HSBC Portfolios€¦ · A Portfolio may engage in foreign currency transactions in order to hedge against currency exchange risk, however there is no guarantee that hedging or protection

HSBC PortfoliosWorld Selection Solutions

1

Introduction

HSBC Portfolios – World Selection is a series of portfolios investing

in an array of different funds and investments, each selected based

on powerful market intelligence. It invests globally into an expansive

range of types of investments, both modern and traditional, which

can include private equity, commodities, bonds and equities. World

Selection gives you access to the investment companies and fund

managers that we consider to be the best in the world, whether

they are from HSBC or not. It is this exceptional combination of

investment types and companies that provides balance, where the

impact of loss to any one investment may be reduced by the rise

of another. We believe it’s the more stable way to invest. What’s

more, because World Selection is monitored on a round-the-clock

basis, we can react to changing markets to help ensure that your

portfolio remains consistent with its objectives.

Who manages the HSBC World Selection Portfolios?

World Selection is currently managed by HSBC Multimanager,

the specialist business which forms part of HSBC Global Asset

Management. HSBC Multimanager is a specialist multimanager

business, providing multimanager solutions to clients globally.

HSBC Multimanager has one of the largest multimanager teams

in the world, comprising more than 40 investment professionals

(including a dedicated property multi-manager team) based in

11 locations around the world. The global reach of the team

locations adds value through highly localised and expert manager

insight and allows the Multimanager team to leverage their local

market knowledge when building truly global solutions for clients.

How are the HSBC Portfolios structured?

The HSBC Portfolios are structured as sub-funds of HSBC Portfolios, a

Luxembourg based SICAV (Société d’Investissement à Capital Variable).

It contains 5 sub-funds :

HSBC Portfolios – World Selection 1

HSBC Portfolios – World Selection 2

HSBC Portfolios – World Selection 3

HSBC Portfolios – World Selection 4

HSBC Portfolios – World Selection 5

Please refer to the simplified prospectus and full

prospectus before making an investment decision. As

with any investment where the underlying investments are

stocks and shares, the price of shares in HSBC Portfolios

and any income from them can go down as well as up, is

not guaranteed, and you may not get back the amount of

your original investment.

2

Multiple markets, multiple assets

World Selection uses investment techniques that not only invest

in worldwide markets but offer you access to a wide range of

respected managers and funds, within a single portfolio. Your

portfolio benefits from the skills of our global team of experts, who

specialise in selecting the best managers and funds, wherever they

are in the world and whomever they work for. This global team of

experts monitor your investments round-the-clock and around the

world.

All funds have exposure to different risks whilst different factors will

affect each one at different times. By putting together a portfolio,

which include overseas equities, bonds, alternative investments

(such as private equity and commodities) and cash, the risks are

spread through diversification – so that all risk is not borne in one

fund, one type of investment or one geographic region. The result

is that when the market dips for some types of investment they

could be offset by others that may continue to perform positively.

Intelligent investment of this kind produces a portfolio which should

be more stable in differing economic climates. You should note that

in extreme market conditions, all types of investment may produce

negative returns.

Creating and managing portfolios like World Selection requires a

strong, connected team of experts based around the globe, using

local knowledge and sophisticated modelling techniques to keep

your portfolio up-to-date in the face of a changing market-place.

Under our watchful eye, we monitor world markets round-the-clock.

Your portfolio is carefully managed on an ongoing basis. Specialists

within the fund management companies that manage the funds we

invest in have the ability to make necessary changes and react to.

3

How will the portfolio objective be met? Benefits of World Selection

Firstly, your portfolio is constructed with a focus on having the right

types of investment for the long-term, through a technique called

strategic asset allocation. In harmony with our realistic long-term

view, we also use a technique called tactical asset allocation to

take advantage of short-term market movements by altering our

weighting within the types of investment we hold. Using our global

team of experts, we identify and select the funds and managers

available worldwide who we consider to be the best in their field –

whether they are from HSBC or not. We then combine them with

the aim of achieving an optimal combination of attributes.

Thereafter, our dedicated, global team work together to monitor

your portfolio round-the-clock. The managers that we invest with

are tasked with proactively managing the underlying investments

and to make adjustments to their portfolios as they see fit using

their specialist knowledge. They can make changes to realign their

portfolios in order to ensure that the investments that they hold

reflect their investment approach. They will also ensure that the

investments managed by them are structured in such a way as to

reflect their long term views and perspectives on the areas within

financial markets in which they specialise.

Investors who place all of their money in one investment type, such

as property or shares, or only in one part of the world, take on very

specific risks that are likely to exaggerate the variability of short term

performance in comparison with a more diversified and global approach.

We believe the optimal approach to investing is to spread your money

across as wide a range of investments as possible so that should one

investment fall, the losses may be reduced by the rise of another.

World Selection provides this optimal spread by holding a diverse array

of investment types from multiple geographies. This approach aims to

maximise your return while reducing the amount of risk you need to

take. You gain access to investment types previously unavailable to the

private investor through a rigorous investment process that uses the full

potential of HSBC’s global expertise, including the advanced expertise

of our dedicated global team, combined with sophisticated computer-

modelling techniques.

Our team has outstanding expertise in selecting what we believe to

be the best available funds and managers the world has to offer –

whether or not they are from HSBC.

We work harder for your money by monitoring world markets

round-the-clock to identify hidden gems of potential growth.

4

Dealing times and charges

Shares are allocated at the Offer Price per share calculated on the

Business Day following the Dealing Day using the latest available

prices of assets.

Applications received after the 10:00 am Jersey time on any Dealing

Day will normally be dealt on the next Dealing Day. Shares are

normally dealt on each Business Day (other than days during a

period of suspension of dealing in shares and other than a Business

Day immediately following the end of a period of such suspension)

and which is also for the Portfolio, a day where stock exchanges

and regulated markets in countries where the Portfolio is materially

invested are open for normal trading.

Valuation

On the Business Day following the Dealing Day

Naturally there are charges involved when you make any type of

investment.

Initial charge

This is up to 4.17% and is included in the purchase price of your

shares in each fund. The initial charge is a one off fee and therefore

will not be refunded if you decide to cash in your investment. We

do not make a charge when you sell your shares.

Annual management charge

An annual charge is levied on each of the funds within HSBC

Portfolios – World Selection and will be between 1.00% and 1.30%

(please see the prospectus for full details). This varies according

to the complexity and costs involved in managing the underlying

investments of each fund.

Switching fee

If you switch to another fund in the Freedom Plus range that has a higher

initial charge, the difference will be deducted from your investment.

5

Tax

HSBC Portfolios is based in Luxembourg, an internationally

recognised financial centre. As a result, the internal taxation of the

funds is very low at just 0.05% per annum of their net asset value.

You may be liable to personal taxation on the profits, income and

gains realised from, or accruing within, the underlying investments

under the domestic tax laws of the country in which you are resident

and/or a country in which you are liable to taxation. We therefore

recommend that you seek independent tax advice as to the treatment

of your investments if you decide to invest through this service.

Will I have to pay tax in return ?

The Council of the European Union adopted on 3rd June 2003

Council Directive 2003/48/EC on the taxation on savings income.

Under this Directive, Member States of the European Union

(“Member States”) will be required to provide the tax authorities of

another Member State with details of payments of interest or other

similar income paid by a person within its jurisdiction to an individual

resident in that other Member State.

It is presently not clear if and to what extent dividends distributed

by the Fund and capital gains realised by Shareholders on the

disposal of shares will be subject to such reporting.

HSBC Portfolios (‘The Company’) reserves the right to reject any

application for shares if the information provided by any prospective

investor does not meet the standards required by legalisation

enacted as a result of this Directive.

The way your returns are treated for tax purposes will depend on your

country of residence, local regulations and your personal circumstances.

As with any investment you should ensure that the fund is

appropriate not only to your tax position but also to your personal

investment needs. Any tax information in this brochure is based on

our understanding of current and proposed legislation and practice.

The accuracy of this information or its completeness cannot be

guaranteed. The legislation and practice may be subject to change.

If you require specific details in respect of this legislation we

strongly recommend that you consult with your tax or legal adviser,

as we cannot provide individual guidance on personal tax matters.

6

Key risks

Market risk

The value of investments and the income derived there from may

fall as well as rise and investors may not recoup the original amount

invested in the Company. In particular, the value of investments

may be affected by uncertainties such as international, political and

economic developments or changes in government policies.

Foreign exchange risk

Because a Portfolios’ assets and liabilities may be denominated

in currencies different to the Base Currency, the Portfolio may

be affected favourably or unfavourably by exchange control

regulations or changes in the exchange rates between the Base

Currency and other currencies. Changes in currency exchange

rates may influence the value of a Portfolio’s shares, the dividends

or interest earned and the gains and losses realised. Exchange

rates between currencies are determined by supply and demand

in the currency exchange markets, the international balance of

payments, governmental intervention, speculation and other

economic and political conditions. If the currency in which a security

is denominated appreciates against the Base Currency, the value

of the security will increase. Conversely, a decline in the exchange

rate of the currency would adversely affect the value of the security.

A Portfolio may engage in foreign currency transactions in order

to hedge against currency exchange risk, however there is no

guarantee that hedging or protection will be achieved. This strategy

may also limit the Portfolio from benefiting from the performance

of a Portfolio’s securities if the currency in which the securities held

by the Portfolio are denominated rises against the Base Currency. In

case of a hedged class, (denominated in a currency different from

the Base Currency), this risk applies systematically.

Liquidity risk

A Portfolio is exposed to the risk that a particular investment or

position cannot be easily unwound or offset due to insufficient

market depth or market disruption. This can affect the ability of a

shareholder to redeem funds from that Portfolio, and can also have

an impact on the value of the Portfolio.

Although the Portfolios will invest mainly in the Collective Investment

Schemes in which the shareholders are entitled to redeem their

shares within a reasonable timeframe, there may be exceptional

circumstances in which such Collective Investment Schemes can

not guarantee the liquidity of their shares/units. Absence of liquidity

may have a determined impact on the Portfolio and the value of its

investments. This liquidity risk is mitigated as the Portfolios will have

a well diversified exposure to a broad range of asset classes and will

be predominantly invested in securities listed on a Regulated Market.

In addition, the Company manages a robust risk management

process effective on a daily basis in identifying, measuring,

monitoring and controlling the liquidity risk for all assets classes

including, but not limited to, emerging markets equities, investment

grade, high yield and emerging markets debt securities, real estate,

hedge fund, private equity and absolute return strategies.

Specific nature of a fund of funds

Prospective investors should be aware of the specific features of a fund

of funds and the consequences of investing in the Collective Investment

Schemes. Although the Company will seek to monitor investments and

trading activities of the Collective Investment Schemes to which certain

Portfolios’ assets will be allocated, investment decisions are made

at the level of such Collective Investment Schemes and it is possible

that the managers of such Collective Investment Schemes will take

positions or engage in transactions in the same securities or in issues

of the same asset class, industry or country or currency at the same

time. Consequently there is a possibility that one Collective Investment

Scheme may purchase an asset at about the same time as another

Collective Investment Schemes may sell it. There can be no assurance

that the selection of the managers of the Collective Investment Schemes

will result in an effective diversification of investment styles and that

positions taken by the underlying Collective Investment Schemes will

always be consistent.

The above is not a full list of all the risks that apply to the funds

within HSBC Global Asset Management (International) Limited’s

range of funds. Investors and potential investors should read the

relevant simplified prospectus or full prospectus for a full list of

risk warnings prior to making an investment in a fund.

7

Important notes

As with any investment where the underlying investments are

stocks and shares, the price of shares in HSBC Portfolios and any

income from them can go down as well as up, is not guaranteed,

and you may not get back the amount of your original investment.

Remember, these funds should be considered as a medium to long-

term commitment, for example at least five years

Please see relevant Simplified Prospectus and Prospectuses for

more information.

Any decision to invest in HSBC Portfolios should be based on the

content of the Prospectus, Application Terms and Conditions and

Nominee Service Agreement.

UK and Isle of Man investors will not be protected by statutory

compensation arrangements if they invest in any of the HSBC

Portfolios . Should a fund fail, investors are reminded that they will

be excluded from the benefit of the rules and regulations made

under the UK Financial Services and Markets Act 2000 including

the UK Financial Services Compensation Scheme.

For further details on these sub-funds and past performance

please visit the web site at: www.offshore.hsbc.com or call

+44 1534 606389 (Monday to Friday exc. UK and Jersey Bank

Holidays, 9am to 5pm UK time).

To help us continually improve our services and in the interests of

security we may monitor and/or record your communications with us.

This offer is not available to residents of Australia, Canada, Hong

Kong, Malaysia, United States of America or New Zealand.

This is an integral part of the HSBC Freedom Plus brochure and

should be read in conjunction with it. Please refer to the main

brochure for additional important information. Before investing in

any of the products in the HSBC Portfolios, please read the full

Prospectus and the sub-funds relevant Simplified Prospectus for

more information and a detailed explanation of the risks involved.

173160 BRO 171/10/2009