september 2011 hsbc gif latin american equity presentation · hsbc gif latin american equity...

1

For professional clients only

HSBC GIF Latin American Equity PresentationSeptember 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 Latin American Equity Fund overview

Competitor analysis

Outlook

Appendix

Contents

HSBC Overview

4

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.

5

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 30th June 2011

HSBC’s presence in emerging markets

7


HSBC Global Asset Management is a leading global asset management firm managing assets totalling USD453.4 billion at the end of June 2011.

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.

8

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 30th June 2011

Emerging Markets AUM by asset class (US$ billion)

Among the largest managers of emerging market funds globally, with approximately USD139 billion in assets under management and over 200 dedicated emerging markets investment professionals in 14 key locations

Latin America

58.9

Asia Pacific61.1

EMEAMENA

9.9Global

9.2

Equity39.9

Fixed Income

76.3

Balanced17.3

Alternative0.8

Liquidity4.8

The Investment Team & Emerging Markets Investment Resources

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Our Latin American Equity Investment Team & Support

Source: HSBC Global Asset Management, Information as of June 2011 – *Numbers of teams are in brackets

Portfolio Manager

Economist (2*)Strategist (2*)

Brazil PMs &Latam Equity Analysts

(10*)

Natalia Kerkis

Latam Investment Committee (15*)

Dealing(3 Brazil, 3 London*)

Aline Cardoso Fernando Fontoura

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Latin American Equity Investment Team

Experienced and stable teams An average of 14 years experience in emerging markets investment.

The Latam

Equity team own and make all decisions

Small and focused Focused, effective teams of decision makers supported by substantial pool of research resourcesA proven investment process based on fundamentals and driven by a core belief that valuations are ultimately driven by company returns

Global resources Fully leverage HSBC’s network of emerging market specialists throughout Latam, EMEA and the world

Significant support Strong team of over 65 investment and support resources allows investment focus

Proprietary research Provides clear research edge and key information advantages

Source: HSBC Global Asset Management; Information as of June, 2011

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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/ 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 May 2011; (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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Investment Philosophy

Non contractual documentNon contractual document

“A bottom up, fundamental approach to stock selection based on disciplined and proprietary research, long term horizon and valuation focused”.

•

Latam markets are inefficient•

Country decisions are the logical starting point•

Cash flows drive long-term stock returns•

Proprietary fundamental research is key to success•

Valuation lies at the heart of the process•

High conviction portfolio drives alpha generation•

Small teams make the most effective investment decisions•

We aim to identify and exploit market inefficiencies and stocks most likely to outperform

We believe that…...

Source: HSBC Global Asset Management; Information as of July, 2011

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Investment Process –

Summary

Stock selection

Continuous assessment of portfolio positioning

Monitoring of volatility and Beta on portfolio and position basis

Ensure adherence to regulatory and fund specific guidelines• front-end systems• client guidelines• in-house risk limits• regulatory guidelines

Implement investment ideas and portfolio strategy

Determine optimal position sizes•

identified inflection points

• liquidity• volatility

Use of limits on country and stock exposures to control risk

Review Latam equity universe through return on capital and valuation metrics

Global macro analysis• economics• sector trends• geo-politics

Country analysis• local economics• market valuation• earnings

Global sector / stock analysis

Bottom-up fundamental analysis

Development of investment ideas, exploiting themes and value opportunities

Relative valuation analysis on universe of stocks

Risk monitoringPortfolio construction

Output: -Stock selection inputs

Output: - Individual Stock Ideas

Output:client portfolio

Output:assessment of

portfolio positions

Idea generation

Approximately 70% of our process is focused on stock selection; 30% on country selection


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Monthly Monthly BRIC forum

Specific focus on four key markets. Attended by local country PMs.

Monthly GEM forum All London based GEM PMs

and analysts inc. New Frontiers. Global backdrop and key positive/ negative drivers for GEM. Break into a smaller group where specific topics of interest are discussed

Monthly Latin America Investment Committee

Investment managers across HSBC’s Latam network. Outlines alternative scenarios for global and country economics. Provides forecast for economic variables, macro economic outlook and asset allocation preferences

Weekly Asia Weekly CallAttended by Analysts and Regional PMs

following a sector rotation programme

Latin America analysts call1:1 with each Sector Analyst following a sector rotation programme

New Frontier meetingsFocus on key positions, themes and cross-over markets

Daily / Ad Hoc Constant interaction on the Desk

Input from analysts across the network

Company management meetingsExtensive travel to meet companies

often with local EM equity team members

Investment Process –

Discussion Forums

Source: HSBC Global Asset Management; Information as of June, 2011

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Investment Process

The team monitors a universe of approximately 350 stocks for Latam:-

Stocks in MSCI Latin America countries.-

Selected stocks in MSCI Latin America Frontier Market countries (liquidity dependent).-

Companies operating in EM Latin America countries, but listed on

a developed market exchange. The fund focuses primarily on stocks with minimum daily liquidity of USD 500K.

Ideas derived from;-

On-the-ground research -

Internal screening processes-

External sources -

HSBC global network Ideas are analysed in the context of:

-

Returns to shareholders and valuation metrics -

Changes in fundamentals as a result of corporate events -

Macro economic environment -

Industry trends

Idea Generation Stock Analysis Portfolio Construction Risk Monitoring


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Investment Process -

Analyse individual stocks and crystallise individual stock ideas

The in depth analysis is based mainly on the following:

-

Corporate Management / Governance.

-

Growth shock or cost of capital issues.

-

Dynamic businesses versus static numbers.

-

Balance Sheet.

-

Underlying return on capital drivers for individual companies.

The stock analysis continues until the portfolio managers have sufficient individual stock ideas to be able to construct their portfolio.

Universe Analysis Stock Analysis Portfolio Construction Risk Monitoring


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Investment Process -

Construct optimal portfolio within defined trading limits


Disciplined portfolio construction focused exclusively on stocks

that meet proprietary analytical criteria

The portfolio has 50-70 positions

Position size will be influenced by:-

Individual company volatility

-

Individual company liquidity

-

Macro factors (economic and political) may reduce deviation from

benchmark

-

Overall country exposure limits (both overweight and underweight)

-

Exposure to a particular theme


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Investment Process

-

Assess portfolio positions and adjust if necessary

The team continuously assesses volatility and beta-

Monitor on a position basis as well as at overall portfolio level.

Style and EMA Risk systems used as a final check in the portfolio construction process

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

Risk monitoring is integral to our investment process -

Monthly risk meeting chaired by HSBC’s Global Asset Management CIO Equities -

Systems used include BARRA, EMA



Risk Management

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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 Latin American markets.

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

Risk Management Framework

24

Risk Monitoring

Source: HSBC Global Asset Management Information as of January 31 2011. Benchmark is MSCI Latam 10/40 Index – Investments involve risk and the objective and targets may not be achieved. *These are the current internal target, which may change and are not detailed in the fund's prospectus. These targets are indicative only and are not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet these targets.**Ex-ante tracking error taken from EM Applications.

Latin American Equity Fund Target* Current Relative weight

Number of stocks 50 –

70 60

Number of countries > 2 7

Country positions relative to benchmark Individual country limits -5.75% to 5.07%

Company positions relative to benchmark Max 10% of NAV -

6.10% to 3.11%

Sectors position relative to benchmark Unconstrained -6.16% to 6.18%

Tracking error** Maximum 15% 3.39%

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Latin America/Brazil Equity Strategies

Strategy AUM (USD Mn) Benchmark Inception Date

“B”

part

of

HGIF BRIC 352 MSCI Brazil 04/04/2005

HGIF Latin American Equity 296 MSCI LATAM 10/40 06/07/2006

Latin America Equity, Institutional Mandate

277 MSCI LATAM 10/40 02/08/2008

Latin America Equity, UK Mandate

15 MSCI LATAM 10/40 15/01/2008

HGIF Brazil Equity 2,355 MSCI BRAZIL 10/40 24/12/2004

Brazil Equity –

Mother Fund 1,766 MSCI BRAZIL 10/40 01/03/2006

Brazil Equity Quarterly Dividends–

Mother Fund80 MSCI BRAZIL 10/40 31/07/2008

HSBC Brazil Equity –

Infrastructure

25 n/a 22/04/2010

Non contractual documentSource: HSBC Global Asset Management; Information as of June 30, 2011

Market Overview

27

Global Overview –

June 2011

US – Sluggish growth•

Manufacturing activity slowing.•

GDP growth being revised downward, prompting fears of a “double dip”

recession. •

Federal Reserve's quantitative easing program (QE2), has ended.•

“Debt ceiling”

worries and possible risk of US default, though unlikely, persist.

China – Economy cooling •

Money supply growth fading.•

PMI dropped to 50.1, indicating the withdrawal of earlier stimulus is having an impact.

•

Inflation still high.•

Soft landing likely to prevail

Japan – Effects of earthquake & tsunami still present•

Supply disruptions still persist in many industries.•

Car exports have suffered tremendously.•

Signs of growth surfacing; reports suggest that nearly 100% of Japanese automakers should be back to full capacity by end of July.

Europe – Fears of sovereign default remain•

EU austerity package accepted by Greek government.•

Fears of debt problems in other countries remain (Portugal, Ireland, Spain).

•

Euro zone composite PMI fell to 53.3 in June, despite German strength.

Commodities•

Despite economic slowdown in many parts of the world, commodities prices are still historically high.

Non contractual document

Source: HSBC Global Asset Management; Information as of June 2011.Any forecast provided is indicative and not guaranteed in any way; For professional investors ‘and intermediaries’ internal use only and not for further distributor.

Industrial PMI – Developed Markets

Real Interest Rate (US)

Source: Bloomberg, HSBC Global Asset Management; Information as of July 2011.

-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.55.05.5

1987 1991 1995 1999 2003 2007 2011

28

LatAm

Overview (1) –

June 2011

FX: Fundamentals remain supportive•

Despite of the commodity sell-off, terms of trade in LatAM

remain at high levels•

FDI also supporting currencies strengthening in the region •

Chile, Colombia and Mexico are adopting measures to limit further FX appreciation.

Less Expansionist Fiscal Policies - Positive for Inflation•

Region as a whole making strides against latest inflation challenges.

Improved country and institutional fundamentals•

Increased credit ratings for Peru (outlook to “positive”), Colombia (investment grade status), and Brazil (BBB-

to BBB).

Brazil•

1Q11 GDP numbers showed a more balanced growth profile •

Inflation, while above the Central Bank´s

target range, beginning to level off.

Mexico•

External demand strong with high oil prices and booming non-oil exports.•

Domestic demand recovering at a slow pace

Peru•

Humana's election causing concerns amongst investors who fear higher corporate taxes and increased government intervention

•

What to focus next: appointment of new cabinet members (expected

for mid-July).•

Strong economic activity with subdued inflation figures

Chile•

Consumption and retail sales still strong

Colombia•

Economy growing rapidly, government expects 2011 GDP growth to reach 6%

Source: HSBC Global Research, July 2011.Any forecast provided is indicative and not guaranteed in any way; For professional investors and intermediaries’ internal use only and not for further distributor.

Headline Inflation vs Target

FDI (USD bn)

Source: HSBC Global Research, CEIC, July 2011

Source: HSBC Global Research, Central Banks, July 2011

29

Valuation –

On P/B vs. ROE method, Brazil is undervalued, against its EM peers

LatAm P/B vs. ROE valuations

Source: FactSet, MSCI, IBES, Factset Market Aggregates. Data as of July 04, 2011.

Brazil, Mexico and Chile all generate similar ROEs

of 15-16%, however, Brazil trades at a much lower P/B multiple, i.e. it is undervalued.

Mexico and Chile in comparison are expensive.

29

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M o roc co

H u n g ary

C z ech

E g yp t

P olan dT urk ey

R u ssia

S. A frica

Peru

C o lom biaC h ile

Mex ico

B raz il

Ph ilipp ine s

T hai land

In do n esia

M alaysia

In dia

T aiw an

K o rea

C h ina

S & P 500

E u rop e

1 .0x

1 .5x

2 .0x

2 .5x

3 .0x

3 .5x

4 .0x

4 .5x

7% 1 2% 17 % 22 % 27% 32%

20 1 1e R O E

2011

e P/

Book

30

Brazil Macroeconomic Summary

Source: HSBC Global Asset Management Information as of June, 2011

Politics•

Recent announcements pointing to a more moderate expansionist strategy in terms of fiscal policy and public credit.

FX Market•

BRL appreciation continuing but has not hurt exports;•

Government has adopted measures to deal with this trend;

Economic growth•

2011 GDP forecast at 4.0%.•

Industrial production stability reflecting both imports increase

and inventories adjustment;

•

Exports continuing to grow; Brazil has a positive trade balance.

•

We remain optimistic about the economy for the next few quarters;•

Key drivers indicating a continued domestic demand growth;

Inflation•

Central Bank continuing to take a proactive approach to fighting

inflation to keep it within manageable levels.

•

Inflation is leveling off and expected to decrease in the near term.

Monetary policy•

We expect one more interest rate hike for 2011 (expected rate of

12.50%);•

There are some uncertainties regarding the Central Bank's next steps (total budget and macro prudential measures).

Source: Central Bank of Brazil as of July, 2011

2007 2008 2009 2010 2011 f

GDP (%) 6.1 5.1 -0.6 7.5 4.0

CPI (%) 4.46 5.9 4.3 5.9 6.1

Nominal interest rate 11.25 13.75 8.75 10.75 12.50

Public Debt (% GDP) 45.1 38.4 42.8 40.4 39.3

Trade Balance (USD bi) 40.0 24.8 25.3 20.3 20.0

BRL Currency 1.77 2.34 1.74 1.67 1.60

31

Mexico Macroeconomic Summary (1)

Source: HSBC; Information as of June, 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

Economic growth:• GDP: 2011 growth estimated at 4.37%• Real GDP grew 4.6% in 1Q11• Exports increasing, resulting in trade surpluses (May USD555 mn)

2011:• Employment and manufacturing improving overall.• Consumption recovering and access to credit increasing.

Good news: • Retail sales, up 1.1% MoM in April (4.9% YoY), show a clear upward path and

suggest that consumption continues to soar. • Exports to countries such as China and Brazil continue to increase at a fast pace,

limiting Mexican exposure to slowdown in the US.• Industrial production, which recently slowed down due to supply chain disruptions

from the Japan earthquake, is predicted to recover.

Bad news:• Unemployment rate still at high level (5.2% YoY in June)• Latest monthly economic activity indicators (IGAE) for April indicated that the

economy, while growing, is slowing down.

109

111

113

115

117

119

121

123

2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011

(inde

x)

SA Trend

Source: HSBC Global Research, June 2011

83

86

89

9295

98

101

104

2003 2004 2005 2006 2007 2008 2009 2010 201195

100

105

110

115

120

United States (left axis) Mexico (right axis)

83

86

89

9295

98

101

104

2003 2004 2005 2006 2007 2008 2009 2010 201195

100

105

110

115

120

United States (left axis) Mexico (right axis)

Retail Sales as of June 2011

Industrial Production, US vs Mexico


32

Mexico Macroeconomic Summary (2)

Inflation: Benign inflation outlook for the rest of 2011

• Inflation to remain relatively low and stable with year end expectations hovering around 3.70%.

• 3.19% YoY for in June vs 3.21% in May.

Monetary policy:

• Policy rate is likely to be maintained at 4.5% until 1Q12

Fiscal policy:

• On track, with a manageable deficit and easy financing, as well as manageable debt levels

• We do not expect any substantial fiscal advancement or retrenchment

Inflation Expectations


Source: HSBC; Information as of June, 2011


Core Non Core

3,0

3,3

3,5

3,8

4,0

2011 2012 2013 2012-2015 2016-2019

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010

(USD

m)

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010

(USD

m)

Foreign International Reserves

33

Chile Macroeconomic Summary (1)

Economic growth:

• GDP Forecast 2011: 6.0 – 7.0%1

• 1Q11 GDP rose 9.8% YoY

Good News:• Despite slowing global economic growth, Chile continues to

grow at a rapid pace.

• Consumer confidence is at record levels

• Private sector-driven growth to continue throughout 2011 at a fast pace

• Industrial production has recovered since the Feb10 earthquake.

• Trade balance posted a USD1.5 bn surplus in April.

Bad News:

• More growth, but continued risks to inflation.

• Unemployment at high level 7.0% in April 2011, though on a downward trend.2

• Copper exports, which make up 51.2% of the country's total exports, decreased by 3.8%2

Source: HSBC, Central Bank of Chile, UBS LatAm Monthly Review2; Information as of June, 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

Source: INE. Information as of March, 2011

0

2

4

6

8

10

12

14

16

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

12 m

onth

s tr

ailli

ng, U

SDbn

INE old survey INE new survey

Source: HSBC Research ;Information as of June, 2011

Monetary policy rate forecast: Nominal and real

Unemployment Rate in Chile

34

Chile Macroeconomic Summary (2)

Inflation:

• Inflation forecasts: 2011 = 3.6%

• 3.26% YoY as of May 2011

FX Market:

• CLP strengthening raised questions of possible intervention by authorities.

Monetary Policy:

• BCCh increased rate by 25 bps in June. Policy rate stands at 5.25%

Fiscal Policy:

• The 2011 budget targets a structural deficit of 1.8% of GDP and a 1.0% deficit level by 2014.



-6

-4

-2

0

2

4

6

8

10

12

2004 2005 2006 2007 2008 2009 2010 2011

y-o-

y %

CPI headline Tradables Non tradables

Consumer Prices

75

80

85

90

95

100

105

110

115

99 00 01 02 03 04 05 06 07 08 09 10 11

1986

=100

Real effective exchange rate 2001-2011 average

Weaker CLP

Stronger CLP

FX interventions

Real Exchange Rate

Source: HSBC Research, June 2011


35

Peru Macroeconomic Summary (1)

Economic growth:

• GDP forecasts: 2011 & 2012 = 6.5%

• High prices of copper, gold and silver supportive of continued growth.

2011:

• Election of Humala a game changer: policies in line with Venezuela's Chavez or Brazil's Lula?

• Peru on track for a fiscal surplus in 2011

Good News:

• High growth potential, at 7.2% in the past five years, nearly double the Latin American average.

Bad news:

• Lack of clarity on exactly what kind of plans and policies this new government will implement


Source: HSBC, Central Bank of Peru, Information as of June 2011


Inflation Ranking

GDP Growth (%)

0 2 4 6 8 10

EgyptCzech Republic

HungaryVenezuela

LebanonIndonesiaPanamaVietnam

PeruIndia

TOP 5BOTTOM

5


0 10 20 30

VenezuelaArgentina

VietnamEgyptIndia

MalaysiaUAEPeru

TaiwanCzech Republic

TOP 5BOTTOM 5

36

Peru Macroeconomic Summary (2)

Inflation:

• Inflation forecast: 2011: 3.0 – 3.05%1

• Likely to be the lowest in the region in 2011 and 2012

FX Market:

• Strong FDI favoured the PEN’s strengthening in 2011

Monetary policy:

• USD inflows are an obstacle in holding PEN appreciation and conducting an independent monetary policy

• The BCRP raised the MPR in May 2011 to 4.25%; kept rate unchanged as of June 2011 meeting

Fiscal policy:

• With inflation under control, the government is likely to reduce the fiscal stimulus only gradually.

• Large infrastructure projects boosting productivity and potential output


Source: HSBC, information as of June 2011 1. Central Bank of Peru, June 17, 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

0

1

2

3

4

5

6

7

8

01-08 07-08 01-09 07-09 01-10 07-10 01-11

y-o-

y %

Core inflation Headline inflationSources: INEI, BCRP & LatinSource- Peru

Peru CPI Inflation (%)

37

Colombia Macroeconomic Summary (1)

Economic growth:

• GDP for 1Q11 5.1% YoY.

• GDP forecast: 2011 = 4.5%

2011

• Consumer confidence is still growing.

Good News

• Moody's upgraded in end of May; S&P upgraded to BBB-, the first time since 1999.

• Colombian Terms of Trade above historical average

• Retail Sales rose 23.2% YoY in April, indicating that consumption is alive and growing.

Bad News

• Export growth may be limited by a stronger COP, which in turn could promote faster growth of imports.


Source: HSBC Global Research; Information as of June, 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

8,0

10,0

12,0

14,0

16,0

Ene-05 May-06 Sep-07 Ene-09 May-10

%

Source: DANE

60

65

70

75

80

85

Ene-00 Ene-02 Ene-04 Ene-06 Ene-08 Ene-10

%

Index of Capacity Utilization in the Manufacturing Sector 6m moving average

Source: Andi (Entrepreneurs´national association)

Capacity Utilization

Unemployment (%)

38

Colombia Macroeconomic Summary (2)

Inflation:

• Inflation: May 2011 = 3.02% YoY

• Inflation rise mostly due to foodstuffs; core inflation virtually unchanged.

FX Market:

• Shift in FX policy: more strategic approach away from the reactionary and ad hoc policies of the past.

• Reform will be implemented in order to simplify FX regulation and make the market more balanced.

Monetary policy:

• Central Bank raised the overnight lending rate to 4.25% in June.

Fiscal policy:

• The fiscal reform agenda set by the Santos administration has been very beneficial.

• Tax reforms would allow for 1% of GDP increase in revenues


Source: HSBC Global Research; Information as of June, 2011Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

1,5

4,0

6,5

9,0

Ene-07 Jul-07 Ene-08 Jul-08 Ene-09 Jul-09 Ene-10 Jul-10

y-o-

y %

Headline CPI CPI ex Food Core 20Source: DANE, Banrep

CPI Inflation (%)

HSBC GIF Latin American Equity Fund -

Overview

40

Executive summary

A proven investment process Based on fundamentals and driven by a core belief that valuations are ultimately driven by company returns

Valuation lies at the heart of the process Price to Book value and Return on Equity are the two principle valuation metrics

Focus on Alpha generation Majority of our time is spent analysing and meeting companies

Active management Rather than tracking the benchmark

Source: HSBC Global Asset Management; Information as of June, 2011.

41

Fund type and domicile

UCITS III Luxembourg SICAV part of the HSBC GIF range

Launch Date

Fund:

06/07/2006

AC Share Class: 12/04/2010

Base Currency

USD

Benchmark*

MSCI Latin America 10/40 USD Net

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.

42

Country Weightings versus Benchmark*Country Weightings

HSBC GIF Latin American Equity Fund – Country weightings*

Source: HSBC Global Asset Management as at 30th June 2011. * For illustrative purposes only. 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.

-3.5

-2.3

-0.8

0.2

1.5

2.2

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Chi

le

Col

ombi

a

Peru

Mex

ico

Bra

zil

Pana

ma

Brazil67.0%

Mexico20.4%

Panama2.2%

Chile4.5%

Colombia1.8%

Cash2.7%

Peru1.4%

43

Sector Weightings versus Benchmark**Sector Weightings

HSBC GIF Latin American Equity Fund – Sector weightings*

Source: HSBC Global Asset Management as at 30th June 2011. * For illustrative purposes only. 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.

Financials25.7%

Materials21.4%

Industrials17.7%

Consumer Discretionary

10.1%

Energy8.4%

Health Care1.7%

Cash2.7%

Consumer Staples2.5%

Telecommunication Services

9.8%

-9.9

-6.5-4.1

-1.4 -1.6

0.8 1.12.5 3.1

13.3

-15

-10

-5

0

5

10

15

Con

sum

er S

tapl

es

Util

ities

Ener

gy

Mat

eria

ls

Info

rmat

ion

Tech

nolo

gy

Tele

com

mun

icat

ion

Serv

ices

Hea

lth C

are

Fina

ncia

ls

Con

sum

erD

iscr

etio

nary

Indu

stria

ls

44

HSBC GIF Latin American Equity Fund – Overview individual stock exposures*

Top 10 Holdings

Source: HSBC Global Asset Management as at 30th June 2011. * For illustrative purposes only‘. 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. The above material is for information only and does not constitute any recommendation to buy or sell any investments

Company Country Sector Portfolio Weight (%)

Vale Brazil Materials 9.38%

Itau Unibanco Holding Brazil Financials 8.11%

Petroleo Brasileiro Brazil Energy 7.97%

America Movil SAB de CV Mexico Telecommunication Services 7.25%

BR Malls Participacoes Brazil Consumer Discretionary 3.14%

CCR Brazil Industrials 2.92%

Grupo Financiero Banorte SAB d Mexico Financials 2.86%

Banco do Brasil Brazil Financials 2.66%

Ternium Brazil Materials 2.62%

Duratex Brazil Industrials 2.60%49.51%TOTAL

45

Performance Net –

AC Share Class

Source: Morningstar as at 30th June 2011. For illustrative purposes only‘. 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.

50

70

90

110

130

150

170

190

210

230

Jul-0

6

Nov

-06

Mar

-07

Jul-0

7

Nov

-07

Mar

-08

Jul-0

8

Nov

-08

Mar

-09

Jul-0

9

Nov

-09

Mar

-10

Jul-1

0

Nov

-10

Mar

-11

HSBC GIF Latin American Equity AC USD MSCI EM Latin America NR USD

Rolling time 30/06/2005 to 30/06/2006

30/06/2006 to 30/06/2007

30/06/2007 to 30/06/2008

30/06/2008 to 30/06/2009

30/06/2009 to 30/06/2010

30/06/2010 to 30/06/2011

HSBC GIF Latin American Equity Fund N/A N/A 20.43 -39.50 38.44 22.08

As at 30 June 2011 1 M 3 M 6 M 1 Y 3 Y 5 Y

HSBC GIF Latin American Equity Fund -1.06 -3.13 -4.69 22.08 2.25 N/A

Benchmark -0.37 -1.86 -1.27 27.35 9.10 N/A

Calendar years 2011 2010 2009 2008 2007 2006

HSBC GIF Latin American Equity Fund -4.69 18.66 126.23 -59.49 58.69 N/A

Benchmark -1.27 17.33 102.19 -49.56 43.21 N/A

46

Performance attribution - Country

Source: HSBC Global Asset Management as of 30th June 2011. It is for illustrative purposes only, and should not be relied on as indication for future returns.

Top 5 country Port. Avg Weight

BM Avg Weight

Allocation Effect

Selection + Interaction Total Effect

Panama 2.20 0.00 0.64 0.00 0.64

Peru 2.44 2.53 -0.08 0.04 -0.05

Brazil 66.50 65.21 0.00 -0.08 -0.08

Bottom 5 country Port. Avg Weight

BM Avg Weight

Allocation Effect


Colombia 1.42 3.90 -0.21 0.03 -0.18

Chile 3.80 7.71 -0.38 -0.03 -0.42

Mexico 21.12 20.66 0.02 -0.63 -0.61

47

Performance attribution - Stock

Source: HSBC Global Asset Management as of 30th June 2011. It is for illustrative purposes only, and should not be relied on as indication for future returns.

Top 5 stock Port. Avg Weight

BM Avg Weight

Allocation Effect


Copa Holdings Sa 2.20 0.00 0.64 0.00 0.64

Cia Hering 1.90 0.33 0.35 0.00 0.35

Vivo Participacoes 1.48 0.57 0.32 -0.04 0.28

Companhia Siderurgica Nacional 0.00 1.25 0.27 0.00 0.27

Br Malls Participa 2.91 0.48 0.25 0.00 0.25

Bottom 5 stock Port. Avg Weight

BM Avg Weight

Allocation Effect


Credicorp Ltd 1.76 0.78 -0.20 0.00 -0.20

Hypermarcas Sa 0.79 0.37 -0.21 0.00 -0.21

Fomento Econ Mexic 0.00 1.55 -0.22 0.00 -0.22

Ternium Sa 2.47 0.00 -0.37 0.00 -0.37

Companhia D Bebidas Ds Americas 0.00 2.75 -0.47 0.00 -0.47

Competitor Analysis

49

Competitor Analysis

Comparative Advantage

►

The fund sits in top decile

in 2009 and 2007

►

Lipper FMI Equities Latin America sector had $3.0bn inflows 12 months to May 2011

►

HSBC Latin America Equity Fund has AUM $316m with $21m inflows in the past 12 months

►

The fund has experienced a significantly higher return than the benchmark and peer group

►

The fund has achieved an average alpha of 1.74 over three years, which far exceeds the performance of the peer group average

Fund Name Data in USD Million as of May 2011 AUM

3 months net sales

12 months net sales to May 2011

2010 net sales

2009 net sales

2008 net sales

2007 net sales

HSBC GIF Latin America Equity 316 -22 21 62 83 -92 223

Lipper FMI Equities Latin America Sector Total 41,093 -406 2,983 4,044 4,772 -5,509 10,634

Source: Morningstar Direct, Lipper FMI, June 2011

50

Competitor Analysis

Source: Morningstar Direct, Lipper FMI, June 2011

Outlook

52

Portfolio Strategy


Source: HSBC Global Asset Management; Information as of July, 2011.Any forecast provided is indicative and not guaranteed in any way; For professional investors ‘and intermediaries’ internal use only and not for further distributor.

Country (weighting vs benchmark) Current strategy Key rationale

Orientation remains domestic; latest market correction re-opened interesting valuation window in consumer related name and banks

Valuations are attractive in all sectors ex-staples and utilities We recognize policy (monetary/fiscal) concernsStrong growth rates in the next few years given ambitious government investment plan, the Panama Canal expansion, and strong domestic demandCopa

Airlines has a hub-and-spoke model linking North, Central and South America

US growth “surprise" close to the end; Mexican expected cyclical recovery may not materializeHowever, macroeconomic indicators continue improving. Exports continue increasing at reasonable ratesInternal sectors of the economy under moderate recovery modePositive on selective Banks, Steel, Petrochemical and Infrastructure

Solid macro economic background but limited investment opportunities on the stock exchangeStill uncertainties regarding key cabinet members appointments after Humala´s

election Lack of clarity on exactly what kind of plans and policies this government will implement

Strongest fundamentals in the Region (growth, investments, politics)Positive on selective Banks, Mining and Telecom We took advantage of the recent market correction to reduce our UW

S+P investment grade: priced-in for equities, but very supportive for increasing FDISantos reform agenda also constructive Strong economic activityWe hold an underweight on Colombia mainly due to high valuation multiples and lack of liquid domestic consumption stocks

Chile

Colombia

Underweight

Peru

Brazil

Overweight

Panama

Mexico Neutral

53

Why remain positive on LatAm

equities in 2011?

Source: HSBC Global Asset Management; Information as of July, 2011.Any forecast provided is indicative and not guaranteed in any way

Strong alternative to Developed Markets •

Despite the end of QE2, concerns of slowing economic growth could propel the Fed to keep rates low and introduce new QE measures.

•

European debt crisis looming; Japan GDP declining.•

Recent GDP growth overall in LatAm

was higher than in DM.

Inflation stabilizing•

Decreasing Inflation could be give a boost to equities in the short-term.

Commodity Prices•

Prices of oil, minerals, and foodstuffs have stabilized after being oversold in May, indicating that demand for such products is still strong.

LatAm

Banks are conservative and very profitable•

One of the highest net interest margins and net capitalization ratios.

Strong demographics + Strong fundamentals = Growth Stability•

Majority of population is young, with their most productive years ahead of them.

•

Pent up demand from prior years of austerity beginning to be served.•

Job growth has been increasing all over LatAm, especially in Mexico and Brazil.

Brazil: Business & consumer confidence high•

High growth, low multiples and oversold stocks.•

Adjustment in Brazil is cyclical and not secular.

GDP Growth (%)

Unemployment Rate in Latin America (%)

Source: HSBC Global Research, July 2011

4,0

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

Mar

-09

May

-09

Jul-0

9

Sep-

09

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-

10

Nov

-10

Jan-

11

Mar

-11

Brazil Chile Uruguay Mexico

-4-202468

10

ARG BRA CHI COL MEX PAN PER URU VEN

2010 2011f 2012f

54

Latin America Share in EM

Source: IMF, BofA Merrill Lynch Global Research; Information as of August, 2010

Growth in developed economies is sputtering, while LatAm

economies remain comparatively healthy

Although Regional GDP accounts for only 8.5% of the world’s GDP, it represents more than 18% of EM GDP. •

In nominal USD terms, LatAm

GDP rose to US$3.4 trillion in 2009 and has averaged around 3.5% growth over the last five years

•

Brazil and Mexico: 11% of EM GDP and 60% of total LatAm

GDP

In an uncertain global growth environment with slowing activity,

LatAm

will be affected (like any other region). However, LatAm

is in much better shape than during previous crises.

EM GDP by region (% of total)

Source: CIA World Fact Book; Information as of June, 2011

LatAm GDP by country (% of total, 2010)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992

1994

1996

1998

2000

2002

2004

2006

2008

Central and Eastern Europe Independent States Developing AsiaMiddle East and North Africa Sub-Saharan Africa Latin America

4% 5%5%

12%

25%9%

4%

36%

Chile Venezuela Colombia OtherMexico Argentina Peru Brazil

55

55

Latin America Growth Drivers

Source: IMF, BofA Merrill Lynch Global Research; Information as of August, 2010, latest data available.

Latin American growth in 2010 only trumped by Emerging Asia

On the demand side, growth in LatAm

is dominated by the consumer. We expect conditions for domestic

demand growth to remain strong.

•

Private consumption accounts for 65% of GDP, followed by investment at 21% and government consumption at 14.5%•

Imports have been outpacing exports over the last 5 years

GDP per capita PPP weighted (international dollars, 2009) Aggregate LatAm GDP by demand-side component (% of GDP, avg, 2005-2009)

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

LatAm

GDP (% of total)

14.5%Government

Consumption

21.1%Investment

-18.8%Imports

Private Consumption 65.1%

Exports 17.7%

19.81818.131

14.56114.341

13.62813.163

12.20111.788

10.57910.514

10.1778.9368.8968.777

8.6387.881

7.7197.366

4.8404.5334.455

2.627

0 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 20.000

Trinidad and TobagoBarbadosArgentina

ChileMexico

UruguayVenezuela

PanamaCosta Rica

BrazilDominicaColombia

Dom. Rep.Jamaica

PeruEcuador

BelizeEl SalvadorGuatemala

ParaguayBolivia

Nicaragua

56

Demand and Supply: Important Differences Among Countries


On the demand side:•

Consumers in Mexico and Peru account for roughly 68-69% of GDP

•

Government participation in Brazil is the highest of all (20,1%); In Peru and Mexico it represents 8.9%

•

Investment is lowest in Brazil at 17%; this could be related to government spending on public projects crowding out private sector investment projects

•

Colombia, Mexico and Peru run trade (goods and services) deficits to fund expansion;

GDP per capita PPP weighted (international dollars, 2009)

68.2% 60.7%

67.3%62.7% 69.6% 68.3%

65.4%

13.6% 13.6%

39.0%17.2%

20.2% 20.2%

20.1%

12.1% 8.9%

12.5%15.7% 8.9% 8.0%

16.0%

-12.4%

12.0%

-44.7%-19.6% -20.3% -20.3%

-41.2%

21.5%

17.0%

25.7%20.9% 22.9% 22.8%

30.5%

-0.2%

0.5%

0.3%

3.1% 0.1% 0.1%

6.5%

-40%

-20%

0%

20%

40%

60%

80%

100%

Argentina Brazil Chile Colombia Mexico Peru Venezuela

Private Consumption Exports Government ConsumptionImports Investments Change in inventories

57

57

Demand and Supply: Important Differences Among Countries

On the supply side:•

Manufacturing and retail sectors combined make up 25-30% of LatAm

GDP.


LatAm GDP by supply-side component (% of GDP, avg, 2005-09)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Argentina Brazil Chile Colombia Mexico Peru Venezuela

Agriculture Fishing Mining Manufacturing

Electricity, gas and water Construction Retail sector Hotels and restaurants

Transportation Financial Services Housing Education

Other Taxes

Appendix

59

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.

Fund Manager biography

60

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 Latin American 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

61

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. 20869/082011/FP11-1564

Important information (cont’d)

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