Common use of Volatility risk Clause in Contracts

Volatility risk. Prices of derivative warrants can increase or decrease in line with the implied volatility of underlying asset price. Investors should aware of the underlying asset volatility. Investors trading CBBCs should be aware of their intraday “knockout” or mandatory call feature. A CBBC will cease trading when the underlying asset value equals the mandatory call price / level as stated in the listing documents. Investors will only be entitled to the residual value of the terminated CBBC as calculated by the product issuer in accordance with the listing documents. Investors should also note that the residual value can be zero. The issue price of a CBBC includes funding costs. Funding costs are gradually reduced over time as the CBBC moves towards expiry. The longer the duration of the CBBC is, the higher the total funding costs. In the event that a CBBC is called, investors will lose the funding costs for the entire lifespan of the CBBC. The formula for calculating the funding costs are stated in the listing documents. Investors are exposed to price movements in the underlying security and the stock market, the impact of dividends and corporate actions and counterparty risks. Investors must also be prepared to accept the risk of receiving the underlying shares or a payment less than their original investment. Investors may lose part or all of their investment if the price of the underlying security moves against their investment view. Investors should note that any dividend payment on the underlying security may affect its price and the payback of the ▇▇▇ at expiry due to ex-dividend pricing. Investors should also note that issuers may make adjustments to the ▇▇▇ due to corporate actions on the underlying security. While most ▇▇▇ offer a yield that is potentially higher than the interest on fixed deposits and traditional bonds, the return on investment is limited to the potential yield of the ▇▇▇. Investors should consult their brokers on fees and charges related to the purchase and sale of ▇▇▇ and payment / delivery at expiry. The potential yields disseminated by Hong Kong Exchanges and Clearing Limited have not taken fees and charges into consideration. Client assets received or held by BMI outside Hong Kong are subject to the applicable laws and regulations of the relevant overseas jurisdiction which may be different from the Securities and Futures Ordinance (Cap.571) and the rules made thereunder. Consequently, such client assets may not enjoy the same protection as that conferred on client assets received or held in Hong Kong. If the Client provides BMI with an authority to hold mail or to direct mail to third parties, it is important for the Client to promptly collect in person all contract notes and statements of the Client’s account and review them in detail to ensure that any anomalies or mistakes can be detected in a timely fashion.

Volatility risk. Prices of derivative warrants can increase or decrease in line with the implied volatility of underlying asset price. Investors should be aware of the underlying asset volatility. Some Additional Risks Involved in Trading CBBCs 1. Mandatory call risk Investors trading CBBCs should be aware of their intraday “knockout” or mandatory call feature. A CBBC will cease trading when the underlying asset value equals the mandatory call price / price/level as stated in the listing documents. Investors will only be entitled to the residual value of the terminated CBBC as calculated by the product issuer in accordance with the listing documents. Investors should also note that the residual value can be zero. 2. Funding costs The issue price of a CBBC includes funding costs. Funding costs are gradually reduced over time as the CBBC moves towards expiry. The longer the duration of the CBBC isCBBC, the higher the total funding costs. In the event that a CBBC is called, investors will lose the funding costs for the entire lifespan of the CBBC. The formula for calculating the funding costs are stated in the listing documents. 1. Market risk ETFs are typically designed to track the performance of certain indices, market sectors, or groups of assets such as stocks, bonds, or commodities. ETF managers may use different strategies to achieve this goal, but in general they do not have the discretion to take defensive positions in declining markets. Investors are exposed must be prepared to price movements in bear the risk of loss and volatility associated with the underlying security index/assets. 2. Tracking errors Tracking errors refer to the disparity in performance between an ETF and the stock market, its underlying index/assets. Tracking errors can arise due to factors such as the impact of dividends transaction fees and corporate actions and counterparty risks. Investors must also be prepared expenses incurred to accept the risk of receiving the underlying shares or a payment less than their original investment. Investors may lose part or all of their investment if the price ETF, changes in composition of the underlying security moves against their investment view. Investors should note that any dividend payment on the underlying security may affect its price index/assets, and the payback of the ▇▇▇ at expiry due to ex-dividend pricingETF manager’s replication strategy. Investors should also note that issuers may make adjustments to the ▇▇▇ due to corporate actions on the underlying security. While most ▇▇▇ offer a yield that is potentially higher than the interest on fixed deposits (The common replication strategies include full replication/representative sampling and traditional bonds, the return on investment is limited to the potential yield of the ▇▇▇. Investors should consult their brokers on fees and charges related to the purchase and sale of ▇▇▇ and payment / delivery at expiry. The potential yields disseminated by Hong Kong Exchanges and Clearing Limited have not taken fees and charges into consideration. Client assets received or held by BMI outside Hong Kong synthetic replication which are subject to the applicable laws and regulations of the relevant overseas jurisdiction which may be different from the Securities and Futures Ordinance (Cap.571) and the rules made thereunder. Consequently, such client assets may not enjoy the same protection as that conferred on client assets received or held discussed in Hong Kong. If the Client provides BMI with an authority to hold mail or to direct mail to third parties, it is important for the Client to promptly collect in person all contract notes and statements of the Client’s account and review them in more detail to ensure that any anomalies or mistakes can be detected in a timely fashionbelow.)