J.P. Morgan Thailand DW41

Product Risk Factors

Product risk factors

(1) Risk arising from limited duration of DW

DW have a limited duration, so their price may decrease over time based upon the remaining period until the maturity date of such derivative warrants. As the derivative warrants approach their maturity date, their price may decrease rapidly.
If the holders of the call warrants retain such call warrants until their maturity date, and the closing price of underlying Shares is lower than or equal to the Exercise Price, then the price of such derivative warrants will be zero, and the holders of the derivative warrants will incur a loss equal to their cost of buying the derivative warrants.

If the holders of the put warrants retain such put warrants until their maturity date, and the closing price of underlying Shares is higher than or equal to the Exercise Price, then the price of such derivative warrants will be zero, and the holders of the derivative warrants will incur a loss equal to their cost of buying the derivative warrants.

Thus, before making any investment in the derivative warrants, investors should study historical trading patterns and the price trends of underlying together with historical trading patterns and price trends of other derivative warrants having the same or similar duration and maturity to the derivative warrants in the current issuance.


(2) Price Risk

The price of the derivative warrants is dependent on many factors, such as the price of the underlying securities , the volatility of the underlying securities in the SET (both price and volume), the remaining duration of the derivative warrants, the prevailing interest rates (both in Thailand and internationally), the magnitude of dividends declared and paid in respect of the underlying securities (in case of no rights adjustment), the supply volume of the derivative warrants and the investors' demand for the derivative warrants. Such risks are commonly referred to as "price risks".

The most important of these price risks is the price of underlying and the manner in which the price of the derivative warrants may vary in accordance with the demand and supply of such derivative warrants in the market. In this regard, the DW Issuer will have some control over the supply of the derivative warrants because these derivative warrants will be offered gradually through the market maker based upon market demand on the SET throughout the duration of the derivative warrants up to the approved number of units. Investors can check the number of units of the derivative warrants offered for each offering period on the SET's website.

Further, the DW Issuer may increase the volume of derivative warrants with the same underlying securities by making additional offerings of derivative warrants in the current series, provided that the DW Issuer has distributed derivative warrants in the earlier series of (a) not less than THB 20 million or (b) not less than 50% of the derivative warrants requested for listing on the SET.

Finally, the DW Issuer (or any other issuer of derivative warrants) is able to seek approval to make additional offerings of derivative warrants having shares of underlying securities, as long as the number of underlying securities for all issuances of derivative warrants having the same underlying securities is not more than 50% of the total paid-up shares of underlying. Any such additional offerings of derivative warrants having the same underlying securities as any existing derivative warrant issue may adversely impact or affect the price of the shares of underlying and/or the price of any such existing (or newly issued) derivative warrants.


(3) Gearing risk from leverage

Investing in derivative warrants requires a smaller amount of capital when compared with investing directly in the shares of underlying. As such, when the price of the shares of underlying falls (or gains), the price of the derivative warrants will fluctuate at a greater percentage rate, thereby exposing investors in the derivative warrants to profits or losses at a percentage rate greater than those of an investor who makes a direct investment in the shares of underlying.


(4) Issuer risk

An investor in derivative warrants will be subject to "Issuer Risk", as the DW Issuer may not be capable of paying the cash settlement in accordance with the terms and conditions of the derivative warrants, or otherwise fails to comply fully with its obligations under the terms and conditions.

The underlying company as the issuer of the underlying securities, does not have any liability, obligation or responsibility for any such defaults of the DW Issuer under the terms and conditions.

Further, the DW Issuer does not have any credit rating ascribed to it (or its debt obligations) by any credit rating agency.Accordingly, investors should study the operating results and financial status of the DW Issuer and the extent and magnitude of the DW Issuer's obligations under the terms and conditions for the derivative warrants before making any investment.

In order to mitigate this Issuer Risk, the DW Issuer has procured a guarantee from JPMorgan Chase Bank, National Association in respect of its payment obligations under the terms and conditions. In addition, the DW Issuer has entered (or will enter into) a back-to-back agreement with J.P. Morgan Securities plc in order to manage economic risks arising from the issuance of the derivativewarrants). Accordingly, investors should take into account information concerning the operating results and financial status (including the credit rating) of JPMorgan Chase Bank, National Association and J.P. Morgan Securities plc.

Investors should monitor any news in respect of the DW Issuer, JPMorgan Chase Bank, National Association, as the guarantor, and/or J.P. Morgan Securities plc, as the risk management counterparty to the back-to-back agreement, including any change in their respective credit ratings (if applicable) on the SEC's website or the credit rating agencies' website or at www.jpmorgan.com.


(5) Liquidity risk

Investors may be unable to sell their derivative warrants in the volume or at the desired price due to insufficient liquidity.Such "Liquidity Risk" will depend on: (i) the actual demand and supply of the derivative warrants themselves on the SET, (ii) the ability of the market maker to maintain the liquidity of the derivative warrants, and (iii) the liquidity requirements of each of the market makers on the SET.

Derivative warrants are a new financial instrument recently introduced to investors in the Thai capital market. The risks stated herein may not cover all the risks which may arise in respect of any investment in the derivative warrants, including risks associated with any unforeseen event which may occur. Investors should review and evaluate other risks associated with the derivative warrants as set out in the annual registration statement of the DW Issuer (Form 56-DW) submitted to the SEC and the SET by the DW Issuer.



Investors should study and understand the products, return conditions, and risk factors before making an investment.
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