HSBC Mutual Funds HSBC Mortgage Fund
Advisor Series As at July 31, 2009
Fund Description
The fundamental investment objective of this Fund is to earn as high a level of income as possible while protecting invested capital by investing primarily in residential first mortgages on property in Canada and other debt obligations. Subject to the availability of suitable mortgages, the Fund will invest primarily in uninsured Canadian dollar denominated mortgages.
Past Performance
Investor Series Advisor Series
1 Annualized
1 Year
5.37% 5.37%
3 Year 1
4.22% 4.28%
5 Year 1
3.47% 3.50%
10 Year 1
4.18% −
Since Inception 1
5.45% 3.56%
Date of Inception
Dec 9, 1992 Mar 22, 2002
Calendar Year Returns
Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Investor 6.14% 2.07% 3.06% 2.01% 3.57% 3.38% 3.12% 7.78% 7.02% 2.02% Advisor 6.31% 2.06% 3.06% 2.01% 3.50% 3.44% − − − − Manager − − − − − − − − − −
Return Analysis (Advisor Series)
# of Years Up (+) # of Years Down (−) Best 1 Yr. Ttl. Rtn. (J an 09) Worst 1 Yr. Ttl. Rtn. (J un 06) Average Up (+) Years Average Down (−) Years 6 0 6.92% 0.89% 3.40% −
Statistics
Portfolio turnover P/E ratio − Fund (Advisor Series) P/E ratio − Benchmark Dividend yield before fees (Advisor Series) Dividend yield before fees (Benchmark) Distribution frequency − − − − − *
Portfolio Composition
Residential Mortgages 83.11%
*Income/Dividend component only. Capital gains distributions, if any, are distributed annually for all funds.
Cash and Cash Equivalents
15.40%
Top Holdings
Bonds 1.49%
Residential Mortgages Govt. of Canada, T−Bill 0.20%, August 10, 2009 Province of Ontario, 0.37%, January 13, 2010 Alberta Capital Fin Auth 0.26%, November 9, 2009
83.11% 1.08% 1.08% 0.65% 0.65% 0.54% 0.54% 0.54% 0.54% 0.54% 89.27%
Mortgage Maturities (in %)
3−4 years 4−5 years 1−2 years 2−3 years More than 5 years Less than 1 year 13.14% 9.60% 33.96% 26.75% 0.29% 16.26%
Govt. of Canada, T−Bill 0.31%, January 7, 2010 Encana Corp. 0.40%, October 15, 2009 Govt. of Canada, T−Bill 0.24%, October 15, 2009 Govt. of Canada, T−Bill 0.51%, June 10, 2010 Municipal Fin Auth B C 0.25%, October 7, 2009 National Bank of Canada, 0.29%, September 30, 2009 Total
HSBC Mutual Funds HSBC Mortgage Fund
Advisor Series As at July 31, 2009
Fund Details
Total Assets: RRSP Eligible: Minimum Initial Purchase: Minimum Subsequent Purchase: Order Cut−off Time: Investment Advisor: Inquiries: Website: $927.6 million Yes $500 $50 1:00pm PST HSBC Global Asset Management (Canada) Limited 1−888−390−3333 hsbc.ca/funds
Fund Commentary
The disruption and subsequent recovery process in credit markets continued to exert significant influence on the global economy and capital markets in the second quarter. Generally speaking, this recent period has seen a return of investors’ risk appetite, an improvement in market liquidity, and a decline in the compensation demanded by investors for assuming credit risk. Corporate bonds dramatically outperformed government bonds, and mortgage rates continued to fall as the cost of funding for financial institutions declined. Mortgage rates fell by a larger margin than short−term bond yields. The yield on the Scotia Capital Markets Residential Mortgage Index fell by 60 bps to 4.55%. The yield differential between 5−year fixed mortgage rates and the 5−year Government of Canada bond, which peaked at a decade high 515 bps in early January, narrowed over the course of the quarter from 365 bps to 335 bps. This allowed mortgages to outperform short−term government bonds in the first quarter. Although there continues to be concerns surrounding global credit markets, it would appear that the Banks are taking a relatively constructive view of the Canadian mortgage market and are passing on improvement in their funding costs to customers. Despite falling mortgage rates, the relatively attractive running yield of the Fund will be positive for returns going forward. Portfolio duration, which was positioned in line with the benchmark at approximately 2 years, had little impact on relative performance. The global economy remains in a severe recession but substantial policy responses from central banks and governments around the world have begun to impact financial markets and eventually should lead to an improvement in economic activity. Following a significant contraction in 2009, we expect fairly modest positive economic growth in 2010. On the positive side, the commitment to very low interest rates for an extended period of time by the Bank of Canada and other central banks combined with fiscal policy initiatives from governments will assist in stimulating better activity in the coming quarters. In the short−term, we feel that valuations in the mortgage market are attractive, particularly when compared with money market securities, and will continue to invest excess cash. The average term of the mortgages in the fund remains conservative at 2.0 years. CA#M0900116
Clients may purchase the Investor and Advisor Series units of all HSBC Mutual Funds in U.S. dollars, with the exception of the Canadian Money Market Fund. The U.S. Dollar Purchase Service is offered as a convenience to advisors and investors. Performance of a fund using the U.S. Dollar Purchase Service may vary from the performance of the same fund in Canadian dollars due to fluctuation in the exchange rate between the two currencies. However, it will have no impact on the overall performance of your clients´ investment in Canadian dollar terms and does not act as a hedge against currency fluctuations between the Canadian and U.S. dollars.
Data and performance provided by: CTVglobemedia Publishing Inc. HSBC Investment Funds (Canada) Inc. ("HSBCIF") is the manager and principal distributor of the HSBC Mutual Funds. Commissions, trailing commissions, management fees and expenses all may be associated with investments in the HSBC Mutual Funds. Please read the HSBC Mutual Funds Simplified Prospectus before applying to invest. HSBC Mutual Funds are not guaranteed or covered by the Canada Deposit Insurance Corporation, HSBC Bank Canada, or any other deposit insurer or financial institution. The value of an investment in the HSBC Mutual Funds may change frequently and past performance may not be repeated. The unit value of money market funds may not remain constant. HSBCIF is a direct subsidiary of HSBC Global Asset Management (Canada) Limited and an indirect subsidiary of HSBC Bank Canada and provides its services in all provinces of Canada except Prince Edward Island. The fund commentary contained in this document has been prepared by HSBC Global Asset Management (Canada) Limited. Opinions expressed in the document are subject to change without notice and this information is not intended to provide professional advice and should not be relied upon in that regard. You are advised to obtain appropriate professional advice where necessary and should consult your investment representative before considering a specific transaction. We, our affiliates and our officers, directors and employees may hold a position in any securities mentioned in this document (or in any related investment) and may from time to time add to or sell any such securities or investment. As well, we and our affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. HSBC Global Asset Management (Canada) Limited is a subsidiary of HSBC Bank Canada and provides services in all provinces of Canada except Prince Edward Island.