Mutual Funds

1- What types of assets do mutual funds invest in?

Mutual funds invest in:

• Equities of Turkish and foreign companies that are listed on ISE Stock Exchange.
• Private and public sector fixed income securities.
• Gold and other precious metals, as well as securitized instruments issued based on these metals.
• Other instruments that are approved by Capital Markets Board (such as futures, Repo and other similar instruments).

2- The basic principles of mutual funds:

Diversification of Risk: By investing in a range of securities and capital market instruments, mutual funds spread their risk across a variety of different assets.

Professional Management: Securities markets require technical knowledge and continuous tracking. Mutual funds are managed by experienced professionals, who constantly track the markets and are able to analyze the impacts of market movements and trade effectively on the basis of those insights.

Management of Securities Portfolio: Mutual Funds, in addition to investing in gold and other precious metals, invest primarily in securities by generating returns from the spread between buying and selling prices of these instruments.

Fiduciary Ownership: By investing their savings in mutual funds, investors authorize founders of the funds to conduct all transactions related to the fund on their behalf. For this reason, the founder is obliged to manage, or if a manager is appointed, to ensure that he/she manages the fund with the best interest of the investors.

Wealth Protection: Mutual funds do not have an independent legal identity. However, as specified in its internal regulations, each mutual fund has its own property holdings separate from its founder. In accordance with the Capital Markets Law, these property holdings cannot be pledged or used as collateral and confiscated by third parties.

3- Important Notice about Mutual Funds:

• Risk Level
  Securities bought by mutual funds can increase or lose in value of some of the investment capital as a result of market fluctuations. Investors, on the basis of their own risk tolerances and earnings expectations, should select the fund that is best suited for them.
• Past Performance
  All mutual fund investors should be aware that, the past performance of the mutual funds does not guarantee the continuity of the generation of similar returns in the future.
• Cost Rates
  Fund management and operating costs have a negative impact on returns. However, a fund with higher management costs does not necessarily deliver lower returns. Fund management cost rates can change based on a variety of factors.
• Investors can be informed about;
  • The founder of the fund; the other available funds and the other types of funds managed by the founder,
  • The portfolio manager,
  • The fund’s most recent composition and strategy,
  • The past performance of the founders funds compared to other funds,
  • Where fund shares can be bought, trading hours, terms and conditions of the buying/selling of shares and especially how many days before selling orders must be placed,
  • Whether or not commission is charged with the buying/selling of shares.

4- Frequently Asked Questions

Up-to-date and detailed information is available via the Continuous Notification Form. Updated information about returns on HSBC Mutual Funds is available through Daily Fund Reports.

HSBC Mutual Funds

The descriptions of the mutual funds below are for informational purposes only.

HSBC A-Type Mutual Funds:

Controlled A - HSBC Bank A Type Variable Fund:

Controlled A HSBC Bank A-Type Variable Fund has conservative equity investment combined with high risk t-bill/bond portfolio. This fund is aimed at investors with appetite for balanced risk.

The fund’s investment strategy has been updated as of 25.01.2008. 25%-55% of the portfolio will be invested in equites that are included in the investable equities list of HSBC research unit, 35%-65% of the portfolio will be invested in T.Bills/G.Bonds, and 0%-30% of the portfolio will be invested in repos. The fund may open index futures position at the Turkish Derivatives Exchange for hedging and investment purposes when an opportunity or need arise. The position of the futures contracts may not exceed the 30% of the fund’s net asset value.

HSBC Bank A Type Asset Management Services Equity Fund:

HSBC Bank A Type Investment Management Services Equity Fund invests a substantial part of assets in stocks. It is aimed to obtain high return of equities with high risksThe objective is to create an ideal portfolio for the investors who intend to benefit from the high return of equities. This fund is only offered to HSBC Portfolio Management customers who are familiar with investing in equities and prefer to take risks.

The fund’s investment strategy has been updated as of 25.01.2008. The fund invests a share of at least 70%, at most 100% into the stocks that are listed in ISE and a share of 0%-30% into repurchase agreements. The fund may trade index futures position at the Turkish Derivatives Exchange for hedging and investment purposes when an opportunity or need arise. The position of the futures contracts may not exceed the 80% of the fund’s net asset value. The summation of net open position of index futures contracts and total market value of equity positions may not exceed the 130% of the fund’s net asset value.

Dynamic - HSBC Yatırım A Type ISE National 30 Index Fund:

The Dynamic HSBC Yatırım A Type ISE-30 Index fund is aimed at investors with a high risk appetite and who seek a comparable return to ISE-30 index yield without actively trading in stocks. The fund aims to achieve a 90% correlation to the ISE-30 index

The fund’s investment strategy has been updated as of 25.01.2008. 80%-100% of the portfolio will be invested in equites traded on the ISE-30 Index, and 0%-20% of the portfolio will be invested in repos. The fund may open index futures position at the Turkish Derivatives Exchange for hedging and investment purposes when an opportunity or need arise. The position of the futures contracts may not exceed the 20% of the fund’s net asset value.

HSBC B-Type Mutual Funds:

Cash - HSBC Bank B Type Liquid Fund :

The Cash HSBC Bank B-Type liquid fund is aimed at investors who seek an alternative return to O/N repo and/or deposit accounts, and in the meantime who would like to satify daily cash needs. The fund aims to generate a high yield by investing exclusively in short-term repo and short-term fixed income securities.

5%-35% of the portfolio will be invested in T.Bills/G.Bonds having a maximum of 180 days to maturity and not exceeding average of 45 days-maturity. 65%-95% of the portfolio will be invested in repos.

Controlled B - HSBC Yatırım B Type Variable Fund:

Controlled B HSBC Yatırım B-Type Variable Fund targets investors who seek to benefit from the high yields of T-Bills & Bonds but still maintain a balanced exposure to the interest rate risk. The fund invests heavily in both short-term and long-term fixed income securities.

70%-100% of the portfolio will be invested in T.Bills/G.Bonds, and 0%-30% of the portfolio will be invested in repos. This fund may temporarily invest in FX-denominated or FX Indexed T.Bills/G.Bonds, Eurobond and G7 notes with a maximum of 15%, should the manager sees an opportunity. This fund may invest in floating rate notes with a maximum of 75%.

Balanced - HSBC Bank B Type T-Bill and Bond Fund:

The Balanced HSBC-Bank B Type T-Bill and Bond Fund aims to achieve a real return for clients in the long-run by investing in long-term and short-term fixed income securities.

60%-90% of the portfolio will permanently be invested in T.Bills/G.Bonds, and 10%-40% of the portfolio will be invested in repos. This fund may temporarily invest in FX-denominated or FX Indexed T.Bills/G.Bonds with a maximum of 15%, should the manager sees an opportunity. This fund may invest in floating rate notes with a maximum of 50%.

Steady - HSBC Yatırım B Type T-Bill and Bond Fund:

The Steady HSBC-Yatırım B Type T-Bill and Bond Fund aims to achieve a real return for clients in the long-run by investing in long-term and short-term fixed income securities.

70%-100% of the portfolio will permanently be invested in T.Bills/G.Bonds, and the rest of the portfolio will be invested in repos. This fund may temporarily invest in FX-denominated or FX Indexed T.Bills/G.Bonds with a maximum of 15%, should the manager sees an opportunity. This fund may invest in floating rate notes with a maximum of 50%.

Orion - HSBC Yatırım B Type Variable Fund:

The Orion HSBC-Yatırım Orion B Type Variable Fund aims to provide a medium-high level of return by taking medium-high level of risk. It is a suitable investment for investors in search of a greater return than that of a conservative bond fund, but also familiar with equity investments and therefore ready to accept fluctuations in the return of the fund.

This fund mainly invests in treasury bills and government bonds. If needed, this fund may also choose to invest in FX-denominated T.Bills/G.Bonds with a maximum of 30% for “hedging” or “investment” purposes. Fund may also invest a maximum of 30% in equities. Should an investment opportunity arise or if needed, the fund may trade currency or index futures contracts listed at the Turkish Derivatives Exchange (VOB) for “hedging” or “investment” purposes. The open position of the index futures contracts cannot exceed 20% of the fund’s net asset value. The open position of the currency futures contracts cannot exceed 20% of the fund’s net asset value either. As of 30.01.2008 fund does not have a benchmark and its investment strategy consists of 0%-100% repurchase agreements, 0%-30% stocks, 0%-100% T.Bills/G.Bonds, 0%-20% ISE Index Future Contracts and 0%-20% Currency Futures Contracts.

HSBC Yatırım B Type Variable Asset Management Services Fund:

The fund aims to achieve a high real return for clients in the long-run by investing in long-term and short-term fixed income securities. This fund is only offered to HSBC Portfolio Management customers who aim to obtain high real return for long-term and want to invest in funds for minimum 60 days maturity.

70%-100% of the portfolio will permanently be invested in T.Bills/G.Bonds, and the rest of the portfolio will be invested in repos. The Fund’s benchmark is composed of 100% KYD All Bonds Index.