May 2011

HSBC Brazil Fund

(An open-ended Fund of Funds Scheme)

Brazil: The opportunity beckons

Brazil A country of opportunities

Brazil 2010
Population Area GDP Exports Imports 193 million 8.5 million km2 USD 2,000 billion USD 201.92 billion USD 181.64 billion

India 2010
1210 million 2.97 million km2 USD 1057.45 billion USD 212.50 billion USD 330.26 billion

Part of the BRIC economies expected to show strong growth over the next few years

Source: Ipeadata. HSBC, Wolfram Alpha, Bloomberg. Information as of March 2011.

Brazil: Large population and stable democracy

Brazil is a federal republic composed
of 26 states and a federal district which comprise 5,565 municipalities
7

Average Grade of Political Freedom and Civil Liberties (1=best grade; 7= worst grade)

Population: 193 million 5th largest in the world Area: 8.5 million km 5th largest in the world Stabilised democracy
A successful process of democratization since the eighties

1 1973 1983 1993 2003 2006 2007 2008 2009

Source: Freedom House; Information as of December, 2008

Source: IBGE; World Bank, IMF

Worlds largest commodities supplier and large GDP

Rich in both soft and hard commodities - Worlds largest commodities supplier
Ranking Sugar 1st Beef 1st Coffee 1st Soybean Corn 2nd 2nd Poultry 2nd Pork 3rd

Ranking

Quartz 1st

Niobium Iron ore 1st 2nd

Bauxite 2nd

Manganese Tin ore 3rd 5th

Source: USDA and US Department of the interior and US Geological Survey; Information as of August, 31, 2010.

LatAm GDP by country (% of total, 2009)

GDP*: USD 2,000 billion

8th largest in the world India ranks 12th
34%

4%

7%

25%

10% 10% Chile Venezuela Colombia Other

6% Mexico Argentina

4% Peru Brazil

Source: IMF, BofA Merrill Lynch Global Research; Information as of August, 2010 Source: IBGE; World Bank, IMF *PPP (Purchase Power Parity) criteria; Freedom House

Brazil A few facts

Brazil is a federation comprised of 26 States, one federal district (which includes the capital city, Braslia) and municipalities Two-thirds of Brazils population is between age group15 and 64, the most economically productive age group Brazil has 12% of the worlds fresh water So Paulo (The economic capital of Brazil) would rank higher than Paris and Shanghai as the world's sixth wealthiest city by 2025 (e) By 2025, Brazil is forecast to become the worlds fifth largest economy, overtaking Britain and France

Source: IBGE; World Bank, IMF. HSBC Asset Management, February 2011,

Brazil: The rising star on the world stage

Brazilian equities have outperformed other markets over the years

Annualised Return on World Stock Markets over the past 10 years

Past performance may or may not be sustained in the future. Source: Bloomberg MSCI Dollar returns, Data as at 4 March 2011. Data is of the most recent available date and is intended to depict the trend only.

Brazil is also the best performing market in 2009 2010

60%

56.57

54.94

54.73 45.80 48.16

50%

42.30
40%

43.95

30%

27.47 21.28 21.21

20%

15.14 8.81

10%

0% Brazil Russia India Emerging Emerging Emerging Markets Markets Markets Taiwan BRIC Korea China Europe World USA Japan

Past performance may or may not be sustained in the future. Source: Bloomberg. Based on the performance of the respective MSCI indices. Total return in US dollar terms. Returns are total returns annualized for the period from 01 January 2009 to 31 December 2010

Brazil has outperformed emerging and developed markets

Historical performance for Equity Indices

Source: Bloomberg, HSBC. Past performance may or may not be sustained in the future.

 mostly on the back of robust earnings growth

Earnings Per Share
9 8 7 6 5 4 3 2 1 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 Sep-10 Jan-11

MSCI World

MSCI Emerging Markets

MSCI Brazil

MSCI India

Source: Bloomberg. Past performance may or may not be sustained in the future.

 but is still relatively attractive in terms of valuation

Selected emerging markets forward P/E ratio
EM VALUATION
P/E (x) CURRENT GLOBAL* USA* EUROPE* JAPAN* EMERGING MARKETS EMF ASIA EMF LATAM EMF EMEA CHINA BRAZIL KOREA TAIWAN SOUTH AFRICA INDIA RUSSIA MEXICO MALAYSIA CHILE INDONESIA TURKEY THAILAND POLAND CZECH REPUBLIC EGYPT PHILLIPPINES HUNGARY 16.4 16.9 15.4 16.8 13.6 14.0 14.1 11.2 13.4 12.4 12.3 15.6 14.8 18.3 8.5 18.6 17.3 17.6 14.5 10.5 13.8 13.6 10.5 11.3 16.5 12.2 12M 12.4 13.4 10.9 13.5 11.3 12.2 11.9 9.3 11.4 10.5 11.8 14.2 11.5 14.9 7.2 15.1 14.8 15.9 12.2 9.9 12.3 11.2 10.6 8.8 14.5 10.0 PROSPECTIVE 09 9.7 11.6 7.8 NM 17.3 19.0 16.6 14.7 17.7 14.6 18.9 30.3 18.8 22.7 12.2 19.9 22.6 21.9 17.8 12.3 17.1 17.1 10.1 13.3 20.3 12.5 10E 15.9 16.5 14.7 16.6 13.8 14.2 14.4 11.4 13.6 12.6 12.3 15.7 15.2 18.6 8.7 19.0 17.6 17.8 14.7 10.5 14.0 13.9 10.5 11.6 16.7 12.4 11E 12.6 13.6 11.0 13.7 11.5 12.4 12.0 9.4 11.6 10.6 11.9 14.4 11.7 15.2 7.3 15.2 14.9 16.1 12.3 10.1 12.5 11.3 10.6 9.1 14.7 10.1 TRAILING FWD P/BV (x) CURRENT PROSPECTIVE TRAILING 1.9 2.3 1.7 1.2 2.0 2.1 2.0 1.6 2.2 1.8 1.7 2.2 2.3 2.9 1.2 2.7 2.3 2.2 3.5 1.9 2.3 1.6 2.0 1.3 2.6 1.3 10E 1.9 2.2 1.6 1.2 2.0 2.2 2.1 1.6 2.2 1.8 1.7 2.2 2.3 2.9 1.2 2.9 2.3 2.2 3.6 1.9 2.3 1.6 2.0 1.3 2.6 1.3 11E 1.7 2.0 1.5 1.1 1.7 1.9 1.6 1.5 2.0 1.7 1.4 2.0 2.1 2.6 1.0 1.3 2.1 2.1 3.0 1.7 2.1 1.5 1.9 1.2 2.4 1.2

LatAm Consensus EPS Growth Estimates

Brazil Mexico Chile Peru Colombia

2010 26 8 23 27 29

2011 28 17 12 32 21

2012 14 13 11 13 5

Source: IBES, Credit Suisse research; Information as of December, 2010

Source: I/B/E/S, MSCI, J.P. Morgan; Information as of February 3, 2011

Forward P/E of Brazil is relatively favourable

Selected emerging markets forward P/E
16 14 12 10 8 6 4 2 0
al ay si a M ex ic Ph o ili pp in es Ta iw an Th ai la So nd ut h A fr ic a In do ne si a C hi na lic ia il Eg yp t or ea d Po la n ra z In d rk e K B ub Tu un H ga ry y

th

So u

Source: IBES, MSCI, Data as of March, 2011

ze ch

ep

Also, Brazil performed relatively well during the crisis

Strong resilience in consumption (private and government), pro-growth policy of lower
rates and fiscal expansion, relatively closed economy contributed for LIFO (last in first out) type of recovery for the Brazilian economy

MSCI World (in USD) MSCI EM (in USD) Sensex (in USD) Ibovespa (in USD) 01-Jan-08 1578.1 1246 515 33817 31-Dec-10 1280.1 1151 459 41714 % change -18.88% -7.62% -10.87% 23.35%

Source: Bloomberg, HSBC Global Asset Management. Data as at December 2010. Past performance may or may not be sustained in the future.

Reasons for investing in Brazil

1. Domestic consumption Robust growth in demand

Robust domestic demand - Domestic consumption accounts for more than 60% of its GDP* with government spending accounting for another 21%
GDP Breakdown Comparison with India

Brazil
Brazilian Real 3.000.000 Household

India
5.000.000 Indian R upees Household Government 4.000.000 Net exports Investments 3.000.000

Government 2.500.000 Net exports 2.000.000 Investments

55,1%

62,62%

1.500.000

11,1%
2.000.000

1.000.000

20,77%
1.000.000

40,1%

500.000

16,69%
0 2000 -500.000 2001 2002 2003 2004 2005 2006 2007 2008

-0,08% 2009
-1.000.000

2003

2004

2005

2006

2007

2008

2009

-6,3%

Source: HSBC Global Asset Management; Information as of June 2010. * Brazilian Institue for Geograpy & Statistics (IBGE)

1. Domestic consumption Growing middle class

Favorable demographics are the key drivers of solid consumption demand Class C (middle class) represents more than 50% of Brazils population
The largest proportion of Brazils population is now entering most productive years

The middle class is growing and also has the largest share of income
Source: Exame December 30, 2010

Source: Folha de Sao Paulo Information as of April, 2010.

1. Domestic consumption Increasing disposable income

Unemployment rate is consistently diminishing and currently below 7% Disposable income is significantly rising

Unemployment rate diminishing

14% 13% 12% 11% 10% 9% 8% 7% 6%

Minimum wage vs Price of basic food basket

2003 Precio de labasic Price of Cesta Basica de food basket Alim entos 225 162

2010

Minimum Sueldo Wage

510 200

100

200

300

400

500

600

2003

2004

2005

2006

2007

2008

2009

2010
Source: Folha de Sao Paulo Information as of April, 2010.

Source: HSBC Global Asset Management; Information as of October, 2010

Data is of the most recent available date and is intended to depict the trend only.

2. Infrastructure - Spending poised to induce growth

Infrastructure remains a long-lasting thematic investment in Brazil
Brazils infrastructure investment boom

Brazil: Infrastructure Investment Plans (R$ billion) Sectors Investments 2010 - 2013 Ports and Highways R$ 47 billion Railways and Sanitation R$ 69 billion Telecommunication R$ 67 billion Electrical Energy R$ 92 billion
Source:Morgan Stanley, Brazil Infrastructure, Paving the way, May 5 2010

Quality of Overall Infrastructure (Countries ranked 1 to 139)

Source: The Global Competitiveness Report (2010-2011)

2. Infrastructure - Olympics & World cup to provide additional boost

Brazil has a one-off opportunity due to hosting the key events like the Fifa World Cup 2014 and Rio Olympics 2016 Projects boosting productivity in the key economic regions:
So Paulo and Rio de Janeiro (metro regions) corresponds for around 30% of Brazilian GDP and are the locations of the biggest companies in Brazil These events will result in investments in key areas (eg. transport) and in interesting business opportunities Year of the Game Olympics 2008 2004 World Cup 2010 2006 2002 South Africa Germany Korea MXZA MXDE MXKR 01 Jan 09 31 Dec 09 30 Dec 04 - 30 Dec 05 26 Dec 00 - 28 Dec 01 61.04 10.50 43.46 30.81 10.02 -15.33 China Greece MXCN MXGR 29 Dec 06 - 28 Dec 07 31 Dec 02 - 31 Dec 03 64.04 63.69 9.69 33.82 Hosting Country MSCI Country Index % returns in % returns in local MSCI MSCI World Index Index

Period of observation

Source: Bloomberg. Total returns denominated in USD.

3. Commodities Showing consistent appreciation

Brazil is one of the worlds largest producers of soft and hard commodities. The country is set to benefit from the recent recovery of commodity prices Commodities are well-supported by global recovery, low interest rate environment. Leading indicators suggest further upside in the foreseeable future

Commodities have shown a consistent appreciation (+ 22% in 2010)

Source: Bloomberg, Data as at 1 January 2011

3. Commodities Brazil basket is well diversified

The commodities basket is well diversified across, Oil, Metals and Agri-products Low dependency on oil imports
Diversified commodities basket of Brazilian exports
12% 10% 8% 6% 4% 2% 0% O il M e ta l M eat A irp la n e s F o o tw e a r S oybean Sugar Tobacco P u lp C o ffe O ra n g e J u ic e V e h ic le Iro n H id e s /S k in W ood A lu m in u m

Source:HSBC Global Asset Management. Information as of January 2011

4. Exports Brazils export dependencies are well diversified

Since 2009, China has replaced US as the largest buyer of Brazilian exports However, Brazils exports are well diversified and not dependant on only the US or China
China replaces US as largest buyer of Brazils exports
Exports to USA Exports to China

Source: Ipeadata, Information as of January 2011

Source: Ipeadata. Information as of January 2011

4. Exports Brazil economy not significantly dependant on exports

However, exports do not constitute a significantly large portion of the GDP of Brazil
Brazil - GDP Breakdown
Brazilian R eal 3.000.000 Household Government 2.500.000 Net exports 2.000.000 Investments

GDP - Industry, Exports, Investments

105 100
62,62%

95 90

1.500.000

85
1.000.000

20,77%

80 75
Industry Exports Investments

500.000

16,69%
0 2000 -500.000 2001 2002 2003 2004 2005 2006 2007 2008

-0,08% 2009

70 2006 2007 2008 2009 2010

Source: HSBC Global Asset Management; Information as of October, 2010. Data is of the most recent available date and is intended to depict the trend only.

Summary

Outlook remains positive and valuations are attractive

Brazil has been the top performing market over the last
10 years. However, it lagged EM, LatAm and its main peers in terms of performance in 2010 despite posting strong earnings revision cycle
CURRENT GLOBAL* USA* EUROPE* JAPAN* EMERGING MARKETS EMF ASIA EMF LATAM EMF EMEA CHINA BRAZIL KOREA TAIWAN SOUTH AFRICA INDIA RUSSIA MEXICO MALAYSIA CHILE INDONESIA TURKEY THAILAND POLAND CZECH REPUBLIC EGYPT PHILLIPPINES HUNGARY 16.6 16.9 15.4 16.8 13.0 14.3 13.8 10.8 12.6 12.2 11.2 14.3 14.4 15.8 7.9 18.6 16.7 17.3 13.9 10.5 13.2 13.2 10.4 11.4 15.6 11.0

EM VALUATION
P/E (x) 12M 12.6 13.6 11.1 15.3 10.9 11.9 11.7 9.0 10.8 10.4 10.7 12.9 11.5 13.0 6.7 14.7 14.3 15.3 11.8 10.0 11.6 10.8 10.6 8.8 13.4 9.6 PROSPECTIVE 10E 15.9 16.5 14.7 NM 13.4 14.7 14.2 11.0 12.9 12.5 11.2 14.4 14.9 16.2 8.0 19.3 17.1 17.6 14.2 10.5 13.4 13.7 10.3 11.9 15.9 11.1 11E 12.8 13.8 11.3 15.5 11.1 12.1 11.9 9.2 11.0 10.6 10.9 13.2 11.7 13.3 6.8 14.9 14.5 15.5 12.0 10.2 12.0 10.9 10.6 9.1 13.7 9.9 12E 11.3 12.1 10.0 13.7 9.7 10.5 10.5 8.0 9.6 9.4 9.9 11.5 10.1 10.9 5.9 13.1 13.1 13.8 10.7 9.1 9.8 10.4 10.2 7.4 11.4 8.2 TRAILING FWD P/BV (x) CURRENT PROSPECTIVE TRAILING 1.9 2.3 1.7 1.2 2.0 2.1 2.0 1.6 2.1 1.8 1.5 2.0 2.3 2.5 1.1 3.1 2.2 2.2 3.4 1.8 2.1 1.6 2.0 1.3 2.4 1.2 11E 1.7 2.0 1.6 1.1 1.7 1.9 1.6 1.4 1.9 1.7 1.3 1.9 2.1 2.3 1.0 1.2 2.0 2.0 2.9 1.7 2.0 1.5 1.9 1.2 2.3 1.2 12E 1.6 1.8 1.4 1.0 1.5 1.7 1.5 1.3 1.6 1.6 1.2 1.8 1.8 2.0 0.9 1.2 2.0 1.9 2.5 1.5 1.7 1.4 1.8 1.2 2.0 1.1

Brazil continues to trade at relative attractive multiples,

12m fwd P/E stands at 10.4x while EM, China and India trades at 10.9x, 10.8x and 13.0x respectively

Brazil looks undervalued both against EM and

LatAm countries in a P/B vs ROE basis as well

In LatAm, Brazil is the most attractive market

across metrics, including P/E, EV/EBITDA, P/B

On the earnings side, Brazils growth is likely to be

sustained at high levels in 2011, faster than other LatAm markets (except for Peru)

EPS growth for MSCI Brazil stands at 17.0% and 17.6%

for 2010 and 2011

Source: I/B/E/S, MSCI, J.P. Morgan; Information as of February 17, 2011

A great growth opportunity to benefit in the medium

to long term
Source: HSBC Global Asset Management; Information as of February, 2011

Corporate earnings beating expectations

Source: Bloomberg; Information as of 6 August, 2010. Data is of the most recent available date and is intended to depict the trend only.

Inflation seems to be moderate and range bound

Brazil CPI IPCA

The IPCA (ndice Nacional de Preos ao Consumidor Amplo, Brazil) or Extended Consumer Price Index, is calculated by IBGE, a government agency, and reflects the average cost of living in 11 major Brazilian cities for families with income up to 40 minimum salaries. The IPCA is used by the government to set benchmark rates and make monetary policy decisions

Source: Bloomberg, HSBC Global Asset Management; as of 31 July, 2010. Data is of the most recent available date and is intended to depict the trend only.

Figures in %

while perspectives for Brazilian Oil industry are very positive

Brazilian Oil Production Million barrels / day Global Ranking Proven Oil Reserves
Brazil China USA Brazil + pre-salt

6.0

5.0

Pre-Salt (already auctioned) Existing Reserves - Other Players Existing Reserves - Petrobras

4.0

Nigeria Lybia

3.0

Russia UAE

2.0

Venezuela Kuwait Iraq

1.0

Iran Canada

0.0 2000 2004 2008 2012 2016 2020

Saudit Arabia 0 25 50 75 100 125 150 175 200 225 250 275
29

Source: Petrobras, EIA, HSBC Research

Macroeconomic Summary - March 2011

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

FX Market BRL appreciation consistent with the global backdrop;

Government adopted some measures to deal with this trend; Further measures could be implemented.

2007 GDP (%) CPI (%) Nominal interest rate 6,1 4,46 11,25 40,0 1,6 1,77

2008 5,1 5,9 13,75 24,8 -28,2 2,34

2009 -0,6 4,3 8,75 25,3 -24,2 1,74

2010 7,5 5,9 10,75 20,3 -47,5 1,67

2011 f 4,5 5,5 12,75 10,0 -63,5 1,75

Economic growth
GDP has gone through some moderation in the last few quarters
Industrial production stability reflecting both imports increase and inventories adjustment; We remain optimistic about the economy in the next few quarters; Key drivers indicating a still solid domestic demand growth; GDP forecast at 4.5% in 2011.

Trade Balance (USD bi) Current Account (USD bi) BRL Currency

Inflation Given our view for activity, we keep our CPI forecast at a level above the
center of the target; Demand-sensitive groups showed acceleration in the last months, with further deterioration of Inflation expectation.

Monetary policy
We expect two additional interest rates hikes (Selic at 12.75%); There are some uncertainties regarding CB next steps (total budget and macro prudential measures
Source: HSBC Global Asset Management Information as of March, 2011

Why look at overseas markets?

Investing in overseas markets gives you

An opportunity to participate in markets which are fundamentally different from India Participation in long term growth stories in other markets which may provide better returns at various points in time, as compared to our domestic market Acts as a diversifier of risk For example, the impact of the global slowdown was considerably lesser in Brazil, as the Ibovespa returns for the period Jan 08 - Dec 10 was 23.35% as compared to Sensex returns of -10.87% for the same period*

*Source: Bloomberg, HSBC Global Asset Management. Returns in USD terms Past performance may or may not be sustained in the future.

 and the reasons are

Developed markets show an increasing affinity towards overseas investments into emerging markets, since emerging markets provide an opportunity for higher growth Provides for an opportunity to profit from competitive advantages of other nations Overseas markets have a relatively lower correlation to Indian markets Provides an opportunity to invest in industries of other countries that are relatively under-developed in India

Our Emerging Markets capabilities

A leader in Emerging Markets Asset Management

Benefit from HSBC Global Asset Managements renowned expertise in emerging markets

HSBC Group has a good track record and a long standing presence in Emerging Markets, its roots were formed in China and India in the 19th century HSBC Global Asset Management has approximately $145billion asset under management in Emerging Markets (as of 31 December 2010) Over 200 dedicated investment professionals focused on Emerging Markets in 20 key offices A wide range of Emerging Markets funds including the largest manager of Brazilian and Indian equity mutual funds* Second largest manager of China funds and the fourth largest manager of BRIC funds**

Source: HSBC Global Asset Management * Data as on 30 June 2010 ** EPFR data as at 31December 2009 BRIC (Brazil, Russia, India, China) geographic focus.

HSBC Global Asset Management - A recognized expertise in Emerging Markets

HSBC GIF Indian Equity Fund
2007 Investir Magazine, France Silver "Laurier" for 5 year performance in the "Indian equity category 2006 Lipper Fund Awards, Hong Kong Best Indian equity fund over 5 years

HSBC GIF Chinese Equity Fund

2006 Lipper Fund Awards Hong Kong Best Chinese equity fund over 5 and 10 years

HSBC GIF BRIC Freestyle Equity Fund

2008 Lippers Best Fund over three years in the Equity Emerging Markets Global Sector 2006 Asia Asset Management Awards 2006 "Hong Kong/Most Innovative Product/Runner-up (Merit Award)"

HSBC GIF Thai Equity Fund

2006 S&P Fund Awards Singapore Best Thai fund over 5 years

EMIF Brazil Equity Fund

2007 Investir Magazine, France - Silver "Laurier" for 5 year performance in the "Brazilian equity" category

HSBC GIF Emerging Markets Bond

2008, Morningstar Fund Awards (HK, Singapore and Taiwan)

HSBC Emerging Markets Inflation-linked Bond Fund

2008, Most Innovative Product, Asia Asset Management Best of the Best Awards (Best of the Best Country Awards HK) 2009, AsiaHedge Award

Best Single Country Hedge Fund (Global Asset Management's India Alpha Fund) Best Global Emerging Markets Manager of the Year
2008, European Pensions awards

Best Fund Manager (HSBC Amanah)

2009, Euromoneys Islamic Finance Awards Past performance is not a guarantee of future results.

HSBC Brazil Fund

(An open-ended Fund of Funds scheme)

Key features
The primary investment objective of the Scheme is to provide long term capital appreciation by investing predominantly in units / shares of HSBC Global Investment Funds (HGIF) Brazil Equity Fund. The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. The Scheme may also invest a certain proportion of its corpus in money market instruments and / or units of liquid mutual fund schemes, in order to meet liquidity requirements from time to time. INR 10,000 Entry Load Nil; Exit Load -1% if redeemed /switched out within 1 year from the date of allotment. Otherwise Nil. Growth, Dividend (Payout & Dividend Reinvestment) Available MSCI Brazil 10/40 Index HSBC Global Investment Funds (HGIF) Brazil Equity Fund

Investment Objective

Minimum Application Amount Load Structure

Options SIP/STP/SEP Benchmark Index Underlying Scheme

HGIF Brazil Equity Fund, The Underlying Fund

Objective: Consistent long term out performance vs benchmark (MSCI Brazil 10/40) Investment universe: The fund may invest in any company listed on a major stock exchange,
whose operations are primarily conducted in Brazil

Asset Allocation: No capitalization or sector restrictions. The fund is expected to fully invest its
cash, but is allowed a maximum tactical allocation of cash to 10%. The fund does not hedge currency exposures

Turnover: Expected to be moderate given long term investment horizon Stocks: A concentrated portfolio of preferred 40 to 60 stocks. Subject to the 10/40 rule and a
maximum tracking error of 15%

Investment vehicles: HGIF Brazil Equity Fund (Fund size : USD 2733 mn*). Segregated
institutional mandates as well.

Non contractual document

*Source: HSBC Global Asset Management , Information as on 28 February 2011

Performance - HGIF Brazil Equity Fund, The Underlying Fund

HGIF Brazil Equity Fund Benchmark - MSCI Brazil 10/40 (IC class)

1 Year 18.17 12.42

Returns in % Since Inception 3 Years Date - 03/03/2006 -1.81 10.68 -1.04 11.81

Past performance may or may not be sustained in the future. Data as on 28 February 2011. All returns are compounded annualised. The above
performance figures are calculated in USD and changes in the rate of currency exchange may affect the value of your investment. The benchmark returns quoted above are basis the MSCI Brazil 10/40 IC Class Price Index performance as available on Bloomberg. Price indices capture an indexs market price performance only and are calculated by MSCI on a daily and a real time basis. Each price index measures the sum of the free float-adjusted market capitalization-weighted returns of all its constituents on a given day. Dividends paid by the underlying securities are not reinvested in the indexthe value of the dividends is essentially dropped from the index value.

Non contractual document

Portfolio Strategy
30%

Orientation remains domestic; latest market

correction re-opened interesting valuation window in consumer and banks

25% 20% 15% 10%

Easing rotation to commodities;

commodities likely to remain robust on EM/China

5% 0% Building Materials Financial Services Infrastructure Oil & Petrochemicals Sugar & Ethanol Consumer Goods & Beverages Steel & Mining Healthcare Pulp & Paper Agribusiness Real Estate Education Capital Goods Data Services Telecom Utilities Retail

Valuations are attractive in all sectors

ex-staples

We recognize policy (monetary/fiscal)

concerns
Sector Overweight Consumption Corporate investment Infrastructure Underweight Utilities Information Technology Upbeat 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) Corporates invest to develop their earnings growth as the economic cycle moves on Infrastructure remains a long-lasting thematic investment in Brazil Infrastructure continues to look attractive both for economic as well as political reasons. Important underweight due to regulatory risk The sector mainly consists of two companies in Brazil and they are in a difficult situation due to regulatory changes
HGIF Brazil MSCI 10/40

Rationale

Investment philosophy of the Underlying Fund

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

Non contractual document

Investment process

The Brazil Equity team is headed by Jos Cuervo and supported by Natalia Kerkis in Sao Paulo Each of the ten analysts, based in London and Sao Paolo, has a number of sectors to cover, and they all meet regularly - both formally and informally to share thoughts and ideas

Investment resources
HSBC Global Asset Management Brazil Resources HSBC Global Asset Management Brazil Resources

Portfolio Managers
Ricardo Maluf Assistant Portfolio Manager

Jose Cuervo

Natalia Kerkis

Macro Team (2) Quantitative/Strategy (2) Analysts (10)

HSBC Global Asset Management Resources

Over 70 investment and support resources New Frontiers, Regional & Global Emerging Markets Equities and Fixed Income Portfolio Managers Investment Support Product Specialists Support, Risk

HSBC Resources

HSBC Access HSBC brand well-known in emerging and frontier markets

Global Reach Local investment team views, idea generation, cross check

Economists

Dealing Legal/Compliance Dedicated in-house expertise

Dedicated Client Service Global Macro Team Product Specialists

Non contractual document

Biography of the fund manager

Jose Cuervo is a also fund manager in the Global Emerging Markets (GEM) equities team and has been working in the industry since 1996. Prior to joining HSBC Global Asset Management in 2000, Jose worked for Phillips, Hager & North Investment Management Ltd and completed the HSBC Global Graduate Program. He holds a B.Com in Finance from the Faculty of Commerce, University of British Columbia (Canada), where he was a member of the UBC Dean of Commerce Portfolio Management Foundation. He is a CFA charterholder.

Investment team Summary

Experienced and stable team Collectively 50+ years of experience in Brazilian Equities investment; three of team have worked together for five years

Small and focused

Small, effective team of decision makers supported by substantial pool of research resource

Global resources

Fully leverage HSBCs global network of 200+ emerging market specialists

Significant support

Strong team of over 70 investment and support resources allows investment focus

Proprietary research

Provides clear research edge and key information advantages

Performance orientation

Strong track record of delivering consistent investment performance

Non contractual document

Potential risks of HGIF Brazil Equity Fund

Major risks are external
A faster exit strategy for global monetary conditions Disappointment on global growth outlook if monetary and fiscal conditions do not gain traction An echo shock from the credit crisis, Dubai, Greece

Locally, the main risk is an inflation disappointment

Fiscal policy is strong and rising given an election year Consumption is very strong, bottlenecks can develop specially related to labour However, the investment cycle appears to be taking hold, minimizing the need for a strong policy response to potential inflation

The global risk trade evaporates

Relative stronger EM economic growth and currencies, rising commodity prices, inflows into EMs and weak USD At some point, this trade will reverse either due to an increase in perceived risks globally, or an improvement in the relative outlook for assets in the developed world

Brazil as compared to India A summary

Brazil
Last 10 years annualised return
(as on 31 March 2010)

India
12.8% p.a.

19.5% p.a.

P/E ratio (2011e)

(Source: HSBC Global Asset Management on 3 August 2010)

9.7

13.5

MSCI EPS estimates

(Source: Thomson Reuters, Datastream, on 5 August 2010)

25.6%

21.3%

3 years risk adjusted annualised return

In USD terms (Source: Morningstar; March 2007- March 2010)

19.4%

10.4%

Thank You

Important notes Underlying Fund

The HSBC Global Investment Funds Brazil Equity (the Fund) invests primarily in Brazilian equities The Fund is subject to the concentration and Emerging Market risks of investing in a single Emerging Market The Funds investments may involve substantial market, currency, volatility, regulatory and political risks. Investors may suffer substantial loss of their investments in the Fund The investment decision is yours but you should not invest unless the intermediary which sells you the Fund has advised you that the Fund is suitable for you and has explained why, including how investing in the Fund would be consistent with your investment objectives Investors should not invest in the Fund solely based on the information provided in this document and should read the offering document of the Fund for details

Disclaimer
This document has been prepared by HSBC Asset Management (India) Private Limited (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verified and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions. Mutual fund investments are subject to market risks. Please read the Statement of Additional Information and Scheme Information Document carefully before investing. Copyright. HSBC Asset Management (India) Private Limited 2011, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Limited. HSBC Asset Management (India) Private Limited; 314, D. N. Road, Fort, Mumbai 400 001. Tel: 6614 8819.

Risk Factors
Investors may obtain Scheme Information Document, Statement of Additional Information and Key Information Memorandums along with application forms from the office of HSBC Mutual Fund, 314, D.N.Road, Fort, Mumbai 400 001. Tel: 022-6666 8819. Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs.1 Lakh). The Sponsor/associates of the Sponsor/AMC are not responsible or liable for any loss or shortfall resulting from the operation of the Scheme. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager. Risk Factors: All investments in mutual funds and securities are subject to market risks and the NAV of the Scheme may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme. Country specific information could yield results substantially different than that be set herein. Investors shall bear the risks and recurring expenses of the underlying scheme(s) into which the Scheme invests. HSBC Brazil Fund (HBF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns. Scheme Classification and Objective: HBF (an open ended Fund of Funds scheme) seeks to provide long term capital appreciation by investing predominantly in units/shares of HSBC Global Investment Funds (HGIF) Brazil Equity Fund. The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. The Scheme may also invest a certain proportion of its corpus in money market instruments and/or units of liquid mutual fund schemes, in order to meet liquidity requirements from time to time. Asset Allocation: Units/shares of HGIF Brazil Equity Fund95 to 100%; Money Market instruments (including CBLO & reverse repo) and/or units of liquid mutual fund schemes0 to 5%. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

Appendix

The past two decades were a period of relevant reforms

Since 1990 opening of the economy and privatizations

1993 - 1994 Mr. Cardoso (centre right) becomes Finance Minister

The Real plan (new currency and disindexation of the economy) is launched

1994 - 2002 Mr. Cardoso becomes president

Financial system / Partial social security reform New economical policy framework: floating exchange rate, inflation targeting, fiscal austerity Fiscal Responsibility Law

2003 - 2010 Mr. Lula da Silva (left) becomes president

Maintenance of the economic policy framework reduces the political risk
Public sector social security reform Micro reforms: civil construction, credit market Partial Judiciary Reform

 and improvement in key indicators

International reserves (USD bi) Public Debt (% of GDP)

350 300 250 200 150 100 50 0 1976 1981 1986 1991 1996 2001 2006 2011

70 60 50 40 30 20 10 0 2000 2004 2008 2012

Source: Brazilian Central Bank, HSBC

 increasing horizon of investments decisions

GDP Growth (%)

8% Average 7% 6% 5% 4% 3% 2% 1% 0% 1901 - 1945 Agricultural Economy 1946 - 1980 Planned Economy 1981-1993 Reality Check 1994-2003 Initial Reforms 2004-2008 Sustainable Growth Volatility

Source: IPEA

 better income distribution

Income groups (% of total population; Monthly income in USD)
50

Income groups (% ; 2008 vs 2003)

50 40

40 2001 30 2008

30 20 10 0

20

-10 -20
10

-30
0 AB > 2900 C 670 to 2900 D 460 to 670 E < 460

-40 -50 AB C D E

Source: FGV; HSBC

 and its effect on several sectors

Essential x Non-essential Expenditures (% of monthly disposable income)
80% Essential 70% 65% 60% 50% 40% 30% 20% 10% 0% 600-1000 < 400 400-600 1000-1200 1200-1600 1600-2000 2000-3000 3000-4000 4000-6000 > 6000 35% 25% Non-Essential 75%

Class C consumption aspirations (December 2009)

Class C: future consumption aspirations

% of Class C consumers with buying intentions for 2010

Furniture Household appliances Leisure & traveling Phone & mobile Computer Car TV or media appliances Decorative items Real estate Tools Motorcycle Sporting equipment

38% 37% 32% 23% 22% 21% 17% 14% 12% 10% 9% 8%

Source: IBGE; Cetelem Ipsos survey

some badly needed reforms

Tax Reform
Reduce both complexity of the system and tax burden

Fiscal and Pension Reforms

Efficiency in the use of public resources and control of long term costs

Review of regulatory framework, Privatization, Allocation of public resources (i.e. more

for investments), Labor and Judiciary reforms Improve environment for doing business and the infrastructure

Central bank autonomy

Further advances in the macro landscape