# Risk Disclosure Statement

Risks in Securities Trading

Securities prices can sometimes be extremely volatile. They may rise or fall and may even become valueless. Trading in securities does not necessarily yield profits; on the contrary, it may result in losses.

Risks in Options Trading

The risk of loss in trading options can be substantial. Under certain circumstances, the losses you incur may exceed the initial margin deposited. Even if you set contingency orders, such as "stop-loss" or "limit" orders, they may not necessarily avoid losses. Market conditions may render such orders unexecutable. You may be required to deposit additional margin within a short period of time. If you fail to provide the required amount within the specified time, your open positions may be liquidated. However, you will still be responsible for any resulting deficit in your account. Therefore, before trading, you should study and understand options and carefully consider whether such trading is suitable for you based on your financial situation and investment objectives. If you trade options, you should familiarize yourself with the procedures for exercising options and upon their expiration, as well as your rights and obligations upon exercise and expiration.

Risks of Trading Growth Enterprise Market (GEM) Shares

GEM shares involve high investment risks. In particular, such companies may be listed on the GEM without having a track record of profitability or without forecasting future profits. GEM shares may be highly volatile and have low liquidity.

You should only make relevant investment decisions after careful and thorough consideration. The higher-risk nature and other characteristics of the GEM market mean that this market is more suitable for professional and other sophisticated investors.

Currently, information on GEM shares can only be found on the website operated by The Stock Exchange of Hong Kong Limited. GEM-listed companies are generally not required to publish paid announcements in specified newspapers in the Gazette. Therefore, you acknowledge that you must obtain the latest information on GEM-listed companies published via the GEM website.

If you have any questions regarding the content of this Risk Disclosure Statement or the nature of the GEM market and the risks involved in trading shares on the GEM, you should seek independent professional advice.

Risks of Trading NASDAQ - American Stock Exchange Securities on The Stock Exchange of Hong Kong Limited

Securities traded under the NASDAQ-American Stock Exchange Pilot Programme (the "Pilot Programme") are intended for sophisticated investors. Before trading securities under the Pilot Programme, you should first consult our company and familiarize yourself with the Pilot Programme. You should be aware that securities traded under the Pilot Programme are not regulated as a class of securities with a primary or secondary listing on the Main Board or the GEM of The Stock Exchange of Hong Kong Limited.

Risks of Using Electronic Facilities under the Online Trading Supplementary Terms

The client acknowledges and accepts that using electronic facilities entails the following risks:

(a) If the client conducts transactions through electronic facilities, the client shall bear risks related to the electronic facility systems, including hardware and software failures, and the failure to execute the client's orders in accordance with the client's instructions, or to execute them fully, due to any system failure.

(b) Electronic facilities may be unreliable due to unpredictable communication congestion and other reasons; transactions conducted through electronic facilities may be subject to delays in transmitting and receiving the client's instructions and other messages, delays in executing the client's instructions, or execution of the client's instructions at securities prices different from those prevailing at the time the instructions were issued, transmission interruptions or signal loss; the risk of possible misunderstandings or errors in communication; and the general difficulty of canceling instructions once issued. Our company shall not be liable for any losses the client may incur due to such interruptions or delays or third-party access to information. If the client is not prepared to bear the risks of such interruptions or delays, the client should not issue any instructions to our company; and

(c) Market data and other information provided to the client through our company's electronic facilities may be obtained by our company from third parties. Although our company believes that such market data or information can be relied upon, neither our company nor such third parties guarantee that such market data or information is accurate, complete or timely.

Risks of Providing a Power of Attorney to Lend or Deposit Your Securities with Third Parties

Providing our company with a power of attorney to allow our company to lend or deposit your securities with third parties in accordance with Rule 7 of the Securities and Futures (Client Securities) Rules, as may be amended from time to time, and relevant rules and regulations, carries certain risks.

Such permission is only effective if you have given written consent in this regard. The written consent must specify a validity period, which shall not exceed 12 months.

There is currently no law requiring you to sign these powers of attorney. However, our company may require a power of attorney, for example, to provide margin loans to clients or be permitted to lend clients' securities to third parties or deposit them as collateral with third parties. Our company shall explain to you the purpose for which the power of attorney will be used.

If you sign a power of attorney and your securities are lent to or deposited with third parties, those third parties will have liens or charges over your securities. Although our company is responsible to you for lending or depositing your securities under the power of attorney, our company's default may result in you losing your securities. Our company also offers cash accounts that do not involve securities lending. If you do not need to use margin loans, or do not wish your securities to be lent or pledged, do not provide the power of attorney in the account opening information form to open such cash accounts.

Risks of Margin Trading

The risk of loss in financing transactions by depositing collateral can be substantial. The losses you incur may exceed the cash and any other assets you deposit with our company as collateral. Market conditions may make contingency orders, such as "stop-loss" or "limit" orders, unexecutable. You may be required to deposit additional margin amounts or pay interest within a short period of time. If you fail to pay the required margin amounts or interest within the specified time, your collateral may be sold without your consent. In addition, you will be responsible for any resulting deficit in your account and the interest payable. Therefore, you should carefully consider whether such financing arrangements are suitable for you based on your financial situation and investment objectives.

Risks of Trading Foreign Securities (including B-shares listed in the People's Republic of China)

Clients should only trade foreign securities if they understand the nature and degree of risks involved in such trading. In particular, it should be noted that although AIS is a participant of The Stock Exchange of Hong Kong, The Stock Exchange of Hong Kong does not regulate the trading of foreign securities, and such trading is not covered by the compensation fund. Clients should carefully consider whether such transactions are suitable based on their own experience, risk profile and other relevant factors. If in doubt, you should consult professional advice.

Risk Disclosure Regarding Structured and Derivative Products

This statement is intended to outline the risks of trading structured or derivative products (e.g., derivative warrants, callable bull/bear contracts, exchange-traded funds, rights issues, etc.) and does not cover all relevant risks and other important matters of such trading. Clients (as customers and investors in structured or derivative products) should, before entering into any such transactions, understand the nature of the contracts to be entered into (and the relevant contractual relationships) and the degree of risk they will assume under such contracts. Trading in structured or derivative products is not suitable for many investors, and clients should carefully assess whether they are suitable to participate in such trading based on their investment experience, investment objectives, financial resources and other relevant conditions.

General Risks

Issuer Default Risk

If the issuer of a structured product becomes insolvent and fails to fulfill its obligations in respect of the securities issued, investors will only be treated as unsecured creditors and will have no priority claim over any assets of the issuer. Therefore, investors should pay particular attention to the financial strength and creditworthiness of the issuer of the structured product.

Note: The "Issuer Credit Ratings" listed under "Derivative Warrants" and "Callable Bull/Bear Contracts" on the website of Hong Kong Exchanges and Clearing Limited show the credit ratings of individual issuers.

Unsecured Product Risk

Unsecured structured products are not backed by assets. If the issuer becomes insolvent, investors may lose their entire investment. To determine whether a product is unsecured, investors must carefully read the listing document.

Leverage Risk

Structured products such as derivative warrants and callable bull/bear contracts are leveraged products, and their value can change rapidly in accordance with the leverage ratio relative to the underlying asset. Investors should note that the value of structured products can drop to zero, resulting in the total loss of the initial investment.

Validity Considerations

Structured products have an expiration date, after which the product becomes worthless. Investors should note the expiration time of the product to ensure that the remaining validity period of the selected product matches their trading strategy.

Unusual Price Movements

The price of a structured product may differ from its theoretical value due to external factors (e.g., market supply and demand), so the actual transaction price can be higher or lower than the theoretical value.

Foreign Exchange Risk

If the underlying asset of a structured product traded by an investor is not denominated in Hong Kong dollars, the investor will also face foreign exchange risk. Fluctuations in exchange rates can adversely affect the value of the underlying asset and, in turn, the price of the structured product.

Liquidity Risk

The Stock Exchange requires all issuers of structured products to appoint a liquidity provider for each individual product. The liquidity provider's role is to provide two-way quotes to facilitate trading. If a liquidity provider defaults or ceases to perform its role, investors in the relevant product may be unable to trade until a new liquidity provider is appointed.

Derivative Warrants

Time Decay Risk

All other things being equal, the value of a derivative warrant decreases as it approaches its expiration date, and therefore should not be regarded as a long-term investment.

Volatility Risk

The price of a derivative warrant can rise or fall with the implied volatility of the underlying asset's price, and investors should note the volatility of the underlying asset.

Callable Bull/Bear Contracts (CBBC)

Mandatory Call Risk

Investors trading CBBC should note the feature that CBBC can be "called" or forcibly called intraday. If the value of the underlying asset of a CBBC equals the mandatory call price/level stated in the listing document, the CBBC will cease trading. At that time, investors can only recover the residual value of the ceased CBBC calculated by the product issuer in accordance with the listing document (note: the residual value can be zero).

Financing Cost

The issue price of CBBC includes financing costs. Financing costs decrease gradually as the CBBC approaches its expiration date. The longer the tenor of the CBBC, the higher the total financing cost. If a CBBC is called one day, investors lose the entire financing cost for the CBBC's validity period. The formula for calculating financing costs is set out in the listing document of the CBBC.

Exchange-Traded Funds (ETFs)

Market Risk

ETFs are primarily designed to track the performance of certain indices, sectors/segments or asset classes (e.g., equities, bonds or commodities). ETF managers may use different strategies to achieve their objectives, but usually cannot adopt defensive strategies at their discretion in a falling market. Investors must be prepared to incur losses due to fluctuations in the relevant index/asset.

Tracking Error

This refers to the divergence between the performance of an ETF and that of the relevant index/asset, which can be caused by factors such as the ETF's transaction fees and other expenses, changes in the composition of the relevant index/asset, the replication strategy of the ETF manager, etc. (Common replication strategies include full replication/sampling and synthetic replication, as detailed below.)

Trading at a Discount or Premium

The price of an ETF may be higher or lower than its net asset value, mainly due to supply and demand factors, especially during periods of significant and erratic market volatility, and this can also be the case for ETFs that specifically track markets/sectors where direct investment is restricted.

Foreign Exchange Risk

If the underlying asset of a structured product traded by an investor is not denominated in Hong Kong dollars, the investor will also face foreign exchange risk. Fluctuations in exchange rates can adversely affect the value of the underlying asset and, in turn, the price of the structured product.

Liquidity Risk

Market makers are Exchange Participants responsible for providing liquidity and facilitating trading in ETFs. Although most ETFs have one or more market makers, if a market maker defaults or ceases to perform its role, investors may be unable to trade.

Counterparty Risks Involved in Different Replication Strategies of ETFs

(a) Full Replication and Sampling Strategies

ETFs adopting a full replication strategy typically invest in all constituent stocks/assets of the benchmark in the same proportions. Those adopting a sampling strategy only invest in some (not all) of the relevant constituent stocks/assets. For ETFs that invest directly in the underlying assets without synthetic replication instruments issued by third parties, counterparty risk is generally not a major issue.

(b) Synthetic Replication Strategies

ETFs adopting a synthetic replication strategy primarily track the performance of the benchmark through swaps or other derivatives. Currently, ETFs adopting synthetic replication strategies can be further divided into two types:

(i) Structured with Swap Contracts

- Total return swaps allow ETF managers to replicate the performance of the fund's benchmark without purchasing the underlying assets.

- ETFs structured with swap contracts are exposed to counterparty risk from the swap dealer. If the swap dealer defaults or fails to fulfill its contractual obligations, the fund may incur losses.

(ii) Structured with Derivatives

- ETF managers can also use other derivatives to synthetically replicate the economic benefits of the relevant benchmark. The derivatives in question can be issued by one or more issuers.

- ETFs structured with derivatives are exposed to counterparty risk from the issuers. If an issuer defaults or fails to fulfill its contractual obligations, the fund may incur losses.

Even if an ETF obtains collateral, it must rely on the collateral provider to fulfill its obligations. In addition, once the right to claim collateral is exercised, the market value of the collateral can be significantly lower than the original amount, resulting in substantial losses for the ETF.

It is extremely important for investors to understand and carefully assess the impact of different ETF structures and features. Investors can refer to the summary classification of ETFs currently listed on the securities market under Hong Kong Exchanges and Clearing Limited on the following website of Hong Kong Exchanges and Clearing Limited.

Futures and Options

"Leverage" Effect

The risks of trading futures are very high. Because the initial margin required to open a futures position is relatively low compared to the value of the futures contract itself, it can create a "leverage" effect in futures trading. Even minor market movements can have a disproportionate impact on the funds you have invested or will be required to invest. Therefore, this leverage effect can work both for and against you. As a result, you may lose your entire initial margin and any additional amounts deposited with the relevant firm to maintain your positions. If market conditions move against your positions or margin levels are increased, you will be subject to margin calls and required to deposit additional funds within a short period of time to maintain your positions. If you fail to pay the additional funds within the specified time, you may be forced to liquidate your positions at a loss, and you will be solely responsible for any resulting deficit.

Risk-Reducing Trading Instructions or Investment Strategies

Even if you use certain trading instructions designed to limit potential losses (such as "stop-loss" or "stop-limit" instructions), they may not be effective because market conditions can make such instructions unexecutable. Strategies involving different combinations of positions, such as "spreads" and "straddles," can carry risks as high as holding basic "long" or "short" positions.

Varying Degrees of Risk

The risks of trading options are very high. Investors, whether buying or selling options, should first understand the type of option they intend to trade (i.e., put option or call option) and the associated risks. You should factor in the option premium and all transaction costs, and then calculate how much the option's value must increase to be profitable.

Investors who purchase options can choose to offset or exercise the option, or let it expire. If the option holder chooses to exercise the option, they must either settle in cash or buy or deliver the underlying asset. If the purchased option is on a futures product, the option holder will acquire a futures position with associated margin obligations (see the "Futures" section above). If the purchased option expires worthless, you will lose all your investment, including all option premiums and transaction fees. If you intend to purchase deep out-of-the-money options, you should note that the chances of profiting from such options are extremely low.

Selling ("writing" or "selling") options generally carries significantly higher risks than buying options. The seller receives a fixed option premium but may incur losses far exceeding that premium. If market conditions reverse, the option seller must deposit additional margin to cover the position. In addition, the option seller bears the risk that the buyer may exercise the option, meaning the option seller is obligated to settle in cash or buy or deliver the underlying asset when the option is exercised by the buyer. If the sold option is on a futures product, the option seller will acquire a futures position with associated margin obligations (see the "Futures" section above). The risks may be reduced if the option seller holds a corresponding amount of the underlying asset, futures, or other options as "cover." If the option is not "covered," the loss risk can be unlimited.

Exchanges in some countries allow option buyers to defer payment of the option premium, so that the buyer's margin payment obligation does not exceed the option premium. Nevertheless, the buyer ultimately remains at risk of losing the option premium and transaction fees. When the option is exercised or expires, the buyer will need to pay any outstanding option premium.

Contract Terms and Conditions

You should inquire with the firm executing your trades about the terms and conditions of the relevant futures or options contracts being traded, as well as your obligations (e.g., under what circumstances you may be required to settle the underlying asset of a futures contract, or for options, the expiration date and time limits for exercise). Exchanges or clearing houses may, in certain circumstances, modify the terms of unexercised contracts (including option strike prices) to reflect changes in the underlying assets of the contracts.

Suspension or Restriction of Trading and Price Relationships

Market conditions (e.g., lack of market liquidity) and/or the application of certain market rules (e.g., suspension of trading in any contract or contract month due to price limits or "circuit breakers") can increase the risk of loss, as investors may find it difficult or impossible to execute trades or close out/offset positions. If you encounter such a situation after selling an option, the risk of loss you must bear may increase.

In addition, the normal price relationship between the underlying asset and futures, and between the underlying asset and options, may not exist. For example, futures contracts underlying futures options are subject to price limits, but the options themselves are not. The absence of a reference price for the underlying asset can make it difficult for investors to determine what constitutes a "fair price."

Cash and Property Held on Deposit

If you deposit funds or other property for transactions conducted locally or overseas, you should understand the protections afforded to such funds or property, particularly in the event of the firm's bankruptcy or insolvency. The amount of funds or property that can be recovered may be subject to specific legal provisions or local rules. In some jurisdictions, if the recovered funds or property are insufficient, the property identified as yours will be allocated to you on a pro rata basis like cash.

Commissions and Other Charges

Before you begin trading, you should clearly understand all commissions, fees, or other charges you must pay. These costs will directly affect the net profits you can obtain (if any) or increase your losses.

Trading in Other Jurisdictions

Trading in markets in other jurisdictions (including markets with formal links to local markets) may involve additional risks. The degree of protection available to investors may vary or even be reduced under the rules of these markets. Before trading, you should first ascertain all the rules governing the transaction you will undertake. The regulatory authority in your own jurisdiction cannot force the regulatory authority or market in the jurisdiction where your trade was executed to enforce the relevant rules. In view of this, before trading, you should first inquire with the relevant firm about the remedies available in your own jurisdiction and other jurisdictions, and the relevant details.

Currency Risk

Profits or losses incurred from trading contracts denominated in foreign currencies (whether the trade is conducted in your own jurisdiction or elsewhere) will be affected by exchange rate fluctuations when the contract's base currency needs to be converted into another currency.

Trading Facilities

Electronic trading facilities are computer-based systems used for transmitting, executing, matching, recording, or settling trade instructions. However, all facilities and systems may be subject to temporary interruptions or malfunctions, and the compensation you can receive for this may be subject to limitations imposed by system providers, markets, clearing houses, and/or participant firms regarding their liability. Since these liability limitations can vary, you should inquire with the firm executing your trades for details in this regard.

Electronic Trading

Trading through one electronic trading system may differ from trading through other electronic trading systems. If you trade through a particular electronic trading system, you must bear the risks associated with that system, including the risk that the relevant hardware or software may fail. System failure may result in your trade instructions not being executed in accordance with the instructions, or not being executed at all.

Over-the-Counter (OTC) Trading

In some jurisdictions, and only under specific circumstances, firms are permitted to engage in OTC trading. The firm executing your trades may be the counterparty to the transaction you are conducting. In such cases, it may be difficult or impossible to close existing positions, assess values, determine fair prices, or evaluate risks. Consequently, such transactions may involve greater risks. In addition, OTC trading may be subject to less regulation or different regulatory regimes; therefore, you should understand the applicable rules and associated risks before engaging in such transactions.