Risk Disclosures

HalHalo Investing MEA Ltd (“Halo MEA”) is licensed and regulated by Abu Dhabi Global Market (“ADGM”)’s Financial Services Regulatory Authority (“FSRA”) as a Cat 3A Authorised Person to conduct the Regulated Activities of (a) Dealing in Investments as Principal (Matched Principle), (b) Dealing in Investments as Agent, (c) Arranging Deals in Investments, in and from ADGM (with a Financial Services Permission number 220081) under the Financial Services and Market Regulations 2015 (“FSMR”). Its registered office and its principal place of business is at Office 502, Al Sarab Tower, ADGM Square, Al Maryah Island, P.O. Box 51921, Abu Dhabi, United Arab Emirates (“UAE”).

Halo MEA is a wholly-owned subsidiary of Halo Investing, Inc. ("Halo US") and acts solely as a distributor/selling agent. Neither Halo MEA nor Halo US are the issuer or guarantor of any structured product.

Halo MEA is authorized to provide financial services and products to Professional Clients in ADGM and is not permitted to deal with Retail Clients as defined in ADGM’s Conduct of Business Rulebook (“COBS”).

The contents and materials provided by Halo MEA herein:

should not be construed, as advice, recommendation, offer, or a solicitation, to buy or sell securities, or trade by any outlined investment strategy herein. It is the investor’s responsibility to understand and evaluate any prospective investment. Such considerations shall be based on your review of applicable offering documents, your evaluation of your financial circumstances, investment objectives, risk tolerance, liquidity needs, and any features of a specific structured product.

are confidential and to be utilized solely in a one-on-one presentation with the recipient firm. Halo MEA in no way authorizes the recipient to distribute these materials to any other person or entity.

may represent model structured products and or related services and do not reflect actual trading and do not reflect the impact that material economic and market factors may have had on Halo MEA’s decision-making, if any. Actual structured products may materially differ compared to the sample product and or related information provided herein.

Interest rates, volatility, price movements, or any other macro variable may negatively impact the investment principal and performance. Investing involves risk. Past performance is not indicative of future results. Nothing herein should be considered as an investment recommendation or advice. All investment decisions should be made by an experienced investment professional.

To check Halo MEA’s FSP, please visit FSRA Public Register at:
https://www.adgm.com/public-registers/fsra/fsf/halo-investing-mea-ltd

What are Structured Products

Structured products are securities Issued by financial institutions whose returns are based on, among other things, equity indexes, a single equity security, a basket of equity securities, interest rates, commodities, and/or foreign currencies. Thus, your return is “linked” to the performance of a reference asset or index. Structured products have a fixed maturity and include two components–a bond component and an embedded derivative. Financial institutions typically design and issue structured products, and broker-dealers sell them to individual investors. Some common types of structured products sold to individual investors include principal protected notes, reverse convertible notes, enhanced participation or leveraged notes, and hybrid notes that combine multiple characteristics.

Risks and Considerations with Structured Products Complexity
You and your broker should take time to fully understand the manner in which your return on a structured product is calculated. You should understand the reference asset(s) or index(es) and determine how the product’s payoff structure incorporates such reference asset(s) or index(es) in calculating the product’s performance. This payoff calculation may include leverage multiplied on the performance of the reference asset or index, protection from losses should the reference asset or index produce negative returns, and fees.

Market Risk
Some structured products provide for the repayment of principal at maturity, which is often referred to as “principal protection.” This principal protection is subject to the credit risk of the issuing financial institution. Many structured products do not offer this feature. For structured products that do not offer principal protection, the performance of the linked asset or index may cause you to lose some, or all, of your principal. Depending on the nature of the linked asset or index, the market risk of the structured product may include changes in equity or commodity prices, changes in interest rates or foreign exchange rates, or market volatility.

Issuance Price and Product Value
The price you will pay for a structured product at issuance will likely be higher than the fair value of the structured product on the date of issuance. Issuers now disclose an estimated value of the structured product on the cover page of the offering prospectus, allowing investors to gauge the difference between the issuer’s estimated value of the product and the issuance price. The estimated value of the products is likely lower than the issuance price of the product to investors because issuers include the costs for selling, structuring or hedging the exposure on the product in the initial price of their product. After issuance, structured products may not be re-sold on a daily basis and thus may be difficult to value given their complexity.

Liquidity
Your ability to trade or sell structured products in a secondary market is often very limited as structured products (other than exchange-traded notes known as ETNs) are not listed for trading on security exchanges. As a result, the only potential buyer for your structured product may be the issuing financial institution’s broker-dealer affiliate or the broker-dealer distributor of the structured product. In addition, issuers often specifically disclaim their intention to repurchase or make markets in the products they issue. You should, therefore, be prepared to hold a structured product to its maturity date, or risk selling the product at a discount at the time of sale.

Daily Pricing
The pricing accuracy is questionable because most structured products never trade after issuance. Prices are usually calculated by a matrix, which is very different than net asset value. Matrix pricing is essentially a best-guess approach by the issuer.

Tax Considerations
The tax treatment of structured products is complicated and, in some cases, uncertain. Before purchasing any structured product, you may wish to consult with a tax advisor. You also should read the applicable tax risk disclosures in the prospectuses and other offering documents of any product you are considering to purchase.

Payoff Structure
Structured products may have complicated payoff structures that can make it difficult for you to accurately assess their value, risk and potential for growth through the term of the structured product. Determining the performance of each product can be complex and this calculation can vary significantly from product to product depending on the structure. Products can be structured in a wide variety of ways. Payoff structures can be leveraged, inverse, or inverse-leveraged, which may result in larger returns or losses for you. You should carefully read the prospectus for a structured product to fully understand how the payoff on a product will be calculated and discuss these issues with your broker. For example, the payoff on structured product can depend on:

Participation Rates
Some structured products provide a minimum payoff of the principal invested plus an additional payoff to you based on multiplying any increase in the reference asset or index by a fixed percentage. This percentage is often called the participation rate. A participation rate determines how much of the increase in the reference asset or index will be paid to investors of the structured product. For example, if the participation rate is 50 percent, and the reference asset or index increased 20 percent, then the return paid to you would be 10 percent (which is 50 percent of 20 percent).

Capped Maximum Returns
Some structured products may provide payments linked to a reference asset or index with a leveraged or enhanced participation rate, but only up to a capped, maximum amount. Once the maximum payoff level is reached, you do not participate in any additional increases in the reference asset or index. For example, a product may provide the investor 100% of all funds invested at the end of two years, plus an enhancement of any rise in the performance of the S&P 500 up to 20%. If the performance of the S&P 500 increases 25% in those two years, you only receive a return of 20%.

Knock-In Feature
If the reference asset or index falls below a pre-specified level during the term of the product, you may lose some or all your principal investment at maturity and could lose coupon payments scheduled throughout the term of the product. This pre-specified level may be called a barrier, trigger, or knock-in. When this level is breached, the payout return changes on the product. For example, if the reference asset or index falls below the knock-in level and its value is lower than on the date of issuance, instead of receiving a return of your principal, you may instead receive an amount that reflects the decline in value of the reference asset or index. For certain types of structured products, you may receive the reference asset that has declined in value during the term of the product.

Credit Risk
Structured products are unsecured debt obligations of the issuer, meaning that the issuer is obligated to make payments on the products as promised. These promises, including any principal protection, are only as good as the financial health of the structured product issuer. If the structured product issuer defaults on these obligations, investors may lose some, or all, of the principal amount they invested in the structured products as well as any other payments that may be due on the structured products.

Call Risk
Some structured products have “call provisions” that allow the issuer, at its sole discretion, to redeem the product before it matures at a price that may be above, below or equal to the face value of the structured product. If the issuer “calls” the structured product, investors may not be able to reinvest their money at the same rate of return provided by the structured product that the issuer redeemed.

Additional Considerations Before Investing in Structured Products
Before investing in any structured product, do your research and ask your Halo MEA investment professional:

Fees and other costs associated with the investment.

Cost premium above an issuer’s estimated value of a structured product investor will be paying for the structured product and its relevance to the investment decision.

Structured products may not be a suitable investment for you. You should review your investment objectives, tolerance for risk and costs with your broker or financial adviser before you consider investing in a structured product.

Alternative products that may be available that provide investment exposure to similar assets, indices or strategies. Carefully consider what might be a suitable investment for you, and whether there are better alternatives to the structured product you are considering, both from a return, fee, and risk perspective. Structured products are meant illiquid typically held to maturity. Investors could lose a significant portion of their investment if principal is needed prior to maturity.

Understand applicable call features to ensure you understand what can trigger the call and the earliest date that the structured product may be called and if so, potential returns can be negatively impacted or capped.

Consult with a tax advisor to understand the consequences of any particular structured product, including imputed interest and any foreign tax consequences.

Purchasing a structured product does not guarantee positive returns. The reference asset or index might not increase in value—or even if it does, there may be conditions that limit your returns.

Be sure to understand the financial condition of the issuer and read its disclosures as carefully as you would for any other investment.

Many structured products are complex, is it is important to review disclosure materials and discuss all aspects of the investment with your financial professional.

Last Modified: 31 December 2023

MEA6001 / 2.0 / 2312

Risk Disclosures

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