HSBC Mutual Funds HSBC Mortgage Fund Advisor Series As at January 31, 2011 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. Since Date of Past Performance 1 Year 3 Year 1 5 Year 1 10 Year 1 Inception 1 Inception Investor Series 2.10% 4.19% 3.61% 3.72% 5.26% Dec 9, 1992 Advisor Series 2.10% 4.25% 3.65% − 3.48% Mar 22, 2002 1 Annualized Calendar Year Returns Return Analysis (Advisor Series) Year Investor Advisor Manager # of Years Up (+) 8 2010 2.13% 2.14% − # of Years Down (−) 0 2009 4.78% 4.79% − Best 1 Yr. Ttl. Rtn. (J an 09) 6.92% 2008 6.14% 6.31% − Worst 1 Yr. Ttl. Rtn. (J un 06) 0.89% 2007 2.07% 2.06% − Average Up (+) Years 3.42% 2006 3.06% 3.06% − Average Down (−) Years − 2005 2.01% 2.01% − 2004 3.57% 3.50% − Statistics 2003 3.38% 3.44% − Portfolio turnover − 2002 3.12% − − P/E ratio − Fund (Advisor Series) − 2001 7.78% − − P/E ratio − Benchmark − Dividend yield before fees (Advisor Series) − Portfolio Composition (in %) Dividend yield before fees (Benchmark) − Distribution frequency * *Income/Dividend component only. Capital gains distributions, if any, are distributed Residential Mortgages 78.64% annually for all funds. Cash and Cash Equivalents 11.40% Top Holdings Bonds 9.96% Residential Mortgages 78.64% Canada Housing Trust No. 1, Frn, September 15, 2015 5.18% Royal Bank of Canada 0.00%, February 1, 2011 1.15% Financement Quebec, Frn, June 2, 2016 0.97% Canada Hous. Trust #1, 4.0%, June 15, 2012 0.92% Mortgage Maturities (in %) Enbridge Inc., 1.16%, February 7, 2011 0.65% Honda Canada 1.11%, March 7, 2011 0.65% Inter Pipeline Fund 1.24%, February 14, 2011 0.65% Less than 1 year 15.30% Shoppers Drug Mart 1.04%, February 4, 2011 0.65% 4−5 years 8.82% Union Gas Ltd. 1.05%, February 4, 2011 0.65% 1−2 years 30.72% Total 90.11% 2−3 years 25.78% 3−4 years 19.38% HSBC Mutual Funds HSBC Mortgage Fund Advisor Series As at January 31, 2011 Fund Details Fund Commentary Total Assets: $1,596.9 million Renewed confidence in the global economic recovery pushed bond yields higher in the fourth quarter. While concerns surrounding European sovereign debt RRSP Eligible: Yes persisted, credit markets remained relatively stable. Mortgage rates, which had Minimum Initial Purchase: $500 lagged bond yields lower in the second quarter, were similarly sticky in the Minimum Subsequent Purchase: $50 opposite direction as bond yields rose. This allowed mortgages to outperform the Order Cut−off Time: 1:00pm PST broader bond market on the quarter. It appears that the Banks are being more aggressive in their mortgage pricing. We believe that mortgage rates represent Investment Advisor: HSBC Global Asset fair value at current levels. The relatively high running yield of the Fund continues Management (Canada) to be a positive for returns, and will help to offset some of the negative impacts if Limited mortgage rates move higher. Portfolio duration is conservatively positioned at Inquiries: 1−888−390−3333 slightly below two years. Website: hsbc.ca/funds Clients may purchase the Investor and Advisor Series units of all HSBC Global economic activity continues to be characterized as modestly positive; Mutual Funds in U.S. dollars, with the exception of the Canadian Money however the pace of growth appears to have gained some momentum. Market Fund. The U.S. Dollar Purchase Service is offered as a convenience Developing economies are expected to continue to outpace the developed world to advisors and investors. Performance of a fund using the U.S. Dollar in 2011. While the Canadian economy continues to perform reasonably well, Purchase Service may vary from the performance of the same fund in external factors have been a significant drag on growth With US growth Canadian dollars due to fluctuation in the exchange rate between the two seemingly gaining traction, the headwinds from trade may begin to subside currencies. However, it will have no impact on the overall performance of your somewhat next year. The level of economic activity and employment in Canada clients´ investment in Canadian dollar terms and does not act as a hedge are both now back to pre−recession levels. For 2011 we anticipate a similar against currency fluctuations between the Canadian and U.S. dollars. pattern of a positive, but modest economic expansion. We expect the Bank of Canada to continue gradually moving away from emergency type interest rates. The rates were increased three times in 2010 to the current 1.00%. We expect the Bank of Canada to resume interest rate hikes by the second half of the year. With longer term yields expected to rise modestly over the next year, the objective will be to maintain the Fund’s interest rate exposure below the benchmark in the near term. 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 approximately 1.8 years. CA#M1101028 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.
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