UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM N-CSR
CERTIFIED SHAREHOLDER
REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07583
HSBC ADVISOR FUNDS TRUST
(Exact name of registrant as specified in charter)
452 FIFTH AVENUE
NEW
YORK, NY 10018
(Address of
principal executive offices) (Zip code)
CITI FUND SERVICES
3435
STELZER ROAD
COLUMBUS, OH 43219
(Name and address of agent for service)
Registrants telephone number, including area code: 1-800-782-8183
Date of fiscal year end: October 31 Date of reporting period: October 31, 2015 |
Item 1. Reports to Stockholders.
HSBC Global Asset Management (USA) Inc.
HSBC Funds
Annual Report
October 31,
2015
EQUITY FUNDS | Class A | Class B | Class C | Class I | ||||
HSBC Growth Fund | HOTAX | HOTBX | HOTCX | HOTYX | ||||
HSBC Opportunity Fund | HSOAX | HOPBX | HOPCX | RESCX |
Table of Contents |
HSBC Family of Funds |
Annual Report - October 31, 2015 |
Glossary of Terms | ||
Commentary From the Investment Manager | 3 | |
Portfolio Reviews | 4 | |
Statements of Assets and Liabilities | 8 | |
Statements of Operations | 9 | |
Statements of Changes in Net Assets | 10 | |
Financial Highlights | 14 | |
Notes to Financial Statements | 17 | |
Report of Independent Registered Public Accounting Firm | 25 | |
Other Federal Income Tax Information | 26 | |
Table of Shareholder Expenses | 27 | |
HSBC Portfolios | ||
Portfolio Composition | 29 | |
Schedules of Portfolio Investments | ||
HSBC Growth Portfolio | 30 | |
HSBC Opportunity Portfolio | 32 | |
Statements of Assets and Liabilities | 34 | |
Statements of Operations | 35 | |
Statements of Changes in Net Assets | 36 | |
Financial Highlights | 37 | |
Notes to Financial Statements | 38 | |
Report of Independent Registered Public Accounting Firm | 44 | |
Table of Shareholder Expenses | 45 | |
Board of Trustees and Officers | 46 | |
Other Information | 48 |
Glossary of Terms |
Barclays Emerging Markets USD Aggregate Index is a flagship hard currency Emergency Markets debt benchmark that includes fixed and floating-rate US dollar-denominated debt issued from sovereign, quasi-sovereign, and corporate EM issuers. Country eligibility and classification as Emerging Markets is rules-based and reviewed annually using World Bank income group and International Monetary Fund country classification.
Barclays Euro Aggregate Bond Index is an index tracks fixed-rate, investment-grade Euro-denominated securities. Inclusion is based on the currency of the issue, and not the domicile of the issuer. The principal sectors in the index are Treasury, Corporate, Government-Related and Securitised. Securities in the index are part of the Pan-European Aggregate and the Global Aggregate Indices.
Barclays U.S. Aggregate Bond Index is an index that is generally representative of investment-grade, USD-denominated, fixed-rate debt issues, taxable bond market, including Treasuries, government-related and corporate securities, asset-backed, mortgage-backed and commercial mortgage-backed securities, with maturities of at least one year.
Barclays U.S. Corporate High-Yield Bond Index is an index that measures the non-investment grade, USD-denominated, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moodys, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt.
Lipper Large-Cap Growth Funds Average is an equally weighted average of mutual funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lippers U.S. Diversified Equity large-cap floor. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index.
Lipper Mid-Cap Growth Funds Average is an equally weighted average of mutual funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lippers U.S. Diversified Equity large-cap floor. Mid-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P MidCap 400 Index.
MSCI Emerging Markets (MSCI EM) Index is an index that captures the large- and mid-cap representation across 23 Emerging Markets (EM) countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
MSCI Golden Dragon Index is an index that captures the equity market performance of large- and mid-cap China securities (H shares, B shares, Red-Chips and P-Chips) and non-domestic China securities listed in Hong Kong and Taiwan.
MSCI World Index is a free float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 23 developed market country indexes: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Russell 1000® Growth Index is an index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2500 Growth Index is an index that measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values.
Standard & Poors 500 (S&P 500) Index is an index that is widely regarded as a gauge of the U.S. equities market. This index includes 500 leading companies in leading industries of the U.S. economy. The S&P 500 Index focuses on the large-cap segment of the market, with approximately 80% coverage of U.S. equities.
Lipper is an independent mutual fund performance monitor whose results are based on total return and do not reflect a sales charge.
Securities indices are unmanaged and assume reinvestment of all distributions and interest payments and do not take in account brokerage fees or expenses. Securities in the Funds do not match those in the indices and performance of the Funds will differ. Investors cannot invest directly in an index.
2 HSBC FAMILY OF FUNDS
Commentary From the Investment Manager |
HSBC Global Asset Management (USA) Inc. |
Global Economic Review
The global economy faced significant headwinds during the 12-month period from November 1, 2014, to October 31, 2015. Slowing economic growth in China and other emerging economies led equities lower. Developed economies fared better, however: The U.S. economy showed signs of continued recovery and the eurozone economy regained its footing after several years of slow growth.
Commodity prices generally remained low during the period, continuing a period of consolidation that began in 2011. Oil prices declined sharply early in the period, however. These declines added to existing pressures on oil-exporting emerging economies and oil-dependent sectors. Energy companies saw diminished earnings and oil and mining production declined.
Central bank policy in many economies was a source of investor uncertainty. China took steps to devalue its currency in August, triggering a dive in its stock market. However, several important monetary programs in other economies benefited equities. Quantitative easing programs in Europe and Japan both improved liquidity and helped buoy equity markets.
Throughout much of the period, investors anticipated action by the U.S. Federal Reserve (the Fed) to raise the federal funds ratea key factor in lending ratesabove the target range of between 0.00% and 0.25%. However, the Fed decided multiple times during the period to keep rates at near-zero levels, due in part to concerns about turbulence in foreign markets and the relatively slow economic recovery in the U.S. The Feds delays added to investor uncertainty.
The U.S. economy grew at a slower rate than in recent years. Early in 2015, harsh winter weather on the East Coast dealt a blow to consumer consumption and a West Coast dockworkers strike slowed international trade. Growth picked up later in the period but some key areas of the economy showed signs of weakness. In particular, industrial production, manufacturing, and business confidence declined during the period. Meanwhile, low oil and gas prices hurt the energy sector but also contributed to a sharp uptick in auto sales.
Other areas of the U.S. economy showed signs of improvement throughout the period. The labor market continued to improve, consumer confidence hit multi-year highs, and the housing market remained robust.
Global inflation remained low during the period. A strong U.S. dollar, which rose rapidly early in the period and remained strong through October 2015, encouraged U.S. imports and discouraged exports. The strong dollar took a toll on commodity-dependent economies and posed challenges for emerging market issuers of dollar-denominated debt.
Chinas ongoing transition to slower economic growth had a profound impact on economies throughout the world, exacerbated by a sharp downturn in Chinese equities and currency depreciation.
Economic growth picked up in the eurozone during the period, supported by the European Central Banks accommodative monetary policy and improving credit conditions. However, the debt crisis in Greece continued to undermine European economic recovery early in the period.
Japanese stocks rallied throughout much of the period as the nations economic growth improved in large part due to Prime Minister Shinzo Abes economic plan, known as Abenomics. The program involved higher taxes, structural reforms, and quantitative easing. Japanese equities gave up much of their gains in August 2015, however, in-step with many other global equity markets. Additionally, in that month a sharp decline in Chinese equities fueled fears that a slowing economy in China could jeopardize the global economic recovery.
Geopolitical turmoil weighed on the global economy during the period, and particularly affected countries such as Russia. Conflict in the Ukraine led to stronger economic sanctions against Russia, dealing a further blow to an economy already hard hit by low oil prices. Inflation soared in Russia while exports plummeted.
Market Review
Global equities made modest but inconsistent gains during the first half of the period, but lost ground in most cases during the late summer and fall. Volatility spiked in August as a Chinese stock sell-off spread to emerging markets and triggered volatility throughout the world. The MSCI EM Index1 finished the period with a 14.22% loss. The MSCI Golden Dragon Index1 of large- and mid-cap securities in China, Hong Kong and Taiwan also fell, posting a -2.99% return. Developed markets fared better despite the increased volatility, with the MSCI World Index1 returning 2.33% on relatively strong gains late in the period.
U.S. equities performed modestly well for the period; the S&P 500 Index1 of large-company stocks returned 5.20%. Robust merger and acquisition activity, as well as strong corporate earnings growth, helped fuel those gains. Performance was uneven across sectors, however. The energy sector saw the largest losses during the period due to declining oil prices, and health care stocks performed poorly.
Fixed income markets in developed economies made modest gains. U.S. interest rates decreased in late 2014 and early 2015, boosting the performance of U.S. Treasuries and many other categories of bonds. Rates rose slightly over the next several months in anticipation of higher interest rates, only to decline as the Fed chose to postpone a rate increase. The Barclays U.S. Aggregate Bond Index1, which tracks the broad investment-grade fixed-income market, returned 1.96% for the 12-month period through October 31. Meanwhile the Barclays U.S. Corporate High-Yield Bond Index1 declined 1.94% for the same period.
Fixed-income markets in Europe rallied throughout the period, fueled by the European Central Banks bond-buying program and assurances from its president that it would expand stimulus efforts and further lower interest rates if necessary. The Barclays Euro Aggregate Bond Index1 returned 3.35%.
Emerging markets debt experienced volatility during the period caused by a strengthening U.S. dollar and an ongoing decline in commodity prices. Monetary easing measures from some central banks served to lower government bond yields in developed and emerging markets countries, however, which helped boost returns. The Barclays Emerging Markets USD Aggregate Index1 returned 0.02% during the 12-month period.
1 | For additional information, please refer to the Glossary of Terms. |
HSBC FAMILY OF FUNDS 3
Portfolio Reviews (Unaudited) |
HSBC Growth Fund |
(Class A Shares, Class B Shares, Class C Shares and Class I Shares) |
by Clark J. Winslow, CEO/Portfolio
Manager
Justin H. Kelly, CFA, CIO/Portfolio Manager
Patrick M. Burton, CFA, Managing Director/Portfolio
Manager
Winslow Capital Management, LLC
The HSBC Growth Fund (the Fund) seeks long-term growth of capital. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities of high-quality companies with market capitalizations generally in excess of $2 billion, which the subadviser believes have the potential to generate superior levels of long-term profitability and growth. The Fund utilizes a two-tier structure, commonly known as a master-feeder structure, in which the Fund invests all of its investable assets in the HSBC Growth Portfolio (the Portfolio). The Portfolio employs Winslow Capital Management, LLC as its subadviser.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities.
The growth investment style may fall out of favor in the marketplace and result in significant declines in the value of the Portfolios securities. Securities of companies considered to be growth investments may have rapid price swings in the event of earnings disappointments or during periods of market, political, regulatory and economic uncertainty.
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability and fluctuations in currency and exchange rates. For a complete description of these and other risks associated with investment in a mutual fund, please refer to the Funds prospectus.
Market Commentary
For the year ended October 31, 2015, the Fund returned 8.15% (without sales charge) for the Class A Shares and 8.44% for the Class I Shares. That compared to a 9.18% total return for the Russell 1000® Growth Index1, the Funds primary performance benchmark, and a 7.90% total return for the Lipper Large-Cap Growth Funds Average1.
Portfolio Performance
The equity markets during the period were influenced by several factors, including slowing economic growth in China and weak prices for commodities such as oil. Inflation and interest rates continued to be low across developed countries, and the Federal Reserve (the Fed) decided to keep U.S. interest rates at near-zero levels. However, modest economic growth and strong corporate earnings and robust mergers-and-acquisition activity fueled modest gains among domestic stocks. In this environment, U.S. large-cap growth equities performed well during this period.
Stock selection in the health care and financials sectors dragged on the Funds relative performance. In the health care sector, the Fund was hurt by holdings of a specialty pharmaceuticals firm, which underperformed amid questions about industry-wide pharmaceutical pricing practices and company-specific issues surrounding accounting and operating practices. Meanwhile, the Feds decisions to leave interest rates unchanged negatively affected some companies in the financials sector. Additionally, the Funds relative performance was hurt by an underweight in the consumer staples sector, which performed well as investors sought stability during the period from rising market volatility.
The Funds relative performance benefited from underweight investments in the energy and industrial sectors. Falling commodity prices contributed to poor performance in these sectors. The Fund also benefited from stock selection in the consumer discretionary and telecommunications sectors. Among consumer discretionary stocks, the Funds exposure to an athletic apparel company with strong global revenue growth boosted relative returns.
|
Portfolio composition is subject to change. | |
1 |
For additional information, please refer to the Glossary of Terms. |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Investment return and principal value will fluctuate so that an investors shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183.
4 HSBC FAMILY OF FUNDS
Portfolio Reviews (Unaudited) |
HSBC Growth Fund |
The charts above represent a historical 10-year performance comparison of a hypothetical investment in the indicated share class versus a similar investment in the Funds benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual | Expense | |||||||||||
Fund Performance | Total Return (%) | Ratio (%)6 | ||||||||||
Inception | ||||||||||||
As of October 31, 2015 | Date | 1 Year | 5 Year | 10 Year | Gross | Net | ||||||
HSBC Growth Fund Class A1 | 5/7/045 | 2.76 | 12.89 | 8.45 | 1.33 | 1.20 | ||||||
HSBC Growth Fund Class B2 | 5/7/045 | 3.77 | 13.21 | 8.51 | 2.08 | 1.95 | ||||||
HSBC Growth Fund Class C3 | 5/7/045 | 6.48 | 13.20 | 8.19 | 2.08 | 1.95 | ||||||
HSBC Growth Fund Class I | 5/7/045 | 8.44 | 14.36 | 9.28 | 1.08 | 0.95 | ||||||
Russell 1000® Growth Index4 | | 9.18 | 15.30 | 9.09 | N/A | N/A | ||||||
Lipper Large-Cap Growth Funds Average4 | | 7.90 | 13.81 | 8.09 | N/A | N/A |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Investment return and principal value will fluctuate so that an investors shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183.
The performance above reflects any fee waivers that have been in effect during the applicable periods, as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. Currently, contractual fee waivers are in effect for the Fund through March 1, 2016.
Certain returns shown include monies received by the Portfolio, in which the Fund invests, in respect of one-time class action settlements and a one-time reimbursement from HSBC Global Asset Management (USA) Inc. (the Adviser) to the Fund related to past marketing arrangements. As a result, the Funds total returns for those periods were higher than they would have been had the Portfolio and the Fund not received the payments.
1 | Reflects the maximum sales charge of 5.00%. | |
2 | Reflects the applicable contingent deferred sales charge, maximum of 4.00%. | |
3 | Reflects the applicable contingent deferred sales charge, maximum of 1.00%. | |
4 | For additional information, please refer to the Glossary of Terms. | |
5 | The HSBC Growth Fund was initially offered for purchase effective May 7, 2004; however, no shareholder activity occurred until May 10, 2004. | |
6 | Reflects the expense ratios as reported in the prospectus dated February 27, 2015. The Adviser has entered into a contractual expense limitation agreement with the Fund under which it will limit total expenses of the Fund (excluding interest, taxes, brokerage commissions, extraordinary expenses and estimated indirect expenses attributable to the Funds investments in investment companies other than the Portfolio) to an annual rate of 1.20%, 1.95%, 1.95% and 0.95% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. The expense limitation shall be in effect until March 1, 2016. Additional information pertaining to the October 31, 2015 expense ratios can be found in the financial highlights. |
The Funds performance is measured against the Russell 1000® Growth Index, an unmanaged index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index.
HSBC FAMILY OF FUNDS 5
Portfolio Reviews (Unaudited) |
HSBC Opportunity Fund (Advisor) |
(Class I Shares) |
HSBC Opportunity Fund |
(Class A Shares, Class B Shares and Class C Shares) |
by William A. Muggia, Committee
Lead/Portfolio Manager
Ethan J. Myers, CFA, Portfolio Manager
John M.
Montgomery, Portfolio Manager
D. Hamlen Thompson, Portfolio Manager
Bruce
N. Jacobs, CFA, Portfolio Manager
Westfield Capital Management Company,
L.P.
The HSBC Opportunity Fund and HSBC Opportunity Fund (Advisor) (collectively the Fund) seek long-term growth of capital by investing, under normal market conditions, primarily in equity securities of small- and mid-cap companies. Small- and mid-cap companies generally are defined as those that have market capitalizations within the range of market capitalizations represented in the Russell 2500 Growth Index. The Fund may also invest in equity securities of larger, more established companies and may invest up to 20% of its assets in securities of foreign companies. The Fund employs a two-tier structure, commonly referred to as a master-feeder structure, in which the Fund invests all of its investable assets in the HSBC Opportunity Portfolio (the Portfolio). The Portfolio employs Westfield Capital Management Company, L.P. as its subadviser.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities.
Small- to mid-capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure, and historically, their stocks have experienced a greater degree of market volatility than stocks on average.
The growth investment style may fall out of favor in the marketplace and result in significant declines in the value of the Portfolios securities. Securities of companies considered to be growth investments may have rapid price swings in the event of earnings disappointments or during periods of market, political, regulatory and economic uncertainty.
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability and fluctuations in currency and exchange rates.
For a complete description of these and other risks associated with investment in a mutual fund, please refer to the Funds prospectus.
Market Commentary
For the year ended October 31, 2015, the Class I Shares of the HSBC Opportunity Fund (Advisor) produced a -1.69% total return, and the Class A Shares of the Fund produced a -2.21% total return (without sales charge). The Russell 2500 Growth Index1, the Funds primary performance benchmark, and the Lipper Mid-Cap Growth Funds Average1 returned 4.17% and 2.90%, respectively.
Portfolio Performance
Global equity markets were challenged by economic weakness in Europe and China, and a glut in U.S. shale oil production contributed to weakness in energy prices. That led to poor performance among many areas of the energy market. In addition the economic weakness outside of the United States contributed to a decline in the materials sector as investors reacted to poor earnings posted by materials producers. However, U.S. stocks performed relatively well due in part to robust mergers-and-acquisition activity within health care and better-than-expected corporate earnings growth in the consumer discretionary and information technology sectors.
The Fund underperformed its benchmark for the 12-month period. The largest detractor from the Funds relative returns was stock selection in the health care sector, particularly individual holdings of pharmaceutical firms and health care facilities. The Fund was hurt by exposure to Pacira Pharmaceuticals, which posted weak quarterly results in April and investors responded negatively to unclear sales projections and news of a potential competitor to the firms popular pain treatment.
Meanwhile, the Funds holdings in the consumer discretionary and information technology sectors boosted relative returns. These holdings benefited from improving confidence and spending on the part of the U.S. consumer.
Among consumer discretionary stocks, the Funds holdings of a cosmetics retailer added to relative returns as the company enjoyed strong online and in-store sales growth.
|
Portfolio composition is subject to change. | |
1 |
For additional information, please refer to the Glossary of Terms. |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Investment return and principal value will fluctuate so that an investors shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183.
6 HSBC FAMILY OF FUNDS
Portfolio Reviews (Unaudited) |
HSBC Opportunity Fund |
The charts above represent a historical 10-year performance comparison of a hypothetical investment in the indicated share class versus a similar investment in the Funds benchmark and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual | Expense | |||||||||||
Fund Performance | Total Return (%) | Ratio (%)5 | ||||||||||
Inception | ||||||||||||
As of October 31, 2015 | Date | 1 Year | 5 Year | 10 Year | Gross | Net | ||||||
HSBC Opportunity Fund Class A1 | 9/23/96 | -7.13 | 11.68 | 9.75 | 1.86 | 1.65 | ||||||
HSBC Opportunity Fund Class B2 | 1/6/98 | -5.86 | 11.99 | 9.81 | 2.61 | 2.40 | ||||||
HSBC Opportunity Fund Class C3 | 11/4/98 | -3.68 | 11.98 | 9.49 | 2.61 | 2.40 | ||||||
HSBC Opportunity Fund (Advisor) Class I | 9/3/96 | -1.69 | 13.40 | 10.77 | 1.00 | 1.00 | ||||||
Russell 2500 Growth Index4 | | 4.17 | 14.25 | 9.29 | N/A | N/A | ||||||
Lipper Mid-Cap Growth Funds Average4 | | 2.90 | 12.25 | 7.95 | N/A | N/A |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Investment return and principal value will fluctuate so that an investors shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183.
The performance above reflects any fee waivers that have been in effect during the applicable periods, as well as any expense reimbursements that have periodically been made. Absent such waivers and reimbursements, returns would have been lower. Currently, contractual fee waivers are in effect for the Fund through March 1, 2016 for Class A Shares, Class B Shares and Class C Shares.
Certain returns shown include monies received by the Portfolio, in which the Fund invests, in respect of one-time class action settlements and a one-time reimbursement from HSBC Global Asset Management (USA) Inc. (the Adviser) to the Fund related to past marketing arrangements. As a result, the Funds total returns for those periods were higher than they would have been had the Portfolio and the Fund not received the payments.
| The Class I Shares are issued by a series of HSBC Advisor Funds Trust, also named the HSBC (Advisor) Fund. | |
1 | Reflects the maximum sales charge of 5.00%. | |
2 | Reflects the applicable contingent deferred sales charge, maximum of 4.00%. | |
3 | Reflects the applicable contingent deferred sales charge, maximum of 1.00%. | |
4 | For additional information, please refer to the Glossary of Terms. | |
5 | Reflects the expense ratios as reported in the prospectus dated February 27, 2015. The Adviser has entered into a contractual expense limitation agreement with the Fund under which it will limit total expenses of the Fund (excluding interest, taxes, brokerage commissions, extraordinary expenses and estimated indirect expenses attributable to the Funds investments in investment companies other than the Portfolio) to an annual rate of 1.65%, 2.40%, and 2.40% for Class A Shares, Class B Shares, and Class C Shares, respectively. The expense limitation shall be in effect until March 1, 2016. Additional information pertaining to the October 31, 2015 expense ratios can be found in the financial highlights. |
The Funds performance is measured against the Russell 2500 Growth Index, an unmanaged index that measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values. The performance for the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index.
HSBC FAMILY OF FUNDS 7
HSBC FAMILY OF FUNDS
Statements of Assets and Liabilitiesas of October 31, 2015
Opportunity | |||||||||||||||||
Growth | Opportunity | Fund | |||||||||||||||
Fund | Fund | (Advisor) | |||||||||||||||
Assets: | |||||||||||||||||
Investments in Affiliated Portfolios | $ | 77,523,631 | $ | 17,632,731 | $ | 219,962,011 | |||||||||||
Receivable for capital shares issued | 20,264 | 1,279 | 39,271 | ||||||||||||||
Receivable from Investment Adviser | | 952 | | ||||||||||||||
Prepaid expenses | 10,652 | 5,925 | 6,685 | ||||||||||||||
Total Assets | 77,554,547 | 17,640,887 | 220,007,967 | ||||||||||||||
Liabilities: | |||||||||||||||||
Payable for capital shares redeemed | 34,572 | 72 | 100,897 | ||||||||||||||
Accrued expenses and other payables: | |||||||||||||||||
Investment Management | 8,677 | | | ||||||||||||||
Administration | 1,500 | 346 | 4,328 | ||||||||||||||
Distribution fees | 513 | 633 | | ||||||||||||||
Shareholder Servicing | 2,847 | 2,801 | | ||||||||||||||
Compliance Services | 7 | 6 | 11 | ||||||||||||||
Accounting | 4,000 | 3,166 | 1,498 | ||||||||||||||
Transfer Agent | 17,914 | 15,768 | 21,535 | ||||||||||||||
Trustee | 353 | 82 | 1,025 | ||||||||||||||
Other | 20,077 | 21,589 | 33,058 | ||||||||||||||
Total Liabilities | 90,460 | 44,463 | 162,352 | ||||||||||||||
Net Assets | $ | 77,464,087 | $ | 17,596,424 | $ | 219,845,615 | |||||||||||
Composition of Net Assets: | |||||||||||||||||
Capital | 52,132,853 | 15,723,119 | 195,911,715 | ||||||||||||||
Accumulated net investment income/(loss) | (182,413 | ) | (160,996 | ) | (617,681 | ) | |||||||||||
Accumulated net realized gains/(losses) from investments | 7,300,752 | (192,900 | ) | (1,323,547 | ) | ||||||||||||
Net unrealized appreciation (depreciation) on investments | 18,212,895 | 2,227,201 | 25,875,128 | ||||||||||||||
Net Assets | $ | 77,464,087 | $ | 17,596,424 | $ | 219,845,615 | |||||||||||
Net Assets: | |||||||||||||||||
Class A Shares | $ | 13,265,336 | $ | 16,592,876 | $ | | |||||||||||
Class B Shares | 170,335 | 178,336 | | ||||||||||||||
Class C Shares | 658,654 | 825,212 | | ||||||||||||||
Class I Shares | 63,369,762 | | 219,845,615 | ||||||||||||||
Total | $ | 77,464,087 | $ | 17,596,424 | $ | 219,845,615 | |||||||||||
Shares Outstanding: | |||||||||||||||||
($0.001 par value, unlimited number of shares authorized): | |||||||||||||||||
Class A Shares | 654,980 | 1,605,487 | | ||||||||||||||
Class B Shares | 10,001 | 25,343 | | ||||||||||||||
Class C Shares | 38,319 | 112,732 | | ||||||||||||||
Class I Shares | 3,033,788 | | 16,025,684 | ||||||||||||||
Net Asset Value, Offering Price and Redemption Price per share: | |||||||||||||||||
Class A Shares | $ | 20.25 | $ | 10.34 | $ | | |||||||||||
Class B Shares(a) | $ | 17.03 | $ | 7.04 | $ | | |||||||||||
Class C Shares(a) | $ | 17.19 | $ | 7.32 | $ | | |||||||||||
Class I Shares | $ | 20.89 | $ | | $ | 13.72 | |||||||||||
Maximum Sales Charge: | |||||||||||||||||
Class A Shares | 5.00 | % | 5.00 | % | | % | |||||||||||
Maximum Offering Price per share | |||||||||||||||||
(Net Asset Value / (100%-maximum sales charge)) | |||||||||||||||||
Class A Shares | $ | 21.32 | $ | 10.88 | $ | |
(a) |
Redemption Price per share varies by length of time shares are held. |
8 HSBC FAMILY OF FUNDS | See notes to financial statements. |
HSBC FAMILY OF FUNDS
Statements of OperationsFor the year ended October 31, 2015
Opportunity | |||||||||||||||||
Growth | Opportunity | Fund | |||||||||||||||
Fund | Fund | (Advisor) | |||||||||||||||
Investment Income: | |||||||||||||||||
Investment Income from Affiliated Portfolios | $ | 576,159 | $ | 128,290 | $ | 1,478,226 | |||||||||||
Expenses from Affiliated Portfolios | (551,268 | ) | (164,405 | ) | (1,894,258 | ) | |||||||||||
Total Investment Income | 24,891 | (36,115 | ) | (416,032 | ) | ||||||||||||
Expenses: | |||||||||||||||||
Administration: | |||||||||||||||||
Class A Shares | 3,171 | 4,226 | | ||||||||||||||
Class B Shares | 56 | 63 | | ||||||||||||||
Class C Shares | 158 | 198 | | ||||||||||||||
Class I Shares | 15,041 | | 51,691 | ||||||||||||||
Distribution: | |||||||||||||||||
Class B Shares | 1,750 | 1,961 | | ||||||||||||||
Class C Shares | 4,937 | 6,186 | | ||||||||||||||
Shareholder Servicing: | |||||||||||||||||
Class A Shares | 32,632 | 39,034 | | ||||||||||||||
Class B Shares | 583 | 654 | | ||||||||||||||
Class C Shares | 1,646 | 2,062 | | ||||||||||||||
Accounting | 23,999 | 18,998 | 8,997 | ||||||||||||||
Compliance Services | 815 | 203 | 2,231 | ||||||||||||||
Printing | 14,510 | 5,471 | 17,055 | ||||||||||||||
Professional | 21,875 | 17,374 | 26,919 | ||||||||||||||
Transfer Agent | 55,122 | 50,324 | 61,581 | ||||||||||||||
Administrative Services | 21,610 | 5,917 | 29,935 | ||||||||||||||
Trustee | 2,344 | 564 | 6,496 | ||||||||||||||
Registration fees | 31,526 | 26,934 | 20,572 | ||||||||||||||
Other | 7,625 | 7,321 | 14,916 | ||||||||||||||
Total expenses before fee and expense reductions | 239,400 | 187,490 | 240,393 | ||||||||||||||
Fees voluntarily reduced/reimbursed by Investment Adviser | | (18,712 | ) | | |||||||||||||
Fees contractually reduced/reimbursed by Investment Adviser | (18,904 | ) | (34,993 | ) | | ||||||||||||
Net Expenses | 220,496 | 133,785 | 240,393 | ||||||||||||||
Net Investment Income (Loss) | (195,605 | ) | (169,900 | ) | (656,425 | ) | |||||||||||
Realized/Unrealized Gains/(Losses) from Investments: | |||||||||||||||||
Net realized gains/(losses) from investments from Affiliated Portfolios | 9,076,016 | (126,642 | ) | (1,250,197 | ) | ||||||||||||
Change in unrealized appreciation/depreciation on investments from Affiliated Portfolios | (2,676,864 | ) | (71,319 | ) | (3,000,512 | ) | |||||||||||
Net realized/unrealized gains (losses) on investments from Affiliated Portfolios | 6,399,152 | (197,961 | ) | (4,250,709 | ) | ||||||||||||
Change in Net Assets Resulting from Operations | $ | 6,203,547 | $ | (367,861 | ) | $ | (4,907,134 | ) |
See notes to financial statements. | HSBC FAMILY OF FUNDS 9 |
HSBC FAMILY OF FUNDS
Statements of Changes in Net Assets
Growth Fund | Opportunity Fund | ||||||||||||||||||||
For the | For the | For the | For the | ||||||||||||||||||
year ended | year ended | year ended | year ended | ||||||||||||||||||
October 31, 2015 | October 31, 2014 | October 31, 2015 | October 31, 2014 | ||||||||||||||||||
Investment Activities: | |||||||||||||||||||||
Operations: | |||||||||||||||||||||
Net investment income (loss) | $ | (195,605 | ) | $ | (190,388 | ) | $ | (169,900 | ) | $ | (182,586 | ) | |||||||||
Net realized gains (losses) from investments | 9,076,016 | 12,286,957 | (126,642 | ) | 3,388,218 | ||||||||||||||||
Change in unrealized appreciation/depreciation | |||||||||||||||||||||
on investments | (2,676,864 | ) | (838,892 | ) | (71,319 | ) | (1,436,875 | ) | |||||||||||||
Change in net assets resulting from operations | 6,203,547 | 11,257,677 | (367,861 | ) | 1,768,757 | ||||||||||||||||
Distributions: | |||||||||||||||||||||
Net realized gains: | |||||||||||||||||||||
Class A Shares | (2,019,395 | ) | (1,473,999 | ) | (3,049,523 | ) | (1,492,680 | ) | |||||||||||||
Class B Shares | (54,222 | ) | (61,772 | ) | (79,546 | ) | (63,060 | ) | |||||||||||||
Class C Shares | (115,977 | ) | (91,036 | ) | (180,411 | ) | (103,788 | ) | |||||||||||||
Class I Shares | (9,610,318 | ) | (7,953,745 | ) | | | |||||||||||||||
Change in net assets resulting from | |||||||||||||||||||||
distributions | (11,799,912 | ) | (9,580,552 | ) | (3,309,480 | ) | (1,659,528 | ) | |||||||||||||
Change in net assets resulting from | |||||||||||||||||||||
capital transactions | 4,231,099 | (5,327,302 | ) | 4,007,938 | 1,706,742 | ||||||||||||||||
Change in net assets | (1,365,266 | ) | (3,650,177 | ) | 330,597 | 1,815,971 | |||||||||||||||
Net Assets: | |||||||||||||||||||||
Beginning of period | 78,829,353 | 82,479,530 | 17,265,827 | 15,449,856 | |||||||||||||||||
End of period | $ | 77,464,087 | $ | 78,829,353 | $ | 17,596,424 | $ | 17,265,827 | |||||||||||||
Accumulated net investment income (loss) | $ | (182,413 | ) | $ | (191,800 | ) | $ | (160,996 | ) | $ | (62,315 | ) |
10 HSBC FAMILY OF FUNDS | See notes to financial statements. |
HSBC FAMILY OF FUNDS
Statements of Changes in Net Assets (continued)
Growth Fund | Opportunity Fund | ||||||||||||||||||||
For the | For the | For the | For the | ||||||||||||||||||
year ended | year ended | year ended | year ended | ||||||||||||||||||
October 31, 2015 | October 31, 2014 | October 31, 2015 | October 31, 2014 | ||||||||||||||||||
CAPITAL TRANSACTIONS: | |||||||||||||||||||||
Class A Shares: | |||||||||||||||||||||
Proceeds from shares issued | $ | 911,998 | $ | 496,557 | $ | 5,620,192 | $ | 1,938,423 | |||||||||||||
Dividends reinvested | 1,980,018 | 1,426,628 | 3,006,950 | 1,468,888 | |||||||||||||||||
Value of shares redeemed | (2,152,764 | ) | (1,492,047 | ) | (4,754,026 | ) | (1,701,878 | ) | |||||||||||||
Class A Shares capital transactions | 739,252 | 431,138 | 3,873,116 | 1,705,433 | |||||||||||||||||
Class B Shares: | |||||||||||||||||||||
Dividends reinvested | 54,223 | 61,488 | 79,546 | 63,060 | |||||||||||||||||
Value of shares redeemed | (156,812 | ) | (228,368 | ) | (157,482 | ) | (190,960 | ) | |||||||||||||
Class B Shares capital transactions | (102,589 | ) | (166,880 | ) | (77,936 | ) | (127,900 | ) | |||||||||||||
Class C Shares: | |||||||||||||||||||||
Proceeds from shares issued | 169,529 | 195,573 | 169,225 | 219,440 | |||||||||||||||||
Dividends reinvested | 115,977 | 89,319 | 180,411 | 102,306 | |||||||||||||||||
Value of shares redeemed | (324,235 | ) | (126,331 | ) | (136,878 | ) | (192,537 | ) | |||||||||||||
Class C Shares capital transactions | (38,729 | ) | 158,561 | 212,758 | 129,209 | ||||||||||||||||
Class I Shares: | |||||||||||||||||||||
Proceeds from shares issued | 7,960,947 | 12,675,493 | | | |||||||||||||||||
Dividends reinvested | 9,568,372 | 7,911,912 | | | |||||||||||||||||
Value of shares redeemed | (13,896,154 | ) | (26,337,526 | ) | | | |||||||||||||||
Class I Shares capital transactions | 3,633,165 | (5,750,121 | ) | | | ||||||||||||||||
Change in net assets resulting from capital transactions | $ | 4,231,099 | $ | (5,327,302 | ) | $ | 4,007,938 | $ | 1,706,742 | ||||||||||||
SHARE TRANSACTIONS: | |||||||||||||||||||||
Class A Shares: | |||||||||||||||||||||
Issued | 46,411 | 24,260 | 501,383 | 154,943 | |||||||||||||||||
Reinvested | 103,395 | 70,451 | 276,374 | 121,096 | |||||||||||||||||
Redeemed | (106,044 | ) | (70,856 | ) | (428,289 | ) | (135,770 | ) | |||||||||||||
Change in Class A Shares | 43,762 | 23,855 | 349,468 | 140,269 | |||||||||||||||||
Class B Shares: | |||||||||||||||||||||
Reinvested | 3,345 | 3,464 | 10,677 | 6,968 | |||||||||||||||||
Redeemed | (9,435 | ) | (12,832 | ) | (20,497 | ) | (20,434 | ) | |||||||||||||
Change in Class B Shares | (6,090 | ) | (9,368 | ) | (9,820 | ) | (13,466 | ) | |||||||||||||
Class C Shares: | |||||||||||||||||||||
Issued | 10,255 | 10,381 | 20,593 | 22,638 | |||||||||||||||||
Reinvested | 7,089 | 4,996 | 23,278 | 10,965 | |||||||||||||||||
Redeemed | (18,438 | ) | (6,864 | ) | (14,948 | ) | (19,935 | ) | |||||||||||||
Change in Class C Shares | (1,094 | ) | 8,513 | 28,923 | 13,668 | ||||||||||||||||
Class I Shares: | |||||||||||||||||||||
Issued | 385,567 | 602,647 | | | |||||||||||||||||
Reinvested | 485,458 | 382,218 | | | |||||||||||||||||
Redeemed | (676,361 | ) | (1,244,759 | ) | | | |||||||||||||||
Change in Class I Shares | 194,664 | (259,894 | ) | | |
See notes to financial statements. | HSBC FAMILY OF FUNDS 11 |
HSBC FAMILY OF FUNDS
Statements of Changes in Net Assets (continued)
Opportunity Fund (Advisor) | ||||||||||
For the | For the | |||||||||
year ended | year ended | |||||||||
October 31, 2015 | October 31, 2014 | |||||||||
Investment Activities: | ||||||||||
Operations: | ||||||||||
Net investment income (loss) | $ | (656,425 | ) | $ | (1,025,940 | ) | ||||
Net realized gains (losses) from investments | (1,250,197 | ) | 43,323,713 | |||||||
Change in unrealized appreciation/depreciation on investments | (3,000,512 | ) | (18,084,143 | ) | ||||||
Change in net assets resulting from operations | (4,907,134 | ) | 24,213,630 | |||||||
Distributions: | ||||||||||
Net investment income: | ||||||||||
Class I Shares | | (433,947 | ) | |||||||
Net realized gains: | ||||||||||
Class I Shares | (42,957,976 | ) | (21,203,571 | ) | ||||||
Change in net assets resulting from distributions | (42,957,976 | ) | (21,637,518 | ) | ||||||
Change in net assets resulting from capital transactions | 62,474,171 | (5,660,696 | ) | |||||||
Change in net assets | 14,609,061 | (3,084,584 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 205,236,554 | 208,321,138 | ||||||||
End of period | $ | 219,845,615 | $ | 205,236,554 | ||||||
Accumulated net investment income (loss) | $ | (617,681 | ) | $ | (587,018 | ) |
12 HSBC FAMILY OF FUNDS | See notes to financial statements. |
HSBC FAMILY OF FUNDS
Statements of Changes in Net Assets (continued)
Opportunity Fund (Advisor) | ||||||||||
For the | For the | |||||||||
year ended | year ended | |||||||||
October 31, 2015 | October 31, 2014 | |||||||||
CAPITAL TRANSACTIONS: | ||||||||||
Class I Shares: | ||||||||||
Proceeds from shares issued | $ | 53,094,557 | $ | 23,221,586 | ||||||
Dividends reinvested | 42,818,632 | 21,593,694 | ||||||||
Value of shares redeemed | (33,439,018 | ) | (50,475,976 | ) | ||||||
Class I Shares capital transactions | 62,474,171 | (5,660,696 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 62,474,171 | $ | (5,660,696 | ) | |||||
SHARE TRANSACTIONS: | ||||||||||
Class I Shares: | ||||||||||
Issued | 3,581,286 | 1,349,096 | ||||||||
Reinvested | 2,979,724 | 1,308,790 | ||||||||
Redeemed | (2,286,235 | ) | (2,969,584 | ) | ||||||
Change in Class I Shares | 4,274,775 | (311,698 | ) |
See notes to financial statements. | HSBC FAMILY OF FUNDS 13 |
HSBC GROWTH FUND |
Financial Highlights |
Select data for a share outstanding throughout the periods indicated.*
Investment Activities | Distributions | Ratios/Supplementary Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||
of Net | Ratio | |||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized | Net | Net | Ratio | Investment | of Expenses | |||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | and Unrealized | Net Realized | Asset | Assets | of Net | Income | to Average | ||||||||||||||||||||||||||||||||||||||||||
Value, | Investment | Gains | Total from | Net | Gains from | Value, | at End | Expenses | (Loss) to | Net Assets | Portfolio | |||||||||||||||||||||||||||||||||||||||
Beginning | Income | (Losses) from | Investment | Investment | Investment | Total | End of | Total | of Period | to Average | Average | (Excluding Fee | Turnover | |||||||||||||||||||||||||||||||||||||
of Period | (Loss)(a) | Investments | Activities | Income | Transactions | Distributions | Period | Return(b) | (000s) | Net Assets | Net Assets | Reductions) | (c) | |||||||||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | $ | 22.09 | $ | (0.09 | ) | $ | 1.69 | $ | 1.60 | $ | | $ | (3.44 | ) | $ | (3.44 | ) | $ | 20.25 | 8.15 | %(d) | $ | 13,265 | 1.20 | % | (0.45 | )% | 1.22 | % | 68 | % | |||||||||||||||||||
Year Ended October 31, 2014 | 21.73 | (0.09 | ) | 3.03 | 2.94 | | (2.58 | ) | (2.58 | ) | 22.09 | 14.59 | % | 13,504 | 1.20 | % | (0.44 | )% | 1.21 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2013 | 17.69 | (0.01 | ) | 5.34 | 5.33 | | (1.29 | ) | (1.29 | ) | 21.73 | 32.24 | %(d) | 12,761 | 1.20 | % | (0.05 | )% | 1.21 | % | 75 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2012 | 16.59 | (0.06 | ) | 1.16 | 1.10 | | | | 17.69 | 6.63 | %(d) | 11,327 | 1.20 | % | (0.36 | )% | 1.27 | % | 53 | % | ||||||||||||||||||||||||||||||
Year Ended October 31, 2011 | 15.02 | (0.07 | ) | 1.64 | 1.57 | | | | 16.59 | 10.45 | %(d) | 15,349 | 1.18 | % | (0.45 | )% | 1.18 | % | 56 | % | ||||||||||||||||||||||||||||||
Class B Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | 19.24 | (0.20 | ) | 1.43 | 1.23 | | (3.44 | ) | (3.44 | ) | 17.03 | 7.32 | %(d) | 170 | 1.95 | % | (1.18 | )% | 1.97 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2014 | 19.36 | (0.21 | ) | 2.67 | 2.46 | | (2.58 | ) | (2.58 | ) | 19.24 | 13.81 | % | 310 | 1.95 | % | (1.17 | )% | 1.96 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2013 | 16.02 | (0.12 | ) | 4.75 | 4.63 | | (1.29 | ) | (1.29 | ) | 19.36 | 31.16 | %(d) | 493 | 1.95 | % | (0.72 | )% | 1.96 | % | 75 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2012 | 15.13 | (0.17 | ) | 1.06 | 0.89 | | | | 16.02 | 5.88 | %(d) | 621 | 1.95 | % | (1.10 | )% | 2.03 | % | 53 | % | ||||||||||||||||||||||||||||||
Year Ended October 31, 2011 | 13.80 | (0.18 | ) | 1.51 | 1.33 | | | | 15.13 | 9.64 | %(d) | 962 | 1.93 | % | (1.19 | )% | 1.93 | % | 56 | % | ||||||||||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | 19.38 | (0.21 | ) | 1.46 | 1.25 | | (3.44 | ) | (3.44 | ) | 17.19 | 7.37 | %(d) | 659 | 1.95 | % | (1.20 | )% | 1.97 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2014 | 19.49 | (0.22 | ) | 2.69 | 2.47 | | (2.58 | ) | (2.58 | ) | 19.38 | 13.76 | % | 764 | 1.95 | % | (1.19 | )% | 1.96 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2013 | 16.12 | (0.14 | ) | 4.80 | 4.66 | | (1.29 | ) | (1.29 | ) | 19.49 | 31.15 | %(d) | 602 | 1.95 | % | (0.81 | )% | 1.96 | % | 75 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2012 | 15.23 | (0.18 | ) | 1.07 | 0.89 | | | | 16.12 | 5.84 | %(d) | 482 | 1.95 | % | (1.14 | )% | 2.03 | % | 53 | % | ||||||||||||||||||||||||||||||
Year Ended October 31, 2011 | 13.89 | (0.18 | ) | 1.52 | 1.34 | | | | 15.23 | 9.65 | %(d) | 251 | 1.94 | % | (1.21 | )% | 1.94 | % | 56 | % | ||||||||||||||||||||||||||||||
Class I Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | 22.63 | (0.04 | ) | 1.74 | 1.70 | | (3.44 | ) | (3.44 | ) | 20.89 | 8.44 | %(d) | 63,370 | 0.95 | % | (0.20 | )% | 0.98 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2014 | 22.14 | (0.04 | ) | 3.11 | 3.07 | | (2.58 | ) | (2.58 | ) | 22.63 | 14.94 | % | 64,252 | 0.95 | % | (0.18 | )% | 0.96 | % | 68 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2013 | 17.99 | 0.04 | 5.42 | 5.46 | (0.02 | ) | (1.29 | ) | (1.31 | ) | 22.14 | 32.49 | %(d) | 68,624 | 0.95 | % | 0.20 | % | 0.96 | % | 75 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2012 | 16.83 | (0.02 | ) | 1.18 | 1.16 | | | | 17.99 | 6.89 | %(d) | 57,916 | 0.95 | % | (0.12 | )% | 1.04 | % | 53 | % | ||||||||||||||||||||||||||||||
Year Ended October 31, 2011 | 15.19 | (0.04 | ) | 1.68 | 1.64 | | | | 16.83 | 10.80 | %(d) | 57,222 | 0.94 | % | (0.22 | )% | 0.94 | % | 56 | % |
* |
The per share amounts and percentages reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the HSBC Growth Portfolio. |
(a) | Calculated based on average shares outstanding. |
(b) | Total return calculations do not include any sales or redemption charges. |
(c) | Portfolio turnover rate is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
(d) | The Portfolio, in which the Fund invests, received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.28%, 0.12%, 0.16% and 0.11% for the years ended October 31, 2011, 2012, 2013 and 2015, respectively. |
14 HSBC FAMILY OF FUNDS | See notes to financial statements. |
HSBC OPPORTUNITY FUND |
Financial Highlights |
Select data for a share outstanding throughout the periods indicated.*
Investment Activities | Distributions | Ratios/Supplementary Data | |||||||||||||||||||||||||||||||||||||||||||||||
Ratio | |||||||||||||||||||||||||||||||||||||||||||||||||
of Net | Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized | Net | Net | Ratio | Investment | of Expenses | ||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | and Unrealized | Net Realized | Asset | Assets | of Net | Income | to Average | |||||||||||||||||||||||||||||||||||||||||
Value, | Investment | Gains | Total from | Net | Gains from | Value, | at End | Expense | (Loss) to | Net Assets | Portfolio | ||||||||||||||||||||||||||||||||||||||
Beginning | Income | (Losses) from | Investment | Investment | Investment | Total | End of | Total | of Period | to Average | Average | (Excluding Fee | Turnover | ||||||||||||||||||||||||||||||||||||
of Period | (Loss)(a) | Investments | Activities | Income | Transactions | Distributions | Period | Return(b) | (000s) | Net Assets | Net Assets | Reductions) | (c) | ||||||||||||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | $ | 12.83 | $ | (0.10 | ) | $ | (0.07 | ) | $ | (0.17 | ) | $ | | $ | (2.32 | ) | $ | (2.32 | ) | $ | 10.34 | (2.21 | )% | $ | 16,593 | 1.55 | % | (0.86 | )% | 1.84 | % | 63 | % | ||||||||||||||||
Year Ended October 31, 2014 | 12.78 | (0.13 | ) | 1.53 | 1.40 | | (1.35 | ) | (1.35 | ) | 12.83 | 11.57 | % | 16,110 | 1.55 | % | (1.04 | )% | 1.86 | % | 66 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2013 | 10.13 | (0.06 | ) | 3.34 | 3.28 | | (0.63 | ) | (0.63 | ) | 12.78 | 34.02 | %(d) | 14,259 | 1.55 | % | (0.49 | )% | 2.01 | % | 70 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2012 | 10.63 | (0.05 | ) | 1.11 | 1.06 | | (1.56 | ) | (1.56 | ) | 10.13 | 12.08 | %(d) | 10,204 | 1.55 | % | (0.51 | )% | 2.20 | % | 59 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2011 | 9.67 | (0.07 | ) | 1.19 | 1.12 | | (0.16 | ) | (0.16 | ) | 10.63 | 11.59 | %(d) | 11,145 | 1.55 | % | (0.62 | )% | 1.85 | % | 69 | % | |||||||||||||||||||||||||||
Class B Shares | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | 9.51 | (0.13 | ) | (0.02 | ) | (0.15 | ) | | (2.32 | ) | (2.32 | ) | 7.04 | (2.90 | )% | 178 | 2.30 | % | (1.61 | )% | 2.60 | % | 63 | % | |||||||||||||||||||||||||
Year Ended October 31, 2014 | 9.87 | (0.16 | ) | 1.15 | 0.99 | | (1.35 | ) | (1.35 | ) | 9.51 | 10.74 | % | 334 | 2.30 | % | (1.74 | )% | 2.60 | % | 66 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2013 | 8.01 | (0.11 | ) | 2.60 | 2.49 | | (0.63 | ) | (0.63 | ) | 9.87 | 33.10 | %(d) | 480 | 2.30 | % | (1.24 | )% | 2.77 | % | 70 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2012 | 8.80 | (0.10 | ) | 0.87 | 0.77 | | (1.56 | ) | (1.56 | ) | 8.01 | 11.15 | %(d) | 499 | 2.30 | % | (1.25 | )% | 2.99 | % | 59 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2011 | 8.09 | (0.12 | ) | 0.99 | 0.87 | | (0.16 | ) | (0.16 | ) | 8.80 | 10.75 | %(d) | 536 | 2.30 | % | (1.36 | )% | 2.64 | % | 69 | % | |||||||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | 9.80 | (0.13 | ) | (0.03 | ) | (0.16 | ) | | (2.32 | ) | (2.32 | ) | 7.32 | (2.93 | )% | 825 | 2.30 | % | (1.61 | )% | 2.62 | % | 63 | % | |||||||||||||||||||||||||
Year Ended October 31, 2014 | 10.14 | (0.17 | ) | 1.18 | 1.01 | | (1.35 | ) | (1.35 | ) | 9.80 | 10.64 | % | 822 | 2.30 | % | (1.77 | )% | 2.61 | % | 66 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2013 | 8.21 | (0.11 | ) | 2.67 | 2.56 | | (0.63 | ) | (0.63 | ) | 10.14 | 33.15 | %(d) | 711 | 2.30 | % | (1.21 | )% | 2.76 | % | 70 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2012 | 8.98 | (0.10 | ) | 0.89 | 0.79 | | (1.56 | ) | (1.56 | ) | 8.21 | 11.14 | %(d) | 545 | 2.30 | % | (1.19 | )% | 3.03 | % | 59 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2011 | 8.25 | (0.13 | ) | 1.02 | 0.89 | | (0.16 | ) | (0.16 | ) | 8.98 | 10.79 | %(d) | 437 | 2.30 | % | (1.38 | )% | 2.64 | % | 69 | % |
* |
The per share amounts and percentages reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the HSBC Opportunity Portfolio. |
(a) | Calculated based on average shares outstanding. |
(b) | Total return calculations do not include any sales or redemption charges. |
(c) | Portfolio turnover rate is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
(d) | The Portfolio, in which the Fund invests, received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.10%, 0.10% and 0.13% for the years ended October 31, 2011, 2012 and 2013, respectively. |
See notes to financial statements. | HSBC FAMILY OF FUNDS 15 |
HSBC OPPORTUNITY FUND (ADVISOR) |
Financial Highlights |
Select data for a share outstanding throughout the periods indicated.*
Investment Activities | Distributions | Ratios/Supplementary Data | |||||||||||||||||||||||||||||||||||||||||||||||
Ratio | |||||||||||||||||||||||||||||||||||||||||||||||||
of Net | Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized | Net | Net | Ratio | Investment | of Expenses | ||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | and Unrealized | Net Realized | Asset | Assets | of Net | Income | to Average | |||||||||||||||||||||||||||||||||||||||||
Value, | Investment | Gains | Total from | Net | Gains from | Value, | at End | Expenses | (Loss) to | Net Assets | Portfolio | ||||||||||||||||||||||||||||||||||||||
Beginning | Income | (Losses) from | Investment | Investment | Investment | Total | End of | Total | of Period | to Average | Average | (Excluding Fee | Turnover | ||||||||||||||||||||||||||||||||||||
of Period | (Loss)(a) | Investments | Activities | Income | Transactions | Distributions | Period | Return(b) | (000s) | Net Assets | Net Assets | Reductions) | (c) | ||||||||||||||||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2015 | $ | 17.47 | $ | (0.05 | ) | $ | (0.08 | ) | $ | (0.13 | ) | $ | | $ | (3.62 | ) | $ | (3.62 | ) | $ | 13.72 | (1.69 | )% | $ | 219,846 | 0.99 | % | (0.30 | )% | 0.99 | % | 63 | % | ||||||||||||||||
Year Ended October 31, 2014 | 17.27 | (0.08 | ) | 2.07 | 1.99 | (0.04 | ) | (1.75 | ) | (1.79 | ) | 17.47 | 12.16 | % | 205,237 | 1.00 | % | (0.49 | )% | 1.00 | % | 66 | % | ||||||||||||||||||||||||||
Year Ended October 31, 2013 | 13.40 | 0.01 | 4.47 | 4.48 | | (0.61 | ) | (0.61 | ) | 17.27 | 34.70 | %(d) | 208,321 | 0.99 | % | 0.07 | % | 0.99 | % | 70 | % | ||||||||||||||||||||||||||||
Year Ended October 31, 2012 | 14.02 | (0.01 | ) | 1.46 | 1.45 | | (2.07 | ) | (2.07 | ) | 13.40 | 12.50 | %(d) | 135,098 | 1.08 | % | (0.01 | )% | 1.08 | % | 59 | % | |||||||||||||||||||||||||||
Year Ended October 31, 2011 | 12.77 | (0.01 | ) | 1.57 | 1.56 | | (0.31 | ) | (0.31 | ) | 14.02 | 12.25 | %(d) | 122,017 | 1.01 | % | (0.07 | )% | 1.01 | % | 69 | % |
* |
The per share amounts and percentages reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the HSBC Opportunity Portfolio. |
(a) | Calculated based on average shares outstanding. |
(b) | Total return calculations do not include any sales or redemption charges. |
(c) | Portfolio turnover rate is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
(d) | The Portfolio, in which the Fund invests, received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.10%, 0.10% and 0.13% for the years ended October 31, 2011, 2012 and 2013, respectively. |
16 HSBC FAMILY OF FUNDS | See notes to financial statements. |
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 |
1. Organization:
The HSBC Funds (the Trust), a Massachusetts business trust organized on April 22, 1987, and the HSBC Advisor Funds Trust (the Advisor Trust), a Massachusetts business trust organized on April 5, 1996, are registered under the Investment Company Act of 1940, as amended (the Act), as open-end management investment companies. As of October 31, 2015, the Trust is composed of 17 separate operational funds and the Advisor Trust is composed of one operational fund, each a series of the HSBC Family of Funds, which also includes the HSBC Portfolios (the Portfolio Trust) (collectively the Trusts). The accompanying financial statements are presented for the following three funds (individually a Fund, collectively the Funds) of the Trust and Advisor Trust:
Fund | Short Name | Trust | |||
HSBC Growth Fund | Growth Fund | Trust | |||
HSBC Opportunity Fund | Opportunity Fund | Trust | |||
HSBC Opportunity Fund (Advisor) | Opportunity Fund (Advisor) | Advisor Trust |
All the Funds are diversified funds. Financial statements for all other funds of the Trusts are published separately.
Each Fund utilizes a master-feeder fund structure and seeks to achieve its investment objectives by investing all of its investable assets in its respective Portfolio (as defined below).
Proportionate | ||||||
Ownership | ||||||
Interest on | ||||||
Fund | Respective Portfolio | October 31, 2015 (%) | ||||
HSBC Growth Fund | HSBC Growth Portfolio | 100.0 | ||||
HSBC Opportunity Fund | HSBC Opportunity Portfolio | 7.4 | ||||
HSBC Opportunity Fund (Advisor) | HSBC Opportunity Portfolio | 92.6 |
The HSBC Growth Portfolio and HSBC Opportunity Portfolio (individually a Portfolio, collectively the Portfolios) are diversified series of the Portfolio Trust. The Portfolios operate as master funds in master-feeder arrangements and also may receive investments from certain fund of funds.
The financial statements of the Portfolios, including the Schedules of Portfolio Investments, are included elsewhere in this report. The financial statements of the Portfolios should be read in conjunction with the financial statements of the Funds.
The Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. The Growth Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class I Shares. The Opportunity Fund offers three classes of shares: Class A Shares, Class B Shares, and Class C Shares. The Opportunity Fund (Advisor) offers one class of shares: Class I Shares. Class A Shares of the Funds have a maximum sales charge of 5.00% as a percentage of the original purchase price. Class B Shares of the Funds are offered without any front-end sales charge but will be subject to a contingent deferred sales charge (CDSC) ranging from a maximum of 4.00% if redeemed less than one year after purchase to 0.00% if redeemed more than four years after purchase. Class C Shares of the Funds are offered without any front-end sales charge but will be subject to a maximum CDSC of 1.00% if redeemed less than one year after purchase. No sales charges are assessed with respect to Class I Shares of the Funds. Each class of shares in the Funds has identical rights and privileges except with respect to arrangements pertaining to shareholder servicing and/or distribution, class-related expenses, voting rights on matters affecting a single class of shares, and the exchange privilege of each class of shares. Class B Shares of the Funds may no longer be purchased or acquired by any new or existing Class B shareholder, except through dividend and/or capital gains reinvestment.
HSBC FAMILY OF FUNDS 17
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Under the Trusts organizational documents, the Trusts officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Trusts enter into contracts with service providers, which also provide for indemnifications by the Funds. The Funds maximum exposure under these arrangements is unknown, as this would involve any future claims that may be made against the Funds. However, based on experience, the Trusts expect that risk of loss to be remote.
The Funds are investment companies and follow accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services-Investment Companies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Securities Valuation:
The Funds record their investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 3 below.
Investment Transactions and Related Income:
The Funds record investments into the Portfolios on a trade date basis. The Funds record daily their proportionate share of income, expenses, changes in unrealized appreciation and depreciation and realized gains and losses derived from their respective Portfolios. In addition, the Funds accrue their own expenses daily as incurred.
Allocations:
Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among the applicable series within the Trusts in relation to the net assets of each fund or on another reasonable basis. Class specific expenses are charged directly to the class incurring the expense. In addition, income, expenses (other than class specific expenses), and unrealized and realized gains and losses are allocated to each class based on relative net assets on a daily basis.
Distributions to Shareholders:
Dividends to shareholders from net investment income, if any, are declared and distributed semi annually in the case of the Funds.
The Funds net realized gains, if any, are distributed to shareholders at least annually. Additional distributions are also made to the Funds shareholders to the extent necessary to avoid the federal excise tax on certain undistributed income and net capital gains of regulated investment companies.
The amount and character of net investment income and net realized gains distributions are determined in accordance with federal income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., reclassification of market discounts, certain gain/loss, and certain distributions), such amounts are reclassified within the composition of net assets; temporary differences (e.g., wash losses and post-October loss deferrals) do not require reclassification. The Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as a part of the dividends paid deduction for income tax purposes. To the extent distributions to shareholders from net investment income and net realized gains exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.
18 HSBC FAMILY OF FUNDS
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Federal Income Taxes:
Each Fund is a separate taxable entity for federal income tax purposes. Each Fund has qualified and intends to continue to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and to distribute substantially all of its taxable net investment income and net realized gains, if any, to its shareholders. Accordingly, no provision for federal income or excise tax is required.
Management of the Funds has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
New Accounting Pronouncements:
In August 2014, the FASB issued Accounting Standards Update No. 2014-15 Presentation of Financial StatementsGoing Concern (Subtopic 205-40) (ASU 2014-15), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern. ASU 2014-15 is effective prospectively for annual periods ending after December 15, 2016, and interim periods thereafter.
In May 2015, the FASB issued Accounting Standards Update No. 2015-07 Fair Value Measurement (Topic 820) (ASU 2015-07), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for all investments that may be measured at fair value using the NAV per share practical expedient. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods.
Management is currently evaluating the implications of these ASUs and their impact on the financial statements and related disclosures has not yet been determined.
3. Investment Valuation Summary
The valuation techniques employed by the Funds, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The Funds investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs used for valuing the Funds investments are summarized in the three broad levels listed below:
● |
Level 1: quoted prices in active markets for identical assets |
● |
Level 2: other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● |
Level 3: significant unobservable inputs (including a Funds own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The Funds determine transfers between fair value hierarchy levels at the reporting period end. There were no transfers between levels as of October 31, 2015, from the valuation input levels used on October 31, 2014. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.
HSBC FAMILY OF FUNDS 19
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
The Funds record their investments in their respective Portfolios at fair value, which represents their proportionate ownership of the value of the Portfolios net assets. These investments are typically categorized as Level 2 in the fair value hierarchy. The underlying securities of the Portfolios are recorded at fair value, as discussed more fully in the Notes to Financial Statements of the Portfolios included elsewhere in this report.
For the year ended October 31, 2015, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value. As of October 31, 2015, all investments were categorized as Level 2 in the fair value hierarchy.
4. Related Party Transactions and Other Agreements and Plans:
Investment Management:
HSBC Global Asset Management (USA) Inc. (HSBC or the Investment Adviser), a wholly-owned subsidiary of HSBC Bank USA, N.A., a national bank organized under the laws of the United States, acts as Investment Adviser to the Portfolios. As Investment Adviser, HSBC manages the investments of the Portfolios and continuously reviews, supervises, and administers the Portfolios investments. The Funds are not directly charged any investment management fees.
Administration:
HSBC also serves the Funds as Administrator. Under the terms of the Administration Agreement, HSBC receives from the Funds (as well as other funds in the Trusts combined) a fee, accrued daily and paid monthly, at an annual rate of:
Based on Average Daily Net Assets of | Fee Rate (%) | |
Up to $10 billion | 0.0550 | |
In excess of $10 billion but not exceeding $20 billion | 0.0350 | |
In excess of $20 billion but not exceeding $50 billion | 0.0275 | |
In excess of $50 billion | 0.0250 |
The fee rates and breakpoints are determined on the basis of the aggregate average daily net assets of the Trusts. The total administration fee paid to HSBC is allocated to each series based upon its proportionate share of the aggregate net assets of the Trusts. For assets invested in the Portfolios by the Funds, the Portfolios pay half of the administration fee and the Funds pay half, for a combination of the total fee rate as set forth above. An amount equal to 50% of the administration fee is deemed to be class specific and is based on the daily net assets.
Pursuant to a Sub-Administration Agreement with HSBC, Citi Fund Services Ohio, Inc. (Citi), a wholly-owned subsidiary of Citigroup, Inc., serves as the Trusts Sub-Administrator, subject to the general supervision by the Trusts Board of Trustees (the Board) and HSBC. For these services, Citi is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above subject to certain reductions associated with services provided to new funds, minus 0.02% which is retained by HSBC.
Under a Compliance Services Agreement between the Trusts and Citi (the CCO Agreement), Citi makes an employee available to serve as the Trusts Chief Compliance Officer (the CCO). Under the CCO Agreement, Citi also provides infrastructure and support in implementing the written policies and procedures comprising the Trusts compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the Trusts paid Citi $300,447 for the year ended October 31, 2015, plus reimbursement of certain out-of-pocket expenses. Expenses incurred by each Fund are reflected on the Statements of Operations as Compliance Services. Citi pays the salary and other compensation earned by individuals performing these services, as employees of Citi.
20 HSBC FAMILY OF FUNDS
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Distribution Arrangements:
Foreside Distribution Services, L.P. (Foreside), a wholly-owned subsidiary of Foreside Financial Group LLC, serves the Trust as Distributor (the Distributor). The Trust has adopted a non-compensatory Distribution Plan and Agreement (the Distribution Plan) pursuant to Rule 12b-1 of the Act. The Distribution Plan provides for reimbursement of expenses incurred by the Distributor related to distribution and marketing, at a rate not to exceed 0.25%, 1.00%, and 1.00% of the average daily net assets of Class A Shares (currently not being charged), Class B Shares (currently charging 0.75%), and Class C Shares (currently charging 0.75%) of the Funds, respectively. For the year ended October 31, 2015, Foreside, as Distributor, also received $148,790, $0, and $15,776 in commissions from sales of the Trusts, for Class A Shares, Class B Shares, and Class C Shares, respectively of which $45, $0, and $0 were reallocated to HSBC-affiliated brokers and dealers, for Class A Shares, Class B Shares, and Class C Shares, respectively.
Shareholder Servicing:
The Trust has adopted a Shareholder Services Plan, which provides for payments to shareholder servicing agents for providing various shareholder services. For performing these services, the shareholder servicing agents receive a fee that is computed daily and paid monthly up to 0.25%, 0.25%, and 0.25% of the average daily net assets of Class A Shares, Class B Shares, and Class C Shares of the Funds, respectively. The fees paid to the Distributor pursuant to the Distribution Plan and to shareholder servicing agents pursuant to the Shareholder Services Plan will not exceed in the aggregate 0.50% of the average daily net assets of Class A Shares, and 1.00% of the average daily net assets of Class B Shares and Class C Shares.
The Distributor has entered into shareholder services contracts with affiliated and unaffiliated financial intermediaries who provide shareholder services and other related services to their clients or customers who invest in the Funds under which the Distributor will pay all or a portion of such fees earned to financial intermediaries for performing such services.
Fund Accounting and Transfer Agency:
Citi provides fund accounting services for each Fund. As fund accountant, Citi receives an annual fee per Fund and share class, subject to minimums, reductions associated with services provided to new funds and reimbursement of certain expenses. Citi receives additional fees paid by the Trust and Advisor Trust for regulatory administration services and blue sky exemption services. Until March 31, 2015, Citi also provided transfer agency services for each Fund. As transfer agent, Citi received a fee based on the number of funds and shareholder accounts, subject to certain minimums, reductions associated with services provided to new funds and reimbursement of certain expenses. Effective March 31, 2015, transfer agent services were provided under the terms of a separate transfer agency services agreement with Citi. Citis rights and obligations under the transfer agency services agreement, in turn, were assigned to SunGard Investor Services LLC (SIS), effective March 31, 2015. The transfer agency services, and fees charged for such services, are unchanged as a result of the separate agreement or the assignment to SIS.
Independent Trustees:
For the period January 1, 2015 through October 31, 2015 the Trusts paid each Independent Trustee an annual retainer of $100,000. The Trusts paid a fee of $12,000 for each regular meeting of the Board of Trustees attended and a fee of $3,000 for each special meeting attended. The Trusts paid each Committee Chair an annual retainer of $12,000, with the exception of the Chair of the Audit Committee, who received a retainer of $15,000. The Trusts also paid the Chairman of the Board an additional annual retainer of $30,000.
Prior to January 1, 2015, the Trusts paid each Independent Trustee an annual retainer of $100,000. The Trusts paid a fee of $10,000 for each regular meeting of the Board of Trustees attended and a fee of $3,000 for each special meeting attended. The Trusts paid each Committee Chair an annual retainer of $3,000, with the exception of the Chair of the Audit Committee, who received a retainer of $6,000. The Trusts also paid the Chairman of the Board, an additional annual retainer of $24,000. In addition, for time expended on Board duties outside normal meetings, which is authorized by the Board, a Trustee was compensated at the rate of $500 per hour, up to a maximum of $3,000 per day.
HSBC FAMILY OF FUNDS 21
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Other:
The Funds pay fees to certain intermediaries or financial institutions for record keeping, sub-accounting services, transfer agency and other administrative services as reflected on the Statements of Operations as Administrative Services.
Fee Reductions:
The Investment Adviser has contractually agreed to limit, through March 1, 2016, the annual total expenses, exclusive of interest, taxes, brokerage commissions, extraordinary expenses, and estimated indirect expenses attributed to a Funds investment in investment companies of certain Funds. Each affected Fund Class has its own expense limitation based on the average daily net assets for any full fiscal year as follows:
Current Contractual | |||||
Expense | |||||
Fund | Class | Limitation(%) | |||
Growth Fund | A | 1.20 | |||
Growth Fund | B | 1.95 | |||
Growth Fund | C | 1.95 | |||
Growth Fund | I | 0.95 | |||
Opportunity Fund | A | 1.65 | |||
Opportunity Fund | B | 2.40 | |||
Opportunity Fund | C | 2.40 | |||
Opportunity Fund (Advisor) | I | 1.10 |
Any amounts contractually waived or reimbursed by the Investment Adviser will be subject to repayment by the respective Fund to the Investment Adviser within three years to the extent that the repayment will not cause the Funds operating expenses to exceed the contractual expense limit that was in effect at the time of such waiver or reimbursement. During the year ended October 31, 2015, the Investment Adviser did not recapture any of its prior contractual waivers or reimbursements. As of October 31, 2015, the repayments that may potentially be made by the Funds are as follows:
Fund | 2018($) | 2017($) | 2016($) | Total($) | |||||
Growth Fund | 18,904 | 6,785 | 5,267 | 30,956 | |||||
Opportunity Fund | 34,993 | 34,544 | 46,445 | 115,982 |
* The year listed above the amounts is the fiscal year ending in which the amounts will no longer be able to be recouped.
The Administrator and Citi may voluntarily waive/reimburse fees to help support the expense limits of the Funds. In addition, HSBC, in its role as Investment Adviser and Administrator, may waive/reimburse additional fees at its discretion. Any voluntary fee waivers/reimbursements are not subject to recoupment in subsequent fiscal periods. Voluntary waivers/reimbursements may be stopped at any time. Amounts waived/reimbursed by the Investment Adviser, Administrator and Citi are reported separately on the Statements of Operations, as applicable.
5. Investment Transactions:
Contributions to and withdrawals from the respective Portfolios for the year ended October 31, 2015 totaled:
Fund | Contributions ($) | Withdrawals ($) | |||||||
Growth Fund | 4,661,525 | 12,493,383 | |||||||
Opportunity Fund | 4,506,928 | 3,928,473 | |||||||
Opportunity Fund (Advisor) | 40,758,900 | 21,422,971 |
22 HSBC FAMILY OF FUNDS
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
6. Federal Income Tax Information:
The tax character of dividends paid by the Funds during the tax year ended October 31, 2015 was as follows:
Dividends paid from | ||||||||||||
Total | ||||||||||||
Ordinary | Net Long Term | Total Taxable | Return of | Dividends | ||||||||
Income ($) | Capital Gains ($) | Dividends ($) | Capital ($) | Paid ($)(1) | ||||||||
Growth Fund | | 11,799,912 | 11,799,912 | | 11,799,912 | |||||||
Opportunity Fund | 572,116 | 2,737,364 | 3,309,480 | | 3,309,480 | |||||||
Opportunity Fund (Advisor) | 8,144,105 | 34,813,856 | 42,957,961 | 15 | 42,957,976 |
The tax character of dividends paid by the Funds during the tax year ended October 31, 2014 was as follows:
Dividends paid from | ||||||||||||
Total | ||||||||||||
Ordinary | Net Long Term | Total Taxable | Return of | Dividends | ||||||||
Income ($) | Capital Gains ($) | Dividends ($) | Capital ($) | Paid ($)(1) | ||||||||
Growth Fund | 848,249 | 8,732,303 | 9,580,552 | | 9,580,552 | |||||||
Opportunity Fund | 29,031 | 1,630,497 | 1,659,528 | | 1,659,528 | |||||||
Opportunity Fund (Advisor) | 2,223,373 | 19,414,145 | 21,637,518 | | 21,637,518 |
(1) | Total dividends paid may differ from the amount reported in the Statement of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. |
As of the tax year ended October 31, 2015, the components of accumulated earnings/(deficit) on a tax basis for the Funds were as follows:
Undistributed | Accumulated | Unrealized | Total | |||||||||||||||||||||||
Undistributed | Undistributed | Long Term | Capital and | Appreciation/ | Accumulated | |||||||||||||||||||||
Ordinary | Tax Exempt | Capital | Accumulated | Dividends | Other | (Depreciation) | Earnings/ | |||||||||||||||||||
Income ($) | Income ($) | Gains ($) | Earnings ($) | Payable ($) | Losses ($) | ($)(1) | (Deficit) ($) | |||||||||||||||||||
Growth Fund | | | 8,022,994 | 8,022,994 | | (182,413) | 17,490,653 | 25,331,234 | ||||||||||||||||||
Opportunity Fund | | | | | | (254,288) | 2,127,593 | 1,873,305 | ||||||||||||||||||
Opportunity Fund | ||||||||||||||||||||||||||
(Advisor) | | | | | | (1,482,280) | 25,416,180 | 23,933,900 |
(1) | The differences between book-basis and tax-basis unrealized appreciation/depreciation are attributable primarily to: tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain derivative instruments, the difference between book and tax amortization methods for premium and market discount, the realization for tax purposes of unrealized gains/losses on investments in passive foreign investment companies and the return of capital adjustments from real estate investment trusts. |
As of the tax year ended October 31, 2015, the Funds have net capital loss carryforwards (CLCFs) as summarized in the tables below. CLCFs subjects to expiration are applied as short-term capital loss regardless of whether the originating capital loss was short-term or long-term. CLCFs that are not subject to expiration must be utilized before those that are subject to expiration. The Board does not intend to authorize a distribution of any realized gain for the Funds until any applicable CLCF has been offset or expires.
CLCFs not subject to expiration:
Short Term | Long Term | |||||||||
Amount ($) | Amount ($) | Total ($) | ||||||||
Opportunity Fund | 93,292 | | 93,292 | |||||||
Opportunity Fund (Advisor) | | 864,599 | 864,599 |
HSBC FAMILY OF FUNDS 23
HSBC FAMILY OF FUNDS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Under current law, capital losses and specified ordinary losses realized after October 31 and non-specified ordinary losses incurred after December 31 (ordinary losses collectively known as late year ordinary loss) may be deferred and treated as occurring on the first business day of the following fiscal year. As of the tax year ended October 31, 2015, the following Funds had deferred losses, which will be treated as arising on the first day of the fiscal year ending October 31, 2016.
Late Year | |
Ordinary Losses | |
($) | |
Growth Fund | 182,413 |
Opportunity Fund | 160,996 |
Opportunity Fund (Advisor) | 617,681 |
7. Significant Shareholders:
The Funds each have one or more shareholders, which are accounts maintained by financial intermediaries on behalf of their clients, that own a significant portion of the Funds outstanding shares, respectively. Significant shareholder transactions by these shareholders may impact the Funds performance.
8. Subsequent Events:
At a meeting on December 17-18, 2015, the Trusts Board of Trustees approved a plan of liquidation to close the HSBC Growth Fund. The liquidation of the HSBC Growth Fund is expected to be effective on or about February 12, 2016. Effective December 18, 2015, the Fund will no longer sell shares to new investors or existing shareholders (except through reinvested dividends), including through exchanges into the Fund from other funds of the Trust. Investors may continue to redeem shares of the Fund.
At a meeting of the Board of Trustees of the Trusts held on December 17-18, 2015, the Trustees of the Trusts approved on behalf of each Trust and each of the Funds a form of Agreement and Plan of Reorganization (the Plan) and other proposals subject to shareholder approval. The Plan will be submitted to a vote of shareholders of the Funds at a special meeting of shareholders to be held in 2016. The Plan calls for the reorganization and redomiciliation of the Funds, which are series of either a Massachusetts business trust (the Trust and Advisor Trust) or a New York trust (the Portfolio Trust), with and into corresponding shell series (New Funds) of a single newly formed Delaware statutory trust (the Redomiciliation). If approved by shareholders, the Redomiciliation is expected to occur in the second calendar quarter of 2016. Upon completion of the Redomiciliation, shareholders of the Funds would own shares of the corresponding class of the New Funds that are equal in value to the shares of the Fund that were held by the shareholders immediately prior to the closing of the Redomiciliation. In addition, the respective share classes of each of the New Funds would assume the performance, financial and other historical information of those of the corresponding Fund. The Redomiciliation is not expected to have an impact on the continuing of operations of the Funds. Additional information about the Plan and the other proposals will be included in the Trusts proxy statement that is expected to be mailed to shareholders in March 2016.
On November 30, 2015, SunGard Investor Services LLC announced that its acquisition by Fidelity National Information Services was completed. The transfer agency services, and fees charged for such services, are unchanged as a result of the acquisition.
Management has evaluated events and transactions through the date the financial statements were issued, for purposes of recognition or disclosure in these financial statements and there are no additional subsequent events to report.
24 HSBC FAMILY OF FUNDS
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and
Shareholders of HSBC Funds and
HSBC Advisor Funds Trust
In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of HSBC Growth Fund and HSBC Opportunity Fund (each a portfolio of HSBC Funds) and HSBC Opportunity Fund (Advisor) (a portfolio of HSBC Advisor Funds Trust) (collectively, the Funds) at October 31, 2015, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statements of changes in net assets for the year ended October 31, 2014 and the financial highlights for each of the periods ended on or prior to October 31, 2014 were audited by other auditors whose report dated December 23, 2014 expressed an unqualified opinion on those statements and financial highlights.
As discussed in Note 8 to the financial statements, the Board of Trustees has approved a plan of liquidation to close the HSBC Growth Fund.
PricewaterhouseCoopers LLP
New York,
New York
December 29, 2015
HSBC FAMILY OF FUNDS 25
HSBC FAMILY OF FUNDS |
Other Federal Income Tax Informationas of October 31, 2015 (Unaudited) |
During the year ended October 31, 2015, the following Funds declared capital gain distributions:
Short Term | Long Term | |||||||
Capital Gain | Capital Gain | |||||||
Distributions ($) | Distributions ($) | |||||||
Growth Fund | | 11,799,912 | ||||||
Opportunity Fund | 572,116 | 2,737,364 | ||||||
Opportunity Fund (Advisor) | 8,144,105 | 34,813,856 |
For the year ended October 31, 2015, the following percentages of the total ordinary income dividends paid by the Funds qualify for the corporate dividends received deduction available to corporate shareholders:
Dividends | |
Received | |
Deduction (%) | |
Opportunity Fund | 21.61 |
Opportunity Fund (Advisor) | 17.73 |
For the year ended October 31, 2015, dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2014 Form 1099-DIV:
Qualified | |
Dividend | |
Income (%) | |
Opportunity Fund | 22.45 |
Opportunity Fund (Advisor) | 18.41 |
26 HSBC FAMILY OF FUNDS
HSBC FAMILY OF FUNDS |
Table of Shareholder Expensesas of October 31, 2015 (Unaudited) |
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases, redemption fees and exchange fees; and (2) ongoing costs, including management fees, distribution fees and/or shareholder servicing fees and other Fund expenses (including expenses allocated from the Portfolios). These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these cost with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2015 through October 31, 2015.
Actual Example
The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Annualized | |||||||||||||||||||
Beginning | Ending | Expenses Paid | Expense Ratio | ||||||||||||||||
Account Value | Account Value | During Period* | During Period | ||||||||||||||||
5/1/15 | 10/31/15 | 5/1/15 - 10/31/15 | 5/1/15 - 10/31/15 | ||||||||||||||||
Growth Fund | Class A Shares | $ | 1,000.00 | $ | 1,034.70 | $ | 6.15 | 1.20% | |||||||||||
Class B Shares | 1,000.00 | 1,030.90 | 9.98 | 1.95% | |||||||||||||||
Class C Shares | 1,000.00 | 1,031.20 | 9.98 | 1.95% | |||||||||||||||
Class I Shares | 1,000.00 | 1,036.20 | 4.88 | 0.95% | |||||||||||||||
Opportunity Fund | Class A Shares | 1,000.00 | 920.70 | 7.50 | 1.55% | ||||||||||||||
Class B Shares | 1,000.00 | 916.70 | 11.11 | 2.30% | |||||||||||||||
Class C Shares | 1,000.00 | 916.10 | 11.11 | 2.30% | |||||||||||||||
Opportunity Fund (Advisor) | Class I Shares | 1,000.00 | 922.70 | 4.80 | 0.99% |
* | Expenses are equal to the average account value over the period, multiplied by the Funds annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
HSBC FAMILY OF FUNDS 27
HSBC FAMILY OF FUNDS |
Table of Shareholder Expensesas of October 31, 2015 (Unaudited) (continued) |
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on each Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized | |||||||||||||||||||
Beginning | Ending | Expenses Paid | Expense Ratio | ||||||||||||||||
Account Value | Account Value | During Period* | During Period | ||||||||||||||||
5/1/15 | 10/31/15 | 5/1/15 - 10/31/15 | 5/1/15 - 10/31/15 | ||||||||||||||||
Growth Fund | Class A Shares | $ | 1,000.00 | $ | 1,019.16 | $ | 6.11 | 1.20% | |||||||||||
Class B Shares | 1,000.00 | 1,015.38 | 9.91 | 1.95% | |||||||||||||||
Class C Shares | 1,000.00 | 1,015.38 | 9.91 | 1.95% | |||||||||||||||
Class I Shares | 1,000.00 | 1,020.42 | 4.84 | 0.95% | |||||||||||||||
Opportunity Fund | Class A Shares | 1,000.00 | 1,017.39 | 7.88 | 1.55% | ||||||||||||||
Class B Shares | 1,000.00 | 1,013.61 | 11.67 | 2.30% | |||||||||||||||
Class C Shares | 1,000.00 | 1,013.61 | 11.67 | 2.30% | |||||||||||||||
Opportunity Fund (Advisor) | Class I Shares | 1,000.00 | 1,020.21 | 5.04 | 0.99% |
* | Expenses are equal to the average account value over the period, multiplied by the Funds annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
28 HSBC FAMILY OF FUNDS
Portfolio Reviews |
Portfolio
Composition* October 31, 2015 (Unaudited) |
HSBC Growth Portfolio | |||
Percentage of | |||
Investment Allocation | Investments at Value (%) | ||
Internet Software & Services | 12.9 | ||
IT Services | 9.5 | ||
Software | 9.1 | ||
Biotechnology | 9.0 | ||
Internet & Catalog Retail | 8.9 | ||
Health Care Equipment & Supplies | 4.6 | ||
Hotels, Restaurants & Leisure | 4.2 | ||
Chemicals | 4.3 | ||
Textiles, Apparel & Luxury Goods | 4.2 | ||
Specialty Retail | 4.1 | ||
Technology Hardware, Storage & Peripherals | 3.6 | ||
Food & Staples Retailing | 2.8 | ||
Pharmaceuticals | 2.8 | ||
Health Care Providers & Services | 2.8 | ||
Media | 2.7 | ||
Industrial Conglomerates | 2.5 | ||
Real Estate Investment Trusts (REITs) | 2.0 | ||
Wireless Telecommunication Services | 1.7 | ||
Airlines | 1.6 | ||
Life Sciences Tools & Services | 1.3 | ||
Road & Rail | 1.2 | ||
Semiconductors & Semiconductor Equipment | 1.2 | ||
Investment Company | 1.1 | ||
Auto Components | 0.7 | ||
Automobiles | 0.6 | ||
Capital Markets | 0.3 | ||
Oil, Gas & Consumable Fuels | 0.3 | ||
Total | 100.0 |
HSBC Opportunity Portfolio | |||
Percentage of | |||
Investment Allocation | Investments at Value (%) | ||
Biotechnology | 9.0 | ||
Specialty Retail | 8.5 | ||
Software | 5.8 | ||
Investment Company | 5.3 | ||
Machinery | 4.9 | ||
IT Services | 4.9 | ||
Household Durables | 4.6 | ||
Hotels, Restaurants & Leisure | 4.5 | ||
Health Care Equipment & Supplies | 4.1 | ||
Pharmaceuticals | 3.7 | ||
Building Products | 3.3 | ||
Communications Equipment | 3.0 | ||
Chemicals | 2.7 | ||
Professional Services | 2.6 | ||
Capital Markets | 2.7 | ||
Diversified Consumer Services | 2.5 | ||
Media | 2.1 | ||
Insurance | 2.0 | ||
Life Sciences Tools & Services | 2.0 | ||
Oil, Gas & Consumable Fuels | 2.0 | ||
Semiconductors & Semiconductor Equipment | 1.9 | ||
Internet Software & Services | 1.9 | ||
Banks | 1.7 | ||
Road & Rail | 1.7 | ||
Commercial Services & Supplies | 1.5 | ||
Health Care Technology | 1.6 | ||
Real Estate Investment Trusts (REITs) | 1.5 | ||
Health Care Providers & Services | 1.4 | ||
Aerospace & Defense | 1.3 | ||
Electronic Equipment, Instruments & | |||
Components | 1.3 | ||
Real Estate Management & Development | 1.4 | ||
Airlines | 1.1 | ||
Trading Companies & Distributors | 1.0 | ||
Leisure Products | 0.5 | ||
Total | 100.0 |
* Portfolio composition is subject to change.
HSBC PORTFOLIOS 29
HSBC GROWTH PORTFOLIO |
Schedule of Portfolio Investmentsas of October 31, 2015 |
Common Stocks 99.4% | ||||
Shares | Value ($) | |||
Airlines 1.6% | ||||
Delta Air Lines, Inc. | 24,600 | 1,250,664 | ||
Auto Components 0.7% | ||||
Delphi Automotive plc | 6,400 | 532,416 | ||
Automobiles 0.6% | ||||
Tesla Motors, Inc. (a) | 2,100 | 434,553 | ||
Biotechnology 9.1% | ||||
AbbVie, Inc. | 10,700 | 637,185 | ||
Alexion Pharmaceuticals, Inc. (a) | 8,365 | 1,472,239 | ||
BioMarin Pharmaceutical, Inc. (a) | 2,520 | 294,941 | ||
Celgene Corp. (a) | 17,950 | 2,202,644 | ||
Gilead Sciences, Inc. | 10,450 | 1,129,959 | ||
Regeneron Pharmaceuticals, Inc. (a) | 805 | 448,699 | ||
Vertex Pharmaceuticals, Inc. (a) | 6,895 | 860,082 | ||
7,045,749 | ||||
Capital Markets 0.3% | ||||
The Charles Schwab Corp. | 7,700 | 235,004 | ||
Chemicals 4.3% | ||||
Ecolab, Inc. | 10,650 | 1,281,727 | ||
PPG Industries, Inc. | 10,160 | 1,059,282 | ||
Sherwin-Williams Co. | 3,745 | 999,278 | ||
3,340,287 | ||||
Food & Staples Retailing 2.9% | ||||
Costco Wholesale Corp. | 5,900 | 932,908 | ||
CVS Health Corp. | 12,950 | 1,279,201 | ||
2,212,109 | ||||
Health Care Equipment & Supplies 4.7% | ||||
Boston Scientific Corp. (a) | 58,100 | 1,062,068 | ||
DexCom, Inc. (a) | 9,180 | 764,878 | ||
Edwards Lifesciences Corp. (a) | 5,360 | 842,324 | ||
Medtronic plc | 12,750 | 942,480 | ||
3,611,750 | ||||
Health Care Providers & Services 2.8% | ||||
Envision Healthcare Holdings, Inc. (a) | 23,900 | 673,980 | ||
UnitedHealth Group, Inc. | 13,000 | 1,531,140 | ||
2,205,120 | ||||
Hotels, Restaurants & Leisure 4.3% | ||||
Chipotle Mexican Grill, Inc. (a) | 1,260 | 806,690 | ||
Hilton Worldwide Holdings, Inc. | 43,700 | 1,092,063 | ||
Starbucks Corp. | 22,400 | 1,401,568 | ||
3,300,321 | ||||
Industrial Conglomerates 2.5% | ||||
Danaher Corp. | 13,200 | 1,231,691 | ||
General Electric Co. | 25,400 | 734,568 | ||
1,966,259 | ||||
Internet & Catalog Retail 8.9% | ||||
Amazon.com, Inc. (a) | 5,685 | 3,558,242 | ||
Ctrip.com International Ltd., ADR (a) | 6,900 | 641,493 | ||
Netflix, Inc. (a) | 5,780 | 626,436 | ||
The Priceline Group, Inc. (a) | 1,430 | 2,079,563 | ||
6,905,734 | ||||
Internet Software & Services 12.9% | ||||
Alibaba Group Holding Ltd., ADR (a) | 11,550 | 968,237 | ||
Alphabet, Inc., Class A (a) | 2,630 | 1,939,336 | ||
Alphabet, Inc., Class C (a) | 2,663 | 1,892,887 | ||
Costar Group, Inc. (a) | 3,695 | 750,344 | ||
Facebook, Inc., Class A (a) | 26,750 | 2,727,697 | ||
LinkedIn Corp., Class A (a) | 7,175 | 1,728,242 | ||
10,006,743 | ||||
IT Services 9.4% | ||||
First Data Corp., Class A (a) | 71,200 | 1,127,808 | ||
MasterCard, Inc., Class A | 17,100 | 1,692,729 | ||
PayPal Holdings, Inc. (a) | 29,200 | 1,051,492 | ||
Visa, Inc., Class A | 44,000 | 3,413,520 | ||
7,285,549 | ||||
Life Sciences Tools & Services 1.3% | ||||
Quintiles Transnational | ||||
Holdings, Inc. (a) | 15,500 | 986,575 | ||
Media 2.7% | ||||
Liberty Global plc, Class C (a) | 16,250 | 692,900 | ||
The Walt Disney Co. | 12,300 | 1,399,002 | ||
2,091,902 | ||||
Oil, Gas & Consumable Fuels 0.3% | ||||
Concho Resources, Inc. (a) | 2,300 | 266,593 | ||
Pharmaceuticals 2.8% | ||||
Allergan plc (a) | 2,040 | 629,279 | ||
Bristol-Myers Squibb Co. | 23,900 | 1,576,205 | ||
2,205,484 | ||||
Real Estate Investment Trusts (REITs) 2.0% | ||||
American Tower Corp. | 14,900 | 1,523,227 | ||
Road & Rail 1.2% | ||||
Union Pacific Corp. | 10,450 | 933,708 | ||
Semiconductors & Semiconductor Equipment 1.2% | ||||
Avago Technologies Ltd. | 7,800 | 960,414 | ||
Software 9.2% | ||||
Adobe Systems, Inc. (a) | 21,000 | 1,861,861 | ||
Intuit, Inc. | 11,050 | 1,076,602 | ||
Microsoft Corp. | 13,600 | 715,904 | ||
Mobileye NV (a) | 20,600 | 937,712 | ||
Salesforce.com, Inc. (a) | 15,000 | 1,165,650 | ||
ServiceNow, Inc. (a) | 10,000 | 816,500 | ||
Workday, Inc., Class A (a) | 6,900 | 544,893 | ||
7,119,122 |
30 HSBC PORTFOLIOS | See notes to financial statements. |
HSBC GROWTH PORTFOLIO |
Schedule of Portfolio Investmentsas of October 31, 2015 (concluded) |
Common Stocks, continued | |||||
Shares | Value ($) | ||||
Specialty Retail 4.2% | |||||
L Brands, Inc. | 8,050 | 772,639 | |||
The Home Depot, Inc. | 12,600 | 1,557,864 | |||
Ulta Salon, Cosmetics & | |||||
Fragrance, Inc. (a) | 5,120 | 890,675 | |||
3,221,178 | |||||
Technology Hardware, Storage & Peripherals 3.6% | |||||
Apple, Inc. | 23,180 | 2,770,010 | |||
Textiles, Apparel & Luxury Goods 4.2% | |||||
Lululemon Athletica, Inc. (a) | 10,800 | 531,036 | |||
NIKE, Inc., Class B | 18,000 | 2,358,540 | |||
Under Armour, Inc., Class A (a) | 4,200 | 399,336 | |||
3,288,912 | |||||
Wireless Telecommunication Services 1.7% | |||||
SBA Communications Corp., | |||||
Class A (a) | 11,200 | 1,333,024 | |||
TOTAL COMMON STOCKS | |||||
(COST $58,819,512) | 77,032,407 | ||||
Investment Company 1.1% | |||||
Northern Institutional Diversified Assets | |||||
Portfolio, Institutional Shares, | |||||
0.01% (b) | 883,466 | 883,466 | |||
TOTAL INVESTMENT COMPANY | |||||
(COST $883,466) | 883,466 | ||||
TOTAL INVESTMENT SECURITIES | |||||
(COST $59,702,978) 100.5% | 77,915,873 | ||||
Other Assets (Liabilities) (0.5)% | (392,242 | ) | |||
NET ASSETS 100% | 77,523,631 |
(a) |
Represents non-income producing security. | |
(b) | The rate represents the annualized one-day yield that was in effect on October 31, 2015. |
ADR American Depositary Receipt
See notes to financial statements. | HSBC PORTFOLIOS 31 |
HSBC OPPORTUNITY PORTFOLIO |
Schedule of Portfolio Investmentsas of October 31, 2015 |
Common Stocks 96.4% | ||||
Shares | Value ($) | |||
Aerospace & Defense 1.4% | ||||
TransDigm Group, Inc. (a) | 14,695 | 3,230,696 | ||
Airlines 1.2% | ||||
Allegiant Travel Co. | 13,857 | 2,736,065 | ||
Banks 1.7% | ||||
First Republic Bank | 61,590 | 4,022,443 | ||
Biotechnology 9.1% | ||||
ACADIA Pharmaceuticals, Inc. (a) | 33,950 | 1,182,139 | ||
ARIAD Pharmaceuticals, Inc. (a) | 389,950 | 2,667,258 | ||
Medivation, Inc. (a) | 110,880 | 4,663,613 | ||
Merrimack Pharmaceuticals, Inc. (a) | 241,210 | 2,252,901 | ||
Neurocrine Biosciences, Inc. (a) | 48,870 | 2,399,028 | ||
Prothena Corp. plc (a) | 8,790 | 452,773 | ||
PTC Therapeutics, Inc. (a) | 67,105 | 1,668,901 | ||
Puma Biotechnology, Inc. (a) | 8,050 | 663,481 | ||
United Therapeutics Corp. (a) | 38,790 | 5,687,779 | ||
21,637,873 | ||||
Building Products 3.4% | ||||
A.O. Smith Corp. | 15,570 | 1,196,087 | ||
Builders FirstSource, Inc. (a) | 164,830 | 1,948,291 | ||
Lennox International, Inc. | 36,625 | 4,864,166 | ||
8,008,544 | ||||
Capital Markets 2.7% | ||||
Affiliated Managers Group, Inc. (a) | 11,925 | 2,149,601 | ||
Raymond James Financial, Inc. | 78,790 | 4,342,116 | ||
6,491,717 | ||||
Chemicals 2.8% | ||||
PolyOne Corp. | 55,750 | 1,864,280 | ||
RPM, Inc. | 26,050 | 1,190,746 | ||
W.R. Grace & Co. (a) | 35,130 | 3,523,539 | ||
6,578,565 | ||||
Commercial Services & Supplies 1.6% | ||||
Knoll, Inc. | 160,910 | 3,739,548 | ||
Communications Equipment 3.0% | ||||
CommScope Holding Co., Inc. (a) | 37,940 | 1,230,394 | ||
Palo Alto Networks, Inc. (a) | 37,000 | 5,957,000 | ||
7,187,394 | ||||
Diversified Consumer Services 2.5% | ||||
Nord Anglia Education, Inc. (a) | 124,790 | 2,445,884 | ||
Service Corp. International | 125,990 | 3,560,477 | ||
6,006,361 | ||||
Electronic Equipment, Instruments & Components 1.4% | ||||
Ingram Micro, Inc. | 108,580 | 3,233,512 | ||
Health Care Equipment & Supplies 4.2% | ||||
Align Technology, Inc. (a) | 67,530 | 4,420,514 | ||
DENTSPLY International, Inc. | 55,355 | 3,368,352 | ||
Wright Medical Group NV (a) | 114,688 | 2,216,928 | ||
10,005,794 | ||||
Health Care Providers & Services 1.5% | ||||
Team Health Holdings, Inc. (a) | 58,550 | 3,493,679 | ||
Health Care Technology 1.6% | ||||
Allscripts Healthcare
Solutions, Inc. (a) |
272,810 | 3,835,709 | ||
Hotels, Restaurants & Leisure 4.5% | ||||
Jack in the Box, Inc. | 49,290 | 3,673,584 | ||
Sonic Corp. | 96,200 | 2,745,548 | ||
Vail Resorts, Inc. | 38,285 | 4,370,998 | ||
10,790,130 | ||||
Household Durables 4.7% | ||||
Harman International Industries, Inc. | 22,090 | 2,429,016 | ||
Jarden Corp. (a) | 104,832 | 4,696,474 | ||
Tempur Sealy International, Inc. (a) | 52,130 | 4,057,799 | ||
11,183,289 | ||||
Insurance 2.1% | ||||
Assurant, Inc. | 60,080 | 4,898,322 | ||
Internet Software & Services 1.9% | ||||
Costar Group, Inc. (a) | 22,030 | 4,473,632 | ||
IT Services 5.0% | ||||
Genpact Ltd. (a) | 73,560 | 1,822,817 | ||
Sabre Corp. | 106,690 | 3,128,151 | ||
Total System Services, Inc. | 86,140 | 4,518,043 | ||
VeriFone Systems, Inc. (a) | 82,020 | 2,472,083 | ||
11,941,094 | ||||
Leisure Products 0.5% | ||||
Polaris Industries, Inc. | 9,720 | 1,091,945 | ||
Life Sciences Tools & Services 2.0% | ||||
Mettler-Toledo International, Inc. (a) | 15,409 | 4,792,045 | ||
Machinery 5.0% | ||||
Middleby Corp. (a) | 34,420 | 4,025,075 | ||
Snap-on, Inc. | 27,320 | 4,532,114 | ||
WABCO Holdings, Inc. (a) | 29,990 | 3,365,778 | ||
11,922,967 | ||||
Media 2.1% | ||||
Interpublic Group of Cos., Inc. | 51,930 | 1,190,755 | ||
Nexstar Broadcasting Group,
Inc., Class A |
71,750 | 3,819,252 | ||
5,010,007 |
32 | HSBC PORTFOLIOS | See notes to financial statements. |
HSBC OPPORTUNITY PORTFOLIO |
Schedule of Portfolio Investmentsas of October 31, 2015 (concluded) |
Common Stocks, continued | ||||||
Shares | Value ($) | |||||
Oil, Gas & Consumable Fuels 2.0% | ||||||
Tesoro Corp. | 44,105 | 4,716,148 | ||||
Pharmaceuticals 3.7% | ||||||
Jazz Pharmaceuticals plc (a) | 41,033 | 5,633,010 | ||||
Pacira Pharmaceuticals, Inc. (a) | 64,960 | 3,244,752 | ||||
8,877,762 | ||||||
Professional Services 2.7% | ||||||
IHS, Inc., Class A (a) | 33,110 | 3,957,970 | ||||
Robert Half International, Inc. | 46,090 | 2,427,099 | ||||
6,385,069 | ||||||
Real Estate Investment Trusts (REITs) 1.5% | ||||||
Starwood Property Trust, Inc. | 177,210 | 3,560,149 | ||||
Real Estate Management & Development 1.4% | ||||||
Jones Lang LaSalle, Inc. | 20,530 | 3,422,556 | ||||
Road & Rail 1.7% | ||||||
Genesee & Wyoming, Inc., | ||||||
Class A (a) | 36,730 | 2,464,583 | ||||
Werner Enterprises, Inc. | 62,880 | 1,663,805 | ||||
4,128,388 | ||||||
Semiconductors & Semiconductor Equipment 1.9% | ||||||
On Semiconductor Corp. (a) | 374,650 | 4,121,150 | ||||
Qorvo, Inc. (a) | 11,650 | 511,785 | ||||
4,632,935 | ||||||
Software 5.9% | ||||||
Fortinet, Inc. (a) | 117,950 | 4,052,762 | ||||
QLIK Technologies, Inc. (a) | 82,120 | 2,576,104 | ||||
ServiceNow, Inc. (a) | 63,600 | 5,192,941 | ||||
Splunk, Inc. (a) | 37,890 | 2,127,902 | ||||
13,949,709 | ||||||
Specialty Retail 8.7% | ||||||
Asbury Automotive Group, Inc. (a) | 41,765 | 3,307,788 | ||||
Restoration Hardware Holdings, | ||||||
Inc. (a) | 44,480 | 4,585,443 | ||||
Signet Jewelers Ltd. | 25,560 | 3,858,026 | ||||
Ulta Salon, Cosmetics & | ||||||
Fragrance, Inc. (a) | 34,420 | 5,987,703 | ||||
Williams-Sonoma, Inc. | 39,144 | 2,886,870 | ||||
20,625,830 | ||||||
Trading Companies & Distributors 1.0% | ||||||
HD Supply Holdings, Inc. (a) | 78,390 | 2,335,238 | ||||
TOTAL COMMON STOCKS | ||||||
(COST $200,831,870) | 228,945,115 | |||||
Investment Company 5.4% | ||||||
Northern Institutional Government | ||||||
Select Portfolio, Institutional Shares, | ||||||
0.01% (b) | 12,771,487 | 12,771,487 | ||||
TOTAL INVESTMENT COMPANY | ||||||
(COST $12,771,487) | 12,771,487 | |||||
TOTAL INVESTMENT SECURITIES | ||||||
(COST $213,603,357) 101.7% | 241,716,602 | |||||
Other Assets (Liabilities) (1.7)% | (4,121,860 | ) | ||||
NET ASSETS 100% | $ | 237,594,742 |
(a) | Represents non-income producing security. | |
(b) | The rate represents the annualized one-day yield that was in effect on October 31, 2015. |
See notes to financial statements. | HSBC PORTFOLIOS 33 |
HSBC PORTFOLIOS
Statements of Assets and Liabilitiesas of October 31, 2015
HSBC | HSBC | ||||||||
Growth | Opportunity | ||||||||
Portfolio | Portfolio | ||||||||
Assets: | |||||||||
Investment securities, at value | $ | 77,915,873 | $ | 241,716,602 | |||||
Dividends receivable | 16,838 | 28,626 | |||||||
Receivable for investments sold | 1,103,874 | 2,116,908 | |||||||
Prepaid expenses | 502 | 1,194 | |||||||
Total Assets | 79,037,087 | 243,863,330 | |||||||
Liabilities: | |||||||||
Payable for investments purchased | 1,448,603 | 6,069,784 | |||||||
Accrued expenses and other liabilities: | |||||||||
Investment Management | 11,140 | 49,611 | |||||||
Sub-Advisory | 25,463 | 109,143 | |||||||
Administration | 1,501 | 4,674 | |||||||
Compliance Services | 10 | 15 | |||||||
Accounting | 6,883 | 6,820 | |||||||
Custodian | 3,497 | 6,162 | |||||||
Trustee | 335 | 1,157 | |||||||
Other | 16,024 | 21,222 | |||||||
Total Liabilities | $ | 1,513,456 | $ | 6,268,588 | |||||
Applicable to investors beneficial interest | $ | 77,523,631 | $ | 237,594,742 | |||||
Total Investments, at cost | $ | 59,702,978 | $ | 213,603,357 |
34 HSBC PORTFOLIOS | See notes to financial statements. |
HSBC PORTFOLIOS
Statements of OperationsFor the year ended October 31, 2015
Growth | Opportunity | ||||||||||
Portfolio | Portfolio | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 577,554 | $ | 1,606,516 | |||||||
Foreign tax withholding | (1,395 | ) | | ||||||||
Total Investment Income | 576,159 | 1,606,516 | |||||||||
Expenses: | |||||||||||
Investment Management Fees | 134,559 | 586,260 | |||||||||
Sub-Advisory Fees | 307,511 | 1,289,776 | |||||||||
Administration | 18,482 | 56,343 | |||||||||
Accounting | 41,867 | 41,871 | |||||||||
Compliance Services | 811 | 2,437 | |||||||||
Custodian | 13,950 | 23,341 | |||||||||
Printing | 2,723 | 9,819 | |||||||||
Professional | 25,079 | 30,765 | |||||||||
Trustee | 2,328 | 7,109 | |||||||||
Other | 3,958 | 10,942 | |||||||||
Total Expenses | 551,268 | 2,058,663 | |||||||||
Net Investment Income (Loss) | $ | 24,891 | $ | (452,147 | ) | ||||||
Net Realized/Unrealized Gains/(Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | 9,076,017 | (1,376,839 | ) | ||||||||
Change in unrealized appreciation/depreciation on investments | (2,676,864 | ) | (3,071,831 | ) | |||||||
Net realized/unrealized gains (losses) on investments | 6,399,153 | (4,448,670 | ) | ||||||||
Change in Net Assets Resulting from Operations | $ | 6,424,044 | $ | (4,900,817 | ) |
See notes to financial statements. | HSBC PORTFOLIOS 35 |
HSBC PORTFOLIOS
Statements of Changes in Net Assets
Growth Portfolio | Opportunity Portfolio | |||||||||||||||||||||
For the | For the | For the | For the | |||||||||||||||||||
year ended | year ended | year ended | year ended | |||||||||||||||||||
October 31, 2015 | October 31, 2014 | October 31, 2015 | October 31, 2014 | |||||||||||||||||||
Investment Activities: | ||||||||||||||||||||||
Operations: | ||||||||||||||||||||||
Net investment income (loss) | $ | 24,891 | $ | 63,233 | $ | (452,147 | ) | $ | (846,122 | ) | ||||||||||||
Net realized gains (losses) from investments | 9,076,017 | 16,100,579 | (1,376,839 | ) | 48,125,818 | |||||||||||||||||
Change in unrealized appreciation/depreciation on | ||||||||||||||||||||||
investments | (2,676,864 | ) | (4,167,672 | ) | (3,071,831 | ) | (20,630,917 | ) | ||||||||||||||
Change in net assets resulting from operations | 6,424,044 | 11,996,140 | (4,900,817 | ) | 26,648,779 | |||||||||||||||||
Proceeds from contributions | 4,661,525 | 6,730,596 | 45,265,828 | 17,143,763 | ||||||||||||||||||
Value of withdrawals | (12,493,383 | ) | (28,479,757 | ) | (25,351,444 | ) | (48,280,031 | ) | ||||||||||||||
Charge in net assets resulting from transactions | ||||||||||||||||||||||
in investors beneficial interest | (7,831,858 | ) | (21,749,161 | ) | 19,914,384 | (31,136,268 | ) | |||||||||||||||
Change in net assets | (1,407,814 | ) | (9,753,021 | ) | 15,013,567 | (4,487,489 | ) | |||||||||||||||
Net Assets: | ||||||||||||||||||||||
Beginning of period | 78,931,445 | 88,684,466 | 222,581,175 | 227,068,664 | ||||||||||||||||||
End of period | $ | 77,523,631 | $ | 78,931,445 | $ | 237,594,742 | $ | 222,581,175 |
36 HSBC PORTFOLIOS | See notes to financial statements. |
HSBC PORTFOLIOS |
Financial Highlights |
Ratios/Supplementary Data | |||||||||||||||||||||
Ratio of | |||||||||||||||||||||
Ratio of Net | Expenses | ||||||||||||||||||||
Ratio of Net | Investment | to Average | |||||||||||||||||||
Net Assets at | Expenses to | Income (Loss) | Net Assets | ||||||||||||||||||
Total | End of Period | Average Net | to Average Net | (Excluding Fee | Portfolio | ||||||||||||||||
Return | (000s) | Assets | Assets | Reductions) | Turnover | ||||||||||||||||
GROWTH PORTFOLIO | |||||||||||||||||||||
Year Ended October 31, 2015 | 8.67 | % | $ | 77,524 | 0.72% | 0.03 | % | 0.72% | 68% | ||||||||||||
Year Ended October 31, 2014 | 15.22 | % | 78,931 | 0.69% | 0.07 | % | 0.69% | 68% | |||||||||||||
Year Ended October 31, 2013 | 32.84 | % | 88,684 | 0.69% | 0.46 | % | 0.69% | 75% | |||||||||||||
Year Ended October 31, 2012 | 7.18 | % | 79,018 | 0.71% | 0.13 | % | 0.71% | 53% | |||||||||||||
Year Ended October 31, 2011 | 11.07 | % | 105,289 | 0.66% | 0.07 | % | 0.66% | 56% | |||||||||||||
OPPORTUNITY PORTFOLIO | |||||||||||||||||||||
Year Ended October 31, 2015 | (1.57 | )% | $ | 237,595 | 0.88% | (0.19 | )% | 0.88% | 63% | ||||||||||||
Year Ended October 31, 2014 | 12.26 | % | 222,581 | 0.88% | (0.37 | )% | 0.88% | 66% | |||||||||||||
Year Ended October 31, 2013 | 34.84 | % | 227,069 | 0.89% | 0.17 | % | 0.89% | 70% | |||||||||||||
Year Ended October 31, 2012 | 12.71 | % | 150,059 | 0.91% | 0.15 | % | 0.91% | 59% | |||||||||||||
Year Ended October 31, 2011 | 12.40 | % | 141,324 | 0.88% | 0.05 | % | 0.88% | 69% |
See notes to financial statements. |
HSBC PORTFOLIOS 37 |
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 |
1. Organization:
The HSBC Portfolios (the Portfolios Trust), is an open-end management investment company organized as a New York trust under the laws of the State of New York on November 1, 1994. The Portfolios Trust contains the following master funds (individually a Portfolio, collectively the Portfolios):
Portfolio | Short Name | ||
HSBC Growth Portfolio | Growth Portfolio | ||
HSBC Opportunity Portfolio | Opportunity Portfolio |
The Portfolios operate as master funds in master-feeder arrangements, in which other feeder funds invest all or part of their investable assets in the Portfolios. The Declaration of Trust permits the Board of Trustees (the Board) to issue an unlimited number of beneficial interests in the Portfolios.
The Portfolios are diversified series of the Portfolios Trust and are part of the HSBC Family of Funds, which also includes HSBC Advisor Funds Trust and HSBC Funds (collectively the Trusts). Financial statements for all other funds of the Trusts are published separately.
The following represents each feeder funds proportionate ownership interest in the Portfolios:
Proportionate | |||||||
Ownership Interest on | |||||||
Feeder Fund | Respective Portfolio | October 31, 2015 (%) | |||||
HSBC Growth Fund | HSBC Growth Portfolio | 100.0 | |||||
HSBC Opportunity Fund | HSBC Opportunity Portfolio | 7.4 | |||||
HSBC Opportunity Fund (Advisor) | HSBC Opportunity Portfolio | 92.6 |
Under the Portfolios Trusts organizational documents, the Portfolios Trusts officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolios. In addition, in the normal course of business, the Portfolios Trust may enter into contracts with its service providers, which also provide for indemnifications by the Portfolios. The Portfolios maximum exposure under these arrangements is unknown as this would involve any future claims that may be made against the Portfolios. However, based on experience, the Portfolios Trust expects that risk of loss to be remote.
The Portfolios are investment companies and follow accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services-Investment Companies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by the Portfolios in the preparation of their financial statements. The policies are in conformity with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Securities Valuation:
The Portfolios record their investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques used to determine fair value are further described in Note 3 below.
38 HSBC PORTFOLIOS
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Investment Transactions and Related Income:
Investment transactions are accounted for no later than one business day after trade date. However, for financial reporting purposes, investment transactions are accounted for on trade date. Investment gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date.
The Portfolios make an allocation of their net investment income and realized gains and losses from securities transactions to their investors in proportion to their investment in the Portfolios.
Expense Allocations:
Expenses directly attributable to a Portfolio are charged to that Portfolio. Expenses not directly attributable to a Portfolio are allocated proportionately among the applicable portfolios or funds within the Trusts in relation to the net assets or on another reasonable basis.
Federal Income Taxes:
The Opportunity Portfolio is treated as a partnership for U.S. federal income tax purposes. Accordingly, the Opportunity Portfolio passes through all of its net investment income and gains and losses to its feeder funds, and is therefore not subject to U.S. federal income tax. As such, investors in the Opportunity Portfolio are allocated for tax purposes their respective share of the Opportunity Portfolios ordinary income and realized gains or losses. It is intended that the Opportunity Portfolio will be managed in such a way that an investor will be able to satisfy the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies. The Growth Portfolio is a disregarded entity for U.S. federal income tax purposes and the assets, liabilities, income, expenses and capital gains or losses of the Growth Portfolio are treated as those of the sole remaining feeder fund.
Management of the Portfolios has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then, as applicable). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
New Accounting Pronouncements:
In August 2014, the FASB issued Accounting Standards Update No. 2014-15 Presentation of Financial StatementsGoing Concern (Subtopic 205-40) (ASU 2014-15), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern. ASU 2014-15 is effective prospectively for annual periods ending after December 15, 2016, and interim periods thereafter.
In May 2015, the FASB issued Accounting Standards Update No. 2015-07 Fair Value Measurement (Topic 820) (ASU 2015-07), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for all investments that may be measured at fair value using the NAV per share practical expedient. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods.
Management is currently evaluating the implications of these ASUs and their impact on the financial statements and related disclosures have not yet been determined.
HSBC PORTFOLIOS 39
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
3. Investment Valuation Summary:
The valuation techniques employed by the Portfolios, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The Portfolios investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The inputs used for valuing the Portfolios investments are summarized in the three broad levels listed below:
● |
Level 1: quoted prices in active markets for identical assets |
● |
Level 2: other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.) |
● |
Level 3: significant unobservable inputs (including a Portfolios own assumptions in determining the fair value of investments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The Portfolios determine transfers between fair value hierarchy levels at the reporting period end. There were no transfers between levels as of October 31, 2015, from the valuation input levels used on October 31, 2014. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.
Exchange traded domestic equity securities are valued at the last sales price on a national securities exchange, or in the absence of recorded sales, at the readily available closing bid price on such exchanges, or at the quoted bid price in the over-the-counter market and are typically categorized as Level 1 in the fair value hierarchy.
Shares of exchange traded and closed-end registered investment companies are valued in the same manner as other equity securities and are typically categorized as Level 1 in the fair value hierarchy. Mutual funds are valued at their net asset values (NAVs), as reported by such companies and are typically categorized as Level 1 in the fair value hierarchy.
Securities or other assets for which market quotations are not readily available, or are deemed unreliable due to a significant event or otherwise, are valued pursuant to procedures adopted by the Trusts Board (Procedures). Depending on the source and relative significance of valuation inputs, these instruments may be classified as Level 2 or Level 3 in the fair value hierarchy. Examples of potentially significant events that could affect the value of an individual security and thus require pricing under the Procedures include corporate actions by the issuer, announcements by the issuer relating to its earnings or products, regulatory news, natural disasters, and litigation. Examples of potentially significant events that could affect multiple securities held by a Portfolio include governmental actions, natural disasters, and armed conflicts. Fair value pricing may require subjective determinations about the value of a security. While the Portfolios Trusts policy is intended to result in a calculation of a Portfolios NAV that fairly reflects security values as of the time of pricing, the Portfolios Trust cannot ensure that fair values determined would accurately reflect the price that a Portfolio could obtain for a security if it were to dispose of that security as of the time of pricing. The prices used by a Portfolio may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements.
For the year ended October 31, 2015, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value. As of October 31, 2015, all investments were categorized as Level 1 in the fair value hierarchy. The breakdown of investment categorization is disclosed in the Schedule of Portfolio Investment for each Portfolio.
40 HSBC PORTFOLIOS
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
4. Related Party Transactions and Other Agreements and Plans:
Investment Management:
HSBC Global Asset Management (USA) Inc. (HSBC or the Investment Adviser), a wholly owned subsidiary of HSBC Bank USA, N.A., a national bank organized under the laws of the United States, acts as the Investment Adviser to the Portfolios pursuant to an investment management contract with the Portfolios Trust. As Investment Adviser, HSBC manages the investments of the Portfolios and continuously reviews, supervises, and administers the Portfolios investments. Winslow Capital Management, LLC. (Winslow) and Westfield Capital Management Company, L.P. (Westfield) serve as subadvisers for the Growth Portfolio and Opportunity Portfolio, respectively, and are paid for their services directly by the respective Portfolios.
For their services, the Investment Adviser and Winslow receive in aggregate, from the Growth Portfolio, a fee, accrued daily and paid monthly, at an annual rate of:
Based on Average Daily Net Assets of all Sub-Adviser serviced funds and separate accounts affiliated | ||
with HSBC: | Fee Rate(%) | |
Up to $250 million | 0.575 | |
In excess of $250 million but not exceeding $500 million | 0.525 | |
In excess of $500 million but not exceeding $750 million | 0.475 | |
In excess of $750 million but not exceeding $1 billion | 0.425 | |
In excess of $1 billion | 0.375 |
* | The Growth Portfolio may pay the Investment Adviser and Winslow an aggregate maximum fee of up to 0.68%. Currently, the Investment Advisers contractual fee is 0.175% and Winslows maximum contractual fee is 0.40%. Accordingly, the current aggregate maximum fee rate is 0.575%. |
For their services, the Investment Adviser and Westfield receive in aggregate, a fee, accrued daily and paid monthly, at an annual rate of 0.80% of the Opportunity Portfolios average daily net assets. Currently, the Investment Advisers contractual fee is 0.25% and Westfields contractual fee is 0.55%.
Administration:
HSBC also serves the Portfolios as Administrator. Under the terms of the Administration Agreement, HSBC receives from the Portfolios (as well as other funds in the Trusts combined) a fee, accrued daily and paid monthly, at an annual rate of:
Based on Average Daily Net Assets of | Fee Rate(%) | ||
Up to $10 billion | 0.0550 | ||
In excess of $10 billion but not exceeding $20 billion | 0.0350 | ||
In excess of $20 billion but not exceeding $50 billion | 0.0275 | ||
In excess of $50 billion | 0.0250 |
The fee rates and breakpoints are determined on the basis of the aggregate average daily net assets of the Trusts, however, the assets of the funds of the HSBC Funds and HSBC Advisor Fund that invest in the Portfolios are not double-counted. The total administration fee paid to HSBC is allocated to each series based upon its proportionate share of the aggregate net assets of the Trusts. For assets invested in the Portfolios by the HSBC Funds and HSBC Advisor Funds Trust, the Portfolios pay half of the administration fee and the other funds pay half of the administration fee, for a combination of the total fee rate set forth above.
Pursuant to a Sub-Administration Agreement with HSBC, Citi Fund Services Ohio, Inc. (Citi), a wholly-owned subsidiary of Citigroup, Inc., serves as the Trusts Sub-Administrator subject to the general supervision by the Trusts Board and HSBC. For these services, Citi is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above subject to certain reductions associated with services provided to new portfolios, minus 0.02% which is retained by HSBC.
HSBC PORTFOLIOS 41
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
Under a Compliance Services Agreement between the Trusts and Citi (the CCO Agreement), Citi makes an employee available to serve as the Trusts Chief Compliance Officer (the CCO). Under the CCO Agreement, Citi also provides infrastructure and support in implementing the written policies and procedures comprising the Trusts compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the Trusts paid Citi $300,447 for the year ended October 31, 2015, plus reimbursement of certain out-of-pocket expenses. Expenses incurred by each Portfolio are reflected on the Statements of Operations as Compliance Services. Citi pays the salary and other compensation earned by individuals performing these services, as employees of Citi.
Fund Accounting:
Citi provides fund accounting services for the Portfolios Trust. For its services to the Portfolios, Citi receives an annual fee per portfolio, including reimbursement of certain expenses that, is accrued daily and paid monthly. Citi receives additional fees paid by the Trust for regulatory administration services.
Independent Trustees:
For the period January 1, 2015 through October 31, 2015, the Trusts paid each Independent Trustee an annual retainer of $100,000. The Trusts paid a fee of $12,000 for each regular meeting of the Board of Trustees attended and a fee of $3,000 for each special meeting attended. The Trusts paid each Committee Chair an annual retainer of $12,000, with the exception of the Chair of the Audit Committee, who received a retainer of $15,000. The Trusts also paid the Chairman of the Board, an additional annual retainer of $30,000.
Prior to January 1, 2015, the Trusts paid each Independent Trustee an annual retainer of $100,000. The Trusts paid a fee of $10,000 for each regular meeting of the Board of Trustees attended and a fee of $3,000 for each special meeting attended. The Trusts paid each Committee Chair an annual retainer of $3,000, with the exception of the Chair of the Audit Committee, who received a retainer of $6,000. The Trusts also paid the Chairman of the Board, an additional annual retainer of $24,000. In addition, for time expended on Board duties outside normal meetings, which is authorized by the Board, a Trustee was compensated at the rate of $500 per hour, up to a maximum of $3,000 per day.
Other:
The Portfolios may purchase securities from an underwriting syndicate in which the principal underwriter or members of the syndicate are affiliated with the Adviser. For the year ended October 31, 2015, the Portfolios purchased the following amounts of such securities:
Purchases ($) | |
Growth Portfolio | 1,393,500 |
The Adviser and its affiliates may have lending, banking, brokerage, underwriting, or other business relationships with the issuers of the securities in which the Portfolios invest.
5. Investment Transactions:
Cost of purchases and proceeds from sales of securities (excluding securities maturing less than one year from acquisition) for the year ended October 31, 2015 were as follows:
Purchases ($) | Sales ($) | |||
Growth Portfolio | 51,679,119 | 58,710,765 | ||
Opportunity Portfolio | 163,244,050 | 143,144,294 |
For the year ended October 31, 2015, there were no long-term U.S. government securities held by the Portfolios.
42 HSBC PORTFOLIOS
HSBC PORTFOLIOS |
Notes to Financial Statementsas of October 31, 2015 (continued) |
6. Federal Income Tax Information:
At October 31, 2015, the cost basis of securities for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation and net unrealized appreciation/depreciation were as follows:
Net Unrealized | ||||||||
Tax Unrealized | Tax Unrealized | Appreciation/ | ||||||
Tax Cost ($) | Appreciation ($) | Depreciation ($) | (Depreciation) ($)* | |||||
Growth Portfolio | 60,032,978 | 18,261,249 | (770,596) | 17,490,653 | ||||
Opportunity Portfolio | 214,440,808 | 38,867,547 | (11,591,753) | 27,275,794 |
* | The difference between book-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales. |
7. Subsequent Events:
At a meeting on December 17-18, 2015, the Trusts Board of Trustees approved a plan of liquidation to close the HSBC Growth Portfolio. The liquidation of the HSBC Growth Portfolio is expected to be effective on or about February 12, 2016.
At a meeting of the Board of Trustees of the Trusts held on December 17-18, 2015, the Trustees of the Trusts approved on behalf of each Trust and each of the Funds a form of Agreement and Plan of Reorganization (the Plan) and other proposals subject to shareholder approval. The Plan will be submitted to a vote of shareholders of the Funds at a special meeting of shareholders to be held in 2016. The Plan calls for the reorganization and redomiciliation of the Funds, which are series of either a Massachusetts business trust (the Trust and Advisor Trust) or a New York trust (the Portfolio Trust), with and into corresponding shell series (New Funds) of a single newly formed Delaware statutory trust (the Redomiciliation). If approved by shareholders, the Redomiciliation is expected to occur in the second calendar quarter of 2016. Upon completion of the Redomiciliation, shareholders of the Funds would own shares of the corresponding class of the New Funds that are equal in value to the shares of the Fund that were held by the shareholders immediately prior to the closing of the Redomiciliation. In addition, the respective share classes of each of the New Funds would assume the performance, financial and other historical information of those of the corresponding Fund. The Redomiciliation is not expected to have an impact on the continuing operations of the Funds. Additional information about the Plan and the other proposals will be included in the Trusts proxy statement that is expected to be mailed to shareholders in March 2016.
On November 30, 2015, SunGard Investor Services LLC announced that its acquisition by Fidelity National Information Services was completed. The transfer agency services, and fees charged for such services, are unchanged as a result of the acquisition.
Management has evaluated events and transactions through the date the financial statements were issued, for purposes of recognition or disclosure in these financial statements and there are no additional subsequent events to report.
HSBC PORTFOLIOS 43
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of HSBC Portfolios
In our opinion, the accompanying statements of assets and liabilities, including the schedules of portfolio investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of HSBC Growth Portfolio and HSBC Opportunity Portfolio (each a portfolio of HSBC Portfolios and hereafter referred to as the Funds) at October 31, 2015, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at October 31, 2015 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The accompanying statements of changes in net assets for the year ended October 31, 2014 and the financial highlights for each of the periods ended on or prior to October 31, 2014 were audited by other auditors whose report dated December 23, 2014 expressed an unqualified opinion on those statements and financial highlights.
As discussed in Note 7 to the financial statements, the Board of Trustees has approved a plan of liquidation to close the HSBC Growth Portfolio.
PricewaterhouseCoopers LLP
New York,
New York
December 29, 2015
44 HSBC PORTFOLIOS
HSBC PORTFOLIOS |
Table of Shareholder Expensesas of October 31, 2015 (Unaudited) |
As a shareholder of the Portfolios, you incur ongoing costs, including management fees and other Fund expenses.
These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolios and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2015 through October 31, 2015.
Actual Example
The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Annualized | ||||||||||||||||||||
Beginning | Ending | Expenses Paid | Expense Ratio | |||||||||||||||||
Account Value | Account Value | During Period* | During Period | |||||||||||||||||
5/1/15 | 10/31/15 | 5/1/15 - 10/31/15 | 5/1/15 - 10/31/15 | |||||||||||||||||
Growth Portfolio | $ | 1,000.00 | $ | 1,037.30 | $ | 3.70 | 0.72 | % | ||||||||||||
Opportunity Portfolio | 1,000.00 | 923.20 | 4.27 | 0.88 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Portfolios annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on each Portfolios actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolios actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized | ||||||||||||||||||||
Beginning | Ending | Expenses Paid | Expense Ratio | |||||||||||||||||
Account Value | Account Value | During Period* | During Period | |||||||||||||||||
5/1/15 | 10/31/15 | 5/1/15 - 10/31/15 | 5/1/15 - 10/31/15 | |||||||||||||||||
Growth Portfolio | $ | 1,000.00 | $ | 1,021.58 | $ | 3.67 | 0.72 | % | ||||||||||||
Opportunity Portfolio | 1,000.00 | 1,020.77 | 4.48 | 0.88 | % |
* | Expenses are equal to the average account value over the period, multiplied by the Portfolios annualized expense ratio, multiplied by 184/365 (to reflect the one half year period). |
HSBC PORTFOLIOS 45
HSBC PORTFOLIOS |
Board of Trustees and Officers (Unaudited) |
MANAGEMENT OF THE TRUST
The following table contains information regarding the HSBC Family of Funds Board of Trustees (Trustees). Asterisks indicate those Trustees who are interested persons, as defined in the Investment Company Act of 1940, as amended, of the HSBC Family of Funds. The HSBC Family of Funds Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling (888) 525-5757.
Portfolios in | ||||||||||
Position(s) | Term of Office | Fund Complex | ||||||||
Name, | Held with | and Length of | Principal Occupation(s) | Overseen By | Other Directorships | |||||
Address, Age | Funds | Time Served | During Past 5 Years | Trustee* | Held by Trustee | |||||
NON-INTERESTED | ||||||||||
TRUSTEES | ||||||||||
MARCIA L. BECK P.O. Box 182845 Columbus, OH 43218-3035 Age: 60 |
Trustee | Indefinite; 2008 to present |
Private Investor (1999 present); Executive Vice President, Prudential Investments (1997 1999); President and Trustee, The Goldman Sachs Mutual Funds (1992 1996) | 24 | None | |||||
SUSAN C. GAUSE P.O. Box 182845 Columbus, OH 43218-3035 Age: 63 |
Trustee | Indefinite; 2013 to present |
Private Investor (2003 present); Chief Executive Officer, Dresdner RCM Global Investors and Allianz Dresdner Asset Management (2000 2002); Board Member, Dresdner Global Asset Management Board (2000 2002); Chief Operating Officer and Senior Managing Director, Dresdner RCM Global Investors (1998 2000); Global Chief Financial Officer, Dresdner RCM Global Investors (1996 1998) | 24 | Met Investors
Series Trust and Metropolitan Series Fund | |||||
SUSAN S. HUANG P.O. Box 182845 Columbus, OH 43218-3035 Age: 61 |
Trustee | Indefinite; 2008 to present |
Private Investor (2000-present); Senior Vice President, Schroder Investment Management (2001 2004); Managing Director, Chase Asset Management (1995-2000) | 24 | None | |||||
THOMAS F. ROBARDS P.O. Box 182845 Columbus, OH 43218-3035 Age: 69 |
Chairman
and Trustee |
Indefinite; 2005 to present |
Partner, Robards & Co. LLC (investment and advisory services) (2005-present); Chief Financial Officer, American Museum of Natural History (2003-2004); Chief Financial Officer, Datek Online Holdings (2000-2003); Executive Vice President and Chief Financial Officer, Republic New York Corporation (1976-2000) | 24 | Ellington Financial
LLC (NYSE listed financial services); Ellington Residential Mortgage REIT (NYSE listed real estate investment trust) | |||||
INTERESTED TRUSTEE | ||||||||||
DEBORAH HAZELL 452 Fifth Avenue New York NY 10018 Age: 52 |
Trustee | Indefinite; 2011 to present |
Chief Executive Officer, HSBC Global Asset Management (USA) Inc. (2011-present); President and Chief Executive Officer, Fisher Francis Trees & Watts (FFTW) (investment adviser), 2008-2011; Client Service, Business Development and Marketing Group, FFTW (1999-2008) | 24 | None |
* Includes the HSBC Funds, the HSBC Advisor Funds Trust and the HSBC Portfolios.
46 HSBC PORTFOLIOS
HSBC PORTFOLIOS |
Board of Trustees and Officers (Unaudited) (continued) |
Position(s) Held | Term of Office and | Principal Occupation(s) | ||||
Name, Address, Age | Funds | Length of Time Served | During Past 5 Years | |||
OFFICERS | ||||||
RICHARD A. FABIETTI 452 Fifth Avenue New York, NY 10018 Age: 57 |
President | One year; 2004 to present |
Senior Vice President, HSBC Global Asset Management (USA) Inc. (1998 - present) | |||
JAMES D. LEVY 452 Fifth Avenue New York, NY 10018 Age: 52 |
Vice President | One year; 2014 to present |
Vice President, Product Management, HSBC Global Asset Management (USA) Inc. (2014 present); Vice President, Product Development, GE Asset Management Inc. (2007 2014) | |||
SCOTT RHODES* |
Treasurer | One year; 2014 to present |
Senior Vice President, Citi (2010 - present); Manager, Treasurer of Mutual Funds, and Broker-Dealer Treasurer and Financial & Operations Principal, GE Asset Management Inc. (2005 2010) | |||
IOANNIS TZOUGANATOS* 100 Summer Street, Suite 1500 Boston, MA 02110 Age: 39 |
Secretary | One Year; 2015 to present |
Vice President, Regulatory Administration, Citi (2008-present) | |||
HEATHER MELITO-DEZAN* 100 Summer Street Suite 1500 Boston, MA 02110 Age: 38 |
Assistant Secretary | One year; 2014 to present |
Assistant Vice President, Regulatory Administration, Citi (2013 - present); Senior Specialist, Regulatory Administration, NGAM (2010-2013); Vice President and Manager. Regulatory Administration, BNY Mellon (2004-2010) | |||
CHARLES L. BOOTH* 3435 Stelzer Road Columbus, OH 43219-3035 Age: 55 |
Chief Compliance Officer | One year; 2015 to present |
Director and Compliance Officer, CCO Services, Citi (1988 - present) |
* | Mr. Rhodes, Mr. Tzouganatos, Ms. Melito-Dezan, and Mr. Booth also are officers of other investment companies of which Citi (or an affiliate) is the administrator or sub-administrator. |
HSBC PORTFOLIOS 47
Other Information (Unaudited):
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders; (ii) on the Funds website at www.investorfunds.us.hsbc.com; and (iii) on the Security and Exchange Commissions (Commission) website at http://www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds Forms N-Q are available on the Commissions website at http://www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the Commissions Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds Schedules of Investments will be available no later than 60 days after each period end, without charge, on the Funds website at www.investorfunds.us.hsbc.com.
An investment in a Fund is not a deposit of HSBC Bank USA, National Association, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
48 HSBC PORTFOLIOS
HSBC FAMILY OF FUNDS:
INVESTMENT ADVISER AND ADMINISTRATOR
HSBC Global Asset Management (USA)
Inc.
452 Fifth Avenue
New York, NY
10018
SUB-ADVISERS
HSBC Growth
Portfolio
Winslow Capital Management,
LLC
4720 IDS Tower
80 South Eighth Street
Minneapolis, MN
55402
HSBC Opportunity
Portfolio
Westfield Capital Management
Company, L.P.
One Financial Center
Boston, MA 02111
ARE NOT A |
ARE
NOT |
ARE NOT |
ARE NOT GUARANTEED BY |
MAY
LOSE |
SHAREHOLDER SERVICING AGENTS
For HSBC Bank USA, N.A. and
HSBC
Securities (USA) Inc. Clients
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
1-888-525-5757
For All Other Shareholders
HSBC Funds
P.O. Box
182845
Columbus, OH 43218
1-800-782-8183
TRANSFER AGENT
SunGard Investor Services, LLC
3435 Stelzer
Road
Columbus, OH 43219
DISTRIBUTOR
Foreside Distribution Services,
L.P.
690 Taylor Road, Suite 150
Gahanna, OH 43230
CUSTODIAN
The Northern Trust Company
50 South
LaSalle Street
Chicago, IL 60603
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300
Madison Avenue
New York, NY 10017
LEGAL COUNSEL
Dechert LLP
1900 K Street,
N.W.
Washington, D.C. 20006
Investment products are offered by HSBC Securities (USA) Inc. (HSI), member NYSE/FINRA/SIPC. HSI is an affiliate of HSBC Bank USA, N.A. Investment products: Are not a deposit or other obligation of the bank or any of its affiliates; Not FDIC insured or insured by any federal government agency of the United States; Not guaranteed by the bank or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.
Investors should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The prospectus contains this and other important information about the investment company. For clients of HSBC Securities (USA) Inc., please call 1-888-525-5757 for more information. For other investors and prospective investors, please call the Funds directly at 1-800-782-8183 or visit our website at www.investorfunds.us.hsbc.com. Investors should read the prospectus carefully before investing or sending money.
HSB-A-RTL-1215 | 12/15 |
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as an Exhibit.
(b) During the period covered by the report, with respect to the registrant's code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. Audit Committee Financial Expert.
3(a)(1) The registrants board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
3(a)(2) The audit committee financial experts are Tom Robards and Marcia Beck, who are independent for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services. | |||
(a) Audit Fees, | |||
2014 | $11,765 | ||
2015 | $8,333 | ||
(b) Audit-Related Fees, | |||
2014 | $389 | ||
2015 | $0 |
2014 Fees
of $389 relate to the consent of N-1A filing. | |||
(c) Tax Fees, | |||
2014 | $5,800 | ||
2015 | $3,000 | ||
Fees for both 2014 and 2015 relate to the preparation of federal income and excise tax returns and the review of excise tax distributions. |
(d) All Other Fees, | |||
2014 | $0 | ||
2015 | $0 |
(e)(1) The audit committee is required to pre-approve all audit and permitted non-audit services performed by the registrants independent auditors in accordance with the audit committee charter and the Investment Company Act of 1940.
(e) (2) | ||||
2014 | 0% | |||
2015 | 0% | |||
(f) Not applicable. | ||||
(g) Non-Audit Fees. | ||||
2014 | $0 | |||
2015 | $10,965,000 | |||
Fees for 2015 represent PricewaterhouseCoopers LLP services provided to HSBC Bank and affiliates related to general corporate, state and local tax assistance, accounting matters and various advisory projects. |
(h) The audit committee considered the nonaudit services rendered to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser, and believes the services are compatible with the principal accountants independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Included as a part of the report to shareholders filed under Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a)The registrants principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b)There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrants internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | HSBC ADVISOR FUNDS TRUST |
By (Signature and Title) | /s/ Richard A. Fabietti |
Richard A. Fabietti | |
President |
Date | December 22, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title) | /s/ Richard A. Fabietti |
Richard A. Fabietti | |
President |
Date | December 22, 2015 |
By (Signature and Title) | /s/ Scott Rhodes |
Scott Rhodes | |
Treasurer |
Date | December 22, 2015 |
CERTIFICATIONS
I, Richard A. Fabietti, certify that:
1. | I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust (the registrant); | |||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |||
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: | |||
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and | |||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |||
5. | The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |||
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and | |||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |||
December 22, 2015 | /s/ Richard A Fabietti | ||
Date | Richard A. Fabietti | ||
President |
CERTIFICATIONS
I, Scott Rhodes, certify that:
1. | I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust (the registrant); | |||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |||
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: | |||
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and | |||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |||
5. | The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |||
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and | |||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |||
December 22, 2015 | /s/ Scott Rhodes | ||
Date | Scott Rhodes | ||
Treasurer |
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended October 31, 2015 of HSBC Advisor Funds Trust (the Registrant).
Each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of the Registrant, certifies that, to such officers knowledge:
1. | the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and | |
2. | the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
December 22, 2015 |
|
Date |
/s/ Richard Fabietti | ||
Richard A. Fabietti | ||
President | ||
/s/ Scott Rhodes | ||
Scott Rhodes | ||
Treasurer |
This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL
OFFICERS
HSBC INVESTOR FUNDS
HSBC ADVISOR FUNDS TRUST
HSBC INVESTOR
PORTFOLIOS
Approved by the Boards of Trustees
HSBC Investor Funds,
HSBC Advisor Funds Trust and HSBC Investor Portfolios
as of August 14, 2003
Pursuant to the Sarbanes-Oxley Act of 2002
I. Introduction and Application
HSBC Investor Funds, HSBC Advisor Funds Trust and HSBC Investor Portfolios (each a Trust) recognize the importance of high ethical standards in the conduct of their business and require this Code of Ethics (Code) to be observed by their respective principal executive officers (each a Covered Officer) (defined below). In accordance with the Sarbanes-Oxley Act of 2002 (the Act) and the rules promulgated thereunder by the U.S. Securities and Exchange Commission (SEC) each Trust is required to file reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (1934 Act), and must disclose whether they have adopted a code of ethics applicable to the principal executive officers. Each Trusts Board of Trustees (Board), including a majority of its Independent Trustees (defined below) has approved this Code as compliant with the requirements of the Act and related SEC rules. This Code does not supersede or otherwise affect the separate code of ethics that each Trust has adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended (1940 Act).
All recipients of the Code are directed to read it carefully, retain it for future reference and abide by the rules and policies set forth herein. Any questions concerning the applicability or interpretation of such rules and policies, and compliance therewith, should be directed to the relevant Compliance Officer (defined below), as specified in Schedule 1.
II. Purpose
This Code has been adopted by the Board in accordance with the Act and the rules promulgated by the SEC in order to deter wrongdoing and promote:
(A) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(B) full, fair, accurate, timely and understandable disclosure in reports and documents filed by the Trust with the SEC or made in other public communications by the Trust;
(C) compliance with applicable governmental laws, rules and regulations;
(D) prompt internal reporting to an appropriate person or persons of violations of the Code; and
(E) accountability for adherence to the Code.
III. Definitions
(A) Covered Officer means the principal executive officer and senior financial officers, including the principal financial officer, controller or principal accounting officer, or persons performing similar functions.
(B) Compliance Officer means the person appointed by the Trusts Board of Trustees to administer the Code.
(C) Trustee means a trustee of the Trust.
(D) Executive Officer shall have the same meaning as set forth in Rule 3b-7 of the 1934 Act. Subject to any changes in the Rule, an Executive Officer means the president, any vice president, any officer who performs a policy making function, or any other person who performs similar policy making functions for the Trust.
(E) Independent Trustee means a trustee of the Trust who is not an interested person of the Trust within the meaning of Section 2(a)(19) of the 1940 Act.
(F) Implicit Waiver means the Compliance Officer failed to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an Executive Officer.
(G) Restricted List means that listing of securities maintained by the Trust Compliance Officer in which trading by certain individuals subject to the Trusts 17j-1 code of ethics is generally prohibited.
(H) Waiver means the approval by the Compliance Office of a material departure from a provision of the Code.
IV. Honest and Ethical Conduct
(A) Overview. A conflict of interest occurs when a Covered Officers personal interest interferes with the interests of, or his service to, the Trust. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust and already are subject to the conflict of interest provisions in the 1940 Act and the Investment Advisers Act of 1940, as amended (the Advisers Act). The Trusts and each investment adviser and sub-advisers compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
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(B) General Policy. Each Covered Officer shall adhere to the highest standards of honest and ethical conduct. Each Covered Officer has a duty to exercise his or her authority and responsibility for the benefit of the Trust, to place the interests of the shareholders first and to refrain from having outside interests that conflict with the interests of the Trust and its shareholders. Each such person must avoid any circumstances that might adversely affect or appear to affect his or her duty of complete loyalty to the Trust and its shareholders in discharging his or her responsibilities, including the protection of confidential information and corporate integrity.
(C) Examples of Conflicts. The following list provides examples of conflicts of interest under the Code but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trust.
(1) Prohibited Conflicts of Interest. Each Covered Officer must:
● |
not use his personal influence or personal relationships improperly
to influence decisions or financial reporting by the Trust whereby the
Covered Officer would benefit personally to the detriment of the Trust;
|
● |
not cause the Trust to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than benefit the
Trust; |
● |
not use material non-public knowledge of portfolio transactions made or contemplated for the Trust to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; |
(2) Conflicts of Interest that may be Waived. There are some conflict of interest situations for which a Covered Officer may seek a Waiver from a provision(s) of the Code. Waivers must be sought in accordance with Section VIII of the Code. Examples of these include:
● |
Outside Employment or Activities. Covered Officers may not serve as directors, officers, general partners, consultants, agents, representatives or employees of any other business unless prior authorization is obtained from the Compliance Officer. Such authorization will be based on a determination that the business of such corporation does not conflict with the interests of the Trust, and that such service would be consistent with the best interests of the Trust and its shareholders, and that such service is not prohibited by law. |
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● |
Gifts, Entertainment, Favors or
Loans. No Covered Officer shall receive any gift or other thing of
more than de minimis value from
any person or entity that does business with or on behalf of the
Trust. |
● |
Corporate Opportunities. Covered
Officers may not exploit for their own personal gain opportunities that
are discovered through the use of Trust property, information or position
unless the opportunity is fully disclosed, in writing, to the Board and
the Board declines to pursue such opportunity.
|
● |
Ownership Interests. Covered Officers may not have: (i) any ownership interest in, or any consulting or employment relationship with, any of the Trusts service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; or (ii) a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership. |
V. Full, Fair, Accurate, Timely and Understandable Disclosure
(A) General Policy. This Code is intended to promote the full, fair, accurate, timely and understandable disclosure in reports and other documents filed by the Trust with the SEC or made in other public communications by the Trust. Accordingly, the Covered Officers are expected to consider this to be central to their roles as officers of the Trust and shall ensure that full, fair, accurate, timely and understandable disclosure is made in the Trusts reports and other documents filed with the SEC and in other public communications.
(B) Responsibilities. Covered Officers shall:
(1) | familiarize himself with the disclosure requirements generally applicable to the Trust; | ||
(2) | not knowingly misrepresent, or cause other to misrepresent; facts about the Trust to others, whether within or outside the Trust, including to the Trusts Trustees and auditors, and to governmental regulators and self-regulatory organizations; | ||
(3) | to the extent appropriate within his area of responsibility, consult with the other officers and employees of the Trust and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trust files with, or submit to, the SEC and in other public communications made by the Trust; and | ||
(4) | promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
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(C) Changes in Disclosure Process. If, at any time, a Covered Officer believes that measures should be taken to improve the Trusts disclosure process, he or she shall advise the Compliance Officer and shall work with the Compliance Officer and other appropriate personnel to facilitate any changes in the process.
VI. Internal Reporting by Covered Persons
(A) Certifications. Each Covered Officer shall:
(1) | upon adoption of the Code (or thereafter as applicable upon becoming a Covered Officer), affirm in writing on Schedule A hereto that the Covered Officer has received, read, and understands the Code; and | ||
(2) | annually thereafter affirm on Schedule A hereto that the Covered Officer has complied with the requirements of the Code. |
(B) Reporting. A Covered Officer shall promptly report any knowledge of a material violation of this Code to the Compliance Officer. Failure to do so is itself a violation of the Code.
(C) Required Documentation. Any such report shall be in writing, and shall describe in reasonable detail the conduct that the Covered Officer believes to have violated this Code. If the Compliance Officer concludes that there has been a violation of the Code, he or she shall determine appropriate sanctions in accordance with Section IX(A) below. Notwithstanding the foregoing, the Compliance Officer shall be entitled to grant a Waiver of one or more provisions of this Code as set forth in Section VIII of the Code.
VII. Waivers of Provisions of the Code
(A) Waivers. The Compliance Officer may grant Waivers to the Code in circumstances that present special hardship. Waivers shall be structured to be as narrow as is reasonably practicable with appropriate safeguards designed to prevent abuse of the Waiver. To request a Waiver from the Code, the Covered Officer shall submit to the Compliance Officer a written request describing the transaction, activity or relationship for which a Waiver is sought. The request shall briefly explain the reason for engaging in the transaction, activity or relationship.
(B) Implicit Waivers. In the event that the Compliance Officer has not acted upon a properly submitted request for a Waiver within a reasonable amount of time and a material departure from the Code has taken place in accordance with the request, the Compliance Officer may nevertheless, in lieu of finding a violation of the Code, determine retroactively to grant a Waiver.
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(C) Documentation. The Compliance Officer shall document all Waiver determinations. If a Waiver is granted under paragraphs (A) or (B), above, the Compliance Officer shall prepare a brief description of the nature of the Waiver, the name of the Covered Officer and the date of the Waiver so that this information may be disclosed in the next Form N-CSR to be filed on behalf of the Trust or posted on the Trusts internet website within five business days following the date of the Waiver. All Waivers must be reported to the Board at each quarterly meeting as set forth in Section IX below.
VIII. Reporting and Monitoring
(A) Sanctions. Compliance by Covered Officers with the provisions of the Code is required. Covered Officers should be aware that in response to any violation, the Trust will take whatever action is deemed necessary under the circumstances, including, but not limited to, fines, suspension or termination.
(B) Board Reporting. The Compliance Officer shall report any material violations of the Code to the Board for its consideration on a quarterly basis. At a minimum, the report shall:
(1) | describe the violation under the Code and any sanctions imposed; | ||
(2) | identify and describe any Waivers to the Code; and | ||
(3) | identify any recommended changes to the Code. |
(C) Amendments to the Code. The Covered Officers and the Compliance Officer may recommend amendments to the Code for the consideration and approval of the Board. In connection with any amendment to the Code, the Compliance Officer shall prepare a brief description of the amendment, so that the necessary disclosure may be made with the next Form N-CSR to be filed on behalf of the Trust or posted on the Trusts internet website within five business days following the date of the amendment.
IX. Record-keeping
The Compliance Officer shall maintain all records, including any internal memoranda, relating to compliance with the Code or Waivers of the Code, for a period of 6 years from the end of the fiscal year in which such document was created, 2 years in an accessible place. Such records shall be furnished to the SEC or its staff upon request.
XI. Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained on a confidential basis and will be reasonably secured to prevent access to such records by unauthorized personnel.
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SCHEDULE 1
COMPLIANCE OFFICER
Frederick J. Schmidt, Chief Compliance Officer
COVERED OFFICERS
Richard A. Fabietti, President
Scott Rhodes,
Treasurer
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