HSBC Canadian Money Market Fund. Annual Management Report of Fund Performance for the year ended December 31, 2011

Transcription

1 HSBC Canadian Money Market Fund Annual Management Report of Fund Performance for the year ended December 31,

2 HSBC Canadian Money Market Fund Management Discussion of Fund Performance In this document, you and your refer to the unitholder of the Fund; we, us and our refer to HSBC Global Asset Management (Canada) Limited; and the Fund refers to the HSBC Canadian Money Market Fund. We are the manager, trustee and primary investment advisor of the Fund. Introduction This Annual Management Report of Fund Performance contains financial highlights but does not contain the complete annual or semi-annual financial statements of the investment fund. You may obtain a copy of the Fund s annual or semi-annual financial statements at your request, at no cost, by calling Telefund at , by visiting our website at by visiting the SEDAR website at or by writing to us at: Corporate Secretary HSBC Global Asset Management (Canada) Limited 19 th Floor 1066 West Hastings Street Vancouver, BC V6E 3X1 You may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly statement of investment portfolio. Investment Objective and Strategies The fundamental investment objective of this Fund is to provide a high level of monthly interest income while preserving capital. To achieve its objectives, the Fund invests primarily in treasury bills, commercial paper, bankers acceptances, mortgages and mortgage-backed securities, guaranteed investment certificates, cash and other fixed income securities. All of the Fund s securities will have a term-to-maturity of less than 365 days, with an average term-to-maturity of no more than 60 days. Risk The risks of investing in the Fund remain as discussed in the Prospectus, and are not expected to have materially increased or decreased during the year. The primary risks that affect the Fund are interest rate risk, credit risk and security risk. This Fund is suitable for investors who want to earn interest income and preserve their capital, have a short-term investment time horizon and have a low tolerance for risk. Results of Operations The Fund s net assets decreased by 24.9% to $324.5 million from $431.8 million at the end of the previous year. Of this decrease a $1.4 million gain was attributable to investment performance, offset by a decrease of $108.7 million due to net redemptions of the Fund s units. Cash distributions also contributed to the change in net assets. Investment Performance The HSBC Canadian Money Market Fund (Investor Series) rose 0.08% for the year ending December 31,, while the benchmark, 5 DEX 30 Day Treasury Bill Index and 5 60 Day DEX Treasury Bill Index, rose 0.93% over the same period. A defensive position to the corporate debt sector was taken in with a focus on high-quality issues where credit risk and liquidity risk were minimized, thus protecting the Fund s primary objectives of preserving capital and providing liquidity. The return from the defensive corporate position above alternative government notes was modest over the twelve months but generally commensurate with the reduced level of risk. An allocation to corporate notes usually provides higher yields over government-backed alternatives; however, these notes come with risks that may be unsuitable for the Fund at any level of compensation. The managers work within an extensive network of global credit research analysts and ensure that a prudent security selection process is in place. The Fund looks to add value by adjusting the weighted-average-maturity (or duration) of the portfolio holdings relative to its benchmark. For, the Fund s duration was targeted close to its blended 45-day benchmark, mitigating any relative interest rate risk. Recent Developments The Bank of Canada (the BOC ) left the target for the overnight rate unchanged at 1. over the final quarter of. Domestic GDP rose 3.5% (annualized) in the third quarter. Leading the way was a rebound in trade activity as the temporary supply-side restrictions that hampered the second quarter were unwound, while growth in domestic activity slowed to 0.9%. Given the growing uncertainty in the global outlook, investment and new hiring intentions will likely be restrained, which will keep growth rates low over the next few quarters. The BOC has acknowledged that both Canada and the US have had stronger than anticipated growth in the second half of. They acknowledged the slightly higher-than-anticipated trend in inflation, but dismissed any growing price pressures as being temporary. The BOC is maintaining their cautious view on the growth outlook. They feel that Canada s historically low interest rates and wellfunctioning financial system that there is considerable monetary policy stimulus in Canada. In our opinion, the bias towards tightening rates that may have been evident earlier in is now on hold and the BOC is now firmly in a neutral stance, signalling no change in rates for quite some time. The Fund remains focused on high-quality government and corporate issues where liquidity risk and credit risk are minimized, and achieving its objectives to preserve capital and provide liquidity. 1

3 HSBC Canadian Money Market Fund Related Party Transactions We, on behalf of the Fund, or the Fund Manager may, from time to time, enter into transactions or arrangements with or involving other members of the HSBC Group or other people or companies related or connected to us or the Fund. To proceed with the transactions, the Fund relied on the positive recommendation of the Fund s Independent Review Committee. A condition of this approval was that the transactions were performed in accordance with our policy on Related Party Transactions. For more general information on persons related to the Fund and the types of potential transactions, see the Fund s Simplified Prospectus. The following is a summary of current transactions and arrangements with entities that are related to us or the Fund. Manager, Trustee and Investment Advisor We are the manager, trustee and primary investment advisor of the Fund. As manager, we manage the overall business and operations of the Fund. As trustee, we hold legal title to the property of the Fund on your behalf. As primary investment advisor, we provide investment advice and portfolio management services to the Fund. We receive a fee from the Fund for these services based on assets under management, calculated daily and paid monthly. Distribution Services The Fund is distributed through us, HSBC Investment Funds (Canada) Inc. (our wholly owned subsidiary) and through HSBC Securities (Canada) Inc. (an affiliate) directly or through its division, HSBC InvestDirect. We pay distribution and servicing fees to them based on the amount of assets held in the investor s account, and additionally, in some cases, on the amount of the initial purchase. If you hold units of this Fund and/or other HSBC Mutual Funds in a registered plan with HSBC Investment Funds (Canada) Inc., they may charge you an annual fee to cover the annual administration costs of the plan. We permit HSBC Investment Funds (Canada) Inc. to collect these fees by redeeming sufficient units of the Fund with the highest market value in your registered plan. Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the years shown. This information is derived from the Fund s audited annual financial statements. The information in the following tables is based on prescribed regulations, and as a result, is not expected to add due to the increase/decrease in net assets from operations being based on average units outstanding during the year and all other numbers being based on actual units outstanding at the relevant point in time. HSBC Canadian Money Market Fund Investor Series Years ended December 31 Inception: January 1989 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.10) (0.06) (0.06) (0.10) (0.10) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $ $ $0.24 $0.34 From income (excluding dividends) (0.01) (0.01) (0.23) (0.34) From dividends From net realized gains on investments Total annual distributions (1,2) $(0.01) $ $(0.01) $(0.23) $(0.34) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $199,156 $255,441 $317,722 $359,146 $430,613 Units outstanding (in 000s) (3) 19,916 25,544 31,772 35,915 43,061 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) % % 1.02% MER before absorbed or waived fees (4) % 0.98% 0.96% 1.02% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a HSBC Canadian Money Market Fund Advisor Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.10) (0.06) (0.06) (0.10) (0.10) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $ $0.01 $0.24 $0.34 From income (excluding dividends) (0.01) (0.01) (0.23) (0.34) From dividends From net realized gains on investments Total annual distributions (1,2) $(0.01) $ $(0.01) $(0.23) $(0.34) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $

4 HSBC Canadian Money Market Fund NAV (in 000s) (3,7) $1,000 $1,180 $1,090 $1,560 $1,774 Units outstanding (in 000s) (3) NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.97% 0.65% 0.62% 0.96% 1.03% MER before absorbed or waived fees (4) 0.97% 1.01% 0.98% 0.96% 1.03% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a HSBC Canadian Money Market Fund Premium Series Years ended December 31 Inception: December * Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.04) (0.04) (0.04) (0.04) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.07 $0.02 $0.03 $0.26 From income (excluding dividends) (0.07) (0.02) (0.03) (0.27) From dividends From net realized gains on investments Total annual distributions (1,2) $(0.07) $(0.02) $(0.03) $(0.27) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 * The Premium Series commenced operations on January 14,. NAV (in 000s) (3,7) $68,787 $99,295 $191,606 $212,133 Units outstanding (in 000s) (3) 6,879 9,929 19,161 21,213 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.45% 0.44% 0.39% 0.4 MER before absorbed or waived fees (4) 0.45% 0.48% 0.45% 0.44% Portfolio turnover rate (5) n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a HSBC Canadian Money Market Fund Manager Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.07) (0.05) (0.05) (0.07) (0.07) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.04 $0.01 $0.01 $0.25 $0.37 Distributions to unitholders: From income (excluding dividends) (0.04) (0.01) (0.02) (0.25) (0.37) From dividends From net realized gains on investments Total annual distributions (1,2) $(0.04) $(0.01) $(0.02) $(0.25) $(0.37) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $4,173 $4,121 $7,805 $9,001 $1,958 Units outstanding (in 000s) (3) NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.69% 0.56% 0.51% % MER before absorbed or waived fees (4) 0.69% 0.74% 0.71% % Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a 3

5 HSBC Canadian Money Market Fund HSBC Canadian Money Market Fund Institutional Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.01) (0.01) (0.01) (0.01) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.10 $0.05 $0.05 $0.31 $0.43 Distributions to unitholders: From income (excluding dividends) (0.10) (0.05) (0.06) (0.32) From dividends From net realized gains on investments (0.43) Total annual distributions (1,2) $(0.10) $(0.05) $(0.06) $(0.32) $(0.43) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $51,335 $71,809 $125,765 $166,192 $12,593 Units outstanding (in 000s) (3) 5,134 7,181 12,576 16,691 1,259 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.06% % 0.06% 0.12% MER before absorbed or waived fees (4) 0.06% % 0.06% 0.12% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a (1) Net assets per unit and distributions per unit are based on the actual number of units outstanding for the relevant series at the relevant time. The increase/decrease in net assets from operations per unit is based on the weighted average number of units outstanding for the relevant series over the fiscal period. (2) Distributions are automatically reinvested in additional units of the Fund, unless the unitholder withdraws from the automatic reinvestment plan by providing written notice to us. (3) This information is provided as at year-end. (4) MER includes the total expenses of each Fund, including the Goods and Services Tax and/or Harmonized Sales Tax thereon, other than brokerage commissions on securities transactions and any foreign withholding taxes on income, as an annualized percentage of average net asset value ( NAV ) of the respective series of unit for the period. In the period a series is established, the MER is annualized from the date of inception to the end of the period. The MER may vary from one Mutual Fund to another and from one series of units to another. We may have waived or absorbed certain fees and expenses otherwise payable by the Fund. The amount of expenses absorbed or waived is at the discretion of and can be terminated at any time by us. (5) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 10 is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher the Fund s portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. The rate is calculated based on the lesser of purchases or sales of securities divided by the average weighted market value of the portfolio securities, excluding short-term securities. (6) The trading expense ratio represents commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the year. (7) Generally accepted accounting principles require that the calculation of a Fund s net asset value for financial reporting purposes ( net assets ) be based upon investments valued using closing bid prices. As permitted by securities regulations, the value of investments used to determine the daily prices of the Fund s units for purchase and redemption by clients ( NAV ) continues to be based upon the last sale price or the midpoint between closing bid and asked quotations. Management Fees For the year ended December 31,, the Fund paid us management fees of $2,233,059. The management fee for each series is calculated as a percentage of the daily net asset value for that series. The fees are reduced, where required, so that these fees do not duplicate fees payable by mutual funds in which the Fund invests for the same service. The Fund s management fees were used by us to pay costs for managing the investment portfolio, providing investment analysis and recommendations, making investment decisions, making brokerage arrangements for the purchase and sale of the investment portfolio and providing other services. The management fees also funded commission payments and other compensation to sales representatives and registered dealers and brokers (collectively distribution costs ), including HSBC Bank Canada, for units of the Fund bought and held by unitholders. Finally, we used management fees to pay for additional marketing and distribution services to the Fund. For the year ended December 31,, approximately 47% of the total management fees collected from all HSBC Mutual Funds were used to fund distribution costs. In comparison, for the Fund, such distribution costs represented 43% of the management fees collected. This may vary by series depending on the assets invested in each of the series. Past Performance The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemption, distribution, optional charges or expenses you may be charged outside of the Fund or the effect of any income tax you may have to pay as a result of your investment in the Fund that would have reduced returns or 4

6 HSBC Canadian Money Market Fund performance. The Fund s past performance does not necessarily indicate how it will perform in the future. Annual Returns Manager Series 15% Year-by-Year Returns Years ended December 31 The following bar charts show the Fund s annual performance for each of the years shown, and illustrate how the Fund s performance changed from year to year. In percentage terms, the bar charts show how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. 1 5% % 1.7% 1.9% % 3.7% 2.6% % 0.1% 0.4% Annual Returns Investor Series 15% Annual Returns Institutional Series 15% 1 1 5% 1.9% 2.2% 1.5% 1.8% 2.9% 3.4% 2.3% % % 5% 2.4% 2.7% % % 3.2% 0.6% 0.6% 1. Annual Returns Advisor Series 15% 1 5% 1.9% 2.3% 1.5% 1.8% 2.9% 3.4% 2.3% Annual Returns Premium Series 15% 1 5% 0.3% 0.2% 0.7% 0.1% % Annual Compound Returns Periods ended December 31, The following tables show the Fund s historical annual compound total returns for the periods indicated, compared with the benchmark indices, 5 DEX 30-Day T-Bill Index and 5 DEX 60-Day T-Bill Index over the same period. The DEX 30-Day T-Bill Index is a broad measure of the total return for the Canadian 30-day treasury bill market, covering marketable Canadian treasury bills with a term-to-maturity of 30 days or less. The DEX 60-Day T-Bill Index is a broad measure of the total return for the Canadian 60-day treasury bill market, covering marketable Canadian treasury bills with a term-to-maturity of 60 days or less. Investor Series Inception: January Year 3 Year 5 Year 10 Year HSBC Canadian Money Market Fund 0.08% 0.08% 1.18% 1.61% 5 DEX 30-Day T-Bill Index 5 DEX 60-Day T-Bill Index 0.93% % 2.3 Advisor Series Inception: December Year 3 Year 5 Year 10 Year HSBC Canadian Money Market Fund 0.11% 0.09% 1.18% 1.62% 5 DEX 30-Day T-Bill Index 5 DEX 60-Day T-Bill Index 0.93% % 2.3 5

7 HSBC Canadian Money Market Fund Premium Series Inception: December 1 Year 3 Year 5 Year Since Inception* HSBC Canadian Money Market Fund 0.66% % 5 DEX 30-Day T-Bill Index 5 DEX 60-Day T-Bill Index 0.93% % Manager Series Inception: December Year 3 Year 5 Year 10 Year HSBC Canadian Money Market Fund 0.39% 0.23% 1.37% 1.81% 5 DEX 30-Day T-Bill Index 5 DEX 60-Day T-Bill Index 0.93% % 2.3 Institutional Series Inception: December Year 3 Year 5 Year Since Inception* HSBC Canadian Money Market Fund 1.03% 0.74% 1.94% 2.35% 5 DEX 30-Day T-Bill Index 5 DEX 60-Day T-Bill Index 0.93% % 2.22% * Due to the fact that several benchmark indices are only available on a monthly basis, the Since Inception performance data for the HSBC Mutual Funds and the benchmark indices are calculated using values from the first month-end date each Fund was in operation. Summary of Investment Portfolio As at December 31, Asset Mix Percentage of NAV Corporate 73.55% Government 26.95% Cash & Equivalents (0.5) Total Top 25 Holdings Percentage of NAV Canada Housing Trust No. 1, /15/ % Canadian Imperial Bank of Commerce, 0.85% 01/03/ % Government of Canada, 0.85% 02/02/ Alberta Capital Finance Authority, FRN, 10/09/ Bank of Nova Scotia, 0.95% 01/03/ Province of British Columbia, 1.05% 08/14/ % Deutsche Bank, 1.09% 01/04/ % Province of British Columbia, 0.95% 01/11/ % Bank of Montreal, 0.95% 01/03/ % National Bank Financial, 0.95% 01/03/ % Province of British Columbia, 0.95% 02/06/ % Province of Alberta, /15/ % Province of Alberta, 0.95% 03/07/ % Canadian Wheat Board, 0.92% 02/02/ % JPMorgan Chase & Co., 1.08% 01/13/ % Royal Bank of Canada, 0.95% 01/03/ % OMERS Finance Trust, 1.11% 01/20/ % PSP Capital, 1.07% 02/21/ % Manulife Financial Corp., 1.14% 02/28/ Bank of America Corp., 1.08% 01/13/ % Credit Agricole CIB Finance (Guernsey) Ltd., FRN, 05/11/ % Lloyds TSB Bank, 1.13% 01/20/ % Rabobank Nederland, FRN, 04/04/ % Sumitomo Mitsui Banking Co., /04/ % Toronto-Dominion Bank, 1.07% 02/03/ % Total of Top 25 Holdings 70.62% The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund, and is available quarterly. 6

8 For more information You can find more information about HSBC Mutual Funds in the Fund s Simplified Prospectus, Annual Information Form and Fund Facts. You can get a copy of these documents, as well as the Fund s Financial Statements, at no cost by calling Telefund at , by contacting your authorized dealer or by visiting our website at These documents and other information about the HSBC Mutual Funds, such as information circulars and material contracts, are also available at Copies of the Annual Report and Semi-Annual Report, Simplified Prospectus, Annual Information Form, Annual and Interim Management Report of Fund Performance and Fund Facts are available on our website at How to reach us Vancouver HSBC Global Asset Management (Canada) Limited 19 th Floor, 1066 West Hastings Street Vancouver, BC V6E 3X1 Website: global_asset_management@hsbc.ca Telefund: Fax: Toronto Suite York Street Toronto, ON M5J 1S9 Calgary 10 th Floor, th Avenue SW Calgary, AB T2P 1E5 Edmonton 9 th Floor, Street NW Edmonton, AB T5J 3P4 Montreal Suite McGill College Avenue Montreal, QC H3A 1G1 Victoria 869 Douglas Street Victoria, BC V8W 2B9 A NOTE ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about the Fund, including its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limitedto, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. We stress that the above-mentioned list of important factors is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements, whether as a result of new information, future events or otherwise. Issued by HSBC Global Asset Management (Canada) Limited ( ) RRD 495E

9 HSBC U.S. Dollar Money Market Fund Annual Management Report of Fund Performance for the year ended December 31,

10 HSBC U.S. Dollar Money Market Fund Management Discussion of Fund Performance In this document, you and your refer to the unitholder of the Fund; we, us and our refer to HSBC Global Asset Management (Canada) Limited; and the Fund refers to the HSBC U.S. Dollar Money Market Fund. We are the manager, trustee and primary investment advisor of the Fund. Introduction This Annual Management Report of Fund Performance contains financial highlights but does not contain the complete annual or semi-annual financial statements of the investment fund. You may obtain a copy of the Fund s annual or semi-annual financial statements at your request, at no cost, by calling Telefund at , by visiting our website at by visiting the SEDAR website at or by writing to us at: Corporate Secretary HSBC Global Asset Management (Canada) Limited 19 th Floor 1066 West Hastings Street Vancouver, BC V6E 3X1 You may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly statement of investment portfolio. Investment Objective and Strategies The fundamental investment objective of this Fund is to earn a high level of monthly interest income while preserving capital. To achieve its objectives, the Fund invests primarily in US dollardenominated treasury bills and other short-term fixed income securities. All of the Fund s securities will have a term-to-maturity of less than 365 days, with an average term-to-maturity of no more than 60 days. Risk The risks of investing in the Fund remain as discussed in the Prospectus, and are not expected to have materially increased or decreased during the year. The primary risks that affect the Fund are interest rate risk, credit risk and security risk. This Fund is suitable for investors who want to earn interest income and preserve their capital, have a short-term investment time horizon, and have a very low tolerance for risk in their returns. Results of Operations All figures are stated in US dollars. The Fund s net assets decreased by 29.2% to $79.6 million from $112.3 million at the end of the previous year. This decrease was attributable to a decrease of $32.7 million due to net redemptions of the Fund s units. Cash distributions also contributed to the change in net assets. Investment Performance The HSBC U.S. Dollar Money Market Fund (Investor Series) rose 0.01% for the year ending December 31,, while its benchmark, 75% Citigroup 1-Month Treasury Bill Index and 25% Citigroup 3-Month Treasury Bill Index, rose 0.06% over the same period. A defensive position to the corporate debt sector was taken over the period with a focus on high-quality issues where credit risk and liquidity risk were minimized, thus protecting the Fund s primary objectives of preserving capital and providing liquidity. The return from the defensive corporate position above alternative government notes was modest over the twelve months but generally commensurate with the reduced level of risk. An allocation to corporate notes is usually positive for performance due to the higher yields they offer over government-backed alternatives. However, these notes come with additional risks that may be unsuitable for the Fund at any level of compensation. The managers work within an extensive network of global credit research analysts and ensure that a prudent security selection process is in place. The Fund also looks to add value by adjusting the weighted-average maturity (or duration) of the portfolio holdings relative to its benchmark. For the twelve months of the year, the Fund s duration was targeted to its blended 45-day benchmark, mitigating any relative interest rate risk. Recent Developments The US economic recovery is continuing, but unfortunately at a much slower pace than many expected, and the Federal Open Market Committee (FOMC) warns of significant downside risks to the economic outlook. The housing sector remains weak, while new business investment has provided some positive support. The FOMC anticipates that economic conditions including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through mid This new commitment to two years of policy rate stability was added at the August 9, meeting. In order to promote a stronger pace of economic recovery and to help ensure that inflation is at levels consistent with its mandate, the FOMC further announced on September 21, that it will be extending the average maturity of its security holdings in a move to put downward pressure on longer-term interest rates, as well as redirecting the reinvestment of certain principal payments to agency mortgage-backed securities. It will continue to regularly review the size and composition of its balance sheet in light of incoming information and will adjust as needed. 1

11 HSBC U.S. Dollar Money Market Fund We expect the US Federal Reserve to maintain its % monetary policy rate target into next year. The Fund remains focused on high-quality government and corporate issues where liquidity risk and credit risk are minimized, to achieve its primary objectives of preserving capital and providing liquidity. Related Party Transactions We, on behalf of the Fund, or the Fund Manager may, from time to time, enter into transactions or arrangements with or involving other members of the HSBC Group or other people or companies related or connected to us or the Fund. To proceed with the transactions, the Fund relied on the positive recommendation of the Fund s Independent Review Committee. A condition of this approval was that the transactions were performed in accordance with our policy on Related Party Transactions. For more general information on persons related to the Fund and the types of potential transactions, see the Fund s Simplified Prospectus. The following is a summary of current transactions and arrangements with entities that are related to us or the Fund. Manager, Trustee and Investment Advisor We are the manager, trustee and primary investment advisor of the Fund. As manager, we manage the overall business and operations of the Fund. As trustee, we hold legal title to the property of the Fund on your behalf. As primary investment advisor, we provide investment advice and portfolio management services to the Fund. We receive a fee from the Fund for these services based on assets under management, calculated daily and paid monthly. Distribution Services The Fund is distributed through us, HSBC Investment Funds (Canada) Inc. (our wholly owned subsidiary) and through HSBC Securities (Canada) Inc. (an affiliate) directly or through its division, HSBC InvestDirect. We pay distribution and servicing fees to them based on the amount of assets held in the investor s account, and additionally, in some cases, on the amount of the initial purchase. If you hold units of this Fund and/or other HSBC Mutual Funds in a registered plan with HSBC Investment Funds (Canada) Inc., they may charge you an annual fee to cover the annual administration costs of the plan. We permit HSBC Investment Funds (Canada) Inc. to collect these fees by redeeming sufficient units of the Fund with the highest market value in your registered plan. Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the years shown. This information is derived from the Fund s audited annual financial statements. The information in the following tables is based on prescribed regulations, and as a result, is not expected to add due to the increase/decrease in net assets from operations being based on average units outstanding during the year and all other numbers being based on actual units outstanding at the relevant point in time. All figures are stated in US dollars. HSBC U.S. Dollar Money Market Fund Investor Series Years ended December 31 Inception: January 1998 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.02) (0.04) (0.11) (0.11) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $0.01 $(0.01) $0.18 $0.41 From income (excluding dividends) (0.01) (0.16) (0.41) From dividends From net realized gains on investments Total annual distributions (1,2) $ $ $(0.01) $(0.16) $(0.41) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $32,469 $45,882 $46,213 $52,423 $81,763 Units outstanding (in 000s) (3) 3,247 4,588 4,621 5,242 8,176 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.14% 0.22% 0.43% 1.13% 1.11% MER before absorbed or waived fees (4) 1.24% 1.18% 1.16% 1.14% 1.18% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a 2

12 HSBC U.S. Dollar Money Market Fund HSBC U.S. Dollar Money Market Fund Advisor Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.02) (0.04) (0.11) (0.11) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $0.01 $ $0.18 $0.41 From income (excluding dividends) (0.01) (0.16) (0.41) From dividends From net realized gains on investments Total annual distributions (1,2) $ $ $(0.01) $(0.16) $(0.41) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $320 $443 $259 $389 $775 Units outstanding (in 000s) (3) NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.14% 0.23% 0.44% 1.13% 1.12% MER before absorbed or waived fees (4) 1.22% 1.17% 1.16% 1.14% 1.19% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a HSBC U.S. Dollar Money Market Fund Premium Series Years ended December 31 Inception: December * Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.02) (0.03) (0.04) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $0.01 $0.01 $0.21 From income (excluding dividends) (0.02) (0.21) From dividends From net realized gains on investments Total annual distributions (1,2) $ $ $(0.02) $(0.21) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 * The Premium Series commenced operations on January 15,. NAV (in 000s) (3,7) $33,737 $50,676 $65,394 $79,112 Units outstanding (in 000s) (3) 3,374 5,068 6,539 7,911 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.14% 0.22% 0.34% 0.44% MER before absorbed or waived fees (4) 0.57% 0.54% 0.53% 0.5 Portfolio turnover rate (5) n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a HSBC U.S. Dollar Money Market Fund Manager Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.02) (0.03) (0.09) (0.09) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.01 $0.01 $(0.01) $0.17 $0.43 From income (excluding dividends) (0.01) (0.19) (0.43) From dividends From net realized gains on investments Total annual distributions (1,2) $ $ $(0.01) $(0.19) $(0.43) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $4,465 $9,479 $7,335 $345 $41 Units outstanding (in 000s) (3) NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) 0.15% 0.22% 0.29% 0.87% 0.81% MER before absorbed or waived fees (4) 0.92% 0.88% % 0.88% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a 3

13 HSBC U.S. Dollar Money Market Fund HSBC U.S. Dollar Money Market Fund Institutional Series Years ended December 31 Inception: December 2001 Net assets per unit, beginning of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 Total revenue Total expenses (0.01) (0.01) (0.01) Realized gains (losses) Unrealized gains (losses) Total increase (decrease) from operations (1) $0.02 $0.03 $0.02 $0.27 $0.51 From income (excluding dividends) (0.02) (0.02) (0.04) (0.27) (0.51) From dividends From net realized gains on investments Total annual distributions (1,2) $(0.02) $(0.02) $(0.04) $(0.27) $(0.51) Net assets per unit, end of period (1,7) $10.00 $10.00 $10.00 $10.00 $10.00 NAV (in 000s) (3,7) $8,569 $5,867 $17,507 $11,267 $13,177 Units outstanding (in 000s) (3) ,751 1,127 1,318 NAV per unit (3) $10.00 $10.00 $10.00 $10.00 $10.00 Management expense ratio ( MER ) (4) (0.06%) 0.02% 0.08% 0.07% 0.05% MER before absorbed or waived fees (4) 0.14% 0.11% 0.11% 0.08% 0.12% Portfolio turnover rate (5) n/a n/a n/a n/a n/a Trading expense ratio (6) n/a n/a n/a n/a n/a (1) Net assets per unit and distributions per unit are based on the actual number of units outstanding for the relevant series at the relevant time. The increase/decrease in net assets from operations per unit is based on the weighted average number of units outstanding for the relevant series over the fiscal period. (2) Distributions are automatically reinvested in additional units of the Fund, unless the unitholder withdraws from the automatic reinvestment plan by providing written notice to us. (3) This information is provided as at year-end. (4) MER includes the total expenses of each Fund, including the Goods and Services Tax and/or Harmonized Sales Tax thereon, other than brokerage commissions on securities transactions and any foreign withholding taxes on income, as an annualized percentage of average net asset value ( NAV ) of the respective series of unit for the period. In the period a series is established, the MER is annualized from the date of inception to the end of the period. The MER may vary from one Mutual Fund to another and from one series of units to another. We may have waived or absorbed certain fees and expenses otherwise payable by the Fund. The amount of expenses absorbed or waived is at the discretion of and can be terminated at any time by us. (5) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 10 is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher the Fund s portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. The rate is calculated based on the lesser of purchases or sales of securities divided by the average weighted market value of the portfolio securities, excluding short-term securities. (6) The trading expense ratio represents commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the year. (7) Generally accepted accounting principles require that the calculation of a Fund s net asset value for financial reporting purposes ( net assets ) be based upon investments valued using closing bid prices. As permitted by securities regulations, the value of investments used to determine the daily prices of the Fund s units for purchase and redemption by clients ( NAV ) continues to be based upon the last sale price or the midpoint between closing bid and asked quotations. Management Fees For the year ended December 31,, the Fund paid us management fees of $19,429. The management fee for each series is calculated as a percentage of the daily net asset value for that series. The fees are reduced, where required, so that these fees do not duplicate fees payable by mutual funds in which the Fund invests for the same service. The Fund s management fees were used by us to pay costs for managing the investment portfolio, providing investment analysis and recommendations, making investment decisions, making brokerage arrangements for the purchase and sale of the investment portfolio and providing other services. The management fees also funded commission payments and other compensation to sales representatives and registered dealers and brokers (collectively distribution costs ), including HSBC Bank Canada, for units of the Fund bought and held by unitholders. Finally, we used management fees to pay for additional marketing and distribution services to the Fund. For the year ended December 31,, approximately 47% of the total management fees collected from all HSBC Mutual Funds were used to fund distribution costs. In comparison, for the Fund, such distribution costs represented 642% of the management fees collected. This may vary by series depending on the assets invested in each of the series. Past Performance The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemption, distribution, optional charges or expenses you may be charged outside of the Fund or the effect of any income tax you may have to pay as a result of your investment in the Fund that would have reduced returns or 4

14 HSBC U.S. Dollar Money Market Fund performance. The Fund s past performance does not necessarily indicate how it will perform in the future. Annual Returns Manager Series 15% Year-by-Year Returns Years ended December 31 The following bar charts show the Fund s annual performance for each of the years shown, and illustrate how the Fund s performance changed from year to year. In percentage terms, the bar charts show how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. 1 5% % % 0.1% Annual Returns Investor Series 15% Annual Returns Institutional Series 15% 1 1 5% 0.9% 0.2% 0.3% 2.1% % 4.1% 1.6% % % 3.2% % 5.2% % 0.4% 0.2% 0.2% Annual Returns Advisor Series 15% 1 5% 4.1% 4.1% % Annual Returns Premium Series 15% 1 5% 0.1% Annual Compound Returns Periods ended December 31, The following tables show the Fund s historical annual compound total returns for the periods indicated, compared with the benchmark indices, the Citigroup 1-Month U.S. T-Bill Index (75%) and the Citigroup 3-Month U.S. T-Bill Index (25%), over the same period. The Citigroup 1-Month U.S. T-Bill Index is a market-weighted index of public obligations of the US Treasury with maturities of one month. The Citigroup 3-Month U.S. T-Bill Index is a market-weighted index of public obligations of the US Treasury with maturities of three months. Investor Series Inception: January Year 3 Year 5 Year 10 Year HSBC U.S. Dollar Money Market Fund 0.01% 0.03% 1.16% % Citigroup 1-Month U.S. T-Bill Index, 25% Citigroup 3-Month U.S. T-Bill Index 0.06% % 1.78% 0.2% Advisor Series Inception: December Year 3 Year 5 Year Since Inception* HSBC U.S. Dollar Money Market Fund 0.01% 0.03% 1.16% 1.75% 75% Citigroup 1-Month U.S. T-Bill Index, 25% Citigroup 3-Month U.S. T-Bill Index 0.06% % 1.96% 5

15 HSBC U.S. Dollar Money Market Fund Premium Series Inception: December 1 Year 3 Year 5 Year Since Inception* HSBC U.S. Dollar Money Market Fund 0.01% 0.06% 0.55% 75% Citigroup 1-Month U.S. T-Bill Index, 25% Citigroup 3-Month U.S. T-Bill Index 0.06% % Manager Series Inception: December Year 3 Year 5 Year Since Inception* HSBC U.S. Dollar Money Market Fund 0.01% 0.04% 1.27% 1.79% 75% Citigroup 1-Month U.S. T-Bill Index, 25% Citigroup 3-Month U.S. T-Bill Index 0.06% % 1.95% Institutional Series Inception: December Year 3 Year 5 Year Since Inception* HSBC U.S. Dollar Money Market Fund 0.21% 0.28% 1.73% 2.29% 75% Citigroup 1-Month U.S. T-Bill Index, 25% Citigroup 3-Month U.S. T-Bill Index 0.06% % 1.93% * Due to the fact that several benchmark indices are only available on a monthly basis, the Since Inception performance data for the HSBC Mutual Funds and the benchmark indices are calculated using values from the first month-end date each Fund was in operation. Summary of Investment Portfolio As at December 31, Asset Mix Percentage of NAV Corporate 73.44% Government 26.24% Cash & Equivalents 0.32% Total Top 25 Holdings Percentage of NAV Federal Home Loan Mortgage, 0.01% 02/22/ % Government of United States, 0.03% 06/21/ % Province of Alberta, 0.13% 03/19/ % Bank of America Corp., 0.05% 01/04/ Bank of Montreal, 0.01% 01/03/ Bank of Nova Scotia, 0.01% 01/03/ National Bank Financial, 0.01% 01/03/ Rabobank USA Financial Corp., 0.42% 02/29/ % Province of Quebec, 0.05% 01/12/ % Bank of Tokyo Mitsubishi, /23/ % Commonwealth Bank of Australia, 0.26% 02/13/ % Government of United States, 0.13% 04/05/ % Nordea North America Inc., /08/ % Westpac Securities NZ Ltd., 0.35% 02/22/ % Canadian Wheat Board, 0.02% 01/04/ % Canadian Wheat Board, 0.04% 04/02/ % Royal Bank of Canada, 0.08% 02/23/ % Toronto-Dominion Bank, 0.08% 02/01/ % Royal Bank of Canada, 0.01% 01/03/ % Caterpillar Inc., /04/ % Nestle Capital, 0.07% 02/13/ % PACCAR Financial Ltd., /03/ % Procter & Gamble Co., 0.07% 02/14/ % Canadian Imperial Bank of Commerce, /08/ % Nationwide Building Society, /27/ % Total of Top 25 Holdings 78.7 The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund, and is available quarterly. 6

16 For more information You can find more information about HSBC Mutual Funds in the Fund s Simplified Prospectus, Annual Information Form and Fund Facts. You can get a copy of these documents, as well as the Fund s Financial Statements, at no cost by calling Telefund at , by contacting your authorized dealer or by visiting our website at These documents and other information about the HSBC Mutual Funds, such as information circulars and material contracts, are also available at Copies of the Annual Report and Semi-Annual Report, Simplified Prospectus, Annual Information Form, Annual and Interim Management Report of Fund Performance and Fund Facts are available on our website at How to reach us Vancouver HSBC Global Asset Management (Canada) Limited 19 th Floor, 1066 West Hastings Street Vancouver, BC V6E 3X1 Website: global_asset_management@hsbc.ca Telefund: Fax: Toronto Suite York Street Toronto, ON M5J 1S9 Calgary 10 th Floor, th Avenue SW Calgary, AB T2P 1E5 Edmonton 9 th Floor, Street NW Edmonton, AB T5J 3P4 Montreal Suite McGill College Avenue Montreal, QC H3A 1G1 Victoria 869 Douglas Street Victoria, BC V8W 2B9 A NOTE ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about the Fund, including its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limitedto, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. We stress that the above-mentioned list of important factors is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements, whether as a result of new information, future events or otherwise. Issued by HSBC Global Asset Management (Canada) Limited ( ) RRD 508E