial risks including market risk, liquidity risk and the risk that the issuer will be unable to satisfy its obligations under Mutual Funds and Unit Trusts. Do not invest in the Mutual Funds and Unit Trusts unless you fully understand and are willing to assume the risks associated with it. You should consider carefully whether Mutual Funds and Unit Trusts are suitable for you in light of your experience, objectives, financial position and other relevant circumstances. The performance of the Mutual Fund and Unit Trust will be affected by a number of risk factors, including but not limited to the following, Investor should read the relevant offering document carefully for further fund details including risk factors.

GENERAL RISK FACTORS
Market Risk

The Fund's investments are subject to the risks inherent in all securities i.e. the value of holdings may fall as well as rise. In addition, the Fund may be subject to investment holding limits imposed on investors by certain markets in which the Fund invests. Investment involves risks. Past performance is no guide to future performance of the funds.

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell. A Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk.

Currency Risk

The Fund may be denominated in foreign currency for example US dollars. The assets in which it is invested and the income from them will or may be quoted in other currencies. The performance of the Fund's assets will therefore be affected by movements in the exchange rate between the currencies in which the assets are held and the US dollars. Since the Manager and the Investment Manager aim to maximise returns in US dollars terms, investors whose base currency is not US dollars may be exposed to additional currency risk. The performance of the Fund's holdings may also be affected by changes in exchange control regulations.

Exchange Rate Control Risk

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected or no interest or principal.

Not a Time Deposit

The Investment Product is not equivalent to time deposit and is not protected by the Deposit Protection Scheme in Hong Kong.

Not SFC Authorized Products

If this product is not SFC Authorized Products, only the Professional Investors defined under SFO may invest.

Event Risk

The product credit rating might be downgraded if there are some major event happen to the issuer.

Lack of Transparency

Most Investment Products are traded over-the-counter, not exchange traded products, so the price of Investment Products are lacking of transparency compared with exchange traded products. In addition, the liquidity risk for OTC trading products is much higher than the exchange traded products.

Credit Risk

A Fund could lose money if the issuer or guarantor of a Fixed Income Security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honour its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer's ability to make payments of principal and/or interest.

Geopolitical Risk

Geopolitical conditions can also affect the product price and yield. Terrorist acts and threats and the response of governments in the UK, the U.S.A. and elsewhere to them could affect the level of economic activity.

Concentration Risk

This Fund is highly specialised. Even though the portfolio is well diversified in terms of the number of holdings, investors should be aware that this Fund is likely to be more volatile than a broad-based fund, such as a global equity fund, as it is more susceptible to fluctuations in value resulting from adverse conditions in the sectors in which it invests.

Hedging Risk

The Manager and the Investment Manager are permitted, but not obliged, to use hedging techniques to attempt to offset market and currency risks. There is no guarantee that hedging techniques will achieve the desired result.

Derivatives Risk

Participation in warrants, futures, options and forward contracts involves potential investment returns which the Fund would not receive, and risks of a type, level or nature to which the Fund would not be subject, in the absence of using these instruments. If the direction of movement of the securities or money markets is for or against the prediction of the Manager and/or the Investment Manager, the Fund may be placed in a position which is better or worse than that in which it would have been if these instruments had not been used.

Suspension of Share Dealings Risk

Investors are reminded that in certain circumstances their right to redeem or switch Shares may be suspended. Investors should read the relevant offering document carefully for further fund details including risk factors.

Political, Economic and Social Risk

All financial markets may at times be adversely affected by changes in political, economic and social conditions.

Legal, Tax and Regulatory Risk

Legal, tax and regulatory changes could occur during the term of the Fund which may adversely affect it. If any of the laws and regulations currently in effect should change or any new laws or regulations should be enacted, the legal requirements to which the Fund and the investors may be subject could differ materially from current requirements and may materially and adversely affect the Fund and the investors.

Custodial Risk

The Trustee may appoint directly or indirectly custodians or sub-custodians in local markets for the purposes of safekeeping of assets in those markets. The Trustee's liability shall not be affected by the fact that it has entrusted to a third party some or all of the assets in its safekeeping. The Trustee must exercise care and diligence in the selection and appointment of a custodian or sub-custodian as a safekeeping agent so as to ensure that the custodian or sub-custodian has and maintains the expertise, competence and standing appropriate to discharge the responsibilities concerned and the Trustee must maintain an appropriate level of supervision over the custodian or sub-custodian and make appropriate enquiries from time to time to confirm that the obligations of the custodian or sub-custodian continue to be competently discharged. The Trustee will not however be responsible for any loss suffered by the Fund by reason only of the liquidation, bankruptcy or insolvency of any such custodian or sub-custodian which are not member of the group of companies to which the Trustee belongs. Where the Fund invests in markets where custodial and/or settlement systems are not fully developed, the assets of the Fund which are traded on such markets and which have been entrusted to custodians or sub-custodians, in circumstances where the use of custodian or sub-custodians is necessary, may be exposed to custodial risk and the Trustee shall have no liability in respect of such risks. The Trustee will endeavour to register the Fund's assets in the name of the Trustee or the Fund and seek to recover losses of securities and investments arising from the default of the third party appointed by the Trustee. The Trustee will not however be responsible for any cash, securities and/or other assets comprising the assets of the Fund which are not deposited with or held to the Trustee's order. In particular, the Trustee will not be responsible for any cash, securities and/or other assets placed with co-custodians, brokers or any other party outside the Trustee's global custodian network.

FIXED INCOME RELATED RISK
Issuer Risk

The value of a security may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer's goods or services.

Interest Rate Risk

As nominal interest rates rise, the value of Fixed Income Securities held by a Fund is likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Inflation-indexed securities decline in value when real interest rates rise. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, inflation-indexed securities may experience greater losses than other fixed income securities with similar durations.

Investment in Structure Product involves substantial risks including market risk, liquidity risk, and the risk that the issuer will be unable to satisfy its obligations under the Structure Product. Do not invest in the Structure Product unless you fully understand and are willing to assume the risks associated with it. You should consider carefully whether Structure Product is suitable for you in light of your experience, objectives, financial position and other relevant circumstances.

GENERAL RISK FACTORS
Issuer's Risk

The Structure Product is subject to both the actual and perceived measures of credit worthiness of the issuer. There is no assurance of protection against a default by the issuer in respect of the repayment obligations. In the worst case scenario (e.g. upon insolvency of issuer), you might not be able to recover the principal and any coupon (if any) if the issuer defaults on the Structure Product. Risks arising from changes in credit quality from issuer. Adverse changes in the credit quality of the issuer or a general deterioration in economic conditions, or arising from systemic risks in the financial systems, could affect the recoverability and value of the issuer assets and require an increase in the issuer provision for impairment losses and other provisions.

Market Risk

The Structure Product is subject to the market risk of the underlying assets, the factors affect the market price cannot be easily determined. If the underlying assets involve high risks, the value of underlying assets may move down or even become valueless. 

Currency risk

If the deposit currency is not your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.

Exchange Rate Control Risk

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected or no interest or principal.

Not a Time Deposit

The Structure Product is not equivalent to time deposit and is not protected by the Deposit Protection Scheme in Hong Kong.

Not SFC Authorized Products

If this product is not SFC Authorized Products, only the Professional Investors defined under SFO may invest.

Lack of Transparency

Most Structure Products are traded over-the-counter, not exchange traded products, so the price of Structure Products are lacking of transparency compared with exchange traded products. In addition, the liquidity risk for OTC trading products is much higher than the exchange traded products.

Liquidity Risk

There can be no assurance as to how any Notes will trade in the secondary market or whether such market will be liquid or illiquid. No assurance can be given that there will be a market for any Notes. If any Notes are not traded on any Exchange, pricing information for such Notes may be more difficult to obtain, and the liquidity and market prices of such Notes may be adversely affected. The liquidity of the Notes may also be affected by restrictions on offers and sales of the Notes in some jurisdictions. Also, to the extent Notes of a particular issue are exercised, the number of Notes of such issue outstanding will decrease, resulting in a diminished liquidity for the remaining Notes of such issue. A decrease in the liquidity of an issue of Notes may cause, in turn, an increase in the volatility associated with the price of such issue of Notes.

Event Risk

The product credit rating might be downgraded if there are some major event happen to the issuer.

Geopolitical Risk

Geopolitical conditions can also affect the product price and yield. Terrorist acts and threats and the response of governments in the UK, the U.S.A. and elsewhere to them could affect the level of economic activity.

Counterparty Risk

You should aware of the identity of the contractual counterparty you are or may be matched with. Often, you will be purchasing an unsecured obligation of such counterparty (as opposed to an obligation of a central clearing corporation as would be the case with exchange traded futures and options) and you should evaluate the comparative credit risk. 

Associated Risks

Risks associated with the structure products are listed in the Offering Document distributed by the Issuer. You must receive and read the Offering Document issued by the Issuer and consult Professional Advisers before making investment decision. 

Specific Risks associated with Accumulators
Knock-out

For those accumulator contracts that have a knock-out clause, when the market price of the underlying asset is at or above the knock-out price, the accumulator contract will terminate (i.e. the investor will cease to accumulate any further underlying asset from the knock-out date). Your potential profit therefore is capped by the knock-out feature.

Potential losses are magnified and can be very substantial

You may suffer substantial loss as you are bound by the accumulator contract to take up periodically (e.g. daily) the agreed amount of the underlying asset (at the strike price) when the market price falls below the strike price.

Please pay attention to any "multiplier" condition (i.e. you are required to take up twice or multiple times of the agreed amount of the underlying asset when the market turns against them) and your maximum exposure after fully taking into account the "multiplier" condition.
You should consider the total maximum exposure arising from the proposed contract together with all other outstanding accumulator contracts of the same underlying asset type (e.g. all stock accumulators contracts or all foreign currency accumulators contracts) for you to make well informed decisions.

You should aware that you may not be able to early terminate the accumulator contracts, and even if we consent to the request for early termination, you would likely need to bear unexpectedly high exit costs and losses.

In case of stock accumulators, the share price of a company could move substantially in particular on corporate specific news/developments and this could pose significant risk to you. Similarly for foreign currency accumulators or stock accumulators involving exposure to a foreign currency, the exchange rate of the relevant foreign currency may go up or down.

Contract tenor

You should aware of the contract tenor and the implications of a long contract period. Accumulator contracts with a longer tenor will be associated with higher risks and usually higher costs of early termination.

Additional risks associated with margin trading or use of credit facility

If you plan to enter into accumulator transactions on a margin basis or with the use of credit facility, you are required to be prepared for paying interest cost for the margin/credit facility and meeting margin calls which require them to make top-up payment to cover the full marked-to-market losses for the remaining period of the contract. Such payment can be substantial in poor market conditions and/ or when the contract has a long remaining period.

In addition, under poor market conditions, you may have to meet margin calls at short notice while their ability to make top-up payments may be much worse than during normal times, due to the significant fall in market value of other financial assets. Please be reminded that we reserves absolute discretion to raise the margin level.  

When you fail to meet margin calls, the contracts may be closed out without your consent and you will have to bear the consequential losses and costs which could be very substantial.

Hedging needs

If you intend to enter into foreign currency accumulator contracts for hedging purpose, you should put in place proper procedures to establish whether the accumulator is indeed a suitable instrument to serve this purpose and even if so, whether the maximum exposure of your positions is appropriate for such purpose. For example, if the proposed maximum exposure associated with foreign currency accumulator contracts (or the resulting total maximum exposure after taking into account other outstanding accumulator contracts as well) for you is materially higher than your positions or anticipated cash outflows in the relevant foreign currency, you will be over exposed. Please be reminded that accumulators cannot be a hedging tool for decumulators.

De-listing or Suspension of Shares

Subject to any effect on settlements, delisting or suspension from trading on eExchange of Shares during the term of the Accumulator will not affect the obligations of the issuer under Accumulator. However, in these circumstances the investor may receive unlisted and therefore illiquid securities and therefore may not be able easily to realise the value of their investment. If the relevant Listed Entity becomes insolvent or is subject to similar proceedings and is wound up or ceases to exist as a legal entity during the term of the Accumulator, the Accumulator will mature worthless. 

Foreign Exchange Rate Risk

Investors trading derivative products with underlying assets not denominated in Hong Kong dollars such as foreign currency accumulators are also exposed to exchange rate risk. Currency rate fluctuations can adversely affect the underlying asset value, also affecting the price of the derivative product.

Settlement Delays

Accumulators are an agreement to purchase the Shares. The number of Shares to be delivered will be determined on the Fixing Date(s). In certain events the issuer’s ability to deliver share certificates in relation to Shares or to effect electronic settlement of the Shares may be restricted. This could result in delays for investors who are entitled to receive Shares. Where such a delay occurs, movements in the price of the Shares could affect the value of the Shares delivered compared to the value of those Shares on the Fixing Date(s). 

Issuer can Postpone the Fixing Date

If the issuer determines that, on the Fixing Date(s), a Market Disruption Event has occurred or is continuing, the Fixing Date will be postponed until the first Business Day on which no Market Disruption Event is occurring. As a result, the Settlement Date for the Accumulator will also be postponed, the Shares or any Cash Settlement Amount will not be delivered until after the originally scheduled Settlement Date. 

Issuer can Elect to Settle in Cash

Accumulators are an agreement to purchase Shares, however if provided in the terms of agreement, the issuer has the discretion to settle the Accumulators in cash instead of delivering the Shares. The investor may not however have a discretion to elect to receive cash instead of Shares. If the issuer exercises its discretion to deliver cash in lieu of Shares the investor will not have a right to require the delivery of Shares and instead a cash amount with a value equal to the product of the Share amount and the Closing Price on the Fixing Date will be delivered to the investor. If, in the period between the Fixing Date and the Settlement Date, there has been a movement in the price of the Shares in Cash Settlement Amount delivered may be less than the value of the Shares on the Settlement Date. 

Potential Conflicts of Interest

Companies &/or affiliates of the issuer may buy and sell Shares or derivatives of Shares, and may issue other instruments the value of which are linked to the value of the Shares. These activities may affect the market value of the Shares, or could result in the issuer having interests which conflict with those of the investors’ in relation to the market value of Shares. Companies &/or affiliates of the issuer may also act as underwriter in connection with future offerings of shares or other securities or may act as financial advisor to the issuer, or sponsor, as the case may be, of any such share or other security or in a commercial banking capacity for the issuer of any such share or other security. Such activities could present certain conflicts of interest and may affect the value of the Accumulator. 

Adjustment to the Accumulator Following Certain Events

Certain events, for example corporate actions or merger events, relating to the Shares permit the issuer to make certain adjustments or amendments to the Terms and Conditions of the Accumulators. An investor has only limited anti-dilution protection under the terms and conditions. The issuer has a discretion as to the adjustments that it makes following such events but the issuer is not obliged to make an adjustment for every event that may affect the Shares. 

No Rights in the Shares

An investor in an Accumulator prior to the Shares being deposited into the investor’s trading Account will not be entitled to voting rights or rights to receive dividends or other distribution or any other rights that a holder of the Shares would normally be entitled to. 

Investment Decisions

The information in the specifications, offering circulars, information memorandums &/or other documents ("Documents") issued by the issuer is included for the purpose of enabling potential investors and their advisers to make an informed assessment of the terms of Accumulators, the general nature of the risks of investing in Accumulators, and the capacity of the issuer to fulfill its obligations under Accumulators.

They do not take into account the investment objectives or financial position of any particular reader. Accordingly, nothing in these Documents should be construed as a recommendation by the issuer or UOB Kay Hian (Hong Kong) Limited. concerning investment in the Accumulators, Shares or any other security. You should not rely on the Documents other than in respect of those matters referred to above, and should not rely on them as the sole basis for any investment decision in relation to Accumulators, Shares or any other security, but should seek appropriate and relevant advice concerning the Listed Entity and the appropriateness of an investment in the Accumulators for their particular circumstances.

Specific Risks associated with Dual Currency Deposit
Currency Risk

You may be exposed to currency fluctuation risk where you effect a transaction involving different currencies, or in a base currency other than one in which you carry on your ordinary business or keep your accounts. Any loss incurred by you as a result of the relevant rates for the conversion of any monies from the base currency to the currency in which you keep your accounts (i) may be greater than the profits from the transaction when measured against the base currency of that transaction or (ii) may increase the amount of the loss you suffer in the transaction itself. Changes in interest rate levels, yield curves and spreads may affect the product price and yield. Changes in currency rates will affect the value of product. Payments, whether in respect of principal or interest in respect of the product will be made in such currencies, and by reference to such rates of exchange and/or such formula. the performance of a product might be affected by the direction, timing and magnitude of an anticipated change in the value of the relevant Reference Item(s).In the course of day to day FX-trading, the Issuer and/or its affiliates may enter into transactions which may affect currency exchange rates. This in turn may affect the value of product and may trigger certain provisions of such product. Potential investors should also note that whilst the market value of such Reference Item Linked Notes is linked to such Reference Item(s) and will be influenced (positively or negatively) by such Reference Item(s), any change may not be comparable and may be disproportionate. It is impossible to predict how the level of the relevant Reference Item(s) will vary over time. In contrast to a direct investment in the relevant Reference Item(s), Reference Item Linked Notes represent the right to receive payment or delivery, as the case may be, of the relevant Final Redemption Amount(s) on the relevant Maturity Date as well as periodic payments of interest (if specified in the applicable Final Terms), all or some of which may be determined by reference to the performance of the relevant Reference Item(s). The applicable Final Terms will set out the provisions for the determination of the Final Redemption Amount and of any periodic interest payments.

Exchange Rate Control Risk

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected or no interest or principal.

The above information is provided for reference only. The information may not contain all material terms, in and of itself should not form the basis for any investment decision. Potential investors must seek their own independent advice in relation to any legal, tax, accounting or regulatory issues relating to the matters discussed herein, By accepting receipt of this information you will be deemed to represent that you possess, either individually or through your advisor, sufficient investment expertise to understand the risks involved in any purchase or sale of any investment products, referenced herein, and investor has made its own independent judgment. The value, price or income from investments may fall as well as rise. 

Specific Risks associated with principal protected note
Principal Risk

Principal protected notes offer 100% principal protection, only if held to maturity and the issuer is able to fulfill its obligation. If sold prior to maturity, you may receive less than their initial investment. Principal is not at risk from negative performance of the underlying asset, but is subject to issuer credit and default risk.

Limited Return Risk

In some circumstances, you may receive no more than their initial investment regardless of how well the underlying asset did throughout the term of the investment. Therefore, the return of the notes may be significantly less in comparison than the direct investment in the underlying asset.

Issuer Call Risk

Some principal protected notes are callable by the issuer, meaning the issuer can choose to call in the notes and redeem them before maturity. An early call prior to maturity may put the investor at risk of reinvesting in a lower interest rate environment ("reinvestment risk"). The call price is generally par (100% of principal), but in some cases it can be above par ("premium call").

Longer Tenor Risk

Tenor of principal protected note is normally longer than non-principal protected note because of it structure nature. You should be aware that there will be chance the note needs to be to hold to maturity to receive initial investment without any coupon. The real value of initial investment may shrink if inflation is counted in ("inflation risk").

Investment in Equity Linked Notes ("the ELNs") / Equity Linked Investments ("the ELIs") involves substantial risks including market risk, liquidity risk, and the risk that the issuer will be unable to satisfy its obligations under the ELNs / ELIs. The ELNs / ELIs concerned are issued by the issuer on an "off-exchange transaction" basis, it may be difficult or impossible to liquidate the ELNs / ELIs, assess their values, and determine a fair price or to assess the exposure to risk. The over-the-counter ("OTC") transaction may be less regulated or subject to a separate regulatory regime. You should understand the nature of all of these risks before making a decision to invest in ELNs / ELIs and consider carefully whether ELNs / ELIs are suitable for you in light of your experience, objectives, financial position and other relevant circumstances.

Prospective investors should recognize that their ELN / ELI may mature worthless.

Market Risk

Investing in ELNs / ELIs involves market risk. Changes in the price of Shares can be unpredictable, sudden and large. Such changes may result in the share price falling below the Reference Price of the ELN / ELI, which will negatively impact the return on the ELN / ELI. In extreme circumstances you may lose all, or a significant proportion of their initial investment.

Not a Time Deposit

The Investment Product is not equivalent to time deposit and is not protected by the Deposit Protection Scheme in Hong Kong.

Not SFC Authorized Products

If this product is not SFC Authorized Products, only the Professional Investors defined under SFO may invest.

Event Risk

The product credit rating might be downgraded if there are some major events happen to the issuer.

Lack of Transparency

Most ELNs / ELIs are traded over-the-counter, not exchange traded products, so the price of ELNs / ELIs are lacking of transparency compared with exchange traded products. In addition, the liquidity risk for OTC trading products is much higher than the exchange traded products.

Liquidity Risk

ELNs / ELIs are investment that is intended to be held to maturity. ELNs / ELIs are not a trading instrument. Unlike a direct holding in listed shares, there will not be a liquid secondary market in ELNs / ELIs. Youare prohibited from transferring the benefit of an ELN / ELI without the written consent of the issuer. If you do not intend to invest in ELN / ELI for the full term of the ELN / ELI you should not make an investment in an ELN / ELI, because youwill not ordinarily be able to realise the value of an ELN / ELI if, for example, the investor's view on the Shares changes after the purchase of an ELN / ELI but before the Settlement Date. Investors must therefore realise that an inability to realise the value of an ELN / ELI prior to maturity is a significant risk of investment in an ELN / ELI.

On request the issuer may, but is not bound to, offer a price at which it redeems an ELN / ELI before its Settlement Date. There is no guarantee that such a price will be available, nor that it will be any particular amount. As a result investors could incur significant losses by selling ELNs / ELIs prior to the Settlement Date. In the event that the issuer does make a price to redeem an ELN / ELI, the price that the issuer will pay will generally be affected by the market price of the Shares more than any other single factor. Other factors that may be relevant in determining the price paid by the issuer include:-

  • the expected price volatility of the Shares;
  • the expected dividends on the Shares
  • interest rates; and
  • time remaining to maturity of the ELNs / ELIs.
Counterparty Risk

You should aware of the identity of the contractual counterparty you are or may be matched with. Often, you will be purchasing an unsecured obligation of such counterparty (as opposed to an obligation of a central clearing corporation as would be the case with exchange traded futures and options) and you should evaluate the comparative credit risk.

Obligation of the Issuer

The issuer has the obligation to deliver to the investor the Share Amount (or at the issuer's election in accordance with the terms and conditions to pay cash in lieu) on the Settlement Date. This obligation is not a deposit liability of the issuer nor a debt of any kind, and is not guaranteed by any other parties. It is an unsecured contractual obligation of the issuer which will rank equally with the issuer's other unsecured contractual obligations and behind preferred liabilities including those mandatorily preferred by law.

If you invest in an ELN / ELI you are relying upon the creditworthiness of the issuer and of no other person. You will have no rights under the ELN / ELI against the Listed Entity which has issued the Shares. Investors must make their own assessment of the ability of the issuer to meet its obligations.

Geopolitical Risk

Geopolitical conditions can also affect the product price and yield. Terrorist acts and threats and the response of governments in the UK, the U.S.A. and elsewhere to them could affect the level of economic activity.

Currency risk

If the deposit currency is not your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.

Exchange Rate Control Risk

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected or no interest or principal.

De-listing or Suspension of Shares

Subject to any effect on settlements, delisting or suspension from trading on Exchange of Shares during the term of the ELN / ELI will not affect the obligations of the issuer under ELN / ELI. However, in these circumstances the investor may receive unlisted and therefore illiquid securities and therefore may not be able easily to realise the value of their investment. If the relevant Listed Entity becomes insolvent or is subject to similar proceedings and is wound up or ceases to exist as a legal entity during the term of the ELN / ELI, the ELN / ELI will mature worthless.

Settlement Delays

ELNs / ELIs are an agreement to purchase the Shares. The number of Shares to be delivered will be determined on the Fixing Date. In certain events the issuer's ability to deliver share certificates in relation to Shares or to effect electronic settlement of the Shares may be restricted. This could result in delays for investors who are entitled to receive Shares. Where such a delay occurs, movements in the price of the Shares could affect the value of the Shares delivered compared to the value of those Shares on the Fixing Date.

Issuer can Postpone the Fixing Date

If the issuer determines that, on the Fixing Date, a Market Disruption Event has occurred or is continuing, the Fixing Date will be postponed until the first Business Day on which no Market Disruption Event is occurring. As a result , the Settlement Date for the ELN / ELI will also be postponed, the Shares or any Cash Settlement Amount will not be delivered until after the originally scheduled Settlement Date.

Issuer can Elect to Settle in Cash

ELNs / ELIs are an agreement to purchase Shares, however if provided in the terms of agreement, the issuer has the discretion to settle the ELNs / ELIs in cash instead of delivering the Shares. The investor may not however have a discretion to elect to receive cash instead of Shares. If the issuer exercises its discretion to deliver cash in lieu of Shares the investor will not have a right to require the delivery of Shares and instead a cash amount with a value equal to the product of the Share amount and the Closing Price on the Fixing Date will be delivered to the investor. If, in the period between the Fixing Date and the Settlement Date, there has been a movement in the price of the Shares, Cash Settlement Amount delivered may be less than the value of the Shares on the Settlement Date.

Potential Conflicts of Interest

Companies &/or affiliates of the issuer may buy and sell Shares or derivatives of Shares, and may issue other instruments the value of which are linked to the value of the Shares. These activities may affect the market value of the Shares, or could result in the issuer having interests which conflict with those of the investors' in relation to the market value of Shares. Companies &/or affiliates of the issuer may also act as underwriter in connection with future offerings of shares or other securities or may act as financial advisor to the issuer, or sponsor, as the case may be, of any such share or other security or in a commercial banking capacity for the issuer of any such share or other security. Such activities could present certain conflicts of interest and may affect the value of the ELN / ELI

Adjustment to the ELN / ELI Following Certain Events

Certain events, for example corporate actions or merger events, relating to the Shares permit the issuer to make certain adjustments or amendments to the Terms and Conditions of the ELNs / ELIs. An investor has only limited antidilution protection under the terms and conditions. The issuer has a discretion as to the adjustments that it makes following such events but the issuer is not obliged to make an adjustment for every event that may affect the Shares.

No Rights in the Shares

An investor in an ELN / ELI prior to the Shares being deposited into the investor's trading Account will not be entitled to voting rights or rights to receive dividends or other distribution or any other rights that a holder of the Shares would normally be entitled to.

Investment Decisions

The information in the specifications, offering circulars, information memorandums &/or other documents ("Documents") issued by the issuer is included for the purpose of enabling potential investors and their advisers to make an informed assessment of the terms of ELNs / ELIs, the general nature of the risks of investing in ELNs / ELIs, and the capacity of the issuer to fulfill its obligations under ELNs / ELIs.

They do not take into account the investment objectives or financial position of any particular reader. Accordingly, nothing in these Documents should be construed as a recommendation by the issuer or UOB Kay Hian (Hong Kong) Limited concerning investment in the ELNs / ELIs, Shares or any other security. Investors should not rely on the Documents other than in respect of those matters referred to above, and should not rely on them as the sole basis for any investment decision in relation to ELNs / ELIs, Shares or any other security, but should seek appropriate and relevant advice concerning the Listed Entity and the appropriateness of an investment in the ELNs / ELIs for their particular circumstances.

Capacity and obligation of UOB Kay Hian (Hong Kong) Limited

UOB Kay Hian (Hong Kong) Limited. ("UOBKH") is only acting as distributor of ELNs / ELIs issued by the issuer and will not be liable for any default in payment by issuer of the ELNs / ELIs nor assume any responsibility if the issuer is unable to fulfill its obligations under the ELNs / ELIs. UOBKH is under obligation to provide to investor relevant information of the ELN / ELI which is however subject to final amendment to be advised to UOBKH by the issuer.

Investment in OTC Options involve substantial risks including market risk, liquidity risk, and the risk that the issuer will be unable to satisfy its obligations under the OTC Options. Do not invest in the OTC Options unless you fully understand and are willing to assume the risks associated with it. You should consider carefully whether OTC Options are suitable for you in light of your experience, objectives, financial position and other relevant circumstances.

GENERAL RISK FACTORS
Issuer's Risk

The OTC Option is subject to both the actual and perceived measures of credit worthiness of the issuer. There is no assurance of protection against a default by the issuer in respect of the repayment obligations. In the worst case scenario (e.g. upon insolvency of issuer), you might not be able to recover the option premium if the issuer defaults on the OTC Option. Risks arising from changes in credit quality due from issuer. Adverse changes in the credit quality of the issuer or a general deterioration in the UK, the U.S.A., European or global economic conditions, or arising from systemic risks in the financial systems, could affect the recoverability and value of the issuer assets and require an increase in the issuer provision for impairment losses and other provisions.

Market Risk

The OTC Option is subject to the market risk of the underlying assets, the factors affect the market price cannot be easily determined. If the underlying assets involve high risks, the value of underlying assets may move down or even become valueless. Investment involves risks. 

Not SFC Authorized Products

If this product is not SFC Authorized Products, only the Professional Investors defined under SFO may invest.

Lack of Transparency

OTC Options are traded over-the-counter, not Exchange Traded Products, so the price of OTC Options are lacking of transparency compared with Exchange Traded Products. In addition, the liquidity risk for OTC trading products is much higher than the exchange traded products.

Liquidity Risk

There can be no assurance as to how any OTC Options will trade in the secondary market or whether such market will be liquid or illiquid. No assurance can be given that there will be a market for any OTC Options. The Pricing information of OTC Options may be more difficult to obtain, and the liquidity and market prices of such OTC Options may be adversely affected. The liquidity of the OTC Options may also be affected by restrictions on offers and sales of the OTC Options in some jurisdictions. Also, to the extent OTC Options of a particular issue are exercised, the number of OTC Options of such issue outstanding will decrease, resulting in a diminished liquidity for the remaining OTC Options of such issue. A decrease in the liquidity of an issue of OTC Options may cause, in turn, an increase in the volatility associated with the price of such issue of OTC Options.

Geopolitical Risk

Geopolitical conditions can also affect the product price and yield. Terrorist acts and threats and the response of governments in the UK, the U.S.A. and elsewhere to them could affect the level of economic activity.

Counterparty Risk

You should aware of the identity of the contractual counterparty you are or may be matched with. Often, you will be purchasing an unsecured obligation of such counterparty (as opposed to an obligation of a central clearing corporation as would be the case with exchange traded futures and options) and you should evaluate the comparative credit risk. 

Associated Risks

Risks associated with the OTC Options are listed in the Offering Document distributed by the Issuer. You must receive and read the Offering Document issued by the Issuer and consult Professional Advisers before making investment decision. 

Specific Risks associated with OTC Options
Variable degree of risk

Transactions in OTC options carry a high degree of risk. As a purchasers or sellers of OTC options, you should familiarize yourself with the types of OTC options (i.e. put or call) which you contemplate trading and the associated risks. You should calculate the extent to which the value of the OTC options must increase for your position to become profitable, taking into account the premium and all transaction costs.

The purchaser of OTC options may offset or exercise the OTC options or allow the OTC options to expire. The exercise of an OTC option results either in a cash settlement or in the purchaser acquiring or delivering the underlying interest. If the OTC option is on a futures contract, the purchaser will acquire a futures position with associated liabilities for margin. If the purchased OTC options expire worthless, you will suffer a total loss of your investment which will consist of the OTC option premium plus transaction costs. If you are contemplating purchasing deep-out-of-the-money OTC options, you should be aware that the chance of such OTC options becoming profitable ordinarily is remote.

Selling ("writing" or "granting") an OTC option generally entails considerably greater risk than purchasing OTC options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of that amount. The seller will be liable for additional margin to maintain the position if the market moves unfavourably. The seller will also be exposed to the risk of the purchaser exercising the OTC option and the seller will be obligated to either settle the option in cash or to acquire or deliver the underlying interest. If the OTC option is on a futures contract, the seller will acquire a position in a futures contract with associated liabilities for margin. If the OTC option is "covered" by the seller holding a corresponding position in the underlying interest or another option, the risk may be reduced. If the option is not covered, the risk of loss can be unlimited.

Additional risks common to OTC options
Terms and conditions of contracts

You have the responsibility to fully understand the terms and conditions of the specific OTC options which you are trading and associated obligations (e.g. the circumstances under which you may become obliged to make or take delivery of an OTC options, expiration dates and restrictions on the time for exercise). 

Suspension or restriction of trading and pricing relationships

The OTC option is subject to the underlying assets' market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. price limits or "circuit breakers"), it may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate positions. If you have sold OTC options, this may increase the risk of loss.

Further, normal pricing relationships between the underlying interest and the OTC option may not exist. The absence of an underlying reference price may make it difficult to judge "fair value".

Commission and other charges

Before you begin to trade, you should obtain a clear explanation of all commission, fees and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.

Transactions in other jurisdictions

Transactions on markets in other jurisdictions, including markets formally linked to a domestic market, may expose you to additional risk. Such markets may be subject to regulation which may offer different or diminished investor protection. Before you trade you should enquire about any rules relevant to your particular transactions. Your local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected. You should fully understand the details about the types of redress available in both your home jurisdiction and other relevant jurisdictions before you start to trade.

Currency risks

The profit or loss in transactions in foreign currency-denominated contracts (whether they are traded in your own or another jurisdiction) will be affected by fluctuations in currency rates where there is a need to convert from the currency denomination of the contract to another currency.

Trading facilities

Electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure. Your ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or participant firms. Such limits may vary, you should understand the details in this respect.

Electronic trading

Trading through UOB Kay Hian (Hong Kong) Limited's trading system may differ from trading on other electronic trading systems. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that your order is either not executed according to your instructions or is not executed at all.

Off-exchange transactions

Transactions in OTC optionmay be difficult or impossible to liquidate an existing position, to assess the value, to determine a fair price or to assess the exposure to risk. For these reasons, these transactions may involve increased risks. Off-exchange transactions may be less regulated or subject to a separate regulatory regime. Before you undertake such transactions, you should familiarize yourself with applicable rules and attendant risks.

The above information is provided for reference only. The information may not contain all material terms, in and of itself should not form the basis for any investment decision. Potential investors must seek their own independent advice in relation to any legal, tax, accounting or regulatory issues relating to the matters discussed herein, By accepting receipt of this information you will be deemed to represent that you possess, either individually or through your advisor, sufficient investment expertise to understand the risks involved in any purchase or sale of any investment products, referenced herein, and investor has made its own independent judgment. The value, price or income from investments may fall as well as rise.