HSBC Saudi Equity Funds

Fund's Objective:

The Saudi Industrial Sector Fund aims to provide long-term capital growth through the investment in proxy sector to the market. The Fund will invest in equities that conform to Shariah Guidelines as set by our Shariah Supervisory Committee.

Sector Review:

The Saudi Industrial Sector witnessed substantial growth in the last years driven by the continuous Government support, which had positive impact on the Saudi Stock Market. The number of companies representing the industrial sector increased to 26 by the end of 2004 with a market cap of more than SAR 555 Billion.

The Saudi Industrial Sector is now the largest among the Saudi sectors in terms of Market Cap representing more than 40% of total market with an increase of more than 16% from Dec 31,2002.

Risk Factors:

• Higher Risk due to single sector investment approach
• High concentration in single stock-SABIC
• Low diversification

Shariah Screening Criteria:

The Saudi Industrial Companies Fund will exclude companies with the following characteristics:

1. Total Debt divided by the trailing 12-month average market capitalization is greater than or equal to 33%. (Total Debt = short term debt + current portion of long term debt + long term debt)
2. The sum of cash and interest bearing securities divided by the trailing 12-month average market capitalization is greater than or equal to 33%.
3. Account Receivables divided by Total Assets is greater than or equal to 45%. (Account Receivables = Current Receivables + Long Term Receivables)

Shariah Supervisory Committee:

The Fund is approved by our Shariah Supervisor Committee, which is comprised of the following respected scholars:

• Sheikh Abdullah Bin Sulaiman Al Manea
• Sheikh Dr. Abdullah Al Mutlaq
• Sheikh Dr. Muhammed A. Elgari Bin Eid

Fund's Objective:

The Saudi Equity Fund aims to achieve long-term equity linked growth by investing in the Saudi stock market. The fund invests in the shares of Saudi publicly quoted companies and Money Market Instruments.

Fund Objective:

The Saudi Equity Income Fund aims to achieve long-term equity linked growth by investing in the Saudi Arabian stock market. The fund invests in the shares of Saudi publicly quoted companies (excluding banks) and short-term trade finance transactions.

The fund started investing in the Saudi market on 01 November 1997 with an inception price of SAR 10. The Saudi Basic Industrial and Saudi Telecom Companies, which are proxies to the market, have the largest fund weighting. The fund is well diversified as it invests in the various Saudi sectors (excluding banks).

Fund Objective:

To provide medium to long-term equity linked growth by investing in the shares of Saudi Arabian Banking Sector.

The Financial Institutions Fund is designed to provide investors with solid and reliable investment platform through investing in the top financial institutions in the Saudi Arabia. In the early years, it is anticipated that the fund will only invest in the shares of Saudi publicly quoted Financial Institutions but will later expand to cover Financial Institutions such as Banks, Non Banking Financial Institutions, Insurance Companies that are quoted in Saudi and GCC. The fund will also have the ability to manage its liquidity through investing in Money Market Instruments. The fund started investing in the Saudi banks on 01 August 2004 with an inception price of SAR 10. The fund is well diversified as it invests in the various Saudi Banks.

The Fund is an open-ended investment fund with the aim to achieve, over the medium to long-term, capital growth by investing in portfolio of selected Saudi Construction and Cement companies listed on the Saudi Equity Market. These companies will include companies specialised in construction, production and/or merchandising of building materials; companies which perform and/or merchandise infrastructure projects and their materials; and cement companies listed on the Saudi Equity Market. The Fund performance will be compared to HSBC Saudi Construction and Cement Equity Index.

HSBC Saudi Freestyle Equity Fund offers investors a new approach in investing in Shariah Compliant Saudi Equity, where its individuality lies in its "Freestyle" technique of the management of the fund.

HSBC Saudi Freestyle Equity fund is an open-ended fund domiciled in the Kingdom of Saudi Arabia, regulated by the Capital Market Authority of Saudi Arabia (CMA).

Fund Objective:

The Fund will aim to seek capital protection, over the long term, by investing in equities of Shariah compliant companies that are listed on the official stock market of Saudi Arabia. The fund will be concentrated, by investing in a small basket of equities, and will be managed in a manner that is both active and flexible, to provide returns to investors that is not linked to a benchmark or weighting tied to an index.