Last Update Date：1 August 2016

Risk Disclosure

Key Product Risks

It is crucial to understand the specific forms and risks mentioned in the relevant offering documents (if applicable) before investing. Key risks include but are not limited to as stated on the next page:

1.Credit Risk

Investors assume credit risk of the Issuer and the Guarantor (if applicable). Any changes to the credit rating of them will affect the price and value of the bonds. Bonds are subject to the risk of the issuer defaulting on its obligations, i.e. An issuer fails to make principal and interest payments when due. The worst case such as bankruptcy of the Issuer/Guarantor will result in the loss of your entire investment. Credit ratings assigned by credit rating agencies do not guarantee the creditworthiness of the issuer.

2.Liquidity Risk

The bond may have limited liquidity and may not be actively traded and/or quoted by brokers in the market. As such,

(i) The value of bond and/or indicative bid/offer price will depend on market liquidity and conditions and may not be available at all times;

(ii) It may take a longer time or impossible to sell the bond to the market; and;

(iii)The executable sale price may be unfavourably different by large amounts from the indicative bid price quoted.

3.Interest Rate Risk

Bonds are more susceptible to fluctuations in interest rates and generally prices of bonds will fall when interest rates rise.

4.Market Risk

The value of investments may fluctuate due to changing political, legal, economic conditions and change in interest rate. This is common to all markets and asset classes. Investor may get back an amount substantially less than initially invested.

5.Curreny Risk

For bonds denominated in a foreign currency, there may be an exchange loss when converting the redemption amount back to the local or base currency.

For Product denominated in Renminbi (RMB) or with underlying assets that are denominated in RMB only

Conversion between RMB and foreign currencies, including Hong Kong dollar, subject to PRC regulatory restrictions – RMB is currently not freely convertible and conversion of RMB through banks in Hong Kong is subject to certain restrictions. The PRC government regulates conversation between RMB and foreign currency both in Hong Kong SAR and mainland China, which as a result may affect the liquidity.

High-yield Bonds Risks

In addition to the generic risks listed above, high-yield bonds are subject to risks such as :

1.Higher Credit Risk

Since they are typically rated below investment grade or are unrated and as such are often subject to a higher risk of issuer default;

2.Vulnerability to Economic Cycles

During economic downturns such bonds typically fall more in value than investment grade bonds as (i) investors become more risk averse and (ii) default risk rises.

Some bonds may contain special features and risks that warrant special attention. These include bonds:

1.Risk associated with perpetual debentures

Perpetual debenture does not have a maturity date, and the coupon paymentspay-out depends on the viability of the issuer in the very long term, it may be deferred or even suspended subject to the terms and conditions of the issue. Furthermore perpetual debentures are often callable and/or subordinated, and bear reinvestment risk and/or subordinated bond risk, detailed below.

2.Re-investment Risk of Callable Bond

If the bond is callable in which the issuer may redeem the bond before maturity, it is subject to reinvestment risk. The yield received when re-investing the proceeds may be less favorable.

3.Risk associated with subordinated debentures

Holders of subordinated debentures will bear higher risks than holders of senior debentures of the issuer due to a lower priority of claim in event of the Issuer’s liquidation. Subordinated debentures are unsecured and have lesser priority than that of an additional debt claim of the same asset. They usually have a lower credit rating than senior bonds. Investor’s specific attention is drawn to the credit information of this product, including the respective credit rating of the Issuer, the debenture and/or the guarantor, as the case may be.

4.Risk associated with variable coupon/ coupon deferral features

If the bonds contain variable and/or deferral of interest payment terms and investors would face uncertainty over the amount and time of the interest payments to be received.

5.Risk associated with extendable maturity date

If the bonds contain extendable maturity dates terms and investors would not have a definite schedule of principal repayment.

6.Risk associated with convertible or exchangeable debentures

They are convertible or exchangeable in nature and investors are subject to both equity and bond investment risk; and/or that have contingent write-down or loss absorption feature and the bond may be written-off fully or partially or converted to common stock on the occurrence of a trigger event.