HSBC Brazil Fund Presentation_post NFO_050511

8/6/2019 HSBC Brazil Fund Presentation_post NFO_050511

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HSBC Brazil Fund(An open-ended Fund of Funds Scheme)

May 2011



Brazil: The opportunity beckons



Brazil – A country of opportunities

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.

Brazil2010

Population 193 millionArea 8.5 million km2

GDP USD 2,000 billion

Exports USD 201.92 billion

Imports USD 181.64 billion

India2010

1210 million2.97 million km2

USD 1057.45 billion

USD 212.50 billion

USD 330.26 billion


http://slidepdf.com/reader/full/hsbc-brazil-fund-presentationpost-nfo050511 4/59Source: IBGE; World Bank, IMF

• Brazil is a federal republic composedof 26 states and a federal districtwhich comprise 5,565 municipalities

• Population: 193 million

– 5th largest in the world

• Area: 8.5 million km²


• Stabilised democracy –A successful process of

democratization since the eighties

Brazil: Large population and stable democracy…

1

2

3

4

5

6

7

1973 1983 1993 2003 2006 2007 2008 2009

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

Source: Freedom House; Information as of December, 2008



• Rich in both soft and hard commodities - World’s largest commodities supplier

Quartz Niobium Iron ore Bauxite Manganese Tin ore

Ranking 1st 1st 2nd 2nd 3rd 5th

• GDP*: USD 2,000 billion


– India ranks 12th

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

…World’s largest commodities supplier and large GDP

4% 7%

25%

4%6%10%

10%

34%

Chile Colombia Mexico PeruVenezuela Other Argentina Brazil

LatAm GDP by country (% of total, 2009)

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

Source: IBGE; World Bank, IMF *PPP (Purchase Power Parity) criteria; Freedom House

Sugar Beef Coffee Soybean Corn Poultry Pork

Ranking 1st 1st 1st 2nd 2nd 2nd 3rd



Brazil – A few facts

Brazil is a federation comprised of 26 States, one federal district (which includes thecapital city, Brasília) and municipalities

Two-thirds of Brazil’s population is between age group15 and 64, the mosteconomically productive age group

Brazil has 12% of the world’s fresh water

São Paulo (The economic capital of Brazil) would rank higher than Paris andShanghai as the world's sixth wealthiest city by 2025 (e)

By 2025, Brazil is forecast to become the world’s fifth largest economy, overtakingBritain and France

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



Brazil: The rising star on the world stage



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.

Brazilian equities have outperformed other markets

over the years…Annualised Return on World Stock Markets over the past 10 years



Brazil is also the best performing market in 2009 – 2010

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

56.57 54.94 54.73

42.30 43.9545.80

48.16

27.47

15.14

21.28 21.21

8.81

0%

10%

20%

30%

40%

50%

60%

Brazil Russia India EmergingMarkets

BRIC

EmergingMarketsTaiwan

EmergingMarkets

Korea China Europe World USA Japan



Brazil has outperformed emerging and developed markets…

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

Historical performance for Equity Indices



… mostly on the back of robust earnings growth

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

Earnings Per Share

0

1

2

3

4

5

6

7

8

9

J a n - 0 0

M a y - 0 0

S e p - 0 0

J a n - 0 1

M a y - 0 1

S e p - 0 1

J a n - 0 2

M a y - 0 2

S e p - 0 2

J a n - 0 3

M a y - 0 3

S e p - 0 3

J a n - 0 4

M a y - 0 4

S e p - 0 4

J a n - 0 5

M a y - 0 5

S e p - 0 5

J a n - 0 6

M a y - 0 6

S e p - 0 6

J a n - 0 7

M a y - 0 7

S e p - 0 7

J a n - 0 8

M a y - 0 8

S e p - 0 8

J a n - 0 9

M a y - 0 9

S e p - 0 9

J a n - 1 0

M a y - 1 0

S e p - 1 0

J a n - 1 1

MSCI World MSCI Emerging Markets MSCI Brazil MSCI India



2010 2011 2012Brazil 26 28 14

Mexico 8 17 13Chile 23 12 11Peru 27 32 13Colombia 29 21 5

Selected emerging markets forward P/E ratio

… but is still relatively attractive in terms of valuation

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

CURRENT 12M CURRENT

TRAILING FWD 09 10E 11E TRAILING 10E 11E

GLOBAL* 16.4 12.4 9.7 15.9 12.6 1.9 1.9 1.7

USA* 16.9 13.4 11.6 16.5 13.6 2.3 2.2 2.0

EUROPE* 15.4 10.9 7.8 14.7 11.0 1.7 1.6 1.5

JAPAN* 16.8 13.5 NM 16.6 13.7 1.2 1.2 1.1

EMERGING MARKETS 13.6 11.3 17.3 13.8 11.5 2.0 2.0 1.7

EMF ASIA 14.0 12.2 19.0 14.2 12.4 2.1 2.2 1.9

EMF LATAM 14.1 11.9 16.6 14.4 12.0 2.0 2.1 1.6

EMF EMEA 11.2 9.3 14.7 11.4 9.4 1.6 1.6 1.5CHINA 13.4 11.4 17.7 13.6 11.6 2.2 2.2 2.0

BRAZIL 12.4 10.5 14.6 12.6 10.6 1.8 1.8 1.7

KOREA 12.3 11.8 18.9 12.3 11.9 1.7 1.7 1.4

TAIWAN 15.6 14.2 30.3 15.7 14.4 2.2 2.2 2.0

SOUTH AFRICA 14.8 11.5 18.8 15.2 11.7 2.3 2.3 2.1

INDIA 18.3 14.9 22.7 18.6 15.2 2.9 2.9 2.6

RUSSIA 8.5 7.2 12.2 8.7 7.3 1.2 1.2 1.0

MEXICO 18.6 15.1 19.9 19.0 15.2 2.7 2.9 1.3MALAYSIA 17.3 14.8 22.6 17.6 14.9 2.3 2.3 2.1

CHILE 17.6 15.9 21.9 17.8 16.1 2.2 2.2 2.1

INDONESIA 14.5 12.2 17.8 14.7 12.3 3.5 3.6 3.0

TURKEY 10.5 9.9 12.3 10.5 10.1 1.9 1.9 1.7

THAILAND 13.8 12.3 17.1 14.0 12.5 2.3 2.3 2.1

POLAND 13.6 11.2 17.1 13.9 11.3 1.6 1.6 1.5

CZECH REPUBLIC 10.5 10.6 10.1 10.5 10.6 2.0 2.0 1.9

EGYPT 11.3 8.8 13.3 11.6 9.1 1.3 1.3 1.2

PHILLIPPINES 16.5 14.5 20.3 16.7 14.7 2.6 2.6 2.4

HUNGARY 12.2 10.0 12.5 12.4 10.1 1.3 1.3 1.2

EM VALUATION

P/E (x) P/BV (x)

PROSPECTIVE PROSPECTIVE

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

LatAm Consensus EPS Growth Estimates



Forward P/E of Brazil is relatively favourable

Selected emerging markets forward P/E

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

0

2

4

6

8

10

12

14

16

I n d i a

M a l a y

s i a

M e x i c o

P h i l i p

p i n e s

T a i w a n

T h a i l a n d

S o u t h A f r i c a

I n d o n e s i a

C h i n a

P o l a n

d

S o u t h K o

r e a

B r a z i l

C z e c h R e p u b l i c

E g y p t

T u r k e y

H u n g a r y



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

Also, Brazil performed relatively well during the crisis…

• Strong resilience in consumption (private and government), pro-growth policy of lowerrates and fiscal expansion, relatively closed economy contributed for LIFO (last in firstout) 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%



Reasons for investing in Brazil



1. Domestic consumption – Robust growth in demand

Robust domestic demand - Domestic consumption accounts for more than 60% ofits GDP* with government spending accounting for another 21%

GDP Breakdown – Comparison with India

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

Brazil

16,69%

-0,08%

20,77%

62,62%

-500.000

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

B r a z i l i a n

R e a Household

Government

Net exports

Investments

India

-6,3%

40,1%

11,1%

55,1%

-1.000.000

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

2003 2004 2005 2006 2007 2008 2009

I n d i a n

R u p e e s Household

Government

Net exports

Investments



Favorable demographics are the key drivers of solid consumption demand

Class C (middle class) represents more than 50% of Brazil’s population

The largest proportion of Brazil’s population is now enteringmost productive years

Source: Exame December 30, 2010

The middle class is growing and also has the largestshare of income

1. Domestic consumption – Growing middle class

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



Unemployment rate is consistently diminishing and currently below 7%

Disposable income is significantly rising

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

Unemployment rate diminishing Minimum wage vs Price of basic food basket

200

162

510

225

0 100 200 300 400 500 600

Sueldo

Precio de la Cesta

Basica de

Alimentos

2003 2010

MinimumWage

Price of basicfood basket

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

1. Domestic consumption – Increasing disposable income

6%

7%

8%

9%

10%

11%

12%

13%

14%

2003 2004 2005 2006 2007 2008 2009 2010

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



2. Infrastructure - Spending poised to induce growth

Brazil’s infrastructure investment boom

Brazil: Infrastructure Investment Plans (R$ billion)

Sectors Investments 2010 - 2013Ports 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)

Infrastructure remains a long-lasting thematic investment in Brazil



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 Cup2014 and Rio Olympics 2016

Projects boosting productivity in the key economic regions: – São 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 businessopportunities

Year of the

Game

Hosting

Country

MSCI

Country

Index Period of observation

% returns in

local MSCI

Index

% returns in

MSCI World

Index

Olympics

2008 China MXCN 29 Dec 06 -

28 Dec 07 64.04 9.69

2004 Greece MXGR 31 Dec 02 -

31 Dec 03 63.69 33.82

World Cup

2010 South Africa MXZA 01 Jan 09 –

31 Dec 09 61.04 30.81

2006 Germany MXDE 30 Dec 04 -

30 Dec 05 10.50 10.02

2002 Korea MXKR 26 Dec 00 - 28 Dec 01 43.46 -15.33

Source: Bloomberg. Total returns denominated in USD.



3. Commodities – Showing consistent appreciation

Brazil is one of the world’s largest producers of soft and hard commodities. Thecountry 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

Source: Bloomberg, Data as at 1 January 2011

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



3. Commodities – Brazil basket is well diversified

0%

2%

4%

6%

8%

10%

12%

O i l

I r o n

S o y

b e a n

M e a t

S

u g a r

V e h i c l e

M e t a l

P u l p

C o f f e

A i r p

l a n e s

T o b

a c c o

H i d e s

/ S k i n

F o o

t w e a r

W

o o d

A l u m

i n u m

O r a n g e

J u i c e

The commodities basket is well diversified across, Oil, Metals and Agri-products

Low dependency on oil imports

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

Diversified commodities basket of Brazilian exports



4. Exports – Brazil’s export dependencies are well diversified

Since 2009, China has replaced US as the largest buyer of Brazilian exports

However, Brazil’s exports are well diversified and not dependant on only theUS or China

Source: Ipeadata, Information as of January 2011

China replaces US as largest buyer of Brazil’s exports

Source: Ipeadata. Information as of January 2011

Exports to ChinaExports to USA



70

75

80

85

90

95

100

105

2006 2007 2008 2009 2010

Industry Exports Investments

4. Exports – Brazil economy not significantly dependant on

exports

However, exports do not constitute a significantly large portion of the GDP of Brazil

GDP - Industry, Exports, Investments

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.

16,69%

-0,08%

20,77%

62,62%

-500.000

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

B r a z i l i a n

R e a l

Household

Government

Net exports

Investments

Brazil - GDP Breakdown



Summary



Outlook remains positive and valuations are attractive

• Brazil has been the top performing market over the last10 years. However, it lagged EM, LatAm and its mainpeers in terms of performance in 2010 despite postingstrong earnings revision cycle

• Brazil continues to trade at relative attractive multiples,12m fwd P/E stands at 10.4x while EM, China and Indiatrades at 10.9x, 10.8x and 13.0x respectively

• Brazil looks undervalued both against EM andLatAm countries in a P/B vs ROE basis as well

• In LatAm, Brazil is the most attractive marketacross metrics, including P/E, EV/EBITDA, P/B

• On the earnings side, Brazil’s growth is likely to besustained at high levels in 2011, faster than other LatAmmarkets (except for Peru)

• EPS growth for MSCI Brazil stands at 17.0% and 17.6%for 2010 and 2011

• A great growth opportunity to benefit in the mediumto long term

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

Source: I/B/E/S, MSCI, J.P. Morgan; Information as of February 17, 201

CURRENT 12M CURRENT

TRAILING FW D 10E 11E 12E TRAILING 11E 12E

GLOBAL* 16.6 12.6 15.9 12.8 11.3 1.9 1.7 1.6

USA* 16.9 13.6 16.5 13.8 12.1 2.3 2.0 1.8

EUROPE* 15.4 11.1 14.7 11.3 10.0 1.7 1.6 1.4

JAPAN* 16.8 15.3 NM 15.5 13.7 1.2 1.1 1.0

EMERGING MARKETS 13.0 10.9 13.4 11.1 9.7 2.0 1.7 1.5EMF ASIA 14.3 11.9 14.7 12.1 10.5 2.1 1.9 1.7

EMF LATAM 13.8 11.7 14.2 11.9 10.5 2.0 1.6 1.5

EMF EMEA 10.8 9.0 11.0 9.2 8.0 1.6 1.4 1.3

CHINA 12.6 10.8 12.9 11.0 9.6 2.1 1.9 1.6

BRAZIL 12.2 10.4 12.5 10.6 9.4 1.8 1.7 1.6

KOREA 11.2 10.7 11.2 10.9 9.9 1.5 1.3 1.2

TAIWAN 14.3 12.9 14.4 13.2 11.5 2.0 1.9 1.8

SOUTH AFRICA 14.4 11.5 14.9 11.7 10.1 2.3 2.1 1.8

INDIA 15.8 13.0 16.2 13.3 10.9 2.5 2.3 2.0

RUSSIA 7.9 6.7 8.0 6.8 5.9 1.1 1.0 0.9

MEXICO 18.6 14.7 19.3 14.9 13.1 3.1 1.2 1.2

MALAYSIA 16.7 14.3 17.1 14.5 13.1 2.2 2.0 2.0

CHILE 17.3 15.3 17.6 15.5 13.8 2.2 2.0 1.9

INDONESIA 13.9 11.8 14.2 12.0 10.7 3.4 2.9 2.5

TURKEY 10.5 10.0 10.5 10.2 9.1 1.8 1.7 1.5

THAILAND 13.2 11.6 13.4 12.0 9.8 2.1 2.0 1.7

POLAND 13.2 10.8 13.7 10.9 10.4 1.6 1.5 1.4

CZECH REPUBLIC 10.4 10.6 10.3 10.6 10.2 2.0 1.9 1.8

EGYPT 11.4 8.8 11.9 9.1 7.4 1.3 1.2 1.2

PHILLIPPINES 15.6 13.4 15.9 13.7 11.4 2.4 2.3 2.0

HUNGARY 11.0 9.6 11.1 9.9 8.2 1.2 1.2 1.1

EM VALUATION

P/E (x) P/BV (x)

PROSPECTIVE PROSPECTIVE



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

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.

Brazil CPI IPCA

The IPCA (Índice Nacional de Preços ao Consumidor Amplo, Brazil) or Extended Consumer Price Index, iscalculated by IBGE, a government agency, and reflects the average cost of living in 11 major Brazilian cities forfamilies with income up to 40 minimum salaries. The IPCA is used by the government to set benchmark rates and

make monetary policy decisions

F i g u r e s i n %



29

…while perspectives for Brazilian Oil industry are very positive

Global RankingProven Oil Reserves

Brazilian Oil ProductionMillion barrels / day

0 25 50 75 100 125 150 175 200 225 250 27

Saudit Arabia

Canada

Iran

Iraq

Kuwait

Venezuela

UAE

Russia

Lybia

Nigeria

Brazil + pre-salt

USA

China

Brazil

Source: Petrobras, EIA, HSBC Research

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2000 2004 2008 2012 2016 2020

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

Existing Reserves - Petrobras

Macroeconomic Summary March 2011



Macroeconomic Summary - March 2011

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

• Politics

• Recent announcements pointing to a more moderate expansioniststrategy 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.

• Economic growth

• GDP has gone through some moderation in the last few quarters• Industrial production stability reflecting both imports increase andinventories 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.

• Inflation

• Given our view for activity, we keep our CPI forecast at a level above thecenter of the target;• Demand-sensitive groups showed acceleration in the last months, withfurther 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 budgetand macro prudential measures

2007 2008 2009 2010 2011 f

GDP (%) 6,1 5,1 -0,6 7,5 4,5

CPI (%) 4,46 5,9 4,3 5,9 5,5

Nominal interest rate 11,25 13,75 8,75 10,75 12,75

Trade Balance (USD bi) 40,0 24,8 25,3 20,3 10,0

Current Account (USD bi) 1,6 -28,2 -24,2 -47,5 -63,5

BRL Currency 1,77 2,34 1,74 1,67 1,75



Why look at overseas markets?



An opportunity to participate in markets which are fundamentally different from India

Participation in long term growth stories in other markets which may provide betterreturns 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 wasconsiderably 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*

Investing in overseas markets gives you…

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



Developed markets show an increasing affinity towards overseas investments intoemerging 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

… and the reasons are…



Our Emerging Markets capabilities



HSBC Group has a good track record and a long standing presence in EmergingMarkets, its roots were formed in China and India in the 19th century

HSBC Global Asset Management has approximately $145billion asset undermanagement 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 ofBrazilian and Indian equity mutual funds*

Second largest manager of China funds and the fourth largest manager of BRICfunds**

A leader in Emerging Markets Asset Management

Benefit from HSBC Global Asset Management’s renowned expertise in emerging markets

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 Lipper’s 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)

Best Single Country Hedge Fund (Global Asset Management's India Alpha Fund)

– 2009, AsiaHedge Award

Best Global Emerging Markets Manager of the Year

– 2008, European Pensions awards

Best Fund Manager (HSBC Amanah)

– 2009, Euromoney’s Islamic Finance Awards

Past performance is not a guarantee of future results.



HSBC Brazil Fund(An open-ended Fund of Funds scheme)



Key features

Investment Objective

The primary investment objective of the Scheme is to provide long termcapital appreciation by investing predominantly in units / shares of HSBCGlobal Investment Funds (HGIF) Brazil Equity Fund. The Scheme may, at thediscretion of the Investment Manager, also invest in the units of other similaroverseas mutual fund schemes, which may constitute a significant part of itscorpus. The Scheme may also invest a certain proportion of its corpus inmoney market instruments and / or units of liquid mutual fund schemes, inorder to meet liquidity requirements from time to time.

Benchmark Index MSCI Brazil 10/40 Index

Minimum ApplicationAmount

INR 10,000

Options Growth, Dividend (Payout & Dividend Reinvestment)

Load StructureEntry Load – Nil; Exit Load -1% if redeemed /switched out within 1 year fromthe date of allotment. Otherwise Nil.

SIP/STP/SEP Available

Underlying Scheme HSBC Global Investment Funds (HGIF) Brazil Equity 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 itscash, but is allowed a maximum tactical allocation of cash to 10%. The fund does not hedgecurrency 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 amaximum tracking error of 15%

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

Non contractual document

HGIF Brazil Equity Fund, The Underlying Fund

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




Performance - HGIF Brazil Equity Fund, The Underlying Fund

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 quotedabove are basis the MSCI Brazil 10/40 IC Class Price Index performance as available on Bloomberg.

Price indices capture an index’s market price performance only and are calculated by MSCI on a daily and a real time basis. Each price index measures the sumof the free float-adjusted market capitalization-weighted returns of all its constituents on a given day. Dividends paid by the underlying securities are not reinvestedin the index—the value of the dividends is essentially dropped from the index value.

1 Year 3 Years

Since Inception

Date - 03/03/2006HGIF Brazil Equity Fund 18.17 -1.81 10.68

Benchmark - MSCI Brazil 10/40 (IC class) 12.42 -1.04 11.81

Returns in %

Portfolio Strategy



gy

• Infrastructure remains a long-lasting thematic investment in Brazil

• Infrastructure continues to look attractive both for economic as well as political reasons.

Infrastructure

Overweight

• Important underweight due to regulatory riskUtilities

• 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)

Consumption

Underweight

• Corporates invest to develop their earnings’ growth as the economic cycle moves onCorporate investment

• The sector mainly consists of two companies in Brazil and they are in a difficult situation due to regulatory changesInformation Technology

RationaleSector

• Infrastructure remains a long-lasting thematic investment in Brazil

• Infrastructure continues to look attractive both for economic as well as political reasons.

Infrastructure

Overweight

• Important underweight due to regulatory riskUtilities

• 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)

Consumption

Underweight

• Corporates invest to develop their earnings’ growth as the economic cycle moves onCorporate investment

• The sector mainly consists of two companies in Brazil and they are in a difficult situation due to regulatory changesInformation Technology

RationaleSector

0%

5%

10%

15%

20%

25%

30%

A g r i b u s i n e s s

B u i l d i n g M a t e r i a l s

C a p i t a l G o o d s

D a t a S e r v i c e s

E d u c a t i o n

F i n a n c i a l S e r v i c e s

H e a l t h c a r e

I n f r a s t r u c t u r e

S t e e l & M i n i n g

O i l & P e t r o c h e m i c a l s

P u l p & P a p e r

R e a l E s t a t e

R e t a i l

S u g a r & E t h a n o l

U t i l i t i e s

T e l e c o m

C o n s u m e r G o o d s & B e v e r a g e s

HGIF Brazil MSCI 10/40

• Orientation remains domestic; latest marketcorrection re-opened interesting valuationwindow in consumer and banks

• Easing rotation to commodities;commodities likely to remain robust onEM/China

• Valuations are attractive in all sectorsex-staples

• We recognize policy (monetary/fiscal)concerns

I t t hil h f th U d l i F d




“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…...

Investment philosophy of the Underlying Fund



In estment reso rces



Investment resources


Portfolio Managers

New Frontiers, Regional &Global Emerging MarketsEquities and Fixed Income

Portfolio Managers

Economists

Global Macro Team

HSBC Global Asset Management ResourcesOver 70 investment and support resources

HSBC Resources

Investment SupportProduct Specialists

Support, Risk

Product Specialists

Dealing

HSBC AccessHSBC brand well-known in

emerging and frontier markets

Global ReachLocal investment team views,idea generation, cross check

Dedicated Client ServiceLegal/Compliance

Dedicated in-house expertise

Macro Team (2)Quantitative/Strategy (2)

Analysts (10)

Ricardo Maluf

Assistant Portfolio Manager

HSBC Global Asset ManagementBrazil Resources

HSBC Global Asset ManagementBrazil Resources

Jose Cuervo Natalia Kerkis

Biography of the fund manager



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 GlobalGraduate 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



Investment team – Summary

Collectively 50+ years of experience in Brazilian Equitiesinvestment; three of team have worked together for five years

Fully leverage HSBC’s global network of 200+ emerging marketspecialists

Strong team of over 70 investment and support resources allowsinvestment focus

Provides clear research edge and key information advantages

Strong track record of delivering consistent investmentperformance

Experienced and stable team

Small and focused

Global resources

Significant support

Proprietary research

Performance orientation

Small, effective team of decision makers supported bysubstantial pool of research resource


Potential risks of HGIF Brazil Equity Fund



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 policyresponse 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 animprovement in the relative outlook for assets in the developed world

Brazil as compared to India A summary



Brazil as compared to India – A summary

Brazil India

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

19.5% p.a. 12.8% 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 returnIn USD terms (Source: Morningstar; March 2007- March 2010)

19.4% 10.4%



Thank You

Important notes – Underlying Fund



Important notes – Underlying Fund

The HSBC Global Investment Funds – Brazil Equity (the “Fund”) invests primarilyin Brazilian equities

The Fund is subject to the concentration and Emerging Market risks of investing in

a single Emerging Market

The Fund’s investments may involve substantial market, currency, volatility,regulatory and political risks. Investors may suffer substantial loss of theirinvestments in the Fund

The investment decision is yours but you should not invest unless the intermediarywhich sells you the Fund has advised you that the Fund is suitable for you and hasexplained 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 inthis document and should read the offering document of the Fund for details

Disclaimer



Disclaimer

This document has been prepared by HSBC Asset Management (India) Private Limited (HSBC) for information purposes only andshould not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All informationcontained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to bereliable but which it has not independently verified and HSBC, the third party makes no guarantee, representation or warranty andaccepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions containedwithin 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 doesnot have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receivethis document. Investors should seek financial advice regarding the appropriateness of investing in any securities or investmentstrategies that may have been discussed or recommended in this report and should understand that the views regarding futureprospects 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 whocome 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 Documentcarefully 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) PrivateLimited.

HSBC Asset Management (India) Private Limited; 314, D. N. Road, Fort, Mumbai 400 001. Tel: 6614 8819.

Risk Factors



Risk Factors

Investors may obtain Scheme Information Document, Statement of Additional Information and Key Information Memorandumsalong 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 anyloss or shortfall resulting from the operation of the Scheme. The Trustees of HSBC Mutual Fund have appointed HSBC AssetManagement (India) Private Limited as the Investment Manager. Risk Factors: All investments in mutual funds and securitiesare subject to market risks and the NAV of the Scheme may go up or down depending on the factors and forces affectingthe securities markets. There can be no assurance that the objectives of the Scheme will be achieved. Past performance ofthe 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 andrecurring expenses of the underlying scheme(s) into which the Scheme invests. HSBC Brazil Fund (HBF) is the name of theScheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns. SchemeClassification 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 thediscretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitutea significant part of its corpus. The Scheme may also invest a certain proportion of its corpus in money market instruments and/orunits of liquid mutual fund schemes, in order to meet liquidity requirements from time to time. Asset Allocation: Units/shares ofHGIF Brazil Equity Fund–95 to 100%; Money Market instruments (including CBLO & reverse repo) and/or units of liquid mutualfund schemes–0 to 5%. Please read the Scheme Information Document and Statement of Additional Information carefullybefore 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)

Source: Brazilian Central Bank, HSBC

0

50

100

150

200

250

300

350

1976 1981 1986 1991 1996 2001 2006 2011

0

10

20

30

40

50

60

70

2000 2004 2008 2012

… increasing horizon of investments decisions



Source: IPEA

GDP Growth

(%)

0%

1%

2%

3%

4%

5%

6%

7%

8%

1901 - 1945Agricultural

Economy

1946 - 1980Planned

Economy

1981-1993Reality

Check

1994-2003Initial

Reforms

2004-2008Sustainable

Growth

Average Volatility

… better income distribution



Source: FGV; HSBC

Income groups

(% ; 2008 vs 2003)

Income groups

(% of total population; Monthly income in USD)

-50

-40

-30

-20

-10

0

10

20

30

40

50

AB C D E

0

10

20

30

40

50

AB> 2900

C670 to 2900

D460 to 670

E< 460

2001 2008

… and its effect on several sectors



Source: IBGE; Cetelem Ipsos survey

Class C consumption aspirations

(December 2009)

Essential x Non-essential Expenditures

(% of monthly disposable income)

Class C: future consumption aspirations

% of Class C consumers with buying intentions for 2010

Furniture 38%Household appliances 37%Leisure & traveling 32%Phone & mobile 23%Computer 22%Car 21%

TV or media appliances 17%Decorative items 14%Real estate 12%Tools 10%Motorcycle 9%

Sporting equipment 8%

25%

65%

75%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

< 4 0 0

4 0 0 - 6 0 0

6 0 0 - 1 0 0 0

1 0 0 0 - 1 2 0 0

1 2 0 0 - 1 6 0 0

1 6 0 0 - 2 0 0 0

2 0 0 0 - 3 0 0 0

3 0 0 0 - 4 0 0 0

4 0 0 0 - 6 0 0 0

> 6 0 0 0

Essential Non-Essential

…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. morefor investments), Labor and Judiciary reforms

• Improve environment for doing business and the infrastructure

• Central bank autonomy

• Further advances in the macro landscape

Documents

HSBC Brazil Fund Presentation_post NFO_050511