The new HSBC GIF RMB Fixed Income Fund

Full of investmentpotential

For professional clients only

BackgroundTo reflect China’s status as the world’s second largest economy the RMB could become a major international trading, reserve and investment currency in the future. To support currency development, the Chinese authorities have initiated policies to increase the use of RMB for trade settlement and to make it more attractive to hold as an investment. This liberalisation process has created an opportunity for Hong Kong to position itself as an offshore launch-pad for RMB products.

By 2015, half of international trade operations (US$ 2tn) could possibly pass through Hong Kong. Over time, we believe the RMB internationalisation process will give foreign holders of RMB the capacity and desire to retain and invest their RMB funds both inside and outside mainland China. The final destination for this process, could make the currency fully convertible. The Chinese authorities have used Hong Kong’s strength as a sophisticated international financial hub to make it the offshore centre for the development of a wide range of RMB products and services.

HSBC GIF RMB Fixed Income Fund

The offshore renminbi (RMB) bond market is growing rapidly. The HSBC GIF RMB Fixed Income Fund gives investors an opportunity to diversity their fixed income allocation, and gain exposure to an expanding bond market and potential RMB currency appreciation.

HSBC’s in-depth knowledge of foreign and domestic issuers is a key advantage to uncovering quality investment opportunities in the offshore RMB bond market.

Fund characteristics

Fund profileThe Fund invests mainly in offshore RMB denominated fixed income securities and deposits. It aims to capture opportunities in the growing RMB fixed income market and to take advantage of the currency’s potential appreciation. The Fund has a flexible asset allocation, allowing investors to take advantage of new opportunities in this developing market.

HSBC GIF RMB Fixed Income FundTo accommodate growing demand for the RMB, the Fund provides access to the developing offshore RMB (CNH) bond market, offering investors a bond portfolio that benefits from HSBC’s in-depth knowledge of foreign and domestic issuers.

Source: HSBC Global Asset Management. * CNH means Chinese Renminbi Offshore. For illustrative purposes only.

HSBC GIF RMB Fixed Income

CNY Onshore bond market

CNH* Offshore bond market and deposits

Mainland China Hong Kong

The Fund invests for total return primarily in a diversified portfolio of investment and non-investment grade as well as unrated fixed income securities (including but not limited to bonds and notes), cash, deposits and structured products with effective underlying currency exposure in RMB

Investment universe

Target average credit quality:* A-

Comparative investment benchmark: ** Offshore Renminbi Overnight Deposit Rate

Target number of securities:* 25 - 50 securities

Management style:* Fundamental active / multi-strategySource: HSBC Global Asset Management. * These objectives and guidelines do not constitute a commitment from the asset manager. ** The Fund does not have an official index however this comparative investment benchmark can be used for comparative purposes only. For illustrative purposes only.

Offshore RMB bond marketsThere are various types of bond issuers in the offshore RMB market. The following table illustrates different types of issuers and examples of issuers in each category.

Investment process The team believes the best way to exploit the inefficiencies in the Asian markets is to apply

an active multi-strategy investment style coupled with top-down macro analysis and bottom-up credit research

The team looks to combine multiple uncorrelated sources of alpha (asset allocation, duration and yield curve positioning and credit analysis and issuer selection) to maximise potential out-performance, and in doing so to exploit discrepancies amoung fundamental trends, valuations/expectations, and curve distortions

Within this integrated approach, credit analysis is based on a rigorous issuer selection process. It relies on fundamental research with a focus on qualitative factors

The team leverages HSBC’s integrated global credit research platform of over 30 dedicated analysts based in New York, London, Paris and Hong Kong with sector and geographic specialisation, covering around 1,000 issuers.

Chinese Issuers

(incorporated in Mainland China)Foreign Issuers Sovereign Type Issuers

CorporatesFinancial

InstitutionsCorporates

Financial

InstitutionsSovereign

Policy

BanksSupranationals

Intime

Department

Stores,

Zhongsheng

Group

Wing Lung

Bank, China

Construction

Bank

Volkswagen,

Air Liquide,

Unilever Liquide,

Zhongsheng

Group

Morgan Stanley,

Svenska

Handelsbanken

Ministry

of Finance

Liquide,

Zhongsheng

Group

China

Development

Bank Liquide,

Zhongsheng

Group

Asian

Development

Bank

• Relatively cheaper funding costs in Hong Kong’s offshore market provide an incentive for onshore issuers to issue in the offshore RMB market

• Relatively cheaper funding cost in the offshore market provides an incentive for issuers instead of onshore equivalent

• Issuance helps name recognition among Asian investors

• Demonstrates the Chinese government supports the development of offshore RMB bonds

• The Chinese government is developing a sovereign yield curve (2, 3, 5 & 10 year)

Source: HSBC Global Asset Management, for illustrative purposes only.

Market outlookHSBC expects that the market will double in size in 2012 from the current RMB 240bn to around RMB 500bn by the end of the year. The market is still attracting global issuance from companies keen to become involved in Chinese bonds and who believe that this will become one of the world’s most important capital markets in the world in years to come. Meanwhile, Chinese banks and corporates are also taking advantage of the opportunity to attract global money and diversify their investor base.

The average yield of the offshore market is around 4%, which represents a competitive return for a low duration, high quality bond market. Since the most recent stage of Renminbi appreciation against the US dollar began in 2005, it has been a steady path with little downside volatility. Although the pace of appreciation may vary from time to time and there will be some volatility as the exchange rate regime is loosened, we believe that there is still capacity for material appreciation given China’s substantial current account surplus and fundamentally undervalued currency.

Why invest?If there is to be a rival to the US dollar as the world’s reserve currency in the 21st century, it may well be the RMB. Already the world’s second largest economy, China is likely to be the biggest by the 2030’s. It is already the world’s biggest exporter. Yet to date, China’s currency has been severely under-represented in global trade and capital markets.

As a strategic priority, Chinese policymakers have already (and will continue) to introduce multiple accommodative taxation, trade finance and capital account measures to facilitate the RMB internationalisation process. More importantly, cost savings on foreign exchange transactions and the potential appreciation of the RMB, should increasingly encourage investors to switch to the currency at the dollar’s expense.

Sensing the potential for business, banks are involved in developing RMB cross-border trade and their early participation has helped launch a global clearing system. Chinese exporters and importers could become more competitive if they could reduce costs and exchange rate risks.

This could also help their export businesses to become stronger in coming years.

We believe investors can benefit from exposure to the offshore market’s growth. Investing in the HSBC GIF RMB Fixed Income Fund gives access both to potential currency appreciation and a pooled fund of diversified investments.

Sub-fund registrationThe HSBC GIF RMB Fixed Income Fund was launched on 25 October 2011. Before subscribing, investors should refer to the Key Investor Information Document (KIID) and/or the simplified prospectus of the sub-fund as well as its complete prospectus for specific risk factors associated with this Fund.

RisksThe Fund is exposed to the following risks: interest rate risk, credit risk, foreign exchange risk, derivative instrument risk, OTC financial derivative transaction risk, emerging market risk, risk of capital loss and risk of discretionary fund management.

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may cause the value of such investments to fluctuate.

Sub-fund lead portfolio managerHon Yu Fung, CFA is a senior investment manager in the Asian Fixed Income team who has been working in the industry since 2000. Prior to joining HSBC in 2003, he worked for Goldman Sachs as a treasury analyst. He holds a Bachelor of Science degree on the Dean’s list from the University of Toronto (Canada), an MBA in Finance from York University (Canada) and is a CFA charterholder.

About HSBC and the teamHSBC Global Asset Management is one of the largest managers of global emerging market funds, with approximately US$ 122bn in assets under management at the end of December 2011. We believe our scale and global presence gives us a clear research edge, and are among the key organisational advantages that we offer investors.

The experienced Asian Fixed Income team, backed by over 200 dedicated emerging markets investment professionals in 20 key locations, manages over US$ 26.2bn (end of December 2011) in Asian Fixed Income assets. The team also benefits from HSBC’s long-standing presence in these markets with local access across the globe, creating exciting investment opportunities from within the emerging markets universe.

Additional informationFX exchange rates will be taken at 14h00 CET time.

Publication of Net Asset Valuewww.assetmanagement.hsbc.com

Fund key features

Name HSBC GIF RMB Fixed Income

Domicile Luxembourg

Launch date 25 October 2011

Dealing Daily

Valuation Daily

Minimum investment

A share class US$ 5,000 GBP £3,000

I share class US$ 1,000,000

Fees Annual Management Charge (AMC)

Operating, administration and servicing fee

A share class 0.75% 0.25%

I share class 0.375% 0.20%

Base currency: USD

Dealing currencies: EUR, GBP, SGD, PLN

USD ISIN Codes Accumulation (A) or Distribution (D)

Bloomberg Ticker

A Share Class: USD LU0692309627 (AC) GBP LU0712165439 (AC) USD LU0692309460 (AD) GBP LU0712165512 (AD)

HSRFAUA LX HSRFAUD LX

I Share Class: LU0692310633 (ID) LU0692309460 (AD)

HSRFIUA LX HSRFAUD LX

This document is intended for Professional Clients only and should not be distributed to or relied upon by Retail Clients. The views expressed were held at the time of preparation and are subject to change without notice. This fund is a sub-fund of HSBC Global Investment Funds, a Luxembourg domiciled SICAV. UK based investors in HSBC Global Investment Funds are advised that they may not be afforded some of the protections conveyed by the provisions of the FSMA 2000. All applications are made on the basis of the current Prospectus, Key Investor Information Document (‘KIID’) and most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ, UK, or local distributors. Investors and potential investors should read and note the risk warnings in the Prospectus and KIID. Copyright © HSBC Global Asset Management (UK) Limited 2012. All rights reserved. 22201/AS/0412/FP12-0526