ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-158385
Dated July 1, 2011
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Investment Description
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These Buffered Return Optimization Securities Linked to the S&P MidCap 400® Index (the "Index") are senior unsecured debt securities issued by HSBC USA Inc. (“HSBC”), which we refer to as the “Securities”. The Securities will rank equally with all of our other unsecured and unsubordinated debt obligations. If the Index Return is positive, HSBC will repay the Principal Amount at maturity plus pay a return equal to the Multiplier of 1.25 times the Index Return, up to the Maximum Gain, which will be set on the Trade Date and is expected to be between 17.00% and 21.00%. If the Index Return is zero or negative but the Index's percentage decline is less than the 10% Buffer, HSBC will repay the full Principal Amount at maturity. However, if the Index Return is negative and the Index's percentage decline is more than the 10% Buffer, HSBC will pay less than the full Principal Amount at maturity, resulting in a loss of principal to investors that is equal to the Index's decline in excess of 10%. Investing in the Securities involves significant risks. HSBC will not pay any interest on the Securities. You may lose up to 90% of your Principal Amount if the Index Return is less than -10%. The buffered downside market exposure applies only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of HSBC. If HSBC were to default on its payment obligations you may not receive any amounts owed to you under the Securities and you could lose your entire investment.
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Features
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q
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Enhanced Growth Potential: At maturity, the Securities enhance any positive Index Return up to the Maximum Gain. If the Index Return is negative, investors may be exposed to the negative Index Return at maturity.
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q
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Buffered Downside Market Exposure: If the Index Return is zero or negative, but the Index's percentage decline is less than the 10% Buffer, HSBC will repay the full Principal Amount at maturity. However, if the Index Return is negative and the Index’s decline is more than the 10% Buffer, HSBC will pay less than the full Principal Amount at maturity resulting in a loss of principal to investors that is equal to the Index's decline in excess of 10%. Accordingly, you could lose up to 90% of the Principal Amount. The buffered downside market exposure applies only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of HSBC.
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Key Dates1
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Trade Date
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July 26, 2011
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Settlement Date
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July 29, 2011
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Final Valuation Date2
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July 25, 2013
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Maturity Date2
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July 31, 2013
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1 Expected. In the event we make any change to the expected Trade Date and Settlement Date, the Final Valuation Date and Maturity Date will be changed so that the stated term of the Securities remains the same.
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THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. THE TERMS OF THE SECURITIES MAY NOT OBLIGATE HSBC TO REPAY THE FULL PRINCIPAL AMOUNT OF THE SECURITIES. THE SECURITIES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE INDEX, SUBJECT TO THE BUFFER, WHICH CAN RESULT IN A LOSS OF UP TO 90% OF THE PRINCIPAL AMOUNT AT MATURITY. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION OF HSBC. YOU SHOULD NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE SECURITIES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER ‘‘KEY RISKS’’ BEGINNING ON PAGE 7 OF THIS FREE WRITING PROSPECTUS AND THE MORE DETAILED ‘‘RISK FACTORS’’ BEGINNING ON PAGE US3-1 OF THE ACCOMPANYING UNDERLYING SUPPLEMENT NO. 3, BEGINNING ON PAGE PS-3 OF THE ACCOMPANYING PRODUCT SUPPLEMENT AND BEGINNING ON PAGE S-3 OF THE ACCOMPANYING PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES.
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Security Offering
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Index
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Multiplier
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Maximum Gain
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Buffer
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Initial Level
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CUSIP
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ISIN
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S&P MidCap 400® Index
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1.25
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17.00% to 21.00%
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10%
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40433C676
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US40433C6764
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Price to Public (1)
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Underwriting Discount (1)
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Proceeds to Us
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Per Security
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$10.00
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$0.20
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$9.80
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Total
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(1)
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UBS Financial Services Inc. will act as placement agent for sales to certain advisory accounts at a purchase price to such accounts of $9.80 per Security, and will not receive a sales commission with respect to such sales. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page 12 of this free writing prospectus.
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UBS Financial Services Inc.
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HSBC USA Inc.
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Additional Information about HSBC USA Inc. and the Securities
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Underlying supplement no. 3 dated October 22, 2010:
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http://www.sec.gov/Archives/edgar/data/83246/000114420410055205/v198039_424b2.htm
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Prospectus supplement dated April 9, 2009:
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www.sec.gov/Archives/edgar/data/83246/000114420409019785/v145824_424b2.htm
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Prospectus dated April 2, 2009:
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www.sec.gov/Archives/edgar/data/83246/000104746909003736/a2192100zs-3asr.htm
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Investor Suitability
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The Securities may be suitable for you if:
¨ You fully understand the risks inherent in an investment in the Securities, including the risk of loss of up to 90% of your Principal Amount.
¨ You can tolerate the loss of up to 90% of your Principal Amount and you are willing to make an investment that has similar downside market risk as a hypothetical investment in the Index, subject to the Buffer at maturity.
¨ You believe the Index will appreciate over the term of the Securities and that the appreciation is unlikely to exceed the Maximum Gain of between 17.00% and 21.00% (the actual Maximum Gain will be determined on the Trade Date).
¨ You understand and accept that your potential return is limited by the Maximum Gain and you would be willing to invest in the Securities if the Maximum Gain were set to the bottom of the range indicated on the cover (the actual Maximum Gain for the Securities will be determined on the Trade Date and will not be less than 17.00%).
¨ You are willing to hold the Securities to maturity, a term of two years, and accept that there may be little or no secondary market for the Securities.
¨ You do not seek current income from your investment and are willing to forego dividends paid on the stocks included in the Index.
¨ You are willing to assume the credit risk of HSBC, as issuer of the Securities, and understand that if HSBC defaults on its obligation you may not receive any amounts due to you including the repayment of your principal.
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The Securities may not be suitable for you if:
¨ You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of up to 90% of your Principal Amount.
¨ You cannot tolerate the loss of up to 90% of your Principal Amount and you are not willing to make an investment that has similar downside market risk as a hypothetical investment in the Index, subject to the Buffer at maturity.
¨ You seek an investment that provides a full return of principal at maturity.
¨ You believe that the level of the Index will decline during the term of the Securities, or you believe the Index will appreciate over the term of the Securities by a percentage that exceeds the Maximum Gain.
¨ You seek an investment that has unlimited return potential without a cap on appreciation.
¨ You would be unwilling to invest in the Securities if the Maximum Gain were set equal to the bottom of the range indicated on the cover (the actual Maximum Gain will be determined on the Trade Date and will not be less than 17.00%).
¨ You prefer the lower risk, and therefore accept the potentially lower returns, of conventional debt securities with comparable maturities issued by HSBC or another issuer with a similar credit rating.
¨ You seek current income from this investment or prefer to receive the dividends paid on the stocks included in the Index.
¨ You are unable or unwilling to hold the Securities to maturity, a term of two years, or you seek an investment for which there will be an active secondary market.
¨ You are not willing or are unable to assume the credit risk associated with HSBC, as issuer of the Securities, for any payment on the Securities, including any repayment of principal.
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Indicative Terms
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Issuer
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HSBC USA Inc. (A1/AA-/AA)1
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Issue Price
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$10.00 per Security for brokerage accounts; $9.80 per Security for certain advisory accounts.
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Principal Amount
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$10 per Security. The Payment at Maturity will be based on the Principal Amount per Security.
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Term
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2 years
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Index
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S&P MidCap 400® Index (“MID”)
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Payment at Maturity (per $10 Principal Amount Security)
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You will receive a cash payment at maturity linked to the performance of the Index during the term of the Securities.
If the Index Return is greater than zero, HSBC will pay you an amount equal to the lesser of:
(A) $10 + ($10 × Index Return × Multiplier); and
(B) $10 + ($10 × Maximum Gain).
If the Index Return is zero or negative, but the Index's percentage decline is not more than the Buffer, HSBC will pay you the $10 Principal Amount.
If the Index Return is negative and the Index's percentage decline is more than the Buffer, HSBC will pay you an amount calculated as follows:
$10 + [$10 × (Index Return + Buffer)]
In this case you could lose up to 90% of your Principal Amount.
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Multiplier
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1.25
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Maximum Gain
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Between 17.00% and 21.00%. The actual Maximum Gain will be determined on the Trade Date.
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Buffer
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10%
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Index Return
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Final Level – Initial Level
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Initial Level
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Initial Level
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The Official Closing Level of the Index on the Trade Date.
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Final Level
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The Official Closing Level of the Index on the Final Valuation Date.
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Official Closing Level
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The Official Closing Level on any scheduled trading day will be the closing level of the Index as determined by the calculation agent and based on the value displayed on Bloomberg Professional® service page “MID <INDEX>”, or on any successor page on Bloomberg Professional® service or any successor service, as applicable.
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CUSIP / ISIN
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40433C676 / US40433C6764
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Calculation Agent
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HSBC USA Inc. or one of its affiliates.
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Trustee
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Notwithstanding anything contained in the accompanying prospectus supplement to the contrary, the Securities will be issued under the senior indenture dated March 31, 2009, between HSBC USA Inc., and Wells Fargo Bank, National Association, as trustee. Such indenture has substantially the same terms as the indenture described in the accompanying prospectus supplement.
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Paying Agent
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Notwithstanding anything contained in the accompanying prospectus supplement to the contrary, HSBC Bank USA, N.A. will act as paying agent with respect to the Securities pursuant to a Paying Agent and Securities Registrar Agreement dated June 1, 2009, between HSBC USA Inc. and HSBC Bank USA, N.A.
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Investment Timeline
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What are the tax consequences of the Securities?
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You should carefully consider, among other things, the matters set forth in the section “Certain U.S. Federal Income Tax Considerations” in the prospectus supplement. The following discussion summarizes certain of the material U.S. federal income tax consequences of the purchase, beneficial ownership, and disposition of each of the Securities. This summary supplements the section “Certain U.S. Federal Income Tax Considerations” in the prospectus supplement and supersedes it to the extent inconsistent therewith. Notwithstanding any disclosure in the accompanying prospectus supplement to the contrary, HSBC’s special U.S. tax counsel in this transaction is Sidley Austin llp.
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There are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the Securities. Under one reasonable approach, the Securities should be treated as pre-paid forward or other executory contracts with respect to the Index. HSBC intends to treat the Securities consistent with this approach and pursuant to the terms of the Securities, you agree to treat the Securities under this approach for all U.S. federal income tax purposes. Subject to certain limitations described in the accompanying prospectus supplement, and based on certain factual representations received from HSBC, in the opinion of HSBC’s special U.S. tax counsel, Sidley Austin llp, it is reasonable to treat the Securities in accordance with this approach. Pursuant to this approach, HSBC does not intend to report any income or gain with respect to the Securities prior to their maturity or an earlier sale or exchange and HSBC intends to treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held the Security for more than one year at such time for U.S. federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations — Certain Equity-Linked Notes — Certain Notes Treated as Forward Contracts or Executory Contracts" in the prospectus supplement for certain U.S. federal income tax considerations applicable to Securities that are treated as pre-paid cash-settled forward or other executory contracts.
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Because there are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the Securities, other characterizations and treatments are possible and the timing and character of income in respect of the Securities might differ from the treatment described above. For example, the Securities could be treated as debt instruments that are “contingent payment debt instruments” for U.S. federal income tax purposes subject to the treatment described under the heading “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.
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In Notice 2008-2, the Internal Revenue Service (“IRS”) and the Treasury Department requested comments as to whether the purchaser of an exchange traded note or pre-paid forward contract (which may include the Securities) should be required to accrue income during its term under a mark-to-market, accrual or other methodology, whether income and gain on such a note or contract should be ordinary or capital, and whether foreign holders should be subject to withholding tax on any deemed income accrual. Accordingly, it is possible that regulations or other guidance could provide that a U.S. holder (as defined in the prospectus supplement) of a Security is required to accrue income in respect of the Security prior to the receipt of payments with respect to the Security or its earlier sale. Moreover, it is possible that any such regulations or other guidance could treat all income and gain of a U.S. holder in respect of a Security as ordinary income (including gain on a sale). Finally, it is possible that a non-U.S. holder (as defined in the prospectus supplement) of the Security could be subject to U.S. withholding tax in respect of a Security. It is unclear whether any regulations or other guidance would apply to the Securities (possibly on a retroactive basis). Prospective investors are urged to consult with their tax advisors regarding Notice 2008-2 and the possible effect to them of the issuance of regulations or other guidance that affects the U.S. federal income tax treatment of the Securities.
PROSPECTIVE PURCHASERS OF SECURITIES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SECURITIES.
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Scenario Analysis and Examples at Maturity
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Hypothetical Final Level
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Hypothetical Index Return
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Multiplier
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Hypothetical Payment at Maturity
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Hypothetical
Return on Securities Purchased at $10.00 (1)
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Hypothetical Return on Securities Purchased at $9.80 by Advisory
Accounts (2)
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1,960.00
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100.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,862.00
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90.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,764.00
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80.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,666.00
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70.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,568.00
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60.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,470.00
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50.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,372.00
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40.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,274.00
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30.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,176.00
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20.00%
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1.25
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$11.900
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19.00%
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21.43%
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1,128.96
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15.20%
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1.25
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$11.900
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19.00%
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21.43%
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1,078.00
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10.00%
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1.25
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$11.250
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12.50%
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14.80%
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1,029.00
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5.00%
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1.25
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$10.625
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6.25%
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8.42%
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1,004.50
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2.50%
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1.25
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$10.313
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3.13%
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5.23%
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980.00
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0.00%
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N/A
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$10.000
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0.00%
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2.04%
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955.50
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-2.50%
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N/A
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$10.000
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0.00%
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2.04%
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931.00
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-5.00%
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N/A
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$10.000
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0.00%
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2.04%
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882.00
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-10.00%
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N/A
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$10.000
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0.00%
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2.04%
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833.00
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-15.00%
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N/A
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$9.500
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-5.00%
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-3.06%
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784.00
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-20.00%
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N/A
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$9.000
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-10.00%
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-8.16%
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686.00
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-30.00%
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N/A
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$8.000
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-20.00%
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-18.37%
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588.00
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-40.00%
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N/A
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$7.000
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-30.00%
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-28.57%
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490.00
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-50.00%
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N/A
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$6.000
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-40.00%
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-38.78%
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392.00
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-60.00%
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N/A
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$5.000
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-50.00%
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-48.98%
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294.00
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-70.00%
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N/A
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$4.000
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-60.00%
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-59.18%
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196.00
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-80.00%
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N/A
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$3.000
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-70.00%
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-69.39%
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98.00
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-90.00%
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N/A
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$2.000
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-80.00%
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-79.59%
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0.00
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-100.00%
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N/A
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$1.000
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-90.00%
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-89.80%
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Key Risks
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Your Investment in the Securities May Result in a Loss: The Securities differ from ordinary debt securities in that HSBC is not necessarily obligated to repay the full Principal Amount of the Securities at maturity. The return on the Securities at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative. If the Index Return is negative and the Index 's percentage decline is more than 10%, HSBC will pay you less than your Principal Amount at maturity resulting in a loss of principal equal to the negative Index Return in excess of the 10% Buffer. Accordingly, you could lose up to 90% of the Principal Amount of the Securities.
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Buffered Downside Market Exposure Applies Only if You Hold the Securities to Maturity: You should be willing to hold your Securities to maturity. If you are able to sell your Securities in the secondary market, you may have to sell them at a loss even if the level of the Index has not declined by more than the Buffer.
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The Multiplier Applies Only if You Hold the Securities to Maturity: You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity in the secondary market, the price you receive will likely not reflect the full economic value of the Multiplier or the Securities themselves, and the return you realize may be less than the Index’s return even if such return is positive and does not exceed the Maximum Gain. You can receive the full benefit of the Multiplier and earn the potential Maximum Gain from HSBC only if you hold your Securities to maturity.
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Maximum Gain: You will not participate in any increase in the level of the Index (as magnified by the Multiplier) beyond the Maximum Gain that will be between 17.00% and 21.00% (to be determined on the Trade Date), which could be significant. YOU WILL NOT RECEIVE A RETURN ON THE PRINCIPAL AMOUNT GREATER THAN THE MAXIMUM GAIN. As a result, your return on the Securities is limited and could be less than a hypothetical direct investment in the Index.
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No Interest Payments: HSBC will not make any interest payments in respect to the Securities.
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The Securities are Subject to the Credit Risk of the Issuer: The Securities are senior unsecured debt obligations of HSBC, and are not, either directly or indirectly, an obligation of any third party. As further described in the accompanying prospectus supplement and prospectus, the Securities will rank on par with all of the other unsecured and unsubordinated debt obligations of HSBC, except such obligations as may be preferred by operation of law. Any payment to be made on the Securities, including any repayment of principal at maturity, depends on the ability of HSBC to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of HSBC may affect the market value of the Securities and, in the event HSBC were to default on its obligations, you may not receive amount owed to you under the terms of the Securities.
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¨
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The Securities Lack Liquidity: The Securities will not be listed on any securities exchange or quotation system. An affiliate of HSBC intends to offer to repurchase the Securities in the secondary market but is not required to do so and may cease any such market-making activities at any time without notice. Because other dealers are not likely to make a secondary market for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price, if any, at which an affiliate of HSBC is willing to buy the Securities. This price, if any, will exclude any fees or commissions paid by brokerage account holders when the Securities were purchased and therefore will generally be lower than such purchase price.
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Owning the Securities is Not the Same as Owning the Stocks Comprising the Index: The return on your Securities may not reflect the return you would realize if you actually owned the stocks included in the Index. As a holder of the Securities, you will not have voting rights or rights to receive dividends or other distributions or other rights that holders of stocks included in the Index would have.
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Price Prior to Maturity: The market price of the Securities will be influenced by many factors including the level of the Index, volatilities, dividends, the time remaining to maturity of the Securities, interest rates, geopolitical conditions, economic, political, financial and regulatory or judicial events, and the creditworthiness of HSBC.
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Changes Affecting the Index: The policies of the reference sponsor concerning additions, deletions and substitutions of the stocks included in the Index and the manner in which the reference sponsor takes account of certain changes affecting those stocks included in the Index may adversely affect the level of the Index. The policies of the reference sponsor with respect to the calculation of the Index could also adversely affect the level of the Index. The reference sponsor may discontinue or suspend calculation or dissemination of the Index. Any such actions could have an adverse effect the value of the Securities.
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The Index Reflects Price Return, Not Total Return: The return on your Securities is based on the performance of the Index, which reflects the changes in the market prices of the component stocks underlying the Index. It is not, however, linked to a ‘total return’ index or strategy, which, in addition to reflecting those price returns, would also reflect dividends paid on the component stocks. The return on your Securities will not include such a total return feature or dividend component.
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¨
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Potential HSBC Impact on Price: Trading or transactions by HSBC USA Inc. or any of its affiliates in the stocks held by the Index or in futures, options, exchange-traded funds or other derivative products on the stocks held by the Index, may adversely affect the market value of the stocks held by the Index, and, therefore, the market value of the Securities.
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Impact of Fees on Secondary Market Prices: Generally, the price of the Securities in the secondary market, if any, is likely to be lower than the initial offering price since the issue price includes and the secondary market prices are likely to exclude hedging costs, and for brokerage accounts, commissions or other compensation paid with respect to the Securities.
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Potential Conflict of Interest: HSBC and its affiliates may engage in business with the issuers of the stocks comprising the Index, which may present a conflict between the obligations of HSBC and you, as a holder of the Securities. The Calculation Agent, who is
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the issuer of the Securities, will determine the Payment at Maturity based on the observed Final Level. The Calculation Agent can postpone the determination of the Final Level or the Maturity Date if a market disruption event occurs and is continuing on the Final Valuation Date.
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Potentially Inconsistent Research, Opinions or Recommendations by HSBC, UBS or Their Respective Affiliates: HSBC, UBS Financial Services Inc., or any of their respective affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Securities and such research, opinions or recommendations may be revised at any time. Any such research, opinions or recommendations could affect the price of the stocks included in the Index, and therefore, the market value of the Securities.
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The Securities are Not Insured by any Governmental Agency of the United States or any Other Jurisdiction: The Securities are not deposit liabilities or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or program of the United States or any other jurisdiction. An investment in the Securities is subject to the credit risk of HSBC, and in the event that HSBC is unable to pay its obligations as they become due, you may not receive the full Payment at Maturity of the Securities.
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Uncertain Tax Treatment: There is no direct legal authority as to the proper tax treatment of the Securities, and therefore significant aspects of the tax treatment of the Securities are uncertain, as to both the timing and character of any inclusion in income in respect of the Securities. Under one reasonable approach, the Securities should be treated as pre-paid forward or other executory contracts with respect to the Index. HSBC intends to treat the Securities consistent with this approach and pursuant to the terms of the Securities, you agree to treat the Securities under this approach for all U.S. federal income tax purposes. Subject to certain limitations described in the accompanying prospectus supplement, and based on certain factual representations received from HSBC, in the opinion of HSBC’s special U.S. tax counsel, Sidley Austin llp, it is reasonable to treat the Securities in accordance with this approach. Pursuant to this approach, HSBC does not intend to report any income or gain with respect to the Securities prior to their maturity or an earlier sale or exchange and HSBC intends to treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held the Security for more than one year at such time for U.S. federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations — Certain Equity-Linked Notes — Certain Notes Treated as Forward Contracts or Executory Contracts" in the prospectus supplement for certain U.S. federal income tax considerations applicable to Securities that are treated as pre-paid cash-settled forward or other executory contracts. Because of the uncertainty regarding the tax treatment of the Securities, we urge you to consult your tax adviser as to the tax consequences of your investment in a Security.
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Information about the S&P MidCap 400® Index (“MID”)
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·
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holdings by other publicly traded corporations, venture capital firms, private equity firms, strategic partners, or leveraged buyout groups;
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·
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holdings by government entities, including all levels of government in the U.S. or foreign countries; and
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·
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holdings by current or former officers and directors of the company, founders of the company, or family trusts of officers, directors, or founders, as well as holdings of trusts, foundations, pension funds, employee stock ownership plans, or other investment vehicles associated with and controlled by the company.
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Type of Corporate Action
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Comments
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Divisor
Adjustment
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Company added/deleted
|
Net change in market value determines Divisor adjustment.
|
Yes
|
Change in shares outstanding
|
Any combination of secondary issuance, share repurchase or buy back—share counts revised to reflect change.
|
Yes
|
Stock split
|
Share count revised to reflect new count. Divisor adjustment is not required since the share count and price changes are offsetting.
|
No
|
Spin-off
|
If spun-off company is not being added to the index, the divisor adjustment reflects the decline in Index Market Value (i.e., the value of the spun-off unit).
|
Yes
|
Spin-off
|
Spun-off company added to the MID, no company removed from the MID.
|
No
|
Spin-off
|
Spun-off company added to the MID, another company removed to keep number of names fixed. Divisor adjustment reflects deletion.
|
Yes
|
Change in IWF
|
Increasing (decreasing) the IWF increases (decreases) the total market value of the index. The Divisor change reflects the change in market value caused by the change to an IWF.
|
Yes
|
Special dividend
|
When a company pays a special dividend the share price is assumed to drop by the amount of the dividend; the divisor adjustment reflects this drop in Index Market Value.
|
Yes
|
Rights offering
|
Each shareholder receives the right to buy a proportional number of additional shares at a set (often discounted) price. The calculation assumes that the offering is fully subscribed. Divisor adjustment reflects increase in market cap measured as the shares issued multiplied by the price paid.
|
Yes
|
Post-Event Aggregate Market Value
|
=
|
Pre-Event Index Value
|
New Divisor
|
New Divisor
|
=
|
Post-Event Aggregate Market Value
|
Pre-Event Index Value
|
Events of Default and Acceleration
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
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