Global Technology Fund (HFGAX, HFGBX, HFGCX, HFGIX)

The Fund seeks to achieve long-term capital appreciation primarily through investments in common stocks and related securities of US and non-US technology-related companies. We define technology-related companies as those companies that suggest rapid and sustainable growth potential from the development, advancement or use of technology to improve their business processes and applications. The Fund is managed by Ian Warmerdam. Stuart O'Gorman provides advice on the Fund to Mr. Warmerdam.

• Quarterly Factsheet

 

Why invest in this fund?

• Exposure to attractive global technology themes, with a focus on international and US technology
• An opportunistic approach with a flexible methodology on stock capitalization
• Bottom-up stock selection drives the portfolio construction process

  

Fund facts (as of 12/31/11)

Inception date:	8/31/01
Minimum initial investment:	$500
Benchmark:	MSCI AC World IT Index
Median market cap ($billions):	15.6
Total number of holdings:	51
Forward 12-month P/E ratio:	13.8
P/B ratio:	3.3
Beta:	1.0
% of holdings in top 10:	36.8
Class A expense ratio1:	1.52
Morningstar rating (as of 12/31/11)2

¹This ratio is not a guaranteed number and may fluctuate. The class A expense ratio is presented as a percentage of average net assets. The expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 11/30/11. The ratio may differ from that presented in the Fund’s prospectus that is based on the Fund’s then most recent previous fiscal year.

² Morningstar category: Technology, Number of funds in category: 186. The overall Morningstar Rating for the Fund is derived from a weighted average of the risk-adjusted performance figure associated with its 3-, 5- and 10- year Morningstar Rating metrics.

Portfolio management

Ian Warmerdam
Director of Technology Investments

• Read biography

 

Stuart O'Gorman
Director of Technology Investments

• Read biography

Top ten holdings %
(as of 12/31/11)

Apple (US)	8.2
ASML Holding (Netherlands)	3.5
Google (US)	3.4
Analog Devices (US)	3.3
Microsoft (US)	3.2
QUALCOMM (US)	3.2
Check Point Software (Israel)	3.1
MasterCard (US)	3.1
Oracle (US)	2.9
Accenture (US)	2.9

A company's country classification is based on multiple factors including legal domicile and underlying exposure of its business.

 

• Full holdings list

 

Performance

Relative performance as of 12/31/11

Inception date 8/31/01, inception of Class I shares 3/31/09.

Lipper rankings are based on total return and do not reflect a sales charge. Rankings are for Class A shares only, other share classes may vary.

Expense ratios are not a guaranteed number and may fluctuate. Gross and net expense ratios are presented as a percentage of average net assets. The gross expense ratio is stated in the current prospectus and is based on the Fund's then most recent previous fiscal year. The net expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 11/30/11. This ratio may differ from that presented in the Fund's prospectus.

Effective 11/30/10, the Global Technology Fund will not accept new or additional investments in Class B shares (HFGBX).

Class I shares were formerly known as Class W shares.

The performance for Class I shares for the period prior to 3/31/09 is based on the performance of Class A shares. Performance for Class I shares would be similar because the shares are invested in the same portfolio of securities and have the same portfolio management. Class I shares are not subject to a front-end sales charge or a distribution fee.

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Performance results with sales charges reflect the deduction of the maximum front end sales charge and/or the deduction of the applicable contingent deferred sales charge (CDSC). Class A shares are subject to a maximum front end sales charge of 5.75%. Class B shares are subject to a CDSC, which declines from 5% the first year to 0% at the beginning of the seventh year. Class C shares may be subject to a CDSC of up to 1% on certain redemptions made within 12 months of purchase. Performance presented at NAV which does not include these sales charges would be lower if these charges were reflected. The Fund’s annual operating expenses will likely vary from year to year. It is important for you to understand that a decline in the Fund’s average net assets during the current fiscal year due to recent market volatility or other factors could cause the Fund’s expense ratios for the Fund’s current fiscal year to be higher than the expense information presented. Returns greater than one year are annualized. Index returns provided by Lipper, Inc. Net Asset Value (NAV) is the value of one share of the Fund excluding any sales charge.

The recent growth rate in the stock market has helped to produce short term returns for some asset classes that are not typical and may not continue in the future. Because of ongoing market volatility, Fund performance may be subject to substantial short term changes.

Returns included the reinvestment of dividends and capital gains. Performance results reflect expense subsidies and waivers in effect during the periods shown. Absent these waivers, results would have been less favorable for certain periods.

Forward 12-month P/E ratio is calculated using the closing price of portfolio holdings divided by the sum of the 12-month forward earnings per share. P/B ratio is calculated using the closing price of portfolio holdings divided by the most recent fiscal year end book value. Both calculations take into account the respective weightings of portfolio holdings. Beta is a quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market. The MSCI AC World IT Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the Information Technology stocks within the MSCI AC World Index. It is not possible to invest directly in any index.

Fund overview

This Fund seeks to achieve long-term capital appreciation primarily through investments in common stocks and related securities of US and non-US technology-related companies. We define technology-related companies as those companies that suggest rapid and sustainable growth potential from the development, advancement or use of technology to improve their business processes and applications. The Fund is managed by Ian Warmerdam. Stuart O'Gorman provides advice on the Fund to Mr. Warmerdam. The team evaluates companies and their potential investment returns based on theme, sector and stock specific characteristics that are driven by bottom up factors rather than on geographic regions. 

Quarterly update

The quarter persisted with market volatility due to stress in the banking system and concerns regarding the continuing European sovereign debt crisis. The BRIC’s (Brazil, Russia, India, and China) fared little better, however the US began to show promising growth in the back end of 2011. The global economic weakness did not help Technology stocks, particularly in October and November, although performance was better than other more cyclically exposed sectors.

Fund performance

Over the quarter the Fund underperformed the MSCI World IT sector. At the sector level, Internet Retail and Electronic Equipment were the biggest detractors to performance, with Communications Equipment providing the biggest contribution. At the stock level, Google was the best performer as valuations bounced upwards from strong fourth quarter results, and positive search trends and renewed growth in E-Commerce. Also benefitting from these trends was Mercadolibre, the leading Latin American online trading site where the secular story remains strong and their long term growth strategy convincing. Apple, the Fund’s largest holding, also performed well with sales of the iPhone keeping momentum and with the iPad continuing to dominate the tablet market. On the negative side was Shutterfly, the photo related E-Commerce business, with recent fourth quarter earnings downgrades due to competitive discounting on its products.

Investment activity

The Fund initiated a number of positions in the quarter including a return to Amazon, the world’s largest E-Commerce platform, Intel, where 2012 may well see more optimism for the PC market following the launch of Ultrabooks and Windows 8. Analog Devices and Texas Instruments were also bought as we see more attractive valuations, falling inventory levels and relatively conservative earnings growth assumptions coming through for the Semiconductor industry this year, supported by generally robust economic data in the US.

Outlook

Near term market direction, including that for Technology, is likely to be dictated by macro economic events. Unfortunately we can add little value here. However the mid to long term backdrop for Technology equities continues to look very attractive given absolute and relative valuation measures close to record lows, high cash levels on balance sheets, high levels of cash generation and demand which is still recovering from well below trend levels. We will continue to invest in some of the opportunities we see across our five favored themes of E-Commerce, Online Advertising, Connectivity, Data Growth and Paperless Payments, as    well as in those in other areas of the market.

Prospectus/SAI

Global Technology Fund