HSBC Investment Funds (Authorised Scheme) · PDF file2 HSBC Investment Funds Directory...

Interim Reports

31 January 2011

(Authorised Scheme) HSBC Investment Funds

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HSBC Investment Funds Directory Managers: HSBC Global Asset Management (Singapore) Limited (Company Registration Number: 198602036R) 21, Collyer Quay #14-01, HSBC Building Singapore 049320 Directors of the Managers: Tse Kwok Shing Patrick Alexander Charles Hungate Gregory Todd Zeeman (Alternate Director to Alexander Charles Hungate) Investment Adviser: Sinopia Asset Management Immeuble Ile de France, 4 Place de la Pyramide 92800 Puteaux La Defense 9, France Trustee/Registrar: RBC Dexia Trust Services Singapore Limited (Company Registration Number: 199504677Z) 20, Cecil Street #28-01, Equity Plaza Singapore 049705 Custodian/ HSBC Institutional Trust Services (Singapore) Limited Accounting & Valuation Agent: (Company Registration Number: 199504677Z) 21 Collyer Quay #14-01, HSBC Building Singapore 049320 Auditors: KPMG LLP 16 Raffles Quay #22-00, Hong Leong Building Singapore 048581 Solicitors to the Manager: Wong Partnership LLP One George Street #20-01 Singapore 049145 Solicitors to the Trustee: Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore 048542

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Contents Page Page

Details of HSBC Investment Funds 4

Manager’s Investment Report

- HSBC Global Reach Fund 5

- HSBC GEM Treasures Fund 12

Financial Statements

Statement of Total Return 20

Balance Sheet 22

Statement Of Movements In Unitholders's Fund 24

Portfolio Statement 25

Notes to the Financial Statements 34

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The Semi Annual Reports of HSBC Global Reach Fund and HSBC GEM Treasures Fund are reported in the format conforming to Code of Collective Investment Scheme and whose financial statements are performed in accordance to RAP 7: Reporting Framework for Unit Trusts. Fund Details HSBC Investment Funds is a Singapore-based authorised umbrella fund with 2 sub-funds currently being offered by the Managers. These 2 sub-funds are the HSBC GEM Treasures Fund and HSBC Global Reach Fund. HSBC GEM Treasures Fund is a direct investment vehicle while HSBC Global Reach Fund is a feeder fund consisting of 3 underlying entities, namely the Actiprimes Obligations, HSBC Global Investment Funds - Global Equity and HSBC Quant Alternative Funds - Global Bond Market Neutral 600 Actiprimes Obligations is established as a mutual fund, Fonds Commun de Placement (FCP) in France, while HSBC Global Investment Funds - Global Equity and HSBC Quant Alternative Funds - Global Bond Market Neutral 600 are established as sub-funds under a SICAV, an investment company incorporated in the Grand Duchy of Luxembourg that qualifies as an Undertaking for Collective Investment in Transferable Securities (UCITS) complying with the provisions of the Luxembourg Law. Sub-fund Underlying Entities HSBC GEM Treasures Fund Not applicable as this is a direct investment vehicle (Available in class A & Z) HSBC Global Reach Fund Actiprimes Obligations (Available in class A) HSBC Global Investment Funds - Global Equity HSBC Quant Alternative Funds – Global Bond Market Neutral 600

All figures indicated are for the financial half-year ending 31 Jan 2011, unless otherwise stated. 1. Country classification is based on the country in which the funds are constituted. 2. Other net assets comprise of receivables, due from brokers, financial derivatives at fair value, cash and bank balances excluding payables as indicated in the financial statement. 3. The expense ratio is calculated in accordance to IMAS guideline. Expense ratio does not include (where applicable) brokerage and other transaction costs, performance fee, interest expense, foreign exchange gains/loss, front or back end loads arising from the purchase or sale of a foreign unit trust or mutual fund, including any costs arising where a Singapore feeder fund invests into an offshore parent fund, dividends and other distributions paid to unit holders and tax deducted at source or arising out of income received, including withholding tax.

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HSBC Global Reach Fund Manager’s Investment Report 1. HSBC Global Reach Fund’s investments at market value and as a percentage of NAV as

of the end of the period under review

Fair Value

Percentage of Total Net Assets Attributable to

Unitholders

31/1/2011 at

31/1/2011 at

31/1/2010 S$ % % Country 1 Underlying Entities Asset

Class France Actiprimes Obligations Class C Bonds 7,463,483 67.17 66.57

7,463,483 67.17 66.57

Luxembourg HSBC Global Investments Funds

- Global Equity Class I Equities

2,198,892 19.79 18.85

Luxembourg HSBC Quant Alternative Funds - Global Bond Market Neutral Fund 600 - Class I

Hedge Funds 1,069,437 9.62 9.67

3,268,329 29.41 28.52 Portfolio of investments 10,731,812 96.58 95.09 Other net assets2 379,853 3.42 4.91 Net assets attributable to

unitholders

11,111,665 100.00 100.00

Source of data: HSBC Institutional Trust Services (Singapore) Limited


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2. The top 10 holdings at market value and as a percentage of NAV as of the end of the period under review and a year ago

The HSBC Global Reach Fund invests into 3 underlying funds:

Underlying Fund Fair Value

(S$ million) 31/1/2011

% of NAV 31/1/2011

Fair Value (S$ million) 31/1/2010

% of NAV 31/1/2010

Actiprimes Obligations Class C 7.46 67.17 10.35 66.57

HSBC Global Investments Funds - Global Equity Class I

2.20 19.79 2.93 18.85

HSBC Quant Alternative Funds - Global Bond Market Neutral Fund 600 - Class I

1.07 9.62 1.50 9.67

The Managers may from time to time at their sole discretion vary the percentage of assets of the

HSBC Global Reach Fund, which may be invested into the underlying funds or other collective investment schemes and may, subject to such regulatory approvals as may be required, vary the jurisdictions and types of underlying funds or other collective investment schemes into which the HSBC Global Reach Fund may invest, in accordance with the investment objective and policy of the HSBC Global Reach Fund.

With regards to the top 10 holdings, at market value and as a percentage of NAV, as at the end

of the period under review and a year ago, it may be more meaningful to look at Actiprimes Obligations’ top 10 holdings into which HSBC Global Reach Fund has invested 67.17% of its total net assets as of 31 January 2011.

3. Exposure to derivatives

(i) Market value of derivative contracts and as a percentage of NAV as of the end of the period under review:

SGD Class: positive: S$ 76 / 0.00%; negative: S$ 154,873 / 1.39%

USD Class: positive: Nil, negative: Nil

(ii) Net gains/losses on derivative contracts realised during the period under review:

SGD class: gain of S$ 210,940

USD class: gain of US$ 2,511

(iii) Net gains/losses on outstanding derivative contracts marked to market as at the end of the

period under review:

SGD class: loss of S$ 154,797

USD class: Nil


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4. Amount and percentage of NAV invested in other schemes as at the end of the period

under review

Holdings Fair

Value


Unitholders

31/1/2011 31/1/2011 at

31/1/2011 at

31/7/2010

By Geography* - Primary S$ % %

Quoted

France

Actiprimes Obligations Class C 10,641 7,463,483 67.17 73.87

Luxembourg


70,473 2,198,892 19.79 17.75

HSBC Quant Alternative Funds - Global Bond Market Neutral Fund 600 Class I

5 1,069,437 9.62 9.35

3,268,329 29.41 27.10

Portfolio of investments 10,731,812 96.58 100.97

Other net assets 379,853 3.42 (0.97)

Net assets attributable to unitholders 11,111,665 100.00 100.00

* Geographical classification is based on the country in which the funds are constituted. Source of data: HSBC Institutional Trust Services (Singapore) Limited 5. Amount and percentage of borrowings to NAV at the end of the period under review NIL

6. Amount of redemptions and subscriptions for the period under review

HSBC Global Reach Fund Market Value

Period ended 31/1/2011

Subscriptions S$ 2,954 Redemptions S$ 2,353,899



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7. Amount of related party transactions for the period under review The Manager has appointed HSBC Institutional Trust Services (Singapore) Limited (HTSG) (a related party) to act as its Valuation Agent of HSBC Global Reach Fund. The Trustee of HSBC Global Reach is RBC Dexia Trust Services Singapore Limited (not related to the Manager).

Amount payable for the period under review: - Trustee fee: S$ 4,227 - Valuation fee: S$ 6,729

8. Performance of the HSBC Global Reach Fund The inception date for HSBC Global Reach Fund is 2 May 2007

Performance as of 31

January 2011

3-month

(%)

6-month

(%)

1-Year

(%)

3-Year

(Ann,%)

Since Inception

(Ann, %) HSBC Global Reach Fund

-0.36 1.03 3.02 -0.29 -1.04

Source of data: Morningstar. Returns are calculated on a SGD, bid-to-bid basis with dividends reinvested at the bid price. The investment objective of the Sub-Fund is to outperform a hurdle rate of the relevant cash rate^ plus 3 to 4% per annum over an average holding period of 3 years or more while maintaining a low volatility, with no reference to any benchmark. ^ The applicable cash rate in relation to the Class A S$ denominated Units is the 1-year SIBOR and in relation to the Class A US$ denominated Units is the 1-year LIBOR.

The performance of the 3 underlying entities and their benchmarks (in EUR) are as follows:

Performance as of 31

January 2011

3-month

(%)

6-month

(%)

1-year

(%)

3-year (Ann) (%)

5-year

(Ann) (%)

Since

Inception (Ann, %)

Actiprimes Obligations -1.76 -0.37 3.29 3.30 3.09 5.93 JP Morgan EUR Hedged GBI Broad -2.35 -1.10 2.63 4.13 4.00 5.96 HSBC Global Investments Funds - Global Equity Class I^ 7.89 9.64 18.43 - - 16.75

MSCI World Unhedged 8.89 11.42 20.86 - - 22.14


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Performance as of 31 January 2011

3-month

(%)

6-month

(%)

1-year

(%)

3-year (Ann) (%)

5-year

(Ann) (%)

Since

Inception (Ann, %)

HSBC Quant Alternative Funds - Global Bond Market Neutral Fund 600 Class I 1.48 0.98 2.87 3.40 2.63 4.22

EONIA^^ 0.15 0.28 0.47 1.80 2.56 2.48

^ HSBC Global Investment Funds - Global Equity was launched in December 1990 but the fund has been managed by the current Investment Advisor effective from December 2008. ^^ The benchmark was changed from Euribor 1 Month to EONIA with effect from 1 October 2009. The performance figures provided here reflect the historical returns for Euribor 1 Month upto 30 September 2009 and EONIA thereafter. Source for underlying entities: Sinopia. Returns are calculated in EUR, bid-to-bid basis with dividends reinvested, as of 31 Jan 2011. Source for benchmarks: Sinopia. Returns are calculated in EUR, period ending 31 Jan 2011. Note: Investors should note that there are necessary limitations in using the performance of the underlying entities as a proxy for the performance of the HSBC Global Reach Fund. The past performances of the underlying entities are not necessarily indicative of its future performance.

9. Expense ratio3 for the period under review (1 Feb 2010 to 31 Jan 2011): 1.67% Expense ratio3 for the previous corresponding period (1 Feb 2009 to 31 Jan 2010): 1.66 % The HSBC Global Reach Fund does not have performance fee.

10. Turnover ratio for the period under review (1 Aug 2010 to 31 Jan 2011): NIL Turnover ratio for the previous corresponding period (1 Aug 2009 to 31 Jan 2010): NIL

11. Any material information that will adversely impact the valuation of the Sub-Fund such

as contingent liabilities of open contracts

NIL

12. Information pertaining to underlying entities

As of 31 January 2011, HSBC Global Reach Fund invested into 3 underlying funds, i.e. (i) Actiprimes Obligations Class C, (ii) HSBC Global Investment Funds - Global Equity Class I and (iii) HSBC Quant Alternative Funds - Global Bond Market Neutral 600 Class I. Of the 3


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underlying funds, HSBC Global Reach Fund invested 67.17% (S$ 7.46 million) of its total Net Asset Value in Actiprimes Obligations. (i) Top 10 holdings of Actiprimes Obligations (Class C) at market value and as a % of NAV as at the end of the period under review and a year ago

The objective of this underlying fund is to outperform the market of government bonds

hedged against the currency risk, as measured by the JP Morgan Government Bond Index Broad hedged against the currency risk.

As of 31 Jan 2011 % of NAV

Market Value

US$m* As of 31 Jan 2010 % of NAV

Market Value US$m

Japan Govt Bond 10-Yr JGB 1.6 09/13 #253

6.66 2.29 French Treasury Bill 0.335% 01-04

7.52 2.78

Akzo Nobel NV 4 ¼ 06/11

5.38 1.85 Japan Govt CPI linked bond 1.4% 06/2018

6.65 2.46

Swiss Govt Bond 2 04/28/21


6.39 2.36

United States Treasury Inflation Indexed 1 5/8 01/15/18

3.62 1.24 Sweden Govt Bond 4.25% 03/2019

6.28 2.32

New Zealand Govt Bond NZGB 6 12/15/17

3.58 1.23 Japan Govt Bond 1.6% 09/2013

5.65 2.09

Japan Govt Bond 20-Yr JGB 2.2 09/26 #90


5.64 2.08

Japan Govt Bond I/L-10Yr JGBi 1.4 06/10/18

2.83 0.97 Akzo Nobel NV Akzana 4.25% 06/2011

5.20 1.92

Enel Soc Azioni ENEL 4 3/4 06/18

1.69 0.58 iShares USD Corporate Bond ETF

4.34 1.61

Fannie Mae FNMA 4 3/8 10/15


4.14 1.53

Gen Elec Cap CRP GE 4 3/4 09/15/14

1.59 0.55 CDEP BTM .3900% 22-02-1 (money market instrument)

3.76 1.39

Source of data: Sinopia * EUR/USD: 1.371 as at 31 Jan 2011


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(ii) Expense ratio of Actiprimes Obligations

Expense ratio for the period under review (1 Feb 2010 to 31 Jan 2011): 0.68%

Expense ratio for the previous corresponding period (1 Feb 2009 to 31 Jan 2010): 0.69%

(iii) Turnover ratio of Actiprimes Obligations

Turnover ratio for the period under review (1 Aug 2010 to 31 Jan 2011): 115.8%

Turnover ratio for the previous corresponding period (1 Aug 2009 to 31 Jan 2010): 158.4%

13. Soft Dollar Commissions

The Manager of the sub-fund, HSBC Global Asset Management (Singapore) Limited, does not enter into any soft dollar commission arrangements with the brokers. The Investment Manager of the underlying entities (Actiprimes Obligations Class C, HSBC Global Investment Funds - Global Equity Class I and HSBC Quant Alternative Funds - Global Bond Market Neutral 600 Class I), Sinopia Asset Management, receives and/or enters into soft dollar commission/arrangements with brokers and has confirmed that:

The soft dollars received were for the benefit of the scheme; The trades executed were on the best available terms; and There was no churning of trades

The soft dollars received are detailed as follows:

Research and advisory services with financial analysis Economic and political analysis Portfolio analysis, including valuation and performance measurement Market analysis, data and quotation services Computer hardware and software incidental to the above goods and services


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HSBC GEM Treasures Fund Manager’s Investment Report

1. HSBC GEM Treasures Fund’s investments at market value and as a percentage of NAV

as of the end of the period under review

(i) Classification by Country

As at 31 Jan 2011 HSBC GEM Treasures Fund

Fair Value

Percentage of Total Net Assets Attributable to Unitholders

at 31/1/2011 at 31/1/2011 at 31/7/2010

US$ % %

By Geography (Summary) - Primary

Quoted Investments

Brazil 2,919,187 14.64 10.42

Chile 307,508 1.54 1.12

China 1,933,283 9.70 7.41

Czech Republic 107,748 0.54 0.40

Egypt 24,440 0.12 0.13

France 114,013 0.57 2.50

Germany 393,104 1.97 1.45

Hong Kong 609,979 3.06 2.17

Hungary 110,720 0.56 0.29

Indonesia 265,282 1.33 1.14

Japan 1,832,401 9.19 6.48

Malaysia 641,821 3.22 2.10

Mexico 978,358 4.90 3.22

Morocco 51,195 0.26 0.18

Philippines 83,247 0.42 0.31

Russian Federation 1,156,434 5.80 4.61

South Africa 1,339,908 6.72 4.97

South Korea 2,500,741 12.55 8.10

Taiwan 7,905 0.04 -

Thailand 342,644 1.72 0.91


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Fair Value


at 31/1/2011 at 31/1/2011 at 31/7/2010

US$ % %


Quoted Investments

Turkey 355,779 1.79 1.59

United States of America 2,235,633 11.22 23.74


Other net assets 1,623,662 8.14 16.76




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(ii) Classification by Industry


Fair Value


31/1/2011 at 31/1/2011 at 31/7/2010

By Industry (Summary) - Secondary US$ % %

Agriculture 159,741 0.80 0.53

Automotives and trucks 678,454 3.40 2.05

Bank 3,412,796 17.12 12.86

Building and construction 180,214 0.90 0.81

Building and construction material 92,084 0.46 0.35

Brewery 560,700 2.81 1.76

Construction 19,974 0.10 0.10

Diversified resource 674,871 3.39 2.05

Electrical and electronic 958,814 4.81 2.95

Electronic 107,757 0.54 0.40

Finance 418,143 2.10 1.44

Government 4,025,230 20.19 25.15

Industrial 141,954 0.71 0.43

Iron & steel 203,200 1.01 0.89

Insurance 443,088 2.22 1.95

Metals 348,606 1.75 1.91

Metal products 304,044 1.53 1.16

Mining 566,297 2.84 2.01

Oil and gas 2,344,361 11.78 7.46

Public utility 307,508 1.54 1.12

Retail 356,992 1.79 1.14

Telecommunication 1,631,379 8.19 6.17

Unit trust/Mutual Fund 375,123 1.88 8.55


Other net assets 1,623,662 8.14 16.76




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(iii) Classification by Asset Class

Asset Class

Holding as of 31 Jan 2011

Bonds 20%

Equities 72%

Other Net Assets 8%


(iv) Allocation of Debt Securities by Credit Rating

Asset Class As at 31 Jan 2010

% of NAV Market Value US$m

AAA 10.93% 2.19 AA 9.14% 1.83 Total 20.08%

Source of data: Sinopia


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2. Top 10 holdings of HSBC GEM Treasures Fund at market value and as a % of NAV as at the end of the period under review and a year ago

As at 31 Jan 2011

% of NAV

Market Value US$m

As at 31 Jan 2010

% of NAV

Market Value US$m

T Bill 03/03/2011 5.00 1.00

Bundesschatzanweisungen (BR) 4.75% 11/06/2010

3.85 1.02

Samsung Electronics GDR

4.59 0.92 US Treasury Note 3.375% 30/06/2013

3.22 0.85

T Bill 21/04/2011 4.00 0.80

LYX or MSCI Emerging Markets ETF

2.88 0.76

Japan (Govt of) 0.2% 07/2012

3.54 0.71 Bundesobligation SER 152 (BR) 3.5% 12/04/2013

2.86 0.75

Hyundai Motor Co 3.39 0.68

US Treasury Note 4.625% 15/02/2017

2.85 0.75

Companhia De Bebidas-Prf ADR

2.80 0.56 Samsung Electronics GDR Regs 144A (BR)

2.71 0.71

Itau Unibanco Hldng-Pref ADR

2.77 0.55 Bundes Republuc SER 08 (BR) 4.25% 04/07/2018

2.35 0.62

Japan (Govt of) 1.3% 06/2013

2.75 0.55 Japan (Govt of) SER 270 0.9% 15/07/2010

2.31 0.61

Standard Bank Group Ltd

2.60 0.52 Standard Bank Group Ltd 1.94 0.51

China Life Insurance Co-H

2.22 0.44 China Life Insurance Co 1.93 0.51

Source of data: Sinopia

3. Exposure to derivatives

(i) Market value of derivative contracts and as a percentage of NAV as of the end of the period under review:

USD Class: positive: US$ 4,260 / 0.02%, negative: US$ 181,476 / 0.91%

SGD Class: positive: Nil; negative: S$ 3,222 / 0.68%

(ii) Net gains/losses on derivative contracts realised during the period under review:

USD class: gain of US$ 183,747

SGD class: gain of S$ 7,330

(iii) Net gains/losses on outstanding derivative contracts marked to market as at the end of the

period under review:

USD class: loss of US$ 239,516

SGD class: loss of S$ 3,222


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4. Amount and percentage of NAV invested in other schemes as at the end of the period

under review Amount of NAV invested in other schemes: US$ 375,123

Percentage of NAV invested in other schemes: 1.88%

5. Amount and percentage of borrowings to NAV at the end of the period under review NIL 6. Amount of redemptions and subscriptions for the period under review

HSBC GEM Treasures Fund Market Value

Period ended 31 Jan 2011

Subscriptions US$ 39,686

Redemptions US$ 7,834,765


7. Amount of related party transactions for the period under review

The Manager has appointed HSBC Institutional Trust Services (Singapore) Limited (HTSG) (a related party) to act as its Valuation Agent of HSBC GEM Treasures Fund. The Trustee of HSBC GEM Treasures Fund is RBC Dexia Trust Services Singapore Limited (not related to the Manager). Amount payable for the period under review: - Trustee fee: US$ 5,846 - Valuation fee: US$ 6,528

8. Performance of HSBC GEM Treasures Fund The inception date for HSBC GEM Treasures – SGD Share Class is 10 June 2008


3-month (%)

6-month (%)

1-year (%)

Since Inception (Ann, %)

HSBC GEM Treasures Fund -2.56 0.83 3.97 -1.06

70% MSCI Emerging Markets Free Index in SGD, un-hedged, and 30% JP Morgan Govt Bond Index, in SGD, currency-hedged*

-0.45 4.65 9.25 1.83


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Source for Fund: Morningstar. Returns are calculated on a SGD, bid-to-bid basis with dividends reinvested at the bid price. * Source for Benchmark: Sinopia The inception date for HSBC GEM Treasures – USD Share Class is 21 November 2007


3-month(%)

6-month (%)

1-year (%)

3-year (Ann, %)

Since Inception (Ann, %)

HSBC GEM Treasures Fund -0.08 7.30 14.07 3.91 2.63

70% MSCI Emerging Markets Free Index in USD, un-hedged, and 30% JP Morgan Govt Bond Index, in USD, currency-hedged*

0.41 9.27 16.78 4.66 2.66

Source for Fund: Morningstar. Returns are calculated on a USD, bid-to-bid basis with dividends reinvested at the bid price. * Source for Benchmark: Sinopia

9. Expense ratio3 for the period under review (1 Feb 2010 to 31 Jan 2011): 0.45%

Expense ratio3 for the corresponding period a year ago (1 Feb 2009 to 31 Jan 2010): 0.46% The HSBC GEM Treasures Fund does not have performance fee.

10. Turnover ratio for the period under review (1 Aug 2010 to 31 Jan 2011): 35.75% Turnover ratio for the corresponding period a year ago (1 Aug 2009 to 31 Jan 2010): 3.52%

11. Any material information that will adversely impact the valuation of the Sub-Fund such

as contingent liabilities of open contracts NIL


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12. Soft Dollar Commissions

The Manager of the sub-fund, HSBC Global Asset Management (Singapore) Limited, does not enter into any soft dollar commission arrangements with the brokers. The Investment Manager, Sinopia Asset Management, receives and/or enters into soft dollar commission/arrangements with brokers and has confirmed that:

The soft dollars received were for the benefit of the scheme; The trades executed were on the best available terms; and There was no churning of trades

The soft dollars received are detailed as follows:

Research and advisory services with financial analysis Economic and political analysis Portfolio analysis, including valuation and performance measurement Market analysis, data and quotation services Computer hardware and software incidental to the above goods and services

The accompanying notes form an integral part of these financial statements

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HSBC Investment Funds

Statement of Total Return (Unaudited)

For the half-year ended 31 Jan 2011

HSBC Global Reach Fund

For the half For the half

year ended year ended

Note 31/1/2011 31/1/2010

S$ S$

Income

Dividends - -

Interest - -

Sundry income 10,460 -

10,460 -

Less: Expenses

Management fees 33,114 43,628

Trustees' fees 4,227 4,109

Audit fees 3,752 6,889

Custodian fee - 4,173

Others 9,474 8,814

50,567 67,613

Net (loss)/income (40,107) (67,613)

Net gains or losses on value of investments

Net realised gain on investments sold 32,383 178,652

Net change in fair value of investments 87,346 (267,251) Net change in fair value of financial derivatives

(154,797) 766,357

Net realised gain/(loss) on financial derivatives

210,940 (178,415)

Net foreign exchange (loss)/gain (2,801) (9,447)

Net gain on value of investments 173,071 489,896

Total return for the period before income tax

132,964 422,283

Less: Income tax 10 - -

Total return for the period after income tax

132,964 422,283


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Statement of Total Return (Unaudited)

For the half-year ended 31 Jan 2011

HSBC GEM Treasures Fund

For the half For the half

year ended year ended

Note 31/1/2011 31/1/2010

US$ US$

Income

Dividends 134,012 145,939

Interest 6 7

Sundry income - -

134,018 145,946

Less: Expenses

Management fees - -

Trustees' fees 5,846 6,611

Audit fees 4,089 4,454

Custodian fee 28,786 28,846

Others 21,079 16,211

59,800 56,122

Net (loss)/income 74,218 89,824

Net gains or losses on value of investments

Net realised gain on investments sold 272,297 175,203

Net change in fair value of investments 1,348,684 1,796,237 Net change in fair value of financial derivatives

(239,516) 57,812

Net realised gain/(loss) on financial derivatives

183,747 (174,862)

Net foreign exchange (loss)/gain 103,483 73,516

Net gain on value of investments 1,668,695 1,927,906

Total return for the period before income tax

1,742,913 2,017,730

Less: Income tax 10 (13,956) (19,132)

Total return for the period after income tax

1,728,957 1,998,598


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Balance Sheet (Unaudited)

As at 31 Jan 2011


Note 31/1/2011 31/7/2010

S$ S$

Assets

Portfolio of investments 10,731,812 13,459,266

Receivables 4 30,460 35,135

Due from brokers - -

Margin deposit - -

Financial derivatives, at fair value 5 76 8,212

Cash and bank balances 6 581,474 228,741

Total assets 11,343,822 13,731,354

Liabilities

Financial derivatives at fair value 5 154,873 183,399

Due to brokers - -

Payables 7 77,284 218,309

Total liabilities 232,157 401,708

Net assets 11,111,665 13,329,646

Represented by:

Unitholders’ fund 11,111,665 13,329,646


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Balance Sheet (Unaudited)

As at 31 Jan 2011


Note 31/1/2011 31/7/2010

US$ US$

Assets

Portfolio of investments 18,311,330 21,642,032

Receivables 4 21,288 63,270

Due from brokers - 2,817,971

Margin deposit 810,104 454,142

Financial derivatives, at fair value 5 4,260 96,732

Cash and bank balances 6 1,477,193 2,523,100

Total assets 20,624,175 27,597,247

Liabilities

Financial derivatives at fair value 5 181,476 47,270

Due to brokers - 670,120

Payables 7 507,707 878,743

Total liabilities 689,183 1,596,133

Net assets 19,934,992 26,001,114

Represented by:

Unitholders’ fund 19,934,992 26,001,114


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Statement Of Movements In Unitholders's Fund

HSBC Global Reach Fund HSBC GEM Treasures Fund

Period ended

Year ended Period ended

Year ended

31/1/2011 31/7/2010 31/1/2011 31/7/2010

S$ S$ US$ US$

At the beginning of the period/year 13,329,646 16,782,270 26,001,114 24,775,156

Operations Change in net assets attributable to unitholders resulting from operations

132,964 709,148 1,728,957 3,655,953

Unitholders' contributions/(withdrawals)

Creation of units 2,954 99,437 39,686 73,732

Cancellation of units (2,353,899) (4,261,209) (7,834,765) (2,503,727)

Change in net assets attributable to unitholders resulting from net creation and cancellation of units

(2,350,945) (4,161,772) (7,795,079) (2,429,995)

Total (decrease)/increase in net assets attributable to unitholders

(2,217,981) (3,452,624) (6,066,122) 1,225,958

At the end of the period/year 11,111,665 13,329,646 19,934,992 26,001,114

Units in issue (see note 9) 1,191,380 1,443,776 1,840,083 2,573,848

Net assets attributable to unitholders

9.32 9.23 10.83 10.10


25


Portfolio Statement (Unaudited)

As at 31 Jan 2011


Holdings Fair

Value


Unitholders

31/1/2011 31/1/2011 at

31/1/2011 at

31/7/2010

By Geography* - Primary S$ % %

Quoted

France

Actiprimes Obligations Class C 10,641 7,463,483 67.17 73.87

Luxembourg


70,473 2,198,892 19.79 17.75


5 1,069,437 9.62 9.35

3,268,329 29.41 27.10


Other net assets 379,853 3.42 (0.97)


* Geographical classification is based on the country in which the funds are constituted


26



As at 31 Jan 2011


Fair

Value


Unitholders

31/1/2011 at

31/1/2011 at

31/7/2010

S$ % %

By Industry (Summary) - Secondary

Unit Trust/Mutual Funds

Actiprimes Obligations Class C 7,463,483 67.17 73.87


2,198,892 19.79 17.75


1,069,437 9.62 9.35


Other net assets/(liabilities) 379,853 3.42 (0.97)



27




Holdings Fair

Value


Unitholders

31/1/2011 31/1/2011 at 31/1/2011 By Geography – Primary Quoted Equities

US$ %

Brazil

Banco Bradesco ADR 17,424 329,662 1.65

Cia Siderurgica Nacional ADR 10,200 173,808 0.87 Companhia De Bebidas Das Americas (Ambev) ADR

21,000 560,700 2.81

Gerdau Sponsored ADR 8,800 116,512 0.58

Itau Unibaco Holding ADR 25,740 553,410 2.78

Petroleo Brasileiro ADR 5,200 190,996 0.96 Petroleo Brasileiro ADR (Preference shares)

7,000 232,540 1.17

Usinas Siderurgicas De Minas Gerais ADR

7,200 86,688 0.43

Vale ADR 8,800 306,328 1.54

Vale ADR (Preference shares) 11,900 368,543 1.85

2,919,187 14.64

Chile Empresa Nacional De Electricidad (Endesa-Chile) ADR

5,900 307,508 1.54

China

Bank of China Limited Shares H Shares 732,000 380,284 1.91 China Communications Construction Co Limited H Shares

223,000 180,214 0.90

China Construction Bank H Shares 487,000 427,919 2.15

China Life Insurance Co H Shares 114,000 443,088 2.22 China Petroleum & Chemical Corporation H Shares

126,000 138,837 0.70

China Shenhua Energy Co Limited 25,000 101,337 0.51 China Telecom Corporation Limited H Shares

132,000 78,397 0.39

Petrochina Co Limited H Shares 132,000 183,207 0.92

1,933,283 9.70

Czech Republic Ceske Energeticke Zavody Czk100 (Frankfurt)

2,300 107,748 0.54


28




Holdings Fair

Value


Unitholders


US$ %

Egypt

Orascom Construction-GDR 600 19,974 0.10

Orascom Telecom Holding GDR Reg'S 1,450 4,466 0.02

24,440 0.12

France

Lyxor MSCI Emerging Markets ETF 10,200 114,013 0.57

Hong Kong

China Mobile Limited 38,000 373,627 1.87

CNOOC Limited 107,000 236,352 1.19

609,979 3.06

Hungary

Mol Magyar Olaj-Es Gazipari Rt GDR 1,000 55,400 0.28

Otp Bank GDR 4,000 55,320 0.28

110,720 0.56

Indonesia

PT Telekomunikasi Indonesia -Sp ADR 7,900 265,282 1.33

Malaysia

CIMB Group Holdings Bhd 111,000 303,832 1.52

IOI Corporation Bhd 85,200 159,741 0.80

Malayan Banking Bhd 62,725 178,248 0.90

641,821 3.22

Mexico

America Movil Sab ADR 6,800 387,328 1.94

Cemex ADR Part Cer 9,734 92,084 0.46

Grupo Televisa Sa ADR 5,900 141,954 0.71

Wal Mart De Mexico Sa Sp ADR V 12,800 356,992 1.79

978,358 4.90

Morocco

Maroc Telecom Mad6 2,700 51,195 0.26


29




Holdings Fair

Value


Unitholders


US$ %

Philippines

Philippine Long Distance Telephone 1,500 83,247 0.42

Russian Federation

Gazprom Oao Spon ADR 16,300 431,298 2.16

Lukoil ADR 3,900 238,680 1.20

Mobile Telesystems ADR 4,750 90,773 0.46

Sberbank GDR Reg S 700 265,357 1.33

Tatneft GDR 3,666 130,326 0.65

1,156,434 5.80

South Africa

Anglo Platinum Limited 1,100 107,702 0.54

Gold Fields Limited 12,100 189,774 0.95

Impala Platinum Holdings Limited 5,900 167,484 0.84

MTN Group Limited 11,200 191,804 0.96

Sasol Limited 3,400 164,081 0.83

Standard Bank Group Limited 35,494 519,063 2.60

1,339,908 6.72

South Korea

Hyundai Motor Co GDR 144A 4,250 678,454 3.40

KB Financial Group ADR 4,600 239,154 1.20

Korea Electric Power Corporation ADR 3,400 43,214 0.22

KT Corporation ADR 2,200 43,296 0.22

Posco ADR 2,900 296,148 1.49

Samsung Electronics GDR Regs 144A 2,100 915,600 4.59

Shinhan Financial Group Co Limited ADR 2,700 239,895 1.20

Sk Telecom Co Limited ADR 2,600 44,980 0.23

2,500,741 12.55

Taiwan

China Steel Corporation Spons GDR 353 7,896 0.04


30




Holdings Fair

Value


Unitholders


US$ %

Hon Hai Precision Industry GDR 1 9 0.00

7,905 0.04

Thailand

PTT Public Company Limited Foreign 31,600 342,644 1.72

Turkey

Akbank T.A.S. ADR 16,266 154,039 0.77

Turkcell Iletisim Hizmet-ADR 1,100 16,984 0.09

Turkiye Garanti Bankasi A.S TRY1 41,600 184,756 0.93

355,779 1.79

United States of America

Ishares Msci Emerging Markets Index 2,000 91,420 0.46 Ishares Msci South Korea Index Fund (Nys)

1,000 61,410 0.31

Ishares Msci Taiwan Index Fund (Nyse Acra)

1,000 15,620 0.08

Southern Copper Corporation 3,900 174,798 0.88

Vanguard Emerging Markets ETF 2,000 92,660 0.46

435,908 2.19

Total Equities 14,286,100 71.67


31




Nominal Amounts

Fair Value


Unitholders

31/1/2011 31/1/2011 at 31/1/2011

By Geography - Primary Quoted Bonds US$ %

Germany Bundesrepub Deutschland Series 05 3.25% 04/07/2015

270,000 393,104 1.97

393,104 1.97

Japan Japan Government Series 270 0.9% 15/07/2010

-

Japan Government Series 73 1.3% 20/06/2013

44,000,000 551,384 2.77


24,900,000 319,545 1.60


58,000,000 708,294 3.55


19,000,000 253,178 1.27

1,832,401 9.19

United States of America

US Treasury Bill 03/03/2011 1,000,000 999,927 5.02

US Treasury Bill 21/04/2011 800,000 799,798 4.01

1,799,725 9.03

Total Bonds 4,025,230 20.19

Portfolio of investments 18,311,330 91.86

Other net assets 1,623,662 8.14

Net assets attributable to unitholders 19,934,992 100.00


32




Percentage of Total Net Assets

Attributable to Unitholders

at 31/1/2011 at 31/7/2010

% %


Quoted Investments

Brazil 14.64 10.42

Chile 1.54 1.12

China 9.70 7.41

Czech Republic 0.54 0.40

Egypt 0.12 0.13

France 0.57 2.50

Germany 1.97 1.45

Hong Kong 3.06 2.17

Hungary 0.56 0.29

Indonesia 1.33 1.14

Japan 9.19 6.48

Malaysia 3.22 2.10

Mexico 4.90 3.22

Morocco 0.26 0.18

Philippines 0.42 0.31

Russian Federation 5.80 4.61

South Africa 6.72 4.97

South Korea 12.55 8.10

Taiwan 0.04 -

Thailand 1.72 0.91

Turkey 1.79 1.59

United States of America 11.22 23.74

Portfolio of investments 91.86 83.24

Other net assets 8.14 16.76

Net assets attributable to unitholders 100.00 100.00


33




Fair Value


31/1/2011 at 31/1/2011 at 31/7/2010

By Industry (Summary) - Secondary US$ % %

Agriculture 159,741 0.80 0.53

Automotives and trucks 678,454 3.40 2.05

Bank 3,412,796 17.12 12.86

Building and construction 180,214 0.90 0.81

Building and construction material 92,084 0.46 0.35

Brewery 560,700 2.81 1.76

Construction 19,974 0.10 0.10

Diversified resource 674,871 3.39 2.05

Electrical and electronic 958,814 4.81 2.95

Electronic 107,757 0.54 0.40

Finance 418,143 2.10 1.44

Government 4,025,230 20.19 25.15

Industrial 141,954 0.71 0.43

Iron & steel 203,200 1.01 0.89

Insurance 443,088 2.22 1.95

Metals 348,606 1.75 1.91

Metal products 304,044 1.53 1.16

Mining 566,297 2.84 2.01

Oil and gas 2,344,361 11.78 7.46

Public utility 307,508 1.54 1.12

Retail 356,992 1.79 1.14

Telecommunication 1,631,379 8.19 6.17

Unit trust/Mutual Fund 375,123 1.88 8.55


Other net assets 1,623,662 8.14 16.76


34

HSBC Investment Funds Notes to Financial Statements 1. General The HSBC Investment Funds (“the Fund”) is an open ended umbrella unit trust constituted pursuant to the Trust Deed dated 1 December 1997 between HSBC Global Asset Management (Singapore) Limited (“the Manager”) and HSBC Institutional Trust Services (Singapore) Limited. With effect from 1 July 2004, the Trustee of the Fund was changed to RBC Dexia Trust Services Singapore Limited (“the Trustee”). The Trust Deed has been amended by Supplemental Deeds and Amending and Restating Deeds. The Trust Deed, Supplemental Deeds and Amending and Restating Deeds are governed by and construed in accordance with the laws of the Republic of Singapore. 2. HSBC Investment Funds As at 31 January 2011, HSBC Investment Funds had the following underlying investments:

Sub-fund Date of launch Underlying investments

HSBC Global Reach Fund 13 March 2007 HSBC Global Investments Funds - Global Equity Class I

HSBC Quant Alternative Fund - Global Bond Market 600 Class I

Actiprimes Obligations Class C

HSBC GEM Treasures Fund 21 November 2007 Invests mainly in equity and equity equivalent securities

3. Summary of Significant Accounting Policies 3.1 Basis of Preparation The financial statements are prepared on a historical cost basis, as modified by the revaluation of investments and in accordance with Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of certified Public Accountants of Singapore (“ICPAS”). The financial statements of HSBC Global Reach Fund and HSBC GEM Treasures Fund are prepared in Singapore Dollars and US Dollars respectively, which are the functional currencies of the respective funds.

35

For the purposes of preparation of these financial statements, the basis used for calculating the ratio of expenses and portfolio turnover rate are in accordance with the guidelines issued by the Investment Management Association of Singapore and the Code on Collective Investment Schemes under the Securities and Futures Act (Cap 289) respectively. Changes in Accounting Policies Starting as of 1 August 2009, the Fund has changed its accounting policy to achieve consistency with the Amendments to FRS 32 Financial Instruments: Presentation and FRS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation. The change has resulted in the Unitholders’ fund of the Fund being classified as equity. Previously, the Unitholders’ fund of the Fund was classified as a financial liability. The reclassification was made in accordance with the Amendments to FRS 32 and FRS 1, which require instruments that impose on an entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity instruments, provided certain conditions are met. The units in issue met the conditions for classification as equity instruments. This change in accounting policy has been applied retrospectively in accordance with the provisions of the amendments and the comparatives have been restated. This change does not have any impact on the Fund’s Statement of Total Return. 3.2 Basis of Valuation of Investments Marketable investments are stated at fair value. The difference between the fair value of the portfolio of investments and the original cost is taken directly to the Statement of Total Return. Realised gains and losses on disposal of investments are computed on the basis of the difference between weighted average cost and selling price and are taken directly to the Statement of Total Return. 3.3 Fair Value Fair value of investment in securities is based on quoted market prices at the balance sheet date. The quoted market price used is the current bid price or the current net asset value of the underlying sub-funds. When such information is unavailable, the price of the most recent transaction is used to fair value the investments.

36

3.4 Recognition of Income Dividends Dividend income is recognised in the income statement when the unitholder’s right to receive payment is established. Interest Income Interest from interest-bearing investments is calculated using the effective interest method. 3.5 Foreign Currency Transactions Transactions in other currencies are translated to respective functional currencies at the exchange rates at the date of the transactions. Monetary assets and liabilities denominated in other currencies at the reporting date are retranslated to respective functional currencies at the exchange rates at the reporting date. Non-monetary assets and liabilities denominated in other currencies that are measured at fair value are retranslated to respective functional currencies at the exchange rate at the date on which the fair value was determined. Currency differences arising on retranslation are recognised in the Statement of Total Return. 3.6 Treatment of Financial Derivatives The Fund enters into foreign exchange and other derivative contracts. Such contracts are marked to market at the balance sheet date. The net resultant profit or loss is included in the Statement of Total Return. 3.7 Unitholders’ Fund Unitholders’ fund represents the residual interest in the Fund’s net assets upon termination and is classified as equity.

37

4. Receivables


31/1/2011 31/7/2010 31/1/2011 31/7/2010

S$ S$ US$ US$

Dividend receivables - - 19,615 61,838

Other receivables 30,460 35,135 1,673 1,432

30,460 35,135 21,288 63,270

5. Financial Derivative Contracts


Notional Positive Negative

amount fair value fair value

S$ S$ S$

31 January 2011 Forward foreign exchange contracts - SGD Class

8,530,689 76 (154,873)

31 July 2010 Forward foreign exchange contracts - SGD Class

11,390,257 8,212 (183,399)


Notional Positive Negative

amount fair value fair value

US$ US$ US$

31 January 2011 Forward foreign exchange contracts - USD Class

2,212,420 - (32,587)

Future contracts – USD class 6,252,488 4,260 (148,889)

8,464,908 4,260 (181,476)

31 July 2010 Forward foreign exchange contracts - USD Class

2,045,898 - (12,838)

Future contracts – USD class 10,004,677 96,732 (34,432)

12,050,575 96,732 (47,270)

38

Financial derivative contracts comprise forward foreign exchange contracts for the sale and purchase of foreign currencies. The period-end positive and negative fair values represent the unrealised gains and losses respectively on revaluation of financial derivative contracts at the balance sheet date. The notional amounts of these financial derivatives and their corresponding gross positive and negative fair values at the balance sheet date are analysed above. 6. Cash and Bank Balances


31/1/2011 31/7/2010 31/1/2011 31/7/2010

S$ S$ US$ US$

Cash and bank balances 581,474 228,741 1,477,193 2,523,100

7. Payables


31/1/2011 31/7/2010 31/1/2011 31/7/2010

S$ S$ US$ US$ Payable to unitholders for cancellation of units

28,438 170,411 490,815 859,945

Amount due to the Manager 40,303 31,087 - -

Accrued expenses 8,543 16,811 16,892 18,798

77,284 218,309 507,707 878,743

39

8. Net Assets Attributable to Unitholders

HSBC Global Reach

Fund HSBC GEM Treasures

Fund

Period ended

Year ended

Period ended

Year ended

31/1/2011 31/7/2010 31/1/2011 31/7/2010

S$ S$ US$ US$


Operations

Change in net assets attributable to

unitholders resulting from operations 132,964 709,148 1,728,957 3,655,953

Unitholders' contributions/(withdrawals)

Creation of units 2,954 99,437 39,686 73,732

Cancellation of units (2,353,899) (4,261,209) (7,834,765) (2,503,727)

Change in net assets attributable to

unitholders resulting from net creation

and cancellation of units (2,350,945) (4,161,772) (7,795,079) (2,429,995)

Total (decrease)/increase in net assets

attributable to unitholders (2,217,981) (3,452,624) (6,066,122) 1,225,958


Units in issue (see note 9) 1,191,380 1,443,776 1,840,083 2,573,848

Net assets attributable to unitholders 9.32 9.23 10.83 10.10

40

9. Units in Issue


Period ended

Year ended

Period ended

Year ended

31/1/2011 31/7/2010 31/1/2011 31/7/2010


Units created 317 11,006 3,666 7,690

Units cancelled (252,713) (467,435) (737,431) (258,894)


The rights and interests of Unitholders are contained in the Trust Deed and include the right to:

receive distribution entitlement determined in accordance with the Trust Deed; attend all Unitholders’ meetings. The Trustee or the Manager may (and the Manager

shall at the request in writing of not less than 50 Unitholders or one-tenth in number of the Unitholders (or Unitholders of Units in any Sub-Fund or Class of Sub-Fund, as the case may be), whichever is the lesser) convene a meeting of Unitholders in accordance with the provisions of the Trust Deed; and

one vote for every Unit of which he is the holder 10. Taxation The Sub-funds are awarded designated unit trust under the Singapore Income Tax Act (Chapter 134) on 18 October 2007. As a result, the following income will not be taxed at the Sub-fund level:

gains or profits derived from Singapore or elsewhere from the disposal of securities; interest (other than interest for which Singapore tax has been withheld); and dividends derived from outside Singapore and received in Singapore


Period ended Period ended Period ended Period ended

31/1/2011 31/1/2010 31/1/2011 31/1/2010

S$ S$ US$ US$

Overseas income tax - - 13,956 19,132

41

11. Related Party Transactions In the normal course of the business of the sub-funds, trustee fees, accounting and valuation fees and management fees have been paid or are payable to the Trustee, Accounting and Valuation agent and Manager respectively as noted in the Statement of Total Return. 12. HSBC Global Reach Fund US Dollar Class (a) The sub-fund offers two classes of units, namely the HSBC Global Reach Fund S$ units and the HSBC Global Reach Fund US$ units. The US$ units are structured such that all or substantially all the amounts received are invested into the S$ units. Consequently, these financial statements of HSBC Global Reach Fund cover the financial information of the S$ units only. As at 31 January 2011 there are no outstanding units under USD class, Supplementary information relating to the US$ units are set out below. (b) Gains on foreign exchange hedging for US$ units

31/1/2011 31/7/2010

US$ US$ Net realised gains on foreign exchange contracts

- 5,834

Notional amount

Negative fair value

Notional amount

Negative fair value

US$ US$ US$ US$

Forward foreign exchange contracts - - 93,288 (1,695)

(c) Net asset value of US$ units

31/1/2011 31/7/2010

Number of S$ units issued to US$ unitholders - 6,178

Net asset value per S$ unit (see Note 8) - S$9.23

S$

US$ equivalent

S$ US$

equivalent

Value of S$ units issued to US$ unitholders - - 57,023 41,943

Net unrealised losses on forward foreign exchange contracts

- (1,695)

Total value attributable to US$ unitholders - 40,248

Number of US$ units in issue - 5,645

Value per US$ unit at 31 July 2010 - US$7.13

42

13. HSBC GEM Treasures Fund Singapore Dollar Class (a) The sub-fund offers two classes of units (class A & Z) in 2 currencies, namely the HSBC GEM Treasures Fund US$ units and the HSBC GEM Treasures Fund S$ units. The S$ units are structured such that all or substantially all the amounts received are invested into the US$ units. Consequently, these financial statements of HSBC GEM Treasures Fund cover the financial information of the US$ units only. Supplementary information relating to the S$ units are set out below. (b) Gains/(losses) on foreign exchange hedging for S$ units The losses and the fair value of the foreign exchange contracts arising from hedging activities for the financial period ended 31 January 2011 are as follows:

31/1/2011 31/7/2010

S$ S$ Net realised gains/(losses) on foreign exchange contracts

7,330 (1,232)

Notional amount

Negative fair value

Notional amount

Positive fair value

S$ S$ S$ S$

Forward foreign exchange contracts 183,168 (3,222) 140,751 2,132

(c) Net asset value of S$ units

31/1/2011 31/7/2010

Number of US$ units issued to S$ unitholders

34,328 34,092

Net asset value per US$ unit (see Note 8)

US$10.83 US$10.10

US$ S$ equivalent US$ S$ equivalent Value of US$ units issued to S$ unitholders

371,772 475,868 344,329 468,132

Net unrealised (losses)/gains on forward foreign exchange contracts

(3,222) 2,132

Total value attributable to S$ unitholders

472,646 470,264

Number of S$ units in issue 48,515 48,756

Value per S$ unit at 31 January 2011 S$9.74 S$9.65

43

14. Financial Instruments Risk Management Objectives and Policies The Manager continually monitors the sub-fund exposure to risk and appropriate procedures are in place to manage the risk. The risks include market risk, credit risk, liquidity risk and foreign currency risk. Market Risk Market risk is the risk of potential adverse change to the value of financial instruments because of changes in market conditions like interest and any rate movements and volatility in securities prices. The Manager manage its exposure to market risk through the use of risk management strategies and various analytical and monitoring techniques. Credit Risk Credit risk is the risk of loss when a counterparty fails to meet its payment obligation. To address the credit risk, the Manager has in place a stringent credit risk management process, which entails evaluating and mitigating the counterparty’s credit worthiness. Liquidity Risk Liquidity risk arises from not being able to fund redemptions or liquidate positions in a timely manner at a reasonable price. Liquidity risk exists when a particular investment is difficult to purchase or sell. These circumstances could prevent the sub-fund from promptly liquidating unfavourable positions and therefore resulting in losses to the sub-fund and corresponding decreases in the net asset value per unit. The Manager manages liquidity risk by investing primarily in assets, which are liquid. Foreign Currency Risk The assets and income of the sub-fund may be denominated in different currencies and will thus be subjected to fluctuation in currency exchange rates and in certain cases, exchange control regulations. As at 31 January 2011, the concentration of the Sub-fund's investments is set out in the Portfolio Statement. 15. Financial Ratios


Period ended

Period ended

Period ended

Period ended

31/1/2011 31/1/2010 31/1/2011 31/1/2010

% % % % Ratio of expenses to average net assets (note 1)

1.67 1.66 0.45 0.46

Portfolio turnover rate (note 2) - - 35.75 3.52

44

Note 1: The expenses used in calculating the "Ratio of expenses to average net assets" include expenses such as management fees, registration fees, trustees' fees, accounting and valuation, custody fees, audit fees, legal and professional fees and other expenses incurred by the sub-fund. Ratio of expenses based on the underlying sub-fund has been included to compute this ratio. Note 2: The turnover rate means the number of times per year that a dollar of assets is reinvested. It is calculated based on the lesser of purchases or sales for the period preceding the reporting date expressed as a percentage of the daily average net asset value.

48

Issued by HSBC Global Asset Management (Singapore) Limited Company registration no.: 198602036R

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