may 2011 hsbc gif bric equity presentation · 2011-06-15 · hsbc gif bric equity presentation may...

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For professional clients only

HSBC GIF BRIC Equity PresentationMay 2011

2

HSBC Overview

HSBC Global Asset Management

The Investment Team & Emerging Markets Investment Resources

Investment Philosophy and Process

Risk management

Market overview

HSBC GIF BRIC Equity Fund overview

Competitor analysis

Outlook

Appendix

Contents

HSBC Overview

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HSBC overview

Emerging markets are at the heart of HSBC's corporate identity

HSBC’s roots were formed in China and India in the 19th century

HSBC Group has maintained a strong presence in global trade, particularly in India and China, the world's most dynamic emerging markets.

Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world, with over 300,000 employees spanning

an international network of around 7,500 offices in the Asia-Pacific region, Europe, the Americas, the Middle East and Africa.

One of the largest global financial services networks with offices in 87 countries of which 54 are in emerging market countries

A unique local market knowledge, enhancing the portfolio management processes

Direct access to local companies and investment opportunities

Source: HSBC Holdings Plc, data as of 31st December 2010.

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Mexico

Honduras

El Salvador Nicaragua

Costa Rica Panama

Colombia

PeruBrazil

ParaguayChile

ArgentinaUruguay

South Africa

Mauritius

Algeria

Libya Egypt

PolandCzech RepublicSlovakia

TurkeyLebanon

IsraelPalestine

Georgia

ArmeniaIraq

KuwaitBahrain, QatarUAE

OmanSaudi Arabia

Kazakhstan

Russia

PakistanChina Korea

India

MaldivesSri Lanka

Taiwan

Philippines

Indonesia

BruneiMalaysia

Singapore

Hong Kong

ThailandVietnam

Macau

Malta

HSBC Global Asset ManagementHSBC Holdings plc

Source: HSBC Global Asset Management, as of 31 December 2010

HSBC’s presence in emerging markets

7


HSBC Global Asset Management is a leading global asset management firm managing assets totalling USD443.5 billion at the end of December 2010.

HSBC Global Asset Management offers clients around the world a diverse and full range of active and quantitative investment products including equity, fixed income, liquidity and alternative strategies.

Worldwide client base invested in both segregated accounts and pooled funds.

HSBC Global Asset Management is part of HSBC Holdings plc.

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HSBC Global Asset Management -

A leader in emerging markets

Complete investment solutions including equity, fixed income, balanced and alternatives products through:

-

Local strategies: Products managed and distributed locally

-

Global, regional and single country strategies: Products managed

across multiple geographies and distributed globally

An extensive range of emerging markets funds, including some of the world's largest in their sectors

-

One of the largest offshore managers of Brazil, India and BRIC equity funds

-

Our flagship global emerging market products have made us leaders in the management of assets in a wide array of emerging markets, not only in Brazil, India and China but also in Taiwan, Thailand and Turkey

Emerging Markets AUM by region (US$ billion)

Source: HSBC Global Asset Management, Assets under management data as of 31st December 2010

Emerging Markets AUM by asset class (US$ billion)

Among the largest managers of emerging market funds globally, with approximately USD145 billion in assets under management and over 200 dedicated emerging markets investment professionals in 14 key locations

Latin America

51.3

Asia Pacific69.3

EMEAMENA16.6

Global7.9

Equity45.5

Fixed Income

75.5

Balanced18.1

Alternative1.1

Liquidity4.9

The Investment Team & Emerging Markets Investment Resources

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Global emerging markets equity investment resources

Portfolio Management

Emerging Markets Nick Timberlake (19)

Emerging MarketsOmar Negyal

(12)

AsiaStephanie Wu (16)

EMEA Douglas Helfer

(16)

Brazil/LATAMNatalia Kerkis

(11)

IndiaSanjiv

Duggal

(15)

ChinaMandy Chan (14)

Research Analysts

EMEATony MacNeary

(29) Helen King (5) Ed Conroy (10)

LATAMCarlos Uema (26)Carlos Lima (28)Raquel Diniz (10)Aline

Cardodo

(10)Ana Browne (6)Tatyana Katalan (7)Guiliano Ajeje (7)Jose Maria Simoe (20)Mariana Araujo (10)Fernando Fontoura (7)

AsiaHugh Lee (9)Kwok Wing Cheong (6) Patrick Crivelli

(8)Alan Zhong

(6)Debbie Chan (6)Divya

Balakrishnan

(5)Deborah Yeo

(2)Sami Abouzahr

(6)Alex Kwan (2)Matthew Lee (10)Elina

Fung (9)

New Frontier/ MENAAndrea Nannini

(12)

New Frontier/ MENABasak

Yavuz

(12)

New Frontier/ MENAAndrew Brudenell

(12)

AsiaHusan

Pai

(24)

AsiaMijung

Kang (12)

IndiaViresh

Mehta (18)

IndiaNilang

Mehta (14)

TaiwanLeilani

Lam (16)

Bill MaldonadoGlobal CIO Equity

Product Management/ Client Service

Emerging MarketsSoren

Beck-Petersen (6)David Wickham (12)Jack O’Brien (2)

Asia Francis Chung (19)

AsiaRoshan

Padamadan

(4)

AsiaArwen Liu (2)

Latin AmericaVictor Arakaki (7)

Latin AmericaMonica Almeida (5)

Chris CheethamGlobal CIO

As of 31 December 2010; (x) number of years of experience

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New YorkGEM Fixed Income8 Investmentprofessionals

Mexico CityMexican Fixed IncomeMexican EquityMexican Alternatives11 Investmentprofessionals

BogotaColombian Fixed IncomeColombian Equity5 Investmentprofessionals

Sao PauloBrazilian Fixed IncomeBrazilian EquityBrazilian AlternativesBrazilian Multimanager21 Investmentprofessionals

Buenos AiresArgentinian Fixed IncomeArgentinian Equity5 Investmentprofessionals

LondonGEM EquityGEM AlternativesGEM Multimanager13 Investmentprofessionals

ParisGEM Fixed IncomeGEM Equity (inc Amanah)9 Investmentprofessionals

IstanbulTurkish Fixed IncomeTurkish EquityTurkish Alternatives10 Investmentprofessionals

RiyadhSaudi Fixed Income (inc

Amanah)Saudi EquitySaudi Alternatives18 Investmentprofessionals

Mumbai Indian Fixed Income Indian Equity19 Investmentprofessionals

SingaporeSingaporean Equity7 Investmentprofessionals

Hong KongHong Kong Fixed IncomeHong Kong EquityHong Kong Alternatives37 Investmentprofessionals

Shanghai Jintrust Chinese Fixed

Income Jintrust Chinese EquityChinese M ultimanager17 Investmentprofessionals

TaipeiTaipei Fixed IncomeTaipei Equity23 Investmentprofessionals

19464

Emerging markets investment capabilities –

A portfolio of opportunities Strategies and locations

As of 31 December 2010

Investment Philosophy and Process

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Stock Analysis

Continuous assessment of:

Risk limits and guidelines.

Beta, tracking error and volatility.

Liquidity of individual stocks and overall portfolio.

External risk monitoring.

Implement investment ideas based on:

Upside to fair value.

Conviction level.

Country and sector views.

Risk limits and guidelines.

Sub-Portfolio is typically 20-50 stocks.

Aggregate portfolio is typically 90 –

150 stocks

Review BRIC equity universe through return on capital and valuation metrics

Global macro analysis Economics Sector trends Geo-politics

Global sector / stock analysis

Country analysis Local economics Market valuation Earnings

In depths analysis combines quantitative and qualitative input:

Quantitative Input:

Valuation.

Earnings Growth.

Return on capital.

Qualitative Input:

Business model.

Cash generation.

Industry dynamics.

Corporate Governance.

Risk MonitoringPortfolio Construction

Output: Allocation to portfolios

Output: Individual stock ideas

Output:Traded Portfolio

Output:Assessment of

Portfolio Positions

Country Allocation

Investment Process Overview

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Formally based upon the Monthly BRIC Call but constantly reviewed throughout the month

Chaired by lead Fund Manager Nick Timberlake, participants are Economic Research, the four fund managers and members of their teams

Review BRIC equity universe through return on capital and valuation metrics

Asset Allocation Stock Analysis Portfolio Construction Risk Monitoring

Global macro analysis-

economics-

sector trends-

geo-politics

Global sector / stock analysis

Country analysis-

local economics-

market valuation-

earnings

Investment Process –

Define the stock universe and do initial screening

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The in-depth Stock Analysis combines quantitative and qualitative analysis.

The quantitative analysis is based on public available data and is focused on:-

Valuation multiple.-

Earnings Growths Expectations.-

Return on capital and profitability.

The qualitative analysis is based on individual assessment of:-

Business model and competitive advantage.-

Cash generation.-

Industry dynamics.-

Corporate governance and management quality.



In depth analysis of individual stocks

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The sub-portfolios are constructed by the local Fund Managers by implementing the individual stock ideas and will typically hold approximately 20-50 stock positions.

The aggregate portfolio typically holds approximately 90-150 stock positions

The single stock weightings are driven by upside to fair value.

The final adjustments of the individual portfolio weightings are then optimised to reflect country and sector views.

The sub-portfolio is checked against defined risk limits and guidelines (and adjusted accordingly if required).


Country

Allocation

Committee

Nick Timberlake

Jose Cuervo Brazil

Douglas Helfer Russia

Sanjiv DuggalIndia

Mandy ChanChina

Stock Selection

Guillaume RabaultEconomic Research

Investment Decision

IndependentRisk Control

Sao-Paulo-based team of 10

London-based team of 2

Singapore- based team of 3

Hong Kong- based team of 3

Paris-based

Process Workflow

HSBC GIF BRIC Equity Fund

Country

Allocation

Committee

Nick Timberlake

Jose Cuervo Brazil

Douglas Helfer Russia

Sanjiv DuggalIndia

Mandy ChanChina

Stock Selection

Guillaume RabaultEconomic Research

IndependentRisk Control

Sao-Paulo-based team of 10

London-based team of 2

Singapore- based team of 3

Hong Kong- based team of 3

Paris - based team of 7

strategists

Process Workflow

HSBC GIF BRIC Equity Fund


Construct optimal long portfolio within defined trading limits

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The portfolio is monitored both externally and at the sub-portfolio level by the local risk monitoring teams

External risk monitoring is overseen by an independent Risk Management department within HSBC Global Asset Management.

The team continuously monitors the following: -

That the portfolio is in line with the Risk Limits and Guidelines.-

Beta, tracking error and volatility on stock and portfolio level.-

Contribution from individual stocks to Beta, Tracking Error and volatility.-

Underlying liquidity of individual holding to ensure sufficient liquidity for the portfolio.



Monitor portfolio positions and adjust if necessary

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The five portfolio managers holds an average of 16 years’ investment experience, and extensive experience in managing money in the BRIC region.

Experienced dedicated team

Well proven investment process with strong focus on 1) Stock selection using in-depth research and 2) Construction of a well diversified portfolio.

Clear Investment Process

Rigorous risk monitoring in place to avoid pitfalls while navigating in volatile markets characterised by high political risks and more difficult access to information.

Strong Risk Controls

Greater transparency for investors and daily liquidity via either UCITS III structure or managed accounts.

Transparency & Liquidity

Fund aims to take advantage of attractive valuations and the expected strong economic outlook offered for the BRIC region in the coming years.

Strong Regional Outlook

Key Strengths

Risk Management

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The portfolio is constructed taking the following risk limits into consideration

Source: HSBC Global Asset Management as of February 2011. For illustrative purposes onlyBenchmark is a customised BRIC Index (25% MSCI Brazil, 25% MSCI Russia, 25% MSCI India, MSCI China) This is the current internal benchmark, which may change and is not detailed in the fund's prospectus. This benchmark is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet this benchmark.

Factor

Single name exposure 10%

Cash weighting Typically 0% to 10%

Sector Limits Unconstrained

Country Limit Max: 50%Minimum of 2 countries

Tracking Error Unconstrained

Diversification Typical 90 to 150 stocks

Risk Control –

Define Risk Limits

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Framework

Investment Team Operational Control Parent Oversight

Portfolio Manager Risk Guidelines and Portfolio Constraints Market Risks

Trading Desk Pre-trade compliance

Coherence of orders

Counterparty risks

Market risks

Risk Control Front-end Systems

Clients guidelines

In-house risk limits

Regulatory guidelines

Management Assistance Operational risk control

Transaction Review Committee

Internal Control/Compliance Process control

HSBC’s Risk Management and Audit Control of processes (including Risk Control Processes)

Follow up of risk control activities

The team is supported by a well proven Risk Management Framework which is put into place to comply with the identified risks characterising investments in the BRIC markets.

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

Risk Management Framework

Market Overview

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Emerging markets snapshot

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Market cap (float adjusted)

Market cap (full market)

GDP at market rates

Exports

GDP at PPP

Foreign exchange reserves

Land mass

Population

Emerging Markets Developed Markets

Source: CIA World Factbook, IMF Report April 2011, MSCI

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1992-1995 2005-2010

The world economy is now led by emerging markets

Emerging Markets' share to world growth has steadily increased over the last 10 years

Average real GDP Y-0-Y growth (%)

Ave

rage

rela

tive

cont

ribut

ion

to

Wor

ld N

omin

al G

DP

grow

th (%

)

Europe

Emerging Markets

US

Japan

0%

10%

20%

30%

40%

50%

60%

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

Average real GDP Y-0-Y growth (%)

Ave

rage

rela

tive

cont

ribut

ion

to

Wor

ld N

omin

al G

DP

grow

th (%

)

5.00

Japan

US

Emerging Markets

Europe

0%

10%

20%

30%

40%

50%

60%

- 2.00 4.00 6.00 8.00

Emerging markets are reshaping the world economy

Sources: UBS December 2010,

25

0

50

100

150

200

250

ChileRussi

aChina

Korea, S

outh

South Afric

aMex

icoTurke

yWorld

United StatesGerm

any

United Kingdo

mFranc

eIta

lyGreece

Japan

Publ

ic D

ebt (

% o

f GD

P)

0

20

40

60

80

100

120

MexicoRussia

India Brazil ChinaPoland Turke

ySouth Afric

aJapan France

Euro zone Avg Italy

Spain US UK

Hou

seho

ld D

ebt (

% o

f GD

P)

2000 Current

Favourable EM debt landscape

Emerging markets have more favourable public debt and household debt landscapes than the developed world

BRIC

Any forecast, projection or target where provided is indicative only and is not guaranteed in any way

Sources: CIA World Factbook as of January 2011 (2010 estimates) Sources: Thompson Reuters Datastream, HSBC Global Asset Management, December 2010

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0 10 20 30 40 5 6 70

Brazil

China

India

Indonesia

Mexico

Russia

725mn

66mn

151mn

130mn

907mn

98mn

156.6

239.1

85.7

199.0

101.7

121.6

108.5

0 50 100 150 200 250 300

0-4

5-14

15-24

25-34

35-44

45-54

55+

Demographic profile of India markedly favours consumption growth

Age structure of population

below 15 yrs between 15 to 64 yrs above 64 yrs

yrs

% of total population

Rising affluence among a young population is positive for consumption growth

Source: HSBC Global Research latest data available, June 2010

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BRIC: Riding the liquidity wave

The key question for risk assets and higher interest rate currencies in 2011 is likely to be what eventually wins out -

the wall of liquidity or the risk that global recovery hits the

wall

Ultra loose monetary policy in the developed world including QE2

from the US Federal Reserve is creating a powerful wave of liquidity

This is unlikely to be easy -

we foresee a series of global and EM-specific risks that will come in and out of focus and disturb the markets in the course of the

year

Expect substantial volatility with price action characterised by

‘risk on risk off’

behaviour just as in 2010

We believe that liquidity is likely eventually to win out with risk assets ending the year higher

The views expressed above were held at the time of preparation and are subject to change without notice.

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Global growth

-

A global economic rebound is well underway

-

The strength and length of recovery will depend on a pick up in developed world end demand

-

BRIC markets have their own growth engines but ultimately their fortunes are still tied to the developed world

Policy / Liquidity

-

Inflation is on the rise everywhere. Policy makers are divided on how to respond. Expect more tightening in BRIC

-

Exit from accommodative policy in developed world is a key risk to global capital markets

BRIC equity earnings / valuations

-

BRIC equity valuations have normalised from extremely oversold levels and appear ‘attractive' now

-

Earnings momentum will be key to further price appreciation

We believe the earnings picture is more attractive in BRIC

What do we believe are the key drivers for the BRIC region?

The views above were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target. Source: HSBC Global Asset Management, March 2011

29

Cumulative data Jan 2000- Dec 2010

0%

50%

100%

150%

200%

250%

China

IndiaPeru

Russia

IndonesiaEgyp

tMalays

iaPhilip

pines

Morocco

KoreaThaila

ndTurke

yColo

mbiaPoland

Chile

Brazil

South A

frica

Czech

RepublicHun

garyMexic

o

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

Cum. GDP growth (LHS) Cum. stock mkt return (RHS)Source: HSBC Global Asset Management, Factset (stock market returns), IMF World Economic Outlook (GDP growth), December 2010. Performance information shown refers to the past and should not be seen as an indication of future returns

The rapid GDP growth within Emerging Market countries since 2000

has not been enough to generate strong stock market returns

Investment Rationale and Philosophy

Consensus growth and inflation forecasts

Source: The Economist, OECD, IMF report April 2011. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

GDP Inflation

(Annual % change) 2008 2009 2010 F 2011 F 2008 2009 2010 F 2011 FNorth America 0.4 -2.4 2.9 3.0 3.7 -0.2 1.6 1.6United States 0.4 -2.4 2.9 3.0 3.8 -0.3 1.6 1.6Canada 0.5 -2.5 3.0 2.5 2.4 0.3 1.8 2.1Western Europe 2 -4.2 1.7 1.6 4.7 0.6 1.7 1.8Euro zone 0.7 -4.1 1.6 1.5 3.3 0.3 1.6 1.7

France 0.7 -2.5 1.6 1.6 2.8 0.1 1.6 1.6Germany 1.3 -4.9 3.4 2.4 2.6 0.4 1.1 1.6Spain 1.2 -3.6 -0.2 0.6 4.1 -0.3 1.7 2.5

UK 0.7 -4.9 1.7 2.0 3.6 2.2 3.2 3.2Switzerland 1.6 -1.5 2.6 1.9 2.4 -0.5 0.7 0.8Eastern Europe 4.3 -5.5 3.7 3.7 10.9 6.6 6.2 5.8Russia 5.6 -7.9 3.9 4.2 13.3 8.8 8.0 7.8Asia Pacific 3.4 1.5 6.6 5.5 4.5 0.8 2.5 2.6Japan -0.7 -5.3 3.9 1.4 1.4 -1.4 -0.8 -0.4Australia 2.1 1.3 2.8 3.2 4.4 1.8 2.9 3.0China 9.0 8.7 10.2 9.2 9 -0.7 3.3 4.0Hong Kong 2.5 -2.8 6.3 4.7 4.3 0.6 2.5 3.6India 6.4 7.4 8.9 8.4 8.2 11.7 10.4 6.8Latin America 4.2 -1.9 5.4 4.4 8.2 5.5 7.2 7.1Brazil 5.2 -0.2 7.6 4.4 5.9 4.3 5.6 5.1World 2 -2.1 4.2 3.8 4.7 1.4 3.1 2.9

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Consensus policy rates

Sources and expectations : analysts‘ consensus, Bloomberg, HSBC Global Asset Management calculations, April 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

Official Last Date Expected in Expected inrates change of change 3 months 12 months

United States 0% / 0.25% -87.5bp 16/12/2008 0% / 0.25% 0% / 0.25%Canada 1.00% 25bp 08/09/2010 1% / 1.25% 1.75% / 2%Euro zone 1.00% -25bp 07/05/2009 1% 1% / 1.25%UK 0.50% -50bp 06/03/2009 0.5% 0.75% / 1%Switzerland 0.25% -25 pb 12/03/2009 0.25% 0.75%Norway 2.00% 25bp 06/05/2010 2% / 2.25% 2.75%Sweden 1.25% 25bp 15/12/2010 1.5% 2.25% / 2.5%Japan 0% / 0.10% -5bp 05/10/2010 0% / 0.10% 0% / 0.10%Australia 4.75% 25bp 02/11/2010 4.75% / 5% 5.25% / 5.5%New Zealand 3.00% 25 bp 29/07/2010 3% / 3.25% 3.75%Hong Kong 0.50% -100 bp 17/12/2008 0.00% 0.00%Singapore 0.44% -0.14 bp 30/12/2010 0.00% 0.00%Brazil 11.25% 50 bp 19/01/2011 11.75% 12.5%Chile 3.25% 25 bp 20/12/2010 3.75% 4.75% / 5%Colombia 3.00% -50 bp 30/04/2010 3% / 3.25% 4.25%Mexico 4.50% -25 bp 17/07/2009 4.5% 4.5% / 4.75%Peru 3.25% 25 bp 06/01/2011 3.5% 4.25%China 5.81% 25 bp 27/12/2010 6% / 6.25% 6.5%India 6.25% 25 bp 02/11/2010 6.5% 7%Indonesia 6.50% -25 bp 05/08/2009 6.75% 7.25% / 7.5%South Korea 2.75% 25 bp 13/01/2011 2.75% / 3% 3.25% / 3.5%Malaysia 2.75% 25 bp 09/07/2010 2.75% / 3% 3% / 3.25%Philippines 4.00% -25 bp 09/07/2009 4% / 4.25% 4.75%Taiwan 1.625% 12.5 bp 30/12/2010 1.75% 2% / 2.25%Thailand 2.25% 25 bp 12/01/2011 2.25% / 2.5% 2.75% / 3%South Africa 5.50% -50 bp 19/11/2010 5.5% 6% / 6.25%Czech Republic 0.75% -25 bp 10/05/2010 0.75% 1.25% / 1.5%Hungary 5.75% 25 bp 20/12/2010 6% 6% / 6.25%Poland 3.75% 25 bp 20/01/2011 3.75% / 4% 4.25% / 4.5%Russia 7.75% -25 bp 01/06/2010 8% 8.25% / 8.5%Turkey 6.25% -25 bp 20/01/2011 5.75% / 6% 7.5%

31

32

The economic recovery is making good progress

Source: Bloomberg, HSBC Global Asset Management, as of January 25th 2011The first estimate of the Eurozone PMI for January eased to 56.9.*PMI = Purchasing Managers Index** Leading Economic Indicators (OECD)

Manufacturing activity continues to be a key driver of the economic recovery.

PMI indices and Industrial production growth displayed solid readings globally in December 2010.

US data was more encouraging. The LEI** Index rose 1.0% m-o-m in December, helped by improvements in the housing market. Existing home sales rose by 12.3% m-o-m in December, while building permits rose well above market expectations.

In aggregate, economic activity has improved in the Eurozone. The region’s economic confidence index rose above the market expectation in December, to 106.2. GDP growth in Q3 2010 was 0.4% q-o-q, largely driven by industrial sectors.

Survey Actual Previous

US 57.0 57.0 56.6

Eurozone* 56.8 57.1 56.8

UK 57.2 58.3 57.5

December PMI* Manufacturing (developed markets)

Survey Actual Previous

China 55.0 53.9 55.2

India - 56.7 58.4

Russia - 53.1 51.1

Brazil - 52.4 49.9

December PMI* Manufacturing (BRIC)

0.8%1.0%

1.2%

0.4%

US Japan Eurozone UK

Industrial Production (month-on-month %) (as of January 25th)

33

Rising urbanisation usually leads to higher GDP per capita

Source : UBS as at 30 June 2010, latest data available

10

100

1000

10000

100000

0 10 20 30 40 50 60 70 80 90

USD GDP per capita

Urban population as share of total %

India

Malaysia

Philippines

South Korea

Data points are every five years from 1970 to 2005

China

Indonesia

34

Source: UN World Urbanization Prospects: The 2005 Revision, CEIC, Deutsche Bank estimates.Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

Increase of urban population between 2005-15

2005 2015

World 51% 56%

Northern America 81% 83%

Latin America 77% 81%

Europe 72% 74%

Oceania 71% 72%

Asia, ex CN&ID 55% 59%

China 43% 52%

Africa 38% 43%

India 29% 32%

Urbanisation rate

China: Another 90million people to move to cities by 2015

Million people

35Sources: Factset, I/B/E/S Estimates, Bloomberg. Time Period: Feb 1991 – Feb 2011

With the recent rally in markets, valuation levels are no longer

extremely cheap but remain supportive.

The asset class is trading below its two decade forward P/E average and still remains well below its 2007 high on a P/B basis.

Sources: Bloomberg. Time Period: Feb 1995 – Feb 2011

Past Performance is not an indication of future returns.Past Performance is not an indication of future returns.

2010

Emerging markets valuations –

attractive relative to history

MSCI EM Forward P/E (against average)

0

5

10

15

20

25

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Forward P/E 20 year average

MSCI EM Price to Book (against trend)

0

0.5

1

1.5

2

2.5

3

3.5

1995 1997 1999 2001 2003 2005 2007 2009 2011

P/B Linear (P/B)

36

Sources: Factset, I/B/E/S Estimates, Bloomberg. Period: February 1991 – February 2011Any performance information shown refers to the past and should not be seen as an indication of future returns.

Emerging markets valuations –

at a discount to developed markets

Forward P/E - MSCI Emerging Markets relative to MSCI World

0%

20%

40%

60%

80%

100%

120%

140%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Valuation Discount EM to World MSCI World Index

37

Key global risks

What factors could have a marked impact on risk appetite and potentially drive prices away from valuation anchors?

Factors include:

China-related risks (tightening-induced sharp growth slowdown, inflation, banking sector impairment)

Peripheral Eurozone

(EZ) public sector fiscal/debt default concerns

On-going risks to economic growth particularly in the US

Protectionism (for example, related to Emerging Markets (EM) currency intervention or high/rising structural unemployment in developed economies)

Inflation risks (EM -

food inflation, unsterilised

currency intervention, capacity constraints; Developed Markets (DM) –

commodity prices and ultimately Quantitative Easing (QE)?)

EM asset price bubbles

US municipal bond market defaults

Climbing ‘debt refinancing walls’

The views expressed above were held at the time of preparation and are subject to change without notice.

HSBC GIF BRIC Equity Fund -

Overview

39

The HSBC BRIC Equity Fund aims to take advantage of the attractive valuations and the expected strong economic outlook offered for Brazil, Russia, India and China in the coming years.

The Fund utilises a well proven investment process which integrates the skills and expertise of HSBC Global Asset Management’s global emerging markets teams.

The lead fund manager Nick Timberlake has managed money in Emerging markets since 1990.

Nick Timberlake allocates the assets of the fund to four very experienced and highly regarded country fund managers; all of whom are supported by large teams based locally

Understanding the dynamics of the individual BRIC markets, in both a global and domestic context, is imperative for the team, and they have access to local information by combining HSBC’s strong presence in the region with regular on site presence.

Rigorous risk monitoring with the intention of avoiding pitfalls

while navigating in volatile markets characterised by higher political risks and more difficult access to information.

Executive Summary

Source: HSBC Global Asset Management

40

Fund type and domicile

UCITS III Luxembourg SICAV part of the HGIF range

Launch Date

Fund: 01/12/2004

AC Share Class: 02/12/2009

Base Currency

USD

Benchmark*

Customised BRIC Index

25% MSCI Brazil

25% MSCI Russia

25% MSCI India

25% MSCI China

Liquidity

Daily

Minimum Investment –

Institutional Share Class

USD 1,000,000 –

Retail Share Class

USD 5,000

Fee Structure–

Institutional Share Class 0.75 % Fixed Management Fee–

Retail Share Class

1.50 % Fixed Management Fee

Investment Vehicle

*This is the current internal benchmark, which may change and is not detailed in the fund's prospectus. This benchmark is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet this benchmark.

41

Country Weightings versus Benchmark**

Source: HSBC Global Asset Management as of end of March 2011. * For illustrative purposes only; ** Benchmark is a customised BRIC index (25% MSCI Brazil Index, 25% MSCI Russia Index, 25% MSCI India Index, 25% MSCI China Index). This is the current internal benchmark, which may change and is not detailed in the fund's prospectus. This benchmark is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet this benchmark.

Country Weightings

HSBC GIF BRIC Equity Fund – Country weightings*

India25.6%

China23.6%

Brazil17.2%

Cash1.4%

Russia32.2%

-7.8

-1.4

0.6

7.2

-10

-8

-6

-4

-2

0

2

4

6

8

Bra

zil

Chi

na

Indi

a

Rus

sia

42

Sector Weightings versus Benchmark**Sector Weightings

HSBC GIF BRIC Equity Fund – Sector weightings*

Source: HSBC Global Asset Management as of end of March 2011. * For illustrative purposes only‘ : ** Benchmark is a customised BRIC index (25% MSCI Brazil Index, 25% MSCI Russia Index, 25% MSCI India Index, 25% MSCI China Index). This is the current internal benchmark, which may change and is not detailed in the fund's prospectus. This benchmark is indicative only and is notguaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet this benchmark. The above material is for information only and does not constituteany recommendation to buy or sell any investments.

-5.0

-2.1-1.2

-0.7 -0.6-0.3

1.32.2 2.2

2.8

-6

-5

-4

-3

-2

-1

0

1

2

3

4

Fina

ncia

ls

Mat

eria

ls

Con

sum

er S

tapl

es

Hea

lth C

are

Util

ities

Tele

com

mun

icat

ion

Ser

vice

s

Info

rmat

ion

Tech

nolo

gy

Ene

rgy

Indu

stria

ls

Con

sum

erD

iscr

etio

nary

Information Technology

6.9%Telecommunication

Services4.4%

Utilities3.0%

Health Care0.7%

Consumer Staples3.3%

Materials12.8%

Energy30.9%

Industrials7.8%

Consumer Discretionary

7.9%Financials20.9%

Cash1.4%

43

Source: HSBC Global Asset Management as at 31st March 2011. For illustrative purposes only‘. The above material is for information only and does not constitute any recommendation to buy or sell any investments.

HSBC GIF BRIC Equity Fund – Overview individual stock exposures

Top 5/Bottom 5 versus BenchmarkTop 10 Holdings

Company Country Sector Top 5 and Bottom 5 Relative weight (%)

Gazprom Russia Energy Cairn Energy 3.79

Sberbank Russia Financials Maruti Suzuki 3.20

Lukoil Russia Energy Hcl Technologies 2.07

Cairn Energy India Energy Gazprom 2.02

Maruti Suzuki India Consumer Discretionary Sberbank 1.81

CVRD Brazil Materials Banco Bradesco -1.52

Petrobras Brazil Energy Icici Bank -1.68

Ind & Com Bank China China Financials Petrobras -2.16

Rosneft Russia Energy Reliance Industries -2.57

HCL Technologies India Information Technology Infosys -2.61

44

Source: Morningstar as of 31st March 2011. *Past performance is net of fees, bid-bid, USD. It is for illustrative purposes only, and should not be relied on as indication for future returns.

HSBC GIF BRIC Equity Fund –

Performance Net AC Share Class

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2011 -0.99% 1.52% 5.84% 6.39%

2010 -4.70% -0.34% 7.21% 0.76% -9.93% 0.23% 7.08% -2.26% 9.57% 3.17% -2.84% 5.59% 12.43%

2009 -6.17% -2.32% 12.48% 17.26% 28.12% -0.11% 9.07% 2.46% 10.72% 3.72% 3.38% 1.80% 108.98%

2008 -13.75% 7.04% -7.64% 7.04% 5.29% -9.05% -4.84% -9.16% -28.26% -28.28% -12.09% 8.04% -63.08%

2007 -1.35% -3.02% 4.14% 3.57% 2.28% 5.59% 5.61% -1.30% 13.92% 10.52% -3.47% 4.54% 47.59%

2006 12.03% 4.64% 1.88% 5.20% -5.59% -1.35% 3.30% 1.65% -0.91% 4.72% 7.07% 5.82% 44.50%

2005 -2.30% 6.96% -7.42% -1.23% 4.48% 3.89% 6.69% 6.83% 12.71% -6.95% 8.10% 4.44% 40.00%

Monthly Performance

Fund Benchmark Fund Benchmark

19.49% 20.63% Returns - 1 Month 5.84% 6.39%

14.29% 15.11% Returns - 3 Months 6.39% 4.20%

9.57% 10.45% Returns - 6 Months 12.61% 10.10%

-9.93% -8.80% Returns - Year To Date 6.39% 4.20%

56.25% 56.25% Returns - 1 Year 17.44% 14.99%

3.91%

Monthly Statistics

Returns Since Inception

Best Month

% Positive Months

Annualised Returns

Worst Month

Tracking Error

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 20110

5

10

15

20

25

30

Fund Return (LHS) Benchmark Return (LHS) Fund NAV (RHS)

45

HSBC GIF BRIC Equity Fund –

Performance Net IC Share Class

Source: Morningstar as of 31st March 2011. *Past performance is net of fees, bid-bid, USD. It is for illustrative purposes only, and should not be relied on as indication for future returns.

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 20110

5

10

15

20

25

30

Fund Return (LHS) Benchmark Return (LHS) Fund NAV (RHS)

Monthly StatisticsFund Benchmark Fund Benchmark

Returns Since Inception 20.52% 30.17% Returns - 1 Month 5.94% 6.39%Annualised Returns 13.25% 19.22% Returns - 3 Months 6.62% 4.20%Best Month 9.65% 10.45% Returns - 6 Months 13.08% 10.10%Worst Month -9.90% -8.80% Returns - Year To Date 6.62% 4.20%% Positive Months 61.11% 61.11% Returns - 1 Year 18.43% 14.99%Tracking Error 7.45%

Monthly PerformanceJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2011 -0.91% 1.57% 5.94% 6.62%

2010 -4.62% -0.27% 7.30% 0.80% -9.90% 0.37% 7.14% -2.21% 9.65% 3.23% -2.78% 5.67% 13.37%2009 -5.38% 3.45% 1.85% -0.30%

46

Quarterly Performance attribution – Country01/01/2011 to 31/03/2011

Source: Morningstar as of 31st March 2011. *Past performance is net of fees, bid-bid, USD. It is for illustrative purposes only, and should not be relied on as indication for future returns. The above material is for information only and does not constitute any recommendation to buy or sell any investments.

Top country Port. Avg Weight

BM Avg Weight

Allocation Effect

Selection + Interaction Total Effect

Russia 33.34 25.45 1.02 0.70 1.71

India 21.77 24.61 0.65 0.35 0.99

China 21.99 24.96 -0.06 0.16 0.10

Bermuda 0.05 0.00 -0.01 0.00 -0.01

Bottom country Port. Avg Weight

BM Avg Weight

Allocation Effect


Cayman Islands 0.04 0.00 -0.03 0.00 -0.03

Cash 1.61 0.00 -0.05 0.00 -0.05

Other 1.00 0.16 -0.09 -0.20 -0.29

Brazil 20.19 24.70 0.06 -0.37 -0.31

47

Quarterly Performance attribution – Stock01/01/2011 to 31/03/2011

Source: HSBC Global Asset Management as of 31st March 2011. It is for illustrative purposes only, and should not be relied on as indication for future returns. The above material is for information only and does not constitute any recommendation to buy or sell any investments.

Top stock Port. Avg Weight

BM Avg Weight

Allocation Effect


Gazprom 9.45 7.10 0.60 0.03 0.63

Lukoil Oil Company 4.59 2.92 0.31 0.04 0.36

Cairn Energy Plc 3.65 0.00 0.30 0.00 0.30

Infosys Technologi 0.14 2.80 0.29 0.00 0.29

Rosneft Ojsc 2.58 1.29 0.26 -0.01 0.26

Bottom stock Port. Avg Weight

BM Avg Weight

Allocation Effect


State Bank Of India 2.59 0.33 -0.18 0.00 -0.18

Unitech Ltd 0.38 0.00 -0.29 0.00 -0.29

Unitech Limited 0.63 0.11 -0.31 0.00 -0.31

Indiabulls Power 0.99 0.00 -0.32 0.00 -0.32

Maruti Suzuki Ind 3.34 0.17 -0.54 0.00 -0.54

Competitor Analysis

49

Competitor Analysis

Fund Net Sales Data in USD Million as of Feb 2011 AUM 3 months net sales

12 months net sales to Feb 2011 2010 net sales 2009 net sales 2008 net sales 2007 net sales

HSBC GIF BRIC Equity 1,996 -100 -230 -126 167 -667 -1,152

Lipper FMI Equities BRIC Sector Total 25,546 -1,835 -2,499 -127 4,374 -775 10,070

Comparative Advantage

►

HSBC BRIC Equity Fund sits it 1st quartile over 3 months, 1 year and 3 years in Morningstar BRIC Equity sector

►

The fund sits in first quartile over 2009 and 2010

►

Lipper FMI Equities BRIC sector had -$2499 outflows 12 months to Feb 2011

Source: Morningstar Direct, Lipper FMI, March 2011, all data in USD. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way

50

Competitor Analysis

Source: Morningstar Direct, Lipper FMI, March 2011. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way

Outlook

52

Country Preferred themes Rationale

Brazil

ConsumptionUpbeat economic outlook and strength in consumer spending: 1) new record lows of unemployment rate, 2) real wages maintains its robust pace and 3) lending conditions remains very favorable (expansion with well behaved, or even falling delinquency)

Commodity Cyclicals Global upturn, attractive valuations

Corporate investment Corporates invest to develop their earnings’ growth as the economic cycle moves on

InfrastructureInfrastructure remains a long-lasting thematic investment in Brazil

Infrastructure continues to look attractive both for economic as

well as political reasons.

Russia

Energy We see deep value in the sector versus oil companies in other markets -

the Russian oil industry currently trades at roughly a 40-50% discount to global and EM peers

Telecoms Valuations look attractive relative to global telecom peers

Financials Sberbank

ROE likely to be 25% in 2010 vs

valuation of just 2x book

India

Consumer –

Discretionary & Staples; real estate

Domestic consumption looks to remain buoyant going forward; rising income & aspirational

levels; shift from unbranded to branded; demand for housing should remain robust

Metals Beneficiaries of global recovery; prefer non ferrous over steel

Information Technology Improved sector outlook on more benign global growth expectation; stable/weak INR to support earnings

Defensives –

healthcare, telecoms, utilities Attractive valuations and defensive; relative earnings certainty

China

Industrials Demand recovering; Utilization rate and price expected to improve

Energy: Rising price on the back of global recovery, especially rising oil price

Materials: Prefer selective commodities such as Copper and Cement, thanks to limited supply

Source: HSBC Global Asset Management as at December 2010. The views expressed above were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target

2011 HSBC Sector Views

53

Brazil The outlook for Brazil remains positive. The market continues to

trade at relatively attractive multiples as its twelve month forward P/E ratio stands at 11.1x while EM, China and India trades at 11.7x, 11.7x and 16.8x respectively. On the earnings side, Brazil’s earnings growth is likely to be sustained at high levels in 2011, faster than other Latin American markets (except Peru). One of the key considerations about Brazilian equities is the performance of China and its demand for Brazilian exports (See below).Inflation expectations have moved up recently and this has put the Brazilian monetary authorities into tightening mode. Despite this, we believe Brazil will continue to deliver strong growth in 2011 (2011 GDP growth of 4.5%) due to strong domestic demand (especially investments) and will amongst the fastest-

growing economies in the world.

Russia As we look to 2011, we believe that Russia should perform strongly versus other markets for a number of reasons. Firstly the strong valuation case remains, with Russia trading on 30-40% discount to GEM depending on the metric used. Several factors point to the possibility of the Russia discount falling, including the possibility of WTO accession mentioned above, plus benefits of privatisation and modernisation spoken of by President Medvedev

in his recent state of the national speech. This coupled with a stable oil price, domestic lending growth and increasing disposable income (and therefore all else equal increased consumer spending) points to a favourable set of circumstances for Russian equities.

India The ability of the Government to take critical decisions on reform, policy, etc remains a key swing point for the market. Consensus earnings estimates for the broad market (MSCI India) were cut marginally by (0.1%) and (0.4%) for FY11 (E) and FY 12(E) over the month. The street estimates earnings growth of 28% for FY11 (E) and 22% for FY12 (E). The breadth of earnings revisions was negative.India faces a risk of GDP growth downgrades in FY2012 due to risk of nascent capex

cycle recovery being postponed due to various issues like environmental clearance, paralysis in government policy making due to corruption related issues and key reforms taking a back seat. Valuations are broadly near the last five year average and we do

not see a case for PE re-rating of Indian markets at this juncture. India continues to be

expensive relative to other emerging & Asian markets, though degree of premium would have marginally reduced in recent months.

China We remain positive on the China market given the pre-emptive tightening measure implemented in December with another 25bps interest rate hike to curb inflation expectations and attractive market valuation. In our view, this pre-emptive measure shall put inflation pressure under control ahead

of the Chinese New Year in early February. China’s official manufacturing PMI fell to 53.9 in December, down from

55.2 in November, which is lower than market expectation, suggesting sequential q-o-q

GDP growth moderation. On December 3rd, the government officially changed its monetary policy stance from “appropriate loose”

to “prudent”. Based on consensus earnings, MSCI China is trading at 12x 2011E PE, on the back of 16% EPS growth and 2.2x 2010E PB (2010 ROE at about 18%), and 3% 2010E dividend yield.

BRIC outlook –

managers’

comments


54

The key ingredients for rising markets remain in place for 2011:

Liquidity is ample and the economic recovery is finally taking hold in the developed world.

Valuations are not stretched, currently roughly in line with the

long term averages

Earnings growth in the mid teens looks achievable.

While we expect this combination of factors to push markets higher over the year as a whole, investors should prepare themselves for more volatility from month to month as unsolved sovereign debt issues in Europe and inflation move back and forth between the foreground and background of market attention.

The key risk for many emerging countries is inflation. Inflation

has been on the rise across the emerging world since early in 2010. We should expect key Emerging Market Central bankers to tighten monetary policy more aggressively in 2011 and look to control prices with more unorthodox economic policies. The Chinese lifted interest rate again at the end of December. Loose monetary policy in the developed world is, to a degree, stoking the inflationary problem in emerging markets.

Market outlook overview


Appendix

56

Nick Timberlake, Global Head of Emerging MarketsNick Timberlake (London) is the Global Head of Emerging Markets and has been working in the industry since 1991. Prior to joining HSBC in 2005, Nick worked for F&C Asset Management where he played a key role in the development of their highly successful GEM business. He holds an

MA (Hons) in Geography and Economics from the University of Dundee (UK), is a member of the UK Society of Investment Professionals and a qualified associate of the Institute of Investment Management and Research (IIMR).

Team biographies

Natalia Kerkis - Senior Portfolio Manager Natalia Kerkis

(Sao Paulo) is a Portfolio manager in the Brazil equities team and has been working in the industry since 2001. Prior to joining HSBC in 2004, she worked as an equity analyst at Unibanco

in Brazil. She holds a Bachelor degree from the Novosibirsk State University (Russia) in Economics and was awarded a Masters degree in Economics from the University of Sao Paulo in 2004.

57

Douglas Helfer, Senior Portfolio Manager – RussiaDouglas Helfer (London) is a fund manager in the Global Emerging

Markets (GEM) equities team and has been working in the industry since 1996. Prior to joining HSBC in 2006, Douglas worked for F&C Emerging Markets where he was responsible for Eastern European, Middle East and African investments. He holds a BA in Soviet and Eastern European Studies from the University of

Colorado (United States), an MA in Russian Studies from the University of London (UK) and an MBA in

Finance from the City University Business School in London (UK).

Sanjiv Duggal, Fund Manager – India Sanjiv joined HSBC in April 1996 and is responsible for the management of Indian equities. With over 15 years of investment experience, Sanjiv has lead managed the flagship HSBC Global Investment Funds -

Indian Equity. Prior to joining HSBC, Sanjiv worked for the Hill

Samuel Group where he spent nearly five years, initially in internal audit and latterly as an Emerging Markets fund manager. Sanjiv is a fully qualified Chartered Accountant.

Mandy Chan, Investment Director – China Mandy Chan (Hong Kong) is an investment director in the Chinese investment team and has been working in the industry since 1997. Prior to joining Halbis in 2009, Mandy worked for Fortis Investment Management as Chief Investment Officer for Greater China equities. She previously worked for Pacific Century Insurance Investment Management and TD Asset Management. She holds a Bachelor of Commerce degree in Finance from the University of British Columbia in Canada and is a CFA charterholder.

Team biographies

58

This presentation is intended for Professional Clients only and should not be distributed to or relied upon by Retail Clients. The contents of this presentation are confidential and may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. The material contained herein is for information only and does not constitute investment advice or a recommendation to any reader of this material to buy or sell investments. HSBC Global Asset Management (UK) Limited has based this presentation on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC Global Asset Management (UK) Limited and HSBC Group accept no responsibility as to its accuracy or completeness. This presentation is intended for discussion only and shall not be capable of creating any contractual or other legal obligations on the part of HSBC Global Asset Management (UK) Limited or any other HSBC Group company. Care has been taken to

ensure the accuracy of this presentation but HSBC Global Asset Management (UK) Limited accepts no responsibility for any errors or omissions contained therein. This presentation and any issues or disputes arising out of or in connection with it (whether such disputes are contractual or non-contractual in nature, such as claims in tort, for breach of statute or regulation or otherwise) shall be governed by and construed in accordance with English law.The views expressed above were held at the time of preparation and are subject to change without notice.Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target.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 go down as well as up.HSBC GIF BRIC Equity Fund is a sub-fund of the 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 Financial Services and Markets Act 2000. HSBC Global Investment Funds is recognised in the United Kingdom by the Financial Services Authority under section 264 of the Act. The shares in HSBC Global Investment Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States Persons. All applications are made on the basis of the current HSBC Global Investment Funds Prospectus, simplified prospectus 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 the local distributors. Investors and potential investors should read and note the risk warnings in the prospectus and relevant simplified prospectus. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established

markets. Economies in Emerging Markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the

countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade.Brokerage commissions, custodial services and other costs relating to investment in Emerging Markets generally are more expensive than those relating to investment in more developed markets. Lack of adequate custodial systems in some markets may prevent investment in a given country or may require a

sub-fund to accept greater custodial risks in order to invest, although the Custodian will endeavour to minimise such risks through the appointment of correspondents that are

international, reputable and creditworthy financial institutions. In addition, such markets have different settlement and clearance procedures. In certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of a sub-fund to make intended securities purchases due to settlement problems could cause the sub-fund to miss attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result either in losses to a sub-fund due to subsequent declines in value of the portfolio security or, if a sub-fund has entered into a contract to sell the security, could result in potential liability to the purchaser.

Important information

59

MSCI Index – The MSCI information may only be used for your internal use, may

not be reproduced or redisseminated

in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an ‘as is’

basis and the user of this information assumes the entire risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any other person involved in or related to compiling, computing or creating the MSCI information (collectively, the ‘MSCI Parties’) makes any express or implied warranties or representations with respect to such information or the results to be obtained by the use thereof, and the MSCI Parties hereby expressly disclaim all warranties (including, without limitation, all warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential or any other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise have anticipated, the possibility of such damagesThe risk also exists that an emergency situation may arise in one or more developing markets as a result of which trading of securities may cease or may be substantially curtailed and prices for a sub-fund’s securities in such markets may not be readily available.Investors should note that changes in the political climate in Emerging Markets may result in significant shifts in the attitude

to the taxation of foreign investors. Such changes may result in changes to legislation, the interpretation

of legislation, or the granting of foreign investors the benefit of tax exemptions or international tax treaties. The effect of such changes can be retrospective and can (if they occur) have an adverse impact on the investment return of shareholders in any sub-fund so affected.This sub-fund invests predominantly in one geographic area; therefore any

decline in the economy of this area may affect the prices and value of the underlying assets. Stockmarket

investments should be viewed as a medium to long term investment and should be held for at least five years. Any performance information shown refers to the past and should not be seen as an indication of future returns.To help improve our service and in the interests of security we may record and/or monitor your communication with us.HSBC Global Asset Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services of the HSBC Group. This presentation is approved for issue in the UK by HSBC Global

Asset Management (UK) Limited, who are authorised and regulated

by the Financial Services Authority. www.assetmanagement.hsbc.com/ukCopyright ©

HSBC Global Asset Management (UK) Limited 2011. All rights reserved. 20487/052011/FP11-0866

Important information (cont’d)

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