HSBC World Selection Funds June 30, Monthly Factsheets Class A and C Shares. Investment products: ARE NOT A BANK ARE NOT DEPOSIT OR

Transcription

1 HSBC World Selection Funds June 30, 2016 Monthly Factsheets Class A and C Shares Aggressive Strategy Fund Balanced Strategy Fund Moderate Strategy Fund Conservative Strategy Fund Income Strategy Fund Investment products: ARE NOT A BANK ARE NOT DEPOSIT OR FDIC OBLIGATION OF THE INSURED BANK OR ANY OF ITS AFFILIATES ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY ARE NOT GUARANTEED BY THE BANK OR ANY OF ITS AFFILIATES MAY LOSE VALUE

2 HSBC World Selection Funds June 30, 2016 Aggressive Strategy Fund Portfolio objective The investment objective of the Aggressive Strategy Fund is long-term growth of capital. Total returns As of June 30, 2016 Aggressive Strategy Fund 1 Aggregate Average annual Without Sales Charge 3 Month YTD 1 Year 3 Years 5 Years 10 Years Inception Class A 1.36% 1.36% -3.95% 4.65% 4.37% 3.88% 5.08% Class C 1.17% 0.97% -4.70% 3.88% 3.59% 3.50% 4.86% With Sales Charge Class A (5.00%) -3.70% -3.70% -8.77% 2.87% 3.30% 3.35% 4.60% Class C (1.00%) 0.17% -0.03% -5.66% 3.88% 3.59% 3.50% 4.86% MSCI ACWI Index % 1.58% -3.17% 6.60% 5.95% 4.82% 5.76% S&P 500 Index % 3.84% 3.99% 11.66% 12.10% 7.42% 7.22% MSCI EAFE Index % -4.04% -9.72% 2.52% 2.15% 2.05% 3.84% Barclays U.S. Aggregate Bond Index % 5.31% 6.00% 4.06% 3.76% 5.13% 4.56% BofA Merrill Lynch U.S. High Yield Master II Index % 9.32% 1.71% 4.18% 5.71% 7.44% 6.96% Citigroup U.S. Domestic 3-Month T-Bill % 0.12% 0.14% 0.07% 0.06% 0.96% 1.28% Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call , or visit our website at The performance above reflects any fee waivers that have been in effect during the applicable periods as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. The indices used for performance comparison are unmanaged and do not reflect the fees and expenses associated with a mutual fund, and investors cannot directly invest in an index. Effective January 19, 2010, the range of available asset classes for investment was expanded to include non-hsbc Funds and the Fund s target allocation was revised. Accordingly, the performance of the Fund prior to January 19, 2010 is not representative of the Funds current investment objective and strategy, and all such performance should be considered with this in mind. Please see page 16 for additional Fund information and index definitions. Fund details Investment adviser HSBC Global Asset Management (USA) Inc. Launch price $10.00 Inception date A: February 14, 2005 C: June 9, 2005 Total number of holdings 10 Ticker (by class) A: HAAGX B: HBAGX C: HCAGX Annual management charge 0.25% CUSIP (by class) A: 40428X750 B: 40428X743 C: 40428X735 Total net assets (all fund classes) $14,042,374 Sales charge (by class) 3 A: 5.00% B: 4.00% C: 1.00% Income Dividend (pay date) A: $ (n/a) C: $ (n/a) Expense ratio (gross) 4 A: 1.79% B: 2.54% C: 2.54% Capital Gain Dividend (pay date) A: $ (n/a) C: $ (n/a) Represents holdings in affiliated portfolios, affiliated and non-affiliated investment companies and exchange traded funds as of June 30, Holdings are subject to change without notice. 1

3 Aggressive Strategy Fund Portfolio summary as of June 30, 2016 Global equity % of assets Passive 52.8% Vanguard FTSE AW 22.2% Vanguard 500 Index 30.6% Alternative Beta 32.2% PowerShares FTSE RAFI US 15.5% PowerShares FTSE RAFI DEV 6.9% ishares Currency Hedged MSCI ETF 9.8% Fixed income Credit 6.0% Columbia High Yield 3.9% HSBC Emerging Markets Debt 2.1% Government Bonds 1.6% HSBC Emerging Markets Local Debt 1.6% Alternatives Global property 5.1% SPDR DJ Global 5.1% Cash Cash 2.3% Portfolio total 100.0% Portfolio composition by asset allocation B C D Top 10 Fund holdings A A. Global Equity 85.0% B. Fixed Income 7.6% C. Alternatives 5.1% D. Cash 2.3% % of total Vanguard 500 Index 30.6% Vanguard FTSE AW 22.2% PowerShares FTSE RAFI US 15.5% ishares Currency Hedged MSCI ETF 9.8% PowerShares FTSE RAFI DEV 6.9% SPDR DJ Global 5.1% Columbia High Yield 3.9% HSBC Money Market 2.3% HSBC Emerging Markets Debt 2.1% HSBC Emerging Markets Local Debt 1.6% The portfolio summary information is subject to change without notice. 1 Certain returns shown include monies received by one or more of the Portfolios, in which the Fund invests, in respect of one-time class action settlements. As a result, the Fund s total returns for those periods were higher than they would have been had the Portfolio(s) not received the payments. 2 Inception performance calculated from February 14, The sales charge for Class A Shares represents the maximum sales charge. Sales charges for Class B and Class C Shares may be assessed on redemptions. The exact amount of these charges, if any, depends on the amount of time the shares have been held by the investor. See the Prospectus for more information. 4 Reflects the expense ratio as reported in the prospectus dated February 28,

4 Aggressive Strategy Fund Quarterly commentary as of June 30, 2016 The Fund returned 1.36% (without sales charge) for the class A Shares for the quarter ended June 30, That compared to a 2.46% total return for the Fund s reference index, the S&P 500 Index The Fund measures performance against several additional reference indices: the S&P 500 Index (2.46% return for the 3 months through March 31, 2016), MSCI EAFE Index (-1.19% gross return), Bank of America/Merrill Lynch US High Yield Master II Index (5.88% return) and Citigroup US Domestic 3-Month Treasury Bill Index (0.06% return). Market commentary During the second quarter of 2016, global equities as represented by the MSCI All Cap World Index returned 1.19%. Broad fixed income as represented by the Barclays US Aggregate Bond returned 2.21%. Volatility remained a feature of the second quarter as markets continue to assess the impact of slowing US and global growth, as well as the impact and uncertainty following the UK referendum result. Fixed Income saw improved performance as US bond interest rates generally declined following a more dovish tone from the US Federal Reserve (Fed). Following the equity market rout and subsequent rally at the beginning of the year, markets entered Q2 with Brexit discourse and global central bank policy top of mind. As investors reacted to news in Europe we saw some volatility at quarter s end but domestic equity indexes had largely recovered by the end of the period. by March s aggressive stimulus package, and there are signs of improved domestic demand and confidence. In our view, the valuation case for equities over bonds remains intact over the longterm but the outlook for risk assets has become less attractive tactically and we have adjusted our positioning accordingly. We believe that global economic growth remains sluggish following a subdued Q1, but is still low relative to previous years. While the May labor market report was worse than expected, other data such as manufacturing, wage growth, services and consumer spending are improving. Corporate earnings, which have been in decline over the last year, may be bottoming out. Therefore, we expect firm but subdued growth looking out over an intermediate term horizon where interest rates remain low. However, current rates are incredibly low and market data suggests the outlook for government bond yields will be lower forever or until further notice. Thus, the bond market has priced in an extremely pessimistic scenario for growth. This raises the risk that when rates do rise, they may do so quickly if the global economy proves more resilient, catching investors by surprise. As such, we maintain our negative view on global government bonds. The World Selection Funds had positive absolute returns across all portfolios. Broadly, the Funds remain globally diversified with exposure to equities and bonds. We do continue to favor risk assets such as global equities, investment grade bonds and high yield debt which appear more reasonably valued relative to developed market government bonds in our view. Much has changed however and we do see increased political risks in Europe combined with the prospect that a slower UK economy may weigh on growth prospects in the region. Offsetting this risk, the European Central Bank remains supportive, as confirmed 3

5 HSBC World Selection Funds June 30, 2016 Balanced Strategy Fund Portfolio objective The investment objective of the Balanced Strategy Fund is long-term growth of capital. Total returns As of June 30, 2016 Balanced Strategy Fund 1 Aggregate Average annual Without Sales Charge 3 Month YTD 1 Year 3 Years 5 Years 10 Years Inception Class A 1.76% 2.62% -2.64% 4.06% 4.13% 4.06% 5.13% Class C 1.57% 2.23% -3.32% 3.31% 3.37% 3.67% 5.00% With Sales Charge Class A (5.00%) -3.35% -2.49% -7.49% 2.29% 3.06% 3.53% 4.65% Class C (1.00%) 0.57% 1.23% -4.28% 3.31% 3.37% 3.67% 5.00% MSCI ACWI Index % 1.58% -3.17% 6.60% 5.95% 4.82% 5.88% S&P 500 Index % 3.84% 3.99% 11.66% 12.10% 7.42% 7.25% MSCI EAFE Index % -4.04% -9.72% 2.52% 2.15% 2.05% 4.04% Barclays U.S. Aggregate Bond Index % 5.31% 6.00% 4.06% 3.76% 5.13% 4.55% BofA Merrill Lynch U.S. High Yield Master II Index % 9.32% 1.71% 4.18% 5.71% 7.44% 6.95% Citigroup U.S. Domestic 3-Month T-Bill % 0.12% 0.14% 0.07% 0.06% 0.96% 1.28% Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call , or visit our website at The performance above reflects any fee waivers that have been in effect during the applicable periods as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. The indices used for performance comparison are unmanaged and do not reflect the fees and expenses associated with a mutual fund, and investors cannot directly invest in an index. Effective January 19, 2010, the range of available asset classes for investment was expanded to include non-hsbc Funds and the Fund s target allocation was revised. Accordingly, the performance of the Fund prior to January 19, 2010 is not representative of the Funds current investment objective and strategy, and all such performance should be considered with this in mind. Please see page 16 for additional Fund information and index definitions. Fund details Investment adviser HSBC Global Asset Management (USA) Inc. Launch price $10.00 Inception date A: February 8, 2005 C: April 27, 2005 Total number of holdings 11 Ticker (by class) A: HAGRX B: HSBGX C: HCGRX Annual management charge 0.25% CUSIP (by class) A: 40428X719 B: 40428X693 C: 40428X685 Total net assets (all fund classes) $35,603,667 Sales charge (by class) 3 A: 5.00% B: 4.00% C: 1.00% Income Dividend (pay date) A: $ (n/a) C: $ (n/a) Expense ratio (gross) 4 A: 1.47% B: 2.22% C: 2.22% Capital Gain Dividend (pay date) A: $ (n/a) C: $ (n/a) Represents holdings in affiliated portfolios, affiliated and non-affiliated investment companies and exchange traded funds as of June 30, Holdings are subject to change without notice. 4

6 Balanced Strategy Fund Portfolio summary as of June 30, 2016 Global equity % of assets Passive 44.1% Vanguard FTSE AW 18.6% Vanguard 500 Index 25.5% Alternative Beta 26.0% PowerShares FTSE RAFI US 12.4% PowerShares FTSE RAFI DEV 5.5% ishares Currency Hedged MSCI ETF 8.1% Fixed income Credit 18.7% Columbia High Yield 11.9% HSBC Emerging Markets Debt 5.2% SPDR Barclays Inter ETF 1.6% Government Bonds 4.1% HSBC Emerging Markets Local Debt 4.1% Alternatives Global Property 5.0% SPDR DJ Global 5.0% Cash Cash 2.1% Portfolio total 100.0% Portfolio composition by asset allocation B C D Top 10 Fund holdings A A. Global Equity 70.1% B. Fixed Income 22.8% C. Alternatives 5.0% D. Cash 2.1% % of total Vanguard 500 Index 25.5% Vanguard FTSE AW 18.6% PowerShares FTSE RAFI US 12.4% Columbia High Yield 11.9% ishares Currency Hedged MSCI ETF 8.1% PowerShares FTSE RAFI DEV 5.5% HSBC Emerging Markets Debt 5.2% SPDR DJ Global 5.0% HSBC Emerging Markets Local Debt 4.1% HSBC Money Market 2.1% The portfolio summary information is subject to change without notice. 1 Certain returns shown include monies received by one or more of the Portfolios, in which the Fund invests, in respect of one-time class action settlements. As a result, the Fund s total returns for those periods were higher than they would have been had the Portfolio(s) not received the payments. 2 Inception performance calculated from February 8, The sales charge for Class A Shares represents the maximum sales charge. Sales charges for Class B and Class C Shares may be assessed on redemptions. The exact amount of these charges, if any, depends on the amount of time the shares have been held by the investor. See the Prospectus for more information. 4 Reflects the expense ratio as reported in the prospectus dated February 28,

7 Balanced Strategy Fund Quarterly commentary as of June 30, 2016 The Fund returned 1.76% (without sales charge) for the class A Shares for the quarter ended June 30, That compared to a 2.46% total return for the Fund s reference index, the S&P 500 index. The Fund measures performance against several additional reference indices: the S&P 500 Index (2.46% return for the 3 months through March 31, 2016), MSCI EAFE Index (-1.19% gross return), Bank of America/Merrill Lynch US High Yield Master II Index (5.88% return) and Citigroup US Domestic 3-Month Treasury Bill Index (0.06% return). Market commentary During the second quarter of 2016, global equities as represented by the MSCI All Cap World Index returned 1.19%. Broad fixed income as represented by the Barclays US Aggregate Bond returned 2.21%. Volatility remained a feature of the second quarter as markets continue to assess the impact of slowing US and global growth, as well as the impact and uncertainty following the UK referendum result. Fixed Income saw improved performance as US bond interest rates generally declined following a more dovish tone from the US Federal Reserve (Fed). Following the equity market rout and subsequent rally at the beginning of the year, markets entered Q2 with Brexit discourse and global central bank policy top of mind. As investors reacted to news in Europe we saw some volatility at quarter s end but domestic equity indexes had largely recovered by the end of the period. Much has changed however and we do see increased political risks in Europe combined with the prospect that a slower UK economy may weigh on growth prospects in the region. Offsetting this risk, the European Central Bank remains supportive, as confirmed by March s aggressive stimulus package, and there are signs of improved domestic demand and confidence. In our view, the valuation case for equities over bonds remains intact over the longterm but the outlook for risk assets has become less attractive tactically and we have adjusted our positioning accordingly. We believe that global economic growth remains sluggish following a subdued Q1, but is still low relative to previous years. While the May labor market report was worse than expected, other data such as manufacturing, wage growth, services and consumer spending are improving. Corporate earnings, which have been in decline over the last year, may be bottoming out. Therefore, we expect firm but subdued growth looking out over an intermediate term horizon where interest rates remain low. However, current rates are incredibly low and market data suggests the outlook for government bond yields will be lower forever or until further notice. Thus, the bond market has priced in an extremely pessimistic scenario for growth. This raises the risk that when rates do rise, they may do so quickly if the global economy proves more resilient, catching investors by surprise. As such, we maintain our negative view on global government bonds. The World Selection Funds had positive absolute returns across all portfolios. Broadly, the Funds remain globally diversified with exposure to equities and bonds. We do continue to favor risk assets such as global equities, investment grade bonds and high yield debt which appear more reasonably valued relative to developed market government bonds in our view. 6

8 HSBC World Selection Funds June 30, 2016 Moderate Strategy Fund Portfolio objective The investment objective of the Moderate Strategy Fund is high total return consisting of long-term growth of capital and current income. Total returns Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call , or visit our website at The performance above reflects any fee waivers that have been in effect during the applicable periods as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. The indices used for performance comparison are unmanaged and do not reflect the fees and expenses associated with a mutual fund, and investors cannot directly invest in an index. Effective January 19, 2010, the investment objective was revised from seeking a competitive total return consisting of long-term growth of capital and current income. In addition, the range of available asset classes for investment was expanded to include non-hsbc Funds and the Fund s target allocation was revised. Accordingly, the performance of the Fund prior to January 19, 2010 is not representative of the Funds current investment objective and strategy, and all such performance should be considered with this in mind. Please see page 16 for additional Fund information and index definitions. Fund details As of June 30, 2016 Moderate Strategy Fund 1 Aggregate Average annual Without Sales Charge 3 Month YTD 1 Year 3 Years 5 Years 10 Years Inception Class A 2.04% 3.90% -0.17% 3.90% 3.83% 4.05% 4.71% Class C 1.93% 3.48% -0.88% 3.11% 3.05% 3.66% 4.33% With Sales Charge Class A (5.00%) -3.02% -1.34% -5.20% 2.14% 2.78% 3.52% 4.23% Class C (1.00%) 0.93% 2.48% -1.86% 3.11% 3.05% 3.66% 4.33% MSCI ACWI Index % 1.58% -3.17% 6.60% 5.95% 4.82% 5.93% S&P 500 Index % 3.84% 3.99% 11.66% 12.10% 7.42% 7.34% MSCI EAFE Index % -4.04% -9.72% 2.52% 2.15% 2.05% 4.04% Barclays U.S. Aggregate Bond Index % 5.31% 6.00% 4.06% 3.76% 5.13% 4.59% BofA Merrill Lynch U.S. High Yield Master II Index % 9.32% 1.71% 4.18% 5.71% 7.44% 7.00% Citigroup U.S. Domestic 3-Month T-Bill % 0.12% 0.14% 0.07% 0.06% 0.96% 1.28% Investment adviser HSBC Global Asset Management (USA) Inc. Launch price $10.00 Inception date A: February 3, 2005 C: June 9, 2005 Total number of holdings 16 Ticker (by class) A: HSAMX B: HSBMX C: HSCMX Annual management charge 0.25% CUSIP (by class) A: 40428X669 B: 40428X651 C: 40428X644 Total net assets (all fund classes) $34,590,213 Sales charge (by class) 3 A: 5.00% B: 4.00% C: 1.00% Income Dividend (pay date) A: $ (7/1/16) C: $ (7/1/16) Expense ratio (gross) 4 A: 1.49% B: 2.24% C: 2.24% Capital Gain Dividend (pay date) A: $ (n/a) C: $ (n/a) Represents holdings in affiliated portfolios, affiliated and non-affiliated investment companies and exchange traded funds as of June 30, Holdings are subject to change without notice. 7

9 Moderate Strategy Fund Portfolio summary as of June 30, 2016 Global equity % of assets Passive 29.1% Vanguard FTSE AW 12.3% Vanguard 500 Index 16.8% Alternative Beta 16.9% PowerShares FTSE RAFI US 8.1% PowerShares FTSE RAFI DEV 3.5% ishares Currency Hedged MSCI ETF 5.3% Fixed income Credit 39.7% Columbia High Yield 11.8% HSBC Emerging Markets Debt 5.2% ishares Iboxx Investment Grade Bond 11.4% SPDR Barclays Inter ETF 11.3% Government Bonds 7.2% HSBC Emerging Markets Local Debt 4.1% ishares Tips Bond ETF 0.3% ishares 7-10 Year 0.4% ishares 1-3 Year 1.0% ishares Barclays 3-7 Year 1.4% Alternatives Global Property 5.1% SPDR DJ Global 5.1% Portfolio composition by asset allocation B C D Top 10 Fund holdings A A. Global Equity 46.0% B. Fixed Income 46.9% C. Alternatives 5.1% D. Cash 2.0% % of total Vanguard 500 Index 16.8% Vanguard FTSE AW 12.3% Columbia High Yield 11.8% ishares Iboxx Investment Grade Bond 11.4% SPDR Barclays Inter ETF 11.3% PowerShares FTSE RAFI US 8.1% ishares Currency Hedged MSCI ETF 5.3% HSBC Emerging Markets Debt 5.2% SPDR DJ Global 5.1% HSBC Emerging Markets Local Debt 4.1% Cash Cash 2.0% Portfolio total 100.0% The portfolio summary information is subject to change without notice. 1 Certain returns shown include monies received by one or more of the Portfolios, in which the Fund invests, in respect of one-time class action settlements. As a result, the Fund s total returns for those periods were higher than they would have been had the Portfolio(s) not received the payments. 2 Inception performance calculated from February 3, The sales charge for Class A Shares represents the maximum sales charge. Sales charges for Class B and Class C Shares may be assessed on redemptions. The exact amount of these charges, if any, depends on the amount of time the shares have been held by the investor. See the Prospectus for more information. 4 Reflects the expense ratio as reported in the prospectus dated February 28,

10 Moderate Strategy Fund Quarterly commentary as of June 30, 2016 The Fund returned 2.04% (without sales charge) for the class A Shares for the quarter ended June 30, That compared to a 2.21% total return for the Fund s reference index, the Barclays U.S. Aggregate Bond Index. The Fund measures performance against several additional reference indices: the S&P 500 Index (2.46% return for the 3 months through March 31, 2016), MSCI EAFE Index (-1.19% gross return), Bank of America/Merrill Lynch US High Yield Master II Index (5.88% return) and Citigroup US Domestic 3-Month Treasury Bill Index (0.06% return). Market commentary During the second quarter of 2016, global equities as represented by the MSCI All Cap World Index returned 1.19%. Broad fixed income as represented by the Barclays US Aggregate Bond returned 2.21%. Volatility remained a feature of the second quarter as markets continue to assess the impact of slowing US and global growth, as well as the impact and uncertainty following the UK referendum result. Fixed Income saw improved performance as US bond interest rates generally declined following a more dovish tone from the US Federal Reserve (Fed). Following the equity market rout and subsequent rally at the beginning of the year, markets entered Q2 with Brexit discourse and global central bank policy top of mind. As investors reacted to news in Europe we saw some volatility at quarter s end but domestic equity indexes had largely recovered by the end of the period. Much has changed however and we do see increased political risks in Europe combined with the prospect that a slower UK economy may weigh on growth prospects in the region. Offsetting this risk, the European Central Bank remains supportive, as confirmed by March s aggressive stimulus package, and there are signs of improved domestic demand and confidence. In our view, the valuation case for equities over bonds remains intact over the longterm but the outlook for risk assets has become less attractive tactically and we have adjusted our positioning accordingly. We believe that global economic growth remains sluggish following a subdued Q1, but is still low relative to previous years. While the May labor market report was worse than expected, other data such as manufacturing, wage growth, services and consumer spending are improving. Corporate earnings, which have been in decline over the last year, may be bottoming out. Therefore, we expect firm but subdued growth looking out over an intermediate term horizon where interest rates remain low. However, current rates are incredibly low and market data suggests the outlook for government bond yields will be lower forever or until further notice. Thus, the bond market has priced in an extremely pessimistic scenario for growth. This raises the risk that when rates do rise, they may do so quickly if the global economy proves more resilient, catching investors by surprise. As such, we maintain our negative view on global government bonds. The World Selection Funds had positive absolute returns across all portfolios. Broadly, the Funds remain globally diversified with exposure to equities and bonds. We do continue to favor risk assets such as global equities, investment grade bonds and high yield debt which appear more reasonably valued relative to developed market government bonds in our view. 9

11 HSBC World Selection Funds June 30, 2016 Conservative Strategy Fund Portfolio objective The investment objective of the Conservative Strategy Fund is high total return consisting of long-term growth of capital and current income. Total returns 30-Day SEC Yield 1 : 1.23% As of June 30, 2016 Conservative Strategy Fund 2 Aggregate Average annual Without Sales Charge 3 Month YTD 1 Year 3 Years 5 Years 10 Years Inception Class A 2.20% 4.42% 1.78% 3.37% 3.46% 3.81% 4.17% Class C 1.97% 4.01% 0.92% 2.61% 2.70% 3.47% 4.07% With Sales Charge Class A (5.00%) -2.87% -0.77% -3.29% 1.62% 2.41% 3.28% 3.69% Class C (1.00%) 0.97% 3.01% -0.08% 2.61% 2.70% 3.47% 4.07% MSCI ACWI Index % 1.58% -3.17% 6.60% 5.95% 4.82% 5.82% S&P 500 Index % 3.84% 3.99% 11.66% 12.10% 7.42% 7.36% MSCI EAFE Index % -4.04% -9.72% 2.52% 2.15% 2.05% 3.84% Barclays U.S. Aggregate Bond Index % 5.31% 6.00% 4.06% 3.76% 5.13% 4.63% BofA Merrill Lynch U.S. High Yield Master II Index % 9.32% 1.71% 4.18% 5.71% 7.44% 6.96% Citigroup U.S. Domestic 3-Month T-Bill % 0.12% 0.14% 0.07% 0.06% 0.96% 1.29% Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call , or visit our website at The performance above reflects any fee waivers that have been in effect during the applicable periods as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. The indices used for performance comparison are unmanaged and do not reflect the fees and expenses associated with a mutual fund, and investors cannot directly invest in an index. Effective January 19, 2010, the investment objective was revised from seeking a competitive total return consisting of long-term growth of capital and current income. In addition, the range of available asset classes for investment was expanded to include non-hsbc Funds and the Fund s target allocation was revised. Accordingly, the performance of the Fund prior to January 19, 2010 is not representative of the Funds current investment objective and strategy, and all such performance should be considered with this in mind. Please see page 16 for additional Fund information and index definitions. Fund details Investment adviser HSBC Global Asset Management (USA) Inc. Launch price $10.00 Inception date A: February 23, 2005 C: April 19, 2005 Total number of holdings 17 Ticker (by class) A: HACGX B: HBCGX C: HCCGX Annual management charge 0.25% CUSIP (by class) A: 40428X628 B: 40428X610 C: 40428X594 Total net assets (all fund classes) $15,344,556 Sales charge (by class) 4 A: 5.00% B: 4.00% C: 1.00% Income Dividend (pay date) A: $ (7/1/16) C: $ (7/1/16) Expense ratio (gross) 5 A: 1.73% B: 2.48% C: 2.48% Capital Gain Dividend (pay date) A: $ (n/a) C: $ (n/a) Represents holdings in affiliated portfolios, affiliated and non-affiliated investment companies and exchange traded funds as of June 30, Holdings are subject to change without notice. 10

12 Conservative Strategy Fund Portfolio summary as of June 30, 2016 Global equity % of assets Passive 13.7% Vanguard FTSE AW 5.7% Vanguard 500 Index 8.0% Alternative Beta 7.8% PowerShares FTSE RAFI US 3.9% PowerShares FTSE RAFI DEV 1.5% ishares Currency Hedged MSCI ETF 2.4% Fixed income Credit 51.4% Columbia High Yield 13.1% HSBC Emerging Markets Debt 4.6% ishares Iboxx Investment Grade Bond 16.4% SPDR Barclays Inter ETF 17.3% Government Bonds 20.5% HSBC Emerging Markets Local Debt 3.5% ishares Tips Bond ETF 1.3% ishares 20+ Year Treasury Bond 0.9% ishares 7-10 Year 1.9% ishares 1-3 Year 5.3% ishares Barclays 3-7 Year 7.6% Alternatives Global Property 5.1% SPDR DJ Global 5.1% Portfolio composition by asset allocation B C D Top 10 Fund holdings A A. Global Equity 21.5% B. Fixed Income 71.9% C. Alternatives 5.1% D. Cash 1.5% % of total SPDR Barclays Inter ETF 17.3% ishares Iboxx Investment Grade Bond 16.4% Columbia High Yield 13.1% Vanguard 500 Index 8.0% ishares Barclays 3-7 Year 7.6% Vanguard FTSE AW 5.7% ishares 1-3 Year 5.3% SPDR DJ Global 5.1% HSBC Emerging Markets Debt 4.6% PowerShares FTSE RAFI US 3.9% Cash Cash 1.5% Portfolio total 100.0% The portfolio summary information is subject to change without notice. 1 This yield is based on a 30-day period and is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. The SEC 30-Day Yields reflects a reduction in the Fund s fees. Past performance is no guarantee of future results. 2 Certain returns shown include monies received by one or more of the Portfolios, in which the Fund invests, in respect of one-time class action settlements. As a result, the Fund s total returns for those periods were higher than they would have been had the Portfolio(s) not received the payments. 3 Inception performance calculated from February 23, The sales charge for Class A Shares represents the maximum sales charge. Sales charges for Class B and Class C Shares may be assessed on redemptions. The exact amount of these charges, if any, depends on the amount of time the shares have been held by the investor. See the Prospectus for more information. 5 Reflects the expense ratio as reported in the prospectus dated February 28,

13 Conservative Strategy Fund Quarterly commentary as of June 30, 2016 The Fund returned 2.20% (without sales charge) for the class A Shares for the quarter ended June 30, That compared to a 2.21% total return for the Fund s reference index, the Barclays U.S. Aggregate Bond Index. The Fund measures performance against several additional reference indices: the S&P 500 Index (2.46% return for the 3 months through March 31, 2016), MSCI EAFE Index (-1.19% gross return), Bank of America/Merrill Lynch US High Yield Master II Index (5.88% return) and Citigroup US Domestic 3-Month Treasury Bill Index (0.06% return). Market commentary During the second quarter of 2016, global equities as represented by the MSCI All Cap World Index returned 1.19%. Broad fixed income as represented by the Barclays US Aggregate Bond returned 2.21%. Volatility remained a feature of the second quarter as markets continue to assess the impact of slowing US and global growth, as well as the impact and uncertainty following the UK referendum result. Fixed Income saw improved performance as US bond interest rates generally declined following a more dovish tone from the US Federal Reserve (Fed). Following the equity market rout and subsequent rally at the beginning of the year, markets entered Q2 with Brexit discourse and global central bank policy top of mind. As investors reacted to news in Europe we saw some volatility at quarter s end but domestic equity indexes had largely recovered by the end of the period. Much has changed however and we do see increased political risks in Europe combined with the prospect that a slower UK economy may weigh on growth prospects in the region. Offsetting this risk, the European Central Bank remains supportive, as confirmed by March s aggressive stimulus package, and there are signs of improved domestic demand and confidence. In our view, the valuation case for equities over bonds remains intact over the longterm but the outlook for risk assets has become less attractive tactically and we have adjusted our positioning accordingly. We believe that global economic growth remains sluggish following a subdued Q1, but is still low relative to previous years. While the May labor market report was worse than expected, other data such as manufacturing, wage growth, services and consumer spending are improving. Corporate earnings, which have been in decline over the last year, may be bottoming out. Therefore, we expect firm but subdued growth looking out over an intermediate term horizon where interest rates remain low. However, current rates are incredibly low and market data suggests the outlook for government bond yields will be lower forever or until further notice. Thus, the bond market has priced in an extremely pessimistic scenario for growth. This raises the risk that when rates do rise, they may do so quickly if the global economy proves more resilient, catching investors by surprise. As such, we maintain our negative view on global government bonds. The World Selection Funds had positive absolute returns across all portfolios. Broadly, the Funds remain globally diversified with exposure to equities and bonds. We do continue to favor risk assets such as global equities, investment grade bonds and high yield debt which appear more reasonably valued relative to developed market government bonds in our view. 12

14 HSBC World Selection Funds June 30, 2016 Income Strategy Fund Portfolio objective The investment objective of the Income Strategy Fund is to provide current income. The Fund s secondary objective is to provide long-term growth of capital. Total returns As of June 30, 2016 Income Strategy Fund Aggregate Average annual Without Sales Charge 3 Month YTD 1 Year 3 Years Inception Class A 2.10% 4.17% 2.29% 2.92% 3.06% Class C 2.03% 3.91% 1.65% 2.16% 2.30% With Sales Charge Class A (4.75%) -2.77% -0.79% -2.55% 1.27% 1.90% Class C (1.00%) 1.03% 2.91% 0.65% 2.16% 2.30% MSCI ACWI Index 1.19% 1.58% -3.17% 6.60% 7.08% S&P 500 Index 2.46% 3.84% 3.99% 11.66% 12.20% MSCI EAFE Index -1.19% -4.04% -9.72% 2.52% 4.10% Barclays U.S. Aggregate Bond Index 2.21% 5.31% 6.00% 4.06% 3.30% BofA Merrill Lynch U.S. High Yield Master II Index 5.88% 9.32% 1.71% 4.18% 5.60% Citigroup U.S. Domestic 3-Month T-Bill 0.06% 0.12% 0.14% 0.07% 0.07% Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call , or visit our website at The performance above reflects any fee waivers that have been in effect during the applicable periods as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. Currently, contractual fee waivers are in effect from March 1, 2016 through March 1, The indices used for performance comparison are unmanaged and do not reflect the fees and expenses associated with a mutual fund, and investors cannot directly invest in an index. Please see page 16 for additional Fund information and index definitions. Fund details Investment adviser HSBC Global Asset Management (USA) Inc. Launch price $10.00 Inception date March 20, 2012 Total number of holdings 17 Ticker (by class) A: HINAX B: HINBX C: HINCX Total net assets (all fund classes) $958,941 CUSIP (by class) A: 44330V753 B: 44330V746 C: 44330V738 Income Dividend (pay date) A: $ (7/1/16) Sales charge (by class) 1 A: 4.75% B: 4.00% C: 1.00% C: $ (7/1/16) Expense ratio (gross/net) 2 A: 10.29%/1.77% B: 11.04%/2.52% C: 11.04%/2.52% Annual management charge 0.25% Capital Gain Dividend (pay date) A: $ (n/a) C: $ (n/a) Represents holdings in affiliated portfolios, affiliated and non-affiliated investment companies and exchange traded funds as of June 30, Holdings are subject to change without notice. 13

15 Income Strategy Fund Portfolio summary as of June 30, 2016 Global equity % of assets Passive 10.8% Vanguard FTSE AW 4.5% Vanguard 500 Index 6.3% Alternative Beta 5.9% PowerShares FTSE RAFI US 3.0% PowerShares FTSE RAFI DEV 1.1% ishares Currency Hedged MSCI ETF 1.8% Fixed income Credit 31.1% Columbia High Yield 13.0% HSBC Emerging Markets Debt 2.6% ishares Iboxx Investment Grade Bond 7.2% SPDR Barclays Inter ETF 8.3% Government Bonds 48.5% HSBC Emerging Markets Local Debt 3.4% ishares Tips Bond ETF 3.4% ishares 20+ Year Treasury Bond 2.3% ishares 7-10 Year 5.1% ishares 1-3 Year 14.1% ishares Barclays 3-7 Year 20.2% Alternatives Global Property 2.1% SPDR DJ Global 2.1% Portfolio composition by asset allocation B D C Top 10 Fund holdings A A. Global Equity 16.7% B. Fixed Income 79.6% C. Alternatives 2.1% D. Cash 1.6% % of total ishares Barclays 3-7 Year 20.2% ishares 1-3 Year 14.1% Columbia High Yield 13.0% SPDR Barclays Inter ETF 8.3% ishares Iboxx Investment Grade Bond 7.2% Vanguard 500 Index 6.3% ishares 7-10 Year 5.1% Vanguard FTSE AW 4.5% ishares Tips Bond ETF 3.4% HSBC Emerging Markets Local Debt 3.4% Cash Cash 1.6% Portfolio total 100.0% The portfolio summary information is subject to change without notice. 1 The sales charge for Class A Shares represents the maximum sales charge. Sales charges for Class B and Class C Shares may be assessed on redemptions. The exact amount of these charges, if any, depends on the amount of time the shares have been held by the investor. See the Prospectus for more information. 2 Reflects the expense ratio as reported in the prospectus dated February 28, HSBC Global Asset Management (USA) Inc., the Fund s investment adviser has entered into a contractual expense limitation agreement with the Fund under which it will limit total expenses of the Fund (excluding interest, tax, brokerage commissions, extraordinary expenses and estimated indirect expenses attributable to the Fund s investments in investment companies other than the HSBC Opportunity Portfolio) to an annual rate of 1.50%, 2.25% and 2.25% for the Class A Shares, Class B Shares and Class C Shares, respectively. The expense limitation agreement is effective until March 1,

16 Income Strategy Fund Quarterly commentary as of June 30, 2016 The Fund returned 2.10% (without sales charge) for the class A Shares for the quarter ended June 30, That compared to a 2.21% total return for the Fund s reference index, the Barclays US Aggregate Bond Index. The Fund measures performance against several additional reference indices: the S&P 500 Index (2.46% return for the 3 months through March 31, 2016), MSCI EAFE Index (-1.19% gross return), Bank of America/Merrill Lynch US High Yield Master II Index (5.88% return) and Citigroup US Domestic 3-Month Treasury Bill Index (0.06% return). Market commentary During the second quarter of 2016, global equities as represented by the MSCI All Cap World Index returned 1.19%. Broad fixed income as represented by the Barclays US Aggregate Bond returned 2.21%. Volatility remained a feature of the second quarter as markets continue to assess the impact of slowing US and global growth, as well as the impact and uncertainty following the UK referendum result. Fixed Income saw improved performance as US bond interest rates generally declined following a more dovish tone from the US Federal Reserve (Fed). Following the equity market rout and subsequent rally at the beginning of the year, markets entered Q2 with Brexit discourse and global central bank policy top of mind. As investors reacted to news in Europe we saw some volatility at quarter s end but domestic equity indexes had largely recovered by the end of the period. Much has changed however and we do see increased political risks in Europe combined with the prospect that a slower UK economy may weigh on growth prospects in the region. Offsetting this risk, the European Central Bank remains supportive, as confirmed by March s aggressive stimulus package, and there are signs of improved domestic demand and confidence. In our view, the valuation case for equities over bonds remains intact over the longterm but the outlook for risk assets has become less attractive tactically and we have adjusted our positioning accordingly. We believe that global economic growth remains sluggish following a subdued Q1, but is still low relative to previous years. While the May labor market report was worse than expected, other data such as manufacturing, wage growth, services and consumer spending are improving. Corporate earnings, which have been in decline over the last year, may be bottoming out. Therefore, we expect firm but subdued growth looking out over an intermediate term horizon where interest rates remain low. However, current rates are incredibly low and market data suggests the outlook for government bond yields will be lower forever or until further notice. Thus, the bond market has priced in an extremely pessimistic scenario for growth. This raises the risk that when rates do rise, they may do so quickly if the global economy proves more resilient, catching investors by surprise. As such, we maintain our negative view on global government bonds. The World Selection Funds had positive absolute returns across all portfolios. Broadly, the Funds remain globally diversified with exposure to equities and bonds. We do continue to favor risk assets such as global equities, investment grade bonds and high yield debt which appear more reasonably valued relative to developed market government bonds in our view. 15

17 Important information This document is for information only and does not constitute investment advice, a solicitation or a recommendation to buy, sell or subscribe to any investment. It is not intended to provide and should not be relied upon for accounting, legal or tax advice. HSBC Global Asset Management has based this material on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC Global Asset Management and HSBC Group accept no responsibility as to its accuracy or completeness. The views expressed were held at the time of preparation and are subject to change without notice. Forecasts, projections or targets are indicative only and are not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. Investment risks: There is no assurance that a portfolio will achieve its investment objective or will work under all market conditions. The value of investments may go down as well as up and you may not get back the amount originally invested. Portfolios may be subject to certain additional risks, which should be considered carefully along with their investment objectives and fees. Equity investments fluctuate in value based on changes to an individual company s financial condition and overall market conditions. Investing in mid and small capitalization stocks involves greater risks than investing in larger companies. Smaller companies may have a limited number of products, be more difficult to buy and sell, subject to greater business and competitive risks and more sensitive to market changes than larger capitalization companies. Fixed income is subject to credit and interest rate risk. Credit risk refers to the ability of an issuer to make timely payments of interest and principal. Interest rate risk refers to fluctuations in the value of a fixed income security that result from changes in the general level of interest rates. In a declining interest rate environment, a portfolio may generate less income. In a rising interest-rate environment, bond prices fall. Investments in high yield securities (commonly referred to as junk bonds ) are often considered speculative investments and have significantly higher credit risk than investment grade securities. The prices of high yield securities, which may be less liquid than higher rated securities, may be more volatile and more vulnerable to adverse market, economic or political conditions. Investments in foreign markets involve risks such as currency rate fluctuations, potential differences in accounting and taxation policies, as well as possible political, economic, and market risks. These risks are heightened for investments in emerging markets which are also subject to greater illiquidity and volatility than developed foreign markets. Real Estate investments are subject to many of the risks associated with direct real estate ownership, such as changes in economic conditions, credit risk, property taxes, zoning laws, and interest rate fluctuations. Exchange Traded Funds (ETFs) are subject to the risks of the underlying securities that they are designed to track. Low liquidity levels in an ETF can result in higher volatility than its underlying securities. ETFs may also have management fees that increase their costs versus owning its underlying securities directly. Risk is inherent in all investing. You could lose money by investing in the Money Market Fund ( MM Fund ). Although the MM Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the MM Fund is not a deposit of HSBC Bank USA, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The MM Fund s sponsor has no legal obligation to provide financial support to the MM Fund, and you should not expect that the sponsor will provide financial support to the MM Fund at any time. HSBC Global Asset Management is the marketing name for the asset management businesses of HSBC Holdings Plc. HSBC Global Asset Management (USA) Inc. is an investment adviser registered with the US Securities and Exchange Commission. HSBC Global Asset Management (USA) Inc. serves as the investment adviser to the HSBC Funds. Foreside Distribution Services, L.P., member FINRA, is the distributor of the HSBC Funds and is not affiliated with the adviser. HSBC Securities (USA) Inc., member NYSE, FINRA and SIPC, is a sub-distributor of the HSBC Funds. Affiliates of HSBC Global Asset Management (USA) Inc. may receive fees for providing various services to the funds. Investors should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The prospectus contains this and other important information about the investment company. For clients of HSBC Securities (USA) Inc., please call for more information. For other investors and prospective investors, please call the Funds directly at or visit our website at Investors should read the prospectus carefully before investing or sending money. Investment products are offered by HSI, member NYSE/FINRA/SIPC. HSI is an affiliate of HSBC Bank USA NA. Investment products: Are not a deposit or other obligation of the bank or any of its affiliates; not FDIC insured or insured by any federal government agency of the United States; not guaranteed by the bank or any of its affiliates; and are subject to investment risk, including possible loss of principal invested. US persons (both entities and individuals) are subject to US taxation on their worldwide income and may be subject to tax and other filing obligations with respect to their US and non-us accounts. The Foreign Account Tax Compliance Act (FATCA) is a US law designed to prevent the use of non-us accounts or non-us entities to avoid US taxation of income and assets. To meet this objective, FATCA imposes on US and non-us entities certain documentation, due diligence, withholding and reporting requirements with respect to accounts and certain payments. Investors should consult their independent tax advisors about investment tax implications. The contents of this document are confidential and may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose without prior written permission. Index definitions An index measures the market prices of a specific group of securities in a particular market or market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, the performance would be lower. All Index returns are shown Gross USD. MSCI ACWI (All Country World Index) Index is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. S&P 500 Index is a widely regarded index used as a gauge of the U.S. equities market. It includes 500 leading companies in leading industries of the U.S. economy. Morgan Stanley Capital International Europe Australasia and Far East Index ( MSCI EAFE ) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities. MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. BofA Merrill Lynch U.S. High Yield Master II Index is a broad-based index that measures the performance of the broad high-yield market. The Citigroup U.S. Domestic 3-Month T-Bill is an index that is comprised of equal dollar amounts of 3-month treasury bills purchased at the beginning of each of three consecutive months. As each bill matures, all proceeds are rolled over and reinvested in a new 3-month treasury bill. The income used to calculate the monthly return is derived from subtracting the original amount invested from the maturity value. The yield curve average is the basis for calculating the return on the Index. The Index is rebalanced monthly by market capitalization. 16