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Passive Investing

2 Passive investing with HSBC Global Asset Management

IntroductionPassive investing has grown in scale and scope over the past two

decades. Today, an increasing range of product options means

that passive investment funds now offer more choice than ever.

We believe that this trend will continue with passive investments

accounting for an ever greater share of client portfolios.

HSBC Global Asset Management offers a wide range of passive

funds that have been developed over time to meet your and your

clients’ ever-changing needs. These include index tracker funds

and Exchange Traded Funds (ETFs).

We believe that our track record in managing passive

investments, which stretches back over more than 25 years,

coupled with our global reach, makes us a strong partner for

meeting your and your clients’ passive investment needs.

Our investment capabilities continue to evolve, with our new

product developments around alternative indexation and

proprietary cap-weighted indices demonstrating our commitment

to index-based investing.

A long heritage in passive 4

Our passive investment product range 6

Why invest with HSBC Global Asset 9 Management?

Conclusion 12

Passive investing with HSBC Global Asset Management 3

Passive investments are becoming more popular…In a global environment, where it remains challenging to

generate positive risk-adjusted returns for client portfolios, there

has been a significant rise in inflows into passive investments,

such as index tracker funds and ETFs, over recent years. These

passive products aim to offer investors low-cost, diversified,

simple and transparent market access.

While passive funds have seen strong investment flows over

the past few years, Europe’s scope for further growth in this

area looks strong, as the Continent remains some way behind

the US and Asia Pacific in terms of passive funds’ overall market

share. In Europe, passive funds (ETFs and index tracking mutual

funds) accounted for 16% of total allocations to equity funds in

2012, which is half the level seen in the US (32%) or Asia Pacific

(30%)1. As European investors align the way they invest closer

to the rest of the word, we expect this gap to narrow in passive

investors’ favour.

…and we expect this trend to continue.In mid-2013, management consultancy firm the Boston

Consulting Group (BCG) stated that it expects passive product

assets under management (AuM) to experience a compound

annual growth rate of around 10%-20% globally between 2012

and 2016.

Certainly, we believe that demand from advisers for new passive

solutions is continuing to grow, both as a result of recent

regulatory changes (such as the UK’s Retail Distribution Review)

and rising interest in passive investments from clients looking

to reduce the costs of managing their investment portfolios.

Consequently, we expect the trend of rising investment flows

into passive funds to continue over the coming years.

This expectation is supported by recent net sales data. For

example, when considering UK index fund net sales from 2009-

2013, we have seen an overall 83.1% increase2 in fund flows into

passive investments over this period.

For over 25 years HSBC Global Asset Management has been successfully offering passive investment strategies to clients. We are committed to building on more than a quarter of a century of our experience in this field to provide modern and competitive passive investment solutions. Our offering has adapted and evolved over time in line with changes in our clients’ investment requirements. Our new alternative indexation strategy, Economic Scale Indexation, is proof of our ongoing commitment, as well as to our ability to lead and shape the passive landscape.

Andy Clark,

Chief Executive Officer, UK HSBC Global Asset Management (UK), Ltd.

1 Source: Lipper 2013 European Fund Market Review, March 2013

2 Source: Lipper FMI


With rising interest in passive investing over the past few years,

there has been a spate of new entrants to the market and fund

launches. Throughout, HSBC Global Asset Management has

stood out as a provider with a strong track record in passive

investment management and a broad range of reliable passive

strategies. HSBC Global Asset Management has been providing

passive investment solutions since 1988, when we launched

our first index tracker fund in the UK (the American Index Fund).

As such, we now offer over 25 years’ experience in managing

passive investments. Since the launch of our first index fund,

our passive investment assets under management (AuM) have

grown over time to reach USD20.9billion1.

For example, our clients’ requirement for an index tracker product

offering greater liquidity was met by our development of a range

of Exchange Traded Funds (ETFs) in Europe that now comprises

28 funds investing in both developed and emerging markets.

Our first ETF, the ABF Hong Kong Bond Index Fund, was

launched in 2003 in Hong Kong. Since 2009, we have offered a

broad range of equity ETFs for sale across Europe.

We have since developed ETFs into areas that were previously

difficult to access for many investors (usually for reasons of cost),

such as in the case of emerging markets. We were the first asset

manager to offer a full physically replicated fund in Russia that

invests in local stocks (the HSBC MSCI Russia Capped UCITS

ETF, which was launched in July 2011).

A long heritage in passive

1988 1989 1990 1998 20 03 20 09 2010 2011 2012 2013 2014

We launched our first index fund in

the UK, the American Index

Fund. Tracking the S&P 500 index, it is one of our biggest

index trackers today

We launched 3 new index tracker funds, including

the FTSE All Share Index Fund, the HSBC European

Index Fund and the HSBC Japan Index

Fund

In 1994, we launched the HSBC

FTSE 100 Index Fund

In 1997 and 1998, we launched the HSBC FTSE 250 Index Fund and

the HSBC Pacific Index Fund

In Asia, we listed the first bond ETF in

Hong Kong, our Asian Bond Index

Fund

We listed our first ETFs in Europe on the LSE, including

the HSBC FTSE 100 UCITS ETF

We launched 13 new Emerging Market ETFs on

the LSE, cross-listed in

France, Germany and Switzerland

We listed 10 new ETFs on the LSE,

including the HSBC S&P 500

UCITS ETF.We also launched the HSBC UK Gilt

Index Fund

We launched a proprietary range of 26 alternative HSBC

Economic Scale Indices

The HSBC GIF Economic Scale

Index GEM Equity fund was the first fund launched in Europe to track

one of our proprietary

Economic Scale indices

HSBC S&P 500 UCITS ETF crossed the

USD1bn threshold

The HSBC ESI WORLDWIDE

EQUITY UCITS ETF and the HSBC WORLDWIDE

EQUITY UCITS ETF, the first ETFs tracking our

proprietary indices, are listed on the

LSE

Today, HSBC Global Asset Management manages 28 physical ETFs

listed on 4 exchanges in

Europe

1As at the end of August 2014. Source: HSBC Global Asset Management (UK)

HSBC Global Asset Management A strong index tracking heritage: 26 years of tradition in passive investment management


1988 1989 1990 1998 20 03 20 09 2010 2011 2012 2013 2014

We launched our first index fund in

the UK, the American Index

Fund. Tracking the S&P 500 index, it is one of our biggest

index trackers today

We launched 3 new index tracker funds, including

the FTSE All Share Index Fund, the HSBC European

Index Fund and the HSBC Japan Index

Fund

In 1994, we launched the HSBC

FTSE 100 Index Fund

In 1997 and 1998, we launched the HSBC FTSE 250 Index Fund and

the HSBC Pacific Index Fund

In Asia, we listed the first bond ETF in

Hong Kong, our Asian Bond Index

Fund

We listed our first ETFs in Europe on the LSE, including

the HSBC FTSE 100 UCITS ETF

We launched 13 new Emerging Market ETFs on

the LSE, cross-listed in

France, Germany and Switzerland

We listed 10 new ETFs on the LSE,

including the HSBC S&P 500

UCITS ETF.We also launched the HSBC UK Gilt

Index Fund

We launched a proprietary range of 26 alternative HSBC

Economic Scale Indices

The HSBC GIF Economic Scale

Index GEM Equity fund was the first fund launched in Europe to track

one of our proprietary

Economic Scale indices

HSBC S&P 500 UCITS ETF crossed the

USD1bn threshold

The HSBC ESI WORLDWIDE

EQUITY UCITS ETF and the HSBC WORLDWIDE

EQUITY UCITS ETF, the first ETFs tracking our

proprietary indices, are listed on the

LSE

Today, HSBC Global Asset Management manages 28 physical ETFs

listed on 4 exchanges in

Europe

We were one of the first providers of passive investment products in the UK. We have a long track record in managing passive investments and helped to develop this sector. Over the past 25 years, we have expanded our passive investment product range in line with the changing needs of clients around the world.


Our passive investment product rangeIndex Tracker FundsIndex tracker funds, which first became widely used in the

1980s, marked the initial step in the development of passive

investing.

As the name suggests, index tracker funds seek to track the

performance of an index as closely as possible. To do this, index

tracker funds match index exposures to each of the constituent

companies within that index. The fund will also mirror the

underlying index by rebalancing and reflecting corporate actions

in the same way and at the same time as the index.

Index tracker funds typically have lower costs than actively-

managed funds. This is because tracker funds’ investment

process is based on replicating the composition of a particular

index, rather than selecting securities according to fund

manager’s conviction, as is the case with most active funds.

Therefore, trackers do not have an added expense of maintaining

teams of dedicated fund managers and stock analysts whose

prime objective is to look into future performance prospects of

single companies. Instead, their portfolio construction process is

largely based on a quantitative, computer-based process.

The use of systematic quantitative approach also ensures trading

costs are kept to a minimum.

Index tracker funds are traded in the same way as a mutual

fund, either via a fund provider or fund platform, such as Fidelity

FundsNetwork, Cofunds and other leading platforms.

HSBC Global Asset Management has been managing index

tracker funds since 1988. Our current fund range is focused on

world markets, encompassing eight equity funds (three providing

exposure to UK equities and one each for European, Japanese,

Pacific, American and Worldwide – developed and emerging -

equities) and one UK bond fund.

As of end of August 2014, HSBC Global Asset Management had

over USD8.5 billion under management in its index tracker range.

Our largest fund is the HSBC American Index Fund had USD1.85

billion under management at the end of August 2014.

Index Tracker Funds range Exchange Traded Funds range

HSBC American Index FundHSBC FTSE 100 Index FundHSBC FTSE 250 Index FundHSBC FTSE All Share Index Fund HSBC European Index FundHSBC Japan Index FundHSBC Pacific Index FundHSBC UK Gilt Index Fund

HSBC ESI WORLDWIDE EQUITY UCITS ETFHSBC Euro Stoxx 50 UCITSHSBC FTSE 100 UCITSHSBC FTSE 250 UCITSHSBC FTSE EPRA/NAREIT DEVELOPED UCITSHSBC MSCI AC FAR EAST EX JAPAN UCITSHSBC MSCI BRAZIL UCITSHSBC MSCI CANADA UCITSHSBC MSCI CHINA UCITSHSBC MSCI Emerging Markets FAR EAST UCITSHSBC MSCI Emerging Markets LATIN AMERICA UCITSHSBC MSCI EMERGING Markets UCITSHSBC MSCI EUROPE UCITSHSBC MSCI INDONESIA UCITS

HSBC MSCI JAPAN UCITSHSBC MSCI KOREA UCITSHSBC MSCI MALAYSIA UCITSHSBC MSCI MEXICO CAPPED UCITSHSBC MSCI PACIFIC ex JAPAN UCITSHSBC MSCI Russia Capped UCITSHSBC MSCI SOUTH AFRICA UCITSHSBC MSCI TAIWAN UCITSHSBC MSCI TURKEY UCITSHSBC MSCI USA UCITSHSBC MSCI WORLD UCITSHSBC S&P 500 UCITSHSBC S&P BRIC 40 UCITSHSBC WORLDWIDE EQUITY UCITS ETF

HSBC Global Asset Management

Passive Investment Product Overview



* The Portfolio Composition of the HSBC ESI WORLDWIDE EQUITY UCITS ETF and HSBC WORLDWIDE EQUITY UCITS ETF are available on request, by email. Please go to www.etf.hsbc.com for more information.

Exchange Traded Funds (ETFs)Following the introduction of index funds to the retail market

in the 1980s, the emergence of ETFs in early 2000s in Europe

marked the next stage in the development of passive investment

products.

ETFs have the same investment aim as index tracker funds,

namely to replicate the performance of an index (whether

positive or negative) as closely as possible. Consequently, ETFs

also provide a low-cost investment solution by holding all or a

sample of the securities within the index, in the same proportion

as of the index. Similarly to index trackers, ETFs do not seek to

outperform their benchmark and hence do not need the structure

to support a stockpicking process, and the expense associated

with that. Therefore, similarly to index funds, ETFs’ running costs

are lower compared to actively-managed funds.

However, there are several key differences between ETFs

and index tracker funds. These are mainly to do with how the

funds are traded, how liquid they are and how transparent their

investment holdings are.

Whereas index tracker funds are traded and priced once a day, in

the same way as any standard mutual fund, ETFs are traded on

an exchange like a share of a company. As such, an ETF can be

bought and sold at any time during the trading day.

ETFs can also be a very liquid investment product, with this

liquidity derived from the liquidity of the underlying shares within

the index being tracked by the ETF.

One further difference is the level of transparency offered by an

ETF investment. Most ETF providers produce a daily list of the

securities held within the fund. Our range of 28 ETFs enables

our European clients to access Developed and Emerging equity

markets at global, regional or country levels. HSBC’s large

footprint in Emerging Markets has allowed us to develop a

successful broad Emerging Market ETF range to sit alongside

our Developed Market products. This combined offering allows

investors to access global equity markets and manage global

investment portfolios.

Every HSBC ETF publishes a full list of securities that it holds

on a daily basis*, in addition to up to date fact sheets on our

website: www.etf.hsbc.com.

As of end of August 2014, HSBC Global Asset Management had

over USD5.9 billion under management in its ETF range. Our

largest fund is the HSBC S&P 500 UCITS ETF had USD1.6 billion

under management at the end of August 2014.

Index Tracker Funds range Exchange Traded Funds range

HSBC American Index FundHSBC FTSE 100 Index FundHSBC FTSE 250 Index FundHSBC FTSE All Share Index Fund HSBC European Index FundHSBC Japan Index FundHSBC Pacific Index FundHSBC UK Gilt Index Fund

HSBC ESI WORLDWIDE EQUITY UCITS ETFHSBC Euro Stoxx 50 UCITSHSBC FTSE 100 UCITSHSBC FTSE 250 UCITSHSBC FTSE EPRA/NAREIT DEVELOPED UCITSHSBC MSCI AC FAR EAST EX JAPAN UCITSHSBC MSCI BRAZIL UCITSHSBC MSCI CANADA UCITSHSBC MSCI CHINA UCITSHSBC MSCI Emerging Markets FAR EAST UCITSHSBC MSCI Emerging Markets LATIN AMERICA UCITSHSBC MSCI EMERGING Markets UCITSHSBC MSCI EUROPE UCITSHSBC MSCI INDONESIA UCITS

HSBC MSCI JAPAN UCITSHSBC MSCI KOREA UCITSHSBC MSCI MALAYSIA UCITSHSBC MSCI MEXICO CAPPED UCITSHSBC MSCI PACIFIC ex JAPAN UCITSHSBC MSCI Russia Capped UCITSHSBC MSCI SOUTH AFRICA UCITSHSBC MSCI TAIWAN UCITSHSBC MSCI TURKEY UCITSHSBC MSCI USA UCITSHSBC MSCI WORLD UCITSHSBC S&P 500 UCITSHSBC S&P BRIC 40 UCITSHSBC WORLDWIDE EQUITY UCITS ETF


Passive Investment Product Overview


Alternative IndexationThe emergence of Alternative Indexation, also known as ‘Smart

Beta’, hailed yet another major development in the world of

index-based investments.

Alternative Indexation tries to address the issue of market

inefficiency, when the price of an asset does not always equal

its value. Particularly during market bubbles, the movements

of asset prices often appear less than rational and seem

disconnected to information flows. As a result, traditional indices,

which are based upon market capitalisation of its constituents,

tend to overweight over-priced companies and underweight

under-priced ones.

In contrast, Alternative Indexation strategies try to get around

this problem by moving away from capitalisation to determine

how much each constituent company should account for in an

index. They utilise a range of weighting techniques based not

on companies’ capitalisation but on other fundamentals. For

example, our new proprietary Economic Scale Indices weigh

stocks based on the economic contribution they make to the

global economy.

The HSBC Economic Scale Index series aims to generate

different risk adjusted returns compared to a traditional market

capitalisation weighted index over the long-term. We apply our

own rules-based methodology in index construction.

Indices are available on a single-country, regional or global basis.

The Economic Scale Index series consists of a total of 26 indices

(counting the different currencies available). It covers both

developed and emerging market companies worldwide and aims

to generate better risk-adjusted returns compared to a traditional

index over the long term.

We have launched funds which aim to track these indices and

expect to expand this range in the future.

For further information regarding our Alternative Indexation range, please go to www.global.assetmanagement.hsbc.com/amg/investment-capabilities/alternative-indexation. You can access daily index values and download the relevant factsheets and constituents.


We believe that HSBC Global Asset Management offers several

key strengths as an investment partner for you and your clients.

We have been present in passive investments for 25 years

and this long experience has enabled us to develop several

common values which we adhere to across our range of passive

investment solutions.

ExperienceHSBC Global Asset Management’s range of passive investment

solutions is managed by a dedicated and highly-experienced

investment management team based in London.

The fact that we have a common investment management

team working across our global passive investment product

range ensures that portfolio construction and risk management

processes are consistent across our family of index tracker funds

and ETFs.

Index selectionAcross our range of index trackers and ETFs, we believe

that index selection is a major contributing factor towards

ensuring strong investment performance. HSBC Global Asset

Management uses benchmark indices that comprise stocks

with a good level of liquidity. Where there is no widely-accepted

standard index (e.g. in markets such as Russia), we work with

index providers to construct a suitable index that balances high

levels of liquidity with broad market exposure.

Robust approach to portfolio constructionOur range of passive funds is based on a robust investment

process.

We start with what we call the “universe analysis” of the

underlying index, focusing mainly on fx allocation, rebalancing

costs, dividends and taxes. While defining the indexation

methodology, we consider client-specific requirements in relation

to the constraints of the fund. The objective of this exercise is to

achieve a minimal tracking error.

Why invest with HSBC Global Asset Management?

Stages in portfolio construction

Portfolio

Trading Analysis

Explicit and implicit costs assessed

Portfolio Construction

Liquidity, volume, index turnover, volatility, sector/market

cap composition)

Universe Analysis

FX allocation, rebalancing costs, dividends and taxes

Client-specific requirements

In order to decide on portfolio construction, we then look at

the investable universe with respect to liquidity, volume, index

turnover and volatility, as well as the distribution between large

and small cap stocks within it and its composition at the country,

sector and industry level. A matrix approach is then used to

manage factor risk in the portfolio and to ensure it has a neutral

position relative to the risk exposure implied by the benchmark.

We then carry out pre and post- trading analysis to ensure that

our portfolio is implemented in the most pragmatic and effective

way. Another part of this trading analysis, which is aimed at

minimising costs, is to estimate the actual costs, whether

they are explicit (taxes, custodian and execution) or implicit

(market impact).


Strong track record on performanceHSBC Global Asset Management has a strong record on both

tracking difference and tracking error (two key measurements of

fund performance) across our range of passive investment funds

when compared to our peers.

Our robust approach towards portfolio management, trading

and risk management all ensure that our passive funds are

able to track their benchmark indices closely, both in terms of

tracking difference and tracking error. Indeed, based on this

approach to efficient portfolio management, we have been able

to demonstrate that physical funds can deliver similar or better

tracking difference than synthetic funds over time without the

associated risks.

If we consider our range of ETFs for example, the tracking error

and tracking difference of both our S&P 500 UCITS ETF and our

MSCI Emerging Markets UCITS ETF compare very favourably

with our competitors.

The HSBC S&P 500 UCITS ETF is our flagship fund, which has

assets under management of over USD1.6 billion (as of end of

August 2014). This ETF is fully replicated and has a cost-efficient

ongoing charge figure (OCF) of just 9 basis points (bps). The

HSBC S&P 500 UCITS ETF has been very consistent in its

tracking accuracy since inception, with a tracking error of only 3

basis points since launch.

The HSBC MSCI Emerging Markets UCITS ETF also offers an

OCF of just 60bps, with HSBC Global Asset Management’s

longstanding presence on local equity emerging markets

ensuring that this fund also offers a low tracking error when

compared to its rivals.

While HSBC Global Asset Management’s approach is to

minimise tracking error as much as possible, it is widely accepted

that emerging markets funds will have slightly higher tracking

error figures when compared to developed markets. This has

much to do with the complexities around accessing and trading

the emerging market segments.

Risk managementRisk management is a key focus for HSBC Global Asset

Management. This not only occurs at the start of the portfolio

construction process, but continues on an ongoing daily basis.

Physical replication onlyWe use physical replication across our range of passive

investment products, as we believe this is the simplest

and most transparent investment strategy.

Where it is not considered cost-effective to buy all of

the securities in the underlying index, we use a process

known as optimisation, where we own a representative

proportion of securities in the underlying index. A good

case in point here would be broad indices comprising a

very large number of stocks, such as the MSCI Emerging

Markets Index or the MSCI World Index.

An alternative to physical is synthetic replication,

which uses swaps and other derivatives to mirror index

performance. Some studies have shown that synthetic

funds can offer a lower tracking error over time than full

physically replicated funds. However, we believe that the

risks associated with synthetic index-based funds – the

most important of which is counterparty risk – make

them a less attractive investment option.

As an example, if we consider emerging markets, HSBC

Global Asset Management has chosen to focus on

developing a physically replicated range of ETFs that is

high quality, straightforward and represents good value.

We have been able to achieve this thanks to our long

presence and expertise in emerging markets.

There are still some markets that pose challenges

for providers of physical-only ETFs. Over time, these

too might become available. For now, given the risks

associated with synthetic replication, we are comfortable

not having exposure to certain emerging markets which

cannot currently be managed on a physical basis without

compromising quality, simplicity and value.


Our passive investment management team is very experienced

in managing index solutions and uses a variety of processes to

ensure that our passive products track their benchmark indices

accurately, while minimising any tracking error.

To start with, net asset value and performance attribution are

calculated daily. The attribution calculation helps to identify

the source of any potential deviation in fund performance and

allows the team to monitor how closely the fund is tracking

its benchmark index. Other factors, such as the fund’s current

exposure to foreign currency, sectors or countries, are also taken

into account.

On an ongoing basis, HSBC Global Asset Management

monitors the impact of corporate actions, index rebalancing

(and associated trading costs) and exchange rate fluctuations

to ensure that tracking difference and tracking error are both

minimised and that our passive products are able to track their

benchmarks as closely as possible.

Focus on providing cost-effective investment solutionsHSBC Global Asset Management has developed a range

of high quality passive investment products that are

competitively priced.

HSBC Global Asset Management is able to use its global

footprint and existing local expertise to devise cost-effective

and focused passive investment products that offer a range of

market exposures, from global down to country-specific. Within

emerging markets, our trading scale enables us to negotiate

attractive dealing costs on local exchanges, which we can then

pass on to you and your clients via a lower ongoing charge

figure (OCF).

Our passive investment team is able to call upon the full

infrastructure and expertise of the wider HSBC group in

areas such as global markets, through to custodian and

administrative services.

All of which allows us to offer a broad range of passive

investment products which feature consistently low

management fees and ongoing charges when compared

to our peers.

The Emerging Markets AdvantageEmerging markets are accounting for a rising share of

international equity markets and consequently are playing

a growing role in asset allocation within global investment

portfolios.

HSBC Global Asset Management has extensive expertise

and a long track record in emerging market investment

and we can offer direct market access on many local

stock exchanges.

We are therefore able to go further in offering passive

investment products based on this fast-growing market

sector than other providers.

HSBC Global Asset Management has also been at the

forefront of innovation in offering physically replicated

passive investment solutions, with our range of Russian

and emerging market ETFs giving you and your clients

access to markets that were previously primarily available

via riskier synthetic ETFs.

Moreover, the tracking error and tracking difference

across our range of emerging market ETFs is very

competitive, compared to both physical and synthetic

funds.

The HSBC MSCI Russia Capped UCITS ETF (launched in

mid-2011) was the first Physical Russian ETF offered for

sale in Europe to invest in local stocks.

The HSBC MSCI MALAYSIA UCITS ETF and HSBC

MSCI INDONESIA UCITS ETF are also the first and only

physical ETFs in Europe on these exposures.


ConclusionHSBC Global Asset Management has been managing passive

investments since 1988. During this time, we have accumulated

valuable practical expertise in this fast-growing area of finance.

We were present in this market during a period of its rapid

evolution. We changed and evolved with it, and developed new

products - from index trackers in the 1980s, ETFs in the 2000s

and Alternative Indexation now.

Indeed, we believe that HSBC Global Asset Management is in a

strong position to take a leading position in passive investment,

offering you and your clients a broad range of complementary

passive investment solutions that can work alongside the active

portions of client portfolios.

Our range of passive investment products is competitively

priced and aims to deliver solid performance for you and your

clients. Our funds are all backed by the robust risk management,

well-established investment expertise and global resources of a

leading global asset manager with a well-known and respected

retail brand.

HSBC Global Asset Management’s global footprint has enabled

us to build a robust passive investment product range that

provides focused and cost-effective exposure to the markets

where your clients are looking to invest. All of our passive

investment products have been designed with you and your

clients in mind.


What to consider when investing in an index tracker fund and an ETF

Market risk

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.

Currency risk

Where overseas investments are held, the rate of currency

exchange may cause the value of such investments to go down

as well as up.

Emerging market risk

Investments in emerging markets are by their nature higher

risk and potentially more volatile than those inherent in some

established markets.

Geographic risk

Some of the Index tracker Funds and Exchange Traded Funds

invest predominantly in one geographic area; therefore any

decline in the economy of this area may affect the prices and

value of the underlying assets.

Property risk

The value of interests in real estate companies may be affected

by changes in interest rates, tax laws and environmental laws

and regulations. While the value of interests in REITs may be

affected by the value of the property owned or the quality of the

mortgages held by the trust.

Russian risk

There are significant risks inherent in investing in Russia, which

could affect the value of investment. These include a lack of

clarity in laws and regulations in the following areas: investor

protection, banks and other financial services, the Russian

economic system, taxation, transaction settlement and fiduciary

duty and responsibilities of company management. Please see

the supplement for full information.

Investors and potential investors should read the relevant Key

Investor Information Document (KIID) and full prospectus and

supplement for full details of the risks involves prior to making a

decision to invest. If you have any doubt about the suitability of

an investment you should consult a financial adviser.


Important InformationThis document is intended for professional clients only and

should not be distributed to or relied upon by retail clients.

The material contained herein is for information purposes only

and does not constitute investment advice or a recommendation

to any reader of this material to buy or sell investments. Care has

been taken to ensure the accuracy of this document, but HSBC

Global Asset Management (UK) Limited accepts no responsibility

for any errors or omissions contained therein.

Fund information

The HSBC index tracker funds referred to are sub-funds of HSBC

Index Tracker Investment Funds, an Open Ended Investment

Company that is authorised in the UK by the Financial Conduct

Authority. The Authorised Corporate Director and Investment

Manager is HSBC Global Asset Management (UK) Limited.

HSBC ETFs are sub-funds of HSBC ETFs plc, an investment

company with variable capital and segregated liability between

sub-funds, incorporated in Ireland as a public limited company,

and authorised by the Central Bank of Ireland. The company

is constituted as an umbrella fund, with segregated liability

between sub-funds.

Shares purchased on the secondary market cannot usually

be sold directly back to the Company. Investors must buy and

sell shares on the secondary market with the assistance of an

intermediary (e.g. a stockbroker) and may incur fees for doing so.

In addition, investors may pay more than the current Net Asset

Value per share when buying shares and may receive less than

the current Net Asset Value per Share when selling them.

For investors in the UK

All applications are made on the basis of the current HSBC ETFs

plc Prospectus, relevant Key Investor Information Document

(“KIID”), Supplementary Information Document (SID) and Fund

supplement, 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 from a stockbroker or

financial adviser. Investors and potential investors should read

and note the risk warnings in the prospectus, relevant KIID, SID

and Fund supplement. UK-based investors in HSBC ETFs plc are

advised that they may not be afforded some of the protections

conveyed by the Financial Services and Markets Act (2000), (‘the

Act’). The company is recognised in the United Kingdom by the

Financial Conduct Authority under section 264 of the Act.

Restrictions

The shares in HSBC ETFs plc 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. Affiliated companies of HSBC Global

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Index disclaimer

The EURO STOXX 50 is the intellectual property (including

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The securities based on the Index are in no way sponsored,

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HSBC Global Asset Management Ltd is the Sponsor for HSBC

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Management Ltd has policies and procedures in place to ensure

that it operates with transparency and accuracy in the Index

creation and management process.

This document is approved for issue in the UK by HSBC Global

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www.assetmanagement.hsbc.com/uk

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ContactFor more information, please contact us:

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