Structured Products

What kind of investment can protect the value of principal at maturity, while offering a minimum guaranteed return?

Principal Protected Structured Products could be the answer! These products combine fixed-term deposits with options. Simply put, the interest earned on fixed-term deposits is used to invest in options (such as currency or interest rates options), that can be exercised to provide an additional source of returns. No matter what type of underlying is chosen, you can rest assured that your original principal is protected at maturity. The product can be tailor-made to meet your specific requirements.

Structured Products can be denominated in a variety of currencies. The underlying asset could be currency rates, interest rates, share prices or stock indices, and the tenor may be short- or medium-term. If the underlying assets performs as you forecast, you will receive additional returns in excess of the term deposit returns. If the underlying assets fail to perform as you originally expected, or if a"knock-out event" is triggered, you may not earn extra returns, but you will get your investment principal back at maturity.

Suitable Investor Profiles

• Seek stable returns that are higher than interest earned from fixed-term deposits;
• Interested in investing in alternative investments such as commodities but afraid of losing principal;
• May lack skill in trading on market momentum or fund management;
• Conservative or cautious investors;
• Intend to diversify investment risk and earn higher returns with a diversified portfolio;
• Has a mid-term or longer-term investment horizon.

Five Characteristics of Structured Product

• Guaranteed minimum returns
• No front-end fees
• Specific to your funding requirements
• Tailor-made

To help you better understand this product, we provide the following example for reference. The foreign exchange rates and returns and other figures used are dependent on market conditions, and do not represent expected returns or constitute any offer or solicitation to customers.

Structured Product:

Index-Linked Structured Product in USD
Potential highest returns: 8.25% p.a. (Actual returns depends on market movements)
Currency: USD
Term: 3 years
Links: Dow Jones EUROSTOXX50, NASDAQ100, Hang Seng Index, NIKKEI225
Start date: July 5, 2006
Expiry date: July 5, 2009
Interest accrued on a daily basis:
A daily coupon is accrued as long as the worst- performing index is greater than or equal to 90% of the initial level at the launch of the product. All coupons are accumulated. otential highest returns: 8.25% p.a. (Actual returns depends on the market conditions)

Notes:

• The information given above does not constitute a recommendation of any deposits or other product mentioned herein. Structured Products are different from term deposits and should not be regarded as a substitute for term deposits. Structured Products are not protected under the deposit insurance scheme of the Central Deposit Insurance Corporation. Investors must bear the credit risk of HSBC.
• Unless otherwise agreed between HSBC and the investor, the investor shall not request an early redemption prior to the maturity of the product. If the investors demand an early redemption prior to the maturity of the product, it is possible that they will lose their investment principal due to market price fluctuations and may not enjoy the minimum returns and/or interest guaranteed by HSBC. For the terms and conditions of principal protection and/or minimum returns guaranteed, the investor should read in detail the Product Information.
• There are risks associated with investments. Returns on investments are dependent on market conditions within the investment periods or relevant scheduled timeframes. The performance of the underlying assets linked to the product may rise or fall during the investment period and such a rise or fall will affect returns on investment. Returns on investment may be lower or equal to the returns offered by fixed-term deposits. Investors must be prepared to bear the risk that they may not be able to obtain the interest they could have earned by other forms of deposits from their investment principal. Investors are advised to carefully evaluate whether any investments are suitable for themselves based on their risk appetite, investment experience, investment objectives, financial conditions and other factors. They should make their own judgments (rather than depending on HSBC or its affiliates) regarding all kinds of risks and impacts (such as market risks, legal, accounting and tax implications). Should investors have any questions or concerns in regards with this product, they should consult their own professional advisers. Please refer to the terms and conditions of the Product Information, appendixes and term sheets of the structured products in order to obtain detailed information of individual structured products launched at different times.