Structured Investment Products (SIP) are investment products structured to meet investor's individual risk-return criteria. Returns may not be necessarily in line with the performance of the underlying assets. The aim is to exceed these performance levels on a risk adjusted basis. SIP is normally a composite of bond, asset, and derivative instruments. For further information on SIP trading on the iMarkets' platform, please contact iMarkets Partner Firms.   Examples of SIP EQUITY LINKED NOTE (ELN) PRINCIPAL GUARANTEED NOTE (PGN)     Equity Linked Note +   How Equity Linked Notes Work Equity Linked Notes (ELN) are issued by major financial institutions such as Deutsche Bank, BNP Paribas and KBC Bank. The notes carry a legal liability against these issuing institutions. Most ELNs have a maturity range from 1 to 2 months. The notes are structured by a zero coupon bond combined with a short position of a put option. In other words an investment that anticipates a price rise of the underlying stock. Investing in ELN is the same as selling a put option on an underlying stock and at the same time placing a deposit with the ELN issuer. High gains from this structured product can be obtained from the option premium received on the short put option plus the accrued interest income derived from placing a deposit with the issuer. Investors determine their risk/reward preferences by making a number of choices: i. Selecting the underlying stock ii. Selecting the maturity date iii. Choosing the strike (exercise) price of the put option iv. Choosing the date (hence the spot price) when the ELN is transacted Since the strike price is often fixed below the spot (market) price of the underlying stock, there is an opportunity to acquire the underlying stock at a lower price if the embedded put option is exercised. ELNs are issued at a discount to par. This is calculated by discounting the ELN's face value at the market interest rate from the time of maturity minus the premium received for the embedded short put option. For Hong Kong underlying stocks the payoff is generally fixed two business days before the ELN matures (fixing date is always the same as the expiry date of the embedded put option). ELN has two payoff possibilities. The investor receives the full face value of the ELN on the fixing date if the underlying stock price closes at or above the strike (exercise) price of the embedded option. Conversely if the underlying stock price closes below the strike (exercise) price of the embedded option, the investor will be obliged to take delivery of the underlying stock at the strike price. The number of shares to be received on maturity is calculated by dividing the ELN's full face value by the strike (exercise) price of the embedded put option. In essence a Bull ELN is most suitable for investors with a short to medium term, mild bullish view on a stock. It offers the chance to buy the stock at a strike (exercise) price which is normally below the current market spot price. Alternatively if the underlying stock closes at or above the strike (exercise) price, the investor will enjoy returns from a higher than market interest rate. Payoff diagram at maturity Pricing factors of ELN Dividend Interest rate Liquidity of underlying stock Maturity Strike/spot ratio Volatility of underlying stock Risks The price of underlying asset may continue to decline after the investor takes delivery of the underlying stock Changes in ELN's pricing factors lead to uncertainty over its value, and thus the investor's return may be affected when selling back to the issuer before maturity The investor is taking on the credit risk of issuer Example Trade Date Today Issuer Investment Bank Notional Amount HK$ 1,000,000.00 Underlying Stock CKH Holdings (CKHH) 0001.HK Price 97.29% Transaction Amount HK$ 972,900.00 Payment T+ 14 (calendar day) Maturity T+ 45 (31- day life) Strike (Exercise) Price 67.00 Spot Price 70.00 (as at time of execution) Fixing Date T+ 43 (2 days before maturity) Currency HK Dollar Clearing Agents Euroclear and Clearstream Final Settlement Cash settlement or physical delivery of shares through CCASS Share Entitlement 14,925 CKHH shares ELN Annualized Yield 32.80% p.a.   Principal Guaranteed Note + ( OR ) How Principal Guaranteed Notes Work Principal Guaranteed Notes (PGNs) are issued by major financial institutions such as Deutsche Bank, BNP Paribas and KBC Bank. The notes carry a legal liability against these issuing institutions. Most PGNs have a maturity range from 6 months onwards. PGN is structured by a zero coupon bond combined with a long position of either a put or a call option on an underlying stock embedded in the bond. Investing in PGN is the same as placing a deposit with the PGN issuer while using the accrued interest income, discounted to present value, to buy a put or call option on an underlying stock. As a result, investors will always be repaid with at least the face value of PGN. The embedded option however offers the possibility of profit if the underlying stock price moves in a favorable direction. Investors determine their individual risk/reward preferences by making a number of choices: i. Selecting the underlying stock ii. Selecting the maturity date iii. Selecting the type of option - put or call iv. Choosing the strike (exercise) price of the option v. Choosing the date (hence the spot price) when the PGN is transacted The strike price is often equal to the current market price of the underlying stock (at-the-money put or at-the-money call), giving investors the highest possible return when PGNs are purchased. PGNs are issued at par with a committed rate of profit participation (expressed as a participation rate). The participation rate is set at the time of purchase. The PGN is a vehicle designed to at least protect the initial investment while offering the possibility of gains derived from the favorable movement of the underlying stock. When this happens the profit from PGNs is calculated as follows: the difference between the closing price and strike price of the underlying stock on the fixing date multiplied by the participation rate. For Hong Kong underlying stocks, the payoff of PGN is fixed two business days before the PGN matures (fixing date is always the same as the expiry date of the embedded option). PGN has two payoff possibilities. If the underlying stock price closes in favor to the embedded option on the fixing date, the investor will receive the full face value of the PGN plus a profit based on the participation rate committed by the issuer. Conversely if the underlying stock price does not close in favor to the embedded option, the investor will receive back the money originally invested in the PGN. Two types of PGN Bull PGN means a call option is embedded, and upward underlying stock price movement is anticipated. If the underlying stock closes above the strike (exercise) price of the call option a Bull PGN returns the full face value plus a profit according to the participation rate calculation. Conversely if the underlying stock closes at or below the strike price of the call option, the Bull PGN only returns the full face value. Bear PGN means a put option is embedded, and downward underlying stock price movement is anticipated. If the underlying stock closes below the strike price of the put option, the Bear PGN returns the full face value plus a profit according to the participation rate calculation. Conversely if the underlying stock closes at or above the strike price of the put option, the Bear PGN only returns full face value. Unlike a simple monetary deposit, the unique structure of PGNs offers investors enhanced returns by forgoing the interest income earned on the deposit and taking a bigger profit by effectively reinvesting this income in the option. In essence PGN is more suitable for conservative investors with a medium to long-term view on a stock and prepared to give up deposit interest income in return for participation in the favorable performance of the underlying stock. Payoff diagrams at maturity Bear PGN Bull PGN Pricing factors of PGN Dividend Interest rate Liquidity of underlying stock Maturity Strike Volatility of underlying stock Risks Changes in the PGN's pricing factors lead to uncertainty over its value, and thus the investor's principal may be affected when selling back to the issuer before maturity. The investor is taking on the credit risk of issuer Example Bull PGN   Trade Date Today Issuer Investment Bank Notional Amount HK$ 1,000,000.00 Underlying Hang Seng Index Transaction Amount HK$ 1,000,000.00 Payment T+ 2 (business day) Maturity T+ 183 (6 months) Strike (Exercise) Price HK$10,000.00 Spot price HK$10,000.00 (as on day of execution) Fixing Date T+ 181 (2 days before maturity) Currency HK Dollar Participation Rate 24.10% Clearing Agents Euroclear and Clearstream Final Settlement Cash settlement

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The risk of loss in trading futures contracts or options can be substantial. In some circumstances, you may sustain losses in excess of your initial margin funds. Placing contingent orders, such as "stop-loss" or "stop-limit" orders, will not necessarily achieve the desired results. Market conditions may make it impossible to execute such orders. You may be called upon at short notice to deposit additional margin funds. If the required funds are not provided within the prescribed time, your position may be liquidated. You will remain liable for any resulting deficit in your account. You should therefore study and understand futures contracts and options before you trade and carefully consider whether such trading is suitable in the light of your own financial position and investment objectives.