PRODUCT KEY FACTS STATEMENT Hang Seng Index ETF June 2011 z This is an exchange traded fund. z This statement provides you with key information about the Hang Seng Index ETF (the “HSI ETF”). z This statement is a part of the Hong Kong Offering Document of the HSI ETF. z You should not invest in the HSI ETF based on this statement alone. Quick Facts Stock code: 2833 Trading lot size: 100 Units Manager: Hang Seng Investment Management Limited Trustee: American International Assurance Company (Trustee) Limited# Registrar: HSBC Provident Fund Trustee (Hong Kong) Limited Estimated Total Expense Ratio*: 0.13% per annum Underlying Index: Hang Seng Index Base Currency: Hong Kong Dollar Financial year end of the HSI ETF: 31 December Dividend Policy: Semi-annually (if any) ETF Website: http://www.hangseng.com/etf # Currently, the Trustee has delegated its administrative and custodian roles to HSBC Provident Fund Trustee (Hong Kong) Limited. The sub-custodian currently appointed by HSBC Provident Fund Trustee (Hong Kong) Limited is The Hongkong and Shanghai Banking Corporation Limited. * “Total Expense Ratio” is the ratio of total expenses of the HSI ETF to its Net Asset Value. Data as of 31 December 2010. What is the HSI ETF? The HSI ETF is part of the Hang Seng Investment Index Funds Series II, a unit trust established as an umbrella fund under the laws of Hong Kong. Objective and Investment Strategy Objective The HSI ETF is an index-tracking fund which aims to match, before expenses, as closely as practicable the performance of the Hang Seng Index. Investment Strategy The Manager primarily adopts a replication strategy. The HSI ETF invests in substantially all the constituent stocks of the Hang Seng Index in substantially the same weightings (i.e. proportions) as these stocks have in the Hang Seng Index. In order to maximise portfolio management efficiency, minimise transaction costs and tracking error, exposure to the Hang Seng Index may also be obtained through other index-tracking strategies or financial instruments from which the return to the HSI ETF will substantially reflect the performance of the Hang Seng Index. Such strategies and instruments will be chosen based on their correlation to the Hang Seng Index and cost efficiency in order to reflect the characteristics of the Hang Seng Index. Hence, the Manager may decide to utilise a representative sampling strategy or another investment strategy from time to time to achieve the HSI ETF’s investment objective. Currently, the Manager has no intention to have any securities lending, repurchase or similar over-the-counter transactions entered into for the account of the HSI ETF. In the future, where the Manager intends to have any securities lending, repurchase or similar over-the-counter transactions entered into for the account of the HSI ETF, subject to SFC’s prior approval, 1 month’s prior notice will be given to the relevant Unitholders. Index The Hang Seng Index is an important indicator of the performance of the Hong Kong stock market. The Hang Seng Index, launched on 24 November 1969, measures the performance of the largest and most liquid companies listed in Hong Kong. It comprises a representative sample of stocks quoted on the Stock Exchange of Hong Kong Limited (“SEHK”). The Hang Seng Index is calculated with a base value of 100 as of 31 July 1964. It is calculated on a 15-second basis during trading hours of the SEHK and its closing value is based on official closing prices of stocks announced by the SEHK. The Hang Seng Index is compiled and managed by Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank Limited. Constituent stocks of the Hang Seng Index are selected by a rigorous process of detailed analysis. Only companies with a primary listing on the Main Board of the SEHK are eligible potential constituents. Mainland China enterprises that have H-share listing in Hong Kong will be eligible for inclusion in the Hang Seng Index if they meet certain condition(s). Besides, to be eligible for inclusion in the Hang Seng Index, a company is subject to eligibility screenings. The final selections are based on the following: • the market capitalisation and turnover ranking of the company; • the representation of the relevant sub-sector within the Hang Seng Index directly reflecting that of the market; and • the financial performance of the company. The review of the Hang Seng Index is conducted quarterly. The Hang Seng Index adopts freefloat-adjusted market capitalisation weighted methodology with a 15% cap on each constituent weighting for calculation. The four sectors of stocks comprising the Hang Seng Index are finance, commerce and industry, properties and utilities. As at 31 May 2011, the respective weightings of the top 10 largest constituent stocks of the Hang Seng Index were as follows: Stock Code Stock Name Weighting (%) 5 HSBC Holdings plc 14.17 939 China Construction Bank Corporation – H Shares 7.11 941 China Mobile Ltd. 6.89 1398 Industrial & Commercial Bank of China Ltd. – H Shares 6.38 883 CNOOC Ltd. 5.64 3988 Bank of China Ltd. – H Shares 4.36 857 PetroChina Co. Ltd. – H Shares 3.84 700 Tencent Holdings Ltd. 3.64 2628 China Life Insurance Co. Ltd. – H Shares 3.29 13 Hutchison Whampoa Ltd. 3.09 For details, please refer to the website of the index compiler, Hang Seng Indexes Company Limited, at http://www.hsi.com.hk/. What are the key risks? Investment involves risks. Please refer to the “What are the Risks of Investing in the HSI ETF?” section in the Hong Kong Offering Document of the HSI ETF for details. 1. Investment Risk The HSI ETF is an investment fund. There is no guarantee of the repayment of principal. Therefore your investment in the HSI ETF may suffer losses. 2. Tracking Error There can be no assurance that the performance of the HSI ETF will be identical to the performance of the Hang Seng Index. Factors such as the fees and expenses borne by the HSI ETF, the timing differences associated with portfolio re-balancing, the prices at which the constituent stocks of the Hang Seng Index are acquired or disposed by the HSI ETF, the market condition at the relevant time, the index-tracking strategies or financial derivative instruments used will affect the performance of the HSI ETF relative to the Hang Seng Index. 2. Passive Investment The HSI ETF is passively managed. The Manager does not have the discretion to select stocks individually or to take defensive positions in declining markets. Hence, any fall in the Hang Seng Index will result in a corresponding fall in the value of the HSI ETF. The composition of the Hang Seng Index may change and stocks currently comprising the Hang Seng Index may subsequently be delisted. Other stocks may also be added subsequently to become constituent stocks of the Hang Seng Index. 3. Concentration Risk & Mainland China Related Risk There is a high concentration risk. To the extent that the Hang Seng Index concentrates in the securities of a particular industry or group of industries, the investments of the HSI ETF may be similarly concentrated. The performance of the HSI ETF could depend heavily on the performance of that industry or group of industries, and the HSI ETF is therefore likely to be more volatile than a broad-based fund. The finance sector and the property sector together account for more than half of the market weighting of the Hang Seng Index. In addition, certain companies are given a large weighting in the Hang Seng Index relative to other companies. As a result, variations in the performance of these sectors or companies could have a larger effect on the price of the Units than a similar variation in the performance of other sectors or companies comprised in the Hang Seng Index. In addition, in seeking to reflect the weightings of constituent stocks of the Hang Seng Index, investments of the HSI ETF may be concentrated in a single constituent stock or several constituent stocks. The performance of the Hang Seng Index and the HSI ETF may be significantly affected by the price fluctuation of one or several of the constituent stocks of the Hang Seng Index. Investment in mainland China, an emerging market, involves special considerations and risks, such as greater price volatility, less developed regulatory and legal framework, economic, social and political instability, etc. 4. Trading risk Generally, retail investors can only buy or sell units of the HSI ETF on SEHK. The trading price of the Units of the HSI ETF on SEHK is subject to market forces and may trade at a substantial premium/discount to its Net Asset Value. Is there any guarantee? The HSI ETF does not have any guarantees. You may not get back the full amount of money you invest. What are the fees and charges? Please refer to paragraph (2)(i) in Appendix 1 (Current Fees and Charges) of the Hong Kong Offering Document of the HSI ETF for details of other fees and expenses applicable to the in-kind creation or redemption of Units. Charges incurred when trading the HSI ETF on SEHK Fee What you pay Brokerage Fee Market rates Transaction Levy 0.003% of the price of the Units Trading Fee 0.005% of the price of the Units Stamp Duty 0.1% of the price of the Units Ongoing fees payable by the HSI ETF The following expenses will be paid out of the HSI ETF. They affect you because they reduce the Net Asset Value of the HSI ETF which may affect the trading price.