Form 424B2 HSBC USA INC /MD/

 

Calculation of Registration Fee

 

Title of Each Class of Securities Offered		Maximum Aggregate Offering Price		Amount of Registration Fee(1)
Debt Securities		$3,506,770		$353.13

⁽¹⁾ Calculated in accordance with Rule 457 (r) of the Securities Act of 1933, as amended.

 

PRICING SUPPLEMENT Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-202524 Dated August 12, 2016

 

HSBC USA Inc. Capped GEARS

$3,506,770 Securities Linked to a Global Fund Basket due on October 31, 2017

Investment Description

 

These Capped GEARS (the ‘‘Securities’’) are senior unsecured debt securities issued by HSBC USA Inc. (“HSBC”) linked to the performance of an equally-weighted basket (the “Basket”) consisting of the WisdomTree^® India Earnings Fund, the iShares^Ò MSCI Brazil Capped ETF and the iShares^® China Large-Cap ETF (each an “Index Fund,” and together, the “Index Funds”). The Securities will rank equally with all of our other unsecured and unsubordinated debt obligations. If the Basket Return is equal to or greater than zero, we will pay the principal amount at maturity plus a return equal to 3.00 (the “Upside Gearing”) multiplied by the Basket Return, up to the Maximum Gain of 22.00%. If the Basket Return is less than zero, HSBC will pay less than the full Principal Amount at maturity, if anything, resulting in a loss of principal that is proportionate to the negative Basket Return. Investing in the Securities involves significant risks. The Securities do not pay any interest. You may lose some or all of your Principal Amount. Any payment on the Securities, including any repayment of principal at maturity, is subject to the creditworthiness of HSBC. If HSBC were to default on its payment obligations, you may not receive any amounts owed to you under the Securities and you could lose your entire investment.

 

The Securities are significantly riskier than conventional debt INSTRUMENTS. the terms of the securities may not obligate HSBC TO REPAY THE FULL PRINCIPAL AMOUNT OF THE SECURITIES. the Securities have downside MARKET risk SIMILAR TO the BASKET, WHICH CAN RESULT IN A LOSS OF SOME OR ALL OF the principal amount at maturity. This MARKET risk is in addition to the CREDIT risk INHERENT IN PURCHASING a DEBT OBLIGATION OF hsbc. You should not PURCHASE the Securities if you do not understand or are not comfortable with the significant risks INVOLVED in INVESTING IN the Securities.

 

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER ‘‘KEY RISKS’’ BEGINNING ON PAGE 5 OF THIS PRICING SUPPLEMENT AND THE MORE DETAILED ‘‘RISK FACTORS’’ BEGINNING ON PAGE S-1 OF THE ACCOMPANYING ETF UNDERLYING SUPPLEMENT AND BEGINNING ON PAGE S-1 OF THE ACCOMPANYING PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES.

 

Security Offering

 

These terms relate to an offering of Securities Linked to a Global Fund Basket. The return on the Securities is limited to, and will not exceed, the Maximum Gain. The Securities are offered at a minimum investment of 100 Securities at the Price to Public described below.

 

Basket	Basket Starting Level	Maximum Gain	Upside Gearing	CUSIP/ISIN
The WisdomTree® India Earnings Fund, the iSharesÒ MSCI Brazil Capped ETF and the iShares® China Large-Cap ETF	100	22.00%	3.00	40434V236 / US40434V2363

 

See “Additional Information About HSBC USA Inc. and the Securities” on page 2 of this pricing supplement. The Securities offered will have the terms specified in the accompanying prospectus dated March 5, 2015, the accompanying prospectus supplement dated March 5, 2015, the accompanying ETF Underlying Supplement dated March 5, 2015 and the terms set forth herein.

 

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the Securities or passed upon the accuracy or the adequacy of this document, the accompanying prospectus, prospectus supplement or ETF Underlying Supplement. Any representation to the contrary is a criminal offense. The Securities are not deposit liabilities or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency of the United States or any other jurisdiction.

 

The Securities will not be listed on any U.S. securities exchange or quotation system. HSBC Securities (USA) Inc., an affiliate of HSBC USA Inc., will purchase the Securities from HSBC USA Inc. for distribution to UBS Financial Services Inc., acting as agent. See “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement for a description of the distribution arrangements.

 

The Estimated Initial Value of the Securities on the Trade Date is $9.68 per Security, which is less than the price to public. The market value of the Securities at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Initial Value” on page 4 and “Key Risks” beginning on page 5 of this document for additional information.

 

	Price to Public(1)	Underwriting Discount(1)	Proceeds to Us
Per Security	$10.00	$0.20	$9.80
Total	$3,506,770.00	$70,135.40	$3,436,634.60

⁽¹⁾ See “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement.

 

The Securities:

 

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

 

UBS Financial Services Inc.

HSBC Securities (USA) Inc.

 

 

Additional Information About HSBC USA Inc. and the Securities

 

This pricing supplement relates to the offering of Securities linked to the Basket identified on the cover page. As a purchaser of a Security, you will acquire a senior unsecured debt instrument linked to the Basket, which will rank equally with all of our other unsecured and unsubordinated debt obligations. Although the offering of Securities relates to the Basket identified on the cover page, you should not construe that fact as a recommendation of the merits of acquiring an investment linked to the Basket, any Index Fund or any index underlying the applicable Index Fund (each an “Underlying Index,” and together, the “Underlying Indices”), or any stocks comprising an Underlying Index, or as to the suitability of an investment in the Securities.

 

You should read this document together with the prospectus dated March 5, 2015, the prospectus supplement dated March 5, 2015 and the ETF Underlying Supplement dated March 5, 2015. If the terms of the Securities offered hereby are inconsistent with those described in the accompanying ETF Underlying Supplement, prospectus supplement or prospectus, the terms described in this pricing supplement shall control. You should carefully consider, among other things, the matters set forth in “Key Risks” beginning on page 5 of this pricing supplement and in “Risk Factors” beginning on page S-1 of the ETF Underlying Supplement and beginning on page S-1 of the prospectus supplement, as the Securities involve risks not associated with conventional debt securities. You are urged to consult your investment, legal, tax, accounting and other advisors before you invest in the Securities.

 

HSBC USA Inc. has filed a registration statement (including the ETF Underlying Supplement, prospectus and prospectus supplement) with the SEC for the offering to which this pricing supplement relates. Before you invest, you should read the ETF Underlying Supplement, prospectus and prospectus supplement in that registration statement and other documents HSBC USA Inc. has filed with the SEC for more complete information about HSBC USA Inc. and this offering. You may get these documents for free by visiting EDGAR on the SEC’s web site at www.sec.gov. Alternatively, HSBC Securities (USA) Inc. or any dealer participating in this offering will arrange to send you the ETF Underlying Supplement, prospectus and prospectus supplement if you request them by calling toll-free 1-866-811-8049.

 

You may access these documents on the SEC web site at www.sec.gov as follows:

 

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ETF Underlying Supplement dated March 5, 2015:

http://www.sec.gov/Archives/edgar/data/83246/000114420415014329/v403640_424b2.htm

 

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Prospectus supplement dated March 5, 2015:

http://www.sec.gov/Archives/edgar/data/83246/000114420415014311/v403645_424b2.htm

 

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Prospectus dated March 5, 2015:

http://www.sec.gov/Archives/edgar/data/83246/000119312515078931/d884345d424b3.htm

 

As used herein, references to the “Issuer,” “HSBC,” “we,” “us” and “our” are to HSBC USA Inc. References to the “prospectus supplement” mean the prospectus supplement dated March 5, 2015, references to “accompanying prospectus” mean the HSBC USA Inc. prospectus, dated March 5, 2015 and references to the “ETF Underlying Supplement” mean the ETF Underlying Supplement dated March 5, 2015.

 

 

Investor Suitability
The Securities may be suitable for you if:   ¨  You fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.   ¨  You are willing to make an investment where you could lose some or all of your initial investment and are willing to make an investment that may be exposed to similar downside market risk as the Index Funds.   ¨  You believe that the Basket will appreciate over the term of the Securities, but will not appreciate by more than the Maximum Gain.   ¨  You understand and accept that your potential return is limited by the Maximum Gain, and you are willing to invest in the Securities based on the Maximum Gain indicated on the cover hereof.   ¨  You understand and accept the risks associated with the Index Funds.   ¨  You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations in the price of the Index Funds.   ¨  You seek an investment with returns based on the performance of emerging markets companies.   ¨  You are willing to hold the Securities to maturity and do not seek an investment for which there is an active secondary market.   ¨  You are willing to accept the risk and return profile of the Securities versus a conventional debt security with a comparable maturity issued by HSBC or another issuer with a similar credit rating.   ¨  You do not seek current income from your investment and are willing to forgo dividends paid on the Index Funds or the stocks included in the Index Funds.   ¨  You are willing to assume the credit risk of HSBC, as Issuer of the Securities, and understand that if HSBC defaults on its obligations, you may not receive any amounts due to you, including any repayment of principal.		The Securities may not be suitable for you if:   ¨  You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.   ¨  You seek an investment that is designed to return your full principal amount at maturity.   ¨  You are not willing to make an investment in which you could lose some or all of your principal amount and you are not willing to make an investment that may be exposed to similar downside market risk as the Index Funds.   ¨  You believe that the level of the Basket will decline during the term of the Securities, or you believe that the Basket will appreciate over the term of the Securities, and that any appreciation will be greater than the Maximum Gain.   ¨  You seek an investment that participates in the full appreciation in the Basket or that has unlimited return potential.   ¨  You are not willing to invest in the Securities based on the Maximum Gain indicated on the cover hereof.   ¨  You do not understand or accept the risks associated with the Index Funds.   ¨  You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar or exceed the downside fluctuations in the price of the Index Funds.   ¨  You do not seek an investment with returns based on the performance of emerging markets companies.   ¨  You are unable or unwilling to hold the Securities to maturity and seek an investment for which there will be an active secondary market.   ¨  You prefer the lower risk, and therefore accept the potentially lower returns, of conventional debt securities with comparable maturities issued by HSBC or another issuer with a similar credit rating.   ¨  You seek current income from your investment or prefer to receive the dividends paid on Index Funds or the stocks included in the Index Funds.   ¨  You are not willing or are unable to assume the credit risk of HSBC, as Issuer of the Securities, including any repayment of principal.

 

The suitability considerations identified above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Securities in light of your particular circumstances. You should also carefully review “Key Risks” beginning on page 5 of this pricing supplement and “Risk Factors” beginning on page S-1 of the ETF Underlying Supplement and beginning on page S-1 of the prospectus supplement.

 

 

Key Risks

 

An investment in the Securities involves significant risks. Some of the risks that apply to the Securities are summarized here, but HSBC urges you to read the more detailed explanation of risks relating to the Securities generally in the “Risk Factors” section of the accompanying ETF Underlying Supplement and the accompanying prospectus supplement. HSBC also urges you to consult your investment, legal, tax, accounting and other advisors before you invest in the Securities.

 

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Risk of Loss at Maturity – The Securities differ from ordinary debt securities in that HSBC will not necessarily pay the full principal amount of the Securities at maturity. The return on the Securities at maturity is linked to the performance of the Basket and will depend on whether, and to the extent which, the Basket Return is positive or negative. If the Basket Return is negative, HSBC will pay you less than the principal amount at maturity, resulting in a loss of principal equal to the negative Basket Return. Accordingly, you could lose up to 100% of the principal amount of the Securities.

 

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Limited Return on the Securities –Your return on the Securities will be limited by the Maximum Gain, regardless of any increase in the price of the Basket, which may be significant. Therefore, you will not benefit from any appreciation of the Basket in excess of an amount that, when multiplied by the Upside Gearing, exceeds the Maximum Gain and your return on the Securities may be less than your return would be on a hypothetical direct investment in the Index Funds or in the stocks included in the Index Funds.

 

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The Upside Gearing Applies Only if You Hold the Securities to Maturity – You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity in the secondary market, the price you receive will likely not reflect the full economic value of the Upside Gearing or the Securities themselves, and the return you realize may be less than the Upside Gearing times the Basket Return, even if that return is positive and, when multiplied by the Upside Gearing, does not exceed the Maximum Gain. You can receive the full benefit of the Upside Gearing, subject to the Maximum Gain, only if you hold your Securities to maturity.

 

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The Amount Payable on the Securities Is Not Linked to the Level of the Basket at Any Time Other Than on the Final Valuation Date – The Basket Return will be based on the Basket Ending Level on the Final Valuation Date, subject to postponement for non-trading days and certain market disruption events. Even if the level of the Basket appreciates prior to the Final Valuation Date but then decreases as of the Final Valuation Date, the Payment at Maturity will be less, and may be significantly less, than it would have been had the Payment at Maturity been linked to the level of the Basket prior to such decrease. Although the actual level of the Basket on the Maturity Date or at other times during the term of the Securities may be higher than the Basket Ending Level, the Payment at Maturity will be based solely on the Basket Ending Level on the Final Valuation Date. You may have to sell the Securities at a loss relative to your initial investment even if the level of the Basket at that time is above the Basket Starting Level.

 

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The Securities Are Subject to the Credit Risk of the Issuer – The Securities are senior unsecured debt obligations of the Issuer, HSBC, and are not, either directly or indirectly, an obligation of any third party. As further described in the accompanying prospectus supplement and prospectus, the Securities will rank on par with all of the other unsecured and unsubordinated debt obligations of HSBC, except such obligations as may be preferred by operation of law. Any payment to be made on the Securities, including any repayment of principal at maturity, depends on the ability of HSBC to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of HSBC may affect the market value of the Securities and, in the event HSBC were to default on its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose your entire investment.

 

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The Estimated Initial Value of the Securities, Which Was Determined by Us on the Trade Date, Is Less than the Price to Public and May Differ from the Market Value of the Securities in the Secondary Market, if Any – The Estimated Initial Value of the Securities was calculated by us on the Trade Date and is less than the price to public. The Estimated Initial Value reflects our internal funding rate, which is the borrowing rate we pay to issue market-linked securities, as well as the mid-market value of the embedded derivatives in the Securities. This internal funding rate is typically lower than the rate we would use when we issue conventional fixed or floating rate debt securities. As a result of the difference between our internal funding rate and the rate we would use when we issue conventional fixed or floating rate debt securities, the Estimated Initial Value of the Securities may be lower if it were based on the prices at which our fixed or floating rate debt securities trade in the secondary market. In addition, if we were to use the rate we use for our conventional fixed or floating rate debt issuances, we would expect the economic terms of the Securities to be more favorable to you. We determined the value of the embedded derivatives in the Securities by reference to our or our affiliates’ internal pricing models. These pricing models consider certain assumptions and variables, which can include volatility and interest rates. Different pricing models and assumptions could provide valuations for the Securities that are different from our Estimated Initial Value. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your Securities in the secondary market (if any exists) at any time.

 

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The Price of Your Securities in the Secondary Market, if Any, Immediately After the Trade Date Will Be Less than the Price to Public – The price to public takes into account certain costs. These costs will include our affiliates’ projected hedging profits (which may or may not be realized) for assuming risks inherent in hedging our obligations under the Securities, the underwriting discount and the costs associated with structuring and hedging our obligations under the Securities. These costs, except for the underwriting discount, will be used or retained by us or one of our affiliates. If you were to sell your Securities in the secondary market, if any, the price you would receive for your Securities may be less than the price you paid for them because secondary market prices will not take into account these costs. The price of your Securities in the secondary market, if any, at any time after issuance will vary based on many factors, including the level of the Basket and changes in market conditions, and cannot be predicted with accuracy. The Securities are not designed to be short-term trading instruments, and you should, therefore, be able and willing to hold the Securities to maturity. Any sale of the Securities prior to maturity could result in a loss to you.

 

 

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If One of Our Affiliates Were to Repurchase Your Securities Immediately After the Settlement Date, the Price You Receive May Be Higher than the Estimated Initial Value of the Securities – Assuming that all relevant factors remain constant after the Settlement Date, the price at which HSBC Securities (USA) Inc. may initially buy or sell the Securities in the secondary market, if any, and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed the Estimated Initial Value on the Trade Date for a temporary period expected to be approximately 7 months after the Settlement Date. This temporary price difference may exist because, in our discretion, we may elect to effectively reimburse to investors a portion of the estimated cost of hedging our obligations under the Securities and other costs in connection with the Securities that we will no longer expect to incur over the term of the Securities. We will make such discretionary election and determine this temporary reimbursement period on the basis of a number of factors, including the tenor of the Securities and any agreement we may have with the distributors of the Securities. The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement period after the Settlement Date of the Securities based on changes in market conditions and other factors that cannot be predicted.

 

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Lack of Liquidity – The Securities will not be listed on any securities exchange or quotation system. One of our affiliates intends to offer to repurchase the Securities in the secondary market but is not required to do so and may cease any such market-making activities at any time without notice. Because other dealers are not likely to make a secondary market for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price, if any, at which one of our affiliates is willing to buy the Securities, which will exclude any fees or commissions you paid when you purchased the Securities.

 

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No Interest Payments – As a holder of the Securities, you will not receive interest payments.

 

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Owning the Securities Is Not the Same as Owning Shares of the Index Funds or the Stocks Included in the Underlying Indices – The return on your Securities may not reflect the return you would realize if you actually owned shares of the Index Funds or the stocks included in the Underlying Indices. As a holder of the Securities, you will not have voting rights or rights to receive dividends or other distributions or other rights as would holders of the shares of the Index Funds or holders of the stocks included in the Underlying Indices. The Basket Return excludes any cash dividend payments paid on the securities held by the Index Funds.

 

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Potentially Inconsistent Research, Opinions or Recommendations by HSBC, UBS or Their Respective Affiliates – HSBC, UBS Financial Services Inc., or their respective affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Securities and which may be revised at any time. Any such research, opinions or recommendations could affect the level of the Basket or the price of the stocks included in the Index Funds, and therefore, the market value of the Securities.

 

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Potential HSBC and UBS Financial Services Inc. Impact on Price – Trading or transactions by HSBC USA Inc., UBS Financial Services Inc., or any of their respective affiliates in the stocks included in the Index Funds, or in futures, options, exchange-traded funds or other derivative products on the stocks included in the Index Funds, may adversely affect the market value of the stocks included in the Index Funds or level of the Basket, and, therefore, the market value of the Securities.

 

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Potential Conflicts of Interest – HSBC, UBS Financial Services Inc., or any of their respective affiliates may engage in business with the issuers of the stocks included in the Index Funds, which may present a conflict between the obligations of HSBC and you, as a holder of the Securities. The Calculation Agent, which may be HSBC or any of its affiliates will determine the Payment at Maturity based on the Basket Ending Level. The Calculation Agent can postpone the determination of the Basket Ending Level and the Maturity Date if a Market Disruption Event occurs and is continuing on the Final Valuation Date.

 

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Economic and Market Factors Affecting the Terms and Market Price Prior to Maturity – Because structured notes, including the Securities, can be thought of as having a debt and derivative component, factors that influence the values of debt instruments and options and other derivatives also affected the terms and features of the Securities at issuance and will affect their market price prior to maturity. These factors include the level of the Basket; the volatility of the Index Funds; the dividend rate paid on stocks included in the Index Funds; the time remaining to the maturity of the Securities; interest rates in the markets in general; geopolitical conditions and economic, financial, political, regulatory, judicial or other events; and the creditworthiness of HSBC. These and other factors are unpredictable and interrelated and may offset or magnify each other.

 

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The Securities Are Not Insured or Guaranteed by Any Governmental Agency of the United States or Any Other Jurisdiction – The Securities are not deposit liabilities or other obligations of a bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or program of the United States or any other jurisdiction. An investment in the Securities is subject to the credit risk of HSBC, and in the event that HSBC is unable to pay its obligations as they become due, you may not receive any amount owed to you under the Securities and could lose your entire investment.

 

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A Change in the Price of One or More Index Funds May Be Offset by a Change in the Prices of the Other Index Funds – A change in the price of one or more Index Funds as of the Final Valuation Date may not correlate with a change in the prices of the other Index Funds. The price of one or more Index Funds may increase, while the prices of the other Index Funds may not increase as much, or may even decrease. Therefore, in calculating the Basket Ending Level, an increase in the price of one or more Index Funds may be moderated, or wholly offset, by lesser increases or decreases in the prices of the other Index Funds.

 

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Non-U.S. Securities Markets Risks – The Index Funds hold stocks that are issued by non-U.S. companies and are traded on various non-U.S. exchanges. These stocks may be more volatile and may be subject to different political, market, economic, exchange rate, regulatory and other risks than stocks issued by U.S. companies and listed on U.S. exchanges. The foreign securities held by the Index Funds may have less liquidity and could be more volatile than many of the securities traded in U.S. or other

 

 

longer-established securities markets. Direct or indirect government intervention to stabilize the relevant foreign securities markets, as well as cross shareholdings in foreign companies, may affect trading levels or prices and volumes in those markets. The other special risks associated with foreign securities may include, but are not limited to: less liquidity and smaller market capitalizations; less rigorous regulation of securities markets; different accounting and disclosure standards; governmental interference; currency fluctuations; higher inflation; and social, economic and political uncertainties. These factors may adversely affect the performance of the Basket and, as a result, the value of the Securities.

 

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There Are Risks Associated with Emerging Markets – An investment in the Securities will involve risks not generally associated with investments which have no emerging market component. In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change without review or appeal. Many emerging markets suffer from underdevelopment of capital markets and tax regulation. The risk of expropriation and nationalization remains a threat. Guarding against such risks is made more difficult by low levels of corporate disclosure and unreliability of economic and financial data.

 

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The Prices of the Index Funds are Subject to Currency Exchange Risk – Because the prices of the Index Funds are related to the U.S. dollar value of the stocks underlying the applicable Underlying Indices, holders of the Securities will be exposed to currency exchange rate risk with respect to each of the currencies in which such component securities trade. Exchange rate movements for a particular currency are volatile and are the result of numerous factors including the supply of, and the demand for, those currencies, as well as relevant government policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative actions related to the relevant region. An investor’s net exposure will depend on the extent to which the currencies of the applicable component securities strengthen or weaken against the U.S. dollar. If the dollar strengthens against the currencies of the applicable component securities held by an Index Fund, the price of the applicable Index Fund will be adversely affected and the payment at maturity on the Securities may be reduced.

 

Of particular importance to potential currency exchange risk are:

 

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existing and expected rates of inflation;

 

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existing and expected interest rate levels;

 

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the balance of payments; and

 

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the extent of governmental surpluses or deficits in the countries represented in the applicable Index Fund and the United States.

 

All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the country represented in the applicable Underlying Index and the United States and other countries important to international trade and finance.

 

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An Index Fund and Its Underlying Index Are Different – The performance of an Index Fund may not exactly replicate the performance of its Underlying Index, because the Index Fund will reflect transaction costs and fees that are not included in the calculation of its Underlying Index. It is also possible that an Index Fund may not fully replicate or may in certain circumstances diverge significantly from the performance of its Underlying Index due to the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments contained in the Index Fund or other circumstances. An Index Fund may use futures contracts, options, swap agreements, currency forwards and repurchase agreements in seeking performance that corresponds to its Underlying Index and in managing cash flows.

 

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The Performance and Market Value of an Index Fund During Periods of Market Volatility May Not Correlate with the Performance of Its Underlying Index as Well as Its Net Asset Value – During periods of market volatility, securities held by the Index Funds may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per share of the Index Funds and the liquidity of the Index Funds may be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares of the Index Funds. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of their Index Funds. As a result, under these circumstances, the market value of shares of the Index Funds may vary substantially from its net asset value per share. For all of the foregoing reasons, the performance of the Index Funds may not correlate with the performance of the Underlying Indices as well as the net asset value per share of the Index Funds, which could materially and adversely affect the value of the Securities in the secondary market and/or reduce your payment at maturity.

 

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Uncertain Tax Treatment – Significant aspects of the tax treatment of the Securities are uncertain. You should consult your tax advisor about your own tax situation. See “What Are the Tax Consequences of the Securities?” beginning on page 11 of this pricing supplement and the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.

 

 

Hypothetical Scenario Analysis and Examples at Maturity

 

The scenario analysis and examples below are hypothetical and provided for illustrative purposes only. They do not purport to be representative of every possible scenario concerning increases or decreases in the Final Basket Level relative to the Initial Basket Level. We cannot predict the Final Basket Level on the Final Valuation Date. You should not take the scenario analysis and these examples as an indication or assurance of the expected performance of the Basket. The numbers appearing in the examples below have been rounded for ease of analysis. The following scenario analysis and examples illustrate the Payment at Maturity per $10.00 Security on a hypothetical offering of the Securities.

 

The following scenario analysis and examples reflect the Basket Starting Level of 100, the Maximum Gain of 22.00% and the Upside Gearing of 3.00.

 

Example 1— The level of the Basket increases from a Basket Starting Level of 100 to a Basket Ending Level of 105. The Basket Return is greater than zero and expressed as a formula:

 

Basket Return = (105 - 100) / 100 = 5.00%

 

Because the Basket Return is greater than zero, the Payment at Maturity for each $10 principal amount of Securities is equal to the lesser of:

 

(A) $10.00 + [$10.00 × (5.00% × 3.00)], and

 

(B) $10.00 + ($10.00 × 22.00%)

 

Payment at Maturity =$11.50

 

Example 2— The level of the Basket increases from a Basket Starting Level of 100 to a Basket Ending Level of 130. The Basket Return is greater than zero and expressed as a formula:

 

Basket Return = (130 - 100) / 100 = 30.00%

 

Because the Basket Return is greater than zero, the Payment at Maturity for each $10 principal amount of Securities is equal to the lesser of:

 

(A) $10.00 + [$10.00 × (30.00% × 3.00)], and

 

(B) $10.00 + ($10.00 × 22.00%)

 

Payment at Maturity =$12.20

 

Example 3— The level of the Basket decreases from a Basket Starting Level of 100 to a Basket Ending Level of 80. The Basket Return is negative and expressed as a formula:

 

Basket Return = (80 - 100) / 100 = -20.00%

 

Payment at Maturity = $10 + ($10 × -20.00%) = $8.00

 

Because the Basket Return is less than zero, the Securities will be fully exposed to any decline in the level of the Basket on the Final Valuation Date. In this case, you would incur a loss of 20.00% of the principal amount.

 

If the Basket Return is negative, you will lose some or all of your principal amount at maturity.

 

 

Scenario Analysis – Hypothetical Payment at Maturity for each $10.00 Principal Amount of Securities.

 

Performance of the Basket*			Performance of the Securities
Hypothetical Basket Ending Level	Hypothetical Basket Return	Upside Gearing	Hypothetical Return on Securities(1)	Hypothetical Payment at Maturity
200.00	100.00%	3.00	22.00%	$12.20
180.00	80.00%	3.00	22.00%	$12.20
160.00	60.00%	3.00	22.00%	$12.20
150.00	50.00%	3.00	22.00%	$12.20
130.00	30.00%	3.00	22.00%	$12.20
120.00	20.00%	3.00	22.00%	$12.20
110.00	10.00%	3.00	22.00%	$12.20
107.33	7.33%	3.00	22.00%	$12.20
105.00	5.00%	3.00	15.00%	$11.50
102.50	2.50%	3.00	7.50%	$10.75
100.00	0.00%	N/A	0.00%	$10.00
95.00	-5.00%	N/A	-5.00%	$9.50
90.00	-10.00%	N/A	-10.00%	$9.00
80.00	-20.00%	N/A	-20.00%	$8.00
70.00	-30.00%	N/A	-30.00%	$7.00
50.00	-50.00%	N/A	-50.00%	$5.00
40.00	-60.00%	N/A	-60.00%	$4.00
20.00	-80.00%	N/A	-80.00%	$2.00
0.00	-100.00%	N/A	-100.00%	$0.00

 

* The Basket Return excludes cash dividend payments on the stocks included in the Index Funds.

 

⁽¹⁾ This “return” is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $10 principal amount Security.

 

 

What Are the Tax Consequences of the Securities?

 

You should carefully consider, among other things, the matters set forth in the section “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement. The following discussion summarizes the U.S. federal income tax consequences of the purchase, beneficial ownership, and disposition of each of the Securities. This summary supplements the section “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and supersedes it to the extent inconsistent therewith.

 

There are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the Securities. Under one reasonable approach, the Securities should be treated as pre-paid executory contracts with respect to the Basket. HSBC intends to treat the Securities consistent with this approach and pursuant to the terms of the Securities, you agree to treat the Securities under this approach for all U.S. federal income tax purposes. Subject to certain limitations described in the accompanying prospectus supplement, and based on certain factual representations received from HSBC, in the opinion of HSBC’s special U.S. tax counsel, Morrison & Foerster LLP, it is reasonable to treat the Securities in accordance with this approach. Pursuant to this approach, and subject to the discussion below regarding “constructive ownership transactions,” HSBC does not intend to report any income or gain with respect to the Securities prior to their maturity or an earlier sale or exchange and HSBC intends to treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held the Security for more than one year at such time for U.S. federal income tax purposes. See "U.S. Federal Income Tax Considerations — Tax Treatment of U.S. Holders — Certain Notes Treated as a Put Option and a Deposit or an Executory Contract — Certain Notes Treated as Executory Contracts" in the accompanying prospectus supplement for certain U.S. federal income tax considerations applicable to Securities that are treated as pre-paid executory contracts.

 

Despite the foregoing, U.S. holders (as defined in the accompanying prospectus supplement) should be aware that the Internal Revenue Code of 1986, as amended (the “Code”) contains a provision, Section 1260 of the Code, which sets forth rules which are applicable to what it refers to as “constructive ownership transactions.” Due to the manner in which it is drafted, the precise applicability of Section 1260 of the Code to any particular transaction is often uncertain. In general, a “constructive ownership transaction” includes a contract under which an investor will receive payment equal to or credit for the future value of any equity interest in a regulated investment company (such as shares of the Underlying Index Fund (the “Underlying Shares”)). Under the “constructive ownership” rules, if an investment in a Security is treated as a “constructive ownership transaction,” any long-term capital gain recognized by a U.S. holder in respect of the Security will be recharacterized as ordinary income to the extent such gain exceeds the amount of “net underlying long-term capital gain” (as defined in Section 1260 of the Code) (the “Excess Gain”). In addition, an interest charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the U.S. holder in taxable years prior to the taxable year of the sale, exchange or maturity of the Security (assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange or maturity of the Security). Furthermore, unless otherwise established by clear and convincing evidence, the “net underlying long-term capital gain” is treated as zero.

 

Although the matter is not clear, there exists a risk that an investment in a Security will be treated as a “constructive ownership transaction.” If such treatment applies, it is not entirely clear to what extent any long-term capital gain recognized by a U.S. holder in respect of a Security will be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary income in respect of each Security will equal the excess of (i) any long-term capital gain recognized by the U.S. holder in respect of such a Security over (ii) the “net underlying long-term capital gain” such U.S. holder would have had if such U.S. holder had acquired a number of the Underlying Shares at fair market value on the original issue date of such Security for an amount equal to the “issue price” of the Security and, upon the date of sale, exchange or maturity of the Security, sold such Underlying Shares at fair market value (which would reflect the percentage increase in the value of the Underlying Shares over the term of the Security). Accordingly, it is possible that all or a portion of any gain on the sale or settlement of the Security after one year could be treated as “Excess Gain” from a “constructive ownership transaction,” which gain would be recharacterized as ordinary income, and subject to an interest charge. U.S. holders should consult their tax advisors regarding the potential application of the “constructive ownership” rules.

 

Because there are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the Securities, other characterizations and treatments are possible and the timing and character of income in respect of the Securities might differ from the treatment described above. For example, the Securities could be treated as debt instruments that are “contingent payment debt instruments” for U.S. federal income tax purposes, subject to the treatment described under the heading “U.S. Federal Income Tax Considerations — Tax Treatment of U.S. Holders — U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes — Contingent Notes” in the accompanying prospectus supplement.

 

In Notice 2008-2, the Internal Revenue Service (“IRS”) and the Treasury Department requested comments as to whether the purchaser of an exchange traded note or pre-paid forward contract (which may include the Securities) should be required to accrue income during its term under a mark-to-market, accrual or other methodology, whether income and gain on such a note or contract should be ordinary or capital, and whether foreign holders should be subject to withholding tax on any deemed income accrual. Accordingly, it is possible that regulations or other guidance could provide that a U.S. holder of a Security is required to accrue income in respect of the Security prior to the receipt of payments with respect to the Security or its earlier sale. Moreover, it is possible that any such regulations or other guidance could treat all income and gain of a U.S. holder in respect of a Security as ordinary income (including gain on a sale). Finally, it is possible that a non-U.S. holder (as defined in the accompanying prospectus supplement) of the Security could be subject to U.S. withholding tax in respect of a Security. It is unclear whether any regulations or other guidance would apply to the Securities (possibly on a retroactive basis). Prospective investors are urged to consult with their tax advisors regarding Notice 2008-2 and the possible effect to them of the issuance of regulations or other guidance that affects the U.S. federal income tax treatment of the Securities.

 

We will not attempt to ascertain whether an Index Fund or any of the entities whose stock is owned by an Index Fund would be treated as

 

 

a passive foreign investment company (“PFIC”) or United States real property holding corporation (“USRPHC”), both as defined for U.S. federal income tax purposes. If an Index Fund or one or more of the entities whose stock is owned by an Index Fund were so treated, certain adverse U.S. federal income tax consequences might apply. You should refer to information filed with the SEC and other authorities by the Index Funds or the entities whose stock is owned by the Index Funds and consult your tax advisor regarding the possible consequences to you if an Index Fund one or more of the entities whose stock is owned by an Index Fund is or becomes a PFIC or USRPHC.

 

Under current law, while the matter is not entirely clear, individual non-U.S. holders, and entities whose property is potentially includible in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, the Securities are likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities should consult their tax advisors regarding the U.S. federal estate tax consequences of investing in the Securities.

 

Recently finalized Treasury Regulations provide that withholding on “dividend equivalent” payments (as discussed in the accompanying prospectus supplement), if any, will not apply to Securities issued before January 1, 2017. Additionally, the IRS has announced that withholding under the Foreign Account Tax Compliance Act (as discussed in the accompanying prospectus supplement) on payments of gross proceeds from a sale, exchange, redemption or other disposition of the Securities will only apply to dispositions after December 31, 2018.

 

PROSPECTIVE PURCHASERS OF SECURITIES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SECURITIES.

 

 

The WisdomTree® India Earnings Fund

 

The WisdomTree^® India Earnings Fund (the “EPI”) is an investment portfolio maintained and managed by WisdomTree Trust (“WTT”). WTAM is currently the investment adviser to the EPI, and Mellon Capital Management Corporation is the sub-adviser to the EPI. The EPI is an exchange traded fund that trades on the NYSE Arca, Inc. under the ticker symbol “EPI.”

 

WTT is a registered investment company that consists of numerous separate investment portfolios, including the EPI. Information provided to or filed with the SEC by WTT under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 333-132380 and 811-21864, respectively, through the SEC’s website at http://www.sec.gov. In addition, information may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We have not made any independent investigation as to the accuracy or completeness of such information. None of the foregoing documents or filings are incorporated by reference in, and should not be considered a part of, this document.

 

Investment Objective and Strategy

 

The EPI is an exchange-traded fund that seeks to track the price and yield performance, before fees and expenses, of the Underlying Index. The Underlying Index is a weighted index that measures the performance of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors as of the annual index rebalance. The inception date of the Underlying Index was December 3, 2007.

 

The EPI pursues a “passive” or indexing approach in attempting to track the performance of the Underlying Index. The EPI attempts to invest all, or substantially all, of its assets in the common stocks that make up the Underlying Index. The EPI generally uses a “representative sampling” strategy to achieve its investment objective, meaning that it generally will invest in a sample of the securities whose risk, return and other characteristics closely resemble the risk, return and other characteristics of the Underlying Index as a whole.

 

Under normal circumstances, at least 95% of the EPI’s total assets (exclusive of collateral held from securities lending) will be invested in the component securities of the Underlying Index. To the extent that the Underlying Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the EPI will concentrate its investments to approximately the same extent as the Underlying Index.

 

The WisdomTree India Earnings Index

 

The Underlying Index is a weighted index that measures the performance of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors as of the annual index rebalance.

 

The Underlying Index consists only of companies that:

 

·

are incorporated in India;

 

·

are listed on a major stock exchange in India;

 

·

have generated at least $5 million in earnings in their fiscal year prior to the annual index rebalance;

 

·

have a market capitalization of at least $200 million on the annual index rebalance;

 

·

have an average daily dollar trading volume of at least $200,000 for each of the six months prior to the annual index rebalance;

 

·

have traded at least 250,000 shares per month for each of the six months prior to the annual index rebalance; and

 

·

have a price to earnings ratio (“P/E ratio”) of at least 2 as of the annual index rebalance.

 

Companies are weighted in the Underlying Index based on reported net income in their fiscal year prior to the annual index rebalance. The reported net income number is then multiplied by a second factor developed by Standard & Poor’s called the “Investability Weighting Factor” (“IWF”). The IWF is used to scale the earnings generated by each company by restrictions on shares available to be purchased. The product of the reported net income and IWF is known at the “Earnings Factor.” Companies are weighted by the proportion of each individual earnings factor relative to the sum of all earnings factors within the Underlying Index.

 

Notwithstanding the criteria used to determine and calculate the Underlying Index, no assurances can be given that the Underlying Index will have a positive return during the term of the Securities.

 

The maximum weight of any one sector in the Underlying Index, at the time of the Underlying Index’s annual rebalance, is capped at 25%. In response to market conditions, sector weights may fluctuate above 25% between annual index rebalance dates.

 

WisdomTree Investments, Inc. (“WTI”), as index provider, currently uses Standard & Poor’s Global Industry Classification Standards to define companies in each sector of the Underlying Index. The following sectors are included in the Underlying Index: consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services, and utilities. A sector is comprised of multiple industry groups. For example, the energy sector is comprised of companies in, among others, the natural gas, oil and petroleum industries.

 

 

Historical Performance of the EPI

 

The following graph sets forth the historical performance of the EPI based on the daily historical closing prices from February 22, 2008 to August 12, 2016, as reported on the Bloomberg Professional^® service. We have not undertaken any independent review of, or made any due diligence inquiry with respect to, the information obtained from the Bloomberg Professional^® service. The historical prices of the EPI should not be taken as an indication of future performance.

 

 

Quarter Begin	Quarter End	Quarterly High	Quarterly Low	Quarterly Close
2/22/2008	3/31/2008*	26.16	21.20	22.82
4/1/2008	6/30/2008	25.50	18.22	18.22
7/1/2008	9/30/2008	21.43	14.91	15.97
10/1/2008	12/31/2008	15.97	8.84	11.35
1/2/2009	3/31/2009	12.12	8.95	10.94
4/1/2009	6/30/2009	18.92	10.94	17.35
7/1/20109	9/30/2009	21.03	15.85	21.03
10/1/2009	12/31/2009	22.34	19.18	22.07
1/2/2010	3/31/2010	23.44	20.23	23.33
4/1/2010	6/30/2010	24.29	20.45	22.75
7/1/2010	9/30/2010	26.57	22.68	26.37
10/1/2010	12/31/2010	28.71	24.60	26.39
1/2/2011	3/31/2011	26.68	21.94	24.79
4/2/2011	6/30/2011	25.51	22.25	23.96
7/1/2011	9/30/2011	24.38	18.15	18.15
10/3/2011	12/30/2011	20.58	15.49	15.60
1/2/2012	3/30/2012	21.56	15.60	19.28
4/2/2012	6/29/2012	19.56	15.62	17.23
7/2/2012	9/28/2012	18.94	16.36	18.94
10/1/2012	12/31/2012	19.84	17.72	19.37
1/2/2013	3/31/2013	20.50	17.75	17.97
4/1/2013	6/28/2013	19.18	15.48	16.16
7/1/2013	9/30/2013	16.83	13.32	15.32
10/1/2013	12/31/2013	17.64	15.32	17.44
1/2/2014	3/31/2014	18.96	15.74	18.96
4/1/2014	6/30/2014	23.45	18.92	22.47
7/1/2014	9/30/2014	23.54	21.66	21.91
10/1/2014	12/31/2014	23.55	20.78	22.05
1/1/2015	3/31/2015	24.33	21.40	22.80
4/1/2015	6/30/2015	23.77	20.67	21.67
7/1/2015	9/30/2015	22.42	17.76	19.92
10/1/2015	12/31/2015	21.14	18.51	19.86
1/1/2016	3/31/2016	19.86	16.67	19.51
4/1/2016	6/30/2016	20.42	18.67	20.19
7/1/2016	8/12/2016**	21.58	20.19	21.55

 

* This pricing supplement includes, for the first calendar quarter of 2008, data for the period from February 22, 2008 through March 31, 2008. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2008.

 

** This pricing supplement includes for the third calendar quarter of 2016 data for the period from July 1, 2016 through August 12, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.

 

 

The iShares® MSCI Brazil Capped ETF

 

Description of the EWZ   The iSharesÒ MSCI Brazil Capped ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Brazil 25/50 Index. The MSCI Brazil 25/50 Index was developed by MSCI as an equity benchmark for Brazilian stock performance, and is designed to measure equity market performance in Brazil.   For more information about the EWZ, see “The iSharesÒ MSCI Brazil Capped ETF” beginning on page S-19 of the accompanying ETF Underlying Supplement.

Historical Performance of the EWZ   The following graph sets forth the historical performance of the EWZ based on the daily historical closing prices from February 22, 2008 through August 12, 2016, as reported on the Bloomberg Professional® service. We have not undertaken any independent review of, or made any due diligence inquiry with respect to, the information obtained from Bloomberg Professional® service. The historical prices of the EWZ should not be taken as an indication of future performance.

Source: Bloomberg Professional® service

 

Quarter Begin	Quarter End	Quarterly High ($)	Quarterly Low ($)	Quarterly Close ($)
2/22/2008	3/31/2008*	88.23	69.13	77.03
4/1/2008	6/30/2008	100.47	77.03	89.59
7/1/2008	9/30/2008	89.59	50.99	56.57
10/1/2008	12/31/2008	56.57	26.89	34.90
1/2/2009	3/31/2009	40.89	31.75	37.67
4/1/2009	6/30/2009	57.95	37.67	52.97
7/1/2009	9/30/2009	67.67	49.05	67.67
10/1/2009	12/31/2009	79.73	66.03	74.61
1/4/2010	3/31/2010	77.79	62.77	73.66
4/1/2010	6/30/2010	75.73	58.61	61.96
7/1/2010	9/30/2010	76.93	61.96	76.93
10/1/2010	12/31/2010	81.58	73.84	77.40
1/3/2011	3/31/2011	78.64	70.22	77.48
4/1/2011	6/30/2011	79.78	69.57	73.35
7/1/2011	9/30/2011	74.16	52.04	52.04
10/3/2011	12/30/2011	64.51	50.89	57.39
1/3/2012	3/30/2012	70.42	57.39	64.74
4/2/2012	6/29/2012	65.36	49.07	51.80
7/2/2012	9/28/2012	57.06	50.03	54.05
10/1/2012	12/31/2012	56.06	51.01	56.06
1/2/2013	3/29/2013	57.65	53.39	54.48
4/1/2013	6/28//2013	55.71	43.07	43.86
7/1/2013	9/30/2013	49.73	41.26	47.91
10/1/2013	12/31/2013	51.58	43.41	44.68
1/1/2014	3/31/2014	45.02	38.03	45.02
4/1/2014	6/30/2014	49.98	45.02	47.78
7/1/2014	9/30/2014	54.00	43.45	43.45
10/1/2014	12/31/2014	47.32	33.82	36.57
1/1/2015	3/31/2015	37.91	29.31	31.37
4/1/2015	6/30/2015	37.19	31.37	32.77
7/1/2015	9/30/2015	32.98	20.64	21.95
10/1/2015	12/31/2015	25.50	20.68	20.68
1/1/2016	3/31/2016	26.93	17.33	26.30
4/1/2016	6/30/2016	30.13	24.96	30.13
7/1/2016	8/12/2016**	34.89	29.03	34.46

 

* This pricing supplement includes, for the first calendar quarter of 2008, data for the period from February 22, 2008 through March 31, 2008. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2008.

 

** This pricing supplement includes, for the third calendar quarter of 2016, data for the period from July 1, 2016 through August 12, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.

 

 

The iShares® China Large-Cap ETF

 

Description of the FXI   The iShares® China Large-Cap ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of 25 of the largest and most liquid Chinese companies that publicly trade on the Hong Kong Stock Exchange and are available to international investors, as measured by the FTSE China 25 Index.   For more information about the FXI, see “The iSharesÒ China Large-Cap ETF” beginning on page S-14 of the accompanying ETF Underlying Supplement.	Historical Performance of the FXI   The following graph sets forth the historical performance of the FXI based on the daily historical closing prices from February 22, 2008 through August 12, 2016, as reported on the Bloomberg Professional® service. We have not undertaken any independent review of, or made any due diligence inquiry with respect to, the information obtained from Bloomberg Professional® service. The historical prices of the FXI should not be taken as an indication of future performance.
	Source: Bloomberg Professional® service

 

Quarter Begin	Quarter End	Quarterly High ($)	Quarterly Low ($)	Quarterly Close ($)
2/22/2008	3/31/2008*	59.25	41.14	45.05
4/1/2008	6/30/2008	54.58	43.13	43.83
7/1/2008	9/30/2008	47.20	30.88	34.47
10/1/2008	12/31/2008	34.47	19.36	29.18
1/2/2009	3/31/2009	31.58	22.80	28.52
4/1/2009	6/30/2009	40.12	28.52	38.37
7/1/2009	9/30/2009	43.78	36.51	40.94
10/1/2009	12/31/2009	46.35	39.48	42.27
1/4/2010	3/31/2010	44.56	37.17	42.10
4/1/2010	6/30/2010	44.59	37.01	39.13
7/1/2010	9/30/2010	42.85	38.73	42.82
10/1/2010	12/31/2010	47.93	42.20	43.09
1/3/2011	3/31/2011	44.96	41.16	44.96
4/1/2011	6/30/2011	46.40	41.11	42.95
7/1/2011	9/30/2011	43.31	30.83	30.83
10/3/2011	12/30/2011	38.95	29.75	34.87
1/3/2012	3/30/2012	40.48	34.87	36.63
4/2/2012	6/29/2012	38.34	31.83	33.67
7/2/2012	9/28/2012	35.29	32.09	34.61
10/1/2012	12/31/2012	40.48	34.61	40.48
1/2/2013	3/29/2013	41.86	36.33	36.90
4/1/2013	6/28//2013	38.62	31.70	32.52
7/1/2013	9/30/2013	39.15	31.73	37.08
10/1/2013	12/31/2013	40.19	36.42	38.35
1/1/2014	3/31/2014	38.35	32.98	35.78
4/1/2014	6/30/2014	38.28	34.59	37.04
7/1/2014	9/30/2014	42.52	37.04	38.28
10/1/2014	12/31/2014	41.98	37.46	41.62
1/1/2015	3/31/2015	44.74	40.77	44.45
4/1/2015	6/30/2015	52.72	44.45	46.10
7/1/2015	9/30/2015	46.10	33.58	35.47
10/1/2015	12/31/2015	40.37	34.53	35.29
1/1/2016	3/31/2016	35.29	28.44	33.77
4/1/2016	6/30/2016	35.12	31.24	34.22
7/1/2016	8/12/2016**	37.12	33.45	37.12

 

* This pricing supplement includes, for the first calendar quarter of 2008, data for the period from February 22, 2008 through March 31, 2008. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2008.

 

** This pricing supplement includes, for the third calendar quarter of 2016, data for the period from July 1, 2016 through August 12, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.

 

 

Hypothetical Performance of the Basket

 

The following graph illustrates the hypothetical daily performance of the Basket from February 22, 2008 through August 12, 2016 based on closing value information from the Bloomberg Professional^® service, if the value of the Basket was made to equal 100 on February 22, 2008. The hypothetical performance reflects the performance the Basket would have exhibited based on the actual historical performance of the Index Funds. Neither the hypothetical performance of the Basket nor the actual historical performance of any Index Fund should be taken as indications of future performance.

 

We cannot give you assurance that the performance of the Basket will result in the return of your initial investment. You may lose all of your initial investment.

 

 

 

Events of Default and Acceleration

 

If the Securities have become immediately due and payable following an Event of Default (as defined in the accompanying prospectus) with respect to the Securities, the Calculation Agent will determine the accelerated payment due and payable at maturity in the same general manner as described in “Final Terms” in this pricing supplement. In that case, the scheduled trading day immediately preceding the date of acceleration will be used as the Final Valuation Date for the purposes of determining the Basket Return. If a Market Disruption Event exists with respect to an Index Fund on that scheduled trading day, then the accelerated Final Valuation Date for that Index Fund will be postponed for up to five scheduled trading days (in the same manner used for postponing the originally scheduled Final Valuation Date). The accelerated Maturity Date will also be postponed by an equal number of business days.

 

If the Securities have become immediately due and payable following an Event of Default, you will not be entitled to any additional payments with respect to the Securities. For more information, see “Description of Debt Securities — Senior Debt Securities — Events of Default” in the accompanying prospectus.

 

Supplemental Plan of Distribution (Conflicts of Interest)

 

Pursuant to the terms of a distribution agreement, HSBC Securities (USA) Inc., an affiliate of HSBC, will purchase the Securities from HSBC for distribution to UBS Financial Services Inc. (the “Agent”). HSBC has agreed to sell to the Agent, and the Agent has agreed to purchase, all of the Securities at the price indicated on the cover of this pricing supplement. HSBC has agreed to indemnify the Agent against liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the Agent may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. The Agent may allow a concession to its affiliates not in excess of the underwriting discount set forth on the cover of this pricing supplement.

 

Subject to regulatory constraints, HSBC USA Inc. (or an affiliate thereof) intends to offer to purchase the Securities in the secondary market, but is not required to do so and may cease making such offers at any time. HSBC or its affiliate will enter into swap agreements or related hedge transactions with one of its other affiliates or unaffiliated counterparties, which may include the Agent, in connection with the sale of the Securities and the Agent and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions.

 

In addition, HSBC Securities (USA) Inc. or another of its affiliates or agents may use this pricing supplement in market-making transactions after the initial sale of the Securities, but is under no obligation to make a market in the Securities and may discontinue any market-making activities at any time without notice.

 

See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-59 in the accompanying prospectus supplement.

 

Validity of the Securities

 

In the opinion of Morrison & Foerster LLP, as counsel to the Issuer, when this pricing supplement has been attached to, and duly notated on, the master note that represents the Securities pursuant to the Senior Indenture referred to in the prospectus supplement dated March 5, 2015, and issued and paid for as contemplated herein, the Securities offered by this pricing supplement will be valid, binding and enforceable obligations of the Issuer, entitled to the benefits of the Senior Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York, the Maryland General Corporation Law (including the statutory provisions, all applicable provisions of the Maryland Constitution and the reported judicial decisions interpreting the foregoing) and the federal laws of the United States of America. This opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the Senior Indenture and the genuineness of signatures and to such counsel’s reliance on the Issuer and other sources as to certain factual matters, all as stated in the legal opinion dated March 5, 2015, which has been filed as Exhibit 5.3 to the Issuer’s registration statement on Form S-3 dated March 5, 2015.

 

 

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