MORNBFI Vol. 1 - Planters Development Bank

APP. Q-16-a09.12.31SAMPLE RISK DISCLOSURE STATEMENT FOR DERIVATIVES ACTIVITIES[Appendix to Sec. 4611Q (2008 - 4603Q)]While derivatives instruments areutilized for hedging or managing investmentrisk, derivatives instruments themselvesinvolve a variety of significant risks.Considering the complexity of derivativesproducts, these products are generallyunsuitable for non-sophisticated investors.You should not deal in derivativesproducts unless you understand their natureand the extent of your exposure to theattendant risks. And even assuming that youunderstand derivatives transactions, youshould not deal with the same unless theproduct is suitable for you in the light ofyour circumstances, experience, financialposition and operational resources.As in any financial transaction, youshould ensure that you understand andcomply with the regulatory requirementsapplicable to you and/or limitations set byyour BOD or other governing body. Youshould also consider the legal, tax andaccounting implications of entering into anyderivatives transaction.This product generally carries higherrisks than those associated with ordinary FIinvestments and therefore not a suitablesubstitute for savings or time deposits. Thesetransactions are risky and may not beappropriate if you are not willing or able toaccept the risk of adverse movements in theunderlying securities/reference rates.This transaction does not guarantee ayield, return or income. Past performance ofthe reference rate or similar instruments is nota guarantee of future performance. The incomefrom the transaction may or may not fluctuatedepending on prevailing market conditions.(An FI need not adopt all the followingenumerated statements. It only has toincorporate those statements that may beapplicable to the derivatives products ortransactions).(1) This transaction may be used for hedgingpurposes. If you are entering into the transactionfor hedging purposes, this product may notmatch your exposure perfectly. You may beunder or over hedged or may be subject toother exposures as a result of the transaction.(2) These are over-the-counter derivativeswhich may pose liquidity risks to you. Theseare generally not liquid because there is noexchange or secondary trading marketthrough which you can dispose thederivative. Bid and offer prices for theseinstrument may not be quoted. Bid and offerquotes, if any, are established by the dealersin the instruments and consequently fairprice may be difficult to establish.(3) While you may terminate thistransaction prior to the specified terminationdate, the cost of early termination may besubstantial. Pre-termination may reduce theexpected return or the investment amount,even in the case of principal protectedstructured products.Product specific disclosures(1) This transaction can be subject to therisk of loss of the entire principal/notionalamount of the transaction. You may losesome or all of your investment.(2) (For principal protected structuredproducts) While the principal for structureddeposits may be protected and carries PDICguarantee, returns are variable and oftencontingent on the performance of complexfinancial instruments that an average customermay not fully understand. There is still apotential loss of the principal amount investedif the structured deposit is not held to maturity,i.e., there is an early redemption fee.(3) (For leveraged products/transactions)If the derivatives transactions require you toput up a margin, you may sustain a loss of theentire margin you deposited with the FI toManual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-16-a - Page 1