-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AtKhCX7D85Qx1H+edKGt/NyYmcDjX9M41qroLIgjzM6ClI6HqrBgl3R0CEQCdslZ IOdgS6Vwkb/+yievQ5Sg8g== 0001144204-08-024737.txt : 20080429 0001144204-08-024737.hdr.sgml : 20080429 20080429142141 ACCESSION NUMBER: 0001144204-08-024737 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20080429 DATE AS OF CHANGE: 20080429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC USA INC /MD/ CENTRAL INDEX KEY: 0000083246 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132764867 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-133007 FILM NUMBER: 08784637 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125253735 MAIL ADDRESS: STREET 1: 452 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 424B2 1 v111996_424b2.htm
 
 
PRICING SUPPLEMENT
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-133007
Dated April 29, 2008
(To the Prospectus dated April 5, 2006 and Prospectus Supplement dated October 12, 2007)
 
100% Principal Protection Absolute Return Barrier Notes
Investment Strategies for Uncertain Markets
HSBC USA Inc. $6,464,690 Notes linked to the MSCI® EAFE Index due on or about October 30, 2009
 
Investment Description
 
100% Principal Protection Absolute Return Barrier Notes are notes issued by HSBC USA Inc. (“HSBC”) linked to the performance of the MSCI® EAFE Index (the ‘‘index’’). The notes provide an opportunity to hedge your exposure to the stocks constituting the index while benefiting from any moderately positive or moderately negative performance of the index. If the index never closes a certain percentage above or below the index starting level (which percentage we refer to as the ‘‘absolute return barrier’’ and which, along with the index starting level, will be determined on the trade date), at maturity, per note you will receive the principal amount plus a return based on the absolute value of the return on the index from, and including, the trade date to, and including, the final valuation date (the “observation period”). Otherwise, at maturity you will receive only your principal amount.
 
Features
 
q Hedging Opportunity—You have the potential to hedge your exposure to the constituent stocks of the index while benefiting from any moderately positive or moderately negative performance over the 18-month term of the notes.
q Potential for Equity-Linked Performance—If the index never closes above the upper index barrier or below the lower index barrier during the observation period, you will receive an equity-based return that may exceed the return you could receive on traditional fixed income investments.
q Preservation of Capital—At maturity, you will receive a cash payment equal to at least 100% of your principal amount.
q Diversification—The notes provide diversification within the equity portion of your portfolio through exposure to the MSCI® EAFE Index.
 
Key Dates
 
Trade Date
April 25, 2008
Settlement Date
April 30, 2008
Final Valuation Date
October 27, 2009
Maturity Date
October 30, 2009
 
 Note Offering
 
These preliminary terms relate to a note offering linked to the index with an absolute return barrier.  The absolute return barrier will be set on the trade date. The notes are offered at a minimum investment of $1,000.
 
Notes
Absolute Return Barrier
Index Starting Level
Upper Index Barrier
Lower Index Barrier
CUSIP
ISIN
Notes linked to the MSCI® EAFE Index
20.00%
2,135.77
2,562.92
1,708.62
40428H573
US40428H5735
 
See “Additional Information about HSBC USA Inc. and the Notes” on page 2. The notes offered will have the terms specified in the accompanying base prospectus dated April 5, 2006, the accompanying prospectus supplement dated October 12, 2007, and the terms set forth herein. See “Key Risks” on page 6 and the more detailed “Risk Factors” beginning on page S-3 of the accompanying prospectus supplement for risks related to the notes and the index.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this document, the accompanying base prospectus, prospectus supplement and any other related prospectus supplements. Any representation to the contrary is a criminal offense. The notes 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 notes will not be listed on any U.S. securities exchange or quotation system. See “Supplemental Plan of Distribution” on page 11 for information relating to the distribution arrangement.

 
Price to Public
Underwriting Discount
Proceeds to Us
Per Note
$10.00
$0.175
$9.825
Total
$6,464,690.00
$113,132.07
$6,351,557.93
 
CALCULATION OF REGISTRATION FEE
TITLE OF CLASS OF SECURITIES OFFERED
MAXIMUM AGGREGATE OFFERING PRICE
AMOUNT OF REGISTRATION FEE (1)
100% Principal Protection Absolute Return Barrier Notes linked to the MSCI® EAFE Index
$6,464,690.00
$254.06
 
(1) Calculated in accordance with Rule 457(r) of the securities act of 1933, as amended.
 
UBS Financial Services Inc.
HSBC USA Inc.




Additional Information about HSBC and the Notes

This pricing supplement relates to one note offering linked to the index identified on the cover page. The index referred to in this pricing supplement is a reference asset as defined in the prospectus supplement. The purchaser of a note will acquire a security linked to the index. We reserve the right to withdraw, cancel or modify any offering and to reject orders in whole or in part. Although the note offering relates to the index identified on the cover page, you should not construe that fact as a recommendation of the merits of acquiring an investment linked to the index, or as to the suitability of an investment in the notes.
 
You should read this document together with the prospectus dated April 5, 2006, the prospectus supplement dated October 12, 2007 and the prospectus addendum dated December 12, 2007. You should carefully consider, among other things, the matters set forth in “Key Risks” beginning on page 6 of this pricing supplement and in “Risk Factors” beginning on page S-3 of the prospectus supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
 
HSBC USA Inc. has filed a registration statement (including a prospectus, prospectus addendum and prospectus supplement) with the U.S. Securities and Exchange Commission, or the SEC, for the offering to which this pricing supplement relates. Before you invest, you should read the prospectus, prospectus addendum 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 Web site at www.sec.gov. Alternatively, HSBC USA Inc. or any dealer participating in this offering will arrange to send you the prospectus, prospectus addendum and prospectus supplement if you request them by calling toll-free 1 888 800 4722.
 
You may access these documents on the SEC web site at www.sec.gov as follows:
 
¨  Prospectus supplement dated October 12, 2007:
¨  Prospectus addendum dated December 12, 2007:
¨  Prospectus dated April 5, 2006:
 
As used herein, references to “HSBC”, “we,” “us” and “our” are to HSBC USA Inc. References to the “prospectus supplement” mean the prospectus supplement dated October 12, 2007, references to the “prospectus addendum” mean the prospectus addendum dated December 12, 2007 and references to “accompanying prospectus” mean the HSBC USA Inc. prospectus, dated April 5, 2006.
 
Investor Suitability
 
The notes may be suitable for you if:
 
¨  You seek an 18-month investment with a return linked to the absolute return of the index, provided the performance of the index does not breach the absolute return barrier during the observation period.
¨  You seek an investment that offers 100% principal protection on the notes when held to maturity.
¨  You believe the performance of the index will be moderately positive or moderately negative over the observation period, and that the closing level of the index is unlikely to exceed on any scheduled trading day the upper index barrier or the lower index barrier.
¨  You are willing to forego dividends paid on the stocks included in the index.
¨  You do not seek current income from this investment.
¨  You are willing to hold the notes to maturity, and you are aware that there may be little or no secondary market for the notes.
¨  You are willing to invest in the notes based on the absolute return barrier.
 
The notes may not be suitable for you if:
 
¨  You believe the performance of the index will not be moderate and may exceed the range of the upper index barrier or the lower index barrier on a scheduled trading day during the observation period.
¨  You do not seek an investment with exposure to the index.
¨  You seek an investment that is exposed to the full potential appreciation of the index, without a cap on the maximum gain on the return of the notes.
¨  You prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities issued by HSBC or another issuer with a similar credit rating.
¨  You prefer to receive the dividends paid on any stocks included in the index.
¨  You seek current income from this investment.
¨  You are unable or unwilling to hold the securities to maturity.
¨  You seek an investment for which there will be an active secondary market.

2



Final Terms
 
Issuer
 
HSBC USA Inc. (Aa3/AA-)1
Principal Amount
(per note)
 
$10
Term
 
18 months
Payment at Maturity (per note)
 
Principal amount plus the variable return
Variable Return
 
A) If the closing level of the index is never greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, including the final valuation date, your variable return will equal the product of your principal amount multiplied by the absolute index return, calculated as follows:
($10.00 x Absolute Index Return)
or
B) If the closing level of the index is greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, including the final valuation date, regardless of what the index ending level is, your variable return will equal:
0%
Absolute Index Return
 
Absolute value of:
Index Ending Level — Index Starting Level
Index Starting Level
Index Starting Level
 
2,135.77, representing the closing level of the index on the trade date.
Index Ending Level
 
The closing level of the index on the final valuation date.
Closing Level
 
The closing level on any scheduled trading day during the observation period will be the closing level of the index as determined by the calculation agent based upon determinations with respect thereto made by the reference sponsor and displayed on Bloomberg Professional® service page “MXEA <INDEX>”.
Observation Period
 
The period starting on, and including, the trade date and ending on, and including the final valuation date.
Upper Index Barrier
 
2,562.92, representing 120.00% of the index starting level.
Lower Index Barrier
 
1,708.62, representing 80.00% of the index starting level.
 
Determining Payment at Maturity
 
 
You will receive a cash payment at maturity equal to the principal amount of your notes or $10 per note.
 
The absolute return barrier limits your potential upside return. However, the absolute return barrier also allows you to benefit from both positive and negative performance if the closing level of the index is never greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period. If the closing level of the index is greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, you will receive only your principal amount.

1 HSBC USA Inc. is rated Aa3 by Moody’s and AA- by Standard & Poor’s. A credit rating reflects the creditworthiness of HSBC USA Inc. and is not a recommendation to buy, sell or hold securities, and it may be subject to revision or withdrawal at any time by the assigning rating organization. The notes themselves have not been independently rated. Each rating should be evaluated independently of any other rating. However, because the return on the notes is dependent upon factors in addition to our ability to pay our obligations under the notes, such as the trading level of the index, an improvement in our credit ratings, financial condition or results of operations is not expected to have a positive effect on the trading value of the notes.


3



Illustrative Examples and Return Table of the Notes at Maturity
 
The following examples are provided for illustrative purposes only and are hypothetical; they do not purport to be representative of every possible scenario concerning increases or decreases in the level of the index relative to its index starting level. We cannot predict the index ending level of the index on the final valuation date or the closing level of the index on any other scheduled trading day. The assumptions we have made in connection with the illustrations set forth below may not reflect actual events. You should not take these examples as an indication or assurance of the expected performance of the index. All prices in the illustrative examples are denominated in USD and rounded to the nearest penny.
 
The following examples and table illustrate the payment at maturity for a $10.00 note on a hypothetical offering of the notes, with the following assumptions:
 
Principal Amount:
$10.00 (per note)
Index Starting Level:
2,135.77
Principal Protection:
100% at maturity
Term:
18 months
Absolute Return Barrier:
20.00 %
Upper Index Barrier:
2,562.92, which is 20.00% above the index starting level
Lower Index Barrier:
1,708.62, which is 20.00% below the index starting level
Observation Period:
The period starting on the trade date and ending on, and including, the final valuation date
 
Example 1 — If the level of the index increases over the observation period by 15% and the closing level of the index is never greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, investors would receive a payment at maturity equal to the principal amount of each note plus the variable return, as expressed below:
 
Payment at maturity per $10.00 note principal amount
=
$10.00 + ($10.00 × (absolute index return))
 
=
$10.00 + ($10.00 × (15%))
 
=
$11.50
 
Example 2 — If the level of the index decreases over the observation period by -15% and the closing level of the index is never greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, investors would receive a payment at maturity equal to the principal amount of each note plus the variable return, as expressed below:

Payment at maturity per $10.00 note principal amount
=
$10.00 + ($10.00 × (absolute index return))
 
=
$10.00 + ($10.00 × (15%))
 
=
$11.50
 
Example 3 — If the closing level of the index is greater than the upper index barrier or less than the lower index barrier of on any scheduled trading day during the observation period, investors would receive $10.00 at maturity for each note regardless of the performance of the index during the observation period. If the closing level of the index is greater than the upper index barrier or less than the lower index barrier on any scheduled trading day during the observation period, investors may receive a return that is less than the return they would receive on a conventional debt offering.
 
4

 
       
No Index Closing Outside
Absolute Return Barrier** 
 
An Index Closing Outside
Absolute Return Barrier 
Index Ending Level
 
Index Return
 
Variable Return ($)*
 
Payment at Maturity ($)*
 
Return on Note (%)*
 
Variable Return ($)
 
Payment at Maturity ($)
 
Return on Note (%)
4,271.54
 
100.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
3,844.39
 
80.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
3,417.23
 
60.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
2,990.08
 
40.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
2,562.92
 
20.00%
 
$2.00
 
$12.00
 
20.00%
 
$0.00
 
$10.00
 
0.00%
2,456.14
 
15.00%
 
$1.50
 
$11.50
 
15.00%
 
$0.00
 
$10.00
 
0.00%
2,349.35
 
10.00%
 
$1.00
 
$11.00
 
10.00%
 
$0.00
 
$10.00
 
0.00%
2,242.56
 
5.00%
 
$0.50
 
$10.50
 
5.00%
 
$0.00
 
$10.00
 
0.00%
2,135.77
 
0.00%
 
$0.00
 
$10.00
 
0.00%
 
$0.00
 
$10.00
 
0.00%
2,028.98
 
-5.00%
 
$0.50
 
$10.50
 
5.00%
 
$0.00
 
$10.00
 
0.00%
1,922.19
 
-10.00%
 
$1.00
 
$11.00
 
10.00%
 
$0.00
 
$10.00
 
0.00%
1,815.40
 
-15.00%
 
$1.50
 
$11.50
 
15.00%
 
$0.00
 
$10.00
 
0.00%
1,708.62
 
-20.00%
 
$2.00
 
$12.00
 
20.00%
 
$0.00
 
$10.00
 
0.00%
1,281.46
 
-40.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
854.31
 
-60.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
427.15
 
-80.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
0.00
 
-100.00%
 
N/A
 
N/A
 
N/A
 
$0.00
 
$10.00
 
0.00%
 
* Numbers have been rounded for ease of analysis.
** Calculation assumes that the index never closes above the upper index barrier or below the lower index barrier on any scheduled trading day during the observation period.
*** Calculation assumes that the index closes above the upper index barrier or below the lower index barrier on at least one scheduled trading day during the observation period.
 
The notes are intended to be held to maturity. They are not intended to be short-term trading instruments. The price at which you will be able to sell your notes prior to maturity may be at a substantial discount from the principal amount of the notes, even in cases where the level of the index has appreciated since the pricing date of the notes. The potential returns described here assume that your notes are held to maturity.
 
What Are the Tax Consequences of the Notes?
 
The following discussion summarizes certain of the material U.S. federal income tax consequences of the purchase, beneficial ownership, and disposition of the notes. This summary supplements the section “Certain U.S. Federal Income Tax Considerations” in the prospectus supplement and supersedes it to the extent inconsistent therewith.
 
There are no statutory provisions, regulations, published rulings or judicial decisions specifically addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the notes. Under one approach, the notes should be treated as contingent payment debt instruments. We intend to treat the notes consistent with this approach, pursuant to the terms of the notes, you agree to treat the notes under this approach for all U.S. federal income tax purposes, and in the opinion of Cadwalader, Wickersham & Taft LLP, special U.S. tax counsel to us, the notes should be treated in accordance with this approach. Pursuant to this approach, a U.S. holder of the notes will be required to include original issue discount (“OID”) in gross income each year, even though no cash payouts will be made with respect to the notes until maturity. If a U.S. holder disposes of the notes prior to maturity, the U.S. holder will be required to treat any gain recognized upon the disposition of the notes as ordinary income (rather than capital gain). See “Certain U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes — Contingent Payment Debt Instruments” in the prospectus supplement for additional information on certain U.S. federal income tax considerations applicable to notes that are treated as contingent payment debt instruments.
 
In the event that, at any time during the observation period more than six months prior to the maturity date, the closing level of the index is observed at greater than the upper index barrier or less than the lower index barrier so that the variable return is fixed at zero, although not free from doubt, under one approach, a U.S. holder should not accrue original issue discount for the remainder of the term of the note, should receive a deduction for prior accrual of original issue discount included in taxable income, and should adjust the projected payment schedule to reflect a payment of the principal amount on the maturity date. Other approaches are possible. U.S. holders should consult with their tax advisors regarding their treatment in the event that the variable return is fixed at zero.
 
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 notes, other characterizations and treatments are possible. As a result, the timing and character of income in respect of the notes might differ from the treatment described above. You should carefully consider the discussion of all potential tax consequences as set forth in “Certain U.S. Federal Income Tax Considerations” in the prospectus supplement.
 
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
 
 
5


Key Risks
 
An investment in the notes involves significant risks. Some of the risks that apply to the notes are summarized here, but we urge you to read the more detailed explanation of risks relating to the notes generally in the “Risk Factors” section of the accompanying prospectus supplement. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
 
¨
The notes are principal protected only if you hold the notes until maturity — If you sell your notes prior to maturity, you may receive less than the principal amount per note.
 
¨
The notes will not be listed on any securities exchange or quotation system — We intend to offer to purchase the notes in the secondary market but are not required to do so. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which we are willing to buy the notes.
 
¨
The notes will not bear interest — As a holder of the notes, you will not receive periodic interest payments. The overall return you earn on your notes, if any, may be lower than interest payments you would receive by investing in a conventional fixed-rate or floating-rate debt security having the same maturity date and issuance date as the notes.
 
¨
The amount you receive at maturity per note may not be greater than the principal amount— If on any scheduled trading day, during the observation period, the closing level of the index is greater than the upper index barrier or less than the lower index barrier, the variable return on the notes will be equal to zero. Accordingly in such a circumstance, at maturity, you would receive only the principal amount of your notes.
 
¨
Your ability to participate in the performance of the index is limited — Your ability to participate in the performance of the index over the term of the notes is limited to the range between, and including, the upper index barrier and the lower index barrier. Therefore, the variable return is capped at the absolute return barrier.
 
¨
Credit of issuer - An investment in the notes is subject to the credit risk of HSBC, and the actual and perceived creditworthiness of HSBC may affect the market value of the notes.
 
¨
If the closing level of the index on any scheduled trading day during the observation period is greater than the upper index barrier or less than the lower index barrier, the market value of the notes will decrease — If the closing level of the index on any scheduled trading day during the observation period is greater than the upper index barrier or less than the lower index barrier, regardless of what the index ending level is, your cash settlement value will be equal to the principal amount at maturity. As such, the market value of the notes may decline below the principal amount of the notes. If you try to sell your notes on the secondary market prior to maturity in these circumstances, you may receive less than the principal amount per note.
 
¨
Potential HSBC impact on price - Trading of transactions by HSBC or its affiliates in the underlying index and/or over-the-counter options, futures or other instruments with returns linked to the performance of the underlying index, may adversely affect the market price of the underlying index and , therefore the market value of the notes.
 
¨
Potential conflict of interest - HSBC and its affiliates may engage in business with the issuers of the stocks comprising the underlying index, which may presents a conflict between the obligations of HSBC and you, as holder of the notes. The calculation agent, an affiliate of the issuer, will determine the index ending level and payment at maturity based on observed levels of the underlying index in the market. The calculation agent can postpone the determination of the index ending level or the maturity date if a market disruption event occurs and is continuing on the final valuation date.
 
¨
Potentially inconsistent research, opinions or recommendations by HSBC - HSBC and its affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the notes. Any such research, opinions or recommendations could affect the value of the underlying index or the stocks included in such index, and therefore the market value of the notes.
 
¨
The absolute index return for the notes will not be adjusted for changes in exchange rates - While the stocks included in the index are denominated in currencies other than the U.S. dollar, the absolute index return is not adjusted for changes in exchange rates. Therefore, if the currencies in which the stocks included in the index are denominated appreciate or depreciate relative to the U.S. dollar over the term of the notes, you will not receive any additional payment or incur any reduction in payment at maturity.
 
¨
Additional Risks Associated With Foreign Securities Markets- Because stocks or companies included in the MXEA are publicly traded in the applicable foreign countries and are denominated in currencies other than U.S. dollars, investments in the notes involve particular risks. For example, the foreign securities markets may be more volatile than the United States securities markets, and market developments may affect these markets differently from the United States or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the United States, as well as cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information concerning foreign issuers may vary depending on their home jurisdiction and the reporting requirements imposed by their respective regulators. Although many of the component stocks in the MXEA are listed or traded on foreign securities markets which constitute “designated offshore securities markets” under Regulation S, certain of the component stocks in the MXEA are primarily traded on foreign securities markets which have not been approved by U.S. securities regulatory agencies or U.S. exchanges. In addition, regardless of their status as designated offshore securities markets, certain stocks underlying the MXEA may be subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to United States reporting companies. In addition, the foreign issuers may be subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to United States reporting companies.
 
6

 

Market Disruption Event
 
If the final valuation date is not a scheduled trading day, then the final valuation date will be the next scheduled trading day. If a market disruption event (as defined below) exists on the final valuation date, then the final valuation date will be the next scheduled trading day for which there is no market disruption event. If a market disruption event exists on five consecutive scheduled trading days with respect to the final valuation date, then that fifth scheduled trading day will be the final valuation date, and the calculation agent will determine the index ending level of the index on that date in good faith and in its sole discretion. If the final valuation date is postponed, then the maturity date will also be postponed until the third business day following the postponed final valuation date.
 
“Market disruption event” for the index means any scheduled trading day on which any relevant exchange or related exchange fails to open for trading during its regular trading session or on which any of the following events has occurred and is continuing which we determine is material:
 
(i) Any suspension of or limitation imposed on trading by any relevant exchanges or related exchanges or otherwise, (A) relating to any security included in the index or (B) in futures or options contracts relating to the index on any related exchange; or
(ii) Any event (other than any event described in (iii) below) that disrupts or impairs the ability of market participants in general (A) to effect transactions in, or obtain market values for any security included in the index or (B) to effect transactions in, or obtain market values for, futures or options contracts relating to the index on any relevant related exchange; or
(iii) The closure on any scheduled trading day of any relevant exchange relating to any security included in the index or any related exchange prior to its scheduled closing time (unless the earlier closing time is announced by the relevant exchange or related exchange at least one hour prior to the earlier of (A) the actual closing time for the regular trading session on the exchange and (B) the submission deadline for orders to be entered into the relevant exchange or related exchange for execution at the close of trading on that day).
 
“Related exchange” means each exchange or quotation system on which futures or options contracts relating to the index are traded, or any successor or temporary substitute for such exchange or quotation system (provided we have determined, for a substitute exchange or quotation system, that liquidity on such substitute is comparable to liquidity on the original related exchange) that has a material effect (as determined by the calculation agent) on the overall market for futures or options related to the index.
 
“Relevant exchange” means the primary exchange or quotation system for any stocks then included in the index.
 
“Scheduled closing time” means the scheduled weekday closing time of the relevant exchange or related exchange, without regard to after hours or any other trading outside of the regular trading session hours.
 
“Scheduled trading day” means any day on which all of the relevant exchanges and related exchanges are scheduled to be open for trading for each security then included in the index.

7



The MSCI EAFE Index (the “index")
 
We have derived all information relating to the index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available sources. The index is a stock index calculated, published and disseminated daily by Morgan Stanley Capital International Inc. (“MSCI®”), a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI® website and in real time on Bloomberg Financial Markets and Reuters Limited.
 
The index is intended to provide performance benchmarks for the developed equity markets in Australia and New Zealand and in Europe and Asia, which are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
 
Index Calculation
 
The index is a free float weighted average of the U.S. dollar values of all of the equity securities (the “index stocks”) constituting the MSCI® indexes for the 21 selected countries (the “component country indices”). Each component country index is a sampling of equity securities across industry groups in such country’s equity markets.
 
Prices used to calculate the index stocks are the official exchange closing prices or prices accepted as such in the relevant market. In general, all prices are taken from the main stock exchange in each market. Closing prices are converted into U.S. dollars using the closing exchange rates calculated by The WM Company at 5:00 P.M. Central Europe Time. The U.S. dollar value of the index is calculated based on the free float-adjusted market capitalization in U.S. dollars of the index stocks. The index was launched on December 31, 1969 at an initial value of 100.
 
Maintenance of the Index and the Component Country Indices.
 
In order to maintain the representativeness of the index, structural changes to the index as a whole may be made by adding or deleting component country indices and the related index stocks. Currently, such changes in the index may only be made on four dates throughout the year: after the last scheduled index close of each February, May, August and November.
 
MSCI® may add additional component country indices to the index or subtract one or more of its current component country indices prior to the expiration of the offered notes. Any such adjustments are made to the index so that the value of the index at the effective date of such change is the same as it was immediately prior to such change.
 
Each component country index is maintained with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets. In maintaining each component country index, emphasis is also placed on its continuity, replicability and on minimizing turnover in the index.
 
MSCI® classifies index maintenance in three broad categories. The first consists of ongoing event-related changes, such as mergers and acquisitions, which are generally implemented in the indices in which they occur. The second category consists of quarterly index reviews, aimed at promptly reflecting other significant market events. The third category consists of full component country index reviews that systematically re-assess the various dimensions of the equity universe for all countries simultaneously and are conducted on a fixed annual timetable.
 
Ongoing event-related changes to the indices are the result of mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events. They can also result from capital reorganizations in the form of rights issues, bonus issues, public placements and other similar corporate actions that take place on a continuing basis. These changes are reflected in the indices at the time of the event. All changes resulting from corporate events are announced prior to their implementation, provided all necessary information on the event is available.
 
The quarterly index review process is designed to ensure that the indices continue to be an accurate reflection of evolving equity markets. This goal is achieved by rapidly reflecting significant market driven changes that were not captured in the index at the time of their actual occurrence and that should not wait until the annual full component country index review due to their importance. These quarterly index reviews may result in additions and deletions of index stocks from a component country index and changes in “foreign inclusion factors” and in number of shares. Additions and deletions to index stocks may result from: the addition or deletion of securities due to the significant over or under-representation of one or more industry groups as a result of mergers, acquisitions, restructurings or other major market events affecting the industry group; the addition or deletion of securities resulting from changes in industry classification, significant increases or decreases in free float or relaxation/removal or decreases of foreign ownership limits not implemented immediately; the additions of large companies that did not meet the minimum size criterion for inclusion at the time of their initial public offering or secondary offering; the replacement of companies which are no longer suitable industry representatives; the deletion of securities whose overall free float has fallen to less than 15% and that do not meet specified criteria; the deletion of securities that have become very small or illiquid; the replacement of securities resulting from the review of price source for index stocks with both domestic and foreign board quotations; and the addition or deletion of securities as a result of other market events.
 
Significant changes in free float estimates and corresponding changes in the foreign inclusion factor for index stocks may result from: large market transactions involving strategic shareholders that are publicly announced; secondary offerings that, given lack of sufficient notice, were not reflected immediately; increases in foreign ownership limits; decreases in foreign ownership limits not applied earlier; corrections resulting from the reclassification of shareholders from strategic to non-strategic, and vice versa; updates to foreign inclusion factors following the public disclosure of new shareholder structures for companies involved in mergers, acquisitions or spin-offs, where different from MSCI®’s pro forma free float estimate at the time of the event; large conversions of exchangeable bonds and other similar securities into already existing shares; the end of lock-up periods or expiration of loyalty incentives for non-strategic shareholders; and changes in the foreign inclusion factor as a result of other events of similar nature. Changes in the number of shares are generally small and result from, for example, exercise of options or warrants, conversion of convertible bonds or other instruments or share buybacks. The implementation of changes resulting from quarterly index reviews occurs on only three dates throughout the year: as of the close of the last business day of February, August and November. The results of the quarterly index reviews are announced at least two weeks prior to their implementation. Any country may be impacted at the quarterly index review.
 
The annual full component country index review includes a re-appraisal of the free float-adjusted industry group representation within a country relative to the 85% target, a detailed review of the shareholder information used to estimate free float for component and non-index stocks, updating the minimum size guidelines for new and existing index stocks, as well as changes typically considered for quarterly index reviews. During a full component country index review, securities may be added or deleted from a component country Index for a range of reasons, including the reasons discussed in the preceding sentence and the reasons for index stocks changes during quarterly index reviews as discussed above. The results of the annual full component country index reviews are announced at least two weeks in advance of their effective implementation date as of the close of the last business day in May. Index maintenance also includes monitoring and completing the adjustments for share changes, stock splits, stock dividends, and stock price adjustments due to company restructurings or spin-offs. Index maintenance of the component country indices is reflected in the index.
 
8

 
Selection of Index Stocks and Calculating and Adjusting for Free Float. 
 
The selection of the index stocks for each component country index is based on the following guidelines:
 
 
I.
Define the universe of listed securities within each country;
 
 
II.
Adjust the total market capitalization for each security for its respective free float available to foreign investors;
 
 
III.
Classify securities into industry groups under the Global Industry Classification Standard ; and
 
 
IV.
Select securities for inclusion according to MSCI®’s index construction rules and guidelines.
 
To determine the free float of a security, MSCI® considers the proportion of shares of such security available for purchase in the public equity markets by international investors. In practice, limitations on the investment opportunities for international investors include: strategic stakes in a company held by private or public shareholders whose investment objective indicates that the shares held are not likely to be available in the market; limits on the proportion of a security’s share capital authorized for purchase by non-domestic investors; or other foreign investment restrictions which materially limit the ability of foreign investors to freely invest in a particular equity market, sector or security.
 
MSCI® will then derive a “foreign inclusion factor” for the company that reflects the percentage of the total number of shares of the company that are not subject to strategic shareholdings and/or foreign shareholder ownership or investment limits. MSCI® will then “float-adjust” the weight of each constituent company in an index by the company’s foreign inclusion factor. Typically, securities with a free float adjustment ratio of.15 or less will not be eligible for inclusion in MSCI®’s indices.
 
Once the free float factor has been determined for a security, the security’s total market capitalization is then adjusted by such free float factor, resulting in the free float-adjusted market capitalization figure for the security. These guidelines and the policies implementing the guidelines are the responsibility of, and, ultimately, subject to adjustment by, MSCI®.

License Agreement between Morgan Stanley Capital International Inc. and HSBC USA Inc.
We expect to enter into a non-exclusive license agreement with Morgan Stanley Capital International Inc. (“MSCI®”), whereby HSBC USA Inc., in exchange for a fee, will be permitted to use the index in connection with the offer and sale of the offered notes. We are not affiliated with MSCI® and the only relationship between MSCI® and HSBC USA Inc. is the licensing of the use of the index and trademarks relating to the index.

The MSCI® indexes are the exclusive property of MSCI®. MSCI® and the MSCI® index names are service mark(s) of MSCI® or its affiliates and have been licensed for use for certain purposes by HSBC USA Inc. The offered notes referred to herein are not sponsored, endorsed, or promoted by MSCI®, and MSCI® bears no liability with respect to any such offered notes. This prospectus supplement contains a more detailed description of the limited relationship MSCI® has with HSBC USA Inc. and any related notes. No purchaser, seller or holder of the offered notes, or any other person or entity, should use or refer to any MSCI® trade name, trademark or service mark to sponsor, endorse, market or promote the offered notes without first contacting MSCI® to determine whether MSCI®’s permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI® without the prior written permission of MSCI®.

THE OFFERED NOTES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI®, ANY AFFILIATE OF MSCI® OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX. THE MSCI® INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI®. MSCI® AND THE MSCI® INDEX NAMES ARE SERVICE MARK(S) OF MSCI® OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY HSBC USA INC. NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE OFFERED NOTES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN FINANCIAL SECURITIES GENERALLY OR IN THE OFFERED NOTES PARTICULARLY OR THE ABILITY OF ANY MSCI® INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI® OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI® INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI® WITHOUT REGARD TO THE OFFERED NOTES OR THE ISSUER OR OWNER OF THE OFFERED NOTES. NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUERS OR OWNERS OF THE OFFERED NOTES INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE MSCI® INDEXES. NEITHER MSCI®, ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE OFFERED NOTES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE OFFERED NOTES ARE REDEEMABLE FOR CASH. NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, THE MAKING OR COMPILING ANY MSCI® INDEX HAS ANY OBLIGATION OR LIABILITY TO THE OWNERS OF THE OFFERED NOTES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THE OFFERED NOTES.

ALTHOUGH MSCI® SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI® INDEXES FROM SOURCES WHICH MSCI® CONSIDERS RELIABLE, NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO MAKING OR COMPILING ANY MSCI® INDEX WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI® INDEX OR ANY DATA INCLUDED THEREIN. NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE’S CUSTOMERS OR COUNTERPARTIES, ISSUERS OF THE OFFERED NOTES, OWNERS OF THE OFFERED NOTES OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI® INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI® INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NEITHER MSCI®, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND MSCI®, ANY OF ITS AFFILIATES AND ANY OTHER PARTY INVOLVED IN, OR RELATED TO MAKING OR COMPILING ANY MSCI® INDEX HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY MSCI® INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MSCI®, ANY OF ITS AFFILIATES OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI® INDEX HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

 
9

 
No purchaser, seller or holder of the offered notes, or any other person or entity, should use or refer to any MSCI® trade name, trademark or service mark to sponsor, endorse, market or promote the offered notes without first contacting MSCI® to determine whether MSCI®’s permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI® without the prior written permission of MSCI®.
All disclosures contained in this prospectus supplement regarding the index, including its make-up, method of calculation and changes in its components, are derived from publicly available information prepared by MSCI®. HSBC USA Inc. does not assume any responsibility for the accuracy or completeness of that information.
 
The graph below illustrates the performance of the index from 1/2/97 to 4/25/08, as well as the upper index barrier and the lower index barrier. The historical levels of the index should not be taken as an indication of future performance. Numbers have been rounded for ease of analysis.
 
The index closing level on April 25, 2008 was 2,135.77.
 
 

10


Certain ERISA Considerations
 
We urge you to read and consult the “Certain ERISA Considerations” section in the Prospectus Supplement.
 
Discontinuance or Modification of the Index
 
If the reference sponsor (as defined below) discontinues publication of or otherwise fails to publish the index on any day on which the index is scheduled to be published and the reference sponsor or another entity publishes a successor or substitute index that the calculation agent determines to be comparable to the discontinued index (the comparable index, the “successor index”), then that successor index will be deemed to be the index for all purposes relating to the notes, including for purposes of determining whether a market disruption event exists. Upon any selection by the calculation agent of a successor index, the calculation agent will furnish written notice to us and the holders of the notes.
 
If the index is discontinued or if the reference sponsor fails to publish the index and the calculation agent determines that no successor index is available at that time, then the calculation agent will determine the index ending level using the same general methodology previously used by the reference sponsor. The calculation agent will continue to make that determination until the earlier of (i) the final valuation date or (ii) a determination by the calculation agent that the index or a successor index is available. In that case, the calculation agent will furnish written notice to us and the holders of the notes.
 
If at any time the method of calculating the index or a successor index, or the value thereof, is changed in a material respect, or if the index or a successor index is in any other way modified so that, in the determination of the calculation agent, the level of the index does not fairly represent the level of the index or successor index that would have prevailed had those changes or modifications not been made, then the calculation agent will make the calculations and adjustments as may be necessary in order to determine a level comparable to the level that would have prevailed had those changes or modifications not been made. If, for example, the method of calculating the index or a successor index is modified so that the level of the index is a fraction of what it would have been if it had not been modified, then the calculation agent will adjust the index in order to arrive at a level of the index or the successor index as if it had not been modified. In that case, the calculation agent will furnish written notice to us and the holders of the notes.
 
Notwithstanding these alternative arrangements, discontinuance of the publication of the index may adversely affect the value of, and trading in, the notes.
 
“Reference sponsor” means the Morgan Stanley Capital International Inc.
 
Events of Default and Acceleration
 
If the calculation agent determines that the notes have become immediately due and payable following an event of default (as defined in the prospectus) with respect to the notes, the calculation agent will determine the accelerated payment at maturity due and payable in the same general manner as described in “Final Terms” in this pricing supplement. In that case, the scheduled trading day preceding the date of acceleration will be used as the final valuation date for purposes of determining the accelerated absolute index return. If a market disruption event exists with respect to the index on that scheduled trading day, then the accelerated final valuation date for that index will be postponed for up to five scheduled trading days (in the same general manner used for postponing the originally scheduled final valuation date). The accelerated maturity date will be the third business day following the accelerated final valuation date.
 
If the notes have become immediately due and payable following an event of default, you will not be entitled to any additional payments, if any, with respect to the notes. For more information, see “Description of Debt Securities — Events of Default” and “— Events of Default; Defaults” in the prospectus.
 
Supplemental Plan of Distribution
 
We will agree to sell to UBS Financial Services Inc. (the “Agent”), and the Agent has agreed to purchase, all of the securities at the price indicated on the cover of this pricing supplement, which will be filed pursuant to Rule 424(b). We have 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 accompanying prospectus supplement and the prospectus. UBS Financial Services Inc. may allow a concession not in excess of the underwriting discount to its affiliates.
 
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. We or our affiliate will enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties 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.
 

11

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-----END PRIVACY-ENHANCED MESSAGE-----