CPI - Interest Rate Range Accrual

• Not a time deposit - Interest Rate Range Accrual is NOT equivalent to, nor should it be treated as a substitute for, time deposit. It is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.
• Derivatives risk - Interest Rate Range Accrual is embedded with interest rate option(s). Option transactions involve risks. If the Interest Rate Reference Index stays outside of the Accrual Range throughout the whole deposit period, you could earn no interest return.
• Limited potential gain - The maximum potential gain is limited to the interest on the deposit calculated based on the Accrual In Rate.
• Market risk - The interest return of the Interest Rate Range Accrual will depend upon the Interest Rate Reference Index during the deposit period. Interest rate movements can be unexpected, sudden and drastic, and can be affected by complex political and economic factors. You could earn no interest return if the Interest Rate Reference Index stays outside the accrual range throughout the deposit period. You must be prepared to take the risk of earning a very low return or even no return on the money invested.
• Liquidity risk - Interest Rate Range Accrual is designed to be held until maturity. You should not use it as a short term investment vehicle. You do not have a right to request early termination of this product before maturity. Under special circumstances, the Bank has the right to accept your early redemption request at its sole discretion and on a case by case basis. The Bank will provide an indication of the redemption price upon such request. Your return upon such early redemption will likely be lower than that if the deposit were held until maturity and may be negative.
• Credit risk of the Bank - Interest Rate Range Accrual is not secured by any collateral. When you invest in this product, you will be relying on the Bank's creditworthiness. If the Bank becomes insolvent or defaults on its obligations under this product, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your deposit amount.
• Currency risk - If the deposit is not in your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
• Risk of early termination by the Bank - The Bank shall have the discretion to uplift a Deposit or any part thereof prior to the Maturity Date (subject to the deduction of such break costs or the addition of such proportion of the return or redemption amount, which may result in a figure less than the original principal amount of the Deposit) if it determines, in its sole discretion, that this is necessary or appropriate to protect any right of the Bank to combine accounts or set-off, or any security interest, or to protect the Customer's interests.
• Risks relating to RMB - You should note that the value of RMB against other foreign currencies fluctuates and will be affected by, amongst other things, the PRC government's control (for example, the PRC government regulates conversion between RMB and foreign currencies), which may adversely affect your return under this product when you convert RMB into your home currency. The value of your RMB deposit will be subject to the risk of exchange rate fluctuation. If you choose to convert your RMB deposit to other currencies at an exchange rate that is less favourable than that in which you made your original conversion to RMB, you may suffer loss in principal. This product (if denominated in RMB) will be denominated and settled in RMB deliverable in Hong Kong, which is different from that of RMB deliverable in Mainland China.

Please note that Structured Investment Deposit is not available for persons who are US citizen / with US nationality, are US resident or US tax payer, or have a US address (e.g. primary mailing, residence or business address in the US).

Scenario 1: Best case scenario

US dollar three-month LIBOR stays within the Accrual Range for the whole deposit period.

Total interest earned is CNY7,000 over 1 year. Effective interest rate is 0.70% p.a.

Scenario 2: Middle-of-the-road scenario

US dollar three-month LIBOR rises and stays outside the Accrual Range for some of the days during the deposit period.

Total interest earned is CNY3,079.41 over 1 year. Effective interest rate is 0.31% p.a.

Scenario 3: Worst case scenario

US dollar three-month LIBOR rises sharply and stays outside the Accrual Range for all days during the deposit period.

Total interest earned is CNY0 over 1 year. Effective interest rate is 0% p.a.

Scenario 4: Converting CNY into your home currency at maturity

Assume US dollar three-month LIBOR stays outside the Accrual Range for all days during the deposit period, which means that there is no interest payment throughout the investment tenor. Also, assume the initial spot for CNH/HKD on Trade Date was 1.2609 and CNH/HKD depreciated by 0.06% during investment tenor resulting CNH/HKD trading at 1.2601 on Maturity Date, and you choose to convert your maturity amount in CNY back to HKD as your home currency.

In this scenario, the potential loss from the product could offset (or even exceed) the potential gain if deposit currency (i.e. CNY) depreciates against your home currency (i.e. HKD):

Principal Amount in HKD at maturity - Principal Amount in HKD on Trade Date

= CNY1,000,000 × 1.2601 - CNY1,000,000 × 1.2609

= - HKD800, equivalent to a loss of 0.06% of the Principal Amount in HKD

Scenario 5: The Bank becomes insolvent or defaults on its obligations

Assuming that the Bank becomes insolvent during the tenor of this product or defaults on its obligations under this product, you can only claim as its unsecured creditor. You may get nothing back and suffer a total loss of your deposit amount.

If investor redeems the product before its maturity, investor may receive less than 100% of initial investment amount. In the worst case scenario, investor may incur significant loss.

As a reference, if a sum of CNY$1,000,000 is placed in a conventional 1-year CNY time deposit on 23 May 201X, the interest rate is 0.60% p.a.

Graphic presentation

Scenario Analysis Disclaimer

The above scenarios are provided for illustrative purposes only, and do not reflect a complete analysis of all possible gain and loss scenarios that may arise during any actual investment. No representation or warranty is made by the Bank that any scenario described above can be duplicated under real investment conditions. Actual results may vary from the results shown above, and variations may be material.