Principal at Risk Notes - Risks of PARs

Risks of PARs

• An investment in PARs may result in a loss. Investing in PARs involves risks similar to investing directly in the underlying asset, including a risk of a loss in the investment. Because the value of the PAR is directly related to the level of a particular underlying asset, an investment in the Notes may result in a loss to the investor if the level of the underlying asset declines.
• An investor’s return on PARs may be limited. The opportunity to participate in the possible increases in the level of the underlying asset through an investment in PARs may be limited if the issue has a Capped Value. However, in the event that the level of the underlying asset declines over the term of the Notes, an investor will realize the entire decline.
• Liquidity of exchange listed PARs.Investors should be aware that the listing or quotation of PARs does not necessarily ensure that an active trading market will develop. The potential limited trading market may affect the price that an investor receives for the Notes if they are not held until the maturity date.
• Liquidity of OTC traded PARs.Although HRBFA expects to make a market, it is not required to do so and may cease making those bids at any time. The limited trading market may affect the price that investors receives if they wish to sell prior to maturity.
• Trading Value of PARs may be affected by complex factors.The effect of one factor may offset the increase in the trading value of the PARs caused by another factor. Conversely, the effect of one factor may exacerbate the decrease in the trading value of the Notes caused by another factor. In addition, there are other factors described in the pricing supplement which include:
  • The level of the underlying asset
  • Changes in the levels of relevant Interest Rates
  • Changes in the volatility of the underlying asset
  • The credit rating of the Issuer.

Basically, PARs are designed to be held to maturity by the investor. If the investor sells the Note prior to maturity, the value may be different than the investor’s perceived value due to the Risks identified above.