Unassociated Document
CALCULATION
OF REGISTRATION FEE
Title
of Class of Securities Offered
|
Maximum
Aggregate Offering Price
|
Amount
of Registration Fee (1)
|
Knock-Out
Buffer Notes Linked to the iShares®
MSCI Mexico Investable Market Index Fund due March 24,
2011
|
$3,388,000
|
$189.05
|
(1)
Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
amended.
|
Filed
Pursuant to Rule 424(b)(2)
Registration
No. 333-158385
September
18, 2009
PRICING
SUPPLEMENT
(To
Prospectus dated April 2, 2009,
Prospectus
Supplement dated April 9, 2009,
and
Product Supplement dated April 9,
2009)
|
Structured
Investments
|
|
HSBC
USA Inc.
$3,388,000
Knock-Out
Buffer Notes Linked to the iShares®
MSCI Mexico Investable Market Index Fund due March 24,
2011
|
General
|
·
|
Terms
used in this pricing supplement are described or defined herein, in the
accompanying product supplement, prospectus supplement and prospectus. The
notes offered will have the terms described in the product supplement,
prospectus supplement or prospectus. The notes are not principal
protected, and you may lose up to 100.00% of your initial
investment.
|
|
·
|
This debt is not guaranteed
under the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program.
|
|
·
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All
references to “Enhanced Market Participation Notes” in the product
supplement shall refer to these Knock-Out Buffer
Notes.
|
|
·
|
This
pricing supplement relates to a single note offering. The purchaser of a
note will acquire a security linked to a single reference asset described
below.
|
|
·
|
Although
the offering relates to a reference asset, you should not construe that
fact as a recommendation as to the merits of acquiring an investment
linked to the reference asset or any component security held by the
reference asset or as to the suitability of an investment in the related
notes.
|
|
·
|
Senior
unsecured debt obligations of HSBC USA Inc. maturing March 24,
2011.
|
|
·
|
Minimum
denominations of $10,000 and integral multiples of $1,000 in excess
thereof.
|
|
·
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If the terms of the notes set
forth below are inconsistent with those described in the accompanying
product supplement, the terms set forth below will
supersede.
|
Key Terms
Issuer:
|
HSBC
USA Inc.
|
Issuer
Rating:
|
AA-
(S&P), A1 (Moody’s), AA (Fitch)*
|
Reference
Asset:
|
The
iShares®
MSCI Mexico Investable Market Index Fund (“EWW”) (the “reference
asset”)
|
Knock-Out
Event:
|
A
knock-out event occurs if, at any time during the observation period, the
official closing price (as defined below) has decreased, as compared to
the initial price, by more than the knock-out buffer
amount.
|
Knock-Out
Buffer Amount:
|
30.00%
|
Contingent
Minimum Return:
|
5.70%
|
Principal
Amount:
|
$1,000
per note.
|
Trade
Date:
|
September
18, 2009
|
Pricing
Date:
|
September
18, 2009
|
Original
Issue Date:
|
September
23, 2009
|
Final
Valuation Date:
|
March
21, 2011, subject to adjustment as described herein and in the
accompanying product supplement.
|
Observation
Period:
|
The
period beginning on and excluding the pricing date and ending on and
including the final valuation date.
|
Maturity
Date:
|
3
business days after the final valuation date and is expected to be March
24, 2011. The maturity date is subject to further adjustment as
described under “Specific Terms of the Notes — Market Disruption Events”
in the accompanying product supplement.
|
Payment
at Maturity:
|
If a
knock-out event has occurred, you will receive a cash payment on
the maturity date that will reflect the performance of the reference
asset. Under these circumstances, your payment at maturity per $1,000
principal amount note will be calculated as follows:
|
|
$1,000
+ ($1,000 × reference return)
|
|
If a knock-out event has
occurred and the final price is less than the initial price, you will lose
some or all of your investment. This means that if the
reference return is -100.00%, you will lose your entire
investment.
|
|
If a
knock-out event has not occurred, you will receive a cash payment
on the maturity date that will reflect the performance of the reference
asset, subject to the contingent minimum return. If a knock-out event has
not occurred, your payment at maturity per $1,000 principal amount note
will equal $1,000 plus the product of (a) $1,000 multiplied by (b) the
greater of (i) the reference return and (ii) the contingent minimum
return. For additional clarification, please see “What is the
Total Return on the Notes at Maturity Assuming a Range of Performance for
the Reference Asset?” herein.
|
Reference
Return:
|
The
quotient, expressed as a percentage, calculated as
follows:
|
|
final price – initial
price
|
|
initial
price
|
Initial
Price:
|
$45.20,
which was the official closing price of one share of the iShares®
MSCI Mexico Investable Market Index Fund on the pricing
date.
|
Final
Price:
|
The
official closing price of one share of the iShares®
MSCI Mexico Investable Market Index Fund on the final valuation date, adjusted
by the calculation agent as described under “Adjustments to an ETF” in the
accompanying product supplement.
|
Official
Closing Price:
|
The
official closing price of one share of the iShares®
MSCI Mexico Investable Market Index Fund on any scheduled trading day as
determined by the calculation agent.
|
CUSIP/ISIN:
|
4042K0ZS7
/ US4042K0ZS76
|
Form
of Notes:
|
Book-Entry
|
Listing:
|
The
notes will not be listed on any U.S. securities exchange or quotation
system.
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* 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.
Investment
in the notes involves certain risks. You should refer to “Selected Risk
Considerations” beginning on page 3 of this document and “Risk Factors” on page
PS-4 of the product supplement and page S-3 of the prospectus
supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of the notes or determined that this pricing supplement,
or the accompanying product supplement, prospectus supplement and prospectus, is
truthful or complete. 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. We may use this pricing
supplement in the initial sale of notes. In addition, HSBC Securities
(USA) Inc. or another of our affiliates or agents may use this pricing
supplement in market-making transactions in any notes after their initial
sale. Unless we or
our agent informs you otherwise in the confirmation of sale, this pricing
supplement is being used in a market-making transaction. HSBC Securities
(USA) Inc., an affiliate of ours, will purchase the notes from us for
distribution to the placement agent. See “Supplemental Plan of
Distribution (Conflicts of Interest)” on page 9 of this pricing
supplement.
We have
appointed J.P. Morgan Securities Inc. as placement agent for the sale of the
notes. J.P. Morgan Securities Inc. will offer the notes to investors
directly or through other registered broker-dealers.
|
Price
to Public(1)
|
Fees
and Commissions
|
Proceeds
to Issuer
|
Per
Note
|
$1,000
|
$12.50
|
$987.50
|
Total
|
$3,388,000
|
$42,350
|
$3,345,650
|
(1)
|
Certain fiduciary accounts will
pay a purchase price of $987.50 per note, and the placement agents with
respect to sales made to such accounts will forgo any
fees.
|
JPMorgan
Placement Agent
September 18,
2009
Additional Terms Specific to the
Notes
This
pricing supplement relates to a single note offering linked to the reference
asset identified on the cover page. The purchaser of a note will acquire a
senior unsecured debt security linked to the reference
asset. Although the note offering relates only to a single reference
asset identified on the cover page, you should not construe that fact as a
recommendation as to the merits of acquiring an investment linked to the
reference asset or any securities held by reference asset or as to the
suitability of an investment in the notes.
You
should read this document together with the prospectus dated April 2, 2009, the
prospectus supplement dated April 9, 2009 and the product supplement dated April
9, 2009. If the terms of the notes offered hereby are inconsistent
with those described in the accompanying product 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 “Selected Risk Considerations” beginning on page 3 of this
pricing supplement and “Risk Factors” on page PS-4 of the product supplement and
page S-3 of the prospectus supplement, as the notes involve risks not associated
with conventional debt securities. All references to “Enhanced Market
Participation Notes” in the product supplement shall refer to these Knock-Out
Buffer Notes. We urge you to consult your investment, legal, tax,
accounting and other advisers before you invest in the notes. As used
herein, references to the “Issuer”, “HSBC”, “we”, “us” and “our” are to HSBC USA
Inc.
HSBC has
filed a registration statement (including a prospectus, a prospectus supplement
and a product supplement) with the U.S. Securities and Exchange Commission
(“SEC”) for the offering to which this pricing supplement
relates. Before you invest, you should read the prospectus,
prospectus supplement and product supplement in that registration statement and
other documents HSBC has filed with the SEC for more complete information about
HSBC and this offering. You may get these documents for free by
visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively,
HSBC or any dealer participating in this offering will arrange to send you the
prospectus, prospectus supplement and product supplement if you request them by
calling toll-free 1 888 800 4722.
You may
also obtain:
Supplemental Information Relating to the
Terms of the Notes
Notwithstanding
anything contained in the accompanying prospectus supplement or product
supplement to the contrary, the notes will be issued under the senior indenture
dated March 31, 2009, between HSBC USA Inc., as Issuer, and Wells Fargo Bank,
National Association, as trustee. Such indenture will have
substantially the same terms as the indenture described in the accompanying
prospectus supplement and product supplement. HSBC Bank USA, N.A.
will act as paying agent with respect to the Notes pursuant to a Paying Agent
and Securities Registrar Agreement dated June 1, 2009, between HSBC USA Inc. and
HSBC Bank USA, N.A.
Selected Purchase
Considerations
|
·
|
APPRECIATION POTENTIAL —
The notes provide the opportunity to participate in the appreciation of
the reference asset at maturity. If a
knock-out event has not occurred, in addition to the principal
amount, you will receive at maturity at least the contingent minimum
return of 5.70% on the notes, or a minimum payment at maturity
of $1,057.00 for every $1,000 principal amount note. Even if a
knock-out event has occurred, if the final price is greater than the
initial price, in addition to the principal amount, you will receive at
maturity a return on the notes equal to the reference return. Because the
notes are our senior unsecured debt obligations, payment of any amount at
maturity is subject to our ability to pay our obligations as they become
due.
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|
·
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LIMITED PROTECTION AGAINST
LOSS — If a
knock-out event has occurred, you will lose 1.00% of the principal
amount for every 1.00% decline of the official closing price of the
reference asset during the observation period as compared to the initial
price. If a knock-out event has occurred and the reference
return is -100.00%, you will lose your entire
investment.
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|
·
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EXPOSURE TO PERFORMANCE OF THE
iSHARES® MSCI MEXICO INVESTABLE MARKET
INDEX FUND — The reference asset is an exchange-traded fund of
iShares, Inc., which is a registered investment company that consists of
numerous separate investment portfolios. The reference asset seeks to
provide investment results that correspond generally to the price and
yield performance, before fees and expenses, of publicly traded securities
in Mexico as measured by the MSCI Mexico Investable Market Index (the
“underlying index”). The underlying index is a free-float adjusted average
of the U.S. dollar values of all of the equity securities constituting the
underlying index. For additional information about the reference asset see
the information set forth under “Description of the Reference Asset”
herein.
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|
·
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TAX TREATMENT — There is
no direct legal authority as to the proper tax treatment of the notes, and
therefore significant aspects of the tax treatment of the notes are
uncertain, as to both the timing and character of any inclusion in income
in respect of the notes. Under one approach, the notes should
be treated as executory contracts with respect to the reference
asset. 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. Notwithstanding any disclosure in the accompanying
product supplement to the contrary, our special U.S. tax counsel in this
transaction is Sidley Austin LLP.
Subject to the limitations described therein, and based on certain factual
representations received from us, in the opinion of our special U.S. tax
counsel, Sidley Austin LLP, it is
reasonable to treat the notes as executory contracts with respect to the
reference asset. Pursuant to this approach and subject
to
|
the
discussion below regarding “constructive ownership transactions”, we do not
intend to report any income or gain with respect to the notes prior to their
maturity or an earlier sale or exchange and we intend 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 note for more than one year at such time for
U.S. federal income tax purposes.
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 the shares of the reference
asset (the “Underlying Shares”)). Under the “constructive ownership” rules, if
an investment in the notes is treated as a “constructive ownership transaction,”
any long-term capital gain recognized by a U.S. holder (as defined under
“Certain U.S. Federal Income Tax Considerations” in the accompanying prospectus
supplement) in respect of a note 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 Internal Revenue Code of 1986, as
amended (the “Code”)) of the U.S. holder determined as if the U.S. holder had
acquired the Underlying Shares on the original issue date of the note at fair
market value and sold them at fair market value on the maturity date (if the
note was held until the maturity date) or on the date of sale or exchange of the
note (if the note was sold or exchanged prior to the maturity date) (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 note
(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 note).
Although
the matter is not clear, there exists a risk that an investment in the notes
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 note 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
note will equal the excess of (i) any long-term capital gain recognized by the
U.S. holder in respect of a note 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 the
note for an amount equal to the “issue price” of the note and, upon the date of
sale, exchange or maturity of the note, 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 note). Accordingly, U.S. holders should
consult their tax advisors regarding the potential application of the
“constructive ownership” rules.
We will
not attempt to ascertain whether the issuer of any stock owned by the reference
asset would be treated as a “passive foreign investment company,” within the
meaning of Section 1297 of the Code. In the event that the issuer of
any stock owned by the reference asset were treated as a passive foreign
investment company, certain adverse U.S. federal income tax consequences might
apply. You should refer to information filed with the SEC or other authorities
by the issuers of stock owned by the reference asset and consult your tax
advisor regarding the possible consequences to you, if any, in the event that
one or more issuers of stock owned by the reference asset is or becomes a
passive foreign investment company.
For a
discussion of certain of the U.S. federal income tax consequences of your
investment in a note, please see the discussion under “Certain U.S. Federal
Income Tax Considerations” in the accompanying product supplement.
Selected Risk
Considerations
An
investment in the notes involves significant risks. Investing in the notes is
not equivalent to investing directly in the reference asset or any of the
component securities held by the reference asset. These risks are explained in
more detail in the “Risk Factors” sections of the accompanying product
supplement and prospectus supplement.
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·
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SUITABILITY OF NOTES FOR
INVESTMENT — A person should reach a decision to invest in the
notes after carefully considering, with his or her advisors, the
suitability of the notes in light of his or her investment objectives and
the information set out in this pricing supplement. Neither
HSBC nor any dealer participating in the offering makes any recommendation
as to the suitability of the notes for
investment.
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|
·
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YOUR INVESTMENT IN THE NOTES
MAY RESULT IN A LOSS — The notes do not guarantee any return of
principal. The return on the notes at maturity is linked to the
performance of the reference asset and will depend on whether a knock-out
event has occurred and whether, and the extent to which, the reference
return is positive or negative. If the official closing price has
declined, as compared to the initial price, by more than the knock-out
buffer amount of 30.00% at any time during the observation period, a
knock-out event has occurred, and the protection provided by the knock-out
buffer amount will terminate. IF A KNOCK-OUT EVENT
OCCURS, YOU MAY
LOSE UP TO 100.00% OF YOUR
INVESTMENT.
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|
·
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CREDIT RISK OF HSBC USA
INC. — The notes are senior unsecured debt obligations of the
issuer, HSBC, and are not, either directly or indirectly, an obligation of
any third party. Any payment to be made on the notes, including any
principal protection 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
notes and, in the event HSBC were to default on its obligations, you may
not receive the amounts owed to you under the terms of the
notes.
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|
·
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YOUR PROTECTION MAY TERMINATE
AT ANY TIME DURING THE TERM OF THE NOTES — If the official closing
price at any time during the observation period declines from the initial
price by more than the knock-out buffer amount of 30.00%, you will at
maturity be fully exposed to any decline in the official closing price of
the reference asset. We refer to this feature as a knock-out buffer
amount. Under these circumstances, if the final price is less than the
initial price, you will lose 1.00% of the principal amount of your
investment for every 1.00% decrease in the final price as compared to the
initial price. You will be subject to this potential loss of principal
even if the official closing price of the reference asset subsequently
increases such that the final price is less than the initial price by not
more than the knock-out buffer amount of 30.00%, or is equal to or greater
than the initial price. As a result, you may lose some or all of your
investment. Your return on the notes may not reflect the return
you would receive on a
|
conventional
fixed or floating rate debt instrument with a comparable term to maturity issued
by HSBC or any other issuer with a similar credit rating.
|
·
|
YOUR ABILITY TO RECEIVE THE
CONTINGENT MINIMUM RETURN MAY TERMINATE AT ANY TIME DURING THE TERM OF THE
NOTES — If the official closing price at any time during the
observation period declines from the initial price by more than the
knock-out buffer amount of 30.00%, you will not be entitled to receive the
protection provided by the contingent minimum return on the notes. Under
these circumstances, you may lose some or all of your investment at
maturity and will be fully exposed to the decline in the official closing
price of the reference asset.
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|
·
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THE
VALUE OF SHARES OF THE REFERENCE ASSET MAY NOT COMPLETELY TRACK THE VALUE
OF THE UNDERLYING INDEX — Although the trading characteristics and
valuations of shares of the reference asset will usually mirror the
characteristics and valuations of the underlying index, the value of the
shares of the reference asset may not completely track the value of the
underlying index. The reference asset may reflect transaction
costs and fees that are not included in the calculation of the underlying
index. Additionally, because the reference asset may not
actually hold all of the stocks comprising the underlying index but
invests in a representative sample of securities which have a similar
investment profile as the stocks comprising the underlying index, the
reference asset may not fully replicate the performance of the underlying
index.
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·
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AN INVESTMENT IN THE NOTES IS
SUBJECT TO RISKS ASSOCIATED WITH FOREIGN SECURITIES MARKETS — The
stocks held by the underlying index, which is the underlying index for the
reference asset, and that are generally tracked by the reference asset
have been issued by companies in Mexico. Although the trading
price of shares of the reference asset is not directly tied to the value
of the underlying index or the trading price of the stocks comprising the
underlying index, the trading price of shares of the reference asset is
expected to correspond generally to the value of publicly traded equity
securities in the aggregate in Mexico, as measured by the underlying
index. This means that the trading price of shares of the
reference asset is expected to be affected by factors affecting securities
markets in Mexico.
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Investments
in securities linked to the value of foreign securities markets involve certain
risk. Foreign securities markets may be more volatile than U.S. or
other securities markets and may be affected by market developments in different
ways than U.S. or other securities markets. Also, there generally may
be less publicly available information about companies in foreign securities
markets than about U.S. companies, and companies in foreign securities markets
are subject to accounting, auditing and financial reporting standards and
requirements that differ from those applicable to U.S. companies. Although many
of the component stocks in the underlying index are listed or traded on foreign
securities markets which constitute “designated offshore securities markets”
under Regulation S, certain of the component stocks in the underlying index 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
component stocks in the underlying index may be subject to accounting, auditing
and financial reporting standards and requirements that differ from those
applicable to United States reporting companies. In addition, foreign
securities issuers may be subject to accounting, auditing and financial
reporting standards and requirements that differ from those applicable to United
States reporting companies. Securities prices generally are subject to
political, economic, financial and social factors that apply to the markets in
which they trade and, to a lesser extent, foreign markets.
Securities
prices outside the United States are subject to political, economic, financial
and social factors that apply in foreign countries. These factors,
which could negatively affect foreign securities markets, include the
possibility of changes in a foreign government’s economic and fiscal policies,
the possible imposition of, or changes in, currency exchange laws or other laws
or restrictions applicable to foreign companies or investments in foreign equity
securities and the possibility of fluctuations in the rate of exchange between
currencies. Moreover, foreign economies may differ favorably or
unfavorably from the United States economy in important respects such as growth
of gross national product, rate of inflation, capital reinvestment, resources
and self-sufficiency.
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·
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AN
INVESTMENT IN THE NOTES IS SUBJECT TO CURRENCY EXCHANGE
RISK — Because
the underlying index is denominated in U.S. Dollars, the prices of the
component stocks comprising the underlying index will be converted into
U.S. Dollars for the purposes of calculating the value of the underlying
index and, thus, noteholders will be exposed to currency exchange rate
risk with respect to the Mexican Peso. A noteholder’s net exposure will
depend on the extent to which the Mexican Peso strengthens or weakens
against the U.S. Dollar. If the U.S. Dollar strengthens against
the Mexican Peso, the value of the reference asset may be adversely
affected, and the principal payment at maturity of the notes may be
reduced.
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|
·
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CERTAIN BUILT-IN COSTS ARE
LIKELY TO ADVERSELY AFFECT THE VALUE OF THE NOTES PRIOR TO MATURITY
— While the payment at maturity described in this pricing supplement is
based on the full principal amount of your notes, the original issue price
of the notes includes the placement agent’s commission and the estimated
cost of hedging our obligations under the notes through one or more of our
affiliates. As a result, the price, if any, at which HSBC Securities (USA)
Inc. will be willing to purchase notes from you in secondary market
transactions, if at all, will likely be lower than the original issue
price, and any sale of notes by you prior to the maturity date could
result in a substantial loss to you. The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and
willing to hold your notes to
maturity.
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|
·
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NO INTEREST OR DIVIDEND
PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not
receive interest payments, and you will not have voting rights or rights
to receive cash dividends or other distributions or other rights that
holders of shares of the reference asset or the underlying index would
have.
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|
·
|
LACK OF LIQUIDITY — The
notes will not be listed on any securities exchange. HSBC Securities (USA)
Inc. may offer to purchase the notes in the secondary market but is not
required to do so and may cease making such offers at any time if at all.
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 HSBC Securities (USA) Inc. is
willing to buy the notes. Even if there is a secondary market, it may not
provide enough liquidity to allow you to trade or sell the notes
easily.
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|
·
|
POTENTIAL CONFLICTS —
HSBC and its affiliates play a variety of roles in connection with the
issuance of the notes, including acting as calculation agent and hedging
its obligations under the notes. In performing these duties, the economic
interests of the calculation agent and other affiliates of HSBC are
potentially adverse to your interests as an investor in the notes. HSBC
will not have any obligation to consider your interests as a holder of the
notes in taking any corporate action that might affect the price of the
reference asset and the value of the
notes.
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|
·
|
THE NOTES ARE NOT INSURED BY
ANY GOVERNMENTAL AGENCY OF THE UNITED STATES OR ANY OTHER
JURISDICTION — 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 or program of the United
States or any other jurisdiction. An investment in the notes 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 the full
payment at maturity of the notes. This debt is not guaranteed
under the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program.
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|
·
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TRANSITION
OF THE REFERENCE ASSET’S INVESTMENT ADVISOR — On June 16, 2009,
Barclays PLC (“Barclays”), the ultimate parent company of Barclays Global
Fund Advisors (“BGFA”), accepted a binding offer and entered into an
agreement to sell its interests in BGFA and certain affiliated companies
to BlackRock, Inc. (the “BlackRock Transaction”). The Barclays
shareholders approved the BlackRock Transaction at a general meeting held
in early August 2009. The BlackRock Transaction is subject to
certain regulatory approvals, as well as other conditions to
closing. Under the Investment Company Act of 1940, as amended,
completion of the BlackRock Transaction will cause the automatic
termination of the reference asset’s current investment advisory agreement
with BGFA. In order for the management of the reference asset
to continue uninterrupted, the reference asset’s Board of Trustees (the
“Board”) will be asked to approve a new investment advisory agreement with
BGFA. If approved by the Board, the new investment advisory
agreement will be submitted to the shareholders of the reference asset for
their approval. The failure to obtain such approvals could
cause interruptions in the management of the reference asset which could
have an adverse effect on the value of the reference asset and
consequently on the value of your
notes.
|
|
·
|
MANY ECONOMIC AND MARKET
FACTORS WILL IMPACT THE VALUE OF THE NOTES — In addition to the
official closing price of the reference asset on any day, the value of the
notes will be affected by a number of economic and market factors that may
either offset or magnify each other,
including:
|
|
·
|
the
expected volatility of the reference
asset;
|
|
·
|
the
time to maturity of the notes;
|
|
·
|
whether
a knock-out event has occurred;
|
|
·
|
the
dividend rate on the equity securities held by the reference asset or
comprising the underlying index;
|
|
·
|
interest
and yield rates in the market
generally;
|
|
·
|
a
variety of economic, financial, political, regulatory or judicial events;
and
|
|
·
|
our creditworthiness, including
actual or anticipated downgrades in our credit
ratings.
|
What
Is the Total Return on the Notes at Maturity Assuming a Range of Performance for
the Reference Asset?
The
following table illustrates the hypothetical total return at maturity on the
notes. The “total return” as used in this pricing supplement is the number,
expressed as a percentage, that results from comparing the payment at maturity
per $1,000 principal amount note to $1,000. The hypothetical total returns set
forth below reflect the knock-out buffer amount of 30.00%, an initial price of
$45.20 and a contingent minimum return on the notes of 5.70%. The hypothetical
total returns set forth below are for illustrative purposes only and may not be
the actual total returns applicable to a purchaser of the notes. The numbers
appearing in the following table and examples have been rounded for ease of
analysis.
Hypothetical
Final Price
|
Hypothetical
Reference Return
|
Hypothetical
Total Return
|
|
|
Knock
Out Event
Has
Not Occurred(1)
|
Knock
Out Event
Has
Occurred(2)
|
$81.36
|
80.00%
|
80.00%
|
80.00%
|
$76.84
|
70.00%
|
70.00%
|
70.00%
|
$67.80
|
50.00%
|
50.00%
|
50.00%
|
$63.28
|
40.00%
|
40.00%
|
40.00%
|
$58.76
|
30.00%
|
30.00%
|
30.00%
|
$54.24
|
20.00%
|
20.00%
|
20.00%
|
$51.98
|
15.00%
|
15.00%
|
15.00%
|
$49.72
|
10.00%
|
10.00%
|
10.00%
|
$47.78
|
5.70%
|
5.70%
|
5.70%
|
$46.33
|
2.50%
|
5.70%
|
2.50%
|
$45.65
|
1.00%
|
5.70%
|
1.00%
|
$45.20
|
0.00%
|
5.70%
|
0.00%
|
$42.94
|
-5.00%
|
5.70%
|
-5.00%
|
$40.68
|
-10.00%
|
5.70%
|
-10.00%
|
$38.42
|
-15.00%
|
5.70%
|
-15.00%
|
$36.16
|
-20.00%
|
5.70%
|
-20.00%
|
$31.64
|
-30.00%
|
5.70%
|
-30.00%
|
$27.12
|
-40.00%
|
N/A
|
-40.00%
|
$22.60
|
-50.00%
|
N/A
|
-50.00%
|
$18.08
|
-60.00%
|
N/A
|
-60.00%
|
$13.56
|
-70.00%
|
N/A
|
-70.00%
|
$9.04
|
-80.00%
|
N/A
|
-80.00%
|
$4.52
|
-90.00%
|
N/A
|
-90.00%
|
$0.00
|
-100.00%
|
N/A
|
-100.00%
|
|
(1)
|
The
official closing price has not declined, as compared to the initial price,
by more than 30.00% at any time during the observation
period.
|
|
(2)
|
The official closing price has
declined, as compared to the initial price, by more than 30.00% at any
time during the observation
period.
|
Hypothetical Examples of Amounts Payable
at Maturity
The
following examples illustrate how the total returns set forth in the table above
are calculated.
Example 1: A knock-out event has not
occurred, and the price of the reference asset increases from the initial price
of $45.20 to a final price of $46.33. Because a knock-out event has not
occurred and the reference return of 2.50% is less than the contingent minimum
return of 5.70%, the investor benefits from the contingent minimum return and
receives a payment at maturity of $1,057 per $1,000 principal amount
note.
Example 2: A knock-out event has not
occurred, and the price of the reference asset decreases from the initial price
of $45.20 to a final price of $38.42. Because a knock-out event has not
occurred and the reference return of -15.00% is less than the contingent minimum
return of 5.70%, the investor benefits from the contingent minimum return and
receives a payment at maturity of $1,057 per $1,000 principal amount
note.
Example 3: A knock-out event has not
occurred, and the price of the reference asset increases from the initial price
of $45.20 to a final price of $51.98. Because a knock-out event has not
occurred and the reference return of 15.00% is greater than the contingent
minimum return of 5.70%, the investor receives a payment at maturity of $1,150
per $1,000 principal amount note, calculated as follows:
$1,000 +
($1,000 × 15.00%) = $1,150
Example 4: A knock-out event has
occurred, and the price of the reference asset decreases from the initial price
of $45.20 to a final price of $40.68. Because a knock-out event has
occurred and the reference return is
-10.00%,
the investor is exposed to the performance of the reference asset and receives a
payment at maturity of $900 per $1,000 principal amount note, calculated as
follows:
$1,000 +
($1,000 × -10.00%) = $900
Example 5: A knock-out event has
occurred, and the price of the reference asset increases from the initial price
of $45.20 to a final price of $51.98. Because a knock-out event
has occurred, your principal is at risk. However, the reference return is 15.00%
and therefore, the investor receives a payment at maturity of $1,150 per $1,000
principal amount note, calculated as follows:
$1,000 +
($1,000 × 15.00%) = $1,150
Description of the Reference
Asset
This
pricing supplement is not an offer to sell and it is not an offer to buy
interests in the reference asset or any of the securities comprising the
underlying index. All disclosures contained in this pricing
supplement regarding the reference asset, including its make-up, performance,
method of calculation and changes in its components, are derived from publicly
available information. Neither HSBC nor any of its affiliates assumes
any responsibilities for the adequacy or accuracy of information about the
reference asset or stocks held by the reference asset contained in this pricing
supplement. You should make your own investigation into the reference
asset and the underlying index, as well as stocks held by the reference asset.
The underlying index sponsor has no obligation to continue to publish, and may
discontinue publication of, the underlying index. The underlying index sponsor
may discontinue or suspend the publication of the underlying index at any
time.
We urge
you to read the section “Sponsors or Issuers and Reference Asset” on
page S-37 in the accompanying prospectus supplement.
The
iShares® MSCI
Mexico Investable Market Index Fund
We have
derived all information contained in this pricing supplement regarding the
reference asset, including, without limitation, its make-up, method of
calculation and changes in its components, from publicly available information.
Such information reflects the policies of, and is subject to change by iShares.
We make no representations or warranty as to the accuracy or completeness of the
information derived from these public sources. The reference asset is an
investment portfolio maintained and managed by iShares®, Inc.
(“iShares”) and advised by Barclays Global Fund Advisors (“BGFA”). iShares is a
registered investment company that consists of numerous separate investment
portfolios, including the reference asset. The shares of the reference asset are
listed and trade at market prices on a national securities exchange such as the
Chicago Board Options Exchange, NASDAQ, NYSE or NYSE Arca under the exchange
trading symbol “EWW”.
Information
provided to or filed with the SEC by iShares pursuant to the Securities Act of
1933 and the Investment Company Act of 1940 can be located by reference to SEC
file numbers 033-97598 and 811-09102, respectively, through the SEC’s website at
www.sec.gov. Information from outside sources is not incorporated by reference
in, and should not be considered a part of, this pricing supplement or any
accompanying prospectus. We make no representation or warranty as to the
accuracy or completeness of such information. In addition, information may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. We make no
representation or warranty as to the accuracy or completeness of such
information. As a prospective purchaser of the securities, you should undertake
an independent investigation of the reference asset as in your judgment is
appropriate to make an informed decision with respect to an investment in the
reference asset shares.
Investment
Objective and Strategy
The
reference asset seeks to provide investment results that correspond generally to
the price and yield performance, before fees and expenses, of the largest and
most liquid Mexican companies, as measured by the underlying index. The
underlying index was developed by MSCI Inc. (“MSCI”) to represent the
performance of the Mexican market that is available to international
investors.
The
reference asset uses a representative sampling strategy (as described below
under “Representative Sampling”) to try to track the underlying index. The
reference asset will at all times invest at least 90% of its assets in the
securities of the underlying index and ADRs based on securities of the
underlying index, and may invest the remainder of its assets in securities not
held by the underlying index, but which BFGA believe will help the reference
asset track the underlying index. The reference asset also may invest its other
assets in futures contracts, options on futures contracts, options and swaps
related to the underlying index, as well as cash and cash equivalents, including
shares of money market funds affiliated with BGFA.
Representative
Sampling
The
reference asset pursues a “representative sampling” strategy in attempting to
track the performance of the underlying index, and generally does not hold all
of the equity securities held by the underlying index. The reference asset
invests in a representative sample of securities in the underlying index, which
have a similar investment profile as the underlying index. Securities selected
have aggregate investment characteristics (based on market capitalization and
industry weightings), fundamental characteristics (such as return variability,
earnings valuation and yield) and liquidity measures similar to those of the
underlying index.
Correlation
The
underlying index is a theoretical financial calculation, while the reference
asset is an actual investment portfolio. The performance of the reference asset
and the underlying index will vary somewhat due to transaction costs, market
impact, corporate actions (such as mergers and spin-offs) and timing variances.
A figure of 100% would indicate perfect correlation. Any correlation of less
than 100% is called “tracking error.” The reference asset, using a
representative sampling strategy, can be expected to have a greater tracking
error than a fund using replication strategy. Replication is a strategy in which
a fund invests in substantially all of the securities in its underlying index in
approximately the same proportions as in the underlying index.
Industry
Concentration Policy
The
reference asset will concentrate its investments ( i.e., hold 25% or more of its
total assets) in a particular industry or group of industries only to
approximately the same extent that the underlying index is so concentrated. For
purposes of this limitation, securities of the U.S. government (including its
agencies and instrumentalities), repurchase agreements collateralized by U.S.
government securities, and securities of state or municipal governments and
their political subdivisions are not considered to be issued by members of any
industry.
The
Underlying Index
All
information in this pricing supplement regarding the underlying index,
including, without limitation, its make-up, method of calculation and changes in
its components, is derived from publicly available information. Such information
reflects the policies of, and is subject to change by, MSCI or any of its
affiliates (the “underlying index sponsor”). The underlying index sponsor owns
the copyright and all other rights to the underlying index. The underlying index
has no obligation to continue to publish, and may discontinue publication of,
the underlying index. We do not assume any responsibility for the accuracy or
completeness of such information. Historical performance of the underlying index
is not an indication of future performance. Future performance of the underlying
index may differ significantly from historical performance, either positively or
negatively.
The
underlying index is published by MSCI and is intended to measure the performance
of equity markets in Mexico. The underlying index is a free float-adjusted
market capitalization index with a base date of December 31, 1987 and an
initial price of 100. Component companies must meet objective criteria for
inclusion in the underlying index, taking into consideration unavailable
strategic shareholdings and limitations to foreign ownership. The underlying
index is calculated daily in U.S. Dollars and published in real time every 60
seconds during market trading hours. The underlying index is published by
Bloomberg under the index symbol “MXMX”.
The
underlying index is part of the MSCI Equity Indices series. MSCI aims to include
in its indices 85% of the free float-adjusted market capitalization in each
industry sector, within each country included in an index.
Constructing
the MSCI Global Investable Market Indices
MSCI
undertakes an index construction process, which involves: (i) defining the
Equity Universe; (ii) determining the Market Investable Equity Universe for
each market; (iii) determining market capitalization size segments for each
market; (iv) applying Index Continuity Rules for the MSCI Standard Index;
(v) creating style segments within each size segment within each market;
and (vi) classifying securities under the Global Industry Classification
Standard (the “GICS”).
Maintenance
The MSCI
Global Investable Market Indices are maintained with the objective of reflecting
the evolution of the underlying equity markets and segments on a timely basis,
while seeking to achieve index continuity, continuous investability of
constituents and replicability of the indices, and index stability and low index
turnover.
In
particular, index maintenance involves:
(i)
Semi-Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and
Global Value and Growth Indices which include:
|
•
|
|
Updating
the indices on the basis of a fully refreshed Equity
Universe.
|
|
•
|
|
Taking
buffer rules into consideration for migration of securities across size
and style segments.
|
|
•
|
|
Updating
FIFs and Number of Shares (“NOS”).
|
(ii)
Quarterly Index Reviews (“QIRs”) in February and August of the Size Segment
Indices aimed at:
|
•
|
|
Including
significant new eligible securities (such as IPOs that were not eligible
for earlier inclusion) in the index.
|
|
•
|
|
Allowing
for significant moves of companies within the Size Segment Indices, using
wider buffers than in the SAIR.
|
|
•
|
|
Reflecting
the impact of significant market events on FIFs and updating
NOS.
|
(iii)
Ongoing event-related changes. Changes of this type are generally implemented in
the indices as they occur. Significantly large IPOs are included in the indices
after the close of the company’s tenth day of trading.
Historical Performance of the Reference
Asset
The
following graph sets forth the historical performance of the reference asset
based on the historical closing prices from January 2, 2004 through September
18, 2009. The closing price for the reference asset on September 18,
2009 was $45.20. We obtained the closing prices below from Bloomberg
Professional® service.
We make no representation or warranty as to the accuracy or completeness of the
information obtained from Bloomberg Professional®
service.
The
historical closing prices of the reference asset should not be taken as an
indication of future performance, and no assurance can be given as to the
official closing price on the final valuation date. We cannot give you assurance
that the performance of the reference asset will result in the return of any of
your initial investment.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
1/2/2003
|
3/31/2003
|
$12.13
|
$11.22
|
$11.80
|
4/1/2003
|
6/30/2003
|
$14.69
|
$11.98
|
$14.49
|
7/1/2003
|
9/30/2003
|
$15.75
|
$14.43
|
$15.63
|
10/1/2003
|
12/31/2003
|
$17.01
|
$15.31
|
$16.50
|
1/2/2004
|
3/31/2004
|
$20.74
|
$17.30
|
$20.72
|
4/1/2004
|
6/30/2004
|
$21.28
|
$17.30
|
$19.20
|
7/1/2004
|
9/30/2004
|
$20.62
|
$18.44
|
$20.55
|
10/1/2004
|
12/31/2004
|
$25.10
|
$20.32
|
$25.06
|
1/3/2005
|
3/31/2005
|
$28.09
|
$23.33
|
$24.10
|
4/1/2005
|
6/30/2005
|
$27.40
|
$22.59
|
$27.17
|
7/1/2005
|
9/30/2005
|
$32.78
|
$27.07
|
$32.76
|
10/3/2005
|
12/30/2005
|
$36.92
|
$29.31
|
$35.74
|
1/3/2006
|
3/31/2006
|
$39.72
|
$35.93
|
$38.34
|
4/3/2006
|
6/30/2006
|
$44.02
|
$31.20
|
$36.99
|
7/3/2006
|
9/29/2006
|
$43.42
|
$35.72
|
$43.20
|
10/2/2006
|
12/29/2006
|
$51.30
|
$41.90
|
$51.20
|
1/3/2007
|
3/30/2007
|
$55.95
|
$46.70
|
$54.36
|
4/2/2007
|
6/29/2007
|
$64.61
|
$54.53
|
$61.65
|
7/2/2007
|
9/28/2007
|
$65.14
|
$49.42
|
$58.79
|
10/1/2007
|
12/31/2007
|
$64.17
|
$52.93
|
$56.00
|
1/2/2008
|
3/31/2008
|
$59.70
|
$47.52
|
$59.10
|
4/1/2008
|
6/30/2008
|
$63.32
|
$56.23
|
$56.94
|
7/1/2008
|
9/30/2008
|
$56.31
|
$43.11
|
$46.67
|
10/1/2008
|
12/31/2008
|
$46.82
|
$23.25
|
$32.27
|
1/2/2009
|
3/31/2009
|
$35.16
|
$21.53
|
$27.10
|
4/1/2009
|
6/30/2009
|
$37.98
|
$26.89
|
$36.86
|
7/1/2009*
|
9/18/2009*
|
$45.92
|
$34.04
|
$45.20
|
* As of
the date of this pricing supplement available information for the third calendar
quarter of 2009 includes data for the period from July 1, 2009 through September
18, 2009. 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 2009.
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 notes from HSBC for distribution to J.P.
Morgan Securities Inc. J.P. Morgan Securities Inc. will act as
placement agent for the notes and will receive a fee that will not exceed $12.50
per $1,000 face amount of notes. See “Supplemental Plan of
Distribution” on page S-52 in the prospectus supplement.