Article 1: Disclosure of Risks of Margin Trading

AFT (NZ) Limited (“AFT”) is providing this document to you to provide some basic facts about purchasing Financial Products (including stocks, options, and futures) (“Financial Products”) on margin (credit terms), and to alert you to the risks involved in trading with a margin account and of granting security to AFT over your Financial Products.

“Margin trading” means where you undertake transactions in which:

• You purchase Financial Products partially through a loan (“margin loan”) provided to you by AFT (also known as a “Long Sale”), or
• You sell Financial Products partially through a securities loan provided to you by AFT or a third party introduced by AFT (also known as a “Short Sale”).

To secure your obligations to AFT under margin loans (including your obligation to pay AFT interest and to repay the principal), you grant AFT security over your Financial Products and other personal property held by or through AFT.

Under AFT terms and conditions, that security also secures obligations of AFT to third parties. This means your Financial Products (and other assets) could, in some circumstances, be sold to allow AFT to meet its obligations to third parties (and also to meet your obligations to AFT). Where sold to meet AFT’s obligations to third parties, you would still have the right to claim the equivalent value from AFT, but you would be an unsecured creditor of AFT for such amounts.

In addition, AFT can provide (directly or indirectly) your Financial Products to other parties in a practice known as “stock lending”. In that case, you are exposed to counterparty risk that the other borrower may fail to retransfer or deliver the Financial Products (or their equivalent) to AFT or a relevant third party (e.g., if they become insolvent).

Accordingly, you assume very significant risk to your Financial Products and other personal property under these arrangements, and you could suffer significant or complete loss of your Financial Products and other personal property (with a real risk that AFT may not be able to pay you the equivalent value). This is the case even if you comply with all of your obligations to AFT and even if your Financial Products maintain or increase their market value.

Before trading Financial Products using a margin loan, you should carefully review the provisions for margin trading in AFT’s Client Service Agreement (“Margin provisions”) provided by AFT and you should seek professional advice as required. AFT can answer any questions you may have about margin accounts, but that is not professional advice.

Risks of Margin Trading

When you sell Financial Products, you may borrow some Financial Products for sale. If you choose to borrow Financial Products from AFT or the third party through AFT, you must also have a margin account with us and abide by the rules of margin trading.

You should understand that, pursuant to the AFT Margin provisions, AFT generally will not issue margin calls, and that AFT will not credit your account to meet intraday margin deficiencies. In most circumstances, AFT will liquidate Financial Products in your account in order to satisfy margin requirements without prior notice to you and without an opportunity for you to choose the Financial Products to be liquidated or the timing or order of liquidation.

In addition, it is important that you fully understand the risks involved in trading Financial Products on margin. These risks include but are not limited to the following:

• You could lose more funds than the value in the margin account. A decline in the value of Financial Products that are purchased on margin may require you to provide additional funds to AFT or you must put up margin (deposit more funds) to avoid the forced sale of those Financial Products or other assets in your account(s).
• AFT can force the sale of Financial Products or other assets in your account(s). If the equity (total value) in your account falls below the minimum margin requirements we set (directly or via relevant markets), AFT can sell the Financial Products or other assets in any of your accounts held with us to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
• AFT can sell your Financial Products or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate Financial Products or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. As noted above, AFT generally will not issue margin calls and AFT reserves the right, but is not obliged, to immediately sell your Financial Products without notice to you in the event that your account has insufficient margin.
• You are not entitled to choose which Financial Products or other assets in your account(s) that are liquidated or sold to meet a margin call. AFT has the right to decide which Financial Products to sell in order to protect its interests.
• AFT can increase the minimum margin requirements at any time and is not required to provide you with advance written notice. These changes often take effect immediately. Your failure to maintain adequate margin in the event of an increased margin rate generally will cause AFT to liquidate or sell Financial Products in your account(s).
• If AFT chooses to issue a margin call rather than immediately liquidating under-margined Financial Products, you are not entitled to an extension of time on the margin call. As a holder of a margin account at AFT, you shall have sufficient equity in your margin account to satisfy the margin required by the relevant exchange and regulators.
• The Margin Facility is a non-standard margin lending facility. You must transfer to AFT (or a third party we select) all your rights, title, and interest in your Financial Products Securities as security for your obligations (and also as security for AFT’s obligations to third parties). When you transfer Financial Products to us or a third party, those Financial Products will be held in either our name or the name of a third party together with other financial products held in relation to the Margin Facility provided to other clients.
• AFT is authorised to transfer those Financial Products to any person. In the ordinary course of and for the purposes of our business under an arrangement commonly known as a ‘stock lending’ arrangement, which requires that person to undertake to retransfer or deliver the Financial Products (or their equivalent) to us. If AFT (or third parties) enter into such stock lending arrangements, you are exposed to counterparty risk that the borrower may fail to retransfer or deliver the Financial Products (or their equivalent) to us or a relevant third party (e.g., if they become insolvent).
• We may not be able to fulfil a request to deliver the Financial Products (or their equivalent) to you. If the market for the Financial Products becomes illiquid, resulting in it being impossible to obtain equivalent securities to transfer to you.
• In the event of AFT’s insolvency, you will be an unsecured creditor. Accordingly, there is the risk that AFT may not be able to retransfer the Financial Products or equivalent securities back to you as contemplated above. This might arise, for example, if we have not discharged our obligations under the stock lending arrangements, or if the Financial Products are used to secure the indebtedness of AFT.

Article 2: Disclosure of Risks for Short Sales

There are some special close-out risks for the Short Sale in margin accounts.

• Clients holding short positions in Financial Products are at risk of having these Financial Products bought-in or closed out with little or no advance notice. This is a risk inherent to short sales and is generally outside of your control. It is also subject to rules that dictate the timeframes by which we must act.
• The securities required to be delivered when a short sale settles cannot be borrowed. When a security is sold short, the broker must arrange for that security to be borrowed at settlement, which in the case of U.S. Financial Products is the first business day following the date of the trade (T+1).
• The shares which were borrowed and delivered at settlement are later recalled. Once a short sale has been settled (i.e., stock has been borrowed and used to deliver the sales sold short to the buyer), the lender (which might be AFT or the third party) of the shares reserves the right to request their return at any time.
• A failure to deliver with the clearinghouse occurs. A failure to deliver occurs when a broker has a net short settlement obligation with the clearinghouse and does not have the shares available within its own inventory or cannot borrow them from another broker in order to meet the delivery obligation.
• You should note that on any day on which you have been closed out, you are required to end the day as a net purchaser in aggregate across all of your account(s) with AFT of at least the number of shares you were closed out on (in the security you were closed out on).
• You should be aware that based on the manner in which AFT is required to execute a close-out and a third party is allowed to execute a buy-in, significant differences between the price at which the transaction was executed and the prior day's close may happen.

Article 3: Introduction of the Margin System

An automated electronic system (“Margin System”) by AFT is designed to set, renew, and enforce margin requirements and operate with respect to margin transactions in your account.

AFT’s Margin System provides pre- and post-execution controls by:

• Testing your orders to ensure that your account holds enough equity to support the execution of the order, rejecting the order if equity is insufficient or directing the order to an execution destination if equity is sufficient.
• Continuously updating your account’s equity and margin requirements and, if your account’s equity falls below its minimum margin requirements, issuing liquidating orders in a sequence generally intended to minimize the impact on account equity.
• Protections in the AFT Margin System prevent you from withdrawing an intraday amount that would cause your account equity to fall below the applicable margin requirements for any position in Financial Products in the account or the minimum available equity level set by AFT, any exchange, or other regulator.

Recognizing that you are an experienced investor, AFT expects you to manage your positions proactively. AFT provides credit manager software in the Meta Trade Terminals of AFT for you to monitor your account equity on a real-time or near real-time basis through your trading screens, and you are obligated to monitor your account equity and manage your trading risks.

This Disclosure shall be written in English and Chinese languages. If there is any difference or inconsistency between the Chinese and English versions, the English version shall prevail.

I HAVE READ AND ACKNOWLEDGED THE RISKS OF MARGIN TRADING AND OF SECURITY GRANTED TO AFT, AND I AGREE TO BEAR ALL THE RISKS, LOSSES, AND RESPONSIBILITIES OF MARGIN TRADING AND THE RELATED GRANTING OF SECURITY.

I ACKNOWLEDGE THAT MY ACCEPTANCE OF THE CONTENTS OF THIS DISCLOSURE IS THE EQUIVALENT OF MY HAND-WRITTEN SIGNATURE.