HSBC Investment Trust - DBS Hong Kong

HSBC Investment Trust 

Annual Report 2009

Contents 

1. HSBC INVESTMENT TRUST 

HSBC Asian All Smiles Capital Guaranteed Fund 

HSBC Turbo Asia Capital Guaranteed Fund 

HSBC All Weather Dynamic Capital Guaranteed Fund 

HSBC All Weather Action Capital Guaranteed Fund 

HSBC Sky High Capital Guaranteed Fund 

HSBC Global Harvest Capital Guaranteed Fund 

HSBC 3 Powers Capital Guaranteed Fund I 

HSBC Korean Power Capital Guaranteed Fund I 

HSBC Korean Power Capital Guaranteed Fund II 

Investment Adviser’s Report 1 

Statement of Assets and Liabilities 10 

Income Statement 16 

Statement of Changes in Net Assets Attributable to Unitholders 22 

Cash Flow Statement 26 

Notes on the Financial Statements 32 

Independent auditor’s Report 91 

Portfolio Statement 92 

Statement of Movements in Portfolio Holdings 95 

Performance Record 96 

Trustee’s Report 100 

2. HSBC INVESTMENT TRUST 

HSBC China Fortune Capital Guaranteed Fund I 

Statement of Assets and Liabilities 101 

Income Statement 103 

Statement of Changes in Net assets Attributable to Unitholders 104 

Cash Flow Statement 105 

Notes on the Financial Statements 106 

Independent auditor’s Report 120 

Performance Record 121 

Trustee’s Report 122 

3. Administration 123 

4. Board of Directors of HSBC Investment Funds (Hong Kong) Limited 124 

Page

Investment Adviser’s Report 


Market Review and Outlook 

Signs of improvement in global economic activity and 

leading indicators continue to emerge, resulting in 

additional gains for financial markets and providing support 

for risky assets. The strong performance of Asian 

economies has played an important role, with stabilization 

or modest recovery elsewhere. However, there remains 

considerable doubt on the sustainability and strength of 

the recovery, particularly as the massive stimulus measures 

are eventually withdrawn. The global economy is still 

expected to contract this year, with growth forecasted to 

turn positive in 2010. 

The U.S. economy is showing increasing signs of 

stabilization. Unprecedented policy interventions are 

helping to stabilize consumer spending, housing and 

financial markets. Market sentiment has improved, 

indicated by the rally in equity markets. Besides, most of 

the inter-bank borrowing rates have returned to pre-crisis 

levels. However, the savings rate continues to climb and 

business investment is dropping. Significant uncertainty 

remains on the near-term prospects, especially the timing 

of FOMC to exit from their accommodative monetary 

policy. 

Recent data from Europe suggests that the pace of decline 

is moderating, although the rebound is likely to be slow, 

driven mainly by rising exports and a turn in the inventory 

cycle. However, tight credit conditions will hinder private 

investment, and rising unemployment will weigh on 

consumption, in addition to the gradual withdrawal of public 

support. 

Japan’s economy started to recover from 2Q09 due to a 

rise in external demand, particularly from Asian neighbours, 

massive stimulus measures and positive inventory 

adjustments in the global supply chain. September’s Tankan 

survey showed the sentiment index for large manufacturing 

firms increased for a second quarter. However, many 

factors still weigh on recovery, including subdued domestic 

demand, global growth stalling, withdrawal of fiscal 

stimulus and Yen appreciation. 

Fund Strategy 

Since inception (April 2004), the Fund’s realisation value 

has dropped by 3.30% to US$9.67 per unit (after the 15% 

guaranteed coupon that was declared in April 2005). The 

Fund’s CD holdings contributed -0.72% to the performance 

while the swap contributed 2.27%. The fees and expenses 

amounted to approximately 4.85% of the fund 

performance. 

Below please find individual stock performance (1) (as of 

30 October 2009) in the underlying basket: 

Stock name Return (1) 

BOC Hong Kong Holdings Ltd 34.28% 

Bridgestone Corp -17.61% 

Canon Inc -8.02% 

Cheung Kong Holdings Ltd 66.70% 

China Mobile Hong Kong Ltd 256.91% 

China Steel Corp 16.16% 

Chinatrust Financial Holding Co -15.47% 

Citigroup Inc -91.52% 

DBS Group Holdings 9.46% 

Dow Chemical Co/The -41.44% 

Fuji Photo Film Co Ltd -25.35% 

Nissan Motor Co Ltd (2) -98.20% 

Groupe Danone 23.65% 

Hang Seng Bank Ltd 13.68% 

Honda Motor Co Ltd 29.15% 

HSBC Holdings Plc -5.45% 

Hutchison Whampoa Ltd 4.93% 

LVMH Moet Hennessy Louis Vuitton SA 18.91% 

SK Telecom Co Ltd -8.10% 

National Australia Bank Ltd 1.40% 

Nestle SA 44.54% 

News Corp (3) -39.85% 

Nokia OYJ -28.34% 

NTT DoCoMo Inc -39.95% 

PetroChina Co Ltd 176.92% 

Pioneer Corp -92.64% 

POSCO 238.63% 

Procter & Gamble Co 10.16% 

Reliance Industries Ltd 329.90% 

Rio Tinto Ltd 153.27% 

Royal Dutch Shell Plc (4) -0.25% 

Samsung Electronics Co Ltd 25.01% 

Seven & I Holding Co Ltd (5) -46.39% 

Singapore Telecommunications Ltd 31.43% 

Sony Corp -34.99% 

Taiwan Semiconductor Manufacturing Co Ltd 24.25% 

BHP Billiton Ltd 222.01% 

Toyota Motor Corp -8.19% 

Volkswagen AG 199.84% 

Astella Pharma Inc (6) -9.00% 

As a reminder, on the maturity date, unitholders are 

guaranteed to receive 100% of the initial capital invested (7) . 

The total target return of the Fund over the whole 

Investment Period is 21% of the Initial Offer Price. The Fund 

will terminate on the first Income Declaration Date on which 

the distributions accumulated up to and including such date 

(ie: the 15% first year guaranteed coupon plus all 

subsequent potential yearly coupons) equal or exceed the 

Total Target Return (8 & 9) . The investment period may last from 

two to ten years. There was no income distribution or early 

1


termination for the 2nd Income declaration date on 28 April 

2006, for the 3rd Income declaration date on 28 April 2007, 

for the 4th Income declaration date on 28 April 2008 and 

for the 5th Income declaration date on 28 April 2009. 

The Fund aims to distribute returns to investors by means 

of: (1) a guaranteed coupon equal to 15% of the Initial Offer 

Price at the end of year 1 to units in issue as at the Income 

Declaration Date of year 1 (which it has already done so). 

(2) Potential Yearly Coupons (8, 9, 10 & 11) of 6% or more in total 

for the remaining years of the Investment Period. The 

Observation points we have so far for the 2nd, 3rd, 4th 

and 5th income dates are as follows:- 

Potential 

Core basket yearly Early 

Observation Income date performance coupon termination 

Year 2 28-Apr-06 29.9212% 0% No 

Year 3 28-Apr-07 43.9372% 0% No 

Year 4 28-Apr-08 35.2966% 0% No 

Year 5 28-Apr-09 -6.8280% 0% No 

Investment involves risk. Past performance is no guide to 

future performance. Please refer to the Explanatory 

Memorandum for details of the Fund’s returns 

determination method, guarantee and risks. 

(1) Stock performances are calculated by comparing the 

closing prices on 30 October 2009 with the initial 

stock levels. The initial stock level of each relevant 

stock was the averaged closing price on the relevant 

Exchange over a period of three exchange business 

days (i.e. 28, 29 and 30 April, 2004). The performance 

of the stocks will only benefit from the rise in stock 

prices and not from any dividends arising from those 

stocks. The performance of the stocks is not indicative 

of the Fund’s performance. 

(2) General Motors was substituted with Nissan Motor 

Co Ltd after the company filed for Chapter 11 on 1 

June 2009. 

(3) Name change from News Corp Ltd to News Corp. 

(4) Name change from Royal Dutch Petroleum Co to 

Royal Dutch Shell Plc following the acquisition. 

(5) Name change from Seven-Eleven Japan Co Ltd to 

Seven & I Holdings Co Ltd following the acquisition. 

(6) Name change from Yamanouchi Pharmaceuticals Co 

Ltd to Astella Pharma Inc. 

(7) The capital guarantee applies only to unitholders who 

hold the investments until the maturity date. Dealings 

2 

before such date are fully exposed to fluctuations in 

the value of the Fund’s assets. The realisation price 

may be lower than the guaranteed value. 

(8) All potential distributions from Year 2 onwards are 

not guaranteed and are subject to the credit risk of 

the swap transaction counterparty. If the Investment 

Period of the Fund lasts for 10 years, the Fund will 

mature at the end of the tenth year regardless 

whether the Fund can achieve its target of distributing 

the Total Target Return to investors within the 

Investment Period. 

(9) The length of the investment period and the Potential 

Yearly Coupon from Year 2 onwards are linked to the 

average performance of the median 20 performing 

stocks in the stock basket. Depending on the 

performance of these stocks, there may be no 

distribution for a particular year. The performance of 

the stock basket will only benefit from the rise in 

share prices of the shares comprising the stock 

basket and not from any dividends arising from those 

shares. There will be a dilution of performance due 

to the guaranteed structure. 

(10) For each year from year 2 to year 9 of the Investment 

Period (as long as the fund has not been terminated), 

the Potential Yearly Coupon per unit is expected to 

be the higher of: 

(i) US$10.00 x [Participation Rate (33.75%) x 

performance of the Core Basket (i.e. the 

average performance of the median 20 

performing stocks in the Stock Basket 

measured on the Averaging Dates of the 

Income Date of the relevant year as against the 

initial level of such stocks)] – all previously 

distributed coupons on a per unit basis (i.e. sum 

of First Year Guaranteed Coupon and all 

subsequent Potential Yearly Coupons). 

OR 

(ii) Zero 

(11) If the Investment Period of the Fund lasts for 10 years, 

the Potential Yearly Coupon per unit for the tenth year 

of the Investment Period is expected to be the higher 

of: 

(i) US$10.00 x [Participation Rate (33.75%) x 

performance of the Core Basket (i.e. the 

average performance of the median 20 

performing stocks in the Stock Basket 

measured on the Averaging Dates of the 

Income Date of the last year as against the


initial level of such stocks)] – all previously 

distributed coupons on a per unit basis (i.e. sum 

of First Year Guaranteed Coupon and the 8 

Potential Yearly Coupons of year 2 to year 9). 

OR 

(ii) The difference between US$2.10 (being the 

minimum level of the Total Target Return for the 

whole Investment Period) and the accumulated 

coupons distributed by the Fund during the 

preceding 9 years (i.e. sum of First Year 

Guaranteed Coupon and the 8 Potential Yearly 

Coupons of year 2 to year 9). 

HSBC All Weather Dynamic Capital Guaranteed 

Fund 























policy. 







support. 










Fund Strategy 

Since inception (June 2004), the Fund’s realisation value 

decreased by 1.40% to US$9.86 per unit (after the 10% 

guaranteed coupon that was declared in June 2005 and 

four 1.333% coupons declared on June 2006, June 2007, 

June 2008 and June 2009 respectively). The Fund’s CD 

holdings contributed -0.87% while the swap, having paid 

the 10% guaranteed coupon in June 2005, 1.3333% 

coupon each in June 2006, June 2007, June 2008 and June 

2009 contributed 5.38% to the fund performance. The fees 

and expenses amounted to approximately 5.91% of the 

fund performance. 

As of 30 October 2009, the 4 least volatile stocks since 

fund start were The Coca-Cola Co, Royal Dutch Shell PLC, 

BNP Paribas and Total SA. The average absolute return was 

3.32%. 

Below please find individual stock absolute performance (1) 

(as of 30 October 2009) in the underlying basket: 

Stock 

absolute 

Stock name return (1) 

American Express Co 18.67% 

American International Group Inc 97.72% 

Anheuser-Busch InBev NV 127.50% 

Sanofi-Aventis SA (2) 10.04% 

Bank of America Corp 65.27% 

Barclays PLC 32.45% 

BASF AG 70.76% 

BNP Paribas 3.40% 

Canon Inc 7.65% 

Carrefour SA 25.95% 

Chevron Corp (3) 68.88% 

Citigroup Inc 91.36% 

Coca-Cola Co/The 2.52% 

E.ON AG 43.07% 

Endesa SA 100.11% 

Enel SpA 27.08% 

General Electric Co 54.56% 

GlaxoSmithKline PLC 8.57% 

Kimberly-Clark Corp 6.94% 

Novartis AG 6.66% 

Pfizer Inc 52.53% 


Royal Dutch Shell PLC (4) 2.77% 

Sony Corp 31.37% 

3


Telecom Italia SpA (5) 59.02% 

Total SA 4.59% 

Toyota Motor Corp 11.52% 

Unilever NV 16.00% 

United Parcel Service Inc/Georgia 26.49% 

Walt Disney Co 11.14% 

As a reminder, on the maturity date, unitholders will receive 

100% of the initial capital invested. (6) 


of: (1) a guaranteed coupon equal to 10% of the Initial 

offering price at the end of year 1 to units in issue as at the 

Income Declaration Date of year 1 (as it has already done 

so in June 2005) (7) and (2) a potential yearly coupon at the 

end of each year during the Investment Period from year 2 

onwards (7, 8 & 9) . 

From year 2 to year 9 of the Investment Period, the Fund 

will mature on the first Income Declaration Date on which 

the Absolute Stock Return (10) in relation to such Income 

Declaration Date reaches or exceeds the Trigger Level (11) 

and at present the earliest possible Early Termination Date 

is expected to be 11 June 2010. The Trigger Level is 45%. If 

none of the 8 Income Declaration Dates from year 2 to 

year 9 (not counting the Income Declaration Date of the 

first year) qualify as an Early Termination Date, the Fund 

will nevertheless mature at the end of the tenth year, which 

is expected to be 10 June 2014. 





(1) Stock absolute performances are calculated by 

comparing the closing prices on 30 October 2009 

with the initial stock levels. The initial stock level of 

each relevant stock was the averaged closing price 

on the relevant Exchange over a period of three 

exchange business days (i.e. 8, 9, 10 June, 2004). 

The performance of the stocks will only take into 

account the change in stock prices and not take into 

account any dividends arising from those stocks. The 

performance of the stocks is not indicative of the 

Fund’s performance. 

(2) Name change from Aventis SA to Sanofi-Aventis SA 

following the acquisition. 

(3) Name change from ChevronTexaco Group to Chevron 

Corp.. 



4 

(5) Name change from TIM SpA to Telecom Italia SpA 


(6) The capital guarantee applies only to unitholders who 





(7) Units realised before an Income Declaration Date in 

a year are not entitled to receive such distribution. 

(8) For year 2 of the Investment Period, the Potential 

Yearly Coupon was US$0.1333 per unit: US$10.00 x 

[Participation Rate (25.1%) x the average absolute 

return (i.e. return regardless of positive or negative 

value) of the 4 least volatile stocks in the Stock Basket 

since the Fund’s Start Date]. 

For each year from year 3 to year 10 of the Investment 

Period (as long as the Fund has not been terminated), 

the Potential Yearly Coupon per unit for a particular 

year is expected to be the higher of: 

(i) US$10.00 x [Participation Rate (25.1%) x the 

Absolute Stock Return (10) of the relevant year] 

OR 

(ii) The Potential Yearly Coupon of the previous 

year. 

(9) Investors should note that the Potential Yearly Coupon 

is not guaranteed and is subject to the credit risk of 

the asset swap transaction counterparty. If the 

Investment Period of the Fund lasts for 10 years, the 

Fund will mature at the end of the tenth year 

regardless the amount of Potential Yearly Coupons 

distributed by the Fund. 

(10) Absolute stock return of a year is measured by the 

average absolute return (since inception) of the four 

least volatile stocks of the stock basket recorded 

around the end of such year. 

(11) The length of the investment period and the 

distributions from Year 2 onwards are linked to the 

average absolute return of the 4 least volatile stocks 

in the stock basket over the relevant periods as 

opposed to a point-to-point measurement of the 

overall performance of the stock basket. Even if there 

is a sharp increase in the share prices of the stocks 

in the stock basket, investors will not obtain a 

proportionately high return from the Fund. In case 

the average absolute return of the relevant stocks 

has reached or exceeded the trigger level of 45%,


investors will not obtain the full benefit of such 45% 

as the potential return of the Fund will be reduced by 

the participation rate. Further, any potential yearly 

coupon that has been distributed previously will not 

be accumulated nor taken into account for 

determining whether the trigger level has been 

reached. 
























policy. 







support. 










Fund Strategy 

Since inception (June 2004), the Fund’s realisation value 

decreased by 2.50% to US$9.75 per unit (after a 5% 

guaranteed distribution declared in Dec 2004, another 5% 

guaranteed distribution declared in June 2005, a 0.934% 

distribution declared in June 2006, June 2007, June 2008 

and June 2009). The Fund’s CD holdings contributed -0.91% 

while the swap (after the aforementioned distributions) 

contributed 4.05% to the fund’s performance. Moreover, 

the fees and expenses amounted to approximately 5.64% 

of the fund performance. 

As of the end of October, the 4 least volatile stocks since 

the start of the fund were Novartis AG, Ente Nazionale 

Idrocarburi SpA, Royal Dutch Shell PLC and Total SA. The 

average absolute return was 3.91%. 

Below please find individual stock absolute performance (1) 

(as of 30 October 2009) in the underlying basket: 

Stock 

absolute 

Stock name return (1) 

Altria Group Inc 69.53% 

Amazon.Com Inc 123.40% 

Sanofi-Aventis SA (2) 5.96% 

Bank of America Corp 65.40% 

Barclays PLC 29.24% 

Bristol-Myers Squibb Co 10.37% 

Chevron Corp (3) 63.53% 

Coca-Cola Co/The 5.66% 

Deutsche Telekom AG 35.37% 

E.ON AG 37.98% 

Endesa SA 100.93% 

Enel SpA 24.19% 

Ente Nazionale Idrocarburi SpA 3.70% 

Freddie Mac 98.05% 

GlaxoSmithKline PLC 12.51% 

Johnson & Johnson 6.38% 

Microsoft Corp 7.81% 

Novartis AG 2.80% 

Oracle Corp 78.86% 

PepsiCo Inc 13.06% 

Pfizer Inc 49.99% 


Royal Dutch Shell PLC (4) 4.07% 

Schlumberger Ltd 95.88% 

Telecom Italia SpA (5) 59.70% 

Total SA 5.08% 

Toyota Motor Corp 17.57% 

Unilever NV 14.44% 

United Parcel Service Inc/Georgia 28.18% 

Vodafone Group PLC 12.54% 

5


As a reminder, on the maturity date, unit holders will receive 

100% of the initial capital invested. (6) 


of: (1) a guaranteed coupon equal to 5% of the Initial Offer 

Price for the first 6-month of the Investment Period (7) ; (2) a 

guaranteed coupon equal to 5% of the Initial Offer Price at 

the end of the first year of the Investment Period (7) ; and 

(3) potential distributions for each year of the Investment 

Period from year 2 onwards (7, 8 & 9) . 

From year 2 to year 9 of the Investment Period, the Fund 

will mature on the first Income Declaration Date on which 

the Absolute Stock Return (10) in relation to such Income 

Declaration Date reaches or exceeds the Trigger Level (11) 

and at present the earliest possible Early Termination Date 

is expected to be 30 June 2010. The Trigger Level is 40%. 

If none of the 8 Income Declaration Dates from year 2 to 

year 9 (not counting the Income Declaration Dates of the 

first 6-month and of the first year) qualify as an Early 

Termination Date, the Fund will nevertheless mature at the 

end of the tenth year, which is expected to be 2 July 2014. 





(1) Stock absolute performances are calculated by 

comparing the closing prices on 30 October 2009 

with the initial stock levels. The initial stock level of 

each relevant stock was the averaged closing price 

on the relevant Exchange over a period of three 

exchange business days (i.e. 30 June, 2004; and 1 

and 2 July 2004). The performance of the stocks will 

only take into account the change in stock prices and 

not take into account any dividends arising from those 

stocks. The performance of the stocks is not indicative 

of the Fund’s performance. 

(2) Name change from Aventis SA to Sanofi-Aventis SA 


(3) Name change from ChevronTexaco Group to Chevron 

Corp.. 



(5) Name change from TIM SpA to Telecom Italia SpA 


(6) The capital guarantee applies only to unit holders who 



6 



(7) Units realised before an Income Declaration Date in 

a year are not entitled to receive such distribution. 

(8) During the Investment Period, the Potential Yearly 

Coupon per unit for each year will be determined 

according to the following method: 

For year 2 of the Investment Period, the Potential 

Yearly Coupon per unit was: US$10.00 x [Participation 

Rate (24.3%)x the average absolute return of the 4 

least volatile stocks in the Stock Basket since the 

Fund’s Start Date], which was US$0.0934 per unit. 

For each year from year 3 to year 10 of the Investment 

Period (as long as the Fund has not been terminated), 

the Potential Yearly Coupon per unit for a particular 

year is expected to be the higher of: 

(i) US$10.00 x [Participation Rate (24.3%) x the 

Absolute Stock Return (10) of the relevant year] 

OR 

(ii) the Potential Yearly Coupon of the previous year. 

(9) Investors should note that the Potential Yearly Coupon 

is not guaranteed and is subject to the credit risk of 

the asset swap transaction counterparty. If the 

Investment Period of the Fund lasts for 10 years, the 

Fund will mature at the end of the tenth year 

regardless the amount of Potential Yearly Coupons 

distributed by the Fund. 

(10) The Absolute Stock Return of a year is equal to the 

average absolute return (i.e. return regardless of 

positive or negative value) of the 4 least volatile stocks 

in the Stock Basket since the Fund’s Start Date 

recorded around the Income Date of the relevant year. 

(11) The length of the investment period and the 

distributions from Year 2 onwards are linked to the 

average absolute return of the four least volatile 

stocks in the stock basket over the relevant periods 

as opposed to a point-to-point measurement of the 

overall performance of the stock basket. Even if there 

is a sharp increase in the share prices of the stocks 

in the stock basket, investors will not obtain a 

proportionately high return from the Fund. In case 

the average absolute return of the relevant stocks 

reaches or exceeds the trigger level of 40%, investors 

will not obtain the full benefit of such 40% as the 

potential return of the Fund will be reduced by the 

participation rate. Further, any potential yearly coupon


that has been distributed previously will not be 

accumulated nor taken into account for determining 

whether the trigger level has been reached. 














China’s economy continued to post a solid recovery in 

3Q09, rising 8.9%. Sources of growth appear to be 

broadening from public investment to consumption, private 

investment and recovery in exports. Orders have markedly 

picked up in recent months and throughput in the Pearl 

River Delta is also showing signs of a rebound. Attention 

is now turning to the timing of Beijing’s exit strategy, 

particularly given the concerns that strong money supply 

growth and bank lending are fuelling asset price bubbles. 

There has been a significant pick up in economic activity in 

India since last year, although recovery signs are mixed. 

Growth is driven mainly by improving domestic demand 

and a weak upturn in exports. Industrial production data 

hints at an economic upturn, though this could falter when 

the stimulus is withdrawn. The near-term hit to agricultural 

growth from the poor monsoon should largely be offset by 

strength in manufacturing and services. 

With exports representing 70% of GDP, the sharp fall in 

external demand is likely to result in Thailand’s GDP 

contracting this year. Domestic political events did not help 

the picture, though the pre-emptive policy response did 

mitigate the downside. Incoming high-frequency data 

suggests growth is improving and also becoming more 

broadly based, but the upturn is still uneven and fragile. 

Fund Strategy 

As of the end of October, the Fund’s realisation value was 

up by 11.50% to US$11.15 per unit since inception (May 

2005) after distributing four coupons of US$0.275 each in 

May 2006, May 2007, May 2008 and May 2009 

respectively. In terms of performance contribution, the CD 

holdings accounted for 8.28% to the Fund’s performance 

after the four coupon distributions mentioned above. The 

option contributed 8.39% to performance while the fees 

and expenses were approximately 5.17% of the fund 

performance. 

In terms of underlying basket (1) performance since fund 

start (2) , 17 of the 21 stocks in the basket reported a positive 

return. The underlying stock basket rose 91.66% since 

inception. In particular, the best performing stock was China 

Life Insurance, which rose by 602.88%. The worst 

performer was Satyam Computer Services which lost 

52.32%. 

(1 & 2) 

Stock name Performance 

Reliance Industries Limited 323.95% 

Oil & Natural Gas Corp Ltd 92.40% 

Satyam Computer Services Ltd -52.32% 

Tata Consultancy Svs Ltd 118.60% 

Infosys Technologies Ltd 117.67% 

Wipro Ltd 88.15% 

Tata Motors Ltd 35.14% 

Tata Iron & Steel Co Ltd 48.94% 

China Petroleum & Chemical-H 119.63% 

China Mobile Hong Kong Ltd 174.07% 

China Life Insurance Co-H 602.88% 

BOC Hong Kong Holdings Ltd 24.40% 

China Merchants Hldgs Intl 66.91% 

CITIC Pacific Limited -8.68% 

China Telecom Corp Ltd-H 33.40% 

Petrochina Co Ltd-H 99.74% 

Bangkok Bank Public Co Ltd 7.69% 

Advanced Info Service PCL -11.20% 

Siam Commercial Bank Pub Co 59.65% 

PTT PCL 17.36% 

Thai Oil PCL -33.60% 

As a reminder, the Fund’s potential return (3) at maturity will 

be calculated based on the floored average performance 

of the Stock Basket as observed on the ten performance 

observation dates and multiplied by a participation rate of 

28.75% minus the sum of the guaranteed income 

distribution (4) , which is 11%. The 8 Observations points we 

have so far are: 

Observation date Basket level* 

Observation 1 11-Nov-05 115.20 

Observation 2 11-May-06 162.17 







* Rebased to 100 at inception. 

7


Units realized on the maturity date are guaranteed with 

the initial capital invested (US$10 per unit). The guarantee 

applies only to unit holders who hold the investments until 

the maturity date. Dealings before such date are fully 

exposed to fluctuations in the value of the Fund’s assets. 

The realization price may be lower than the guaranteed 

value. 





(1) The basket is currently composed of the following 

stocks: 

8 

Reliance Industries Limited BOC Hong Kong Holdings Ltd 

Oil & Natural Gas Corp Ltd China Merchants Hldgs Intl 

Satyam Computer Services Ltd CITIC Pacific Limited 

Tata Consultancy Svs Ltd China Telecom Corp Ltd-H 

Infosys Technologies Ltd Petrochina Co Ltd-H 

Wipro Ltd Bangkok Bank Public Co Ltd 

Tata Motors Ltd Advanced Info Service PCL 

Tata Iron & Steel Co Ltd Siam Commercial Bank Pub Co 

China Petroleum & Chemical-H PTT PCL 

China Mobile Hong Kong Ltd Thai Oil PCL 

China Life Insurance Co-H 

(2) Individual stock performance is calculated by 

comparing the closing price on 30 October 2009 with 

the averaged closing price of the initial reference 

period (four business days starting from 11 May 

2005). The performance of the stock basket will only 

benefit from the rise in share prices of the shares 

comprising the stock basket and not from any 

dividends arising from those shares. The performance 

of the stock basket is not indicative of the Fund’s 

performance. 

(3) The potential return of the Fund at maturity is 

calculated based on the floored average performance 

of the stock basket as observed on the ten 

performance observation dates of the Fund and 

multiplied by the participation rate, and then minus 

the sum of the guaranteed income distributions 

already distributed, not computed by a point-to-point 

measurement of the stocks’ performance. In the 

event that prices of the stocks in the stock basket 

rise continuously towards the end of the investment 

period, averaging will reduce the potential return. On 

each performance observation date, the performance 

of a stock in the stock basket is computed by 

comparing the stock’s level on such date with the 

stock’s initial reference level around the start date of 

the Fund. The performance of the stock basket will 

only benefit from the rise in stock prices of the stocks 


dividend arising from those stocks. The potential 

return of the Fund is not guaranteed and is subject 

to the credit risk of the option counterparty. 

(4) The Fund will pay four guaranteed income 

distributions in respect of units held until the relevant 

income dates. Any potential return above the 

guaranteed income distributions is not guaranteed. 











may eventually be withdrawn. The global economy is still 



Korean economic indicators surprised the market on the 

upside, with further pick up in real GDP growth for 3Q09. 

The inventory cycle appears to be turning around, which 

should lead to increased capacity utilization, capex 

investment and eventually job creation. Recent US data, 

including auto sales and PC demand, bodes well for Korean 

exports. The key concerns include the timing of the Bank 

of Korea’s exit strategy and also Won appreciation. 

Fund Strategy 

As of the end of October, the Fund’s realisation value grew 

by 1.10% to US$10.11 per unit since inception (September 

2005) after four 2.5% guaranteed coupons each were paid 

on 22 September 2006, 24 September 2007, 22 September 

2008 and 22 September 2009 respectively. In terms of 

performance contribution, the CD holdings accounted for 

8.55% of the Fund’s performance. The option contributed 

-1.52% to performance while the fees and expenses were 

approximately 5.93% of the fund performance. 

In terms of underlying basket (1) performance since fund 

start (2) as of 30 October 2009, 6 out of 7 stocks posted a 

positive return. The underlying stock basket rose by 46.69% 

since inception. In particular, the best performing stock was 

POSCO, which rose by 122.03% since inception.


Stock name Return 

Hyundai Motor Co 37.00% 

KB Financial Group (5) -2.74% 

KT&G Corp 52.67% 

LG Electronics Inc 66.05% 

POSCO 122.03% 

Samsung Electronics Co Ltd 21.77% 

Shinsegae Co Ltd 30.06% 

Overall basket 46.69% 

As a reminder, the Fund’s potential return (3) at maturity will 

be calculated based on the enhanced floored average 

performance of the Stock Basket as observed on the ten 

performance observation dates and multiplied by a 

participation rate of 27.75% minus the sum of the 

guaranteed income distribution (4) of 10%. The Observation 

points we have so far are as follows: 

Stock basket level 

Observation Stock basket floored at 

date level* previous high 

Observation 1 22-Mar-06 109.82 109.82 

Observation 2 22-Sep-06 110.80 110.80 


Observation 4 27-Sep-07 149.39 149.39 


Observation 6 22-Sept-08 137.98 149.39 


Observation 8 22-Sept-09 156.49 156.49 

* Rebased to 100 at inception. 

Units realized on the maturity date are guaranteed with 

the initial capital invested (US$10 per unit). The guarantee 

applies only to unitholders who hold the investments until 

the maturity date. Dealings before such date are fully 

exposed to fluctuations in the value of the Fund’s assets. 

The realization price may be lower than the guaranteed 

value. 





(1) The basket is currently composed of the following 

stocks: 

Hyundai Motor Co 

KB Financial Group (5) 

KT&G Corp 

LG Electronics Inc 

POSCO 

Samsung Electronics Co Ltd 

Shinsegae Co Ltd 

(2) Individual stock performance is calculated by 

comparing the closing price on 30 October 2009 with 

the averaged closing price of the initial reference 

period (four business days starting from 22 

September 2005). The performance of the stock 

basket will only benefit from the rise in share prices 

of the shares comprising the stock basket and not 

from any dividends arising from those shares. The 

performance of the stock basket is not indicative of 

the Fund’s performance. 

(3) The potential return of the Fund at maturity is 

calculated based on the enhanced floored average 

performance of the stock basket as observed on the 

ten performance observation dates of the Fund and 

multiplied by the participation rate, and then minus 

the sum of the guaranteed income distributions 

already distributed, not computed by a point-to-point 

measurement of the stocks’ performance. In the 

event that prices of the stocks in the stock basket 

rise continuously towards the end of the investment 

period, averaging will reduce the potential return. On 

each performance observation date, the performance 

of a stock in the stock basket is computed by 

comparing the stock’s level on such date with the 

stock’s initial reference level around the start date of 

the Fund. The performance of the stock basket will 

only benefit from the rise in stock prices of the stocks 


dividend arising from those stocks. The potential 

return of the Fund is not guaranteed and is subject 

to the credit risk of the option counterparty. 

(4) The Fund will pay four guaranteed income 

distributions in respect of units held until the relevant 

income dates. Any potential return above the 

guaranteed income distributions is not guaranteed. 

(5) Name change from Kookmin Bank. 1 share of 

Kookmin Bank was exchanged for 1 share of KB 

Financial Group. 

9

Statement of Assets and Liabilities 

as at 31 October 2009 

(Expressed in United States dollars) 

10 

2009 

HSBC HSBC 

Asian HSBC All Weather 

All Smiles Turbo Asia Dynamic 

Capital Capital Capital 

Guaranteed Guaranteed Guaranteed 

Note Fund (1) Fund Fund 

Assets 

Investments 10(e), 5 – 42,533,184 6,505,904 

Interest receivable – 64,454 8,232 

Prepayment of management fees 6, 10(b), (f) – 1,075,388 168,666 

Prepayment of trustee’s fees 6, 10(a), (f) – 16,512 3,009 

Cash and cash equivalents 9, 10(c) 65,226 688,418 44,161 

65,226 44,377,956 6,729,972 

Liabilities 

Unrealised loss on swap contracts – 1,706,399 84,903 

Redemption payable – 178,746 9,760 

Accruals and other payables 10(a), (b), (f) 65,226 100,619 19,255 

65,226 1,985,764 113,918 

Net assets attributable to unitholders – 42,392,192 6,616,054 

Representing: 

Net assets 6 – 42,392,192 6,616,054 

Number of units in issue 7 – 4,270,300 653,310 

Net asset value per unit – 9.93 10.13 

Realisation value per unit 6 – 9.67 9.86 

(1) HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. All units were redeemed and the net 

assets remaining at that date after paying all redemption proceeds to investors of US$373,052 were payable to the 

Manager in accordance with the terms set out in the Explanatory Memorandum. 

(2) HSBC Sky High Capital Guaranteed Fund matured on 22 June 2009. All units were redeemed and the net assets 

remaining at that date after paying all redemption proceeds to investors of US$90,448 were payable to the Manager in 

accordance with the terms set out in the Explanatory Memorandum. 

(3) HSBC Global Harvest Capital Guaranteed Fund matured on 24 August 2009. All units were redeemed and the net 



(4) HSBC Korean Power Capital Guaranteed Fund II matured on 23 March 2009. All units were redeemed and the net 



Approved by the Trustee and the Manager on 19 February 2010. 

) 

Keith CHEUNG ) For and on behalf of 

Gary LEUNG ) 

) 

) 

HSBC Trustee (Cayman) Limited 

Po Yee LAM ) For and on behalf of 

Edmund R STOKES ) 

) 

HSBC Investment Funds (Hong Kong) Limited 

The notes on pages 32 to 90 form part of these financial statements.




2009 

HSBC HSBC HSBC HSBC HSBC HSBC 

All Weather Sky High Global 3 Powers Korean Korean 

Action Capital Capital Harvest Capital Capital Power Capital Power Capital 

Guaranteed Guaranteed Guaranteed Guaranteed Guaranteed Guaranteed 

Fund Fund (2) Fund (3) Fund I Fund I Fund II (4) 

19,926,913 – – 35,524,294 6,840,098 – 

15,357 – – – – – 

523,536 – – 90,896 43,686 – 

8,737 – – 3,935 3,681 – 

230,351 24,336 14,230 64,735 31,735 24,294 

20,704,894 24,336 14,230 35,683,860 6,919,200 24,294 

488,865 – – – – – 

144,600 – – – – – 

24,368 24,336 14,230 28,822 26,448 24,294 

657,833 24,336 14,230 28,822 26,448 24,294 

20,047,061 – – 35,655,038 6,892,752 – 

20,047,061 – – 35,655,038 6,892,752 – 

2,001,814 – – 3,189,763 677,091 – 

10.01 – – 11.18 10.18 – 

9.75 – – 11.15 10.11 – 

11




12 

2008 


Double Multi-Star 

Blossom Capital Capital 

Guaranteed Guaranteed 

Note Fund (1) Fund (2) 

Assets 

Investments 10(e), 5 – – 

Interest receivable 21 17 

Prepayment of management fees 6, 10(b), (f) – – 

Prepayment of trustee’s fees 6, 10(a), (f) – – 

Cash and cash equivalents 9, 10(c) 108,001 92,883 

108,022 92,900 

Liabilities 

Unrealised loss on swap contracts – – 

Redemption payable – – 

Accruals and other payables 10(a), (b), (f) 108,022 92,900 

108,022 92,900 

Net assets attributable to unitholders – – 

Representing: 

Net assets 6 – – 

Number of units in issue 7 – – 

Net asset value per unit – – 

Realisation value per unit 6 – – 

(1) HSBC Double Blossom Capital Guaranteed Fund matured on 27 December 2007. All units were redeemed and the net 



(2) HSBC Multi-Star Capital Guaranteed Fund matured on 11 December 2007. All units were redeemed and the net assets 

remaining at that date after paying all redemption proceeds to investors of US$168,685 were payable to the Manager 

in accordance with the terms set out in the Explanatory Memorandum. 

(3) HSBC All Weather Plus Capital Guaranteed Fund matured on 10 June 2008. All units were redeemed and the net 



(4) HSBC Greater China BonBon Capital Guaranteed Fund matured on 15 July 2008. All units were redeemed and the net 



(5) HSBC Asian Delights Capital Guaranteed Fund matured on 8 October 2008. All units were redeemed and the net 







2008 


All Weather Greater China Asian Asian Turbo Asia All Weather 

Plus Capital BonBon Capital Delights Capital All Smiles Capital Capital Dynamic Capital 


Fund (3) Fund (4) Fund (5) Fund Fund Fund 

– – – 164,844,205 49,594,253 9,995,548 

3 9 4,689 2,118,955 318,747 42,757 

– – – 184,859 1,561,485 321,344 

– – – 7,175 23,993 5,738 

32,294 57,163 30,443 450,122 592,403 54,185 

32,297 57,172 35,132 167,605,316 52,090,881 10,419,572 

– – – – 6,350,062 539,298 

– – – – – – 

32,297 57,172 35,132 25,117 307,216 39,884 

32,297 57,172 35,132 25,117 6,657,278 579,182 

– – – 167,580,199 45,433,603 9,840,390 

– – – 167,580,199 45,433,603 9,840,390 

– – – 16,478,332 5,074,050 1,023,313 

– – – 10.17 8.95 9.62 

– – – 10.16 8.64 9.30 

13




14 

2008 

HSBC 

All Weather 

Action Capital 

Guaranteed 

Note Fund 

Assets 

Investments 10(e), 5 28,103,618 

Interest receivable 49,268 

Prepayment of management fees 6, 10(b), (f) 913,348 

Prepayment of trustee’s fees 6, 10(a), (f) 15,254 

Cash and cash equivalents 9, 10(c) 122,369 

29,203,857 

Liabilities 

Unrealised loss on swap contracts 2,060,108 

Redemption payable – 

Accruals and other payables 10(a), (b), (f) 42,915 

2,103,023 

Net assets attributable to unitholders 27,100,834 

Representing: 

Net assets 6 27,100,834 

Number of units in issue 7 2,877,643 

Net asset value per unit 9.42 

Realisation value per unit 6 9.10 

(6) HSBC China Fortune Capital Guaranteed Fund II matured on 15 August 2008. All units were redeemed and the net 




) 


Gary LEUNG ) HSBC Trustee (Cayman) Limited 

) 

) 


Edmund R STOKES ) HSBC Investment Funds (Hong Kong) Limited 

) 





2008 


Sky High Global China 3 Powers Korean Korean 

Capital Harvest Capital Fortune Capital Capital Power Capital Power Capital 


Fund Fund Fund II (6) Fund I Fund I Fund II 

84,945,879 52,424,326 – 40,459,678 10,226,164 2,902,917 

110 1,498,685 – 501,163 27,580 2 

556,001 436,402 – 493,056 170,034 10,199 

23,747 19,523 – 21,596 14,422 793 

142,392 91,263 17,773 94,059 48,454 25,804 

85,668,129 54,470,199 17,773 41,569,552 10,486,654 2,939,715 

– – – – – – 

– – – – – – 

21,528 14,344 17,773 24,805 21,731 23,017 

21,528 14,344 17,773 24,805 21,731 23,017 

85,646,601 54,455,855 – 41,544,747 10,464,923 2,916,698 

85,646,601 54,455,855 – 41,544,747 10,464,923 2,916,698 

8,637,002 5,345,965 – 3,844,407 1,034,521 258,630 

9.92 10.19 – 10.81 10.12 11.28 

9.85 10.10 – 10.67 9.94 11.23 

15

Income Statement 

for the year ended 31 October 2009 


16 

2009 






Note Fund (1) Fund Fund 

Income 

Interest on certificates of deposit 10(f) 726,721 542,686 118,767 

Interest on bank deposits 10(f) 2,473 980 36 

Income from swap counterparties – 92,065 435,011 

Coupon income on options – – – 

Gains on investments 3 1,865,971 975,931 210,356 

Losses on investments 3 (771,052) (140,713) (67,601) 

Gains on swap contracts 4 – 4,230,359 300,979 

Losses on swap contracts 4 – (34,545) (13,098) 

Net investment income 1,824,113 5,666,763 984,450 

Expenses 

Management fees and registrar’s fees 10(b), (f) 174,542 539,013 166,267 

Trustee’s fees 10(a), (f) 7,175 29,894 6,786 

Auditor’s remuneration 50,337 8,467 3,868 

Fee of assets remaining at maturity 10(b), (f) 373,052 – – 

Safe custody fees and bank charges 1,782 5,956 1,033 

Administration expenses 13,041 4,478 3,480 

Expenses to swap counterparties – 591,224 130,873 

Miscellaneous 517 7,224 2,125 

Securities expenses 75 600 475 

Operating expenses 620,521 1,186,856 314,907 

Change in net assets attributable 

to unitholders before finance costs 1,203,592 4,479,907 669,543 

Distributions 8 (3,984,398) – (89,398) 


to unitholders from operations (2,780,806) 4,479,907 580,145 

(1) Matured on 24 December 2008 

(2) Matured on 22 June 2009 

(3) Matured on 24 August 2009 

(4) Matured on 23 March 2009 





2009 






364,721 1,911,111 1,409,380 1,439,204 325,785 38,197 

133 162 220 87 21 – 

599,534 – – – – – 

– – – – – – 

581,295 1,329,163 465,951 1,574,905 183,781 191,325 

(129,082) (1,837,872) (771,644) (377,462) (125,400) (187,033) 

1,355,645 – – – – – 

– – – – – – 

2,772,246 1,402,564 1,103,907 2,636,734 384,187 42,489 

418,506 546,180 436,887 411,435 134,987 (1,488) 

19,592 23,747 19,523 17,661 10,741 793 

6,213 23,553 10,336 7,624 3,877 (7,468) 

– 90,448 52,779 – – 23,943 

2,894 6,326 4,927 4,479 1,037 102 

3,952 7,210 5,054 4,423 3,367 121 

371,124 – – – – – 

4,492 922 877 967 865 361 

600 350 425 575 500 125 

827,373 698,736 530,808 447,164 155,374 16,489 

1,944,873 703,828 573,099 2,189,570 228,813 26,000 

(193,548) – (1,584,837) (956,265) (172,973) – 

1,751,325 703,828 (1,011,738) 1,233,305 55,840 26,000 

17




18 

2008 





Note Fund (1) Fund (2) 

Income 

Interest on certificates of deposit 10(f) 454,339 249,734 

Interest on bank deposits 10(f) 94,443 63,528 

Income from swap counterparties – – 

Coupon income on options – – 

Gains on investments 3 1,475,592 427,815 

Losses on investments 3 (1,337,492) (237,781) 

Gains on swap contracts 4 – – 

Losses on swap contracts 4 – – 

Net investment income/(loss) 686,882 503,296 

Expenses 

Management fees and registrar’s fees 10(b), (f) 128,180 107,590 

Trustee’s fees 10(a), (f) 7,600 4,344 

Auditor’s remuneration 18,079 883 

Legal and professional fees – – 

Fee of assets remaining at maturity 10(b), (f) 205,977 168,685 

Safe custody fees and bank charges 1,483 963 

Administration expenses 615 874 

Expenses to swap counterparties – – 

Miscellaneous 559 546 

Securities expenses 100 50 

Operating expenses 362,593 283,935 


to unitholders before finance costs 324,289 219,361 

Distributions 8 – – 


to unitholders from operations 324,289 219,361 




(4) Matured on 15 July 2008 

(5) Matured on 8 October 2008 





2008 






1,751,201 4,603,662 2,235,452 5,910,682 2,008,928 475,862 

18,153 29,187 9,850 19,227 20,904 1,434 

– – – – 116,266 199,827 

– – 2,091,625 – – – 

4,080,610 3,223,412 1,000,320 4,497,736 1 – 

(2,700,344) (165,497) (3,391,486) (4,198,310) (334,382) (67,991) 

– – – – – 1,210,654 

– – – – (3,387,310) (219,337) 

3,149,620 7,690,764 1,945,761 6,229,335 (1,575,593) 1,600,449 

601,289 1,480,468 737,533 2,081,091 1,027,158 276,969 

29,486 55,425 32,011 80,359 41,971 11,001 

27,213 32,958 10,106 14,306 9,919 3,722 

– – – – – – 

134,370 227,115 121,785 – – – 

8,182 17,369 8,671 23,090 7,425 1,621 

51 11,352 (3,192) 7,178 5,229 3,561 

– – – – 2,039,652 470,418 

3,764 3,925 1,039 1,026 9,004 3,276 

350 424 525 600 550 475 

804,705 1,829,036 908,478 2,207,650 3,140,908 771,043 

2,344,915 5,861,728 1,037,283 4,021,685 (4,716,501) 829,406 

– – (3,238,243) (4,137,065) – (144,111) 

2,344,915 5,861,728 (2,200,960) (115,380) (4,716,501) 685,295 

19




20 

2008 


All Weather 


Guaranteed 

Note Fund 

Income 

Interest on certificates of deposit 10(f) 1,170,776 

Interest on bank deposits 10(f) 4,566 

Income from swap counterparties 356,155 

Coupon income on options – 

Gains on investments 3 1 

Losses on investments 3 (209,116) 

Gains on swap contracts 4 2,296,746 

Losses on swap contracts 4 (392,939) 

Net investment income/(loss) 3,226,189 

Expenses 

Management fees and registrar’s fees 10(b), (f) 572,463 

Trustee’s fees 10(a), (f) 25,942 

Auditor’s remuneration 6,380 

Legal and professional fees – 

Fee of assets remaining at maturity 10(b), (f) – 

Safe custody fees and bank charges 4,162 

Administration expenses 3,832 

Expenses to swap counterparties 1,101,279 

Miscellaneous 6,224 

Securities expenses 600 

Operating expenses 1,720,882 

Change in net assets attributable to unitholders before finance costs 1,505,307 

Distributions 8 (287,181) 

Change in net assets attributable to unitholders from operations 1,218,126 






2008 






3,456,383 1,926,416 330,174 1,694,685 592,220 171,475 

6,737 4,847 2,260 3,047 1,509 578 

– – – – – – 

– – – – – – 

2,117,496 1,546,513 5,649,391 2,016,899 411,343 103,908 

(897,896) (126,722) (8,315,798) (9,723,231) (535,225) (189,565) 

– – – – – – 

– – – – – – 

4,682,720 3,351,054 (2,333,973) (6,008,600) 469,847 86,396 

1,208,315 720,599 99,531 536,056 209,537 50,336 

51,180 31,938 5,949 23,035 16,976 3,544 

12,651 6,170 (366) 7,173 3,648 3,961 

– – – – – – 

– – 33,904 – – – 

12,286 7,272 1,137 5,386 1,527 392 

4,718 3,970 2,018 4,552 3,518 3,435 

– – – – – – 

1,091 1,052 511 1,061 1,081 853 

600 575 475 600 525 350 

1,290,841 771,576 143,159 577,863 236,812 62,871 

3,391,879 2,579,478 (2,477,132) (6,586,463) 233,035 23,525 

(2,677,419) (1,699,080) – (1,138,432) (268,855) – 

714,460 880,398 (2,477,132) (7,724,895) (35,820) 23,525 

21

Statement of Changes in Net Assets Attributable to 

Unitholders 



22 

2009 






Fund (1) Fund Fund 

Subscriptions received from units issued – – – 

Less: 

Redemptions (164,799,393) (7,521,318) (3,804,481) 

(164,799,393) (7,521,318) (3,804,481) 

Change in net assets attributable to unitholders from operations (2,780,806) 4,479,907 580,145 

(167,580,199) (3,041,411) (3,224,336) 

Net assets brought forward 167,580,199 45,433,603 9,840,390 

Net assets carried forward – 42,392,192 6,616,054 

(1) HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. All units were redeemed and the net 

assets remaining at that date after paying all redemption proceeds to investors were payable to the Manager in accordance 

with the terms set out in the Explanatory Memorandum. 


remaining at that date after paying all redemption proceeds to investors were payable to the Manager in accordance 










Unitholders 



2009 






– – – – – – 

(8,805,098) (86,350,429) (53,444,117) (7,123,014) (3,628,011) (2,942,698) 

(8,805,098) (86,350,429) (53,444,117) (7,123,014) (3,628,011) (2,942,698) 

1,751,325 703,828 (1,011,738) 1,233,305 55,840 26,000 

(7,053,773) (85,646,601) (54,455,855) (5,889,709) (3,572,171) (2,916,698) 

27,100,834 85,646,601 54,455,855 41,544,747 10,464,923 2,916,698 

20,047,061 – – 35,655,038 6,892,752 – 

23


Unitholders 



24 

2008 





Fund (1) Fund (2) 

Subscriptions received from units issued – – 

Less: 

Redemptions (114,638,714) (90,720,419) 

(114,638,714) (90,720,419) 

Change in net assets attributable to unitholders from operations 324,289 219,361 

(114,314,425) (90,501,058) 

Net assets brought forward 114,314,425 90,501,058 

Net assets carried forward – – 

2008 


All Weather 


Guaranteed 

Fund 

Subscriptions received from units issued – 

Less: 

Redemptions (8,972,241) 

(8,972,241) 

Change in net assets attributable to unitholders from operations 1,218,126 

(7,754,115) 

Net assets brought forward 34,854,949 

Net assets carried forward 27,100,834 

(1) HSBC Double Blossom Capital Guaranteed Fund matured on 27 December 2007. All units were redeemed and the net 



(2) HSBC Multi-Star Capital Guaranteed Fund matured on 11 December 2007. All units were redeemed and the net assets 








Unitholders 



2008 






– – – – – – 

(115,981,617) (220,907,889) (80,273,142) (38,654,153) (16,870,026) (4,838,367) 

(115,981,617) (220,907,889) (80,273,142) (38,654,153) (16,870,026) (4,838,367) 

2,344,915 5,861,728 (2,200,960) (115,380) (4,716,501) 685,295 

(113,636,702) (215,046,161) (82,474,102) (38,769,533) (21,586,527) (4,153,072) 

113,636,702 215,046,161 82,474,102 206,349,732 67,020,130 13,993,462 

– – – 167,580,199 45,433,603 9,840,390 

2008 






– – – – – – 

(20,119,408) (9,721,466) (19,537,409) (7,218,041) (3,699,388) (1,578,049) 

(20,119,408) (9,721,466) (19,537,409) (7,218,041) (3,699,388) (1,578,049) 

714,460 880,398 (2,477,132) (7,724,895) (35,820) 23,525 

(19,404,948) (8,841,068) (22,014,541) (14,942,936) (3,735,208) (1,554,524) 

105,051,549 63,296,923 22,014,541 56,487,683 14,200,131 4,471,222 

85,646,601 54,455,855 – 41,544,747 10,464,923 2,916,698 

(4) HSBC Greater China BonBon Capital Guaranteed Fund matured on 15 July 2008. All units were redeemed and the net 






(6) HSBC China Fortune Capital Guaranteed Fund II matured on 15 August 2008. All units were redeemed and the net 



25

Cash Flow Statement 



26 

2009 






Note Fund Fund Fund 

Operating activities 

Income received from swap counterparties – 100,256 438,538 

Interest received on bank deposits 2,605 1,109 45 

Interest received on certificates of deposit 2,634,873 788,659 149,756 

Fee paid for assets remaining at maturity (338,022) – – 

Management fees paid (3,250) (57,762) (15,934) 

Trustee’s fees paid – (22,703) (4,242) 

Other operating expenses paid (47,106) (24,631) (8,334) 

Expenses paid to swap counterparties – (794,779) (151,619) 

Net cash provided by/(used in) operating activities 2,249,100 (9,851) 408,210 

Investing activities 

Payments for termination of swap contracts – (447,849) (166,514) 

Proceeds from maturity and sale of certificates 

of deposit and options 166,149,795 7,896,287 3,632,399 

Net cash provided by investing activities 166,149,795 7,448,438 3,465,885 

Financing activities 

Proceeds from subscription of units – – – 

Payments on redemption of units (164,799,393) (7,342,572) (3,794,721) 

Distributions paid (3,984,398) – (89,398) 

Net cash used in financing activities (168,783,791) (7,342,572) (3,884,119) 

Net (decrease)/increase in cash and 

cash equivalents (384,896) 96,015 (10,024) 

Cash and cash equivalents at the beginning 

of the year 450,122 592,403 54,185 

Cash and cash equivalents at the end 

of the year 9 65,226 688,418 44,161 





2009 





Fund Fund Fund Fund I Fund I Fund II 

606,027 – – – – – 

162 272 272 148 40 2 

392,110 – 1,602,920 1,025,878 213,353 – 

– (81,513) (47,921) – – (667) 

(32,175) (5,499) (5,704) (6,948) (6,378) (401) 

(13,397) – – – – – 

(15,740) (29,168) (21,372) (16,378) (7,190) (3,152) 

(388,279) – – – – – 

548,708 (115,908) 1,528,195 1,002,700 199,825 (4,218) 

(215,598) – – – – – 

8,628,918 86,348,281 53,423,726 7,047,255 3,584,440 2,945,406 

8,413,320 86,348,281 53,423,726 7,047,255 3,584,440 2,945,406 

– – – – – – 

(8,660,498) (86,350,429) (53,444,117) (7,123,014) (3,628,011) (2,942,698) 

(193,548) – (1,584,837) (956,265) (172,973) – 

(8,854,046) (86,350,429) (55,028,954) (8,079,279) (3,800,984) (2,942,698) 

107,982 (118,056) (77,033) (29,324) (16,719) (1,510) 

122,369 142,392 91,263 94,059 48,454 25,804 

230,351 24,336 14,230 64,735 31,735 24,294 

27




28 

2008 





Note Fund Fund 


Income received from swap counterparties – – 

Interest received on bank deposits 94,818 64,590 

Interest received on certificates of deposit – – 

Coupon received on options – – 

Fee paid for assets remaining at maturity (114,041) (100,000) 

Management fees paid (1,993) (1,629) 

Trustee’s fees paid – – 

Other operating expenses paid (21,956) (12,284) 

Expenses paid to swap counterparties – – 

Net cash provided by/(used in) operating activities (43,172) (49,323) 


Payments for termination of swap contracts – – 

Proceeds from maturity and sale of certificates 

of deposit and options 114,637,584 90,729,256 

Net cash provided by investing activities 114,637,584 90,729,256 


Procceds from subscription of units – – 

Payments on redemption of units (114,638,714) (90,720,419) 

Distributions paid – – 

Net cash used in financing activities (114,638,714) (90,720,419) 

Net (decrease)/increase in cash and cash equivalents (44,302) (40,486) 

Cash and cash equivalents at the beginning of the year 152,303 133,369 

Cash and cash equivalents at the end of the year 108,001 92,883 





2008 





Fund Fund Fund Fund Fund Fund 

– – – – 134,485 204,993 

19,517 31,960 5,982 20,767 22,934 1,579 

1,685,286 2,024,446 2,263,037 4,512,316 2,491,709 510,173 

– – 2,091,625 – – – 

(124,675) (200,000) (97,775) – – – 

(5,574) (4,399) (4,073) (5,911) (76,873) (19,327) 

– – – – (58,641) (14,628) 

(33,765) (48,550) (24,757) (49,549) (26,646) (9,677) 

– – – – (2,503,026) (512,635) 

1,540,789 1,803,457 4,234,039 4,477,623 (16,058) 160,478 

– – – – (1,650,487) (533,581) 

114,289,933 218,871,591 79,149,974 38,230,362 18,400,857 5,355,246 

114,289,933 218,871,591 79,149,974 38,230,362 16,750,370 4,821,665 

– – – – – – 

(115,981,617) (220,907,889) (80,273,142) (38,654,153) (16,870,026) (4,838,367) 

– – (3,238,243) (4,137,065) – (144,111) 

(115,981,617) (220,907,889) (83,511,385) (42,791,218) (16,870,026) (4,982,478) 

(150,895) (232,841) (127,372) (83,233) (135,714) (335) 

183,189 290,004 157,815 533,355 728,117 54,520 

32,294 57,163 30,443 450,122 592,403 54,185 

29




30 

2008 


All Weather 


Guaranteed 

Note Fund 


Income received from swap counterparties 363,072 

Interest received on bank deposits 5,092 

Interest received on certificates of deposit 1,196,672 

Coupon received on options – 

Fee paid for assets remaining at maturity – 

Management fees paid (40,266) 

Trustee’s fees paid (34,178) 

Other operating expenses paid (17,441) 

Expenses paid to swap counterparties (1,132,613) 

Net cash provided by/(used in) operating activities 340,338 


Payments for termination of swap contracts (970,619) 

Proceeds from maturity and sale of certificates of deposit and options 9,847,086 

Net cash provided by investing activities 8,876,467 


Procceds from subscription of units – 

Payments on redemption of units (8,972,241) 

Distributions paid (287,181) 

Net cash used in financing activities (9,259,422) 

Net (decrease)/increase in cash and cash equivalents (42,617) 

Cash and cash equivalents at the beginning of the year 164,986 

Cash and cash equivalents at the end of the year 122,369 





2008 





Fund Fund Fund II Fund I Fund I Fund II 

– – – – – – 

8,058 5,347 2,414 3,536 1,947 621 

2,918,542 2,097,253 – 1,216,932 301,254 – 

– – – – – – 

– – (19,273) – – – 

(4,373) (3,688) (4,644) (4,232) (3,820) (1,399) 

– – – – – – 

(27,896) (17,772) (7,267) (15,676) (7,394) (4,872) 

– – – – – – 

2,894,331 2,081,140 (28,770) 1,200,560 291,987 (5,650) 

– – – – – – 

19,861,213 9,312,711 19,543,654 7,131,599 3,655,432 1,572,970 

19,861,213 9,312,711 19,543,654 7,131,599 3,655,432 1,572,970 

– – – – – – 

(20,119,408) (9,721,466) (19,537,409) (7,218,041) (3,699,388) (1,578,049) 

(2,677,419) (1,699,080) – (1,138,432) (268,855) – 

(22,796,827) (11,420,546) (19,537,409) (8,356,473) (3,968,243) (1,578,049) 

(41,283) (26,695) (22,525) (24,314) (20,824) (10,729) 

183,675 117,958 40,298 118,373 69,278 36,533 

142,392 91,263 17,773 94,059 48,454 25,804 

31

Notes on the Financial Statements 


1 The Trust 

32 

The funds presented in the financial statements (“the sub-funds”) represent sub-funds within HSBC Investment Trust 

(“the Trust”) which is an open-ended umbrella unit trust established under the laws of the Cayman Islands pursuant to 

a Trust Deed dated 9 October 2000 and supplemental trust deeds dated 22 June 2001, 9 January 2002, 9 April 2003, 25 

August 2003, 10 March 2004 and 19 April 2004. The Trust registered under the Mutual Funds Law of the Cayman 

Islands on 19 October 2000. The purpose of the Trust was to provide a certain level of guarantee on the value of funds 

invested. These sub-funds were launched and terminated/will terminate on the date of commencement and the date 

of maturity respectively as set out below: 

Date of Date of 

commencement maturity 

– HSBC Asian All Smiles Capital Guaranteed Fund 24 March 2004 24 December 2008 

– HSBC Turbo Asia Capital Guaranteed Fund 28 April 2004 30 April 2014* 

– HSBC All Weather Dynamic Capital Guaranteed Fund 8 June 2004 10 June 2014* 

– HSBC All Weather Action Capital Guaranteed Fund 30 June 2004 2 July 2014* 

– HSBC Sky High Capital Guaranteed Fund 22 September 2004 22 June 2009 

– HSBC Global Harvest Capital Guaranteed Fund 24 November 2004 24 August 2009 

– HSBC 3 Powers Capital Guaranteed Fund I 11 May 2005 11 February 2010 

– HSBC Korean Power Capital Guaranteed Fund I 22 September 2005 22 June 2010 

– HSBC Korean Power Capital Guaranteed Fund II 22 September 2005 23 March 2009 

The sub-funds are authorised by the Hong Kong Securities and Futures Commission under section 104 of the Hong 

Kong Securities and Futures Ordinance. They are governed by the Hong Kong Code on Unit Trusts and Mutual Funds. 

The Trust Deed does not contain any requirement that a combined set of financial statements for the Trust itself be 

prepared. 

* Subject to early termination on the happening of the relevant early termination events.



2 Significant accounting policies 

(a) Statement of compliance 

The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting 

Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting 

Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute 

of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong, the relevant 

provision of the Trust Deed and the relevant disclosure provisions of the Hong Kong Code on Unit Trusts and 

Mutual Funds issued by the Hong Kong Securities and Futures Commission. A summary of the significant 

accounting policies adopted by the Trust is set out below. 

The HKICPA has issued a number of new interpretations and an amendment to HKFRSs that are first effective for 

the current accounting period of the Trust. However, none of these developments are relevant to the Trust’s 

operations. 

The Trust has not applied any new standard or interpretation that is not yet effective for the current accounting 

period (see note 16). 

(b) Basis of preparation of the financial statements 

The functional and presentation currency of the sub-funds is the United States dollar reflecting the fact that the 

participating redeemable units of the Trust for the sub-funds are issued and redeemed in United States dollars. 

The financial statements are prepared on a fair value basis for financial assets and liabilities at fair value through 

profit or loss and derivative financial instruments. Other financial assets and financial liabilities are stated at 

amortised cost or redemption amount. 

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, 

estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, 

income and expenses. The estimates and associated assumptions are based on historical experience and various 

other factors that are believed to be reasonable under the circumstances, the results of which form the basis of 

making the judgements about carrying values of assets and liabilities that are not readily apparent from other 

sources. Actual results may differ from these estimates. 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates 

are recognised in the period in which the estimate is revised if the revision affects only that period, or in the 

period of the revision and future periods if the revision affects both current and future periods. 

The accounting policies have been applied consistently by the sub-funds and are consistent with those used in 

the previous year. 

The Trust maintains a separate account for each sub-fund to which the proceeds of issue and the income arising 

from the investment of those proceeds are credited and against which the expenses are allocated accordingly. 

Upon redemption before maturity, unitholders are entitled only to their proportion of the net assets held in the 

account relating to the sub-fund in which the units are designated. 

33



34 

(c) Revenue recognition 

Provided it is probable that the economic benefits will flow to the Trust and the revenue and costs if applicable, 

can be measured reliably, revenue is recognised in the income statement as follows: 

(i) Interest income 

Bank interest income and interest on certificates of deposit is recognised as it accrues, using the original 

effective interest rate method. 

(ii) Other income 

All other income is accounted for on an accruals basis. 

(d) Fees and expenses 

All expenses are recognised in the income statement on an accruals basis. 

(e) Financial instruments 

(i) Classification 

All fixed income securities held as investments and derivatives are designated into the fair value through 

profit or loss category upon initial recognition. 

Derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as 

financial assets. All derivatives in a net payable position (negative fair value), as well as options written, are 

reported as financial liabilities. 

Financial assets that are classified as receivables include interest receivable and prepayments. 

Financial liabilities that are not at fair value through profit or loss include accruals and other payables, and 

financial liabilities arising on redeemable units. 

(ii) Recognition 

The Trust recognises financial assets and financial liabilities on the date it becomes a party to the contractual 

provisions of the instruments. 

A regular way purchase of financial assets or financial liabilities is recognised using trade date accounting. 

From this date any gains and losses arising from changes in fair value of the financial assets or financial 

liabilities are recorded. 

Financial liabilities are not recognised unless one of the parties has performed their obligations under the 

contract or the contract is a derivative contract not exempted from the scope of HKAS 39. 

(iii) Measurement 

Financial instruments are measured initially at fair value (transaction price). Transaction costs on financial 

assets and financial liabilities held at fair value through profit or loss are expensed immediately, while on 

other financial instruments they are amortised. 

Subsequent to initial recognition, all instruments classified at fair value through profit or loss are measured 

at fair value with changes in their fair value recognised in the income statement.



Financial assets classified as receivables are carried at amortised cost using the effective interest rate 

method, less impairment losses, if any. 

Financial liabilities other than those at fair value through profit or loss are measured at amortised cost using 

the effective interest rate method. Financial liabilities arising from the units issued by the Trust are carried 

at the redemption amount representing the investors’ right to a residual interest in the Trust’s assets. 

Derivative financial instruments are recognised initially at fair value. At each statement of assets and liabilities 

date the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately 

to profit or loss, except where the derivatives qualify for cash flow hedge accounting or hedge the net 

investment in a foreign operation, in which case recognition of any resultant gain or loss depends on the 

nature of the item being hedged. 

All swaps are stated at the latest available quotation by swap counterparties at the close of business on the 

last business day of the financial period, which represents the unrealised gain or loss on swaps, and is 

included in the statement of assets and liabilities. The income from or expenses to the swap counterparties, 

the net realised gain or loss on termination of swap contracts and the net movement in unrealised gain or 

loss in value of the swaps are dealt with in the income statement. 

(iv) Fair value measurement principles 

The fair value of financial instruments is based on their quoted market price at the date of the statement of 

assets and liabilities without any deduction for estimated future selling costs. Financial assets are priced at 

current bid prices, while financial liabilities are priced at current asking prices. 

If a quoted market price is not available on a recognised stock exchange or from a broker/dealer for nonexchange-traded 

financial instruments, the fair value of the instrument is estimated using valuation 

techniques, including use of recent arm’s length market transactions, reference to the current fair value of 

another instrument that is substantially the same, discounted cash flow techniques, option pricing models 

or any other valuation technique that provides a reliable estimate of prices obtained in actual market 

transactions. 

Where pricing models are used, inputs are based on market data at the date of the statement of assets and 

liabilities. 

(v) Impairment 

Financial assets that are stated at cost or amortised cost are reviewed at each date of the statement of 

assets and liabilities to determine whether there is objective evidence of impairment. If any such indication 

exists, an impairment loss is recognised in the income statement as the difference between the asset’s 

carrying amount and the present value of estimated future cash flows discounted at the financial asset’s 

original effective interest rate. 

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at 

amortised cost decreases and the decrease can be linked objectively to an event occurring after the writedown, 

the write-down is reversed through the income statement. 

(vi) Derecognition 

The Trust derecognises a financial asset when the contractual rights to the cash flows from the financial 

assets expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance 

with HKAS 39. 

The Trust uses the weighted average method to determine realised gains and losses on derecognition. 

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or 

expires. 

35



36 

(vii) Offsetting 

Financial assets and liabilities are offset and the net amount is reported in the statement of assets and 

liabilities when the Trust has a legally enforceable right to set off the recognised amounts and the transactions 

are intended to be settled on a net basis or simultaneously, e.g. through a market clearing mechanism. 

(viii) Specific instruments 

Cash and cash equivalents 

Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments 

that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in 

value, and are held for the purpose of meeting short-term cash commitments rather than for investment or 

other purposes. 

(f) Foreign currency translation 

Foreign currency transactions during the year/period are translated into United States dollars at the exchange 

rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies that are 

stated at fair value are translated into United States dollars at the foreign exchange rates ruling at the date of the 

statement of assets and liabilities. Foreign exchange differences arising on translation and realised gains and 

losses on disposals or settlements of monetary assets and liabilities are recognised in the income statement. 

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated 

to United States dollars at the foreign currency exchange rates ruling at the dates that the values were determined. 

Foreign currency exchange differences relating to investments at fair value through profit or loss are included in 

gains and losses on investments. All other foreign currency exchange differences relating to monetary items are 

presented separately in the income statement, if any. 

(g) Related parties 

For the purposes of these financial statements, a party is considered to be related to the Trust if: 

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Trust or 

exercise significant influence over the Trust in making financial and operating policy decisions, or has joint 

control over the Trust; 

(ii) the Trust and the party are subject to common control; 

(iii) the party is a subsidiary, an associate of the Trust or a joint venture in which the Trust is a venturer; 

(iv) the party is a member of key management personnel of the Trust or a close family member of such an 

individual, or is an entity under the control, joint control or significant influence of such individuals; or 

(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control 

or significant influence of such individuals. 

(h) Subscriptions and redemptions 

The Trust recognises unitholders’ subscriptions and allots units upon receipt of a valid subscription application 

and derecognises them upon receipt of a valid redemption application. 

(i) Units issued to investors 

All redeemable units issued by the Trust provide the respective unitholders with the right to require redemption for 

cash at the value proportionate to the unitholders’ share in the Trust’s net assets at the redemption date. In accordance 

with HKAS 32 such instruments give rise to a financial liability for the present value of the redemption amount.



3 Gains and losses on investments 

2009 

HSBC HSBC HSBC All HSBC All HSBC 

Asian Turbo Weather Weather Sky 

All Smiles Asia Dynamic Action High 

Capital Capital Capital Capital Capital 

Guaranteed Guaranteed Guaranteed Guaranteed Guaranteed 

Fund (1) Fund Fund Fund Fund (2) 

Realised gains 1,865,971 – – – 1,329,163 

Unrealised gains – 975,931 210,356 581,295 – 

Total gains on investments 1,865,971 975,931 210,356 581,295 1,329,163 

Realised losses (771,052) (140,713) (67,601) (129,082) (1,837,872) 

Unrealised losses – – – – – 

Total losses on investments (771,052) (140,713) (67,601) (129,082) (1,837,872) 

1,094,919 835,218 142,755 452,213 (508,709) 

2009 

HSBC HSBC HSBC 

Global HSBC Korean Korean 

Harvest 3 Powers Power Power 

Capital Capital Capital Capital 

Guaranteed Guaranteed Guaranteed Guaranteed 

Fund (3) Fund I Fund I Fund II (4) 

Realised gains 465,951 502,376 114,965 191,325 

Unrealised gains – 1,072,529 68,816 – 

Total gains on investments 465,951 1,574,905 183,781 191,325 

Realised losses (771,644) – (65,873) (187,033) 

Unrealised losses – (377,462) (59,527) – 

Total losses on investments (771,644) (377,462) (125,400) (187,033) 

(305,693) 1,197,443 58,381 4,292 

(1) HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. All units were redeemed and 

the net assets remaining at that date after paying all redemption proceeds to investors were payable to the 





37



38 


assets remaining at that date after paying all redemption proceeds to investors were payable to the Manager in 





2008 



Greater HSBC 

Double HSBC All China Asian 

Blossom Multi-Star Weather BonBon Delights 

Capital Capital Plus Capital Capital Capital 


Fund (1) Fund (2) Fund (3) Fund (4) Fund (5) 

Realised gains 1,475,592 427,815 4,080,610 3,223,412 1,000,320 

Unrealised gains – – – – – 

Total gains on investments 1,475,592 427,815 4,080,610 3,223,412 1,000,320 

Realised losses (1,337,492) (237,781) (2,700,344) (165,497) (3,391,486) 

Unrealised losses – – – – – 

Total losses on investments (1,337,492) (237,781) (2,700,344) (165,497) (3,391,486) 

138,100 190,034 1,380,266 3,057,915 (2,391,166) 

2008 


Asian HSBC All Weather All Weather HSBC 

All Smiles Turbo Asia Dynamic Action Sky High 



Fund Fund Fund Fund Fund 

Realised gains 221,439 1 – 1 112,367 

Unrealised gains 4,276,297 – – – 2,005,129 

Total gains on investments 4,497,736 1 – 1 2,117,496 

Realised losses (244,168) (221,144) (62,754) (112,915) (294,361) 

Unrealised losses (3,954,142) (113,238) (5,237) (96,201) (603,535) 

Total losses on investments (4,198,310) (334,382) (67,991) (209,116) (897,896) 

299,426 (334,381) (67,991) (209,115) 1,219,600



2008 

HSBC HSBC HSBC HSBC 

Global China HSBC Korean Korean 

Harvest Fortune 3 Powers Power Power 



Fund Fund II (6) Fund I Fund I Fund II 

Realised gains 38,314 5,649,391 999,994 40,319 103,908 

Unrealised gains 1,508,199 – 1,016,905 371,024 – 

Total gains on investments 1,546,513 5,649,391 2,016,899 411,343 103,908 

Realised losses (126,722) (8,315,798) (2,198) (77,243) – 

Unrealised losses – – (9,721,033) (457,982) (189,565) 

Total losses on investments (126,722) (8,315,798) (9,723,231) (535,225) (189,565) 

1,419,791 (2,666,407) (7,706,332) (123,882) (85,657) 

(1) HSBC Double Blossom Capital Guaranteed Fund matured on 27 December 2007. All units were redeemed and 



(2) HSBC Multi-Star Capital Guaranteed Fund matured on 11 December 2007. All units were redeemed and the net 






(4) HSBC Greater China BonBon Capital Guaranteed Fund matured on 15 July 2008. All units were redeemed and 






(6) HSBC China Fortune Capital Guaranteed Fund II matured on 15 August 2008. All units were redeemed and the 

net assets remaining at that date after paying all redemption proceeds to investors were payable to the Manager 


39



4 Gains and losses on swap contracts 

40 

2009 


HSBC All All 

Turbo Weather Weather 

Asia Dynamic Action 



Fund Fund Fund 

Realised gains 259,270 61,184 292,366 

Unrealised gains 3,971,089 239,795 1,063,279 

Total gains on swap contracts 4,230,359 300,979 1,355,645 

Realised losses (34,545) (13,098) – 

Unrealised losses – – – 

Total losses on swap contracts (34,545) (13,098) – 

4,195,814 287,881 1,355,645 

2008 


HSBC All All 

Turbo Weather Weather 

Asia Dynamic Action 



Fund Fund Fund 

Realised gains – – – 

Unrealised gains – 1,210,654 2,296,746 

Total gains on swap contracts – 1,210,654 2,296,746 

Realised losses (201,659) (219,337) (392,939) 

Unrealised losses (3,185,651) – – 

Total losses on swap contracts (3,387,310) (219,337) (392,939) 

(3,387,310) 991,317 1,903,807



5 Investments 

2009 


HSBC HSBC All All HSBC 






Unlisted but quoted call options 

Cost – – – – – 

Unrealised (diminution)/ 

appreciation in value – – – – – 

– – – – – 

Unlisted but quoted 

certificates of deposit 

Cost – 42,860,761 6,563,403 20,109,086 – 

Amortised discount/(premium) – (156,761) (29,403) (90,086) – 


appreciation in value – (170,816) (28,096) (92,087) – 

– 42,533,184 6,505,904 19,926,913 – 

Investments, at market value – 42,533,184 6,505,904 19,926,913 – 

2009 








Cost – 964,031 183,766 – 


appreciation in value – 2,675,022 (103,157) – 

– 3,639,053 80,609 – 



Cost – 29,241,879 6,180,474 – 

Amortised discount/(premium) – 2,273,760 413,494 – 


appreciation in value – 369,602 165,521 – 

– 31,885,241 6,759,489 – 

Investments, at market value – 35,524,294 6,840,098 – 

41



42 













According to the Explanatory Memorandum of the sub-funds, realisation of units prior to the maturity date of the subfunds 

will take place at the net asset value per unit on the dealing day on which units are realised. The option/swap 

contract counterparty has agreed to quote a bid price to repurchase options, regardless of the amount to be repurchased 

at least two times per month during the life of the option/swap contract. The bid price quoted by the option/swap 

contract counterparty will be impacted by a number of factors including but not necessarily limited to the size of the 

option/swap contract position being repurchased, the option/swap contract counterparty’s appetite for the market 

risks arising from the option/swap contract position being repurchased, the administrative costs arising from the 

repurchase of the relevant size of option/swap contracts and other factors referred to in the Explanatory Memorandum. 

2008 










Cost – – – – – 



– – – – – 



Cost – – – – – 

Amortised discount/(premium) – – – – – 



– – – – – 

Investments, at market value – – – – –



2008 








Cost 

Unrealised (diminution)/ 1,104,052 – – – 1,290,908 

appreciation in value (747,236) – – – (1,290,908) 

356,816 – – – – 



Cost 154,855,319 50,927,264 10,280,053 28,906,497 80,631,992 

Amortised discount/(premium) 8,864,639 (186,264) (46,053) (129,497) 3,766,923 


appreciation in value 767,431 (1,146,747) (238,452) (673,382) 546,964 

164,487,389 49,594,253 9,995,548 28,103,618 84,945,879 

Investments, at market value 164,844,205 49,594,253 9,995,548 28,103,618 84,945,879 

2008 








Cost 426,300 – 1,161,862 280,784 205,090 


appreciation in value (424,850) – 1,602,493 (171,973) 138,249 

1,450 – 2,764,355 108,811 343,339 



Cost 50,230,802 – 35,243,715 9,443,684 2,288,788 

Amortised discount/(premium) 1,846,230 – 1,704,544 448,621 307,093 


appreciation in value 345,844 – 747,064 225,048 (36,303) 

52,422,876 – 37,695,323 10,117,353 2,559,578 

Investments, at market value 52,424,326 – 40,459,678 10,226,164 2,902,917 

43



44 



















According to the Explanatory Memorandum of the sub-funds, realisation of units prior to the maturity date of the subfunds 

will take place at the net asset value per unit on the dealing day on which units are realised. The option/swap 

contract counterparty has agreed to quote a bid price to repurchase options, regardless of the amount to be repurchased 

at least two times per month during the life of the option/swap contract. The bid price quoted by the option/swap 

contract counterparty will be impacted by a number of factors including but not necessarily limited to the size of the 

option/swap contract position being repurchased, the option/swap contract counterparty’s appetite for the market 

risks arising from the option/swap contract position being repurchased, the administrative costs arising from the 

repurchase of the relevant size of option/swap contracts and other factors referred to in the Explanatory Memorandum. 

6 Realisation value per unit 

In accordance with the Explanatory Memorandum, the realisation value per unit in each sub-fund prior to the maturity 

date equals the unitholders’ share of the net assets of the sub-fund after deducting their share of the prepaid management 

fees and trustee’s fees in order to ensure that any unitholder redeeming before maturity bears the management fees 

and trustee’s fees for the first two years of HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather Dynamic 

Capital Guaranteed Fund and HSBC All Weather Action Capital Guaranteed Fund; and the life of other sub-funds in the 

Trust as specified in the Explanatory Memorandum. Accordingly the realisation value of the units in each sub-fund does 

not equal its share of the net assets of the sub-fund shown in the financial statements at 31 October 2009. 

The amount of prepaid management fees and trustee’s fees which is deducted for the purposes of the above calculation 

in order to arrive at the realisation value of the units at year/period end is summarised below: 

2009 








Net assets as stated – 42,392,192 6,616,054 20,047,061 – 

Prepaid management and 

trustee’s fees – (1,091,900) (171,675) (532,273) – 

Net assets for calculation of 

realisation value – 41,300,292 6,444,379 19,514,788 –



2009 







Net assets as stated – 35,655,038 6,892,752 – 


trustee’s fees – (94,831) (47,367) – 


realisation value – 35,560,207 6,845,385 – 













2008 









Net assets as stated – – – – – 


trustee’s fees – – – – – 


realisation value – – – – – 

45



46 

2008 







Net assets as stated 167,580,199 45,433,603 9,840,390 27,100,834 85,646,601 


trustee’s fees (192,034) (1,585,478) (327,082) (928,602) (579,748) 


realisation value 167,388,165 43,848,125 9,513,308 26,172,232 85,066,853 

2008 







Net assets as stated 54,455,855 – 41,544,747 10,464,923 2,916,698 


trustee’s fees (455,925) – (514,652) (184,456) (10,992) 


realisation value 53,999,930 – 41,030,095 10,280,467 2,905,706 


















in accordance with the terms set out in the Explanatory Memorandum.



7 Units issued and redeemed 

2009 








Number of units in issue 

brought forward 16,478,332 5,074,050 1,023,313 2,877,643 8,637,002 

Units redeemed during the 

year/period (16,478,332) (803,750) (370,003) (875,829) (8,637,002) 


carried forward – 4,270,300 653,310 2,001,814 – 

2009 








brought forward 5,345,965 3,844,407 1,034,521 258,630 


year/period (5,345,965) (654,644) (357,430) (258,630) 


carried forward – 3,189,763 677,091 – 

2008 


HSBC HSBC Greater HSBC 









year/period (11,024,437) (8,991,439) (11,439,758) (21,515,603) (7,907,703) 


carried forward – – – – – 

47



48 

2008 










year/period (3,822,452) (1,862,170) (541,801) (996,031) (2,036,356) 


carried forward 16,478,332 5,074,050 1,023,313 2,877,643 8,637,002 

2008 








brought forward 6,333,835 1,300,892 4,467,932 1,400,350 400,003 


year/period (987,870) (1,300,892) (623,525) (365,829) (141,373) 


carried forward 5,345,965 – 3,844,407 1,034,521 258,630 




(4) Matured on 23 March 2009 






(10) Matured on 15 August 2008



8 Distributions attributable to the year/period 

HSBC Asian Delights Capital Guaranteed Fund 

2009 2008 

Distributions declared and paid during the period/year 

(2009: $Nil per unit; 2008: $0.4234 per unit on 7,648,189 units) – 3,238,243 

HSBC Asian All Smiles Capital Guaranteed Fund 

Distributions declared and paid during the year 

(2009: $0.243 per unit on 16,396,699 units; 

2008: $0.2285 per unit on 18,105,318 units) 3,984,398 4,137,065 



(2009: $0.1333 per unit on 670,656 units; 

2008: $0.1136 per unit on 1,269,028 units) 89,398 144,111 





HSBC Sky High Capital Guaranteed Fund 


(2009: $Nil per unit; 2008: $0.3 per unit on 8,924,730 units) – 2,677,419 

HSBC Global Harvest Capital Guaranteed Fund 



2008: $0.28 per unit on 6,068,142 units) 1,584,837 1,699,080 

HSBC 3 Power Capital Guaranteed Fund I 

Distribution declared and paid during the year 


2008: $0.275 per unit on 4,139,751 units) 956,265 1,138,432 


Distribution declared and paid during the year 

(2009: $0.25 per unit on 691,891 units; 


There were no distributions attributable to the year/period for the unitholders of the other sub-funds in the Trust. 

49



9 Cash and cash equivalents 

50 

2009 







Fund Fund Fund Fund Fund (2) 

Cash at bank 65,226 238,418 44,161 230,351 24,336 

Deposits with bank – 450,000 – – – 

65,226 688,418 44,161 230,351 24,336 

2009 






Fund (3) Fund I Fund I Fund II 

Cash at bank 14,230 64,735 31,735 24,294 

Deposits with bank – – – – 

14,230 64,735 31,735 24,294 

2008 








Cash at bank 108,001 92,883 32,294 57,163 30,443 

Deposits with bank – – – – – 

108,001 92,883 32,294 57,163 30,443



2008 








Cash at bank 40,122 62,403 34,185 42,369 42,392 

Deposits with bank 410,000 530,000 20,000 80,000 100,000 

450,122 592,403 54,185 122,369 142,392 

2008 






Fund Fund II Fund I Fund I Fund II 

Cash at bank 31,263 17,773 44,059 33,454 25,804 

Deposits with bank 60,000 – 50,000 15,000 – 

10 Related party transactions 

91,263 17,773 94,059 48,454 25,804 

The following is a summary of transactions with related parties during the year/period. All such transactions were 

entered into in the ordinary course of business and on normal commercial terms. 

(a) Trustee’s fees 

The trustee of the sub-funds is HSBC Trustee (Cayman) Limited (“the Trustee”) which is entitled to a trustee’s fee 

determined at the rates stated below, on the aggregate amount of the subscription proceeds received during the 

offer period. The trustee’s fees for the term of the sub-funds are paid in advance following the close of the offer 

period of each sub-fund. Starting from the third year of the Investment Period, the trustee fees for HSBC Turbo 

Asia Capital Guaranteed Fund, HSBC All Weather Dynamic Capital Guaranteed Fund and HSBC All Weather Action 

Capital Guaranteed Fund are charged at the rates stated below. The fees are accrued on and calculated as at each 

dealing day and payable yearly in arrears. 

Unitholders redeeming out of the sub-funds prior to the maturity date bear the prepaid trustee’s fees for the first 

two years of HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather Dynamic Capital Guaranteed Fund and 

HSBC All Weather Action Capital Guaranteed Fund; and the life of other sub-funds in the Trust as explained in 

note 6. 

Valuation fees for the sub-funds in the Trust have been waived. 

51



52 

The rates for trustee’s fees charged to individual sub-funds are as follows: 

Minimum 

Rate per annum annual fee 

HSBC Double Blossom Capital 0.06% on first $40 million N/A 

Guaranteed Fund 0.04% on proceeds in excess of $40 million 

HSBC Multi-Star Capital 0.05% on first $40 million N/A 


but not exceeding $200 million 

0.03% on proceeds in excess of $200 million 



HSBC All Weather Plus Capital 0.05% on first $40 million N/A 






HSBC Greater China BonBon Capital 0.05% on first $40 million N/A 






HSBC Asian Delights Capital 0.05% on first $40 million N/A 






HSBC Asian All Smiles Capital 0.05% on first $40 million N/A 






HSBC Turbo Asia Capital 0.05% on first $40 million N/A 





0.02% on proceeds in excess of $400 million



Minimum 


Additionally, from the third year onwards: 

0.05% on first $40 million Aggregate 

Nominal Value 

0.04% on Aggregate Nominal Value 

in excess of $40 million but not 

exceeding $200 million 





in excess of $400 million 

HSBC All Weather Dynamic Capital 0.05% on first $40 million N/A 








Nominal Value 









HSBC All Weather Action Capital 0.05% on first $40 million N/A 








Nominal Value 









53



54 

Minimum 


HSBC Sky High Capital 0.05% on first $40 million N/A 






HSBC Global Harvest Capital 0.05% on first $40 million $20,000 





HSBC China Fortune Capital 0.05% on first $40 million $20,000 

Guaranteed Fund II 0.04% on proceeds in excess of $40 million 





HSBC 3 Powers Capital 0.05% on first $40 million $20,000 

Guaranteed Fund I 0.04% on proceeds in excess of $40 million 





HSBC Korean Power Capital 0.05% on first $40 million $20,000 

Guaranteed Fund I 0.04% on proceeds in excess of $40 million 





HSBC Korean Power Capital 0.05% on first $40 million $20,000 

Guaranteed Fund II 0.04% on proceeds in excess of $40 million 





The Aggregate Nominal Value of Units means the number of units of the relevant sub-fund in issue as at the 

relevant dealing day multiplied by the initial offer price of the relevant sub-fund. 

Information relating to these transactions is set out in note 10(f).



(b) Management fees and registrar’s fees 

The Manager of the sub-funds is HSBC Investment Funds (Hong Kong) Limited (“the Manager”) which is entitled 

to a management fee determined at the rates stated below, on (unless otherwise specified) the aggregate 

amount of subscription proceeds received during the offer period. The management fees for the term of the subfunds 

are paid in advance following the close of the offer period of each sub-fund. Starting from the third year of 

the Investment Period, the management fees for HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather 

Dynamic Capital Guaranteed Fund and HSBC All Weather Action Capital Guaranteed Fund are charged at the 

rates stated below. The fees are accrued on and calculated as at each dealing day and payable yearly in arrears. 

Unitholders redeeming out of the sub-funds prior to the maturity date bear the prepaid management fees for the 

first two years of HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather Dynamic Capital Guaranteed 

Fund and HSBC All Weather Action Capital Guaranteed Fund; and the life of other sub-funds in the Trust as 

explained in note 6. 

The rates for management fees charged to individual sub-funds are as follows: 

Rate per 

annum 

HSBC Double Blossom Capital Guaranteed Fund 0.773% 

HSBC Multi-Star Capital Guaranteed Fund 1.056% 

HSBC All Weather Plus Capital Guaranteed Fund 0.875% 

HSBC Greater China BonBon Capital Guaranteed Fund 1% 

HSBC Asian Delights Capital Guaranteed Fund 1% 

HSBC Asian All Smiles Capital Guaranteed Fund 1% 

HSBC Turbo Asia Capital Guaranteed Fund 2.8% 

Additionally, from the third year onwards 

0.1% of the Aggregate Nominal Value of Units 

HSBC All Weather Dynamic Capital Guaranteed Fund 2.8% 

Additionally, from the third year onwards 

0.1% of the Aggregate Nominal Value of Units 

HSBC All Weather Action Capital Guaranteed Fund 2.8% 

Additionally, from the third year onwards, 

1% of the Aggregate Nominal Value of Units 

HSBC Sky High Capital Guaranteed Fund 1% 

HSBC Global Harvest Capital Guaranteed Fund 1% 

HSBC China Fortune Capital Guaranteed Fund II 1% 

HSBC 3 Powers Capital Guaranteed Fund I 1% 

HSBC Korean Power Capital Guaranteed Fund I 1% 

HSBC Korean Power Capital Guaranteed Fund II 1% 

The Aggregate Nominal Value of Units means the number of units of the relevant sub-fund in issue as at the 

relevant dealing day multiplied by the initial offer price of the relevant sub-fund. 

55



56 

The Manager is also entitled to an annual registrar’s fee for registration services to each sub-fund as follows: 

HSBC Double Blossom Capital Guaranteed Fund 8,236 

HSBC Multi-Star Capital Guaranteed Fund 9,576 

HSBC All Weather Plus Capital Guaranteed Fund 11,016 

HSBC Greater China BonBon Capital Guaranteed Fund 5,763 

HSBC Asian Delights Capital Guaranteed Fund 8,416 

HSBC Asian All Smiles Capital Guaranteed Fund 9,039 

HSBC Turbo Asia Capital Guaranteed Fund 6,773 

HSBC All Weather Dynamic Capital Guaranteed Fund 5,387 

HSBC All Weather Action Capital Guaranteed Fund 5,910 

HSBC Sky High Capital Guaranteed Fund 9,039 

HSBC Global Harvest Capital Guaranteed Fund 5,672 

HSBC China Fortune Capital Guaranteed Fund II 8,320 

HSBC 3 Powers Capital Guaranteed Fund I 9,100 

HSBC Korean Power Capital Guaranteed Fund I 8,477 

HSBC Korean Power Capital Guaranteed Fund II 8,963 

In addition, if there are any assets remaining in a sub-fund at the maturity date of the sub-fund after investors 

have received the returns and capital according to the terms set out in the respective sub-fund’s Explanatory 

Memorandum, the Manager will be entitled to receive a fee equal to such assets. 

Information relating to these transactions is set out in note 10(f). 

(c) Banking services 

The sub-funds utilise the banking services of certain branches or subsidiaries of the HSBC Group, which are 

fellow subsidiaries of the Trustee and the Manager, in the ordinary course of their banking and securities custodian 

business. Information relating to the interest income earned from deposit placements during the year/period are 

set out in note 10(f). 

(d) Guarantee services 

The Hongkong and Shanghai Banking Corporation Limited (“the Guarantor”), which is an intermediate holding 

company of the Trustee and the Manager acts as the guarantor to the sub-funds. The details of the guarantee 

terms are set out in note 13. 

(e) Investment portfolio 

The sub-funds invested in certificates of deposit issued by The Hongkong and Shanghai Banking Corporation 

Limited during the year/period. The portfolio holdings of such investments at 31 October are as follows: 

2009 








Portfolio holdings – 42,704,000 6,534,000 20,019,000 – 

Market value – 42,533,184 6,505,904 19,926,913 – 

% of net assets 0% 100.33% 98.34% 99.40% 0%



2009 







Portfolio holdings – 31,898,000 6,771,000 – 

Market value – 31,885,241 6,759,489 – 

% of net assets 0% 89.43% 98.07% 0% 

(1) HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. All units were redeemed 

and the net assets remaining at that date after paying all redemption proceeds to investors were payable to 

the Manager in accordance with the terms set out in the Explanatory Memorandum. 

(2) HSBC Sky High Capital Guaranteed Fund matured on 22 June 2009. All units were redeemed and the net 

assets remaining at that date after paying all redemption proceeds to investors were payable to the Manager 


(3) HSBC Global Harvest Capital Guaranteed Fund matured on 24 August 2009. All units were redeemed and 



(4) HSBC Korea Power Capital Guaranteed Fund II matured on 23 March 2009. All units were redeemed and 



2008 









Portfolio holdings – – – – – 

Market value – – – – – 

% of net assets 0% 0% 0% 0% 0% 


2008 







Portfolio holdings 164,784,000 50,741,000 10,234,000 28,777,000 86,371,000 

Market value 164,487,389 49,594,253 9,995,548 28,103,618 84,945,879 

% of net assets 98.15% 109.16% 101.58% 103.70% 99.18% 

57



58 

2008 







Portfolio holdings 53,460,000 – 38,445,000 10,346,000 2,587,000 

Market value 52,422,876 – 37,695,323 10,117,353 2,559,578 

% of net assets 96.27% 0% 90.73% 96.68% 87.76% 

(1) HSBC Double Blossom Capital Guaranteed Fund matured on 27 December 2007. All units were redeemed 



(2) HSBC Multi-Star Capital Guaranteed Fund matured on 11 December 2007. All units were redeemed and 



(3) HSBC All Weather Plus Capital Guaranteed Fund matured on 10 June 2008. All units were redeemed and 



(4) HSBC Greater China BonBon Capital Guaranteed Fund matured on 15 July 2008. All units were redeemed 



(5) HSBC Asian Delights Capital Guaranteed Fund matured on 8 October 2008. All units were redeemed and 



(6) HSBC China Fortune Capital Guaranteed Fund II matured on 15 August 2008. All units were redeemed and 


Manager in accordance with the terms set out in the Explanatory Memorandum.



(f) Information on transactions with related parties is set out below: 

2009 








(i) Trustee’s fees 

Total trustee’s fees earned by the 

trustee during the year/period 7,175 29,894 6,786 19,592 23,747 

Trustee’s fees prepaid to the 

trustee at the year/period end – 16,512 3,009 8,737 – 

Trustee’s fees payable to the 

trustee at the year/period end – 2,203 341 1,259 – 

(ii) Management fees and 

registrar’s fees 

Total management fees and 

registrar’s fees earned by the 

manager during the year/period 174,542 539,013 166,267 418,506 546,180 

Management fees and registrar’s 

fees prepaid to the manager at 

the year/period end – 1,075,388 168,666 523,536 – 


fees payable to the manager at 

the year/period end 25 38,702 7,439 12,689 39 

(iii) Banking services 

Interest income earned during 

the year/period 2,473 980 36 133 162 

(iv) Investment income 

Interest income earned from 


during the year/period 726,721 542,686 118,767 364,721 1,911,111 

(v) Fee of assets remaining 

at maturity 

Fee of assets remaining 

at maturity earned by 

the manager during the 

year/period 373,052 – – – 90,448 

Fee of assets remaining at 

maturity payable to the manager 

at the year/period end 35,030 – – – 8,935 

59



60 

2009 









trustee during the year/period 19,523 17,661 10,741 793 


trustee at the year/period end – 3,935 3,681 – 


trustee at the year/period end – – – – 





manager during the year/period 436,887 411,435 134,987 (1,488) 



the year/period end – 90,896 43,686 – 


fees payable to the manager at 

the year/period end 45 16,091 15,059 – 



the year/period 220 87 21 – 




during the year/period 1,409,380 1,439,204 325,785 38,197 


at maturity 




year/period 52,779 – 23,943 – 



at the year/period end 4,858 – 23,276 – 




(4) Matured on 23 March 2009



2008 












trustee at the year/period end – – – – – 







manager during the year/period 128,180 107,590 601,289 1,480,468 737,533 



the year/period end – – – – – 


fees payable to the manager 

at the year/period end – 12,270 1,621 391 1,821 



the year/period 700 395 2,450 5,388 2,675 



certificates of deposit during 

the year/period 454,339 249,734 1,751,201 4,603,662 2,235,452 


at maturity 


maturity earned by the manager 

during the year/period 205,977 168,685 134,370 227,115 121,785 



at the year/period end 91,936 68,685 9,695 27,115 24,010 

61



62 

2008 











trustee at the year/period end 7,175 23,993 5,738 15,254 23,747 


trustee at the year/period end – 2,493 526 1,381 – 





manager during the year/period 2,081,091 1,027,158 276,969 572,463 1,208,315 



the year/period end 192,034 1,585,478 327,082 913,348 556,001 



at the year/period end 13,592 43,548 9,784 16,170 15,359 



the year/period 13,611 16,803 494 2,376 3,928 




the year/period 5,910,682 2,008,928 475,862 1,170,776 3,456,383 


at maturity 



during the year/period – – – – – 



at the year/period end – – – – –




2008 










trustee at the year/period end 19,523 – 21,596 14,422 793 







manager during the year/period 720,599 99,531 536,056 209,537 50,336 



the year/period end 436,402 – 493,056 170,034 10,199 



at the year/period end 5,264 835 13,764 12,798 12,088 



the year/period 2,177 209 2,063 750 194 




the year/period 1,926,416 330,174 1,694,685 592,220 171,475 


at maturity 



during the year/period – 33,904 – – – 



at the year/period end – 14,631 – – – 







63



11 Taxation 

64 

No provision for Hong Kong profits tax has been made in the financial statements as the sub-funds are exempt from 

taxation under section 26A(1A) of the Hong Kong Inland Revenue Ordinance. 

There are no taxes on income or gains in the Cayman Islands and the Trust has received an undertaking from the 

Governor in Cabinet of the Cayman Islands exempting it from all local income, profits and capital taxes for a period of 

50 years until 2050. Accordingly, no provision for Cayman Islands income taxes is included in these financial statements. 

12 Soft commission arrangements 

No soft commission arrangements were entered into with brokers during the year/period (2008: $Nil). 

13 Guarantee 

The Hongkong and Shanghai Banking Corporation Limited (“the Guarantor”) undertakes to provide irrevocable guarantees 

to the unitholders of the sub-funds on the terms and conditions set out in the respective deeds of guarantee. 

Details of the guaranteed realisation prices and guaranteed returns of the sub-funds are stated as follows: 

Additional 

guaranteed 

return over 

the whole 

Guaranteed investment 

realisation period of the 

price on respective 

maturity date sub-fund 

HSBC Double Blossom Capital Guaranteed Fund 10/unit 0.52/unit 

HSBC Multi-Star Capital Guaranteed Fund 10/unit 0.5/unit 

HSBC All Weather Plus Capital Guaranteed Fund 10/unit 0.5/unit 

HSBC Greater China BonBon Capital Guaranteed Fund 10/unit 0.82/unit 

HSBC Asian Delights Capital Guaranteed Fund 10/unit 0.85/unit 

HSBC Asian All Smiles Capital Guaranteed Fund 10/unit 0.8/unit 

HSBC Turbo Asia Capital Guaranteed Fund 10/unit 1.5/unit 

HSBC All Weather Dynamic Capital Guaranteed Fund 10/unit 1.0/unit 

HSBC All Weather Action Capital Guaranteed Fund 10/unit 1.0/unit 

HSBC Sky High Capital Guaranteed Fund 10/unit 1.0/unit 

HSBC Global Harvest Capital Guaranteed Fund 10/unit 1.0/unit 

HSBC China Fortune Capital Guaranteed Fund II 10/unit – 

HSBC 3 Powers Capital Guaranteed Fund I 10/unit 1.1/unit 

HSBC Korean Power Capital Guaranteed Fund I 10/unit 1.0/unit 

HSBC Korean Power Capital Guaranteed Fund II 10/unit – 

No guarantee fee was charged by the Guarantor on the sub-fund during the year/period (2008: $Nil).



14 Financial instruments and associated risks 

The Trust invests the majority of its assets in coupon bearing or puttable floating rate US dollar negotiable certificates 

of deposits or similar debt securities issued by The Hongkong and Shanghai Banking Corporation Limited. The Trust’s 

investment portfolio also comprises options and swaps. The Trust intends to hold the investment portfolio for definite 

periods of time as specified in the Explanatory Memorandum of the sub-funds within the Trust. 

The most important types of financial risks to which the Trust is exposed to are market risk, liquidity risk and credit risk. 

The nature and extent of the financial instruments outstanding at the reporting date and the risk management policies 

employed by the Trust are discussed below. 

(a) Market risk 

Market risk embodies the potential for both losses and gains and includes currency risk, interest rate risk and 

price risk. 

The Trust’s strategy on the management of investment risks is driven by the Trust’s investment objectives. The 

Trust’s market risk is managed on a regular basis by the Manager in accordance with policies and procedures in 

place. As the financial market remains very uncertain, the amount that will eventually be received on maturity or 

on disposal of investments held by the Trust before maturity may differ significantly from the valuation of these 

investments as at the year/period end. The Manager and the Trustee will assess the fair market values of these 

investments on each dealing day (and the maturity date) based on the latest market conditions and in a prudent 

manner in accordance with HKFRSs. 

Details of the nature of the Trust’s investment portfolio at the date of statement of assets and liabilities are 

disclosed in note 5. Details of the nature and terms of derivative financial instruments outstanding at the date of 

statement of assets and liabilities are set out in note 14(d). 

Currency risk 

The Trust did not hold any significant assets denominated in currencies other than United States dollars. The Trust 

therefore is not exposed to significant currency risks. Changes in foreign exchange rates will not significantly 

change the net assets attributable to unitholders of the Trust. 

Interest rate risk 

The majority of the Trust’s financial assets are certificates of deposits issued by The Hongkong and Shanghai 

Banking Corporation Limited, which are interest-bearing financial instruments. Any excess cash and cash 

equivalents of the Trust are invested in short-term deposits placed with subsidiaries of the HSBC Group. 

The Trust’s interest rate risk is managed on a regular basis by the Manager in accordance with policies and 

procedures in place. Interest rate risk is mitigated by aligning the maturity profile of the certificates of deposits to 

that of the maturity profile of the sub-funds within the Trust. 

The following table details the Trust’s exposure to interest rate risk. It includes the Trust’s debt instruments, swap 

contracts at fair values and deposits with banks, categorised by the earlier of contractual re-pricing or maturity 

date measured by the carrying value of the debt instruments: 

65



66 

2009 







Fund (1) Fund (5), (6) Fund (5), (7) Fund (5), (8) Fund (2) 

Certificates of deposits 

– 1 year or less – 42,533,184 6,505,904 19,926,913 – 

– over 1 year to 5 years – – – – – 

Unrealised loss on swap contracts 

– 1 year or less – (1,706,399) (84,903) (488,865) – 


Deposits with bank 

– 1 year or less 65,226 688,418 44,161 230,351 24,336 


65,226 41,515,203 6,465,162 19,668,399 24,336 

2009 








– 1 year or less – 31,885,241 6,759,489 – 

– over 1 year to 5 years – – – – 


– 1 year or less – – – – 



– 1 year or less 14,230 64,735 31,735 24,294 


14,230 31,949,976 6,791,224 24,294 












(4) HSBC Korean Power Capital Guaranteed Fund II matured on 23 March 2009. All units were redeemed and 



(5) HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather Dynamic Capital Guaranteed Fund and HSBC 

All Weather Action Capital Guaranteed Fund only invested in floating rate Certificates of Deposits and all 

other sub-funds invested in fixed coupon Certificates of Deposits. 

(6) The notional amount of swap contract under HSBC Turbo Asia Capital Guaranteed Fund as at 31 October 

2009 was $42,704,000. Under the contract, the sub-fund is entitled to receive 0.2% per annum plus potential 

return dependent on the performance of a basket of 40 stocks and is required to pay 3 months USD London 

InterBank Offer Rate (“LIBOR”) minus 0.18% per annum. 

(7) The notional amount of swap contract under HSBC All Weather Dynamic Capital Guaranteed Fund as at 31 

October 2009 was $6,534,000. Under the contract, the sub-fund is entitled to receive 0.24% per annum 

plus potential return dependent on the performance of a basket of 30 stocks and is required to pay 3 

months USD LIBOR minus 0.18% per annum. 

(8) The notional amount of swap contract under HSBC All Weather Action Capital Guaranteed Fund as at 31 




The following table details the Trust’s exposure to interest rate risk. It includes the Trust’s debt instruments, swap 

contracts at fair values and deposits with banks, categorised by the earlier of contractual re-pricing or maturity 

date measured by the carrying value of the debt instruments: 

2008 










– 1 year or less – – – – – 



– 1 year or less – – – – – 



– 1 year or less – – – – – 


– – – – – 

67



68 

2008 






Fund Fund (7), (8) Fund (7), (9) Fund (7), (10) Fund 


– 1 year or less 164,487,389 49,594,253 9,995,548 28,103,618 84,945,879 



– 1 year or less – (6,350,062) (539,298) (2,060,108) – 



– 1 year or less 410,000 530,000 20,000 80,000 100,000 


164,897,389 43,774,191 9,476,250 26,123,510 85,045,879 

2008 








– 1 year or less 52,422,876 – – – 2,559,578 

– over 1 year to 5 years – – 37,695,323 10,117,353 – 


– 1 year or less – – – – – 



– 1 year or less 60,000 – 50,000 15,000 – 


52,482,876 – 37,745,323 10,132,353 2,559,578 





















(7) HSBC Turbo Asia Capital Guaranteed Fund, HSBC All Weather Dynamic Capital Guaranteed Fund and HSBC 

All Weather Action Capital Guaranteed Fund only invested in floating rate Certificates of Deposits and all 

other sub-funds invested in fixed coupon Certificates of Deposits. 

(8) The notional amount of swap contract under HSBC Turbo Asia Capital Guaranteed Fund as at 31 October 

2008 was $50,741,000. Under the contract, the sub-fund is entitled to receive 0.2% per annum plus potential 

return dependent on the performance of a basket of 40 stocks and is required to pay 3 months USD London 

InterBank Offer Rate (“LIBOR”) minus 0.18% per annum. 

(9) The notional amount of swap contract under HSBC All Weather Dynamic Capital Guaranteed Fund as at 31 




(10) The notional amount of swap contract under HSBC All Weather Action Capital Guaranteed Fund as at 31 




Interest rate risk sensitivity analysis 

If the market interest rate at the date of statement of assets and liabilities had changed by 100 basis points, with all 

other variables held constant, this would have affected the net assets attributable to unitholders of the Trust by: 

2009 








Changes in net assets attributable 

to unitholders if the market 

interest rate had increased by 

100 basis points at the date 

of statement of assets 

and liabilities – (202,778) (14,610) (68,149) – 

Changes in net asset attributable 


interest rate had decreased by 



and liabilities – 202,778 14,610 68,149 – 

69



70 

2009 






Fund Fund I Fund I Fund II 






and liabilities – (89,978) (43,335) – 






and liabilities – 89,978 43,335 – 

2008 













and liabilities – – – – – 






and liabilities – – – – –



2008 












and liabilities (239,251) (343,866) (30,060) (114,340) (543,585) 






and liabilities 239,251 343,866 30,060 114,340 543,585 

2008 












and liabilities (425,964) – (482,826) (165,885) (10,028) 






and liabilities 425,964 – 482,826 165,885 10,028 

Price risk 

Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, 

whether caused by factors specific to an individual investment or its issuer, or factors affecting all instruments traded 

in the market. The Trust is exposed to price risk as changes in market prices of its investments will affect the valuation 

of the Trust. The financial instruments held by the Trust will be valued by the relevant counterparties on a mark-tomarket 

basis for each dealing day. The main factors affecting the value of the instruments include but are not limited to 

the terms of the instruments, the performance of the linked investment, the degree of volatility, the remaining maturity 

and the prevailing interest rates. The investment adviser or investment sub-adviser of the Trust will act independently 

from the issuer of the instruments to review the value of such instruments periodically. 

71



72 

Price risk is managed by the Trust’s Manager in accordance with policies and procedures in place. 

The following table details the breakdown of the investment assets and liabilities held by the Trust: 

Investment assets 

2009 








Certificates of deposits – 42,533,184 6,505,904 19,926,913 – 

Options – – – – – 

Total investment assets – 42,533,184 6,505,904 19,926,913 – 

Investment liabilities 

Unrealised loss on swap contracts – (1,706,399) (84,903) (488,865) – 

Total investment liabilities – (1,706,399) (84,903) (488,865) – 

Net investment assets – 40,826,785 6,421,001 19,438,048 – 


2009 







Certificates of deposits – 31,885,241 6,759,489 – 

Options – 3,639,053 80,609 – 

Total investment assets – 35,524,294 6,840,098 – 


Unrealised loss on swap contracts – – – – 

Total investment liabilities – – – – 

Net investment assets – 35,524,294 6,840,098 –
















2008 









Certificates of deposits – – – – – 

Options – – – – – 

Total investment assets – – – – – 


Unrealised loss on swap contracts – – – – – 

Total investment liabilities – – – – – 

Net investment assets – – – – – 

73



74 


2008 







Certificates of deposits 164,487,389 49,594,253 9,995,548 28,103,618 84,945,879 

Options 356,816 – – – – 

Total investment assets 164,844,205 49,594,253 9,995,548 28,103,618 84,945,879 


Unrealised loss on swap contracts – (6,350,062) (539,298) (2,060,108) – 

Total investment liabilities – (6,350,062) (539,298) (2,060,108) – 

Net investment assets 164,844,205 43,244,191 9,456,250 26,043,510 84,945,879 


2008 







Certificates of deposits 52,422,876 – 37,695,323 10,117,353 2,559,578 

Options 1,450 – 2,764,355 108,811 343,339 

Total investment assets 52,424,326 – 40,459,678 10,226,164 2,902,917 


Unrealised loss on swap contracts – – – – – 

Total investment liabilities – – – – – 

Net investment assets 52,424,326 – 40,459,678 10,226,164 2,902,917





















Price risk sensitivity analysis 

If the value of investments at the date of statement of assets and liabilities had changed by 5%, with all other 

variables held constant, would have affected the net assets attributable to unitholders of the Trust by: 

2009 









to unitholders if the value 

of investments had increased 

by 5% at the date of statements 

of assets and liabilities – 2,041,339 321,050 971,902 – 


to unitholders if the value of 

investments had decreased by 

5% at the date of statements 

of assets and liabilities – (2,041,339) (321,050) (971,902) – 

75



76 

2009 






Fund Fund I Fund I Fund II 


to unitholders if the value 

of investments had increased 

by 5% at the date of statements 

of assets and liabilities – 1,776,215 342,005 – 





of assets and liabilities – (1,776,215) (342,005) – 

2008 










investments had increased by 


of assets and liabilities – – – – – 





of assets and liabilities – – – – –



2008 











of assets and liabilities 8,242,210 2,162,210 472,813 1,302,176 4,247,294 





of assets and liabilities (8,242,210) (2,162,210) (472,813) (1,302,176) (4,247,294) 

2008 






Fund Fund II Fund I Fund I Fund II 





of assets and liabilities 2,621,216 – 2,022,984 511,308 145,146 





of assets and liabilities (2,621,216) – (2,022,984) (511,308) (145,146) 

(b) Credit risk 

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation to pay its dues 

on time. The Trust is exposed to the credit risk of the counterparties and guarantor. The Trust manages the risk by 

appointing reputable and well-established issuers and guarantors. 

Credit risk arising from derivatives transactions with counterparties includes the risk relates to transactions awaiting 

settlement and the risk that the issuer of the derivative instruments being unable or unwilling to make timely 

principal and/or interest payments. This credit risk is managed by monitoring the credit quality of the derivative 

instruments held by the sub-funds and the financial position of the derivative instrument counterparties. 

77



78 

Credit risk arising on debt instruments is managed by reviewing and monitoring of the credit quality of debt 

securities and investing primarily in rated securities or securities issued by rated counterparties which meet the 

minimum credit ratings set by the Explanatory Memorandum. 

Credit risk arising from transactions with brokers relates to transactions awaiting settlement. Risk relating to 

unsettled transactions is considered low due to the short settlement period involved, the high credit quality of 

the brokers used and the performance of the brokers. For the year/period ended 31 October 2009 and 2008, 

there was no default by the brokers. 

The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date. 

This relates also to financial assets carried at amortised cost, as they have a short-term to maturity. 

At the reporting date, the Trust’s financial assets exposed to credit risk amounted to the following: 

2009 








Investment in certificates 

of deposits – 42,533,184 6,505,904 19,926,913 – 

Investment in options – – – – – 

Interest receivable – 64,454 8,232 15,357 – 

Cash and cash equivalents 65,226 688,418 44,161 230,251 24,336 

Total 65,226 43,286,056 6,558,297 20,172,521 24,336 

2009 








of deposits – 31,885,241 6,759,489 – 

Investment in options – 3,639,053 80,609 – 

Interest receivable – – – – 

Cash and cash equivalents 14,230 64,735 31,735 24,294 

Total 14,230 35,589,029 6,871,833 24,294















2008 










of deposits – – – – – 

Investment in options – – – – – 

Interest receivable 21 17 3 9 4,689 


Total 108,022 92,900 32,297 57,172 35,132 

2008 








of deposits 164,487,389 49,594,253 9,995,548 28,103,618 84,945,879 

Investment in options 356,816 – – – – 

Interest receivable 2,118,955 318,747 42,757 49,268 110 


Total 167,413,282 50,505,403 10,092,490 28,275,255 85,088,381 

79



80 

2008 








of deposits 52,422,876 – 37,695,323 10,117,353 2,559,578 

Investment in options 1,450 – 2,764,355 108,811 343,339 

Interest receivable 1,498,685 – 501,163 27,580 2 


Total 54,014,274 17,773 41,054,900 10,302,198 2,928,723 



















The issuer of the certificates of deposits held by the Trust is The Hongkong and Shanghai Banking Corporation 

Limited. 

The Hongkong and Shanghai Banking Corporation Limited undertakes to provide irrevocable guarantees to the 

unitholders of the sub-funds on the terms and conditions set out in the respective deeds of guarantee. Please 

refer to note 13 for details. 

At 31 October 2009, the credit rating of The Hongkong and Shanghai Banking Corporation Limited was Aa1 (longterm 

foreign issuer credit by Moody’s). The credit rating as at 31 October 2008 was Aa2.



Transactions involving options are usually with counterparties with whom the Trust signed master netting 

agreements. Master netting agreements provide for the net settlement of contracts with the same counterparty 

in the event of default. The impact of the master netting agreement is to reduce credit risk from the options. The 

credit risk associated with options subject to a master netting arrangement is eliminated only to the extent that 

financial liabilities due to the same counterparty will be settled after the assets are realised. The exposure to 

credit risk reduced by master netting arrangements may change significantly within short period of time as a 

result of transactions subject to the arrangement. In addition, the Trust has collateral arrangement with each 

option counterparty. Under the arrangement, when the option value exceeds a threshold of net asset value of 

respective sub-fund, the counterparty has to deliver a collateral in cash to that particular sub-fund. 

Substantially all of the assets held by the Trust are held by The Hongkong and Shanghai Banking Corporation 

Limited, Societe Generale, BNP Paribas and Credit Suisse Global Foreign Exchange as custodians. Bankruptcy or 

insolvency of the custodians may cause the Trust’s rights with respect to securities held by the custodian to be 

delayed or limited. 

Substantially all of the cash held by the Trust is held by The Hongkong and Shanghai Banking Corporation Limited. 

Bankruptcy or insolvency of The Hongkong and Shanghai Banking Corporation Limited may cause the Trust’s 

rights with respect to cash held by The Hongkong and Shanghai Banking Corporation Limited to be delayed or 

limited. 

(c) Liquidity risk 

The Trust’s constitution provides for bi-weekly redemption of units prior to maturity dates and the Trust is therefore 

exposed to liquidity risk in meeting unitholders’ redemptions. In order to take effect for the redemption prior to 

maturity dates, a valid redemption request must be received by the Manager before 4:00 p.m. Hong Kong time 

one Hong Kong business day before the dealing day. Redemption proceeds will be paid not later than one calendar 

month after receipt of completed redemption documentation. 

The certificates of deposits, options and interest rate swaps held by the Trust are not listed investments that are 

traded in an organised public market and which generally may be illiquid. This liquidity risk is mitigated by the 

Trust entering into Market Making Undertaking Agreements with its dealing counterparties. The dealing 

counterparties undertake in the Agreements to provide an Over-the-Counter market for the certificates of deposits, 

options and interest rate swaps by providing a firm quotation to buy back the certificates of deposits, options and 

interest rate swaps on an ongoing basis. 

The following table details the remaining contractual maturities at the reporting date of the Trust’s non-derivative 

financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed 

using contractual rates, or if floating based on rates current at the reporting date) and the earliest date the Trust 

can be required to pay: 

81



82 

2009 








Redemption payable and accruals 

and other payables 

– carrying amount 65,226 279,365 29,015 168,968 24,336 

– total contractual undiscounted 

cash flow 65,226 279,365 29,015 168,968 24,336 

– within 1 year or on demand 65,226 279,365 29,015 168,968 24,336 


– over 5 years – – – – – 


– carrying amount – 1,706,399 84,903 488,865 – 


cash inflow – (427,274) (78,453) (220,330) – 

– within 1 year or on demand – (127,293) (25,134) (70,588) – 

– over 1 year to 5 years – (299,981) (53,319) (149,742) – 

– over 5 years – – – – – 


cash outflow – 207,743 31,782 97,389 – 

– within 1 year or on demand – 52,355 7,258 21,005 – 

– over 1 year to 5 years – 155,388 24,524 76,384 – 

– over 5 years – – – – – 

Total 

– carrying amount 65,226 1,985,764 113,918 657,833 24,336 


cash flow 65,226 59,834 (17,656) 46,027 24,336 



– over 5 years – – – – –



2009 









– carrying amount 14,230 28,822 26,448 24,294 


cash flow 14,230 28,822 26,448 24,294 

– within 1 year or on demand 14,230 28,822 26,448 24,294 


– over 5 years – – – – 


– carrying amount – – – – 


cash inflow – – – – 

– within 1 year or on demand – – – – 


– over 5 years – – – – 


cash outflow – – – – 

– within 1 year or on demand – – – – 


– over 5 years – – – – 

Total 

– carrying amount 14,230 28,822 26,448 24,294 


cash flow 14,230 28,822 26,448 24,294 

– within 1 year or on demand 14,230 28,822 26,448 24,294 


– over 5 years – – – – 













83



84 

2008 












cash flow 108,002 92,900 32,297 57,172 35,132 



– over 5 years – – – – – 


– carrying amount – – – – – 


cash inflow – – – – – 

– within 1 year or on demand – – – – – 


– over 5 years – – – – – 


cash outflow – – – – – 



– over 5 years – – – – – 

Total 



cash flow 108,002 92,900 32,297 57,172 35,132 



– over 5 years – – – – –



2008 











cash flow 25,117 307,216 39,884 42,915 21,528 



– over 5 years – – – – – 


– carrying amount – 6,350,062 539,298 2,060,108 – 


cash inflow – (609,170) (147,434) (380,027) – 

– within 1 year or on demand – (153,196) (34,318) (84,643) – 


– over 5 years – (49,768) (14,804) (41,975) – 


cash outflow – 8,420,573 1,698,361 4,775,610 – 

– within 1 year or on demand – 1,753,116 320,415 850,918 – 

– over 1 year to 5 years – 5,861,104 1,182,137 3,324,044 – 

– over 5 years – 806,353 195,809 600,648 – 

Total 

– carrying amount 25,117 6,657,278 579,182 2,103,023 21,528 


cash flow 25,117 8,118,619 1,590,811 4,438,498 21,528 

– within 1 year or on demand 25,117 1,907,136 325,981 809,190 21,528 

– over 1 year to 5 years – 5,454,898 1,083,825 3,070,635 – 

– over 5 years – 756,585 181,005 558,673 – 

85



86 

2008 











cash flow 14,344 17,773 24,805 21,731 23,017 



– over 5 years – – – – – 


– carrying amount – – – – – 


cash inflow – – – – – 



– over 5 years – – – – – 


cash outflow – – – – – 



– over 5 years – – – – – 

Total 



cash flow 14,344 17,773 24,805 21,731 23,017 



– over 5 years – – – – – 












the Manager in accordance with the terms set out in the Explanatory Memorandum.









(d) Specific instruments 

(i) Options 

The Trust had the following purchased options at the reporting date: 

All amounts stated in USD 

2009 2008 

Underlying Fair value Fair value Fair value Fair value 

Sub-funds Type of contract Expiration investments (assets) (liabilities) (assets) (liabilities) 

HSBC Asian All Smiles Options 24 December 2008 Basket of stock – – 356,816 – 

Capital Guaranteed Fund (1) indices 

HSBC Sky High Capital Options 22 June 2009 Dow Jones Global – – – – 

Guaranteed Fund (2) Titans 50 Index 

HSBC Global Harvest Capital Options 24 August 2009 Basket of stocks – – 1,450 – 

Guaranteed Fund (3) 

HSBC 3 Powers Capital Options 11 February 2010 Basket of stocks 3,639,053 – 2,764,355 – 

Guaranteed Fund I 

HSBC Korean Power Capital Options 22 June 2010 Basket of stocks 80,609 – 108,811 – 


HSBC Korean Power Capital Options 23 March 2009 Basket of stocks – – 343,339 – 

Guaranteed Fund II (4) 

(1) HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. All units were 

redeemed and the net assets remaining at that date after paying all redemption proceeds to investors 

were payable to the Manager in accordance with the terms set out in the Explanatory Memorandum. 

(2) HSBC Sky High Capital Guaranteed Fund matured on 22 June 2009. All units were redeemed and the 

net assets remaining at that date after paying all redemption proceeds to investors were payable to 


(3) HSBC Global Harvest Capital Guaranteed Fund matured on 24 August 2009. All units were redeemed 

and the net assets remaining at that date after paying all redemption proceeds to investors were 

payable to the Manager in accordance with the terms set out in the Explanatory Memorandum. 

(4) HSBC Korean Power Capital Guaranteed Fund II matured on 23 March 2009. All units were redeemed 

and the net assets remaining at that date after paying all redemption proceeds to investors were 

payable to the Manager in accordance with the terms set out in the Explanatory Memorandum. 

87



88 

(ii) Swaps 

The Trust had the following swaps outstanding at the reporting date: 

31 October 2009 

Payments made Payments received 

by sub-fund per by sub-fund per 

Sub-funds Notional amount Counter-party Termination date annum annum Fair value 

HSBC Turbo Asia Capital 42,704,000 BNP Paribas 20 May 2014 3 month USD 15% p.a. in 1st year (1,706,399) 

Guaranteed Fund Societe Generale LIBOR 

minus 0.18% p.a. 0.2% p.a. plus 

potential return 

dependent on the 

performance of a 

basket of 40 stocks 

from 2nd year and 

onwards 

HSBC All Weather Dynamic 6,534,000 Societe Generale 30 June 2014 3 month USD 10% p.a. in 1st year (84,903) 

Capital Guaranteed Fund LIBOR 







onwards 

HSBC All Weather Action 20,019,000 Societe Generale 22 July 2014 3 month USD 10% p.a. in 1st year (488,865) 






basket of 30 stocks



31 October 2008 

Payments made Payments received 

by sub-fund per by sub-fund per 

Sub-funds Notional amount Counter-party Termination date annum annum Fair value 

HSBC Turbo Asia Capital 50,741,000 BNP Paribas 20 May 2014 3 month USD 15% p.a. in 1st year (6,350,062) 

Guaranteed Fund Societe Generale LIBOR 







onwards 

HSBC All Weather Dynamic 10,234,000 Societe Generale 30 June 2014 3 month USD 10% p.a. in 1st year (539,298) 








onwards 

HSBC All Weather Action 28,777,000 Societe Generale 22 July 2014 3 month USD 10% p.a. in 1st year (2,060,108) 







15 Accounting estimates and judgements 

The Trust’s investments are unquoted and are valued using valuation techniques, including use of recent arm’s length 

market transactions, reference to the current fair value of another instrument that is substantially the same, discounted 

cashflow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices 

obtained in actual market conditions. Fair value estimates are made at specific point in time, based on market conditions 

and information about the financial instrument. The derivative instruments are valued by the counterparties. The main 

factors affecting the valuation include the exercise price, the correlation between the relevant underlying assets of the 

derivatives, the performance of the underlying assets, the degree of volatility, the remaining maturity and prevailing 

interest rates. Although valuation of financial instruments is linked to the performance of underlying basket of stocks/ 

indices, the Trust does not hold/own the underlying assets. The Trust, in fact, is holding the financial instruments only. 

The certificates of deposits are valued by The Hongkong and Shanghai Banking Corporation Limited based on the 

prevailing market conditions and the level of interest rates for a maturity equal to the time to lapse between the pricing 

date and the maturity date. These estimates are subjective in nature and involve uncertainties and matters of judgement 

and therefore cannot be determined with precision. 

89



16 Possible impact of amendments, new standards and interpretations issued but not yet effective for the 

annual accounting year ended 31 October 2009 

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards 

and interpretations which are not yet effective for the accounting year ended 31 October 2009 and which have not 

been adopted in these financial statements. 

90 

Of these developments, the following relate to matters that may be relevant to the Trust’s operations and financial 

statements: 

Effective for 

accounting periods 

beginning on or after 

HKAS 1 (Revised) Presentation of financial statements: 1 January 2009 

Disclosure 

HKAS 1 and HKAS 32 Financial instruments: Presentation 1 January 2009 

(Amendments) – Puttable financial instruments 

and obligations arising on 

liquidation 

HKFRS 7 (Amendments) Financial instruments: Disclosures 1 January 2009 

– Improving disclosures about 

financial instruments 

HKFRS 8 Operating segments 1 January 2009 

The Trust is in the process of making an assessment of what the impact of these amendments, new standards and 

interpretations is expected to be in the period of initial application. So far it has concluded that while the adoption of 

them may result in new or amended disclosures, it is unlikely to have a significant impact on the Trust’s results of 

operations and financial position.

Independent auditor’s Report to the Unitholders of 

HSBC Investment Trust (“the Trust”) 

We have audited the accompanying financial statements of the sub-funds within the Trust (“the sub-funds”) on pages 10 to 

90 which comprise the statement of assets and liabilities as at 31 October 2009, and the income statement, statement of 

changes in net assets attributable to unitholders and cash flow statement for the year then ended, and a summary of 

significant accounting policies and other explanatory notes. 

Trustee’s and Manager’s responsibilities for the financial statements 

The Trustee and the Manager are responsible for the preparation and the true and fair presentation of these financial statements 

in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants 

and the relevant disclosure provisions of the Trust Deed, as amended, and the relevant disclosure requirements set out in 

Appendix E to the Hong Kong Code on Unit Trusts and Mutual Funds issued by the Hong Kong Securities and Futures 

Commission (“the Code”). This responsibility includes designing, implementing and maintaining internal control relevant to 

the preparation and the true and fair presentation of financial statements that are free from material misstatements, whether 

due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are 

reasonable in the circumstances. 

Auditor’s responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to 

you, as a body, and to report to you on matters set out above, and for no other purpose. We do not assume responsibility 

towards or accept liability to any other person for the contents of this report. 

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified 

Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to 

obtain reasonable assurance as to whether the financial statements are free of material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 

The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the 

financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant 

to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures that 

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s 

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 

accounting estimates made by the Trustee and the Manager, as well as evaluating the overall presentation of the financial 

statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 

In our opinion, the financial statements give a true and fair view of the financial position of the sub-funds as at 31 October 

2009, and of their financial performance and their cash flows for the year then ended in accordance with Hong Kong Financial 

Reporting Standards, and have been properly prepared in accordance with the relevant disclosure provisions of the Trust 

Deed dated 9 October 2000, as amended, and the relevant disclosure requirements of the Code. 

KPMG 

PO Box 493 

Century Yard, Cricket Square 

Grand Cayman KY1-1106 

Cayman Islands 

19 February 2010 

91

Portfolio Statement 



Unlisted (quoted) investments 

Certificates of deposit 

92 

% of net 

Maturity date Holdings Market value assets 

US$ 

HSBC Puttable Floating Rate 20 May 2014 42,704,000 42,533,184 100.33% 

Certificates of Deposit 

Total investments 42,533,184 100.33% 

Swaps 

Cancellable USD Quanto Swap 20 May 2014 19,383,000 (854,586) -2.01% 

on Share Basket Rainbow 

– BNP Paribas 

Cancellable USD Quanto Swap 20 May 2014 23,321,000 (851,813) -2.01% 

on Share Basket Rainbow 

– Societe Generale 

(1,706,399) -4.02% 

Other net assets 1,565,407 3.69% 

Net assets attributable to unitholders 42,392,192 100.00% 

Total cost of investments 39,352,757






% of net 


US$ 

HSBC Puttable Floating Rate 30 June 2014 6,534,000 6,505,904 98.34% 



Swaps 

Cancellable USD Quanto Swap 30 June 2014 6,534,000 (84,903) -1.29% 

on Share Basket 

Other net assets 195,053 2.95% 


Total cost of investments 6,184,431 





% of net 


US$ 

HSBC Puttable Floating Rate 22 July 2014 20,019,000 19,926,913 99.40% 



Swaps 

Callable USD Quanto Swap 22 July 2014 20,019,000 (488,865) -2.44% 

on Share Basket 




93






94 

% of net 


US$ 

HSBC 2.75% Certificates of Deposit 11 February 2010 31,898,000 31,885,241 89.43% 

Options 

Floored Semi-Annually 11 February 2010 9,171,000 3,639,053 10.20% 

Averaged European 

Call Option on Basket of 

21 India-China-Thai 

Related Stocks 









% of net 


US$ 

HSBC 2.5% Certificates of Deposit 22 June 2010 6,771,000 6,759,489 98.07% 

Options 

USD Floor on Basket of 22 June 2010 1,879,000 80,609 1.17% 

7 Korea STK 




Total cost of investments 6,364,240

Statement of Movements in Portfolio Holdings 


HSBC Turbo Asia HSBC All Weather Dynamic 

Capital Guaranteed Fund Capital Guaranteed Fund 

% of net % of net % of net % of net 

assets as at assets as at assets as at assets as at 

31 October 31 October 31 October 31 October 

2009 2008 2009 2008 

Unlisted (quoted) investments 100.33% 109.16% 98.34% 101.58% 

Total investments 100.33% 109.16% 98.34% 101.58% 

Swaps (4.02%) (13.98%) (1.29%) (5.48%) 

Other net assets 3.69% 4.82% 2.95% 3.90% 

Net assets attributable to unitholders 100.00% 100.00% 100.00% 100.00% 

HSBC All Weather Action HSBC 3 Powers 

Capital Guaranteed Fund Capital Guaranteed Fund I 

% of net % of net % of net % of net 

assets as at assets as at assets as at assets as at 


2009 2008 2009 2008 

Unlisted (quoted) investments 99.40% 103.70% 99.63% 97.38% 

Total investments 99.40% 103.70% 99.63% 97.38% 

Swaps (2.44%) (7.60%) – – 

Other net assets 3.04% 3.90% 0.37% 2.62% 

Net assets attributable to unitholders 100.00% 100.00% 100.00% 100.00% 

HSBC Korean Power 

Capital Guaranteed Fund I 

% of net % of net 

assets as at assets as at 

31 October 31 October 

2009 2008 

Unlisted (quoted) investments 99.24% 97.72% 

Total investments 99.24% 97.72% 

Other net assets 0.76% 2.28% 

Net assets attributable to unitholders 100.00% 100.00% 

95

Performance Record 

HSBC Investment Trust 

96 

Realisation Realisation Realisation Realisation Realisation Realisation 

value value value value value value 

per unit per unit per unit per unit per unit per unit 

as at as at as at as at as at as at 

31 October 31 October 31 October 31 October 31 October 31 October 

2009 2008 2007 2006 2005 2004 

US$ US$ US$ US$ US$ US$ 

HSBC Asian All Smiles 

Capital Guaranteed Fund – 10.16 10.05 9.46 9.20 9.41 

HSBC Turbo Asia Capital 

Guaranteed Fund 9.67 8.64 9.29 8.27 7.35 8.92 

HSBC All Weather Dynamic 

Capital Guaranteed Fund 9.86 9.30 8.56 8.34 7.98 9.41 

HSBC All Weather Action 

Capital Guaranteed Fund 9.75 9.10 8.62 8.26 8.11 9.56 

HSBC Sky High Capital 

Guaranteed Fund – 9.85 9.67 9.33 9.16 9.46 

HSBC Global Harvest 

Capital Guaranteed Fund – 10.10 9.80 9.46 9.26 N/A 

HSBC 3 Powers Capital 

Guaranteed Fund I 11.15 10.67 12.41 10.14 9.39 N/A 

HSBC Korean Power Capital 

Guaranteed Fund I 10.11 9.94 9.85 9.21 N/A N/A 


Guaranteed Fund II – 11.23 11.03 9.74 N/A N/A 

HSBC Asian All Smiles Capital Guaranteed Fund matured on 24 December 2008. HSBC Sky High Capital Guaranteed Fund 

matured on 22 June 2009. HSBC Global Harvest Capital Guaranteed Fund matured on 24 August 2009. HSBC Korean Power 

Capital Guaranteed Fund II matured on 23 March 2009. All units were redeemed and the net assets remaining at those dates 

after paying all redemption proceeds to investors were paid to the Manager in accordance with the terms set out in the 

Explanatory Memorandum.


Net assets 

Net assets Net assets Net assets Net assets Net assets Net assets 

as at as at as at as at as at as at 

31 October 31 October 31 October 31 October 31 October 31 October 

2009 2008 2007 2006 2005 2004 



Capital Guaranteed Fund – 167,580,199 206,349,732 239,398,124 252,470,408 266,772,036 


Guaranteed Fund 42,392,192 45,433,603 67,020,130 101,727,065 100,451,671 125,019,254 


Capital Guaranteed Fund 6,616,054 9,840,390 13,993,462 22,612,558 24,187,855 28,849,479 


Capital Guaranteed Fund 20,047,061 27,100,834 34,854,949 45,799,177 50,023,894 59,719,960 


Guaranteed Fund – 85,646,601 105,051,549 135,009,226 139,050,558 146,693,510 


Capital Guaranteed Fund – 54,455,855 63,296,923 77,851,469 79,801,122 N/A 


Guaranteed Fund I 35,655,038 41,544,747 56,487,683 74,181,941 76,373,796 N/A 


Guaranteed Fund I 6,892,752 10,464,923 14,200,131 18,261,886 N/A N/A 


Guaranteed Fund II – 2,916,698 4,471,222 6,260,013 N/A N/A 




after paying all redemption proceeds to investors were paid to the Manager in accordance with the terms set out in the 

Explanatory Memorandum. 

97


Realisation value per unit 

98 

Year/period ended Year/period ended Year/period ended Year/period ended 


2009 2008 2007 2006 

Highest Lowest Highest Lowest Highest Lowest Highest Lowest 

price price price price price price price price 

US$ US$ US$ US$ US$ US$ US$ US$ 


Capital Guaranteed Fund 10.27 10.00 10.28 10.04 10.05 9.47 9.46 9.15 


Guaranteed Fund 9.67 8.76 9.30 8.64 9.30 8.30 8.32 7.46 






Guaranteed Fund 10.02 9.86 10.10 9.67 9.85 9.33 9.46 9.13 




Guaranteed Fund I 11.21 10.66 12.23 10.67 12.41 10.15 10.14 9.35 


Capital Guaranteed 

Fund I 10.36 9.96 10.41 9.87 11.03 9.76 9.48 9.13 



Fund II 11.50 11.26 11.41 10.99 11.03 9.22 10.01 9.24



Year/period ended Year/period ended Year/period ended 

31 October 31 October 31 October 

2005 2004 2003 

Highest Lowest Highest Lowest Highest Lowest 

price price price price price price 



Capital Guaranteed Fund 9.34 9.10 10.00 8.92 N/A N/A 


Guaranteed Fund 8.94 7.29 10.00 8.60 N/A N/A 






Guaranteed Fund 9.49 9.15 10.00 9.38 N/A N/A 


Capital Guaranteed Fund 9.40 9.13 N/A N/A N/A N/A 


Guaranteed Fund I 9.59 9.39 N/A N/A N/A N/A 



Fund I N/A N/A N/A N/A N/A N/A 



Fund II N/A N/A N/A N/A N/A N/A 




were paid to the Manager in accordance with the terms set out in the Explanatory Memorandum. 

99

Trustee’s Report to the Unitholders of 

HSBC Investment Trust (“the Trust”) 

We hereby confirm that, in our opinion, the Manager of the sub-funds within the Trust (“the sub-funds”) has, in all material 

respects, managed the sub-funds in accordance with the provisions of the Trust Deed dated 9 October 2000, as amended, 

for the year ended 31 October 2009. 

) 

) 



) 

) 

100



Period from 1 November 2008 to 16 November 2009 (date of maturity) 


Period ended Year ended 

16 November 31 October 

Note 2009 2008 

Assets 

Investments 9(e), 4 – 48,987,553 

Interest receivable – 794,136 

Receivables on sale of investments 5,714,675 – 

Prepayment of management fees 5, 9(b), (f) – 469,390 

Prepayment of trustee’s fees 5, 9(a), (f) – 18,705 

Cash and cash equivalents 8, 9(c) 33,938,497 126,024 

39,653,172 50,395,808 

Liabilities 

Redemption payable 39,542,938 – 

Accruals and other payables 9(a), (b), (f) 110,234 17,240 

39,653,172 17,240 

Net assets attributable to unitholders – 50,378,568 

Representing: 

Net assets – 50,378,568 

Number of units in issue 6 – 4,488,244 

Net asset value per unit 5 – 11.22 

The notes on pages 106 to 119 form part of these financial statements. 

101





102 



Note 2009 2008 

Realisation value per unit 5 – 11.12 


) 

) 



) 

) 

) 

) 


Edmund R STOKES ) HSBC Investment Funds (Hong Kong) Limited 

) 

) 






Period from 

1 November 

2008 to 

16 November Year ended 

2009 (date 31 October 

Note of maturity) 2008 

Income 

Interest on certificates of deposit 9(f) 1,491,244 1,917,572 

Interest on bank deposits 9(f) 155 6,420 

Gains on investments 3 6,383,094 5,089,267 

Losses on investments 3 (4,617,443) (19,781,029) 

Net investment income/(loss) 3,257,050 (12,767,770) 

Expenses 

Management fees and registrar’s fees 9(b), (f) 465,329 797,789 

Trustee’s fees 9(a), (f) 18,705 31,425 

Auditor’s remuneration 19,420 6,483 

Fee of assets remaining at maturity 9(b), (f) 88,929 – 

Safe custody fees and bank charges 5,024 6,728 

Administration expenses 7,322 4,425 

Miscellaneous 967 1,052 

Securities expenses 600 600 

Operating expenses 606,296 848,502 


to unitholders before finance cost 2,650,754 (13,616,272) 

Distributions 7 (1,079,648) (1,404,840) 

Change in net assets attributable to 

unitholders from operations 1,571,106 (15,021,112) 


103

Statement of Changes in Net Assets Attributable 




104 

Period from 

1 November 

2008 to 



of maturity) 2008 

Subscriptions received from units issued – – 

Less: Redemptions (51,949,674) (20,231,571) 

(51,949,674) (20,231,571) 

Change in net assets attributable to unitholders from operations 1,571,106 (15,021,112) 

(50,378,568) (35,252,683) 

Net assets brought forward 50,378,568 85,631,251 

Net assets carried forward – 50,378,568






Period from 

1 November 

2008 to 



Note of maturity) 2008 

Interest received on bank deposits 254 6,847 

Interest received on certificates of deposit 1,113,355 1,602,473 

Management fees paid (6,668) (4,192) 

Other operating expenses paid (18,539) (20,112) 

Net cash from operating activities 1,088,402 1,585,016 


Proceeds from maturity and sale of 

certificates of deposit and options 46,210,455 20,001,588 

Net cash from investing activities 46,210,455 20,001,588 


Payments on redemption of units (12,406,736) (20,231,571) 

Distribution paid (1,079,648) (1,404,840) 

Net cash used in financing activities (13,486,384) (21,636,411) 

Net increase/(decrease) in cash and cash equivalents 33,812,473 (49,807) 

Cash and cash equivalents at the beginning of the period/year 126,024 175,831 

Cash and cash equivalents at the end of the period/year 8 33,938,497 126,024 


105





1 The Fund 

HSBC China Fortune Capital Guaranteed Fund I (“the 

Fund”) is a sub-fund within HSBC Investment Trust 

(“the Trust”) which is an open-ended umbrella unit 

trust established under the laws of the Cayman 

Islands pursuant to a Trust Deed dated 9 October 

2000 and supplemental trust deeds dated 22 June 

2001, 9 January 2002, 9 April 2003, 25 August 2003, 

10 March 2004 and 19 April 2004. The Trust registered 

under the Mutual Funds Law of the Cayman Islands 

on 19 October 2000. The purpose of the Trust was to 

provide a certain level of guarantee on the value of 

funds invested. 

106 

The Fund was launched on 15 February 2005 and 

matured on 16 November 2009. As explained in note 

2(b), the Fund was terminated on 16 November 2009 

and all the remaining units were redeemed by the 

unitholders. 

The Fund is authorised by the Hong Kong Securities 

and Futures Commission under section 104 of the 

Hong Kong Securities and Futures Ordinance. It is 

governed by the Hong Kong Code on Unit Trusts and 

Mutual Funds. 

2 Significant accounting policies 

(a) Statement of compliance 

The financial statements have been prepared 

in accordance with all applicable Hong Kong 

Financial Reporting Standards (“HKFRSs”), 

which collective term includes all applicable 

individual Hong Kong Financial Reporting 

Standards, Hong Kong Accounting Standards 

(“HKASs”) and Interpretations issued by the 

Hong Kong Institute of Certified Public 

Accountants (“HKICPA”), accounting principles 

generally accepted in Hong Kong, the relevant 

provision of the Trust Deed and the relevant 

disclosure provisions of the Hong Kong Code 

on Unit Trusts and Mutual Funds issued by the 

Hong Kong Securities and Futures Commission. 

A summary of the significant accounting 

policies adopted by the Fund is set out below. 

The HKICPA has issued a number of new 

interpretations and an amendment to HKFRSs 

that are first effective for the current accounting 

period of the Fund. However, none of these 

developments are relevant to the Fund’s 

operations. 

The Fund has not applied any new standard or 

interpretation that is not yet effective for the 

current accounting period (see note 15). 

(b) Basis of preparation of the financial 

statements 

The functional and presentation currency of the 

Fund is the United States dollar reflecting the 

fact that the participating redeemable units of 

the Fund are issued and redeemed in United 

States dollars. 

The financial statements are prepared on a fair 

value basis for financial assets and liabilities at 

fair value through profit or loss and derivative 

financial instruments. Other financial assets and 

financial liabilities are stated at amortised cost 

or redemption amount. 

The preparation of financial statements in 

conformity with HKFRSs requires management 

to make judgements, estimates and 

assumptions that affect the application of 

policies and reported amounts of assets, 

liabilities, income and expenses. The estimates 

and associated assumptions are based on 

historical experience and various other factors 

that are believed to be reasonable under the 

circumstances, the results of which form the 

basis of making the judgements about carrying 

values of assets and liabilities that are not 

readily apparent from other sources. Actual 

results may differ from these estimates. 

The estimates and underlying assumptions are 

reviewed on an ongoing basis. Revisions to 

accounting estimates are recognised in the 

period in which the estimate is revised if the 

revision affects only that period, or in the period 

of the revision and future periods if the revision 

affects both current and future periods.





The Fund matured on 16 November 2009 and 

the remaining units of the Fund were redeemed 

by the unitholders. Accordingly, the financial 

statements of the Fund have been prepared on 

a break-up basis as the Fund is no longer a going 

concern. Under a break-up basis, adjustments 

are required to be made to reduce the value of 

assets to their recoverable amount, and to 

provide for any further liabilities and expenses 

to be incurred by the Fund in connection with 

the termination. 

The Trust is an umbrella fund which maintains 

a separate account for each sub-fund to which 

the proceeds of issue and the income arising 

from the investment of those proceeds are 

credited and against which the expenses are 

allocated accordingly. Upon redemption before 

maturity, unitholders are entitled only to their 

proportion of the net assets held in the account 

relating to the Fund in which the units are 

designated. 

(c) Revenue recognition 

Provided it is probable that the economic 

benefits will flow to the Fund and the revenue 

and costs if applicable, can be measured 

reliably, revenue is recognised in the income 

statement as follows: 

(i) Interest income 

Bank interest income and interest on 

certificates of deposit is recognised as it 

accrues, using the original effective 

interest rate method. 

(ii) Other income 

All other income is accounted for on an 

accruals basis. 

(d) Fees and expenses 

All expenses are recognised in the income 

statement on an accruals basis. 

(e) Financial instruments 

(i) Classification 

All fixed income securities held as 

investments and derivatives are 

designated into the fair value through 

profit or loss category upon initial 

recognition. 

Derivatives in a net receivable position 

(positive fair value), as well as options 

purchased, are reported as financial 

assets. All derivatives in a net payable 

position (negative fair value), as well as 

options written, are reported as financial 

liabilities. 

Financial assets that are classified as 

receivables include interest receivable, 

receivables on sale of investments and 

prepayments. 

Financial liabilities that are not at fair value 

through profit or loss include accruals and 

other payables, and financial liabilities 

arising on redeemable units. 

(ii) Recognition 

The Fund recognises financial assets and 

financial liabilities on the date it becomes 

a party to the contractual provisions of 

the instruments. 

A regular way purchase of financial assets 

or financial liabilities is recognised using 

trade date accounting. From this date any 

gains and losses arising from changes in 

fair value of the financial assets or 

financial liabilities are recorded. 

Financial liabilities are not recognised 

unless one of the parties has performed 

their obligations under the contract or the 

contract is a derivative contract not 

exempted from the scope of HKAS 39. 

107





108 

(iii) Measurement 

Financial instruments are measured 

initially at fair value (transaction price). 

Transaction costs on financial assets and 

financial liabilities held at fair value 

through profit or loss are expensed 

immediately, while on other financial 

instruments they are amortised. 

Subsequent to initial recognition, all 

instruments classified at fair value 

through profit or loss are measured at fair 

value with changes in their fair value 

recognised in the income statement. 

Financial assets classified as receivables 

are carried at amortised cost using the 

effective interest rate method, less 

impairment losses, if any. 

Financial liabilities other than those at fair 

value through profit or loss are measured 

at amortised cost using the effective 

interest rate method. Financial liabilities 

arising from the units issued by the Fund 

are carried at the redemption amount 

representing the investors’ right to a 

residual interest in the Fund’s assets. 

Derivative financial instruments are 

recognised initially at fair value. At each 

statement of assets and liabilities date 

the fair value is remeasured. The gain or 

loss on remeasurement to fair value is 

charged immediately to profit or loss, 

except where the derivatives qualify for 

cash flow hedge accounting or hedge the 

net investment in a foreign operation, in 

which case recognition of any resultant 

gain or loss depends on the nature of the 

item being hedged. 

(iv) Fair value measurement principles 

The fair value of financial instruments is 

based on their quoted market price at the 

date of the statement of assets and 

liabilities without any deduction for 

estimated future selling costs. Financial 

assets are priced at current bid prices, 

while financial liabilities are priced at 

current asking prices. 

If a quoted market price is not available 

on a recognised stock exchange or from 

a broker/dealer for non-exchange-traded 

financial instruments, the fair value of the 

instrument is estimated using valuation 

techniques, including use of recent arm’s 

length market transactions, reference to 

the current fair value of another 

instrument that is substantially the same, 

discounted cash flow techniques, option 

pricing models or any other valuation 

technique that provides a reliable 

estimate of prices obtained in actual 

market transactions. 

Where pricing models are used, inputs 

are based on market data at the date of 

the statement of assets and liabilities. 

(v) Impairment 

Financial assets that are stated at cost or 

amortised cost are reviewed at each date 

of the statement of assets and liabilities 

to determine whether there is objective 

evidence of impairment. If any such 

indication exists, an impairment loss is 

recognised in the income statement as 

the difference between the asset’s 

carrying amount and the present value of 

estimated future cash flows discounted 

at the financial asset’s original effective 

interest rate. 

If in a subsequent period the amount of 

an impairment loss recognised on a 

financial asset carried at amortised cost 

decreases and the decrease can be linked 

objectively to an event occurring after the 

write-down, the write-down is reversed 

through the income statement if any. 

(vi) Derecognition 

The Fund derecognises a financial asset 

when the contractual rights to the cash 

flows from the financial assets expire or 

it transfers the financial asset and the 

transfer qualifies for derecognition in 

accordance with HKAS 39.





The Fund uses the weighted average 

method to determine realised gains and 

losses on derecognition. 

A financial liability is derecognised when 

the obligation specified in the contract is 

discharged, cancelled or expires. 

(vii) Offsetting 

Financial assets and liabilities are offset 

and the net amount is reported in the 

statement of assets and liabilities when 

the Fund has a legally enforceable right 

to set off the recognised amounts and the 

transactions are intended to be settled on 

a net basis or simultaneously, e.g. 

through a market clearing mechanism. 

(viii) Specific instruments 

Cash and cash equivalents 

Cash comprises current deposits with 

banks. Cash equivalents are short-term 

highly liquid investments that are readily 

convertible to known amounts of cash, 

are subject to an insignificant risk of 

changes in value, and are held for the 

purpose of meeting short-term cash 

commitments rather than for investment 

or other purposes. 

(f) Foreign currency translation 

Foreign currency transactions during the period 

are translated into United States dollars at the 

exchange rates ruling at the transaction dates. 

Monetary assets and liabilities denominated in 

foreign currencies that are stated at fair value 

are translated into United States dollars at the 

foreign exchange rates ruling at the date of the 

statement of assets and liabilities. Foreign 

exchange differences arising on translation and 

realised gains and losses on disposals or 

settlements of monetary assets and liabilities 

are recognised in the income statement. Nonmonetary 

assets and liabilities denominated in 

foreign currencies that are measured at fair 

value are translated to United States dollars at 

the foreign currency exchange rates ruling at 

the dates that the values were determined. 

Foreign currency exchange differences relating 

to investments at fair value through profit or 

loss are included in gains and losses on 

investments. All other foreign currency 

exchange differences relating to monetary 

items are presented separately in the income 

statement, if any. 

(g) Related parties 

For the purposes of these financial statements, 

a party is considered to be related to the Fund 

if: 

(i) the party has the ability, directly or 

indirectly through one or more 

intermediaries, to control the Fund or 

exercise significant influence over the 

Fund in making financial and operating 

policy decisions, or has joint control over 

the Fund; 

(ii) the Fund and the party are subject to 

common control; 

(iii) the party is a subsidiary, an associate of 

the Fund or a joint venture in which the 

Trust is a venturer; 

(iv) the party is a member of key 

management personnel of the Fund or a 

close family member of such an 

individual, or is an entity under the 

control, joint control or significant 

influence of such individuals; or 

(v) the party is a close family member of a 

party referred to in (i) or is an entity under 

the control, joint control or significant 

influence of such individuals. 

(h) Subscriptions and redemptions 

The Fund recognises unitholders’ subscriptions 

and allots units upon receipt of a valid 

subscription application and derecognises them 

upon receipt of a valid redemption application. 

109





110 

(i) Units issued to investors 

All redeemable units issued by the Fund provide 

the respective unitholders with the right to 

require redemption for cash at the value 

proportionate to the unitholders’ share in the 

Fund’s net assets at the redemption date. In 

accordance with HKAS 32 such instruments 

give rise to a financial liability for the present 

value of the redemption amount. 

3 Gains and losses on investments 



2009 2008 

Realised gains 6,383,094 3,704,338 

Unrealised gains – 1,384,929 

Total gains on investments 6,383,094 5,089,267 

Realised losses (4,617,443) (32,599) 

Unrealised losses – (19,748,430) 

Total losses on investments (4,617,443) (19,781,029) 

4 Investments 


call options 

1,765,651 (14,691,762) 



2009 2008 

Cost – 894,528 

Unrealised appreciation 

in value – 4,107,685 

– 5,002,213 





2009 2008 

Cost – 41,639,844 

Amortised discount – 1,835,738 

Unrealised appreciation 

in value – 509,758 

– 43,985,340 

Investments, at market value – 48,987,553 

5 Realisation value per unit 

In accordance with the Explanatory Memorandum, 

the realisation value per unit in the Fund prior to the 

maturity date equals the unitholders’ share of the net 

assets of the Fund after deducting their share of the 

prepaid management fees and trustee’s fees in order 

to ensure that any unitholder redeeming before 

maturity bears the management fees and trustee’s 

fees for the life of the Fund as specified in the 

Explanatory Memorandum. Accordingly the 

realisation value of the units in the Fund does not 

equal its share of the net assets of the Fund shown 

in the financial statements at 16 November 2009. 

The amount of prepaid management fees and Fund’s 

fees which is deducted for the purposes of the above 

calculation in order to arrive at the realisation value 

of the units at period end is summarised below: 



2009 2008 

Net assets as stated – 50,378,568 


trustee’s fees – (488,095) 

Net assets for calculation 

of realisation value – 49,890,473





6 Units issued and redeemed 



2009 2008 


brought forward 4,488,244 6,151,152 


period/year (4,488,244) (1,662,908) 


carried forward – 4,488,244 

7 Distributions 



2009 2008 

Distributions declared and 

paid during the period/year 

(2009: $0.25 per unit on 

4,318,593 units, 

2008: $0.25 per unit on 

5,619,359 units) 1,079,648 1,404,840 

8 Cash and cash equivalents 


2009 2008 

Cash at bank 33,938,497 36,024 

Deposits with bank – 90,000 

33,938,497 126,024 

9 Related party transactions 

The following is a summary of transactions with 

related parties during the period. All such transactions 

were entered into in the ordinary course of business 

and on normal commercial terms. 

(a) Trustee’s fees 

The trustee of the Fund is HSBC Trustee 

(Cayman) Limited (“the Trustee”) which is 

entitled to a trustee’s fee determined at the 

rates stated below, on the aggregate amount 

of the subscription proceeds received during 

the offer period. The trustee’s fees for the term 

of the Fund are paid in advance following the 

close of the offer period of the Fund. 

Unitholders redeeming out of the Fund prior to 

the maturity date bear the prepaid trustee’s fees 

for the life of the Fund as explained in note 5. 

Valuation fees for the Fund have been waived. 

The rate for trustee’s fees charged to the Fund 

is as follows: 

Minimum 


HSBC China Fortune 0.05% on first $40 million 20,000 

Capital Guaranteed 0.04% on proceeds in excess of 

Fund I $40 million but not exceeding 

$200 million 

0.03% on proceeds in excess of 

$200 million but not exceeding 

$400 million 

0.02% on proceeds in excess of 

$400 million 

Information relating to these transactions is set 

out in note 9(f). 

(b) Management fees and registrar’s fees 

The Manager of the Fund is HSBC Investment 

Funds (Hong Kong) Limited (“the Manager”) 

which is entitled to a management fee of 1% 

per annum on the aggregate amount of 

subscription proceeds received during the offer 

period. The management fees for the term of 

the Fund are paid in advance following the close 

of the offer period of the Fund. 

Unitholders redeeming out of the Fund prior to 

the maturity date bear the prepaid management 

fees for the Fund as explained in note 5. 

Rate 

per annum 

HSBC China Fortune Capital Guaranteed Fund I 1% 

111





112 

In addition, if there are any assets remaining in 

the Fund at the maturity date of the Fund after 

investors have received the returns and capital 

according to the terms set out in the 

Explanatory Memorandum, the Manager is 

entitled to receive a fee equal to such assets. 

Information relating to these transactions is set 

out in note 9(f). 

(c) Banking services 

The Fund utilises the banking services of certain 

branches or subsidiaries of the HSBC Group, 

which are fellow subsidiaries of the Trustee and 

the Manager, in the ordinary course of their 

banking and securities custodian business. 

Information relating to the interest income 

earned from deposit placements during the 

period are set out in note 9(f). 

(d) Guarantee services 

The Hongkong and Shanghai Banking 

Corporation Limited (“the Guarantor”), which 

is an intermediate holding company of the 

Trustee and the Manager acts as the guarantor 

to the Fund. The details of the guarantee terms 

are set out in note 12. 

(e) Investment portfolio 

The Fund invested in certificates of deposit 

issued by The Hongkong and Shanghai Banking 

Corporation Limited during the period. The 

portfolio holdings of such investments at 16 

November 2009 are as follows: 



2009 2008 

Portfolio holdings – 44,883,000 

Market value – 43,985,340 

% of net assets – 87.31% 

(f) Information on transactions with related 

parties is set out below: 



2009 2008 


Total trustee’s fees 

earned by the trustee 

during the period/year 18,705 31,425 

Trustee’s fees prepaid 

to the trustee at the 

period/year end – 18,705 

Trustee’s fees payable 

to the trustee at the 

period/year end – – 



Total management fees 

and registrar’s fees 

earned by the manager 

during the period/year 465,329 797,789 

Management fees and 

registrar’s fees prepaid 

to the manager at the 

period/year end – 469,390 

Management fees and 

registrar’s fees payable 

to the manager at the 

period/year end 895 11,624 


Interest income earned 

during the period/year 155 3,581 


Interest income earned 

from certificates of 

deposit during the 

period/year 1,491,244 1,917,572







2009 2008 


at maturity 




period/year 88,929 – 


at maturity payable to 

the manager at the 

period/year end 88,929 – 

(vi) Other payable to the 

manager 

Other payable to the 

manager at the 

period/year end 3,476 – 

10 Taxation 

No provision for Hong Kong profits tax has been made 

in the financial statements as the Fund is exempt 

from taxation under section 26A(1A) of the Hong 

Kong Inland Revenue Ordinance. 

There are no taxes on income or gains in the Cayman 

Islands and the Trust has received an undertaking 

from the Governor in Cabinet of the Cayman Islands 

exempting it from all local income, profits and capital 

taxes for a period of 50 years until 2050. Accordingly, 

no provision for Cayman Islands income taxes is 

included in these financial statements. 

11 Soft commission arrangements 

No soft commission arrangements were entered into 

with brokers during the period (2008: $Nil). 

12 Guarantee 

The Hongkong and Shanghai Banking Corporation 

Limited (“the Guarantor”) undertakes to provide 

irrevocable guarantees to the unitholders of the Fund 

on the terms and conditions set out in the respective 

deeds of guarantee. 

The Guarantor guarantees that each unit held at the 

maturity date of the Fund will be redeemed at a 

minimum of $10. No guarantee fee was charged by 

the Guarantor on the Fund during the period ended 

16 November 2009 (2008: $Nil). 

13 Financial instruments and associated risks 

The Fund invested the majority of its assets in coupon 

bearing or puttable floating rate US dollar negotiable 

certificates of deposit or similar debt security issued 

by The Hongkong and Shanghai Banking Corporation 

Limited. The Fund’s investment portfolio also 

comprised options. The Fund intended to hold the 

investment portfolio for definite periods of time as 

specified in the Explanatory Memorandum of the 

Fund. 

The most important types of financial risks to which 

the Fund is exposed to are market risk, liquidity risk 

and credit risk. 

The nature and extent of the financial instruments 

outstanding at the reporting date and the risk 

management policies employed by the Fund are 

discussed below. 

(a) Market risk 

Market risk embodies the potential for both 

losses and gains and includes currency risk, 

interest rate risk and price risk. 

The Fund’s strategy on the management of 

investment risks is driven by the Fund’s 

investment objectives. The Fund’s market risk 

is managed on a regular basis by the Manager 

in accordance with policies and procedures in 

place. As the financial market remains very 

uncertain, the amount that will eventually be 

received on maturity or on disposal of 

investments held by the Fund may differ 

significantly from the valuation of these 

investments as at the period/year end. The 

Manager and the Trustee will assess the fair 

market values of these investments on each 

dealing day (and the maturity date) based on 

the latest market conditions and in a prudent 

manner in accordance with HKFRSs. 

113





114 

Details of the nature of the Fund’s investment 

portfolio at the date of statement of assets and 

liabilities are disclosed in note 4. Details of the 

nature and terms of derivative financial 

instruments outstanding at the date of 

statement of assets and liabilities are set out 

in note 13(d). 

Currency risk 

The Fund did not hold any significant assets 

denominated in currencies other than United 

States dollars. The Fund therefore is not 

exposed to significant currency risks. Changes 

in foreign exchange rates will not significantly 

change the net assets attributable to 

unitholders of the Fund. 

Interest rate risk 

The majority of the Fund’s financial assets are 

certificates of deposits issued by The Hongkong 

and Shanghai Banking Corporation Limited, 

which are interest-bearing financial instrument. 

Any excess cash and cash equivalents of the 

Fund are invested in short-term deposits placed 

with subsidiaries of the HSBC Group. 

As at 16 November 2009, the Fund did not hold 

any certificates of deposits and deposits with 

bank. 

The Fund’s interest rate risk is managed on a 

regular basis by the Manager in accordance 

with policies and procedures in place. Interest 

rate risk is mitigated by aligning the maturity 

profile of the certificates of deposits to that of 

the maturity profile of the Fund. 

The following table details the Fund’s exposure 

to interest rate risks. It includes the Fund’s debt 

instruments and deposits with banks, 

categorised by the earlier of contractual 

repricing or maturity date measured by the 

carrying value of the debt instruments: 

Certificate of deposits 


2009 2008 

– 1 year or less – – 

– over 1 year to 5 years – 43,985,340 

Deposits with banks 

– 1 year or less – 90,000 

– over 1 year to 5 years – – 

Interest rate risk sensitivity analysis 

– 44,075,340 

If the market interest rate at the date of 

statement of assets and liabilities had changed 

by 100 basis points, with all other variables held 

constant, this would have affected the net 

assets attributable to unitholders of the Fund 

by: 


2009 2008 

Changes in net assets 

attributable to unitholders 

if the market interest 

rate had increased by 

100 basis points at the 

date of statement 

of assets and liabilities – (458,235) 

Changes in net asset 


if the market interest rate 

had decreased by 

100 basis points at the 

date of statement of 

assets and liabilities – 458,235 

Price risk 

Price risk is the risk that the value of a financial 

instrument will fluctuate as a result of changes 

in market prices, whether caused by factors 

specific to an individual investment or its issuer,





or factors affecting all instruments traded in the 

market. The Fund is exposed to price risk as 

changes in market prices of its investments will 

affect the valuation of the Fund. The financial 

instruments held by the Fund will be valued by 

the relevant counterparties on a mark-to-market 

basis for each dealing day. The main factors 

affecting the value of the instruments include 

but are not limited to the terms of the 

instruments, the performance of the linked 

investment, the degree of volatility, the 

remaining maturity and the prevailing interest 

rates. The investment adviser or investment 

sub-adviser of the Fund will act independently 

from the issuer of the instruments to review 

the value of such instruments periodically. 

Price risk is managed by the Fund’s Manager 

in accordance with policies and procedures in 

place. 

The following table details the breakdown of 

the investment assets and liabilities held by the 

Fund: 



2009 2008 

Certificates of deposits – 43,985,340 

Options – 5,002,213 

Total investment assets – 48,987,553 

Price risk sensitivity analysis 

If the price of investments at the date of 

statement of assets and liabilities had changed 

by 5%, with all other variables held constant, 

would have affected the net assets attributable 

to unitholders of the Fund by: 


2009 2008 



if the underlying index 

or basket of stocks had 

increased by 5% at the 

date of statement of assets 

and liabilities – 2,449,378 



if the underlying index 

or basket of stocks had 

decreased by 

5% at the date of 

statement of assets 

and liabilities – (2,449,378) 

(b) Credit risk 

Credit risk is the risk that a counterparty to a 

financial instrument will fail to discharge an 

obligation to pay its dues on time. The Fund is 

exposed to the credit risk of the counterparties 

and guarantor. The Fund manages the risk by 

appointing reputable and well-established 

issuers and guarantors. 

Credit risk arising from derivatives transactions 

with counterparties include the risk relates to 

transactions awaiting settlement and the risk 

that the issuer of the derivative instruments 

being unable or unwilling to make timely 

principal and/or interest payments. This credit 

risk is managed by monitoring the credit quality 

of the derivative instruments held by the Fund 

and the financial position of the derivative 

instrument counterparties. 

Credit risk arising on debt instruments is 

managed by reviewing and monitoring of the 

credit quality of debt securities and investing 

primarily in rated securities or securities issued 

by rated counterparties which meet the 

minimum credit ratings set by the Explanatory 

Memorandum. 

115





116 

Credit risk arising from transactions with 

brokers relates to transactions awaiting 

settlement. Risk relating to unsettled 

transactions is considered low due to the short 

settlement period involved, the high credit 

quality of the brokers used and the performance 

of the brokers. For the period/year ended 16 

November 2009 and 31 October 2008, there 

was no default by the brokers. 

The carrying amounts of financial assets best 

represent the maximum credit risk exposure 

at the reporting date. This relates also to 

financial assets carried at amortised cost, as 

they have a short-term to maturity. 

At the reporting date, the Fund’s financial assets 

exposed to credit risk amounted to the 

following: 


2009 2008 

Investments in certificates 

of deposits – 43,985,340 

Investments in options – 5,002,213 

Interest receivable – 794,136 

Cash and cash equivalents 33,938,497 126,024 

Total 33,938,497 49,907,713 

The issuer of the certificates of deposits held 

by the Fund is The Hongkong and Shanghai 

Banking Corporation Limited. 


Corporation Limited undertakes to provide 

irrevocable guarantee to the unitholders of the 

Fund on the terms and conditions set out in 

the deed of guarantee. Please refer to note 12 

for details. 

As at 16 November 2009, the credit rating of 


Corporation Limited was Aa1 (long-term foreign 

issuer credit by Moody’s). The credit rating as 

at 31 October 2008 was Aa2. 

Transactions involving options are usually with 

counterparties with whom the Fund signed 

master netting agreements. Master netting 

agreements provide for the net settlement of 

contracts with the same counterparty in the 

event of default. The impact of the master 

netting agreement is to reduce credit risk from 

the options. The credit risk associated with 

options subject to a master netting 

arrangement is eliminated only to the extent 

that financial liabilities due to the same 

counterparty will be settled after the assets are 

realised. The exposure to credit risk reduced 

by master netting arrangements may change 

significantly within short period of time as a 

result of transactions subject to the 

arrangement. In addition, the Fund has collateral 

arrangement with each option counterparty. 

Under the arrangement, when the option value 

exceeds a threshold of net asset value of the 

Fund, the counterparty has to deliver a collateral 

in cash to the Fund. 

Substantially all of the assets held by the Fund 

are held by The Hongkong and Shanghai 

Banking Corporation Limited as custodian. 

Bankruptcy or insolvency of the custodian may 

cause the Fund’s rights with respect to 

securities held by the custodian to be delayed 

or limited. 

Substantially all of the cash held by the Fund is 

held by The Hongkong and Shanghai Banking 

Corporation Limited. Bankruptcy or insolvency 

of The Hongkong and Shanghai Banking 

Corporation Limited may cause the Fund’s 

rights with respect to cash held by The 

Hongkong and Shanghai Banking Corporation 

Limited to be delayed or limited. 

(c) Liquidity risk 

The Fund’s Constitution provides for bi-weekly 

redemption of units prior to maturity date and 

the Fund is therefore exposed to liquidity risk 

in meeting unitholders’ redemptions. In order 

to take effect for the redemption prior to 

maturity date, a valid redemption request must 

be received by the Manager before 4:00 p.m. 

Hong Kong time one Hong Kong business day





before the dealing day. Redemption proceeds 

will be paid not later than one calendar month 

after receipt of completed redemption 

documentation. 

The certificates of deposits and options held 

by the Fund are not listed investments that are 

traded in an organised public market and which 

generally may be illiquid. This liquidity risk is 

mitigated by the Fund entering into Market 

Making Undertaking Agreements with its 

dealing counterparties. The dealing 

counterparties undertake in the Agreements to 

provide an Over-the-Counter market for the 

certificates of deposits and options by providing 

a firm quotation to buy back the certificates of 

deposits and options on an ongoing basis. 

The following table details the remaining 

contractual maturities at the reporting date of 

the Fund’s financial liabilities, which are based 

on contractual undiscounted cash flows 

(including interest payments computed using 

contractual rates, or if floating based on rates 

current at the reporting date) and the earliest 

date the Fund can be required to pay: 

Date of statement of 

assets and liabilities 


2009 2008 

Redemption payable 

– carrying amount 39,542,938 – 

– total contractual 

undiscounted cash flow 39,542,938 – 

– within 1 month or on 

demand 39,542,938 – 

Accruals and other payables 

– carrying amount 110,234 17,240 


undiscounted cash flow 110,234 17,240 


demand 110,234 17,240 

Total 

– carrying amount 39,653,172 17,240 


undiscounted cash flow 39,653,172 17,240 


demand 39,653,172 17,240 

117





118 

(d) Specific instruments 

Options 

The Fund had the following purchased options at the reporting date: 

As at 16 November 2009 

All amounts stated in USD 

As at 16 November 2009 

(date of maturity) As at 31 October 2008 

Underlying Fair value Fair value Fair value Fair value 

Fund Type of contract Expiration investments (assets) (liabilities) (assets) (liabilities) 

HSBC China Fortune Capital Options 16 November 2009 Basket of stocks – – 5,002,213 – 


14 Accounting estimates and judgements 

The Fund’s investments are unquoted and are valued using valuation techniques, including use of recent arm’s length 

market transactions, reference to the current fair value of another instrument that is substantially the same, discounted 

cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices 

obtained in actual market conditions. Fair value estimates are made at specific point in time, based on market conditions 

and information about the financial instrument. The derivative instruments are valued by the counterparties. The main 

factors affecting the valuation include the exercise price, the correlation between the relevant underlying assets of the 

derivatives, the performance of the underlying assets, the degree of volatility, the remaining maturity and providing 

interest rates. Although the valuation of financial instruments is linked to the performance of underlying basket of 

stocks, the Fund does not hold/own the underlying assets. The Fund, in fact, is holding the financial instruments only. 

The certificates of deposits are valued by The Hongkong and Shanghai Banking Corporation Limited based on the 

prevailing market conditions and the level of interest rate for a maturity equal to the time to lapse between the pricing 

date and the maturity date. These estimates are subjective in nature and involve uncertainties and matters of judgement 

and therefore cannot be determined with precision.





15 Possible impact of amendments, new standards and interpretations issued but not yet effective for the 

accounting period ended 16 November 2009 (date of maturity) 

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards 

and interpretations which are not yet effective for the accounting period ended 16 November 2009 and which have not 

been adopted in these financial statements. 

Of these developments, the following relate to matters that may be relevant to the Fund’s operations and financial 

statements: 

Effective for 

accounting periods 

beginning on or after 

HKAS 1 (Revised) Presentation of financial statements: Disclosure 1 January 2009 

HKAS 1 and HKAS 32 Financial instruments: Presentation 1 January 2009 

(Amendments) – Puttable financial instruments and obligations 

arising on liquidation 

HKFRS 7 (Amendments) Financial instruments: Disclosures 1 January 2009 

– Improving disclosures about financial instruments 

HKFRS 8 Operating segments 1 January 2009 

119

Independent auditor’s Report to the Unitholders of 

HSBC China Fortune Capital Guaranteed Fund I (“the Fund”) 

We have audited the accompanying financial statements of the Fund, a sub-fund within HSBC Investment Trust, on pages 

101 to 119 which comprise the statement of assets and liabilities as at 16 November 2009 (date of maturity), and the 

income statement, statement of changes in net assets attributable to unitholders and cash flow statement for the period 

from 1 November 2008 to 16 November 2009 (date of maturity), and a summary of significant accounting policies and 

other explanatory notes. 

Trustee’s and Manager’s responsibilities for the financial statements 

The Trustee and the Manager are responsible for the preparation and the true and fair presentation of these financial 

statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified 

Public Accountants and the relevant disclosure provisions of the Trust Deed, as amended, and the relevant disclosure 

requirements set out in Appendix E to the Hong Kong Code on Unit Trusts and Mutual Funds issued by the Hong Kong 

Securities and Futures Commission (“the Code”). This responsibility includes designing, implementing and maintaining 

internal control relevant to the preparation and the true and fair presentation of financial statements that are free from 

material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making 

accounting estimates that are reasonable in the circumstances. 

Auditor’s responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to 

you, as a body, and to report to you on matters set out above, and for no other purpose. We do not assume responsibility 

towards or accept liability to any other person for the contents of this report. 

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of 

Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the 

audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial 

statements. The procedures selected depend on our judgement, including the assessment of the risks of material 

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider 

internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order to 

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the 

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies 

used and the reasonableness of accounting estimates made by the Trustee and the Manager, as well as evaluating the 

overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 

In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 16 November 

2009 (date of maturity), and of its financial performance and its cash flows for the period from 1 November 2008 to 16 

November 2009 (date of maturity) in accordance with Hong Kong Financial Reporting Standards, and have been properly 

prepared in accordance with the relevant disclosure provisions of the Trust Deed dated 9 October 2000, as amended, and 

the relevant disclosure requirements of the Code. 

Emphasis of matter 

Without qualifying our opinion, we draw attention to notes 1 and 2 to the financial statements. All outstanding units of the 

Fund were redeemed by the unitholders on 16 November 2009 and the Fund was terminated on that date. Accordingly, the 

financial statements have been prepared on a break-up basis as the going concern basis is no longer appropriate. 

KPMG 

PO Box 493 

Century Yard, Cricket Square 



19 February 2010 

120



Realisation Realisation Realisation Realisation Realisation 

value value value value value 

per unit per unit per unit per unit per unit 

as at as at as at as at as at 

16 November 31 October 31 October 31 October 31 October 

2009 2008 2007 2006 2005 

US$ US$ US$ US$ US$ 

HSBC China Fortune Capital Guaranteed Fund I – 11.12 13.71 9.80 9.21 

HSBC China Fortune Capital Guaranteed Fund I matured on 16 November 2009. All units were redeemed and the net assets 

remaining at that date after paying all redemption proceeds to investors were paid to the Manager in accordance with the 

terms set out in the Explanatory Memorandum. 

Net assets 

Net assets Net assets Net assets Net assets Net assets 

as at as at as at as at as at 


2009 2008 2007 2006 2005 

US$ US$ US$ US$ US$ 

HSBC China Fortune Capital 

Guaranteed Fund I – 50,378,568 85,631,251 112,078,071 111,810,862 


Period ended Year ended Year ended Year ended Period ended 


2009 2008 2007 2006 2005 

Highest Lowest Highest Lowest Highest Lowest Highest Lowest Highest Lowest 

price price price price price price price price price price 

US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ 

HSBC China Fortune Capital 

Guaranteed Fund I 11.71 10.98 13.31 11.12 13.71 9.85 9.81 9.15 9.41 9.16 

HSBC China Fortune Capital Guaranteed Fund I matured on 16 November 2009. All units were redeemed and the net assets 

remaining at that date were paid to the Manager in accordance with the terms set out in the Explanatory Memorandum. 

121

Trustee’s Report to the Unitholders of 

HSBC Investment Trust – HSBC China Fortune Capital 

Guaranteed Fund I (“the Fund”) 

We hereby confirm that, in our opinion, the Manager of the Fund has, in all material respects, managed the Fund in accordance 

with the provisions of the Trust Deed dated 9 October 2000, as amended, for the period ended 16 November 2009. 

) 

) 



) 

) 

122

Administration 

Manager and registrar’s agent 

HSBC Investment Funds (Hong Kong) Limited 

HSBC Main Building 

1 Queen’s Road Central 

Hong Kong 

Investment adviser 

SINOPIA Asset Management (Asia Pacific) Limited 

HSBC Main Building 



Trustee and registrar 

HSBC Trustee (Cayman) Limited 

PO Box 484 

HSBC House 

68 West Bay Road 



Guarantor 

The Hongkong and Shanghai Banking Corporation Limited 



Legal adviser 

Deacons 

5/F Alexandra House 

16 – 20 Chater Road 


Auditor 

KPMG 

PO Box 493 

Century Yard 

Cricket Square 



123

Board of Directors of HSBC Investment Funds 

(Hong Kong) Limited 

Rudolf Eduard Walter APENBRINK 

Patrice Pierre Henri CONXICOEUR 

Ayaz Hatim EBRAHIM 

Po Yee LAM 

Edmund Richard STOKES 

Kim Kean LIM (appointed on 2 July 2009) 

Ngar Yee LOUIE (resigned on 2 July 2009) 

124

Issued by HSBC Global Asset Management (Hong Kong) Limited 

HIT1009A Printed in the Hong Kong SAR

HSBC Investment Trust - DBS Hong Kong

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