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Filename: Annual Report Cover_2016-17.ai Size (cm): 13 (W) x 20.5 (H) Job No.: 17-0972
Abridged SchemewiseAnnual Reports 2016 - 2017
► INDEX HSBC Equity Fund 1 HSBC India Opportunities Fund 23 HSBC Midcap Equity Fund 45 HSBC Infrastructure Equity Fund 67 HSBC Tax Saver Equity Fund 89 HSBC Dynamic Fund 111 HSBC Dividend Yield Fund 133 HSBC Emerging Markets Fund 155 HSBC Asia Pacific (Ex Japan) Dividend Yield Fund 177 HSBC Brazil Fund 199 HSBC Managed Solutions 221 HSBC Global Consumer Opportunities Fund 262 HSBC MIP 284 HSBC Income Fund 308 HSBC Ultra Short Term Bond Fund 344 HSBC Cash Fund 370 HSBC Flexi Debt Fund 395 HSBC Capital Protection Oriented Fund 421 HSBC Fixed Term Series 454
HSBC Equity Fund 1
HSBC Equity FundAn Open-ended Diversified Equity Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Equity Fund 1
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
1 HSBC Equity Fund
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC Equity Fund 1
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
1 HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2017
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Equity Fund (HEF) – an open-ended diversifi ed Equity Scheme HEF seeks to generate long-term capital growth from an actively managed portfolio of equity and equity related securities.
The net assets of HEF amounted to Rs. 598.66 crores as at March 31, 2017 as against Rs. 567.22 crores as at March 31, 2016. Around 98.32% of the net assets were invested in equities, 1.46% of the net assets were invested in reverse repos / CBLO and 0.22% in net current assets as at March 31, 2017.
HEF is a true large cap fund and we remained invested in a diversifi ed portfolio across large capitalization stocks. It has outperformed its benchmark Nifty 50 over the FY 2016-17 by 670bps primarily due to superior stock selection. Selections in sectors like Financials, Materials, Energy, and Consumer Discretionary contributed to the outperformance during this period. In terms of allocation, being overweight in Financials and underweight in Telecom have been positive contributors to outperformance.
Date of Inception : 10 December 2002 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Equity Fund – Growth 25.25 14.58 13.04 22.23
Nifty 50 (Scheme Benchmark) 18.55 11.01 11.60 16.24
S&P BSE 200 (Standard Benchmark) 22.47 14.17 13.08 17.75
Rs. 10,000, if invested in HEF, would have become 12,525 15,043 18,453 177,911
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 86,601
Rs. 10,000, if invested in S&P BSE 200, would have become
12,247 14,882 18,487 104,155
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
5
HSBC Equity Fund 1
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
6
1 HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
7
HSBC Equity Fund 1
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Equity Fund 12801781.29 1,077 7672580.56 198
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance
8
1 HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
9
HSBC Equity Fund 1
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
10
1 HSBC Equity Fund
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC Equity Fund 1
To the Board of Trustees of
HSBC Mutual Fund - HSBC Equity Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report
12
1 HSBC Equity Fund
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC Equity Fund 1
Rs. in Lakhs
HSBC EQUITY FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 7,764.84 9,085.47 2 Reserves & Surplus2.1 Unit Premium Reserves (10,081.39) (10,382.19)2.2 Unrealised Appreciation Reserve 13,606.79 8,498.63 2.3 Other Reserves 48,607.04 49,509.44 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 461.94 416.69
TOTAL 60,359.22 57,128.04
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 58,869.22 55,571.881.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 58,869.22 55,571.88 2 Deposits 5.25 9.80 3 Other Current Assets3.1 Cash & Bank Balance 24.07 10.37 3.2 CBLO / Reverse Repo Lending 873.25 1,169.00 3.3 Others 587.43 366.99 4 Deferred Revenue Expenditure
(to the extent not written off)– –
TOTAL 60,359.22 57,128.04
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
14
1 HSBC Equity Fund
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC EQUITY FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 672.09 792.42
1.2 Interest 77.17 112.61
1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –
1.4 Realised Gains / (Losses) on Interscheme sale of investments – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
8,574.14 7,095.46
1.6 Realised Gains / (Losses) on Derivative Transactions – –
1.7 Other Income 0.35 0.51
(A) 9,323.75 8,001.00
2 EXPENSES2.1 Management fees 931.59 971.22
2.2 Service tax on Management fees 138.93 135.46
2.3 Transfer agents fees and expenses 72.29 77.90
2.4 Custodian fees 7.08 8.15
2.5 Trusteeship fees 1.27 1.35
2.6 Commission to Agents 222.89 314.83
2.7 Marketing & Distribution expenses – –
2.8 Audit fees 3.47 2.23
2.9 Investor Education Expenses 11.74 12.93
2.10 Other operating expenses 15.75 21.66
2.11 Less: Expenses to be Reimbursed by the Investment Manager – –
(B) 1,405.01 1,545.73
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 7,918.74 6,455.27
4 Change in Unrealised Depreciation in value of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 7,918.74 6,455.27
6 Change in unrealised appreciation in the value of investments and derivatives (F) 5,108.16 (10,735.37)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 13,026.90 (4,280.10)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 10,735.37
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 5,108.16 –
7.3 Add / (Less) : Equalisation (6,696.89) (2,162.44)
7.4 Transfer from Reserve Fund 49,509.44 48,780.52
8 Total 50,731.29 53,073.35
9 Dividend appropriation
9.1 Income Distributed during the year 2,124.25 3,563.91
9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet
48,607.04 49,509.44
Notes to Accounts – Annexure I
15
HSBC Equity Fund 1
Key Statistics for the year ended March 31, 2017
HSBC EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 141.2682 150.8367
Regular Plan Dividend Option 25.8480 31.5714
Direct Plan - Growth Option 144.7545 153.4636
Direct Plan - Dividend Option 26.6029 32.1591
High
Regular Plan Growth Option 177.0058 156.0068
Regular Plan Dividend Option 30.8070 32.6535
Direct Plan - Growth Option 182.6662 158.7632
Direct Plan - Dividend Option 31.8040 33.2697
Low
Regular Plan Growth Option 137.2160 124.5225
Regular Plan Dividend Option 24.6306 22.7841
Direct Plan - Growth Option 140.6212 127.5066
Direct Plan - Dividend Option 25.5723 23.4331
End
Regular Plan Growth Option 176.9354 141.2682
Regular Plan Dividend Option 29.1250 25.8480
Direct Plan - Growth Option 182.5970 144.7545
Direct Plan - Dividend Option 30.2968 26.6029
2. Closing Assets Under Management (Rs. in Lakhs)
End 59,866 56,722
Average (AAuM)1 58,719 64,633
3. Gross income as % of AAuM2 15.88% 12.38%
4. Expense Ratio:
a. Total Expense as % of AAuM (Including service tax on Management fees) (planwise)
Regular Plan 2.66% 2.61%
Direct Plan 1.95% 1.90%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.59% 1.50%
Direct Plan 1.59% 1.50%
5. Net Income as a percentage of AAuM3 13.49% 9.99%
6. Portfolio turnover ratio4 0.82 1.03
16
1 HSBC Equity Fund
HSBC EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option 3.00 3.70
Direct Plan - Dividend Option 3.00 3.70
Corporate
Regular Plan Dividend Option 3.00 3.70
Direct Plan - Dividend Option 3.00 3.70
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 25.2479 (6.3268)
Direct Plan - Growth Option 26.1425 (5.6600)
Benchmark
Nifty 50** 18.5484 N.A.
S&P BSE 200 N.A. (7.8430)
b. Since Inception
Scheme
Regular Plan Growth Option 22.2272 22.0033
Direct Plan - Growth Option 13.3624 9.6931
Benchmark
Nifty 50** 16.2430 N.A.
S&P BSE 200 N.A. 17.4012
1. AAuM=Average daily net assets
2. Gross income = amount against (A) in the Revenue Account i.e. Income
3. Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year
4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
** Benchmark Changed from S&B BSE 200 to Nifty 50 w.e.f. November,11 2016
Key Statistics for the year ended March 31, 2017 (Contd...)
17
HSBC Equity Fund 1
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC EQUITY FUND
1 Investments: 1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the
benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies:
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 1,452,436,300 – 402,773,900
Equities 94,659,583 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 272,462,600 421,271,947
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Years March 31, 2017 and March 31, 2016 and percentage to net assets are as under :
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 1,420,865,440 23.73 933,315,831 16.45
– Depreciation 60,186,043 1.01 83,452,629 1.47
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 4,817,105,443 and Rs. 5,855,659,764 respectively being 82.04% and 99.72% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 6,640,530,266 and Rs. 7,262,948,262 respectively being 102.74% and 112.37% of the average daily net assets.
1.8. Non-Traded securities in the portfolio of the Scheme as of the Years ended March 31, 2017 and March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
During the year 2016-17, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges amounting to Rs. Nil and clearing member charges on derivative transactions amounting to Rs. Nil.
During the year 2015-16, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges amounting to Rs. Nil and clearing member charges on derivative transactions amounting to Rs. Nil.
18
1 HSBC Equity Fund
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 10.69 9.47 4,202,846 19.88
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 13.16 6.52 4,961,813 16.50
Brokerage paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 18.76 1.76 225,076 1.87
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 53.37 3.84 640,335 4.03
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission / Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC Equity Fund 1
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description 2016-2017Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Regular Plan Growth Option
14,054,147.391 667,074.951 2,441,971.049 12,279,251.293 10
Regular Plan Dividend Option
61,896,207.796 22,504,997.170 32,158,319.074 52,242,885.892 10
Direct Plan - Growth Option
14,298,056.590 1,803,272.765 3,640,190.810 12,461,138.545 10
Direct Plan - Dividend Option
606,276.584 230,021.500 171,170.707 665,127.377 10
Description 2015–2016Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Regular Plan Growth Option
16,585,344.452 1,047,143.153 3,578,340.214 14,054,147.391 10
Regular Plan Dividend Option
67,296,181.727 40,274,879.752 45,674,853.683 61,896,207.796 10
Direct Plan - Growth Option
12,801,065.001 4,328,936.741 2,831,945.152 14,298,056.590 10
Direct Plan - Dividend Option
499,987.238 162,287.394 55,998.048 606,276.584 10
**Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 33,261.112 & as on 31/03/2016 is 33,261.112.
5 Previous year fi gures have been re-grouped/re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 35,081 represents Exit load (net of service tax) credited to the scheme. (2016: Rs. 51,153 represents Exit load (net of service tax) credited to the scheme & an Old Balance in Redemption Recon written off)
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)Opening Balance as on April 01, 2016 –Add: Accrual during FY 2016-17 182Less: Transferred to AMFI 83Less: Payable to AMFI (March 2017 accrual) 8Add: Investment Income FY 2016-17 11Less: Spent during FY 2016-17 58Closing Balance as on March 31, 2017 44
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
20
1 HSBC Equity Fund
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC Equity Fund 1
Statutory Details & DisclaimersAll returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC INDIA OPPORTUNITIES FUND 3
HSBC India Opportunities FundAn Open-ended Flexi-cap Equity Scheme
Abridged Annual Report 2016 - 2017
1
HSBC INDIA OPPORTUNITIES FUND 3
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
3 HSBC INDIA OPPORTUNITIES FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC INDIA OPPORTUNITIES FUND 3
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
3 HSBC INDIA OPPORTUNITIES FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC India Opportunities Fund (HIOF) – an open-ended Flexi-cap Equity Scheme HIOF seeks to generate long term capital growth through investments across all market capitalizations, including small, mid and large cap stocks. It aims to be predominantly invested in equity and equity related securities. However, it could move a signifi cant portion of its assets towards fi xed income securities if the fund manager becomes negative on equity markets.
The net assets of HIOF amounted to Rs. 454.14 crores as at March 31, 2017 as compared to Rs. 464.85 crores as at March 31, 2016. Around 97.51% of the net assets were invested in equities, 3.50% of the net assets were invested in reverse repos / CBLO and (-1.01%) in net current assets as at March 31, 2017.
HIOF is a multi-cap fund with a large-cap bias and we remained invested in a diversifi ed portfolio across capitalization stocks. HIOF outperformed its benchmark S&P BSE200 over the FY 2016-17 by 404bps primarily due to superior stock selection. Selections in sectors like Financials, Materials and Industrials contributed to the outperformance during this period. In terms of allocation, being overweight in Financials and underweight in Telecom have been positive contributors to outperformance.
Date of Inception : 24 February 2004 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC India Opportunities Fund - Growth 26.51 19.99 17.56 16.88
S&P BSE 200 (Scheme Benchmark) 22.47 14.17 13.08 13.79
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 13.13
Rs. 10,000, if invested in HIOF, would have become 12,651 17,276 22,452 77,263
Rs. 10,000, if invested in S&P BSE 200, would have become
12,247 14,882 18,487 54,407
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 50,385
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC INDIA OPPORTUNITIES FUND 3
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
3 HSBC INDIA OPPORTUNITIES FUND
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC INDIA OPPORTUNITIES FUND 3
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC India Opportunities Fund 3679066.84 349 3213967.36 71
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
3 HSBC INDIA OPPORTUNITIES FUND
customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC INDIA OPPORTUNITIES FUND 3
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
3 HSBC INDIA OPPORTUNITIES FUND
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC INDIA OPPORTUNITIES FUND 3
To the Board of Trustees ofHSBC Mutual Fund - HSBC India Opportunities Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC India Opportunities Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other expl anatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that: (a) We have obtained all information and explanations which, to the best of our knowledge and belief, were
necessary for the purposes of the audit; (b) The balance sheet and revenue account have been prepared in accordance with the accounting policies
and standards specifi ed in the Ninth Schedule of the Regulations.2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet
and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report
12
3 HSBC INDIA OPPORTUNITIES FUND
Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 11,251.70 14,161.06 2 Reserves & Surplus2.1 Unit Premium Reserves (8,846.95) (8,635.72)2.2 Unrealised Appreciation Reserve 11,663.27 5,539.94 2.3 Other Reserves 31,397.19 35,448.45 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 837.86 370.14
TOTAL 46,303.07 46,883.87
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 44,273.21 45,491.19 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 44,273.21 45,491.19 2 Deposits 3.11 4.73 3 Other Current Assets3.1 Cash & Bank Balance 86.72 28.37 3.2 CBLO / Reverse Repo Lending 1,591.39 1,121.00 3.3 Others 348.64 238.58 4 Deferred Revenue Expenditure
(to the extent not written off)– –
TOTAL 46,303.07 46,883.87
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
13
HSBC INDIA OPPORTUNITIES FUND 3
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 395.54 571.20
1.2 Interest 71.50 106.99
1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –
1.4 Realised Gains / (Losses) on Interscheme sale of investments – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
5,778.90 3,517.99
1.6 Realised Gains / (Losses) on Derivative Transactions – –
1.7 Other Income 0.04 0.10
(A) 6,245.98 4,196.28
2 EXPENSES2.1 Management fees 675.34 624.47
2.2 Service tax on Management fees 100.90 87.81
2.3 Transfer agents fees and expenses 57.36 61.61
2.4 Custodian fees 5.63 6.37
2.5 Trusteeship fees 1.03 1.06
2.6 Commission to Agents 399.59 521.89
2.7 Marketing & Distribution expenses 0.56 0.84
2.8 Audit fees 2.68 1.73
2.9 Investor Education Expenses 9.32 10.14
2.10 Other operating expenses 10.66 16.19
2.11 Less: Expenses to be Reimbursed by the Investment Manager (18.15) –
(B) 1,244.92 1,332.11
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 5,001.06 2,864.17
4 Change in Unrealised Depreciation in value of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 5,001.06 2,864.17
6 Change in unrealised appreciation in the value of investments and derivatives (F) 6,123.33 (6,351.29)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 11,124.39 (3,487.12)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 6,351.29
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 6,123.33 –
7.3 Add / (Less): Equalisation (7,886.42) 3,952.76
7.4 Transfer from Reserve Fund 35,448.45 30,454.98
8 Total 32,563.09 37,271.91
9 Dividend appropriation
9.1 Income Distributed during the year 1,165.90 1,823.46
9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet
31,397.19 35,448.45
Notes to Accounts – Annexure I
14
3 HSBC INDIA OPPORTUNITIES FUND
Key Statistics for the year ended March 31, 2017
HSBC INDIA OPPORTUNITIES FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 61.0480 65.1082
Regular Plan Dividend Option 20.6385 23.6325
Direct Plan - Growth Option 62.5482 66.2199
Direct Plan - Dividend Option 22.3399 25.2658
High
Regular Plan Growth Option 77.2302 67.6825
Regular Plan Dividend Option 25.8705 24.5669
Direct Plan - Growth Option 79.6946 68.8500
Direct Plan - Dividend Option 28.1979 26.2693
Low
Regular Plan Growth Option 59.8941 53.3794
Regular Plan Dividend Option 20.2484 18.0459
Direct Plan - Growth Option 61.3742 54.6499
Direct Plan - Dividend Option 21.9206 19.5189
End
Regular Plan Growth Option 77.2302 61.0480
Regular Plan Dividend Option 24.5936 20.6385
Direct Plan - Growth Option 79.6946 62.5482
Direct Plan - Dividend Option 26.9482 22.3399
2. Closing Assets Under Management (Rs. in Lakhs)
End 45,414 46,485
Average (AAuM)1 46,588 50,689
3. Gross income as % of AAuM2 13.41% 8.28%
4. Expense Ratio:
a. Total Expense as % of AAuM (Including service tax on Management fees) (planwise)
Regular Plan 2.69% 2.63%
Direct Plan 1.98% 1.90%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.45% 1.23%
Direct Plan 1.45% 1.23%
5. Net Income as a percentage of AAuM3 10.73% 5.65%
6. Portfolio turnover ratio4 0.36 0.71
15
HSBC INDIA OPPORTUNITIES FUND 3
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INDIA OPPORTUNITIES FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option 1.50 1.50
Direct Plan - Dividend Option 1.50 1.50
Corporate
Regular Plan Dividend Option 1.50 1.50
Direct Plan - Dividend Option 1.50 1.50
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 26.5073 (6.2196)
Direct Plan - Growth Option 27.4131 (5.5300)
Benchmark
S&P BSE 200** 22.4731 N.A.
S&P BSE 500 N.A. (7.7960)
b. Since Inception
Scheme
Regular Plan Growth Option 16.8785 16.1167
Direct Plan - Growth Option 18.8582 16.3407
Benchmark
S&P BSE 200** 13.7930 N.A.
S&P BSE 500 N.A. 13.2641
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue Account i.e. Income3. Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
** Change in Benchmark from S&P BSE 500 to S&P BSE 200 wef 11 Nov 2016
16
3 HSBC INDIA OPPORTUNITIES FUND
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC INDIA OPPORTUNITIES FUND1 Investments:
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies.
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 1,452,436,300 – 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 141,238,418 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2017 and 2016 are NIL.
1.5. The NPAs as on March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Years March 31, 2017 and March 31, 2016 are as under :
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 1,237,575,093 27.25 676,595,912 14.56
– Depreciation 71,248,018 1.57 122,601,583 2.64
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) is Rs. 1,681,371,410 and Rs. 2,993,446,387 respectively being 36.09% and 65.25% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) is Rs. 4,037,913,895 and Rs. 3,585,156,360 respectively being 79.66% and 70.73% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2017 and March 31, 2016 are Nil.
17
HSBC INDIA OPPORTUNITIES FUND 3
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the InvestmentManager
2016-2017 53.50 43.32 19,197,398 54.44
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the InvestmentManager
2015-2016 83.08 31.50 20,274,528 40.70
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 2.21 0.47 26,515 0.50
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 6.40 0.84 76,971 0.90
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission / Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
18
3 HSBC INDIA OPPORTUNITIES FUND
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016 :
Description
2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
41,711,714.841 11,489,195.576 20,855,342.557 32,345,567.860 10
Regular Plan Dividend Option
98,605,873.865 11,164,695.313 31,302,013.300 78,468,555.878 10
Direct Plan - Growth Option
1,019,631.010 690,362.046 330,702.177 1,379,290.879 10
Direct Plan - Dividend Option
273,348.554 112,451.027 62,184.309 323,615.272 10
Description
2015–2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
38,777,910.214 19,254,153.636 16,320,349.009 41,711,714.841 10
Regular Plan Dividend Option
86,641,081.099 57,066,737.471 45,101,944.705 98,605,873.865 10
Direct Plan - Growth Option
250,484.953 924,391.961 155,245.904 1,019,631.010 10
Direct Plan - Dividend Option
426,947.991 133,649.270 287,248.707 273,348.554 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 76,942.845 & as on 31/03/2016 is 76,942.845.
5 Previous years fi gures have been re-grouped/re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 3,529.34 represents Exit load (net of service tax) credited to the scheme. (2016:Rs. 9,925.82 represents Exit load (net of service tax) credited to the scheme.)
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC INDIA OPPORTUNITIES FUND 3
9 Merger of HSBC Dividend Yield Equity Fund (HDYEF) into HSBC India Opportunities Fund (HIOF)
The Board of Directors of HSBC Asset Management (India) Private limited and Board of Trustees of HSBC Mutual Fund have approved the merger of HDYEF into HIOF in their meetings held on February 01, 2017 and February 02, 2017 respectively. SEBI has also granted it’s no objection to the aforesaid merger vide its letter dated April 03, 2017. Accordingly, a notice was published on May, 24, 2017 giving an option to the unitholders of HDYEF to exit during the period from May 31, 2017 to June 30, 2017 at the applicable NAV, without payment of exit load, if any and sale of units in the HDYEF was suspended effective from May 31, 2017. The HDYEF was merged into HIOF and ceased to exists from July 01, 2017. The unit holders of HDYEF who have not exercised the exit option during the aforesaid exit window have been allotted units of HIOF at the NAV declared as on the close of business hours on June 30, 2017.
10 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
11 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
20
3 HSBC INDIA OPPORTUNITIES FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC INDIA OPPORTUNITIES FUND 3
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC MIDCAP EQUITY FUND 16
HSBC Midcap Equity FundAn Open-ended Diversified Equity Scheme
Abridged Annual Report 2016 - 2017
1
HSBC MIDCAP EQUITY FUND 16
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
16 HSBC MIDCAP EQUITY FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC MIDCAP EQUITY FUND 16
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
16 HSBC MIDCAP EQUITY FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Midcap Equity Fund (HMEF) – an open-ended diversifi ed Equity SchemeHMEF seeks to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However, it could move a portion of its assets towards fi xed income securities if the fund manager becomes negative on the Indian equity markets.
The net assets of HMEF amounted to Rs. 429.86 crores as at March 31, 2017 as compared to Rs. 360.31 crores as at March 31, 2016. Around 99.16 % of the net assets were invested in equities, 1.13% of the net assets were invested in reverse repos / CBLO and (-0.29%) in net current assets as at March 31, 2017.
HMEF has done well in terms of outperformance v/s its benchmark due to stock selection across various sectors for long term periods. The focus on reasonable growth oriented companies available at attractive valuations (price to book ratio / return on equity) paid off over longer periods of outperformance v/s benchmark. HMEF continues to be overweight in Auto Ancillary, Agro & Specialty Chemicals, Capital Goods, Financials, Industrials and underweight in FMCG sector.
Date of Inception : 19 May 2005 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Midcap Equity Fund - Growth 35.35 30.08 21.82 14.39
S&P BSE Midcap (Scheme Benchmark) 32.75 25.76 17.29 NA
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 13.94
Rs. 10,000, if invested in HMEF, would have become 13,535 22,011 26,823 47,213
Rs. 10,000, if invested in S&P BSE Midcap, would have become
13,275 19,890 22,193 NA
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 45,140
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC MIDCAP EQUITY FUND 16
NA means not available. BSE vide its notifi cation dated April 10, 2015 have notifi ed change in the index composition of S&P BSE Midcap Index. As a result returns for the said benchmark are different when compared to the historically published returns. The corresponding benchmark returns for inception of the scheme has not been provided, as the historical index data for S&P BSE Midcap Index is available only from September 16, 2005 whereas the inception date of the scheme is May 19, 2005.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
16 HSBC MIDCAP EQUITY FUND
these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC MIDCAP EQUITY FUND 16
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
SchemeUnclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Midcap Equity Fund 2730524.06 390 2218703.18 81
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
16 HSBC MIDCAP EQUITY FUND
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC MIDCAP EQUITY FUND 16
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
16 HSBC MIDCAP EQUITY FUND
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC MIDCAP EQUITY FUND 16
To the Board of Trustees of
HSBC Mutual Fund - HSBC Midcap Equity Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Midcap Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report
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16 HSBC MIDCAP EQUITY FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
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HSBC MIDCAP EQUITY FUND 16
Rs. in Lakhs
HSBC MIDCAP EQUITY FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 11,170.04 12,380.692 Reserves & Surplus2.1 Unit Premium Reserves 2,213.63 3,485.442.2 Unrealised Appreciation Reserve 11,514.23 3,568.262.3 Other Reserves 18,146.21 16,555.573 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 200.11 401.14
TOTAL 43,244.22 36,391.10
ASSETS – –1 Investments1.1 Listed Securities:1.1.1 Equity Shares 42,631.61 35,839.471.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 42,631.61 35,839.472 Deposits 1.40 3.023 Other Current Assets3.1 Cash & Bank Balance 23.21 1.613.2 CBLO / Reverse Repo Lending – 181.593.3 Others 588.00 365.414 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 43,244.22 36,391.10
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
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16 HSBC MIDCAP EQUITY FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC MIDCAP EQUITY FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 368.14 673.891.2 Interest 31.99 39.961.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments4,792.45 4,694.89
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.11 0.15
(A) 5,192.69 5,408.892 EXPENSES2.1 Management fees 593.92 533.252.2 Service tax on Management fees 88.68 74.692.3 Transfer agents fees and expenses 48.64 46.312.4 Custodian fees 4.81 4.892.5 Trusteeship fees 0.81 0.802.6 Commission to Agents 309.18 324.902.7 Marketing & Distribution expenses – 1.812.8 Audit fees 2.37 1.202.9 Investor Education Expenses 7.86 7.642.10 Other operating expenses 8.34 12.642.11 Less: Expenses to be Reimbursed by the Investment Manager (29.96) –
(B) 1,034.65 1,008.13
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A – B = C) 4,158.04 4,400.76
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C + D)] 4,158.04 4,400.76
6 Change in unrealised appreciation inthe value of investments and derivatives (F) (7,945.97) 5,370.88
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (3,787.93) 9,771.64
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 7,945.97 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 5,370.887.3 Add / (Less): Equalisation (1,804.50) 1,098.567.4 Transfer from Reserve Fund 16,555.57 12,412.07
8 Total 18,909.11 17,911.39
9 Dividend appropriation9.1 Income Distributed during the year 762.90 1,355.829.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward to
Balance sheet18,146.21 16,555.57
Notes to Accounts – Annexure I
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HSBC MIDCAP EQUITY FUND 16
Key Statistics for the year ended March 31, 2017
HSBC MIDCAP EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 36.4435 37.4445
Dividend Option 17.0700 20.0184
Direct Plan - Growth Option 37.3519 38.0836
Direct Plan - Dividend Option 19.9660 20.3576
High
Growth Option 49.3277 42.8105
Dividend Option 22.2175 22.8874
Direct Plan - Growth Option 50.9217 43.6471
Direct Plan - Dividend Option 26.0904 23.3310
Low
Growth Option 36.2656 32.1696
Dividend Option 16.6941 15.0681
Direct Plan - Growth Option 37.1732 32.9455
Direct Plan - Dividend Option 19.8705 17.6106
End
Growth Option 49.3277 36.4435
Dividend Option 21.2134 17.0700
Direct Plan - Growth Option 50.9217 37.3519
Direct Plan - Dividend Option 25.3285 19.9660
2. Closing Assets Under Management (Rs. in Lakhs)
End 42,986 36,031
Average (AAuM)1 39,287 38,330
3. Gross income as % of AAuM2 13.22% 14.11%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees ) (planwise)
Regular Plan 2.75% 2.76%
Direct Plan 2.04% 1.99%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.51% 1.39%
Direct Plan 1.51% 1.39%
5. Net Income as a percentage of AAuM3 10.58% 11.48%
6. Portfolio turnover ratio4 0.30 0.55
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16 HSBC MIDCAP EQUITY FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC MIDCAP EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Dividend Option 1.75 2.50
Direct Plan - Dividend Option 1.75 –
Corporate
Dividend Option 1.75 2.50
Direct Plan - Dividend Option 1.75 –
8. Returns (%):
a. Last One Year
Scheme
Growth Option 35.3539 (2.6661)
Direct Plan - Growth Option 36.3296 (1.9161)
Benchmark
S&P BSE Midcap Index 32.7499 0.2517
b. Since Inception
Scheme
Growth Option 14.3854 12.6284
Direct Plan - Growth Option 23.6306 19.9627
Benchmark
S&P BSE Midcap Index 10.8077 8.9255
1. AAuM=Average daily net assets.2. Gross income = amount against (A) in the Revenue account i.e. Income.3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year.4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.
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HSBC MIDCAP EQUITY FUND 16
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC MIDCAP EQUITY FUND
1 Investments: 1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the
benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at Years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2017 and March 31, 2016 are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 1,409,769,112 32.80 779,701,441 21.64
– Depreciation 258,346,442 6.01 422,875,480 11.74
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016 - 2017 (excluding accretion of discount) is Rs. 1,176,145,124 and Rs. 1,770,798,009 respectively being 29.94% and 45.07% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015 - 2016 (excluding accretion of discount) is Rs. 2,165,688,524 and Rs. 2,089,384,566 respectively being 56.50% and 54.51% of the average daily net assets.
1.8. Non-Traded securities in the portfolio of the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor/AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 100.28 67.62 15,132,500 54.27
Name of Sponsor/AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 69.62 40.43 13,033,279 42.16
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16 HSBC MIDCAP EQUITY FUND
Brokerage paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
"Brokerage paid
[Rs.]“(on accrual basis)“"
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 – – – –
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission / Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the year ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016 :
Description
2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 60,015,072.936 24,366,468.574 30,262,335.299 54,119,206.211 10
Dividend Option 47,674,873.624 11,627,491.175 15,843,977.997 43,458,386.802 10
Direct Plan - Growth Option
15,888,452.518 2,423,946.434 4,432,792.649 13,879,606.303 10
Direct Plan - Dividend Option
228,462.529 368,903.382 354,122.150 243,243.761 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC MIDCAP EQUITY FUND 16
Description
2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 53,719,887.361 26,870,376.822 20,575,191.247 60,015,072.936 10
Dividend Option 46,725,476.045 19,022,459.117 18,073,061.538 47,674,873.624 10
Direct Plan - Growth Option
17,397,033.394 6,942,729.095 8,451,309.971 15,888,452.518 10
Direct Plan - Dividend Option
124,796.316 213,403.953 109,737.740 228,462.529 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 129,937.630 and as on 31/03/2016 is 129,937.630
5 Previous year’s fi gures have been re–grouped/re-arranged where appropriate.
6 No contingent liabilities for the year ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 11,196 (2016: Rs. 14,542) represents Exit load (net of service tax) credited to the scheme .
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
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16 HSBC MIDCAP EQUITY FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC MIDCAP EQUITY FUND 16
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC INFRASTRUCTURE FUND 14
HSBC Infrastructure Equity Fund(Formerly HSBC Progressive Themes Fund)An Open-ended Equity Scheme
Abridged Annual Report 2016 - 2017
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HSBC INFRASTRUCTURE FUND 14
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
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14 HSBC INFRASTRUCTURE FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
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HSBC INFRASTRUCTURE FUND 14
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
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14 HSBC INFRASTRUCTURE FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Infrastructure Equity Fund (HIEF) – an open-ended equity SchemeHIEF seeks to generate long term capital appreciation from an actively managed portfolio of equity and equity related securities by investing predominantly in equity and equity related securities of companies engaged in or expected to benefi t from growth and development of Infrastructure in India.
The net assets of HIEF amounted to Rs. 126.90 crores as at March 31, 2017 as compared to Rs. 105.88 crores as at March 31, 2016. Around 99.67% of the net assets were invested in equities, 1.06% of the net assets were invested in reverse repos / CBLO and (-0.73%) in net current assets as at March 31, 2017.
HIEF is a theme based fund with focus on infrastructure segment. During the FY 2016-17, the fund performed better than diversifi ed benchmark like Nifty while underperformed BSE Infrastructure Index. With government focus on roads, railways, power, defence, housing, infrastructure theme fund like HIEF is expected to do well going forward.
Date of Inception : 23 February 2006 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Infrastructure Equity Fund - Growth 32.76 23.80 12.80 6.76
S&P BSE India Infrastructure (Scheme Benchmark) 40.59 NA NA NA
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 13.94
Rs. 10,000, if invested in HIEF, would have become 13,276 18,975 18,261 12,048
Rs. 10,000, if invested S&P BSE India Infrastructure, would have become
14,059 NA NA NA
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 14,499
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
NA – Not available. The benchmark of the scheme was changed from S&P BSE 200 to S&P BSE India Infrastructure Index with effect from 11th November, 2016 as a more suitable benchmark was identifi ed which better matched the portfolio strategy. There has been no change to investment management of the scheme. Since, S&P BSE India Infrastructure Index was launched on May 19, 2014 and the historic index data prior to the said date is not available, wherever scheme’s corresponding benchmark returns are not available, the same has not been provided.
Trustees’ ReportFor the year ended March 31, 2017
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HSBC INFRASTRUCTURE FUND 14
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
14 HSBC INFRASTRUCTURE FUND
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI).
The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with
the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC INFRASTRUCTURE FUND 14
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Infrastructure Equity Fund 1064123.00 287 7819277.56 389
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
14 HSBC INFRASTRUCTURE FUND
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints
pending at the
beginning of the year
(b) No. of complaintsreceivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC INFRASTRUCTURE FUND 14
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decisionFor Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund. b) The price and redemption value of the units, and income from them, can go up as well as down with
fl uctuations in the market value of its underlying investments.c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall
be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. GidwaniChairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
14 HSBC INFRASTRUCTURE FUND
To the Board of Trustees of
HSBC Mutual Fund - HSBC Infrastructure Equity Fund (formerly HSBC Progressive Themes Fund)
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Infrastructure Equity Fund (formerly HSBC Progressive Themes Fund) (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
11
HSBC INFRASTRUCTURE FUND 14
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
12
14 HSBC INFRASTRUCTURE FUND
Rs. in Lakhs
HSBC INFRASTRUCTURE EQUITY FUND
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 6,543.54 7,286.82 2 Reserves & Surplus2.1 Unit Premium Reserves (9,893.78) (10,956.68)2.2 Unrealised Appreciation Reserve 2,369.12 848.50 2.3 Other Reserves 13,668.51 13,407.67 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 162.15 141.17
TOTAL 12,849.54 10,727.48
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 12,643.60 10,528.43 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 12,643.60 10,528.43
2 Deposits 0.52 0.52 3 Other Current Assets3.1 Cash & Bank Balance 3.69 1.87 3.2 CBLO / Reverse Repo Lending 134.08 132.70 3.3 Others 67.65 63.96 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 12,849.54 10,727.48
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
13
HSBC INFRASTRUCTURE FUND 14
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC INFRASTRUCTURE EQUITY FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 236.43 218.73 1.2 Interest 8.56 14.90 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments1,832.61 2,264.91
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.02 0.03
(A) 2,077.62 2,498.57 2 EXPENSES2.1 Management fees 204.55 227.59 2.2 Service tax on Management fees 30.51 31.68 2.3 Transfer agents fees and expenses 13.99 14.90 2.4 Custodian fees 1.38 1.59 2.5 Trusteeship fees 0.22 0.26 2.6 Commission to Agents 69.66 71.77 2.7 Marketing & Distribution expenses 2.71 4.68 2.8 Audit fees 0.71 0.35 2.9 Investor Education Expenses 2.26 2.51 2.10 Other operating expenses 4.71 6.58 2.11 Less: Expenses to be Reimbursed by the Investment Manager – –
(B) 330.70 361.91
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 1,746.92 2,136.66
4 Change in Unrealised Depreciation in value of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 1,746.92 2,136.66
6 Change in unrealised appreciation in the value of investments and derivatives (F) (1,520.62) 4,506.34
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 226.30 6,643.00
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 1,520.62 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 4,506.34 7.3 Add / (Less): Equalisation (1,486.08) (1,758.11)7.4 Transfer from Reserve Fund 13,407.67 13,029.12 8 Total 13,668.51 13,407.67 9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward
to Balance sheet13,668.51 13,407.67
Notes to Accounts – Annexure I
14
14 HSBC INFRASTRUCTURE FUND
Key Statistics for the year ended March 31, 2017
HSBC INFRASTRUCTURE EQUITY FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 15.5812 18.9292
Dividend Option 13.2533 16.1011
Direct Plan - Growth Option 15.9551 19.2475
Direct Plan - Dividend Option 13.5728 16.3734
High
Growth Option 20.6858 20.2839
Dividend Option 17.5953 17.2535
Direct Plan - Growth Option 21.3313 20.6752
Direct Plan - Dividend Option 18.1461 17.5880
Low
Growth Option 15.0317 13.8894
Dividend Option 12.7859 11.8143
Direct Plan - Growth Option 15.4084 14.2095
Direct Plan - Dividend Option 13.1077 12.0878
End
Growth Option 20.6858 15.5812
Dividend Option 17.5953 13.2533
Direct Plan - Growth Option 21.3313 15.9551
Direct Plan - Dividend Option 18.1461 13.5728
2. Closing Assets Under Management (Rs. in Lakhs)
End 12,690 10,588
Average (AAuM)1 11,304 12,555
3. Gross income as % of AAuM2 18.38% 19.90%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Plan (Continue) 2.93% 2.89%
Direct Plan 2.23% 2.19%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 1.81% 1.81%
Direct Plan 1.81% 1.81%
5. Net Income as a percentage of AAuM3 15.45% 17.02%
6. Portfolio turnover ratio4 0.22 0.21
15
HSBC INFRASTRUCTURE FUND 14
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INFRASTRUCTURE EQUITY FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Growth Option 32.7613 (17.6432)
Direct Plan - Growth Option 33.6958 (17.0631)
Benchmark
S&P BSE India Infrastructure Index** 40.5861 NA
S&P BSE 200 NA (7.8430)
b. Since Inception
Scheme
Growth Option 6.7632 4.4856
Direct Plan - Growth Option 13.4908 7.9054
Benchmark
S&P BSE India Infrastructure Index** 8.3138 NA
S&P BSE 200 NA 9.6934
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
** Benchmark changed from 11 November, 2016,
16
14 HSBC INFRASTRUCTURE FUND
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC INFRASTRUCTURE EQUITY FUND
1 Investments:
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Year 2016 -2017 and percentage to net assets are as under :
Company Name Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 439,260,333 34.61 339,553,176 32.07
– Depreciation 202,348,275 15.95 254,702,792 24.06
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 246,487,792 and Rs. 376,074,513 respectively being 21.80% and 33.27% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 263,841,696 and Rs. 433,083,514 respectively being 21.02% and 34.50% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2017 and March 31, 2016 are Nil.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor /AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.50 5.48 736,714 11.68
17
HSBC INFRASTRUCTURE FUND 14
Name of Sponsor /AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.27 4.55 809,773 12.16
Brokerage paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs. ]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 _ _ _ _
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs. ]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 – – – –
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
18
14 HSBC INFRASTRUCTURE FUND
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016 – 2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 39,294,611.140 4,331,669.941 6,259,790.829 37,366,490.252 10
Dividend Option 33,013,292.954 115,442.339 5,591,659.447 27,537,075.846 10
Direct Plan - Growth Option
517,609.397 167,762.524 179,812.708 505,559.213 10
Direct Plan - Dividend Option
42,685.343 314,665.324 331,125.073 26,225.594 10
Description
2015 – 2016
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 43,406,482.885 1,812,066.499 5,923,938.244 39,294,611.140 10
Dividend Option 39,166,088.472 542,512.816 6,695,308.334 33,013,292.954 10
Direct Plan - Growth Option
228,501.368 560,493.708 271,385.679 517,609.397 10
Direct Plan - Dividend Option
45,059.572 181,552.523 183,926.752 42,685.343 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 274,726.784 and as on 31/03/2016 is 274,726.784.
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 2,264 represents Exit load (net of service tax) credited to the Scheme. (2016: Rs. 2,585 represents Exit load (net of service tax) credited to the Scheme)
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
19
HSBC INFRASTRUCTURE FUND 14
10 Change in Fundamental Attribute - HSBC Infrastructure Equity Fund (Formerly HSBC Progressive Themes Fund) (“HIEF”)
In accordance with regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996, HSBC Progressive Themes Fund had undergone change in its fundamental attributes i.e. changes in its asset allocation and investment objective and it was renamed as HSBC Infrastructure Equity Fund with effect from September 14, 2015. A written communication was sent to the unit holders and a Notice-cum-addendum was published in newspapers, informing the investors about these changes with an option to exit for those unit holders who did not wish to continue to hold units in view of the said changes.
11 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
20
14 HSBC INFRASTRUCTURE FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC INFRASTRUCTURE FUND 14
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC TAX SAVER EQUITY FUND 13
HSBC Tax Saver Equity FundAn open-ended Equity Linked Savings Scheme
Abridged Annual Report 2016 - 2017
1
HSBC TAX SAVER EQUITY FUND 13
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
13 HSBC TAX SAVER EQUITY FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC TAX SAVER EQUITY FUND 13
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
13 HSBC TAX SAVER EQUITY FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Tax Saver Equity Fund (HTSF) - an open ended Equity linked Savings SchemeHTSF seeks to provide long term capital appreciation by investing in a diversifi ed portfolio of equity & equity related instruments of companies across various sectors and industries, with no capitalization bias. The Fund may also invest in fi xed income securities.
The net assets of HTSF amounted to Rs. 181.97 crores as at March 31, 2017 compared to Rs 161.21 crores as at March 31, 2016. Around 97.18% of the net assets were invested in equities, 0.87% of the net assets were invested in reverse repos / CBLO and 1.95% in net current assets as at March 31, 2017.
HTSF outperformed its benchmark during most of the time periods due to reasonable stock selection and the approach of creating a stable and quality portfolio. Going forward, the portfolio would be managed in a similar fashion of bottom up stock picking approach following our valuation - profi tability framework of price to book/return on equity balanced by adequate risk management.
Date of Inception : 5 January 2007 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Tax Saver Equity Fund - Growth 30.64 19.76 18.91 12.43
S&P BSE 200 (Scheme Benchmark) 22.47 14.17 13.08 8.92
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 8.49
Rs. 10,000, if invested in HTSF, would have become 13,064 17,177 23,773 33,196
Rs. 10,000, if invested in S&P BSE 200, would have become
12,247 14,882 18,487 24,003
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 23,035
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC TAX SAVER EQUITY FUND 13
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
13 HSBC TAX SAVER EQUITY FUND
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI).
The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with
the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC TAX SAVER EQUITY FUND 13
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Tax Saver Equity Fund 4929034.13 992 4527953.10 162
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
13 HSBC TAX SAVER EQUITY FUND
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints
pending at the
beginning of the year
(b) No. of complaintsreceivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC TAX SAVER EQUITY FUND 13
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decisionFor Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund. b) The price and redemption value of the units, and income from them, can go up as well as down with
fl uctuations in the market value of its underlying investments.c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall
be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. GidwaniChairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
13 HSBC TAX SAVER EQUITY FUND
To the Board of Trustees of
HSBC Mutual Fund - HSBC Tax Saver Equity Fund
Report on the Financial StatementsReport on the fi nancial statements
We have audited the accompanying fi nancial statements of HSBC Tax Saver Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report
11
HSBC TAX SAVER EQUITY FUND 13
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
12
13 HSBC TAX SAVER EQUITY FUND
Rs. in Lakhs
HSBC TAX SAVER EQUITY FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 6,257.44 7,105.082 Reserves & Surplus2.1 Unit Premium Reserves (3,138.29) (3,122.45)2.2 Unrealised Appreciation Reserve 4,371.93 2,113.002.3 Other Reserves 10,699.03 10,027.603 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 197.22 234.31
TOTAL 18,387.33 16,357.54
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 17,684.68 15,927.941.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 17,684.68 15,927.94
2 Deposits 1.59 0.763 Other Current Assets3.1 Cash & Bank Balance 14.60 11.363.2 CBLO / Reverse Repo Lending 157.53 160.973.3 Others 528.93 256.514 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 18,387.33 16,357.54
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
13
HSBC TAX SAVER EQUITY FUND 13
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC TAX SAVER EQUITY FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 153.43 222.381.2 Interest 23.62 24.561.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments2,698.24 2,903.43
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 2,875.29 3,150.37
2 EXPENSES2.1 Management fees 295.43 302.002.2 Service tax on Management fees 44.06 42.102.3 Transfer agents fees and expenses 21.31 21.092.4 Custodian fees 2.07 2.222.5 Trusteeship fees 0.37 0.472.6 Commission to Agents 114.45 116.582.7 Marketing & Distribution expenses 0.49 –2.8 Audit fees 1.06 0.552.9 Investor Education Expenses 3.44 3.522.10 Other operating expenses 6.30 8.282.11 Less: Expenses to be Reimbursed by the Investment Manager – (1.35)
(B) 488.98 495.46
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A – B = C) 2,386.31 2,654.91
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C + D)] 2,386.31 2,654.91
6 Change in unrealised appreciation in thevalue of investments and derivatives (F) 2,258.93 (3,571.51)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 4,645.24 (916.60)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 3,571.517.2 Less: Balance transfer to Unrealised Appreciation Reserve 2,258.93 –7.3 Add / (Less): Equalisation (1,366.65) (899.48)7.4 Transfer from Reserve Fund 10,027.60 8,666.50
8 Total 11,047.26 10,421.93
9 Dividend appropriation9.1 Income Distributed during the year 348.23 394.339.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward to
Balance sheet 10,699.03 10,027.60
Notes to Accounts - Annexure I
14
13 HSBC TAX SAVER EQUITY FUND
Key Statistics for the year ended March 31, 2017
HSBC TAX SAVER EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 25.4025 26.7780
Regular Plan Dividend Option 18.0472 20.6127
Direct Plan - Growth Option 26.0174 27.2337
Direct Plan - Dividend Option 18.5799 21.0259
High
Regular Plan Growth Option 33.1854 28.3838
Regular Plan Dividend Option 23.1073 21.8488
Direct Plan - Growth Option 34.2301 28.9382
Direct Plan - Dividend Option 23.9550 22.3418
Low
Regular Plan Growth Option 24.6506 22.3150
Regular Plan Dividend Option 17.5131 17.1772
Direct Plan - Growth Option 25.2508 22.8397
Direct Plan - Dividend Option 18.0324 17.6335
End
Regular Plan Growth Option 33.1854 25.4025
Regular Plan Dividend Option 22.0461 18.0472
Direct Plan - Growth Option 34.2301 26.0174
Direct Plan - Dividend Option 22.9142 18.5799
2. Closing Assets Under Management (Rs. in Lakhs)
End 18,197 16,121
Average (AAuM)1 17,217 17,617
3. Gross income as % of AAuM2 16.70% 17.88%
4. Expense Ratio:
a. Total Expense as % of AAuM (Including service tax on Management fees) (planwise)
Regular Plan (Continue) 2.85% 2.82%
Direct Plan 2.14% 2.12%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 1.72% 1.71%
Direct Plan 1.72% 1.71%
5. Net Income as a percentage of AAuM3 13.86% 15.07%
6. Portfolio turnover ratio4 0.63 0.57
15
HSBC TAX SAVER EQUITY FUND 13
HSBC TAX SAVER EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option 1.50 1.50
Direct Plan - Dividend Option 1.50 1.50
Corporate
Regular Plan Dividend Option 1.50 1.50
Direct Plan - Dividend Option 1.50 1.50
8. Returns (%):
a. Last One Year
Scheme
Regular Plan - Growth Option 30.6383 (5.1230)
Direct Plan - Growth Option 31.5662 (4.4542)
Benchmark
BSE 200 22.4731 (7.8430)
b. Since Inception
Scheme
Regular Plan Growth Option 12.4264 10.6146
Direct Plan - Growth Option 17.9834 14.0892
Benchmark
S&P BSE 200 8.9235 7.5503
1 AAuM=Average daily net assets.2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.
Key Statistics for the year ended March 31, 2017 (Contd...)
16
13 HSBC TAX SAVER EQUITY FUND
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC TAX SAVER EQUITY FUND
1 Investments:
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies are as under :
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 1,452,436,300 – 402,773,900
Equities – 94,659,583 34,045,924 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended 31 March, 2016 is NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years and their percentages to net assets are as under:
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 474,804,951 26.09 282,011,859 17.49
– Depreciation 37,612,098 2.07 70,711,755 4.39
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) is Rs. 1,086,271,967 and Rs. 1,406,333,513 respectively being 63.09% and 81.69% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2014-15 (excluding accretion of discount) is Rs. 913,780,521 and Rs. 1,486,412,318 respectively being 46.58% and 75.77% of the average daily net assets.
1.8. Non-Traded securities
Aggregate fair value of non-traded (including private placement) investments as determined by HSBC Asset Management (India) Private Limited under the procedures approved by the Board of Trustees as at March 31, 2017 are as follows:
17
HSBC TAX SAVER EQUITY FUND 13
Non-Traded securities in the portfolio as on March 31, 2017 are NIL
Name of Scheme
March 31, 2016
Company Name Fair Value (Rupees)
% to Net Assets
HTSF Crompton Greaves Consumer Electrical Ltd 23,239,440 1.44%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.96 18.38 390,163 3.79
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.48 12.24 359,237 3.32
Brokerage paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs. ]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 2.63 1.05 31,545 1.06
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs. ]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 4.54 2.05 54,646 2.07
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
18
13 HSBC TAX SAVER EQUITY FUND
The brokerage paid was at rates similar to those offered to other brokers / distributors. And the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016.
Description
2016-2017
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Growth Option
44,160,495.610 863,365.911 6,378,858.358 38,645,003.163 10
Dividend Option
26,079,028.181 379,489.487 3,448,724.749 23,009,792.919 10
Direct Plan - Growth Option
646,815.360 163,110.181 84,112.404 725,813.137 10
Direct Plan - Dividend Option
164,419.463 41,924.891 12,547.092 193,797.262 10
Description
2015-2016
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Growth Option
48,473,903.152 544,751.743 4,858,159.285 44,160,495.610 10
Dividend Option
28,501,783.448 285,677.670 2,708,432.937 26,079,028.181 10
Direct Plan - Growth Option
368,064.984 294,476.543 15,726.167 646,815.360 10
Direct Plan - Dividend Option
126,180.031 38,307.796 68.364 164,419.463 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 187,801.892 and as on 31/03/2016 is 187,801.892
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC TAX SAVER EQUITY FUND 13
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income for the years ended March 31, 2017 and March 31, 2016 NIL .
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
13 HSBC TAX SAVER EQUITY FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC TAX SAVER EQUITY FUND 13
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC DYNAMIC FUND 2
HSBC Dynamic FundAn open-ended Scheme
Abridged Annual Report 2016 - 2017
1
HSBC DYNAMIC FUND 2
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
2 HSBC DYNAMIC FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC DYNAMIC FUND 2
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
2 HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2017
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Dynamic Fund (HDF) - an open-ended SchemeHDF seeks to provide long term capital appreciation by allocating funds in equity and equity related instruments. It also has the fl exibility to move, entirely if required, into debt instruments in times that the view on equity markets seems negative.
The net assets of HDF amounted to Rs. 46.22 crores as at March 31, 2017 compared to Rs. 53.41 crores as at March 31, 2016. Around 81.59% of the net assets were invested in equities, 18.31% of the net assets were invested in reverse repos / CBLO and 0.10% in net current assets as at March 31, 2017.
HDF has underperformed its benchmark S&P BSE200 over the FY 2016-17 by 569 bps primarily due to high cash balance. The scheme allocates capital across equity and debt securities dynamically. In a year when equity market was up by 22.5%, approximately 18% allocation to cash (full year average) had a negative impact on attribution. Selections in sectors like Financials, Consumer Discretionary, and Industrials contributed to reducing the underperformance during FY 2016-17.
Date of Inception : 24 September 2007 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Dynamic Fund - Growth 16.78 11.75 10.14 4.76
S&P BSE 200 (Scheme Benchmark) 22.47 14.17 13.08 7.13
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 6.73
Rs. 10,000, if invested in HDF, would have become 11,678 13,954 16,209 15,578
Rs. 10,000, if invested in S&P BSE 200, would have become
12,247 14,882 18,487 19,280
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 18,603
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
5
HSBC DYNAMIC FUND 2
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
6
2 HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI).
The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with
the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
7
HSBC DYNAMIC FUND 2
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Dynamic Fund – – 2412057.37 82
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
8
2 HSBC DYNAMIC FUND
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints
pending at the
beginning of the year
(b) No. of complaintsreceivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC DYNAMIC FUND 2
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decisionFor Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund. b) The price and redemption value of the units, and income from them, can go up as well as down with
fl uctuations in the market value of its underlying investments.c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall
be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. GidwaniChairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
2 HSBC DYNAMIC FUND
To the Board of Trustees of
HSBC Mutual Fund - HSBC Dynamic Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Dynamic Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
11
HSBC DYNAMIC FUND 2
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
12
2 HSBC DYNAMIC FUND
Rs. in Lakhs
HSBC DYNAMIC FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 2,965.34 4,005.92 2 Reserves & Surplus2.1 Unit Premium Reserves (2,675.16) (3,525.40)2.2 Unrealised Appreciation Reserve 747.99 356.89 2.3 Other Reserves 3,582.61 4,507.05 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 90.62 85.85
TOTAL 4,711.40 5,430.31
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 3,772.02 4,314.97 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 3,772.02 4,314.97 2 Deposits 2.53 4.06 3 Other Current Assets3.1 Cash & Bank Balance 21.16 5.96 3.2 CBLO / Reverse Repo Lending 846.13 1,080.43 3.3 Others 69.56 24.89 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 4,711.40 5,430.31
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
13
HSBC DYNAMIC FUND 2
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC DYNAMIC FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 56.38 52.77
1.2 Interest 57.29 96.37
1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –
1.4 Realised Gains / (Losses) on Interscheme sale of investments – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
430.94 486.85
1.6 Realised Gains / (Losses) on Derivative Transactions – –
1.7 Other Income 0.01 0.01
(A) 544.62 636.00
2 EXPENSES2.1 Management fees 85.50 102.30 2.2 Service tax on Management fees 12.74 14.23 2.3 Transfer agents fees and expenses 5.98 6.94 2.4 Custodian fees 0.50 0.59 2.5 Trusteeship fees 0.10 0.12 2.6 Commission to Agents 34.66 41.01 2.7 Marketing & Distribution expenses 0.11 –2.8 Audit fees 0.27 0.20 2.9 Investor Education Expenses 0.97 1.16 2.10 Other operating expenses 1.87 2.86 2.11 Less: Expenses to be Reimbursed by the Investment Manager – –
(B) 142.70 169.41
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 401.92 466.59
4 Change in Unrealised Depreciation in value of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 401.92 466.59
6 Change in unrealised appreciation in the value of investments and derivatives (F) 391.10 (670.33)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 793.02 (203.74)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 670.33
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 391.10 –
7.3 Add / (Less): Equalisation (1,326.36) (640.60)
7.4 Transfer from Reserve Fund 4,507.05 4,681.06
8 Total 3,582.61 4,507.05
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet
3,582.61 4,507.05
Notes to Accounts – Annexure I
14
2 HSBC DYNAMIC FUND
Key Statistics for the year ended March 31, 2017
HSBC DYNAMIC FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 13.3378 13.7952
Regular Plan Dividend Option 13.3378 13.7952
Direct Plan - Growth Option 13.6523 14.0220
Direct Plan - Dividend Option 13.6523 14.0220
High
Regular Plan Growth Option 15.5762 14.2913
Regular Plan Dividend Option 15.5762 14.2913
Direct Plan - Growth Option 16.0556 14.5563
Direct Plan - Dividend Option 16.0556 14.5563
Low
Regular Plan Growth Option 13.0429 12.0504
Regular Plan Dividend Option 13.0429 12.0504
Direct Plan - Growth Option 13.3523 12.3264
Direct Plan - Dividend Option 13.3523 12.3264
End
Regular Plan Growth Option 15.5762 13.3378
Regular Plan Dividend Option 15.5762 13.3378
Direct Plan - Growth Option 16.0556 13.6523
Direct Plan - Dividend Option 16.0556 13.6523
2. Closing Assets Under Management (Rs. in Lakhs)
End 4,622 5,341
Average (AAuM)1 4,867 5,799
3. Gross income as % of AAuM2 11.19% 10.97%
4. Expense Ratio:
a. Total Expense as % of AAuM (Including service tax on Management fees) (planwise)
Regular Plan (Continue) 2.94% 2.93%
Direct Plan 2.24% 2.23%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 1.76% 1.76%
Direct Plan 1.76% 1.76%
5. Net Income as a percentage of AAuM3 8.26% 8.05%
6. Portfolio turnover ratio4 0.66 0.89
15
HSBC DYNAMIC FUND 2
HSBC DYNAMIC FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 16.7824 (3.3067)
Direct Plan - Growth Option 17.6036 (2.6295)
Benchmark
S&P BSE 200 22.4731 (7.8430)
b. Since Inception
Scheme
Regular Plan Growth Option 4.7634 3.4369
Direct Plan - Growth Option 10.1110 7.8821
Benchmark
S&P BSE 200 7.1347 5.4659
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue Account i.e. Income3. Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
Key Statistics for the year ended March 31, 2017 (Contd...)
16
2 HSBC DYNAMIC FUND
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC DYNAMIC FUND
1 Investments:
1.1. It is confi rmed that investments of the schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives amount as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies :
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 1,452,436,300 – 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities 1,025,985 1,025,985 7,570,930 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Years and percentage to net assets.
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 76,542,575 16.56 40,220,736 7.53
– Depreciation 1,743,430 0.38 4,531,408 0.85
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016 - 2017 (excluding accretion of discount) is Rs. 318,875,139 and Rs. 455,418,228 respectively being 65.52% and 93.57% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015 - 2016 (excluding accretion of discount) is Rs. 526,956,230 and Rs. 516,964,736 respectively being 90.86% and 89.14% of the average daily net assets.
1.8. Non-Traded securities in the portfolio of the Scheme as of the Years ended March 31, 2017 and March 31, 2016 are NIL.
17
HSBC DYNAMIC FUND 2
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 4.64 90.33 1,084,039 34.14
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 3.49 68.58 1,602,589 41.04
Brokerage paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 0.32 0.31 3,816 0.32
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission / Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong Kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
18
2 HSBC DYNAMIC FUND
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016 :
Description
2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
21,838,405.104 3,055,782.763 5,761,102.519 19,133,085.348 10
Regular Plan Dividend Option
17,759,428.505 420,688.114 8,058,316.625 10,121,799.994 10
Direct Plan - Growth Option
456,848.648 15,258.393 78,994.438 393,112.603 10
Direct Plan - Dividend Option
4,528.200 2,148.166 1,256.964 5,419.402 10
Description
2015–2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
24,741,200.315 1,165,810.374 4,068,605.585 21,838,405.104 10
Regular Plan Dividend Option
20,918,533.869 1,859,487.241 5,018,592.605 17,759,428.505 10
Direct Plan - Growth Option
96,070.412 373,274.415 12,496.179 456,848.648 10
Direct Plan - Dividend Option
2,394.352 2,133.848 – 4,528.200 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 360,147.516 & as on 31/03/2016 is 360,147.516
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 1,148.06 represents Exit load (net of service tax) credited to the scheme. (2016: Rs. 1,115 represents Exit load (net of service tax) credited to the scheme.)
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC DYNAMIC FUND 2
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
2 HSBC DYNAMIC FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC DYNAMIC FUND 2
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC DIVIDEND YIELD EQUITY FUND 5
HSBC Dividend Yield Equity FundAn open-ended Equity Scheme
Abridged Annual Report 2016 - 2017
1
HSBC DIVIDEND YIELD EQUITY FUND 5
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
5 HSBC DIVIDEND YIELD EQUITY FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC DIVIDEND YIELD EQUITY FUND 5
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
5 HSBC DIVIDEND YIELD EQUITY FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Dividend Yield Equity Fund (HDYEF) - an open ended equity SchemeHDYEF aims to generate dividend yield and capital appreciation by primarily investing into equities and equity related securities of domestic Indian companies.
The net assets of HDYEF amounted to Rs. 42.49 crores as at March 31, 2017 compared to Rs. 38.52 crores as at March 31, 2016. Around 99.49 % of the net assets were invested in equities, 0.63% of the net assets were invested in reverse repos / CBLO and (-0.12%) in net current assets as at March 31, 2017.
The scheme out-performed its benchmark during FY 2016-17 due to overweight position in Industrial and Consumer discretionary. We will maintain the current positing and will continue to be invested in companies offering attractive dividend yields along with profi tability and valuation framework.
Date of Inception : 21 March 2007 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Dividend Yield Equity Fund - Growth 25.93 15.53 13.80 6.82
S&P BSE 200 (Scheme Benchmark) 22.47 14.17 13.08 9.96
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 9.28
Rs. 10,000, if invested in HDYEF, would have become 12,593 15,422 19,088 19,398
Rs. 10,000, if invested in S&P BSE 200, would have become
12,247 14,882 18,487 25,938
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 24,375
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC DIVIDEND YIELD EQUITY FUND 5
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
5 HSBC DIVIDEND YIELD EQUITY FUND
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI).
The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with
the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC DIVIDEND YIELD EQUITY FUND 5
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Dividend Yield Equity Fund – – 2846464.52 79
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
5 HSBC DIVIDEND YIELD EQUITY FUND
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints
pending at the
beginning of the year
(b) No. of complaintsreceivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC DIVIDEND YIELD EQUITY FUND 5
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decisionFor Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund. b) The price and redemption value of the units, and income from them, can go up as well as down with
fl uctuations in the market value of its underlying investments.c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall
be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. GidwaniChairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
5 HSBC DIVIDEND YIELD EQUITY FUND
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Dividend Yield Equity Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Dividend Yield Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
11
HSBC DIVIDEND YIELD EQUITY FUND 5
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
12
5 HSBC DIVIDEND YIELD EQUITY FUND
Rs. in Lakhs
HSBC DIVIDEND YIELD EQUITY FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 2,189.49 2,500.18 2 Reserves & Surplus2.1 Unit Premium Reserves (2,965.73) (3,295.69)2.2 Unrealised Appreciation Reserve 1,379.55 628.41 2.3 Other Reserves 3,644.97 4,018.55 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 44.25 48.51
TOTAL 4,292.53 3,899.96
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 4,227.48 3,813.00 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 4,227.48 3,813.00
2 Deposits 0.25 0.22 3 Other Current Assets3.1 Cash & Bank Balance 1.18 0.66 3.2 CBLO / Reverse Repo Lending 26.67 61.60 3.3 Others 36.95 24.48 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 4,292.53 3,899.96
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
13
HSBC DIVIDEND YIELD EQUITY FUND 5
Rs. in Lakhs
HSBC DIVIDEND YIELD EQUITY FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 101.77 104.55 1.2 Interest 2.79 7.80 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
171.69 598.86
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.01 –
(A) 276.26 711.21 2 EXPENSES2.1 Management fees 57.46 60.24 2.2 Service tax on Management fees 8.58 8.38 2.3 Transfer agents fees and expenses 4.92 5.04 2.4 Custodian fees 0.49 0.53 2.5 Trusteeship fees 0.08 0.09 2.6 Commission to Agents 26.63 28.72 2.7 Marketing & Distribution expenses 0.10 0.05 2.8 Audit fees 0.24 0.20 2.9 Investor Education Expenses 0.80 0.85 2.10 Other operating expenses 1.80 2.34 2.11 Less: Expenses to be Reimbursed by the Investment Manager – –
(B) 101.10 106.44 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 175.16 604.77
4 Change in Unrealised Depreciation in value of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 175.16 604.77
6 Change in unrealised appreciation in the value of investments and derivatives (F) 751.14 (976.00)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 926.30 (371.23)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve
– 976.00
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 751.14 –7.3 Add / (Less): Equalisation (548.74) (651.14)7.4 Transfer from Reserve Fund 4,018.55 4,064.92 8 Total 3,644.97 4,018.55 9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward
to Balance sheet3,644.97 4,018.55
Notes to Accounts – Annexure I
Abridged Revenue Account for the year ended March 31, 2017
14
5 HSBC DIVIDEND YIELD EQUITY FUND
Key Statistics for the year ended March 31, 2017
HSBC DIVIDEND YIELD EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 15.4003 16.7511
Regular Plan Dividend Option 15.4003 16.7511
Direct Plan - Growth Option 15.7588 17.0215
Direct Plan - Dividend Option 15.7588 17.0215
High
Regular Plan Growth Option 19.3940 17.0788
Regular Plan Dividend Option 19.3940 17.0788
Direct Plan - Growth Option 19.9860 17.3588
Direct Plan - Dividend Option 19.9860 17.3588
Low
Regular Plan Growth Option 15.0048 13.8420
Regular Plan Dividend Option 15.0048 13.8420
Direct Plan - Growth Option 15.3562 14.1558
Direct Plan - Dividend Option 15.3562 14.1558
End
Regular Plan Growth Option 19.3940 15.4003
Regular Plan Dividend Option 19.3940 15.4003
Direct Plan - Growth Option 19.9860 15.7588
Direct Plan - Dividend Option 19.9860 15.7588
2. Closing Assets Under Management (Rs. in Lakhs)
End 4,249 3,852
Average (AAuM)1 3,981 4,228
3. Gross income as % of AAuM2 6.94% 16.82%
4. Expense Ratio:
a. Total Expense as % of AAuM (Including service tax on Management fees) (planwise)
Regular Plan 2.55% 2.52%
Direct Plan 1.84% 1.83%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 1.44% 1.42%
Direct Plan 1.44% 1.42%
5. Net Income as a percentage of AAuM3 4.40% 14.30%
6. Portfolio turnover ratio4 0.12 0.30
15
HSBC DIVIDEND YIELD EQUITY FUND 5
HSBC DIVIDEND YIELD EQUITY FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 25.9326 (8.0428)
Direct Plan - Growth Option 26.8244 (7.3988)
Benchmark
S&P BSE 200 22.4731 (7.8430)
b. Since Inception
Scheme
Regular Plan Growth Option 6.8230 4.8949
Direct Plan - Growth Option 13.3381 9.4285
Benchmark
S&P BSE 200 9.9600 8.6562
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue Account i.e. Income3. Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
Key Statistics for the year ended March 31, 2017 (Contd...)
16
5 HSBC DIVIDEND YIELD EQUITY FUND
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC DIVIDEND YIELD EQUITY FUND
1 Investments:
1.1 It is confi rmed that Investments of the Schemes are registered in the name of the Trustees for the benefi ts of the Scheme’s Unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended 31 March, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Year and their percentages to net assets are as under:
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Equity Shares
– Appreciation 145,634,412 34.27 78,927,411 20.49
– Depreciation 7,679,573 1.81 16,086,285 4.18
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017(excluding accretion of discount) is Rs. 49,446,523 and Rs. 100,283,656 respectively being 12.42% and 25.19% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 128,762,925 and Rs. 182,998,283 respectively being 30.45% and 43.28% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2017 and March 31, 2016 are Nil.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
During the year 2016-17, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid clearing member charges on derivative transactions amounting to Rs. Nil.
During the year 2015-16, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid clearing member charges on derivative transactions amounting to Rs. Nil.
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
17
HSBC DIVIDEND YIELD EQUITY FUND 5
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.48 40.24 266,688.51 11.06
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.10 9.26 288,081.28 10.86
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transactions of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 3.63 11.66 43,546 11.64
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
18
5 HSBC DIVIDEND YIELD EQUITY FUND
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016 – 2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
14,150,858.974 337,312.496 1,617,290.352 12,870,881.118 10
Regular Plan Dividend Option
10,542,612.806 81,107.080 1,933,306.229 8,690,413.657 10
Direct Plan - Growth Option
291,333.281 43,489.704 15,221.777 319,601.208 10
Direct Plan - Dividend Option
17,041.599 – 2,989.443 14,052.156 10
Description
2015 – 2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
16,162,975.017 159,218.729 2,171,334.772 14,150,858.974 10
Regular Plan Dividend Option
12,635,870.043 83,091.551 2,176,348.788 10,542,612.806 10
Direct Plan - Growth Option
8,450.150 284,199.625 1,316.494 291,333.281 10
Direct Plan - Dividend Option
4,801.778 12,239.821 – 17,041.599 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 272,756.686 & as on 31/03/2016 is 272,756.686.
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 765.73 represents Exit load (net of service tax) credited to the Scheme (2016: Rs. 190 represents Exit load (net of service tax) credited to the scheme).
9 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC DIVIDEND YIELD EQUITY FUND 5
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
10 Merger of HSBC Dividend Yield Equity Fund (HDYEF) into HSBC India Opportunities Fund (HIOF)
The Board of Directors of HSBC Asset Management (India) Private limited and Board of Trustees of HSBC Mutual Fund have approved the merger of HDYEF into HIOF in their meetings held on February 01, 2017 and February 02, 2017 respectively. SEBI has also granted it’s no objection to the aforesaid merger vide its letter dated April 03, 2017. Accordingly, a notice was published on May, 24, 2017 giving an option to the unitholders of HDYEF to exit during the period from May 31, 2017 to June 30, 2017 at the applicable NAV, without payment of exit load, if any and sale of units in the HDYEF was suspended effective from May 31, 2017. The HDYEF was merged into HIOF and ceased to exists from July 01, 2017. The unit holders of HDYEF who have not exercised the exit option during the aforesaid exit window have been allotted units of HIOF at the NAV declared as on the close of business hours on June 30, 2017.
11 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
5 HSBC DIVIDEND YIELD EQUITY FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC DIVIDEND YIELD EQUITY FUND 5
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
EMERGING MARKETS FUND 15
HSBC Emerging Markets FundAn Open-ended Scheme
Abridged Annual Report 2016 - 2017
1
EMERGING MARKETS FUND 15
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
15 EMERGING MARKETS FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
EMERGING MARKETS FUND 15
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
15 EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2017
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Emerging Markets Fund (HEMF) - an open-ended SchemeHEMF seeks to provide long term capital appreciation by investing in India and in the emerging markets, in equity and equity related instruments, share classes and units/securities issued by overseas mutual funds or unit trusts. The fund may also invest a limited proportion in debt and money market instruments.
The net assets of HEMF amounted to Rs. 9.28 crores as at March 31, 2017 compared to Rs. 8.76 crores as at March 31, 2016. Around 96.55% of the net assets were invested in HSBC GEM Equity Fund (overseas mutual fund), 3.79% of the net assets were invested in reverse repos / CBLO and (-0.34%) in net current assets as at March 31, 2017.
HEMF outperformed its benchmark during 2016-17 on account of the performance of its underlying fund as well as appreciation in INR vis-à-vis the USD.
Date of Inception : 17 March 2008 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Emerging Markets Fund - Growth 16.28 3.28 3.72 2.00
MSCI Emerging Market Index (Scheme Benchmark) 12.42 3.09 2.62 1.83
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 8.19
Rs. 10,000, if invested in HEMF, would have become 11,628 11,018 12,002 11,962
Rs. 10,000, if invested in MSCI Emerging Market Index, would have become
11,242 10,957 11,381 11,785
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 20,376
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
5
EMERGING MARKETS FUND 15
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
6
15 EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
7
EMERGING MARKETS FUND 15
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Emerging Market Fund 8688.49 13 1076796.75 26
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance
8
15 EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
EMERGING MARKETS FUND 15
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
10
15 EMERGING MARKETS FUND
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
EMERGING MARKETS FUND 15
To the Board of Trustees of
HSBC Mutual Fund - HSBC Emerging Markets Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Emerging Markets Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
12
15 EMERGING MARKETS FUND
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
13
EMERGING MARKETS FUND 15
Rs. in Lakhs
HSBC EMERGING MARKETS FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 784.53 861.762 Reserves & Surplus2.1 Unit Premium Reserves (456.13) (457.00)2.2 Unrealised Appreciation Reserve 136.85 14.902.3 Other Reserves 463.22 456.663 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 12.75 16.48
TOTAL 941.22 892.80
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 896.36 854.11
Total Investments 896.36 854.11
2 Deposits 0.07 0.073 Other Current Assets3.1 Cash & Bank Balance 1.00 0.363.2 CBLO/Reverse Repo Lending 35.17 29.713.3 Others 8.62 8.554 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 941.22 892.80
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017
14
15 EMERGING MARKETS FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC EMERGING MARKETS FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 18.78 23.73
1.2 Interest 1.39 1.72
1.3 Realised Gain / (Loss) on Foreign Exchange Transactions (0.36) (0.38)
1.4 Realised Gains / (Losses) on Interscheme sale of investments – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
12.64 (1.11)
1.6 Realised Gains / (Losses) on Derivative Transactions – –
1.7 Other Income – 0.01
(A) 32.45 23.97
2 EXPENSES2.1 Management fees 7.24 8.74
2.2 Service tax on Management fees 1.08 1.21
2.3 Transfer agents fees and expenses 0.50 0.48
2.4 Custodian fees 1.62 1.60
2.5 Trusteeship fees 0.02 0.02
2.6 Commission to Agents 5.03 5.17
2.7 Marketing & Distribution expenses 0.02 –
2.8 Audit fees 0.20 0.20
2.9 Investor Education Expenses 0.18 0.19
2.10 Other operating expenses 0.70 1.03
2.11 Less: Expenses to be Reimbursed by the Investment Manager – (0.43)
(B) 16.59 18.213 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 15.86 5.77
4 Change in Unrealised Depreciation invalue of investments*** (D) (0.07) –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 15.79 5.77
6 Change in unrealised appreciation in the value of investments and derivatives (F) 121.95 (112.71)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 137.74 (106.94)
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 121.95 –
7.3 Add / (Less): Equalisation (9.23) (10.38)
7.4 Transfer from Reserve Fund 456.66 461.27
8 Total 463.22 456.66
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 463.22 456.66
Notes to Accounts - Annexure I
15
EMERGING MARKETS FUND 15
Key Statistics for the year ended March 31, 2017
HSBC EMERGING MARKETS FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 10.2862 11.4242
Regular Plan Dividend Option 9.8413 10.9301
Direct Plan - Growth Option 10.5337 11.6174
Direct Plan - Dividend Option 10.0863 11.1241
High
Regular Plan Growth Option 12.2453 12.6726
Regular Plan Dividend Option 11.7157 12.1244
Direct Plan - Growth Option 12.6251 12.8935
Direct Plan - Dividend Option 12.0889 12.3460
Low
Regular Plan Growth Option 9.7917 8.5733
Regular Plan Dividend Option 9.3682 8.2025
Direct Plan - Growth Option 10.0367 8.7678
Direct Plan - Dividend Option 9.6104 8.3955
End
Regular Plan Growth Option 11.9610 10.2862
Regular Plan Dividend Option 11.4436 9.8413
Direct Plan - Growth Option 12.3347 10.5337
Direct Plan - Dividend Option 11.8110 10.0863
2. Closing Assets Under Management (Rs. in Lakhs)
End 928 876
Average (AAuM)1 906 945
3. Gross income as % of AAuM2 3.58% 2.54%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise5)
Regular Plan (Continue) 1.87% 1.97%
Direct Plan 1.17% 1.27%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.80% 0.92%
Direct Plan 0.80% 0.92%
5. Net Income as a percentage of AAuM3 1.75% 0.61%
6. Portfolio turnover ratio4 0.02 0.03
16
15 EMERGING MARKETS FUND
HSBC EMERGING MARKETS FUND Current
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 16.2820 (9.9355)
Direct Plan - Growth Option 17.0975 (9.3040)
Benchmark
MSCI Emerging Markets Index 12.4242 (9.8927)
b. Since Inception
Scheme
Regular Plan Growth Option 1.9997 0.3514
Direct Plan - Growth Option 2.0725 (2.1584)
Benchmark
MSCI Emerging Markets Index 1.8320 0.5870
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year5 The Total management fees and other expenses charged by the underlying fund along with the
management fee and recurring expenses charged by the domestic Mutual Fund is as follows:
Scheme TER charged by underlying Fund
***
TER of the domestic Fund***
Total TER *** Maximum TER Cap as per circular ***
2016-17
HSBC Emerging Markets Fund
0.85% 1.77% 2.62% 2.70%
2015-16
HSBC Emerging Markets Fund
0.85% 1.84% 2.69% 2.70%
*** The TER excludes service Tax on Management fees
Key Statistics for the year ended March 31, 2017 (Contd...)
17
EMERGING MARKETS FUND 15
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC EMERGING MARKETS FUND1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 & March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016Foreign Securities
– Appreciation 13,684,634 14.74 1,489,911 1.70
– Depreciation – – – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 1877656 and 11,112,687 respectively being 2.07% and 11.26% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 2,372,666 and 11,260,298 respectively being 2.51% and 11.92% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 and March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.13 30.24 101,711.63 22.21
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.09 15.10 109,516.09 22.71
18
15 EMERGING MARKETS FUND
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
5,569,323.787 319,549.456 840,327.611 5,048,545.632 10
Regular Plan Dividend Option
2,547,371.707 34,037.579 298,558.919 2,282,850.367 10
Direct Plan - Growth Option
497,559.401 28,559.337 15,582.705 510,536.033 10
Direct Plan - Dividend Option
3,374.592 – – 3,374.592 10
Description
2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
6,230,264.050 278,218.982 939,159.245 5,569,323.787 10
Regular Plan Dividend Option
2,942,879.435 156,376.205 551,883.933 2,547,371.707 10
Direct Plan - Growth Option
390,143.904 127,368.781 19,953.284 497,559.401 10
Direct Plan - Dividend Option
3,374.592 – – 3,374.592 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 113,484.384 & as on March 31, 2016 is 113,484.384
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
EMERGING MARKETS FUND 15
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 497 represents Exit load (net of service tax) credited to the scheme (2016: Rs. 1,356 represents Exit load (net of service tax) credited to the scheme).
9 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount(in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
15 EMERGING MARKETS FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
EMERGING MARKETS FUND 15
Statutory Details & DisclaimersAll returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
HSBC Asia Pacifi c (Ex Japan) Dividend Yield FundAn Open-ended Fund of Funds Scheme
Abridged Annual Report 2016 - 2017
1
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund (HAPDF) – an open ended Fund of Funds SchemeHAPDF seeks to provide long term capital appreciation by investing predominantly in units of HSBC Global Investment Funds (HGIF) Asia Pacifi c Ex Japan Equity High Dividend Fund. The Scheme may, also invest a certain proportion of its corpus in money market instruments and / or units of liquid mutual fund schemes, in order to meet liquidity requirements from time to time. However, there is no assurance that the investment objective of the Scheme will be achieved.
The net assets of HAPDF amounted to Rs. 9.79 crores as on March 31, 2017 as compared to 14.88 crores as at March 31, 2016. Around 97.97 % of the net assets were invested in HSBC Global Investment Funds (HGIF) Asia Pacifi c Ex Japan Equity High Dividend Fund (overseas mutual fund), 2.94% of the net assets were invested in reverse repos / CBLO and (-0.91%) in net current assets as at March 31, 2017.
HAPDF outperformed its benchmark on account of the performance of its underlying fund as well as appreciation in INR vis-à-vis the USD.
Date of Inception : 24 February 2014 Absolute Returns
(%)
Compounded Annualized Returns
(%)
Scheme Name & Benchmarks 1 Year 3 Years Since Inception
HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund - Growth 17.47 5.82 5.04
MSCI AC Asia Pacifi c ex Japan (Scheme Benchmark) 14.92 0.65 1.46
Nifty 50 (Standard Benchmark) 18.55 11.01 13.56
Rs. 10,000, if invested in HAPDF, would have become 11,747 11,850 11,647
`Rs. 10,000, if invested in MSCI AC Asia Pacifi c ex Japan, would have become
11,492 10,196 10,459
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 14,835
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:NIL
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
11
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
To the Board of Trustees of
HSBC Mutual Fund - HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
12
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC ASIA PACIFIC (EX JAPAN)DIVIDEND YIELD FUND
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 839.16 1,500.33 2 Reserves & Surplus2.1 Unit Premium Reserves (46.83) (52.45)2.2 Unrealised Appreciation Reserve 100.07 - 2.3 Other Reserves 86.23 40.28 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 9.67 21.95
TOTAL 988.30 1,510.11
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 958.72 1,474.82
Total Investments 958.72 1,474.82
2 Deposits 0.05 0.13 3 Other Current Assets3.1 Cash & Bank Balance 0.72 0.08 3.2 CBLO/Reverse Repo Lending 28.79 34.50 3.3 Others 0.02 0.58 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 988.30 1,510.11
Notes to Accounts – Annexure I
14
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC ASIA PACIFIC (EX JAPAN)DIVIDEND YIELD FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 35.40 78.78 1.2 Interest 1.52 3.71 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions (1.44) (0.50)1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments6.88 (37.90)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 42.36 44.09 2 EXPENSES2.1 Management fees 6.13 15.11 2.2 Service tax on Management fees 0.91 2.08 2.3 Transfer agents fees and expenses 0.59 1.09 2.4 Custodian fees 1.82 1.91 2.5 Trusteeship fees 0.03 0.05 2.6 Commission to Agents 8.04 16.87 2.7 Marketing & Distribution expenses 0.02 0.02 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 0.22 0.45 2.10 Other operating expenses 0.58 1.04 2.11 Less: Expenses to be Reimbursed by the Investment Manager (0.02) (0.59)
(B) 18.52 38.23
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 23.84 5.86
4 Change in Unrealised Depreciation in value of investments*** (D) 57.07 (57.07)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 80.91 (51.21)6 Change in unrealised appreciation in the
value of investments and derivatives (F) 100.07 (133.31)7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 180.98 (184.52)7.2 Less: Balance transfer to Unrealised Appreciation Reserve 100.07 - 7.3 Add / (Less): Equalisation (34.96) (4.74)7.4 Transfer from Reserve Fund 40.28 96.23 8 Total 86.23 40.28 9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward
to Balance sheet86.23 40.28
Notes to Accounts – Annexure I*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions.
15
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Key Statistics for the year ended March 31, 2017
HSBC ASIA PACIFIC (EX JAPAN)DIVIDEND YIELD FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 9.9136 10.5578
Regular Plan Dividend Option 9.9136 10.5578
Direct Plan - Growth Option 10.0606 10.6396
Direct Plan - Dividend Option 10.0606 10.6396
High
Regular Plan Growth Option 11.7780 11.4832
Regular Plan Dividend Option 11.7780 11.4832
Direct Plan - Growth Option 12.0343 11.5781
Direct Plan - Dividend Option 12.0343 11.5781
Low
Regular Plan Growth Option 9.6546 8.7163
Regular Plan Dividend Option 9.6546 8.7163
Direct Plan - Growth Option 9.7986 8.8337
Direct Plan - Dividend Option 9.7986 8.8337
End
Regular Plan Growth Option 11.6452 9.9136
Regular Plan Dividend Option 11.6452 9.9136
Direct Plan - Growth Option 11.9009 10.0606
Direct Plan - Dividend Option 11.9009 10.0606
2. Closing Assets Under Management (Rs. in Lakhs)
End 979 1,488
Average (AAuM)1 1,113 2,230
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Plan (Continue) 1.70% 1.73%
Direct Plan 1.00% 1.03%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.55% 0.68%
Direct Plan 0.55% 0.68%
5. Net Income as a percentage of AAuM3 2.14% 0.26%
6. Portfolio turnover ratio4 0.03 0.04
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
16
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
HSBC ASIA PACIFIC (EX JAPAN)DIVIDEND YIELD FUND
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 17.4669 (6.0855)
Direct Plan - Growth Option 18.2921 (5.4275)
Benchmark
MSCI AC Asia Pacifi c ex Japan 14.9176 (14.0840)
b. Since Inception
Scheme
Regular Plan Growth Option 5.0382 (0.4126)
Direct Plan - Growth Option 5.7770 0.2883
Benchmark
MSCI AC Asia Pacifi c ex Japan 1.4566 (4.3910)
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year5 The Total management fees and other expenses charged by the mutual fund(s) in foreign countries along
with the management fee and recurring expenses charged to the domestic mutual fund is as follows:
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
TotalTER ***
Maximum TER Cap as per
circular ***
2016-17
HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund 0.65% 1.63% 2.28% 2.70%
2015-16
HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund 0.65% 1.64% 2.29% 2.70%
*** The TER excludes service Tax on Management fees
Key Statistics for the year ended March 31, 2017 (Contd...)
17
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Foreign Securities
– Appreciation 10,002,325 10.22% – –
– Depreciation – – 5,707,146 3.84
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Rs. 3,540,439 and 71,549,666 respectively being 3.18% and 64.28% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 7,877,857 and 134,458,824 respectively being 3.53% and 60.30% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 and March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.09 24.06 656,195.93 88.14
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.08 4.45 1,471,404.52 92.60
18
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission / Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil).
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the year ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016-2017
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Plan Growth Option
12,889,012.163 99,915.980 6,081,538.955 6,907,389.188 10
Regular Plan Dividend Option
1,571,468.652 88,688.074 726,158.095 933,998.631 10
Direct Plan - Growth Option
530,176.617 8,920.761 – 539,097.378 10
Direct Plan - Dividend Option
12,640.880 – 1,500.000 11,140.880 10
Description
2015–2016
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Plan Growth Option
25,408,964.288 121,388.531 12,641,340.656 12,889,012.163 10
Regular Plan Dividend Option
2,812,657.917 26,575.657 1,267,764.922 1,571,468.652 10
Direct Plan - Growth Option
97,412.408 436,478.403 3,714.194 530,176.617 10
Direct Plan - Dividend Option
11,596.101 2,085.427 1,040.648 12,640.880 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 434,480.361 & as on 31/03/2016 is 434,480.361.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil.( 2016 :- NIL)
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount(in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
20 HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
Voting Policy and Procedures
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND 20
Statutory Details & DisclaimersAll returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC BRAZIL FUND 17
HSBC Brazil FundAn Open-ended Fund of Funds Scheme
Abridged Annual Report 2016 - 2017
1
HSBC BRAZIL FUND 17
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
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17 HSBC BRAZIL FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
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HSBC BRAZIL FUND 17
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
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17 HSBC BRAZIL FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Brazil Fund (HBF) - an open ended Fund of Funds SchemeHBF seeks to provide long term capital appreciation by investing predominantly in units/shares of HSBC Global Investments Funds (HGIF) Brazil Equity Fund. The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a signifi cant part of its corpus. The scheme may also invest a certain proportion of its corpus in money market instruments and /or units of liquid mutual fund schemes, in order to meet liquidity requirements from time to time.
The net assets of HBF amounted to Rs. 29.17 crores as at March 31, 2017 compared to Rs. 26.20 crores as at March 31, 2016. Around 98.21 % of the net assets were invested in HSBC Brazil Equity Fund (overseas mutual fund), 2.91% of the net assets were invested in reverse repos / CBLO and (-1.12%) in the net current assets as at March 31, 2017.
The performance of the underlying fund led to the underperformance in HBF relative to its benchmark.
Date of Inception : 6 May 2011 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Brazil Fund - Growth 33.46 -6.69 -6.70 -5.81
MSCI Brazil 10/40 Index (Scheme Benchmark) 37.56 -5.73 -9.31 -9.57
Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 8.88
Rs. 10,000, if invested in HBF, would have become 13,346 8,124 7,072 7,019
Rs. 10,000, if invested in MSCI Brazil 10/40 Index, would have become
13,756 8,379 6,136 5,519
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 16,529
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
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HSBC BRAZIL FUND 17
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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17 HSBC BRAZIL FUND
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC BRAZIL FUND 17
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Brazil Fund – – 47643.65 3
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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17 HSBC BRAZIL FUND
customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC BRAZIL FUND 17
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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17 HSBC BRAZIL FUND
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
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HSBC BRAZIL FUND 17
To the Board of Trustees of
HSBC Mutual Fund - HSBC Brazil Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Brazil Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
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17 HSBC BRAZIL FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC BRAZIL FUND 17
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC BRAZIL FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 4,151.33 5,666.63 2 Reserves & Surplus2.1 Unit Premium Reserves (13.11) (26.28)2.2 Unrealised Appreciation Reserve – –2.3 Other Reserves (1,220.34) (2,657.93)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 42.99 61.35
TOTAL 2,960.87 3,043.77
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 2,864.69 2,611.87
Total Investments 2,864.69 2,611.87
2 Deposits 0.55 0.23 3 Other Current Assets3.1 Cash & Bank Balance 3.62 1.45 3.2 CBLO / Reverse Repo Lending 84.96 429.25 3.3 Others 7.05 0.97 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 2,960.87 3,043.77
Notes to Accounts – Annexure I
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17 HSBC BRAZIL FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 58.49 154.10 1.2 Interest 7.42 5.87 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions (5.86) (2.90)1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments(639.97) (483.77)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.03 0.05
(A) (579.89) (326.65)2 EXPENSES2.1 Management fees 28.23 27.04 2.2 Service tax on Management fees 4.21 3.73 2.3 Transfer agents fees and expenses 1.67 1.42 2.4 Custodian fees 1.96 1.75 2.5 Trusteeship fees 0.06 0.06 2.6 Commission to Agents 19.25 19.16 2.7 Marketing & Distribution expenses 0.41 0.38 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 0.60 0.57 2.10 Other operating expenses 1.78 1.39 2.11 Less: Expenses to be Reimbursed by the Investment Manager – –
(B) 58.37 55.70 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) (638.26) (382.35)4 Change in Unrealised Depreciation
in value of investments*** (D) 1,456.69 (114.18)5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 818.43 (496.53)6 Change in unrealised appreciation in the
value of investments and derivatives (F) – –7 NET SURPLUS / (DEFICIT) FOR THE YEA (E + F = G) 818.43 (496.53)7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 619.16 125.57 7.4 Transfer from Reserve Fund (2,657.93) (2,286.97)8 Total (1,220.34) (2,657.93)9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward
to Balance sheet(1,220.34) (2,657.93)
Notes to Accounts – Annexure I
*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions.
15
HSBC BRAZIL FUND 17
Key Statistics for the year ended March 31, 2017
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 5.2601 6.1058
Regular Plan Dividend Option 5.2601 6.1058
Direct Plan - Growth Option 5.3850 6.2071
Direct Plan - Dividend Option 5.3850 6.2071
High
Regular Plan Growth Option 7.9177 7.1410
Regular Plan Dividend Option 7.9177 7.1410
Direct Plan - Growth Option 8.1569 7.2632
Direct Plan - Dividend Option 8.1569 7.2632
Low
Regular Plan Growth Option 4.8980 3.6007
Regular Plan Dividend Option 4.8980 3.6007
Direct Plan - Growth Option 5.0149 3.6812
Direct Plan - Dividend Option 5.0149 3.6812
End
Regular Plan Growth Option 7.0201 5.2601
Regular Plan Dividend Option 7.0201 5.2601
Direct Plan - Growth Option 7.2373 5.3850
Direct Plan - Dividend Option 7.2373 5.3850
2. Closing Assets Under Management (Rs. in Lakhs)
End 2,917 2,620
Average (AAuM)1 2,990 2,856
3. Gross income as % of AAuM2 -19.39% -11.44%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Plan (Continue) 1.98% 1.97%
Direct Plan 1.27% 1.27%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.94% 0.95%
Direct Plan 0.94% 0.95%
5. Net Income as a percentage of AAuM3 -21.35% -13.39%
6. Portfolio turnover ratio4 0.22 0.05
16
17 HSBC BRAZIL FUND
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 33.4594 (13.8157)
Direct Plan - Growth Option 34.3974 (13.2108)
Benchmark
MSCI Brazil 10/40 Index 37.5570 (0.1334)
b. Since Inception
Scheme
Regular Plan Growth Option (5.8139) (12.2717)
Direct Plan - Growth Option (7.3859) (17.4296)
Benchmark
MSCI Brazil 10/40 Index (9.5690) (16.9781)
1 AAuM=Average daily net assets
2 Gross income = amount against (A) in the Revenue account i.e. Income
3 Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year
4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
5 The Total management fees and other expenses charged by the underlying fund along with the management fee and recurring expenses charged by the domestic Mutual Fund is as follows:
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
Total TER *** Maximum TER Cap as per circular ***
2016-17
HSBC Brazil Fund 0.85% 1.83% 2.68% 2.70%
2015-16
HSBC Brazil Fund 0.85% 1.84% 2.69% 2.70%
*** The TER excludes service Tax on Management fees
Key Statistics for the year ended March 31, 2017 (Contd...)
17
HSBC BRAZIL FUND 17
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC BRAZIL FUND1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2017 2016
Foreign Securities
– Appreciation – – – –
– Depreciation 92,603,581 31.75 238,286,090 90.93
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 64,376,138 and Rs. 120,785,705 respectively being 5.40% and 18.73% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 15,409,705 and Rs. 53,509,405 respectively being 21.53% and 40.39% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 and March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 3.46 35.12 940,613 54.54
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 3.88 46.88 1,076,718 59.93
18
17 HSBC BRAZIL FUND
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Regular Plan Growth Option
43,145,354.299 10,976,827.343 22,789,514.596 31,332,667.046 10
Regular Plan Dividend Option
12,155,653.078 626,765.345 4,251,912.562 8,530,505.861 10
Direct Plan - Growth Option
1,352,163.735 1,869,262.627 1,682,393.117 1,539,033.245 10
Direct Plan - Dividend Option
13,156.078 97,934.473 – 111,090.551 10
Description
2015–2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Regular Plan Growth Option
43,311,723.043 12,227,698.514 12,394,067.258 43,145,354.299 10
Regular Plan Dividend Option
15,562,865.843 604,070.144 4,011,282.909 12,155,653.078 10
Direct Plan - Growth Option
553,248.887 1,253,292.775 454,377.927 1,352,163.735 10
Direct Plan - Dividend Option
23,605.294 1,274.942 11,724.158 13,156.078 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 701,095.111 & as on 31/03/2016 is 701,095.111.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC BRAZIL FUND 17
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income of Rs. 2,839 represents Exit load (net of service tax) credited to the Scheme. (2016: Rs. 4,630 represents Exit load (net of service tax) credited to the scheme.)
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount(in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
9. The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
17 HSBC BRAZIL FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC BRAZIL FUND 17
Statutory Details & DisclaimersAll returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC MANAGED SOLUTIONS 12
HSBC Managed SolutionsAn Open-ended Fund of Funds Scheme
Abridged Annual Report 2016 - 2017
1
HSBC MANAGED SOLUTIONS 12
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
12 HSBC MANAGED SOLUTIONS
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC MANAGED SOLUTIONS 12
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
12 HSBC MANAGED SOLUTIONS
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Managed Solutions (HMS) – an open ended Fund of Funds SchemeHMS seeks to provide long term total return primarily by seeking capital appreciation through an active asset allocation with diversifi cation commensurate with the risk profi le of investments by investing predominantly in units of equity mutual funds as well as in a basket of debt mutual funds, gold exchange traded funds (ETFs) and other ETFs, offshore mutual funds and money market instruments.
The Scheme has three plans – Conservative Plan, Growth Plan and the Moderate Plan. The plans under the Scheme will invest predominantly in the existing and / or prospective schemes of HSBC Mutual Fund, units of third party domestic mutual funds, units of offshore equity oriented funds managed by HSBC Global Asset Management, gold ETFs and other ETFs of third parties until such time that the Fund doesn’t have such scheme offerings.
The net assets of HMS – Conservative Plan amounted to Rs. 344.32 crores as at March 31, 2017 as compared to Rs. 311.75 crores as at March 31, 2016. Around 98.64% of the net assets was invested in mutual fund schemes, 1.05% of the net assets was invested in reverse repos / CBLO and 0.31% in net current assets as at March 31, 2017. The net assets of HMS – Growth Plan amounted to Rs. 140.90 crores as at March 31, 2017 as compared to Rs. 125.16 crores as at March 31, 2016. Around 98.95% of the net assets were invested in Mutual fund schemes, 0.92% of the net assets were invested in reverse repos / CBLO and 0.13% in net current assets as at March 31, 2017. The net assets of HMS – Moderate Plan amounted to Rs. 215.58 crores as at March 31, 2017 as compared to Rs. 192.80 crores as at March 31, 2016. Around 98.47% of the net assets were invested in mutual fund schemes, 0.84% of the net assets were invested in reverse repos / CBLO and 0.69% in net current assets as at March 31, 2017.
The performance of HMS – Growth Plan is benchmarked against Composite Index constituting 80% of BSE 200 Index and 20% of CRISIL Composite Bond Index while the performance of HMS – Moderate Plan is benchmarked against CRISIL Balanced Fund Index. The performance of HMS – Conservative Plan is benchmarked against Composite Index constituting of 90% into CRISIL Composite Bond Index and 10% of BSE 200 Index. HMS Growth Plan and Moderate Plan outperformed the benchmark index due to allocation effect. HMS Conservative underperformed due to allocation to fi xed income which remained volatile during the year and also, equity asset class underperformed.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC MANAGED SOLUTIONS 12
HMS - Growth Plan
Date of Inception : 30 April 2014 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year Since Inception
HSBC Managed Solutions - Growth Plan - Growth 24.68 16.62
Customised Benchmark Index Fund (Scheme Benchmark)* 20.20 13.84
Nifty 50 (Standard Benchmark) 18.55 11.38
CRISIL 10 Year Gilt Index (Standard Benchmark) 11.87 11.55
Rs. 10,000, if invested in HMS - Growth, would have become 12,468 15,674
Rs. 10,000, if invested in Customised Benchmark Index, would have become 12,020 14,126
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,704
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become 11,187 13,765
*Composite index of S&P BSE 200 (80%) and CRISIL Composite Bond Fund Index (20%).
HMS - Conservative Plan
Date of Inception : 30 April 2014 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year Since Inception
HSBC Managed Solutions - Conservative Plan - Growth 10.40 10.21
Customised Benchmark Index Fund (Scheme Benchmark)* 12.23 11.55
Nifty 50 (Standard Benchmark) 18.55 11.38
CRISIL 10 Year Gilt Index (Standard Benchmark) 11.87 11.55
Rs. 10,000, if invested in HMS - Conservative, would have become 11,040 13,286
Rs. 10,000, if invested in Customised Benchmark Index, would have become 11,223 12,464
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,704
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become 11,187 13,765
*Composite index of S&P BSE 200 (80%) and CRISIL Composite Bond Fund Index (20%).
HMS - Moderate Plan
Date of Inception : 30 April 2014 Absolute Returns
(%)
Compounded Annualized
(%)
Scheme Name & Benchmarks 1 Year Since Inception
HSBC Managed Solutions - Moderate Plan - Growth 21.52 14.97
CRISIL Balanced Fund Index (Scheme Benchmark) 16.10 11.59
Nifty 50 (Standard Benchmark) 18.55 11.38
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
12 HSBC MANAGED SOLUTIONS
Date of Inception : 30 April 2014 Absolute Returns
(%)
Compounded Annualized
(%)
Scheme Name & Benchmarks 1 Year Since Inception
CRISIL 10 Year Gilt Index (Standard Benchmark) 11.87 11.55
Rs. 10,000, if invested in HMS - Moderate, would have become 12,152 15,035
Rs. 10,000, if invested in CRISIL Balanced Fund Index, would have become 11,610 13,778
Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,704
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become 11,187 13,765
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC MANAGED SOLUTIONS 12
investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
12 HSBC MANAGED SOLUTIONS
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC MANAGED SOLUTIONS 12
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017: NIL
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
12 HSBC MANAGED SOLUTIONS
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC MANAGED SOLUTIONS 12
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
12
12 HSBC MANAGED SOLUTIONS
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Managed Solutions India - Growth
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Managed Solutions India - Growth (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
13
HSBC MANAGED SOLUTIONS 12
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
14
12 HSBC MANAGED SOLUTIONS
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Managed Solutions India - Moderate
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Managed Solutions India - Moderate (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
15
HSBC MANAGED SOLUTIONS 12
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
16
12 HSBC MANAGED SOLUTIONS
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund – HSBC Managed Solutions India - Conservative
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Managed Solutions India - Conservative (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
17
HSBC MANAGED SOLUTIONS 12
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
18
12 HSBC MANAGED SOLUTIONS
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – GROWTH
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 8,992.86 9,958.642 Reserves & Surplus2.1 Unit Premium Reserves 690.56 961.262.2 Unrealised Appreciation Reserve 3,398.81 1,032.602.3 Other Reserves 1,011.08 563.623 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 38.46 71.22
TOTAL 14,131.77 12,587.34
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Other Debentures & Bonds – –1.2.4 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund 13,965.28 12,363.601.10 Foreign Securities – –
Total Investments 13,965.28 12,363.60
2 Deposits 0.44 0.783 Other Current Assets3.1 Cash & Bank Balance 3.22 0.213.2 CBLO / Reverse Repo Lending 129.42 142.473.3 Others 33.41 80.284 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 14,131.77 12,587.34
Notes to Accounts - Annexure I
19
HSBC MANAGED SOLUTIONS 12
Abridged Revenue Account For the Year Ended March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – GROWTH
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – 5.971.2 Interest 9.70 14.391.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments585.37 480.95
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 595.07 501.31
2 EXPENSES2.1 Management fees – –2.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 7.18 6.832.4 Custodian fees 1.65 1.832.5 Trusteeship fees 0.26 0.262.6 Commission to Agents 100.57 98.272.7 Marketing & Distribution expenses 0.32 1.082.8 Audit fees 0.79 0.432.9 Investor Education Expenses 2.61 2.592.10 Other operating expenses 3.27 3.762.11 Less: Expenses to be Reimbursed by the Investment Manager (33.37) (30.25)
(B) 83.28 84.80
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 511.79 416.51
4 Change in Unrealised Depreciation in value of investments*** (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 511.79 416.51
6 Change in unrealised appreciation in the value of investments and derivatives (F) 2,366.22 (653.76)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 2,878.01 (237.25)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 653.767.2 Less: Balance transfer to Unrealised Appreciation Reserve 2,366.22 –7.3 Add / (Less): Equalisation (64.33) (7.51)7.4 Transfer from Reserve Fund 563.62 154.628 Total 1,011.08 563.62
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 1,011.08 563.62
Notes to Accounts - Annexure I
20
12 HSBC MANAGED SOLUTIONS
Key Statistics for the year ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – GROWTH
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 12.5664 12.7703
Regular Plan Dividend Option 12.5664 12.7703
Direct Plan - Growth Option 12.6317 12.8021
Direct Plan - Dividend Option 12.6317 12.8021
High
Regular Plan Growth Option 15.6675 13.3873
Regular Plan Dividend Option 15.6675 13.3873
Direct Plan - Growth Option 15.7915 13.4332
Direct Plan - Dividend Option 15.7915 13.4332
Low
Regular Plan Growth Option 12.3619 11.3144
Regular Plan Dividend Option 12.3619 11.3144
Direct Plan - Growth Option 12.4268 11.3702
Direct Plan - Dividend Option 12.4268 11.3702
End
Regular Plan Growth Option 15.6675 12.5664
Regular Plan Dividend Option 15.6675 12.5664
Direct Plan - Growth Option 15.7915 12.6317
Direct Plan - Dividend Option 15.7915 12.6317
2. Closing Assets Under Management (Rs. in Lakhs)
End 14,090 12,516
Average (AAuM)1 13,066 12,947
3. Gross income as % of AAuM2 4.55% 3.87%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise5)
Regular Plan (Continue) 0.65% 0.66%
Direct Plan 0.37% 0.39%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.00% 0.00%
Direct Plan 0.00% 0.00%
5. Net Income as a percentage of AAuM3 * 3.92% 3.22%
6. Portfolio turnover ratio4 0.16 0.43
21
HSBC MANAGED SOLUTIONS 12
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC MANAGED SOLUTIONS INDIA – GROWTH
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Period
Scheme
Regular Plan Growth Option 24.6777 (1.5923)
Direct Plan - Growth Option 25.0148 (1.3274)
Benchmark
Composite Index constituting 80% of BSE 200 Index and 20% of CRISIL Composite Bond Index
20.1964 (4.6313)
b. Since Inception
Scheme
Regular Plan Growth Option 16.6187 12.6309
Direct Plan - Growth Option 16.9339 12.9353
Benchmark
Composite Index constituting 80% of BSE 200 Index and 20% of CRISIL Composite Bond Index
13.8434 10.7017
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period5. The Total management fees and other expenses charged by the mutual fund(s) in foreign countries along
with the management fee and recurring expenses charged to the domestic Mutual Fund is as follows:
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
Total TER *** Maximum TER Cap as per circular ***
2016-17
HSBC Managed Solutions India - Growth
1.73% 0.65% 2.38% 2.70%
2015-16
HSBC Managed Solutions India - Growth
1.65% 0.66% 2.31% 2.70%
*** The TER excludes service Tax on Management fees.
22
12 HSBC MANAGED SOLUTIONS
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – GROWTH
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 & March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 & March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 & March 31, 2016 are NIL.
1.5. NPA as at years ended March 31, 2017 & March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016Units in Domestic Mutual Fund– Appreciation 339,881,440 24.12 103,259,933 8.25– Depreciation – – – –Foreign Securities– Appreciation – – – –– Depreciation – – – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Rs. 208,000,000 and 345,497,540 respectively being 15.92% and 26.44% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 551,000,000 and 554,874,269 respectively being 42.56% and 42.83% of the average daily net assets.
1.8. Non-Traded securities in the portfolios as at March 31, 2017 & March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 17.04 65.34 8,221,960 93.31
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 23.92 73.92 8,336,982 89.19
23
HSBC MANAGED SOLUTIONS 12
Brokerage paid to Sponsor /AMC and its associates / related parties / group companies
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value ofTransac-
tions[Rs. InCrores]
% of totalvalue oftransac-tions ofthe fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value ofTransac-
tions[Rs. InCrores]
% of totalvalue oftransac-tions ofthe fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 12.74 100.00 127,503 100.00
The brokerage paid was at rates similar to those offered to other brokers / distributors. The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 & March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 & March 31, 2016** :
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2016-2017
Regular Plan Growth Option
89,592,289.575 9,936,465.585 18,684,802.258 80,843,952.902 10
Regular Plan Dividend Option
7,354,500.200 2,401,422.284 3,696,500.693 6,059,421.791 10
Direct Plan - Growth Option
2,571,059.034 558,645.425 201,530.170 2,928,174.289 10
Direct Plan - Dividend Option
68,543.396 28,529.536 – 97,072.932 10
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
24
12 HSBC MANAGED SOLUTIONS
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2015-2016
Regular Plan Growth Option
91,938,819.705 19,107,106.092 21,453,636.222 89,592,289.575 10
Regular Plan Dividend Option
6,487,461.214 2,171,631.960 1,304,592.974 7,354,500.200 10
Direct Plan - Growth Option
771,332.789 1,801,944.498 2,218.253 2,571,059.034 10
Direct Plan - Dividend Option
115,919.599 786.969 48,163.172 68,543.396 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 377,569.065 & as on 31/03/2016 is 377,569.065
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil. (2016 : Nil)
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
25
HSBC MANAGED SOLUTIONS 12
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – MODERATE
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 14,413.72 15,569.812 Reserves & Surplus2.1 Unit Premium Reserves 895.11 1,114.092.2 Unrealised Appreciation Reserve 4,617.66 1,387.502.3 Other Reserves 1,736.30 1,185.483 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 60.16 319.96
TOTAL 21,722.95 19,576.84
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Other Debentures & Bonds – –1.2.4 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund 21,401.69 19,186.841.10 Foreign Securities – –
Total Investments 21,401.69 19,186.84
2 Deposits 0.73 1.373.1 Cash & Bank Balance 104.46 0.483.2 CBLO / Reverse Repo Lending 181.73 300.593.3 Others 34.34 87.564 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 21,722.95 19,576.84
Notes to Accounts - Annexure I
26
12 HSBC MANAGED SOLUTIONS
Abridged Revenue Account For the Year Ended March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – MODERATE
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – 8.611.2 Interest 13.59 32.551.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments794.55 1,407.42
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 808.14 1,448.58
2 EXPENSES2.1 Management fees 20.54 –2.2 Service tax on Management fees 3.08 –2.3 Transfer agents fees and expenses 10.92 11.982.4 Custodian fees 1.71 1.942.5 Trusteeship fees 0.39 0.472.6 Commission to Agents 154.99 169.812.7 Marketing & Distribution expenses 0.48 2.142.8 Audit fees 1.21 0.702.9 Investor Education Expenses 3.99 4.612.10 Other operating expenses 4.68 6.322.11 Less: Expenses to be Reimbursed by the Investment Manager (34.28) (12.49)
(B) 167.71 185.48
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 640.43 1,263.10
4 Change in Unrealised Depreciation in value of investments*** (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 640.43 1,263.10
6 Change in unrealised appreciation in the value of investments and derivatives (F) 3,230.16 (1,174.43)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3,870.59 88.67
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 1,174.437.2 Less: Balance transfer to Unrealised Appreciation Reserve 3,230.16 –7.3 Add / (Less): Equalisation (89.61) (229.62)7.4 Transfer from Reserve Fund 1,185.48 152.00
8 Total 1,736.30 1,185.48
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward to
Balance sheet 1,736.30 1,185.48
Notes to Accounts - Annexure I*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions.
27
HSBC MANAGED SOLUTIONS 12
Key Statistics for the period ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – MODERATE
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 12.3679 12.2870
Regular Plan Dividend Option 12.3679 12.2870
Direct Plan - Growth Option 12.4274 12.3153
Direct Plan - Dividend Option 12.2567 12.3153
High
Regular Plan Growth Option 15.0289 12.7411
Regular Plan Dividend Option 15.0289 12.7411
Direct Plan - Growth Option 15.1390 12.7815
Direct Plan - Dividend Option – 12.5897
Low
Regular Plan Growth Option 12.2148 11.3141
Regular Plan Dividend Option 12.2148 11.3141
Direct Plan - Growth Option 12.2742 11.3658
Direct Plan - Dividend Option – 12.0624
End
Regular Plan Growth Option 15.0289 12.3679
Regular Plan Dividend Option 15.0289 12.3679
Direct Plan - Growth Option 15.1390 12.4274
Direct Plan - Dividend Option – 12.2567
2. Closing Assets Under Management (Rs. in Lakhs)
End 21,558 19,280
Average (AAuM)1 19,934 23,028
3. Gross income as % of AAuM2 4.05% 6.29%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)5
Regular Plan (Continue) 0.84% 0.81%
Direct Plan 0.59% 0.56%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.10% 0.00%
Direct Plan 0.10% 0.00%
5. Net Income as a percentage of AAuM3 * 3.21% 5.49%
6. Portfolio turnover ratio4 0.15 0.56
28
12 HSBC MANAGED SOLUTIONS
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC MANAGED SOLUTIONS INDIA – MODERATE
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Period
Scheme
Regular Plan Growth Option 21.5154 0.6566
Direct Plan - Growth Option 21.8195 0.9078
Benchmark
CRISIL Balanced Fund Index 16.0998 (2.8954)
b. Since Inception
Scheme
Regular Plan Growth Option 14.9688 11.7010
Direct Plan - Growth Option 15.2565 11.9805
Benchmark
CRISIL Balanced Fund Index 11.5860 12.2949
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period5. The Total management fees and other expenses charged by the mutual fund(s) in foreign countries along with
the management fee and recurring expenses charged to the domestic Mutual Fund is as follows:
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
Total TER *** Maximum TER Cap as per circular ***
2016-17
HSBC Managed Solutions India - Moderate
1.52% 0.83% 2.34% 2.70%
2015-16
HSBC Managed Solutions India - Moderate
1.34% 0.81% 2.15% 2.70%
*** The TER excludes service Tax on Management fees.
29
HSBC MANAGED SOLUTIONS 12
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – MODERATE
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 & March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 & March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 & March 31, 2016 are NIL.
1.5. NPA as at years ended March 31, 2017 & March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016Units in Domestic Mutual Fund
– Appreciation 461,765,968 21.42 138,750,201 6.03– Depreciation – – – –Foreign Securities– Appreciation – – – –– Depreciation – – – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Rs. 300,000,000 and 498,496,610 respectively being 15.05% and 25.01% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 1,289,500,000 and 1,753,135,863 respectively being 56.00% and 76.13% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 & March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of theI n v e s t m e n t Manager
2016-2017 22.77 69.67 12,888,744.86 98.28
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of theI n v e s t m e n t Manager
2015-2016 50.62 74.93 15,305,238.21 92.31
30
12 HSBC MANAGED SOLUTIONS
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value ofTransac-
tions[Rs. InCrores]
% of totalvalue oftransac-tions ofthe fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association / Nature of
relation
Period Covered
Value ofTransac-
tions[Rs. InCrores]
% of totalvalue oftransac-tions ofthe fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 18.36 100.00 183,823 100.00
The brokerage paid was at rates similar to those offered to other brokers / distributors. The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 & March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 & March 31, 2016** :
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2016-2017
Regular Plan Growth Option
139,432,622.243 16,279,365.089 25,282,235.344 130,429,751.988 10
Regular Plan Dividend Option
15,794,573.484 1,286,409.291 3,864,524.009 13,216,458.766 10
Direct Plan - Growth Option
470,909.044 20,905.676 801.205 491,013.515 10
Direct Plan - Dividend Option
– – – – 10
31
HSBC MANAGED SOLUTIONS 12
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2015-2016
Regular Plan Growth Option
172,897,071.121 38,243,715.567 71,708,164.445 139,432,622.243 10
Regular Plan Dividend Option
23,049,762.765 7,604,136.997 14,859,326.278 15,794,573.484 10
Direct Plan - Growth Option
53,692.431 424,256.108 7,039.495 470,909.044 10
Direct Plan - Dividend Option
53,177.964 – 53,177.964 – 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 407,381.757 & as on 31/03/2016 is 407,381.757
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil. (2016 : Nil)
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
32
12 HSBC MANAGED SOLUTIONS
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – CONSERVATIVE
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 26,010.07 26,012.082 Reserves & Surplus2.1 Unit Premium Reserves (196.59) (217.41)2.2 Unrealised Appreciation Reserve 6,104.48 3,852.962.3 Other Reserves 2,634.00 1,651.55
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 60.97 139.93
TOTAL 34,612.93 31,439.11
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –
1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –
1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund 34,191.95 30,774.221.10 Foreign Securities – –
Total Investments 34,191.95 30,774.22
2 Deposits 1.46 3.05
3.1 Cash & Bank Balance 8.78 0.413.2 CBLO/Reverse Repo Lending 360.66 657.613.3 Others 50.08 3.824 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 34,612.93 31,439.11
Notes to Accounts - Annexure I
33
HSBC MANAGED SOLUTIONS 12
Abridged Revenue Account For the Year Ended March 31, 2017
Rs. in Lakhs
HSBC MANAGED SOLUTIONS INDIA – CONSERVATIVE
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 26.82 37.761.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments1,275.99 1,226.03
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 1,302.80 1,263.79
2 EXPENSES2.1 Management fees 80.83 48.232.2 Service tax on Management fees 11.98 7.002.3 Transfer agents fees and expenses 18.07 16.522.4 Custodian fees 1.81 1.962.5 Trusteeship fees 0.66 0.632.6 Commission to Agents 193.80 186.552.7 Marketing & Distribution expenses 0.80 0.782.8 Audit fees 1.97 1.142.9 Investor Education Expenses 6.59 6.212.10 Other operating expenses 7.51 8.792.11 Less: Expenses to be Reimbursed by the Investment Manager – (3.68)
(B) 324.02 274.13
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 978.78 989.66
4 Change in Unrealised Depreciation in value of investments*** (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 978.78 989.66
6 Change in unrealised appreciation in the value of investments and derivatives (F) 2,251.52 517.17
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3,230.30 1,506.83
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 2,251.52 517.177.3 Add / (Less): Equalisation 3.67 (14.76)7.4 Transfer from Reserve Fund 1,651.55 676.658 Total 2,634.00 1,651.55
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 2,634.00 1,651.55
Notes to Accounts - Annexure I*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions.
34
12 HSBC MANAGED SOLUTIONS
Key Statistics for the period ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – CONSERVATIVE
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 12.0317 11.4619
Regular Plan Dividend Option 12.0317 11.4619
Direct Plan - Growth Option 12.0896 11.4883
Direct Plan - Dividend Option – –
High
Regular Plan Growth Option 13.2900 12.0317
Regular Plan Dividend Option 13.2900 12.0317
Direct Plan - Growth Option 13.3826 12.0896
Direct Plan - Dividend Option – –
Low
Regular Plan Growth Option 12.0354 11.3683
Regular Plan Dividend Option 12.0354 11.3683
Direct Plan - Growth Option 12.0938 11.4002
Direct Plan - Dividend Option – –
End
Regular Plan Growth Option 13.2827 12.0317
Regular Plan Dividend Option 13.2827 12.0317
Direct Plan - Growth Option 13.3800 12.0896
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 34,432 31,175
Average (AAuM)1 32,958 31,052
3. Gross income as % of AAuM2 3.95% 4.07%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise5)
Regular Plan (Continue) 0.99% 0.89%
Direct Plan 0.74% 0.64%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.25% 0.16%
Direct Plan 0.25% 0.16%
5. Net Income as a percentage of AAuM3 2.97% 3.19%
6. Portfolio turnover ratio4 0.21 0.26
35
HSBC MANAGED SOLUTIONS 12
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC MANAGED SOLUTIONS INDIA – CONSERVATIVE
Current Period ended
March 31, 2017
Previous Period ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Period
Scheme
Regular Plan Growth Option 10.3975 4.9573
Direct Plan - Growth Option 10.6736 5.2194
Benchmark
Composite Index constituting of 90% into CRISIL Composite Bond Index and 10% of BSE 200 Index
12.2280 6.6095
b. Since Inception
Scheme
Regular Plan Growth Option 10.2081 10.1096
Direct Plan - Growth Option 10.4838 10.3851
Benchmark
Composite Index constituting of 90% into CRISIL Composite Bond Index and 10% of BSE 200 Index
11.5476 11.2100
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period5. The Total management fees and other expenses charged by the mutual fund(s) in foreign countries along with
the management fee and recurring expenses charged to the domestic Mutual Fund is as follows :
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
Total TER *** Maximum TER Cap as per circular ***
2016-17
HSBC Managed Solution India - Conservative
0.69% 0.95% 1.64% 2.70%
2015-16
HSBC Managed Solution India - Conservative
0.75% 0.86% 1.62% 2.70%
*** The TER excludes service Tax on Management fees.
36
12 HSBC MANAGED SOLUTIONS
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC MANAGED SOLUTIONS INDIA – CONSERVATIVE
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 & March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of the years ended March 31, 2017 & March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31,2017 & March 31, 2016 are NIL.
1.5. NPA as at years ended March 31, 2017 & March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Units in Domestic Mutual Fund
– Appreciation 611,501,023 17.76 385,295,932 12.36
– Depreciation – – – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Rs. 681,500,000 and 714,998,140 respectively being 20.68% and 21.69% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 815,000,000 and 855,882,397 respectively being 26.25% and 27.56% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 & March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 87.89 82.13 16,160,689 91.08
37
HSBC MANAGED SOLUTIONS 12
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 105.43 89.70 15,633,720 91.55
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 & March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 & March 31, 2016:
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2016-2017
Regular Plan Growth Option
221,619,118.875 54,135,724.841 52,833,051.017 222,921,792.699 10
Regular Plan Dividend Option
34,635,446.213 15,624,642.889 16,760,049.120 33,500,039.982 10
Direct Plan - Growth Option
3,866,256.910 226.521 187,599.618 3,678,883.813 10
38
12 HSBC MANAGED SOLUTIONS
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2015-2016
Regular Plan Growth Option
221,730,386.712 73,573,878.332 73,685,146.169 221,619,118.875 10
Regular Plan Dividend Option
37,109,518.207 18,148,017.371 20,622,089.365 34,635,446.213 10
Direct Plan - Growth Option
99,503.863 3,887,006.078 120,253.031 3,866,256.910 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 434,786.389 & as on 31/03/2016 is 434,786.389
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil. (2016 : Nil)
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
39
HSBC MANAGED SOLUTIONS 12
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
40
12 HSBC MANAGED SOLUTIONS
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC Global Consumer Opportunities Fund 4
HSBC Global Consumer Opportunities Fund –Benefiting From China’s Growing Consumption PowerAn Open-ended Fund of Funds Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Global Consumer Opportunities Fund 4
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
4 HSBC Global Consumer Opportunities Fund
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC Global Consumer Opportunities Fund 4
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
4 HSBC Global Consumer Opportunities Fund
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Global Consumer Opportunities Fund (HGCOF) - an open ended Fund of Funds Scheme (Benefi ting from China’s Growing Consumption Power)HGCOF seeks to provide long term capital appreciation by investing predominantly in units of HSBC Global Investment Funds (HGIF) China Consumer Opportunities Fund. The Scheme may also invest a certain proportion of its corpus in money market instruments and/or units of liquid mutual fund schemes, in order to meet liquidity requirements from time to time.
The net assets of HGCOF amounted to Rs. 5.20 crores as at March 31, 2017 as compared to 10.51 crores as on March 31, 2016. Around 98.22 % of the net assets were invested in HSBC Global Consumer Opportunities Fund (overseas mutual fund) 3% of the net assets were invested in reverse repos / CBLO and (-1.22%) in net current assets as at March 31, 2017.
The performance of the underlying fund led to the underperformance in HGCOF relative to its benchmark.
Date of Inception : 24 February 2015 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year Since Inception
HSBC Global Consumer Opportunities Fund - Growth 8.46 1.29
MSCI AC World Index (Scheme Benchmark) 12.71 1.88
Nifty 50 (Standard Benchmark) 18.55 2.25
Rs. 10,000, if invested in HGCOF, would have become 10,846 10,274
Rs. 10,000, if invested in MSCI AC World Index, would have become 11,271 10,400
Rs. 10,000, if invested in Nifty 50, would have become 11,855 10,479
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC Global Consumer Opportunities Fund 4
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
4 HSBC Global Consumer Opportunities Fund
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC Global Consumer Opportunities Fund 4
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017: Nil
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
4 HSBC Global Consumer Opportunities Fund
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC Global Consumer Opportunities Fund 4
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
4 HSBC Global Consumer Opportunities Fund
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC Global Consumer Opportunities Fund 4
To the Board of Trustees of
HSBC Mutual Fund - HSBC Global Consumer Opportunities Fund - Benefi ting from China’s Growing Consumption Power
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Global Consumer Opportunities Fund - Benefi ting from China’s Growing Consumption Power (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
Independent Auditors’ Report
12
4 HSBC Global Consumer Opportunities Fund
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC Global Consumer Opportunities Fund 4
Rs. in Lakhs
HSBC GLOBAL CONSUMER OPPORTUNITIES FUND – BENEFITING FROM CHINA’S GROWING
CONSUMPTION POWERAs at As at
March 31, 2017 March 31, 2016
LIABILITIES1 Unit Capital 505.85 1,109.532 Reserves & Surplus2.1 Unit Premium Reserves (6.49) (1.48)2.2 Unrealised Appreciation Reserve 28.07 –2.3 Other Reserves (7.35) (56.92)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 6.82 14.15
TOTAL 526.90 1,065.28
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 510.82 1,037.28
Total Investments 510.82 1,037.282 Deposits 0.05 0.163 Other Current Assets3.1 Cash & Bank Balance 0.40 0.073.2 CBLO / Reverse Repo Lending 15.61 12.703.3 Others 0.02 15.074 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 526.90 1,065.28
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017
14
4 HSBC Global Consumer Opportunities Fund
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC GLOBAL CONSUMER OPPORTUNITIES FUND
– BENEFITING FROM CHINA’S GROWING CONSUMPTION POWER
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 1.25 2.431.3 Realised Gain / (Loss) on Foreign Exchange Transactions (1.37) 1.531.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments(9.33) (40.66)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) (9.45) (36.70)
2 EXPENSES2.1 Management fees 3.81 11.232.2 Service tax on Management fees 0.57 1.552.3 Transfer agents fees and expenses 0.38 0.812.4 Custodian fees 1.84 1.862.5 Trusteeship fees 0.02 0.042.6 Commission to Agents 4.82 11.692.7 Marketing & Distribution expenses 0.01 0.022.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.15 0.332.10 Other operating expenses 0.52 0.772.11 Less: Expenses to be Reimbursed by the Investment Manager – (0.03)
(B) 12.32 28.47
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) (21.77) (65.17)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 26.59 (72.88)
6 Change in unrealised appreciation inthe value of investments and derivatives (F) 28.07 –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 54.66 (72.88)
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 28.07 –7.3 Add / (Less): Equalisation 22.98 43.897.4 Transfer from Reserve Fund (56.92) (27.93)8 Total (7.35) (56.92)
9 Dividend appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward toBalance sheet (7.35) (56.92)
Notes to Accounts - Annexure I
15
HSBC Global Consumer Opportunities Fund 4
Key Statistics for the year ended March 31, 2017
HSBC GLOBAL CONSUMER OPPORTUNITIES FUND
– BENEFITING FROM CHINA’S GROWING CONSUMPTION POWER
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 9.4719 9.8761
Regular Plan Dividend Option – –
Direct Plan - Growth Option 9.5452 9.8831
Direct Plan - Dividend Option – –
High
Regular Plan Growth Option 10.4370 10.5667
Regular Plan Dividend Option – –
Direct Plan - Growth Option 10.5889 10.5843
Direct Plan - Dividend Option – –
Low
Regular Plan Growth Option 8.9271 8.4668
Regular Plan Dividend Option – –
Direct Plan - Growth Option 9.0114 8.5208
Direct Plan - Dividend Option – –
End
Regular Plan Growth Option 10.2734 9.4719
Regular Plan Dividend Option – –
Direct Plan - Growth Option 10.4257 9.5452
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 520 1,051
Average (AAuM)1 731 1,652
3. Gross income as % of AAuM2 -1.29% -2.22%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise5)
Regular Plan (Continue) 1.71% 1.73%
Direct Plan 1.00% 1.03%
b. Management Fee as % of AAuM (planwise)
Regular Plan (Continue) 0.52% 0.68%
Direct Plan 0.52% 0.68%
5. Net Income as a percentage of AAuM3 -2.98% -3.94%
6. Portfolio turnover ratio4 – –
16
4 HSBC Global Consumer Opportunities Fund
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC GLOBAL CONSUMER OPPORTUNITIES FUND
– BENEFITING FROM CHINA’S GROWING CONSUMPTION POWER
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend Option – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year Scheme
Regular Plan Growth Option 8.4619 (4.0818)
Direct Plan - Growth Option 9.2245 (3.4098)
Benchmark
MSCI AC World Index 12.7078 (6.2223)
b. Since Inception
Scheme
Regular Plan Growth Option 1.2919 (4.8068)
Direct Plan - Growth Option 2.0037 (4.1382)
Benchmark
MSCI AC World Index 1.8824 (7.0433)
1. AAuM=Average daily net assets
2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year5 The Total management fees and other expenses charged by the underlying fund along with the management
fee and recurring expenses charged by the domestic Mutual Fund is as follows:
Scheme TER charged by underlying Fund ***
TER of the domestic Fund***
Total TER ***
Maximum TER Cap as per
circular***
2016-17
HSBC Global Consumer Opportunities Fund – Benefi ting From China’s Growing Consumption Power
0.70% 1.63% 2.33% 2.70%
2015-16
HSBC Global Consumer Opportunities Fund – Benefi ting From China’s Growing Consumption Power
0.70% 1.64% 2.34% 2.70%
*** The TER excludes service Tax on Management fees
17
HSBC Global Consumer Opportunities Fund 4
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC GLOBAL CONSUMER OPPORTUNITIES FUND – BENEFITING FROM CHINA’S GROWING CONSUMPTION POWER
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 & March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 & March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 & March 31, 2016 are NIL.
1.5. NPA as at years ended March 31, 2017 & March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial year and percentage to net assets :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Foreign Securities
– Appreciation 2,806,628 5.40 – –
– Depreciation – – 4,842,133 4.61
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Nil and 59,362,253 respectively being Nil and 81.16% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Nil and 113,180,304 respectively being Nil and 68.52% of the average daily net assets.
1.8. Non-Traded securities in the portfolios as at March 31, 2017 & March 31, 2016 are NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2016-2017 0.01 3.56 385,884.60 85.37
18
4 HSBC Global Consumer Opportunities Fund
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of Investment Manager
2015-2016 0.14 18.01 969,338 87.60
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 & March 31, 2016.
4 Unit Capital movement during the year ended March 31, 2017 :
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
10,825,774.705 43,032.929 6,065,616.450 4,803,191.184 10
Direct Plan - Growth Option
269,518.254 3,012.443 17,229.812 255,300.885 10
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
22,300,744.780 202,602.005 11,677,572.080 10,825,774.705 10
Direct Plan - Growth Option
250,472.037 20,141.375 1,095.158 269,518.254 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 244,572.037 & as on 31/03/2016 is 244,572.037
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
19
HSBC Global Consumer Opportunities Fund 4
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
5 No contingent liabilities for the years ended March 31, 2017 & March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil.
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount(in Rs. Lacs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
20
4 HSBC Global Consumer Opportunities Fund
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC Global Consumer Opportunities Fund 4
HSBC Monthly Income Plan(Formerly known as HSBC MIP Fund – Savings Plan)An Open-ended Fund*
Abridged Annual Report 2016 - 2017*Monthly income is not assured and is subject to the availability of distributable surplus.
HSBC MIP 6
1
HSBC MIP 6
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
6 HSBC MIP
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC MIP 6
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
6 HSBC MIP
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Monthly Income Plan (HMIP) – an open-ended Fund (Monthly income is not assured and is subject to availability of distributable surplus.)HMIP is an open-ended fund which seeks to generate reasonable returns through investments in Debt and Money Market Instruments. The secondary objective of the scheme is to invest in equity and equity related instruments to seek capital appreciation.
The net assets of HSBC Monthly Income Plan amounted to Rs. 290.82 crores as at March 31, 2017 as compared to Rs. 213.78 crores as at March 31, 2016. Around 73.53% of the net assets were invested in debt and money market instruments, 23.72% of the net assets were invested in equities and 2.75% were in net current assets as at March 31, 2017.
HMIP outperformed the index due to equity market outperformance during the period. Fixed income portion was volatile in wake of demonetization during the year.
Date of Inception : 24 February 2004 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Monthly Income Plan – Growth 12.99 11.06 10.67 9.70
Crisil MIP Blended Index (Scheme Benchmark) 12.30 11.37 9.92 8.08
Crisil 1 Year T-Bill Index (Standard Benchmark) 7.15 7.85 7.54 5.99
Crisil 10 Year Gilt Index (Standard Benchmark) 11.87 11.43 8.79 5.82
Rs. 10,000, if invested in HMIP, would have become 11,299 13,699 16,599 33,655
Rs. 10,000, if invested in Crisil MIP Blended Index, would have become
11,230 13,814 16,045 27,703
Rs. 10,000, if invested in Crisil 1 Year T-Bill Index, would have become
10,715 12,546 14,382 21,446
Rs. 10,000, if invested in Crisil 10 Year Gilt Index, would have become
11,187 13,835 15,242 20,995
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC MIP 6
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
6 HSBC MIP
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC MIP 6
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
SchemeUnclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC MIP Regular Plan 693604.31 219 410476.27 15
HSBC Monthly Income Plan Saving 1259854.40 293 572953.79 17
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
6 HSBC MIP
Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC MIP 6
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios
** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
6 HSBC MIP
certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC MIP 6
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund – HSBC Monthly Income Plan (Formerly known as HSBC MIP Fund – Savings Plan)
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Monthly Income Plan (formerly known as HSBC MIP Fund - Savings Plan) (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
12
6 HSBC MIP
Report on other legal and regulatory requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
13
HSBC MIP 6
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC MONTHLY INCOME PLANAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 14,259.77 11,247.70 2 Reserves & Surplus2.1 Unit Premium Reserves 1,560.89 927.41 2.2 Unrealised Appreciation Reserve 1,320.48 594.07 2.3 Other Reserves 11,954.22 8,692.30 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 188.05 161.95
TOTAL 29,283.41 21,623.43
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 6,898.66 5,343.35 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 8,740.90 4,648.60 1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds 501.70 - 1.3.5 Securitised Debt securities – –1.4 Government Securities 11,455.68 10,092.46 1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – 790.35 1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 27,596.94 20,874.76 2 Deposits 12.59 9.37 3 Other Current Assets3.1 Cash & Bank Balance 47.66 80.41 3.2 CBLO / Reverse Repo Lending 679.16 208.17 3.3 Others 947.06 450.72 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 29,283.41 21,623.43
Notes to Accounts – Annexure I
14
6 HSBC MIP
Rs. in Lakhs
HSBC MONTHLY INCOME PLANCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend 51.91 63.90 1.2 Interest 1,398.85 1,312.47 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
1,226.78 609.15
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 2,677.54 1,985.52 2 EXPENSES2.1 Management fees 317.32 233.85 2.2 Service tax on Management fees 47.60 32.39 2.3 Transfer agents fees and expenses 10.59 10.36 2.4 Custodian fees 0.84 0.84 2.5 Trusteeship fees 0.89 0.59 2.6 Commission to Agents 231.64 231.98 2.7 Marketing & Distribution expenses 1.02 1.35 2.8 Audit fees 1.66 0.79 2.9 Investor Education Expenses 4.89 4.31 2.10 Other operating expenses 6.47 4.45 2.11 Expenses to be Reimbursed by the Investment Manager (8.17) –
(B) 614.75 520.91 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 2,062.79 1,464.61 4 Change in Unrealised Depreciation in
value of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 2,062.79 1,464.61 6 Change in unrealised appreciation in the
value of investments (F) 726.40 (965.69)7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 2,789.19 498.92
7.1 Add: Balance transfer from Unrealised Appreciation Reserve
– 965.69
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 726.40 –7.3 Add / (Less): Equalisation 2,128.79 1,070.69 7.4 Transfer from Reserve Fund 8,692.30 6,978.27 7.5 Transfer from Unit Premium Reserve – –8 Total 12,883.88 9,513.57 9 Dividend appropriation9.1 Income Distributed during the year (670.63) (592.09)9.2 Tax on income distributed during the year (259.03) (229.18)10 Retained Surplus / (Defi cit) carried forward
to Balance sheet 11,954.22 8,692.30
Notes to Accounts – Annexure I
Abridged Revenue Account for the year ended March 31, 2017
15
HSBC MIP 6
Key Statistics for the year ended March 31, 2017
HSBC MONTHLY INCOME PLANCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 29.7774 29.1042
Monthly Dividend Option 12.9427 13.7738
Quarterly Dividend Option 12.8672 13.6843
Direct Plan - Growth Option 30.3022 29.4706
Direct Plan - Monthly Dividend Option 14.0813 14.6259
Direct Plan - Quarterly Dividend Option 13.5589 14.3110
High
Growth Option 33.6465 29.9742
Monthly Dividend Option 13.6821 13.8846
Quarterly Dividend Option 13.7529 13.7944
Direct Plan - Growth Option 34.4244 30.4341
Direct Plan - Monthly Dividend Option 15.9969 14.7466
Direct Plan - Quarterly Dividend Option 14.5463 14.4291
Low
Growth Option 29.6570 28.3175
Monthly Dividend Option 12.8904 12.4361
Quarterly Dividend Option 12.8152 12.5045
Direct Plan - Growth Option 30.1817 28.8028
Direct Plan - Monthly Dividend Option 14.0253 13.3845
Direct Plan - Quarterly Dividend Option 13.5050 13.1656
End
Growth Option 33.6465 29.7774
Monthly Dividend Option 13.4002 12.9427
Quarterly Dividend Option 13.3254 12.8672
Direct Plan - Growth Option 34.4244 30.3022
Direct Plan - Monthly Dividend Option 15.9969 14.0813
Direct Plan - Quarterly Dividend Option 14.1874 13.5589
2. Closing Assets Under Management (Rs. in Lakhs)
End 29,082 21,378
Average (AAuM)1 24,456 21,563
3. Gross income as % of AAuM2 10.95% 9.21%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Growth Option 2.52% 2.42%
Direct Plan - Growth Option 1.98% 1.92%
16
6 HSBC MIP
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC MONTHLY INCOME PLANCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
b. Management Fee as % of AAuM (planwise)
Growth Option 1.30% 1.08%
Direct Plan - Growth Option 1.30% 1.08%
5. Net Income as a percentage of AAuM3 8.43% 6.79%
6. Portfolio turnover ratio – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Monthly Dividend Option 0.8414 0.8162
Quarterly Dividend Option 0.8379 0.8089
Direct Plan - Monthly Dividend Option – 0.6789
Direct Plan - Quarterly Dividend Option 0.8379 0.8234
Corporate
Monthly Dividend Option 0.7796 0.7561
Quarterly Dividend Option 0.7762 0.7495
Direct Plan - Monthly Dividend Option – 0.6290
Direct Plan - Quarterly Dividend Option 0.7762 0.7629
8. Returns (%):
a. Last One Year
Scheme
Growth Option 12.9934 2.3067
Direct Plan - Growth Option 13.6036 2.8140
Benchmark
CRISIL MIP Blended Index 12.2956 5.6525
b. Since Inception
Scheme
Growth Option 9.6992 9.4314
Direct Plan - Growth Option 10.3648 9.3777
Benchmark
CRISIL MIP Blended Index 8.0827 7.7419
1. AAuM = Average daily net assets.2. Gross income = amount against (A) in the Revenue account i.e. Income.3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year.
17
HSBC MIP 6
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC Monthly Income Plan
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of year ended March 31, 2017 is NIL. Open Positions of derivatives as of year ended March 31, 2016 is NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016.
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments by
all schemes
March 31, 2017 March 31, 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
50,270,700 1,452,436,300 35,169,750 402,773,900
Equities – 94,659,583 21,456,037 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as on March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years 2017 and 2016 and their percentage to net assets are as under :
Security Category March 31, 2017 March 31, 2016
Amount(Rs.)
Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
Equity Shares
– Appreciation 165,536,178 5.69 98,225,972 4.59
– Depreciation 40,313,592 1.39 47,270,146 2.21
Non-Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 7,847,368 0.27 1,695,200 0.08
– Depreciation 2,197,380 0.08 675,570 0.02
Government Securities
– Appreciation 4,791,783.72 0.16 7,383,643 0.35
– Depreciation 3,616,778.14 0.12 – –
Commercial Paper / Certifi cate of Deposit
– Appreciation – – 48,225 0.00 ~
– Depreciation – – – –
~ Indicates less than 0.01
18
6 HSBC MIP
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 4,635,146,230 and Rs. 4,917,390,745 being 189.53% and 201.07% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) are Rs. 4,227,968,397 and Rs. 3,953,877,417 being 196.08% and 183.37% of the average daily net assets.
1.8. Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under :
Security Category Amount(Rs.)
Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
2017 2016
Equities – – 9,716,490 0.45%
Debt Instruments 753,503,467 25.91% 464,859,520 21.74%
Money Market Instruments – – 79,035,440 3.70%
Total 753,503,467 25.91% 553,611,450 25.90%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 88.04 43.24 6,549,074 31.81
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 34.62 24.13 5,327,497 24.42
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transaction of the fund
Brokerage paid [Rs.]
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2016-2017 – – – –
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
19
HSBC MIP 6
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association /Nature of
relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transaction of the fund
Brokerage paid [Rs.]
(on accrual basis)
% of total brokerage
paid by the fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2015-2016 1.90 1.71 22,884.65 3.65
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the schemes at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016.
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2016–2017
Growth Option 40,691,714.524 33,559,634.111 25,389,297.275 48,862,051.360 10
Monthly Dividend Option
52,399,045.765 57,771,010.165 39,561,685.766 70,608,370.164 10
Quarterly Dividend Option
18,925,865.373 9,776,699.579 6,188,874.837 22,513,690.115 10
Direct Plan - Growth Option
386,315.422 233,932.920 102,681.192 517,567.150 10
Direct Plan - Monthly Dividend Option
62,168.782 51,861.554 28,870.000 85,160.336 10
Direct Plan - Quarterly Dividend Option
11,885.441 693.583 1,681.759 10,897.265 10
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
20
6 HSBC MIP
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2015-2016
Growth Option 35,459,516.375 27,745,170.014 22,512,971.865 40,691,714.524 10
Monthly Dividend Option
46,100,913.211 34,955,758.224 28,657,625.670 52,399,045.765 10
Quarterly Dividend Option
17,755,316.260 6,410,299.745 5,239,750.632 18,925,865.373 10
Direct Plan - Growth Option
153,726.932 237,121.310 4,532.820 386,315.422 10
Direct Plan - Monthly Dividend Option
78,733.760 6,223.524 22,788.502 62,168.782 10
Direct Plan - Quarterly Dividend Option
14,163.025 1,687.508 3,965.092 11,885.441 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 339,032.989 & as on 31/03/2016 is 170,321.192
5 Prior year amounts have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income NIL (2016: Rs. 140 /- represents Fractional amount received on bonus shares of Mothersons Sumi.)
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
10 Garnishee Notices :
An Income tax demand of Rs. 32.58 crores was purported to be recovered under garnishee proceedings, by Income Tax Authorities in respect of investments made in Pass through Certifi cates (PTC) by some of the debt schemes (including matured schemes) of HSBC Mutual Fund (HSBC MF), for A.Y. 2009-2010.The said demand, impacting various mutual fund players in the industry, raised originally on the trusts sponsored by IL&FS Trust Company Ltd., (Appellants) was sought to be also recovered u/s 177(3) of the Income Tax Act, from HSBC MF. Against the demand an appeal was fi led by the Appellant with the fi rst Appellate Authority CIT(A)] and thereafter with ITAT. ITAT decided the issue in favour of the Appelant.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
21
HSBC MIP 6
Similar to AY 2009-10, HSBC MF had received a demand notice from the Income Tax authorities for AY 2010-11 for Rs. 6.95 crores. ITAT has passed an order in favour of the appellant for this year as well.
Assessment for the A.Y. 2007-2008 has also been reopened by the Income Tax Authorities and demand has been made of Rs. 2.04 Crores on the trust sponsored by IL&FS Trust Company Ltd. HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year. ITAT has passed an order in favour of the appellant for this year as well No intimation of tax department fi ling further appeal has been received by the appellate or HSBC MF.
11 Merger
Merger of HSBC MIP Regular Plan (MIPR) in to HSBC MIP Savings Plan (MIPS) and to rename it as HSBC Monthly Income Plan
The Board of Directors of HSBC Asset Management (India) Private limited and Board of Trustees of HSBC Mutual Fund have approved the merger of MIPR into MIPS in their meetings held on May 18, 2016 and May 20, 2016 respectively. SEBI has also granted it’s no objection to the aforesaid merger vide its letter dated July 28, 2016. Accordingly, a notice was published on August 29, 2016 giving an option to the unit holders of MIPR to exit during the period from September 8, 2016 to October 7, 2016 at the applicable NAV, without payment of exit load, if any and sale of units in the MIPR was suspended effective from September 8, 2016. The MIPR was merged into MIPS and MIPS was renamed as HSBC Monthly Income Plan effective from October 8, 2016. Accordingly, the MIPR ceased to exist from October 8, 2016. The unit holders of MIPR who have not exercised the exit option during the aforesaid exit window have been allotted units of MIPS at the NAV declared as on the close of business hours on the Effective Date i.e. October 8, 2016.
Details of scheme merged are as follows :-
Transferor Scheme Surviving Scheme Net assets taken over
Face value of units issued
Unit premium of units issued
HSBC MIP Regular Plan HSBC Monthly Income Plan
785,403,968 370,943,771 414,460,197
12 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
22
6 HSBC MIP
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
23
HSBC MIP 6
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC INCOME FUND 18
HSBC Income FundAn Open-ended Income Scheme
Abridged Annual Report 2016 - 2017
1
HSBC INCOME FUND 18
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
18 HSBC INCOME FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC INCOME FUND 18
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
18 HSBC INCOME FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Income Fund (HIF) – an open-ended Income Scheme HIF seeks to generate reasonable income through a diversifi ed portfolio of fi xed income securities. The AMC’s view of interest rate trends and the nature of the plans will be refl ected in the type and maturities of securities in which the Short Term and Investment Plans are invested.
The Scheme has two plans – the Investment Plan and the Short Term Plan. The net assets of HSBC Income Fund – Investment Plan (HIF – IP) amounted to Rs. 56.72 crores as at March 31, 2017 as compared to Rs. 77.65 crores as at March 31, 2016. Around 92.68% of the net assets was invested in debt and money market instruments, 3.55% of the net assets was invested in reverse repos / CBLO and 3.77 % in net current assets as at March 31, 2017. The net assets of HSBC Income Fund – Short Term Plan (HIF – STP) amounted to Rs. 1990.87 crores as at March 31, 2017 as compared to Rs. 1453.82 crores as at March 31, 2016. Around 97.18% of the net assets were invested in debt and money market instruments, 0.45% of the net assets were invested in reverse repos / CBLO and 2.37% in net current assets as at March 31, 2017.
HIF - IP
HIF-IP underperformed its scheme’s benchmark due to volatility in the G-sec segment due to demonetization.
Date of Inception : 10 December 2002 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Income Fund - Investment Plan - Regular - Growth 9.17 9.56 8.27 7.26
CRISIL Composite Bond Fund Index (Scheme Benchmark) 11.09 11.26 9.45 6.86
CRISIL 10 Year Gilt Index (Standard Benchmark) 11.87 11.43 8.79 6.34
Rs. 10,000, if invested in HIF - IP, would have become 10,917 13,151 14,876 27,260
Rs. 10,000, if invested in CRISIL Composite Bond Fund Index, would have become
11,109 13,774 15,705 25,859
Rs. 10,000, if invested in CRISIL10 Year Gilt Index, would have become
11,187 13,835 15,242 24,124
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC INCOME FUND 18
HIF - STP
HIF-STP underperformed its scheme’s benchmark due to volatility caused by demonetization during the year. However, the direct plan outperformed the index by 20 bps.
Date of Inception : 10 December 2002 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Income Fund - Short Term Plan- Regular Plan - Growth
8.26 8.54 8.45 7.16
CRISIL Short Term Bond Fund Index (Scheme Benchmark) 9.10 9.29 9.15 7.19
CRISIL 1 Year T-Bill Index (Standard Benchmark) 7.15 7.85 7.54 5.94
Rs. 10,000, if invested in HIF -ST, would have become 10,826 12,785 15,002 26,913
Rs. 10,000, if invested in CRISIL Short Term Bond Fund Index, would have become
10,910 13,053 15,492 27,015
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,715 12,546 14,382 22,845
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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18 HSBC INCOME FUND
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC INCOME FUND 18
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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18 HSBC INCOME FUND
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
SchemeUnclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Income Fund Investment Plan 790795.94 336 1691635.26 33
HSBC Income Fund Short Term Plan 462686.69 24 1100746.88 3
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC INCOME FUND 18
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
18 HSBC INCOME FUND
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC INCOME FUND 18
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Income Fund - Investment Plan
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Income Fund - Investment Plan (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
12
18 HSBC INCOME FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC INCOME FUND 18
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Income Fund - Short Term Plan
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Income Fund - Short Term Plan (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
14
18 HSBC INCOME FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
15
HSBC INCOME FUND 18
Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLAN
As atMarch 31, 2017
As atMarch 31, 2016
LIABILITIES1 Unit Capital 2,327.77 3,246.74 2 Reserves & Surplus2.1 Unit Premium Reserves (493.80) (405.90)2.2 Unrealised Appreciation Reserve 53.72 109.38 2.3 Other Reserves 3,783.83 4,814.37 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 34.18 26.49
TOTAL 5,705.70 7,791.08
ASSETS1 Investments1.1 Listed Securities: – – 1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 1,975.42 1,728.35 1.1.5 Securitised Debt securities – 6.82 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities – – 1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds 301.02 –1.3.5 Securitised Debt securities – – 1.4 Government Securities 2,978.67 5,518.14 1.5 Treasury Bills – – 1.6 Commercial Paper – –1.7 Certifi cate of Deposits – 148.19 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 5,255.11 7,401.50 2 Deposits 3.96 5.20 3 Other Current Assets3.1 Cash & Bank Balance 5.33 1.45 3.2 CBLO / Reverse Repo Lending 201.44 87.58 3.3 Others 239.86 295.35 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 5,705.70 7,791.08
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
16
18 HSBC INCOME FUND
Rs. in Lakhs
HSBC INCOME FUND – SHORT TERM PLAN
As atMarch 31, 2017
As atMarch 31, 2016
LIABILITIES1 Unit Capital 97,385.88 76,226.55 2 Reserves & Surplus2.1 Unit Premium Reserves 10,515.38 7,499.56 2.2 Unrealised Appreciation Reserve 632.32 244.53 2.3 Other Reserves 91,533.26 63,340.81 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 564.14 1,733.99
TOTAL 200,630.98 149,045.44
ASSETS1 Investments1.1 Listed Securities: – – 1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 169,323.14 100,786.84 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities – – 1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds 4,034.72 2,012.68 1.3.5 Securitised Debt securities – – 1.4 Government Securities 19,564.90 19,539.05 1.5 Treasury Bills – – 1.6 Commercial Paper 494.35 7,865.61 1.7 Certifi cate of Deposits – 12,319.05 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 193,417.11 142,523.23
2 Deposits 93.40 24.40 3 Other Current Assets3.1 Cash & Bank Balance 138.63 1,482.48 3.2 CBLO/Reverse Repo Lending 901.92 1,534.71 3.3 Others 6,079.92 3,480.62 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 200,630.98 149,045.44
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
17
HSBC INCOME FUND 18
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLAN
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 498.91 795.00 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
316.75 86.25
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 815.66 881.25 2 EXPENSES2.1 Management fees 71.22 104.57 2.2 Service tax on Management fees 10.62 14.55 2.3 Transfer agents fees and expenses 2.36 4.38 2.4 Custodian fees 0.11 0.14 2.5 Trusteeship fees 0.09 0.13 2.6 Commission to Agents 23.01 35.30 2.7 Marketing & Distribution expenses 0.04 - 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 1.34 2.02 2.10 Other operating expenses 0.64 2.07 2.11 Less : Expenses to be Reimbursed by the Investment Manager – (0.63)
(B) 109.63 162.73 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 706.03 718.52 4 Change in Unrealised Depreciation
in value of investments (D) (1.36) 0.22 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 704.67 718.74 6 Change in unrealised appreciation
in the value of investments (F) (55.66) (225.73)7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 649.01 493.01 7.1 Add : Balance transfer from Unrealised
Appreciation Reserve 55.66 225.73 7.2 Less : Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (1,698.18) (1,761.90)7.4 Transfer from Reserve Fund 4,814.37 5,890.22 7.5 Transfer from Unit Premium Reserve – –8 Total 3,820.86 4,847.06 9 Dividend Appropriation9.1 Income Distributed during the year (26.73) (23.59)9.2 Tax on income distributed during the year (10.30) (9.10)10 Retained Surplus / (Defi cit) carried forward to
Balance Sheet 3,783.83 4,814.37
Notes to Accounts – Annexure I
18
18 HSBC INCOME FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC INCOME FUND – SHORT TERM PLAN
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 18,228.70 13,342.98 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments 1,723.64 527.71
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.01
(A) 19,952.34 13,870.70 2 EXPENSES2.1 Management fees 897.08 709.38 2.2 Service tax on Management fees 133.50 100.62 2.3 Transfer agents fees and expenses 85.23 79.04 2.4 Custodian fees 11.80 8.98 2.5 Trusteeship fees 1.73 1.48 2.6 Commission to Agents 875.82 565.52 2.7 Marketing & Distribution expenses 1.74 2.91 2.8 Audit fees 3.26 3.66 2.9 Investor Education Expenses 46.49 31.53 2.10 Other operating expenses 16.61 23.52 2.11 Less : Expenses to be Reimbursed by the
Investment Manager– –
(B) 2,073.26 1,526.64 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 17,879.08 12,344.06 4 Change in Unrealised Depreciation
in value of investments (D) (69.64) –5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 17,809.44 12,344.06 6 Change in unrealised appreciation
in the value of investments (F) 387.79 (533.45)7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 18,197.23 11,810.61
7.1 Add : Balance transfer from Unrealised Appreciation Reserve – 533.45
7.2 Less : Balance transfer to Unrealised Appreciation Reserve 387.79 –7.3 Add / (Less): Equalisation 13,220.02 4,695.02 7.4 Transfer from Reserve Fund 63,340.81 48,977.66 7.5 Transfer from Unit Premium Reserve – –8 Total 94,370.27 66,016.74 9 Dividend Appropriation9.1 Income Distributed during the year (2,036.71) (1,916.23)9.2 Tax on income distributed during the year (800.30) (759.70)10 Retained Surplus / (Defi cit) carried forward to
Balance Sheet 91,533.26 63,340.81
Notes to Accounts – Annexure I
19
HSBC INCOME FUND 18
Key Statistics for the year ended March 31, 2017
HSBC INCOME FUND –INVESTMENT PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Growth Option 24.9657 23.7966
Regular Dividend Option – –
Regular Quarterly Dividend Option 10.9417 11.3683
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 25.6219 24.2396
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – 10.0000
High
Regular Growth Option 28.0149 24.9657
Regular Dividend Option – –
Regular Quarterly Dividend Option 11.7630 11.3894
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 28.8923 25.6219
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
20
18 HSBC INCOME FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND –INVESTMENT PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
Low
Regular Growth Option 25.0235 23.4514
Regular Dividend Option – –
Regular Quarterly Dividend Option 10.9182 10.8479
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 25.6839 23.9237
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
End
Regular Growth Option 27.2545 24.9657
Regular Dividend Option – –
Regular Quarterly Dividend Option 11.0019 10.9417
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 28.1815 25.6219
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
21
HSBC INCOME FUND 18
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND –INVESTMENT PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
2. Closing Assets Under Management (Rs. in Lakhs)
End 5,672 7,765
Average (AAuM)1 6,677 10,093
3. Gross income as % of AAuM2 12.22% 8.73%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 1.99% 1.98%
Institutional Growth Option – –
Institutional Plus Growth Option – –
Direct Plan - Growth Option 1.25% 1.23%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 1.07% 1.04%
Institutional Growth Option – –
Institutional Plus Growth Option – –
Direct Plan - Growth Option 1.07% 1.04%
5. Net Income as a percentage of AAuM3 10.57% 7.12%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Weekly Dividend Option – –
Regular Quarterly Dividend Option 0.6645 0.6934
Regular Monthly Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Corporate
Regular Weekly Dividend Option – –
Regular Quarterly Dividend Option 0.6156 0.6424
Regular Monthly Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
22
18 HSBC INCOME FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND –INVESTMENT PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 9.1678 4.8991
Institutional Growth Option N.A. N.A.
Institutional Plus Growth Option N.A. N.A.
Direct Plan - Growth Option 9.9899 5.6866
Benchmark
CRISIL Composite Bond Fund Index 11.0896 8.2153
b. Since Inception
Scheme
Regular Growth Option 7.2552 7.1129
Direct Plan - Growth Option 8.3958 7.9070
Benchmark
CRISIL Composite Bond Fund Index 6.8606 6.5496
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
23
HSBC INCOME FUND 18
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Growth Option 24.8551 23.1336
Regular Dividend Option – –
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option 10.2169 10.2245
Regular Monthly Dividend Option – 11.1550
Institutional Growth Option – 10.0000
Institutional Dividend Option – –
Institutional Weekly Dividend Option 13.2695 13.3113
Institutional Monthly Dividend Option 11.9946
Institutional Plus Growth Option 14.6519 13.5486
Institutional Plus Weekly Dividend Option 10.1875 10.2186
Institutional Plus Monthly Dividend Option – 10.0000
Direct Plan - Growth Option 25.5527 23.5578
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option 10.2424 10.2514
Direct Plan - Monthly Dividend Option 11.4386 11.2000
Direct Plan - Quarterly Dividend Option – –
High
Regular Growth Option 26.9083 24.8551
Regular Dividend Option – –
Regular Quarterly Dividend Option 10.0419 –
Regular Weekly Dividend Option 10.3144 10.2427
Regular Monthly Dividend Option 11.4221 11.2210
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option 13.5117 13.3294
Institutional Monthly Dividend Option – 12.0705
Institutional Plus Growth Option 15.9658 14.6519
Institutional Plus Weekly Dividend Option 10.5629 10.2333
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 27.9283 25.5527
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option 10.2889 10.2696
Direct Plan - Monthly Dividend Option 12.0465 11.4386
Direct Plan - Quarterly Dividend Option – –
24
18 HSBC INCOME FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
Low
Regular Growth Option 24.9155 23.1722
Regular Dividend Option – –
Regular Quarterly Dividend Option 9.9401 –
Regular Weekly Dividend Option 10.1496 10.1627
Regular Monthly Dividend Option 11.1058 10.9953
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option 13.2366 13.2194
Institutional Monthly Dividend Option – 11.9036
Institutional Plus Growth Option 14.6885 13.5727
Institutional Plus Weekly Dividend Option 10.1609 10.1491
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 25.6175 23.6009
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option 10.1490 10.1899
Direct Plan - Monthly Dividend Option 11.1941 11.1147
Direct Plan - Quarterly Dividend Option – –
End
Regular Growth Option 26.9083 24.8551
Regular Dividend Option – –
Regular Quarterly Dividend Option 10.0419 –
Regular Weekly Dividend Option 10.2072 10.2169
Regular Monthly Dividend Option 11.1758 11.1036
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option 13.3262 13.2695
Institutional Monthly Dividend Option – 11.9393
Institutional Plus Growth Option 15.9658 14.6519
Institutional Plus Weekly Dividend Option – 10.1875
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 27.9283 25.5527
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option 10.2304 10.2424
Direct Plan - Monthly Dividend Option 11.2791 11.4386
Direct Plan - Quarterly Dividend Option – –
25
HSBC INCOME FUND 18
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
2. Closing Assets Under Management (Rs. in Lakhs)
End 199,087 145,382
Average (AAuM)1 232,457 157,670
3. Gross income as % of AAuM2 8.58% 8.80%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 1.29% 1.31%
Institutional Growth Option 0.75% 0.74%
Institutional Plus Growth Option 0.65% 0.66%
Direct Plan - Growth Option 0.34% 0.36%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.39% 0.45%
Institutional Growth Option 0.39% 0.45%
Institutional Plus Growth Option 0.39% 0.45%
Direct Plan - Growth Option 0.39% 0.45%
5. Net Income as a percentage of AAuM3 7.69% 7.83%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Weekly Dividend Option 0.5931 0.5111
Regular Quarterly Dividend Option – –
Regular Monthly Dividend Option 0.5911 0.6141
Institutional Weekly Dividend Option 0.7771 0.7398
Institutional Monthly Dividend Option – 0.2543
Institutional Plus Weekly Dividend Option 0.2942 0.5745
Direct Plan - Weekly Dividend Option 0.6657 0.5823
Direct Plan - Monthly Dividend Option 0.8538 0.4861
Corporate
Regular Weekly Dividend Option 0.5495 0.4735
Regular Quarterly Dividend Option – –
Regular Monthly Dividend Option 0.5476 0.5690
Institutional Weekly Dividend Option 0.7199 0.6854
Institutional Monthly Dividend Option – 0.2356
Institutional Plus Weekly Dividend Option 0.2725 0.5323
Direct Plan - Weekly Dividend Option 0.6167 0.5395
Direct Plan - Monthly Dividend Option 0.7911 0.4503
26
18 HSBC INCOME FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
CurrentYear ended
March 31, 2017
PreviousYear ended
March 31, 2016
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 8.2607 7.4205
Institutional Growth Option – –
Institutional Plus Growth Option 8.9674 8.1201
Direct Plan - Growth Option 9.2969 8.4440
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 7.1594 7.0772
Institutional Growth Option – –
Institutional Plus Growth Option 5.9327 5.5132
Direct Plan - Growth Option 9.1621 9.1206
Benchmark
CRISIL Short-Term Bond Fund Index 7.1875 7.0449
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
27
HSBC INCOME FUND 18
HSBC INCOME FUND – INVESTMENT PLAN AND SHORT TERM PLAN
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 is NIL.
1.3. Investments in Associates and Group Companies:(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments by
all schemes
2017 2016
INVESTMENT PLAN
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
40,216,560 1,452,436,300 50,242,500 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments by
all schemes
2017 2016
SHORT TERM PLAN
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
850,000,000 1,452,436,300 – 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs for the Scheme for the years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years 2017 and 2016 and their percentages to net assets are as under :
Security Type Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
INVESTMENT PLAN
March 31, 2017 March 31, 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 5,988,462 1.06 4,788,940 0.62
– Depreciation 616,080 0.11 – –
Certifi cate of Deposits
– Appreciation – – 9,042 0.00~
– Depreciation – – – –
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
28
18 HSBC INCOME FUND
Security Type Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
INVESTMENT PLAN
March 31, 2017 March 31, 2016
Asset Backed Securities
– Appreciation – – – –
– Depreciation – – 18,181 0.00~
Government Securities
– Appreciation 1,193,193 0.21 6,140,266 0.79
– Depreciation 1,347,573 0.24 106 0.00~
~ Indicates less than 0.01
Security Type Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
SHORT TERM PLAN
March 31, 2017 March 31, 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 96,328,988 0.48 20,496,617 0.14
– Depreciation 33,096,914 0.17 16,057,301 0.11
Certifi cate of Deposits
– Appreciation – – 5,451,999 0.04
– Depreciation – – – –
Asset Backed Securities
– Appreciation – – – –
– Depreciation – – – –
Government Securities
– Appreciation 6,446,313 0.03 14,322,479 0.10
– Depreciation 13,410,769 0.07 – 0.00~
~ Indicates less than 0.01
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 1,974,710,593 and Rs. 2,214,714,439 respectively being 295.73% and 331.68% of the average daily net assets for Investment Plan and Rs. 47,429,622,469 and Rs. 42,609,787,503 respectively being 204.04% and 183.30% of the average daily net assets for Short Term Plan.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) are Rs. 3,070,375,805 and Rs. 3,318,712,507 respectively being 304.22% and 328.83% of the average daily net assets for Investment Plan and Rs. 28,966,534,828 and Rs. 27,721,277,711 respectively being 183.72% and 175.82% of the average daily net assets for Short Term Plan.
1.8. Non-Traded securities in the portfolio:
Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets are as under:
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
29
HSBC INCOME FUND 18
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Security Category INVESTMENT PLAN
2017 2016
Fair Value (Rupees)
Percentage to Net Assets
Fair Value (Rupees)
Percentage to Net Assets
Debt Instruments 207,918,917 36.66 173,517,330 22.35
Money Market Instruments – – 14,819,145 1.91
Total 207,918,917 36.66 188,336,475 24.26
Security Category SHORT TERM PLAN
2017 2016
Fair Value (Rupees)
Percentage to Net Assets
Fair Value (Rupees)
Percentage to Net Assets
Debt Instruments 17,093,785,708 85.86 9,120,693,070 62.74
Money Market Instruments 49,434,645 0.25 2,018,466,400 13.88
Total 17,143,220,353 86 11,139,159,470 76.62
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
During the year 2016-17, The Hong Kong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges are Nil for Short Term Plan and Investment Plan.
During the year 2015-16, The Hong Kong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges are Nil for Short Term Plan and Investment Plan.
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rupees]
% of Total commission paid by the
Fund
INVESTMENT PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2016-2017 12.79 65.50 797,837.46 37.38
The Hongkong and Shanghai Banking Corporation Limited
Associate 2015-2016 6.27 41.00 919,352.86 28.64
30
18 HSBC INCOME FUND
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rupees]
% of Total commission paid by the
Fund
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2016-2017 772.05 19.00 33,482,489.32 39.08
The Hongkong and Shanghai Banking Corporation Limited
Associate 2015-2016 697.56 40.40 26,139,711.23 55.90
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager.- Nil. ( Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of Investment Plan and Short Term Plan as at the years ended on March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016.
INVESTMENT PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
2016–2017
Regular Dividend Option
3,024,737.783 6,311,517.880 4,588,207.038 4,748,048.625 10
Regular Growth Option
16,780,873.098 3,294,869.957 12,223,227.544 7,852,515.511 10
Direct Plan - Growth Option
12,661,792.774 257,390.970 2,242,033.177 10,677,150.567 10
2015–2016
Regular Dividend Option
3,506,118.794 1,284,648.595 1,766,029.606 3,024,737.783 10
Regular Growth Option
20,867,744.911 5,104,186.952 9,191,058.765 16,780,873.098 10
Direct Plan - Growth Option
21,505,643.851 613,125.413 9,456,976.490 12,661,792.774 10
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
31
HSBC INCOME FUND 18
SHORT TERM PLAN
Description Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
2016–2017
Regular Dividend Option
173,185,872.078 283,174,133.999 218,559,680.051 237,800,326.026 10
Regular Growth Option
283,130,329.022 391,286,628.634 277,487,853.881 396,929,103.775 10
Regular Quarterly Option
– 305,000.000 5,000.000 300,000.000 10
Regular Weekly Dividend Option
96,697,381.334 167,480,793.308 123,142,298.088 141,035,876.554 10
Institutional Dividend Option
– – – – 10
Institutional Growth Option
– – – – 10
Institutional Weekly Dividend Option
599,442.020 – – 599,442.020 10
Institutional Plus Growth Option
20,431,475.616 – – 20,431,475.616 10
Institutional Plus Weekly Dividend Option
20,163,437.936 – 20,163,437.936 – 10
Direct Plan - Growth Option
166,478,621.239 935,406,401.448 927,672,998.960 174,212,023.727 10
Direct Plan - Dividend Option
87,619.808 424,628.523 420,058.455 92,189.876 10
Direct Plan - Weekly Dividend Option
1,491,346.402 3,161,391.362 2,194,404.965 2,458,332.799 10
2015–2016
Regular Dividend Option
217,742,895.128 220,394,907.268 264,951,930.318 173,185,872.078 10
Regular Growth Option
233,120,466.473 319,630,309.211 269,620,446.662 283,130,329.022 10
Regular Weekly Dividend Option
88,445,213.028 147,542,903.285 139,290,734.979 96,697,381.334 10
Institutional Dividend Option
574,716.029 – 574,716.029 – 10
Institutional Growth Option
– – – – 10
Institutional Weekly Dividend Option
599,442.020 – – 599,442.020 10
Institutional Plus Growth Option
20,431,475.616 – – 20,431,475.616 10
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
32
18 HSBC INCOME FUND
SHORT TERM PLAN
Description Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Institutional Plus Weekly Dividend Option
20,163,437.936 – – 20,163,437.936 10
Direct Plan - Growth Option
168,843,411.730 211,122,139.806 213,486,930.297 166,478,621.239 10
Direct Plan - Dividend Option
105,576.224 9,236,357.705 9,254,314.121 87,619.808 10
Direct Plan - Weekly Dividend Option
385,640.464 2,061,568.540 955,862.602 1,491,346.402 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 206,147.313 & as on 31/03/2016 is 206,147.313 for investment plan and Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 210,860.141 & as on 31/03/2016 is 210,860.141 for short term plan.
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for Investment Plan and Short Term Plan for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income is Rs. 4 Exit load credited to the Scheme in Investment Plan (2016: Nil) and Rs. 19 in Short Term Plan represents Exit load (net of service tax) credited to the scheme (2016: Rs. 963 represents Exit load (net of service tax) credited to the scheme).
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
10 Garnishee Notices :
An Income tax demand of Rs. 32.58 crores was purported to be recovered under garnishee proceedings, by Income Tax Authorities in respect of investments made in Pass through Certifi cates (PTC) by some of the debt schemes (including matured schemes) of HSBC Mutual Fund (HSBC MF), for A.Y. 2009-2010. The said demand, impacting various mutual fund players in the industry, raised originally on the trusts sponsored by IL&FS Trust Company Ltd., (Appellants) was sought to be also recovered u/s 177(3) of the Income Tax Act, from HSBC MF. Against the demand an appeal was fi led by the Appellant with the fi rst
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
33
HSBC INCOME FUND 18
Appellate Authority CIT(A)] and thereafter with ITAT. ITAT decided the issue in favour of the Appelant. Similar to AY 2009-10, HSBC MF had received a demand notice from the Income Tax authorities for AY 2010-11 for Rs. 6.95 crores. ITAT has passed an order in favour of the appellant for this year as well.
Assessment for the A.Y. 2007-2008 has also been reopened by the Income Tax Authorities and demand has been made of Rs. 2.04 Crores on the trust sponsored by IL&FS Trust Company Ltd. HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year. ITAT has passed an order in favour of the appellant for this year as well No intimation of tax department fi ling further appeal has been received by the appellate or HSBC MF.
11 Change in Fundamental Attributes of HSBC Income Fund –Short Term Plan
During the year, the Scheme has changed its asset allocation and modifi ed duration with effect from January 15, 2014 in accordance with regulation 18(15A) of SEBI Regulations. The Change in Fundamental Attribute of the Scheme was approved by the Board of Directors of the AMC and Board of Trustees of the Fund. The change was effected in line with the relevant provisions of SEBI (Mutual Funds) Regulations, 1996.
12 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
34
18 HSBC INCOME FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
35
HSBC INCOME FUND 18
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC Ultra Short Term Bond FundAn Open-ended Debt Scheme
Abridged Annual Report 2016 - 2017
HSBC ULTRA SHORT TERM BOND FUND 10
1
HSBC ULTRA SHORT TERM BOND FUND 10
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
10 HSBC ULTRA SHORT TERM BOND FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC ULTRA SHORT TERM BOND FUND 10
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
10 HSBC ULTRA SHORT TERM BOND FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Ultra Short Term Bond Fund (HUSTF) – an open ended debt scheme HUSTF seeks to provide liquidity and reasonable returns by investing primarily in a mix of short term debt and money market instruments.
The net assets of HUSTF amounted to Rs. 392.65 crores as at March 31, 2017 compared to Rs. 432.41 crores as at March 31, 2016. Around 96.47% of the net assets were invested in debt and money market instruments, 2.65% was invested in reverse repos / CBLO and 0.88% in the net current assets as at March 31, 2017.
HUSTF outperformed the index on back of overweight in the duration and liquidity easing in the period following demonetization. However, the direct plan outperformed the index by 0.96% as compared to mere 9 bps.
Date of Inception : 17 October 2006 Absolute Returns
(%)
Compounded Annualized Returns
(%)
Scheme Name & Benchmarks 1 Year 3 Years Since Inception#
HSBC Ultra Short Term Bond Fund - Growth 7.40 8.10 8.37
Customised Benchmark Index Fund (Scheme Benchmark)* 7.31 8.16 8.42
CRISIL1 Year T-Bill Index (Standard Benchmark) 7.15 7.85 7.43
Rs. 10,000, if invested in HUSBF, would have become 10,740 12,633 14,360
Rs. 10,000, if invested in Customised Benchmark Index, would have become
10,731 12,333 14,392
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,715 12,546 13,809
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
#Pursuant to SEBI circular dated September 13, 2012, certain Plans / options within the schemes have been discontinued to comply with a single plan structure. Since there was no continuous NAV history available for the surviving Plan prior to 1 October 2012, returns since the said date have been considered for calculating performance. The inception date of HSBC Ultra Short Term Bond Fund however is 17 October 2006.
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC ULTRA SHORT TERM BOND FUND 10
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
10 HSBC ULTRA SHORT TERM BOND FUND
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC ULTRA SHORT TERM BOND FUND 10
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
SchemeUnclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Ultra Short Term Bond Fund 1380.12 1 561835.85 8
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
10 HSBC ULTRA SHORT TERM BOND FUND
customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC ULTRA SHORT TERM BOND FUND 10
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios
** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
10 HSBC ULTRA SHORT TERM BOND FUND
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC ULTRA SHORT TERM BOND FUND 10
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund – HSBC Ultra Short Term Bond Fund
Report on the fi nancial statementsWe have audited the accompanying fi nancial statements of HSBC Ultra Short Term Bond Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and
(ii) in the case of the revenue account, of the net surplus for the year ended on that date.
12
10 HSBC ULTRA SHORT TERM BOND FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC ULTRA SHORT TERM BOND FUND 10
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 34,479.19 40,799.25 2 Reserves & Surplus2.1 Unit Premium Reserves (27.37) (15.35)2.2 Unrealised Appreciation Reserve 55.53 110.37 2.3 Other Reserves 5,394.45 4,730.13 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 104.67 786.57
TOTAL 40,006.47 46,410.97
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 20,863.03 15,089.31 1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds 2,518.94 503.17 1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 4,951.36 5,707.62 1.7 Certifi cate of Deposits 9,542.56 22,034.77 1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 37,875.89 43,334.87
2 Deposits 5.82 16.75 3 Other Current Assets3.1 Cash & Bank Balance 349.69 613.32 3.2 CBLO / Reverse Repo Lending 1,040.28 2,248.62 3.3 Others 734.79 197.41 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 40,006.47 46,410.97
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
14
10 HSBC ULTRA SHORT TERM BOND FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 3,790.56 3,125.58 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments120.75 64.24
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 3,911.31 3,189.82 2 EXPENSES2.1 Management fees 191.37 144.63 2.2 Service tax on Management fees 28.57 20.77 2.3 Transfer agents fees and expenses 16.96 15.16 2.4 Custodian fees 2.93 2.42 2.5 Trusteeship fees 0.44 0.35 2.6 Commission to Agents 187.91 161.37 2.7 Marketing & Distribution expenses 0.46 - 2.8 Audit fees 0.49 1.20 2.9 Investor Education Expenses 9.46 7.41 2.10 Other operating expenses 4.11 7.38 2.11 Expenses to be Reimbursed by the Investment Manager – –
(B) 442.70 360.69
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 3,468.61 2,829.13
4 Change in Unrealised Depreciation in value of investments (D) 26.25 (26.25)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C+D)] 3,494.86 2,802.88
6 Change in unrealised appreciation in the value of investments (F) (54.84) 36.50
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3,440.02 2,839.38
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 54.84 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 36.50 7.3 Add / (Less): Equalisation (880.90) 1,565.70 7.4 Transfer from Reserve Fund 4,730.13 2,097.96 7.5 Transfer from Unit Premium Reserve – –8 Total 7,344.10 6,466.55 9 Dividend appropriation9.1 Income Distributed during the year (1,381.79) (1,242.02)9.2 Tax on income distributed during the year (567.86) (494.40)10 Retained Surplus / (Defi cit) carried forward to Balance sheet 5,394.45 4,730.13
Notes to Accounts – Annexure I
15
HSBC ULTRA SHORT TERM BOND FUND 10
Key Statistics for the year ended March 31, 2017
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Growth Option 19.4802 18.1078
Regular Daily Dividend Option 10.0021 10.0021
Regular Weekly Dividend Option 10.0329 10.0309
Regular Monthly Dividend Option – –
Institutional Growth Option 13.3679 12.3892
Institutional Daily Dividend Option 10.0207 10.0207
Institutional Weekly Dividend Option 10.0629 10.0614
Institutional Monthly Dividend Option 10.1658 10.1576
Institutional Plus Growth Option – –
Institutional Plus Daily Dividend Option 14.9294 13.7326
Institutional Plus Weekly Dividend Option – 10.2153
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 13.6479 12.5476
Direct Plan - Daily Dividend Option 10.0840 10.0840
Direct Plan - Weekly Dividend Option 10.1137 10.1133
Direct Plan - Monthly Dividend Option – –
High
Regular Growth Option 20.8601 19.4802
Regular Daily Dividend Option 10.0021 10.0021
Regular Weekly Dividend Option 10.0524 10.0329
Regular Monthly Dividend Option – –
Institutional Growth Option 14.3570 13.3679
Institutional Daily Dividend Option 10.0524 10.0207
Institutional Weekly Dividend Option 10.0829 10.0629
Institutional Monthly Dividend Option 10.2239 10.2140
Institutional Plus Growth Option – –
Institutional Plus Daily Dividend Option 16.1556 14.9294
Institutional Plus Weekly Dividend Option – 10.2048
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 14.7759 13.6479
Direct Plan - Daily Dividend Option 10.0840 10.0840
Direct Plan - Weekly Dividend Option 10.1349 10.1137
Direct Plan - Monthly Dividend Option 10.4266 –
16
10 HSBC ULTRA SHORT TERM BOND FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Low
Regular Growth Option 19.5088 18.1331
Regular Daily Dividend Option 9.9861 9.9993
Regular Weekly Dividend Option 9.9840 9.9975
Regular Monthly Dividend Option – –
Institutional Growth Option 13.3880 12.4071
Institutional Daily Dividend Option 10.0210 10.0181
Institutional Weekly Dividend Option 10.0295 10.0274
Institutional Monthly Dividend Option 10.1236 10.1271
Institutional Plus Growth Option – –
Institutional Plus Daily Dividend Option 14.9530 13.7542
Institutional Plus Weekly Dividend Option – 10.1822
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 13.6696 12.5674
Direct Plan - Daily Dividend Option 10.0685 10.0817
Direct Plan - Weekly Dividend Option 10.0814 10.0778
Direct Plan - Monthly Dividend Option 10.1814 –
End
Regular Growth Option 20.8601 19.4802
Regular Daily Dividend Option 10.0021 10.0021
Regular Weekly Dividend Option 10.0084 10.0329
Regular Monthly Dividend Option – –
Institutional Growth Option 14.3570 13.3679
Institutional Daily Dividend Option 10.0524 10.0207
Institutional Weekly Dividend Option 10.0569 10.0629
Institutional Monthly Dividend Option 10.1401 10.1658
Institutional Plus Growth Option – –
Institutional Plus Daily Dividend Option 16.1556 14.9294
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 14.7759 13.6479
Direct Plan - Daily Dividend Option 10.0840 10.0840
Direct Plan - Weekly Dividend Option 10.1073 10.1137
Direct Plan - Monthly Dividend Option 10.3442 –
2. Closing Assets Under Management (Rs. in Lakhs)
End 39,265 43,241
Average (AAuM)1 47,310 37,057
17
HSBC ULTRA SHORT TERM BOND FUND 10
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
3. Gross income as % of AAuM2 8.27% 8.61%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 1.35% 1.33%
Institutional Growth Option 1.05% 1.03%
Institutional Plus Growth Option 0.30% 0.27%
Direct Plan - Growth Option 0.25% 0.23%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.40% 0.39%
Institutional Growth Option 0.40% 0.39%
Institutional Plus Growth Option 0.40% 0.39%
Direct Plan - Growth Option 0.40% 0.39%
5. Net Income as a percentage of AAuM3 7.33% 7.63%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.4946 0.5279
Regular Weekly Dividend Option 0.5125 0.5044
Institutional Daily Dividend Option 0.4950 0.5505
Institutional Weekly Dividend Option 0.5228 0.5275
Institutional Monthly Dividend Option 0.5429 0.5525
Institutional Plus Daily Dividend Option – –
Institutional Plus Weekly Dividend Option – 0.2336
Institutional Plus Monthly Dividend Option – –
Direct Plan - Daily Dividend Option 0.5786 0.6123
Direct Plan - Weekly Dividend Option 0.5840 0.5882
Direct Plan - Monthly Dividend Option 0.3830 –
Corporate
Regular Daily Dividend Option 0.4582 0.4891
Regular Weekly Dividend Option 0.4748 0.4674
Institutional Daily Dividend Option 0.4586 0.5100
Institutional Weekly Dividend Option 0.4844 0.4887
Institutional Monthly Dividend Option 0.5030 0.5119
Institutional Plus Daily Dividend Option – –
Institutional Plus Weekly Dividend Option – 0.2164
Institutional Plus Monthly Dividend Option – –
Direct Plan - Daily Dividend Option 0.5361 0.5673
Key Statistics for the year ended March 31, 2017 (Contd...)
18
10 HSBC ULTRA SHORT TERM BOND FUND
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Direct Plan - Weekly Dividend Option 0.5411 0.5449
Direct Plan - Monthly Dividend Option 0.3548 –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.0836 7.5576
Institutional Growth Option 7.3991 7.8772
Institutional Plus Growth Option – –
Direct Plan - Growth Option 8.2650 8.7440
Benchmark
CRISIL Composite Index ^^ 7.3100 8.0764
b. Since Inception
Scheme
Regular Growth Option 7.2819 7.3029
Institutional Growth Option 3.5179 3.1159
Institutional Plus Growth Option – –
Direct Plan - Growth Option 9.1700 9.4698
Benchmark
CRISIL Composite Index ^^ 8.4248 8.7449
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year
^^ Composite Index of CRISIL Liquid Fund Index (90%) and CRISIL Short Term Bond Fund Index (10%)
Key Statistics for the year ended March 31, 2017 (Contd...)
19
HSBC ULTRA SHORT TERM BOND FUND 10
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
HSBC ULTRA SHORT TERM BOND FUND
1 Investments:
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of year ended March 31, 2017 is NIL. Open Positions of derivatives as of year ended March 31, 2016 is NIL.
1.3. Investments in Associates and Group Companies as of years ended March 31, 2017 and March 31, 2016.
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
250,541,400 1,452,436,300 – 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2017 and 2016 are NIL.
1.5. NPAs as on March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2017 and March 31, 2016 are as under :
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Certifi cate of Deposit / Commercial Paper
- Appreciation 1,726,265 0.04 10,976,971 0.25
- Depreciation – – 239 0.00~
Non Convertible Debentures and Bonds Listed / Awaiting Listing
- Appreciation 6,190,502 0.16 641,250 0.01
- Depreciation 2,363,865 0.06 3,265,934 0.08
Privately Placed Non Convertible Debentures / Bonds
- Appreciation – – 59,800 0.00~
- Depreciation – – – –
~ Indicates less than 0.01
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 10,745,558,804 and Rs. 11,624,406,923 respectively being 227.13% and 245.71% of the average daily net assets.
20
10 HSBC ULTRA SHORT TERM BOND FUND
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) are Rs. 13,692,412,086 and Rs. 11,498,956,112 respectively being 369.50% and 310.31% of the average daily net assets.
1.8. Non-Traded securities in the portfolio :
Aggregate Value of Equity, Debt & Money Market Instruments and their percentages to Net assets are as under :
Security Category Fair Value (Rupees)
% to Net Assets
Fair Value (Rupees)
% to Net Assets
2017 2016
Debt Instruments 2,338,197,145 59.55% 1,559,247,774 36.06%
Money market Instruments 1,449,392,388 36.91% 2,774,239,457 64.16%
Total 3,787,589,533 80.06% 4,333,487,231 100.22%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor/AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 489.62 41.49 10,249,921 58.08
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 902.41 60.64 9,546,685 67.08
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
21
HSBC ULTRA SHORT TERM BOND FUND 10
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016.**
Description
2016–2017
Opening Units Subscription Redemption Closing Units FaceValue per Unit (Rs.)
Regular Growth Option
846,977.339 – 46,870.593 800,106.746 10
Regular Daily Dividend Option
6,160,703.281 – 933,676.380 5,227,026.901 10
Regular Weekly Dividend Option
2,376,252.883 – 215,626.504 2,160,626.379 10
Institutional Growth Option
126,662,073.067 262,996,266.57 274,389,168.547 115,269,171.092 10
Institutional Daily Dividend Option
185,128,859.528 389,622,561.38 420,910,021.222 153,841,399.682 10
Institutional Weekly Dividend Option
29,814,574.060 54,946,443.00 59,537,967.842 25,223,049.222 10
Institutional Monthly Dividend Option
32,992,083.649 40,097,580.49 55,936,675.673 17,152,988.461 10
Institutional Plus Daily Dividend Option
200,543.261 – 166,600.804 33,942.457 10
Direct Plan - Growth Option
9,351,701.85 168,725,510.56 174,618,816.046 3,458,396.362 10
Direct Plan - Daily Dividend Option
4,058,074.29 53,231,912.31 47,638,616.500 9,651,370.098 10
Direct Plan - Weekly Dividend Option
10,400,628.52 9,404,324.19 10,313,168.159 9,491,784.548 10
Direct Plan - Monthly Dividend Option
– 8,405,500.57 5,923,478.282 2,482,022.29 10
Description
2015–2016
Opening Units Subscription Redemption Closing Units FaceValue per Unit (Rs.)
Regular Growth Option 1,123,000.353 – 276,023.014 846,977.339 10
Regular Daily Dividend Option
6,723,622.530 – 562,919.249 6,160,703.281 10
Regular Weekly Dividend Option
2,537,348.577 – 161,095.694 2,376,252.883 10
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
22
10 HSBC ULTRA SHORT TERM BOND FUND
Description
2015–2016
Opening Units Subscription Redemption Closing Units FaceValue per Unit (Rs.)
Institutional Growth Option
81,734,103.370 356,913,386.543 311,985,416.846 126,662,073.067 10
Institutional Daily Dividend Option
59,697,802.669 672,742,602.720 547,311,545.861 185,128,859.528 10
Institutional Weekly Dividend Option
13,744,625.534 73,848,382.474 57,778,433.948 29,814,574.060 10
Institutional Monthly Dividend Option
13,388,094.775 88,070,853.261 68,466,864.387 32,992,083.649 10
Institutional Plus Daily Dividend Option
200,543.261 – – 200,543.261 10
Institutional Plus Weekly Dividend Option
459,743.404 – 459,743.40 0.000 10
Direct Plan - Growth Option
1,599,682.319 114,659,305.67 106,907,286.14 9,351,701.852 10
Direct Plan - Daily Dividend Option
2,161,990.857 14,724,685.99 12,828,602.561 4,058,074.286 10
Direct Plan - Weekly Dividend Option
271,737.092 10,128,891.43 – 10,400,628.520 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 789,205.091 & as on 31/03/2016 is 395,920.436.
5 Prior year amounts have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. NIL (2016: NIL)
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
23
HSBC ULTRA SHORT TERM BOND FUND 10
10 Garnishee Notices :
An Income tax demand of Rs. 32.58 crores was purported to be recovered under garnishee proceedings, by Income Tax Authorities in respect of investments made in Pass through Certifi cates (PTC) by some of the debt schemes (including matured schemes) of HSBC Mutual Fund (HSBC MF), for A.Y. 2009-2010.The said demand, impacting various mutual fund players in the industry, raised originally on the trusts sponsored by IL&FS Trust Company Ltd., (Appellants) was sought to be also recovered u/s 177(3) of the Income Tax Act, from HSBC MF. Against the demand an appeal was fi led by the Appellant with the fi rst Appellate Authority CIT(A)] and thereafter with ITAT. ITAT decided the issue in favour of the Appelant. Similar to AY 2009-10, HSBC MF had received a demand notice from the Income Tax authorities for AY 2010-11 for Rs. 6.95 crores. ITAT has passed an order in favour of the appellant for this year as well.
Assessment for the A.Y. 2007-2008 has also been reopened by the Income Tax Authorities and demand has been made of Rs. 2.04 Crores on the trust sponsored by IL&FS Trust Company Ltd. HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year. ITAT has passed an order in favour of the appellant for this year as well No intimation of tax department fi ling further appeal has been received by the appellate or HSBC MF.
11 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2017
24
10 HSBC ULTRA SHORT TERM BOND FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC ULTRA SHORT TERM BOND FUND 10
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC CASH FUND 8
HSBC Cash FundAn Open-ended Liquid Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Cash Fund 8
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
8 HSBC Cash Fund
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC Cash Fund 8
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
8 HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2017
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Cash Fund (HCF) – an open-ended Liquid SchemeHCF aims to provide reasonable returns, commensurate with low risk while providing a high level of liquidity, through a portfolio of money market and debt securities.
The net assets of HCF amounted to Rs. 1,850.07 crores as at March 31, 2017 as compared to Rs. 1359.41 crores as at March 31, 2016. The entire net asset remains invested in debt and money market instruments including reverse repos / CBLO as at March 31, 2017.
HCF performed in line with its benchmark for FY 2016-2017 due to conservative investments in line with the internal group guidelines and the focus being on accruals and credit.
Date of Inception : 4 December 2002
Simple Annualized Returns (%)
Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks
Last 7 Days as on 31 March 2017
Last 15 Days as on 31 March 2017
Last 30 Days as on 31 March 2017
1 Year 3 Years 5 Years Since Inception
HSBC Cash Fund - Growth 7.00 6.91 6.66 7.21 8.10 8.53 8.53
CRISIL Liquid Fund Index (Scheme Benchmark)
7.21 7.18 6.68 7.11 8.04 8.36 8.39
CRISIL 91 Day T-Bill Index (Standard Benchmark)
6.41 6.37 6.35 6.70 7.78 8.09 8.01
Rs. 10,000, if invested in HCF, would have become
10,013 10,028 10,055 10,721 12,630 15,057 16,173
Rs. 10,000, if invested in CRISIL Liquid Fund Index, would have become
10,014 10,030 10,055 10,711 12,611 14,939 16,053
Rs. 10,000, if invested in CRISIL 91 Day T-Bill Index, would have become
10,012 10,026 10,052 10,670 12,521 14,753 15,721
5
HSBC Cash Fund 8
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other
6
8 HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
7
HSBC Cash Fund 8
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Cash Fund – – 215969.59 13
8
8 HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
9
HSBC Cash Fund 8
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
8 HSBC Cash Fund
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC Cash Fund 8
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Cash Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Cash Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
12
8 HSBC Cash Fund
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
13
HSBC Cash Fund 8
Rs. in Lakhs
HSBC CASH FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 150,672.19 115,527.48 2 Reserves & Surplus2.1 Unit Premium Reserves 1,787.34 1,763.13 2.2 Unrealised Appreciation Reserve 24.05 75.91 2.3 Other Reserves 32,540.35 18,613.00 3 Loans & Borrowings 21,500.00 –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 10,256.48 205.29
TOTAL 216,780.41 136,184.81
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 123,266.91 68,324.26 1.7 Certifi cate of Deposits 81,765.90 46,963.33 1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 205,032.81 115,287.59 2 Deposits 10,309.81 20,055.67 3 Other Current Assets3.1 Cash & Bank Balance 1,421.76 38.10 3.2 CBLO / Reverse Repo Lending – 707.66 3.3 Others 16.03 95.79 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 216,780.41 136,184.81
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017
14
8 HSBC Cash Fund
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC CASH FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 15,866.30 15,417.58 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments 14.18 27.06
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.66 –
(A) 15,881.14 15,444.64
2 EXPENSES2.1 Management fees 50.04 –2.2 Service tax on Management fees 7.51 –2.3 Transfer agents fees and expenses 40.92 37.45 2.4 Custodian fees 6.34 6.27 2.5 Trusteeship fees 2.28 1.93 2.6 Commission to Agents 45.87 48.22 2.7 Marketing & Distribution expenses 2.47 1.22 2.8 Audit fees 4.82 4.70 2.9 Investor Education Expenses 66.48 39.00 2.10 Interest on Borrowing 11.86 –2.11 Other operating expenses 24.27 30.81 2.12 Expenses to be Reimbursed by the Investment Manager – (18.27)
(B) 262.86 151.33 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 15,618.28 15,293.31 4 Change in Unrealised Depreciation
in value of investments (D) – 5.22 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C + D)] 15,618.28 15,298.53 6 Change in unrealised appreciation in the
value of investments (F) (51.86) 27.32 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 15,566.42 15,325.85
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 51.86 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 27.32 7.3 Add / (Less): Equalisation 3,978.09 (9,797.78)7.4 Transfer from Reserve Fund 18,613.00 20,954.53 7.5 Transfer from Unit Premium Reserve – –
8 Total 38,209.37 26,455.28 9 Dividend appropriation9.1 Income Distributed during the year (3,847.54) (5,321.24)9.2 Tax on income distributed during the year (1,821.48) (2,521.04)10 Retained Surplus / (Defi cit) carried forward to Balance sheet 32,540.35 18,613.00
Notes to Accounts – Annexure I
15
HSBC Cash Fund 8
Key Statistics for the year ended March 31, 2017
HSBC CASH FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.): Open Regular Growth Option 2,298.8714 2,144.7901 Regular Daily Dividend Option 1,019.3000 1,019.3000 Regular Weekly Dividend Option 1,002.5519 1,003.4059 Institutional Growth Option 2,388.1672 2,213.6653 Institutional Daily Dividend Option 1,124.4110 1,097.9635 Institutional Weekly Dividend Option – – Institutional Monthly Dividend Option – – Institutional Plus Growth Option 1,508.3028 1,394.5179 Institutional Plus Daily Dividend Option 1,000.5600 1,000.5600 Institutional Plus Weekly Dividend Option 1,111.6391 1,112.7323 Institutional Plus Monthly Dividend Option 1,001.3295 1,001.8485 Direct Plan - Growth Option 1,510.3819 1,395.7229 Direct Plan - Daily Dividend Option 1,000.5600 1,000.5600 Direct Plan - Weekly Dividend Option 1,111.6463 1,112.7280 Direct Plan - Monthly Dividend Option 1,001.5205 1,001.8039 Unclaimed Dividend less than 3 yrs ### – – Unclaimed Dividend more than 3 yrs ### – – Unclaimed Redemption less than 3 yrs ### – – Unclaimed Redemption more than 3 yrs ### – – High Regular Growth Option 2,443.1533 2,298.8714 Regular Daily Dividend Option 1,019.3000 1,019.3000 Regular Weekly Dividend Option 1,003.6299 1,003.2184 Institutional Growth Option 2,554.6040 2,388.1672 Institutional Daily Dividend Option 1,202.8387 1,124.4110 Institutional Weekly Dividend Option – – Institutional Monthly Dividend Option – – Institutional Plus Growth Option 1,616.9837 1,508.3028 Institutional Plus Daily Dividend Option 1,000.5600 1,000.5600 Institutional Plus Weekly Dividend Option 1,112.9701 – Institutional Plus Monthly Dividend Option 1,006.9700 1,008.2273 Direct Plan - Growth Option 1,620.1903 1,510.3819 Direct Plan - Daily Dividend Option 1,000.5600 1,000.5600 Direct Plan - Weekly Dividend Option 1,112.9925 1,112.5165 Direct Plan - Monthly Dividend Option 1,013.4196 1,008.2196 Unclaimed Dividend less than 3 yrs ### 1,067.3816 – Unclaimed Dividend more than 3 yrs ### 1,000.0000 – Unclaimed Redemption less than 3 yrs ### 1,067.3816 – Unclaimed Redemption more than 3 yrs ### 1,000.0000 – Low Regular Growth Option 2,300.2996 2,147.2106 Regular Daily Dividend Option 1,019.3000 1,019.3000 Regular Weekly Dividend Option 1,001.6255 1,001.7309 Institutional Growth Option 2,389.7785 2,216.3603 Institutional Daily Dividend Option 1,125.1698 1,097.9691
16
8 HSBC Cash Fund
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC CASH FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Institutional Weekly Dividend Option – – Institutional Monthly Dividend Option – – Institutional Plus Growth Option 1,509.3503 1,396.2709 Institutional Plus Daily Dividend Option 1,000.5600 1,000.5600 Institutional Plus Weekly Dividend Option 1,110.5845 – Institutional Plus Monthly Dividend Option 1,000.4252 1,000.2366 Direct Plan - Growth Option 1,511.4432 1,397.4870 Direct Plan - Daily Dividend Option 1,000.5600 1,000.5600 Direct Plan - Weekly Dividend Option 1,110.5876 1,110.7063 Direct Plan - Monthly Dividend Option 1,000.7940 1,000.4205 Unclaimed Dividend less than 3 yrs ### 1,010.2729 – Unclaimed Dividend more than 3 yrs ### 1,000.0000 – Unclaimed Redemption less than 3 yrs ### 1,010.2729 – Unclaimed Redemption more than 3 yrs ### 1,000.0000 – End Regular Growth Option 2,443.1533 2,298.8714 Regular Daily Dividend Option 1,019.3000 1,019.3000 Regular Weekly Dividend Option 1,001.9877 1,002.5519 Institutional Growth Option 2,554.6040 2,388.1672 Institutional Daily Dividend Option 1,202.8387 1,124.4110 Institutional Weekly Dividend Option – – Institutional Monthly Dividend Option – – Institutional Plus Growth Option 1,616.9837 1,508.3028 Institutional Plus Daily Dividend Option 1,000.5600 1,000.5600 Institutional Plus Weekly Dividend Option 1,111.0123 1,111.6391 Institutional Plus Monthly Dividend Option 1,001.0652 1,001.3295 Direct Plan - Growth Option 1,620.1903 1,510.3819 Direct Plan - Daily Dividend Option 1,000.5600 1,000.5600 Direct Plan - Weekly Dividend Option 1,111.0173 1,111.6463 Direct Plan - Monthly Dividend Option 1,009.1530 1,001.5205 Unclaimed Dividend less than 3 yrs ### 1,067.3816 – Unclaimed Dividend more than 3 yrs ### 1,000.0000 – Unclaimed Redemption less than 3 yrs ### 1,067.3816 – Unclaimed Redemption more than 3 yrs ### 1,000.0000 –2. Closing Assets Under Management (Rs. in Lakhs) End 185,007 135,941 Average (AAuM)1 224,522 194,971 3. Gross income as % of AAuM2 7.07% 7.92%4. Expense Ratio: a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) Regular Plan 1.00% 1.00% Institutional Plan 0.35% 0.35% Institutional Plus Plan 0.13% 0.09% Direct Plan 0.07% 0.04% b. Management Fee as % of AAuM (planwise) Regular Plan 0.02% 0.00%
17
HSBC Cash Fund 8
HSBC CASH FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Institutional Plan 0.02% 0.00% Institutional Plus Plan 0.02% 0.00% Direct Plan 0.02% 0.00%5. Net Income as a percentage of AAuM3 6.96% 7.84%6. Portfolio turnover ratio – –7. Total Dividend per unit distributed during the year (planwise) Retail Regular Daily Dividend Option 44.8188 51.0827 Regular Weekly Dividend Option 44.4765 49.5173 Institutional Daily Dividend Option – 41.4016 Institutional Plus Daily Dividend Option 50.2851 56.6850 Institutional Plus Weekly Dividend Option 56.2965 62.1281 Institutional Plus Monthly Dividend Option 50.6109 57.2279 Direct Plan - Daily Dividend Option 50.7074 57.0738 Direct Plan - Weekly Dividend Option 56.7886 62.6121 Direct Plan - Monthly Dividend Option 45.4206 57.4389 Corporate Regular Daily Dividend Option 41.5239 47.3271 Regular Weekly Dividend Option 41.2067 45.8769 Institutional Daily Dividend Option – 38.3578 Institutional Plus Daily Dividend Option 46.5882 52.5176 Institutional Plus Weekly Dividend Option 52.1577 57.5605 Institutional Plus Monthly Dividend Option 46.8900 53.0206 Direct Plan - Daily Dividend Option 46.9795 52.8778 Direct Plan - Weekly Dividend Option 52.6135 58.0089 Direct Plan - Monthly Dividend Option 42.0813 53.2161 8. Returns (%): a. Last One Year Scheme Regular Growth Option 6.2762 7.1637 Institutional Growth Option 6.6962 7.8606 Institutional Plus Growth Option 7.2055 8.1363 Direct Plan - Growth Option 7.2702 8.1917 Benchmark CRISIL Liquid Fund Index 7.1141 8.0358 b. Since Inception Scheme Regular Growth Option 6.4314 6.4431 Institutional Growth Option 3.8141 3.5326 Institutional Plus Growth Option 6.8293 6.8181 Direct Plan - Growth Option 8.5015 8.8836 Benchmark CRISIL Liquid Fund Index 8.3914 8.6555
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year
### Unclaimed Plan launch during the FY 2016-2017, as per circular - SEBI/HO/IMD/DF2/CIR/P/2016/37 dated 25 Feburary, 2016.
Key Statistics for the year ended March 31, 2017 (Contd...)
18
8 HSBC Cash Fund
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC CASH FUND
1 Investments:-
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 end are NIL.
1.3. Investments in Associates and Group Companies :
(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 1,452,436,300 – 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as on March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years March 31, 2017 and March 31, 2016 are as under:
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Certifi cates of Deposit / Commercial Paper
– Appreciation 2,462,234 0.01 7,955,746 0.06
– Depreciation 57,060 0.00~ 364,626 0.00~
Government Securities
– Appreciation – – – –
– Depreciation – – – –
~ Indicates less than 0.01
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 166,800,296,469 and Rs. 159,116,416,187 respectively being 742.91% and 708.69% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) are Rs. 152,253,516,905 and Rs. 153,709,618,321 respectively being 780.90% and 788.37% of the average daily net assets.
19
HSBC Cash Fund 8
1.8. Non-Traded securities in the portfolio:
Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2017 2016
Money Market Instruments 19,761,843,935 106.82 11,528,758,815 84.81
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates / related parties / group companies
Nature of Association /
Nature of Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 1,241.42 1.28 2,473,015 61.25
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association /
Nature of Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 1,164.99 2.39 2,906,504 65.95
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
20
8 HSBC Cash Fund
3 Details of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016 :
Scheme Name Number of investors
Percentage holdings
Number of investors
Percentage holdings
2017 2016
HSBC Cash Fund – – 1 30.22%
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016** :
Description
2016–2017
Opening Units Subscription Redemption Closing Units
Face Value
per unit (Rupees)
Regular Growth Option 13,831.759 – 1,110.042 12,721.717 1,000
Regular Daily Dividend Option
99,872.751 – 25,889.794 73,982.957 1,000
Regular Weekly Dividend Option
69,625.861 – 3,137.767 66,488.094 1,000
Institutional Growth Option 3,205.025 – – 3,205.025 1,000
Institutional Daily Dividend Option
38.218 – – 38.218 1,000
Institutional Plus Growth Option
2,092,356.261 97,313,848.407 96,779,629.667 2,626,575.001 1,000
Institutional Plus Daily Dividend Option
4,243,212.920 17,811,086.097 16,896,517.288 5,157,781.729 1,000
Institutional Plus Weekly Dividend Option
127,327.143 277,666.314 310,240.273 94,753.184 1,000
Institutional Plus Monthly Dividend Option
163,468.562 201,825.620 201,360.878 163,933.304 1,000
Direct Plan - Growth Option 1,835,687.400 479,353,982.910 478,334,791.227 2,854,879.083 1,000
Direct Plan - Daily Dividend Option
2,883,139.976 44,383,321.281 43,333,881.945 3,932,579.312 1,000
Direct Plan - Weekly Dividend Option
16,097.054 1,719.957 8,581.860 9,235.151 1,000
Direct Plan - Monthly Dividend Option
4,885.062 842,451.733 843,365.186 3,971.609 1,000
Unclaimed Plan- Dividend less than 3 years
– 19,817.166 4,925.339 14,891.827 1,000
Unclaimed Plan- Dividend more than 3 years
– 14,747.640 2,148.727 12,598.913 1,000
Unclaimed Plan-Redemption less than 3 years
– 29,691.345 10,502.705 19,188.640 1,000
Unclaimed Plan-Redemption more than 3 years
– 22,706.642 2,311.260 20,395.382 1,000
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
21
HSBC Cash Fund 8
Description
2015–2016
Opening Units Subscription Redemption Closing Units
Face Value
per unit (Rupees)
Regular Growth Option 20,708.194 – 6,876.435 13,831.759 1,000
Regular Daily Dividend Option
164,946.017 – 65,073.266 99,872.751 1,000
Regular Weekly Dividend Option
90,955.261 – 21,329.400 69,625.861 1,000
Institutional Growth Option
3,205.025 – – 3,205.025 1,000
Institutional Daily Dividend Option
8,355.716 – 8,317.498 38.218 1,000
Institutional Weekly Dividend Option
– – – – 1,000
Institutional Monthly Dividend Option
– – – – 1,000
Institutional Plus Growth Option
2,105,588.055 23,807,597.354 23,820,829.148 2,092,356.261 1,000
Institutional Plus Daily Dividend Option
4,290,550.132 24,353,297.185 24,400,634.397 4,243,212.920 1,000
Institutional Plus Weekly Dividend Option
193,506.562 434,359.059 500,538.478 127,327.143 1,000
Institutional Plus Monthly Dividend Option
279,930.027 284,449.884 400,911.349 163,468.562 1,000
Direct Plan - Growth Option
3,514,400.682 204,719,971.504 206,398,684.786 1,835,687.400 1,000
Direct Plan - Daily Dividend Option
903,520.697 129,826,354.639 127,846,735.360 2,883,139.976 1,000
Direct Plan - Weekly Dividend Option
11.354 17,337.301 1,251.601 16,097.054 1,000
Direct Plan - Monthly Dividend Option
9,213.988 25,839.307 30,168.233 4,885.062 1,000
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 323,925.038 & as on 31/03/2016 is 318,205.581
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income :– Rs. 65,971/- represents compensation paid by AMC (2016 : Nil).
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
22
8 HSBC Cash Fund
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
10 Borrowings
Details of Outstanding Borrowing Liability are as follows: -
March 31, 2017
Name of the Scheme
Date of Borrowing
Amount Borrowed
(INR crores)
Rate of Interest
Source
HCF 31-Mar-17 215 8% The amount was borrowed to meet the redemption requirement by pledging Certifi cate of Deposit of HSBC Cash Fund. The pledged securities were released and credited to the account of the Scheme on the date of repayment i.e. April 3, 2017
11 Garnishee Notices
An Income tax demand of Rs. 32.58 crores was purported to be recovered under garnishee proceedings, by Income Tax Authorities in respect of investments made in Pass through Certifi cates (PTC) by some of the debt schemes (including matured schemes) of HSBC Mutual Fund (HSBC MF), for A.Y. 2009-2010.The said demand, impacting various mutual fund players in the industry, raised originally on the trusts sponsored by IL&FS Trust Company Ltd., (Appellants) was sought to be also recovered u/s 177(3) of the Income Tax Act, from HSBC MF. Against the demand an appeal was fi led by the Appellant with the fi rst Appellate Authority CIT(A)] and thereafter with ITAT. ITAT decided the issue in favour of the Appelant. Similar to AY 2009-10, HSBC MF had received a demand notice from the Income Tax authorities for AY 2010-11 for Rs. 6.95 crores. ITAT has passed an order in favour of the appellant for this year as well.
Assessment for the A.Y. 2007-2008 has also been reopened by the Income Tax Authorities and demand has been made of Rs. 2.04 Crores on the trust sponsored by IL&FS Trust Company Ltd. HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year. ITAT has passed an order in favour of the appellant for this year as well No intimation of tax department fi ling further appeal has been received by the appellate or HSBC MF.
12 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
23
HSBC Cash Fund 8
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
24
8 HSBC Cash Fund
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC FLEXI DEBT FUND 7
HSBC Flexi Debt FundAn Open-ended Debt Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Cash Fund 7
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
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7 HSBC FLEXI DEBT FUND
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC Cash Fund 7
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
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7 HSBC FLEXI DEBT FUND
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Flexi Debt Fund (HFDF) – an open ended Debt SchemeHFDF seeks to deliver returns in the form of interest income and capital gains, along with high liquidity, commensurate with the current view on the markets and the interest rate cycle, through active investment in debt and money market instruments.
The net assets of HFDF amounted to Rs. 442.43 crores as at March 31, 2017 as compared to Rs. 456.19 crores as at March 31, 2016. Around 91.02% of the net assets was invested in debt and money market instruments, 5.64% was invested in reverse repos / CBLO and 3.34% in the net current assets as at March 31, 2017.
HFDF underperformed its scheme’s benchmark due to volatility caused by demonetization during the year.
Date of Inception : 5 October 2007 Absolute Returns
(%)
Compounded Annualized Returns (%)
Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception
HSBC Flexi Debt Fund - Growth Option 9.85 9.73 8.79 8.81
CRISIL Composite Bond Fund Index (Scheme Benchmark) 11.09 11.26 9.45 8.02
CRISIL 10 Year Gilt Index (Standard Benchmark) 11.87 11.43 8.79 7.33
Rs. 10,000, if invested in HFDF, would have become 10,985 13,214 15,242 22,286
Rs. 10,000, if invested in CRISIL Composite Bond Fund Index, would have become
11,109 13,774 15,705 20,796
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
11,187 13,835 15,242 19,582
Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.
Trustees’ ReportFor the year ended March 31, 2017
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HSBC Cash Fund 7
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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7 HSBC FLEXI DEBT FUND
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC Cash Fund 7
HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Flexi Debt Fund 21509.87 2 152889.61 1
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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7 HSBC FLEXI DEBT FUND
Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC Cash Fund 7
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios
** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
7 HSBC FLEXI DEBT FUND
certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC Cash Fund 7
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Flexi Debt Fund
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Flexi Debt Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
12
7 HSBC FLEXI DEBT FUND
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non-traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC Cash Fund 7
Rs. in Lakhs
HSBC FLEXI DEBT FUNDAs at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 20,597.67 23,475.85 2 Reserves & Surplus2.1 Unit Premium Reserves 1,545.69 1,870.75 2.2 Unrealised Appreciation Reserve 63.23 387.09 2.3 Other Reserves 22,087.06 19,897.01 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 138.67 171.84
TOTAL 44,432.32 45,802.54
ASSETS1 Investments1.1 Listed Securities: – –1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 15,124.93 7,766.57 1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds 1,705.78 –1.3.5 Securitised Debt securities – –1.4 Government Securities 23,435.40 32,939.68 1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – 3,624.17 1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 40,266.11 44,330.42
2 Deposits 140.21 30.29 3 Other Current Assets3.1 Cash & Bank Balance 160.78 0.15 3.2 CBLO / Reverse Repo Lending 2,495.26 55.74 3.3 Others 1,369.96 1,385.94 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 44,432.32 45,802.54
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2017
14
7 HSBC FLEXI DEBT FUND
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 3,411.56 4,259.66 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption
of investments 2,079.09 95.65
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 5,490.65 4,355.31 2 EXPENSES2.1 Management fees 387.99 466.90 2.2 Service tax on Management fees 57.83 65.60 2.3 Transfer agents fees and expenses 16.59 20.75 2.4 Custodian fees 0.59 0.77 2.5 Trusteeship fees 0.60 0.71 2.6 Commission to Agents 212.46 202.49 2.7 Marketing & Distribution expenses 0.32 1.52 2.8 Audit fees 0.51 1.21 2.9 Investor Education Expenses 9.26 10.85 2.10 Other operating expenses 3.98 8.82 2.11 Less: Expenses to be Reimbursed by the Investment Manager (19.37) –
(B) 670.76 779.61 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 4,819.89 3,575.70 4 Change in Unrealised Depreciation in value
of investments (D) (29.85) –5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C + D)] 4,790.04 3,575.70 6 Change in unrealised appreciation in the value of
investments (F) (323.86) (893.08)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 4,466.18 2,682.62 7.1 Add: Balance transfer from Unrealised Appreciation Reserve 323.86 893.08 7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (2,370.44) (4,748.74)7.4 Transfer from Reserve Fund 19,897.01 21,334.22 7.5 Transfer from Unit Premium Reserve – –8 Total 22,316.61 20,161.18 9 Dividend Appropriation9.1 Income Distributed during the year (165.70) (189.83)9.2 Tax on income distributed during the year (63.85) (74.34)10 Retained Surplus / (Defi cit) carried forward to
Balance Sheet 22,087.06 19,897.01
Notes to Accounts – Annexure I
15
HSBC Cash Fund 7
Key Statistics for the year ended March 31, 2017
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Regular Plan - Growth Option 19.7448 18.8438
Regular Plan - Fortnightly Dividend Option 12.7068 12.1270
Regular Plan - Monthly Dividend Option 12.4854 11.9157
Regular Plan - Quarterly Dividend Option 12.0463 11.9924
Regular Plan - Half Yearly Dividend Option 13.9631 13.3253
Growth Option **** 20.2692 19.2952
Fortnightly Dividend Option **** 10.7645 11.1156
Monthly Dividend Option **** 10.6089 10.5973
Quarterly Dividend Option **** 11.5230 11.9465
Half Yearly Dividend Option **** 11.6594 12.0645
Direct Plan - Growth Option 20.7857 19.6398
Direct Plan - Fortnightly Dividend Option – 10.1268
Direct Plan - Monthly Dividend Option – 10.7337
Direct Plan - Quarterly Dividend Option 11.8699 12.1881
Direct Plan - Half Yearly Dividend Option 11.0590 11.4103
High
Regular Plan - Growth Option 22.2193 19.7448
Regular Plan - Fortnightly Dividend Option 14.2992 12.7068
Regular Plan - Monthly Dividend Option 14.0501 12.4854
Regular Plan - Quarterly Dividend Option 13.5560 12.0463
Regular Plan - Half Yearly Dividend Option 15.7143 13.9631
Growth Option **** 22.8466 20.2692
Fortnightly Dividend Option **** 11.0293 11.1385
Monthly Dividend Option **** 11.0545 10.7541
Quarterly Dividend Option **** 12.4499 11.9712
Half Yearly Dividend Option **** 12.6179 12.3161
Direct Plan - Growth Option 23.5436 20.7857
Direct Plan - Fortnightly Dividend Option – 10.2290
Direct Plan - Monthly Dividend Option – 10.8886
Direct Plan - Quarterly Dividend Option 12.9054 12.2290
Direct Plan - Half Yearly Dividend Option 12.0011 11.6900
Low
Regular Plan - Growth Option 19.7882 18.5458
Regular Plan - Fortnightly Dividend Option 12.7347 11.9352
Regular Plan - Monthly Dividend Option 12.5128 11.7272
16
7 HSBC FLEXI DEBT FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Regular Plan - Quarterly Dividend Option 12.0728 11.6059
Regular Plan - Half Yearly Dividend Option 13.9938 13.1145
Growth Option **** 20.3145 18.9996
Fortnightly Dividend Option **** 10.3481 10.6501
Monthly Dividend Option **** 10.1779 10.4114
Quarterly Dividend Option **** 11.5057 11.4383
Half Yearly Dividend Option **** 11.6855 11.6212
Direct Plan - Growth Option 20.8343 19.3678
Direct Plan - Fortnightly Dividend Option – 9.9253
Direct Plan - Monthly Dividend Option – 10.5481
Direct Plan - Quarterly Dividend Option 11.8818 11.7669
Direct Plan - Half Yearly Dividend Option 11.0849 11.0220
End
Regular Plan - Growth Option 21.6355 19.7448
Regular Plan - Fortnightly Dividend Option 13.9232 12.7068
Regular Plan - Monthly Dividend Option 13.6809 12.4854
Regular Plan - Quarterly Dividend Option 13.1998 12.0463
Regular Plan - Half Yearly Dividend Option 15.3021 13.9631
Growth Option**** 22.2659 20.2692
Fortnightly Dividend Option **** 10.5114 10.7645
Monthly Dividend Option **** 10.3387 10.6089
Quarterly Dividend Option **** 11.6308 11.5230
Half Yearly Dividend Option **** 11.7967 11.6594
Direct Plan - Growth Option 23.0049 20.7857
Direct Plan - Fortnightly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option 12.0968 11.8699
Direct Plan - Half Yearly Dividend Option 11.2261 11.0590
2. Closing Assets Under Management (Rs. in Lakhs)
End 44,243 45,619
Average (AAuM)1 46,288 54,254
3. Gross income as % of AAuM2 11.86% 8.03%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Plan - Growth Option 1.97% 1.95%
Growth Option **** 1.72% 1.70%
Direct Plan - Growth Option 0.97% 0.95%
17
HSBC Cash Fund 7
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
b. Management Fee as % of AAuM (planwise)
Regular Plan - Growth Option 0.84% 0.86%
Growth Option **** 0.84% 0.86%
Direct Plan - Growth Option 0.84% 0.86%
5. Net Income as a percentage of AAuM3 10.41% 6.59%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan - Fortnightly Dividend Option – –
Regular Plan - Monthly Dividend Option – –
Regular Plan - Quarterly Dividend Option – 0.3611
Fortnightly Dividend Option **** 0.9166 0.6396
Monthly Dividend Option **** 0.9268 0.3706
Quarterly Dividend Option **** 0.7222 0.7223
Half Yearly Dividend Option **** 0.7222 0.7223
Direct Plan - Fortnightly Dividend Option – 0.3356
Direct Plan - Monthly Dividend Option – 0.3144
Direct Plan - Quarterly Dividend Option 0.7295 0.7223
Direct Plan - Half Yearly Dividend Option 0.7222 0.7223
Corporate
Regular Plan - Fortnightly Dividend Option – –
Regular Plan - Monthly Dividend Option – –
Regular Plan - Quarterly Dividend Option – 0.3346
Fortnightly Dividend Option **** 0.8492 0.5925
Monthly Dividend Option **** 0.8587 0.3433
Quarterly Dividend Option **** 0.6692 0.6692
Half Yearly Dividend Option **** 0.6692 0.6692
Direct Plan - Fortnightly Dividend Option – 0.3109
Direct Plan - Monthly Dividend Option – 0.2913
Direct Plan - Quarterly Dividend Option 0.6759 0.6692
Direct Plan - Half Yearly Dividend Option 0.6692 0.6692
8. Returns (%):
a. Last One Year
Scheme
Regular Plan - Growth Option 9.5757 4.7680
Growth Option **** 9.8509 5.0338
Direct Plan - Growth Option 10.6766 5.8182
Key Statistics for the year ended March 31, 2017 (Contd...)
18
7 HSBC FLEXI DEBT FUND
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2017
Previous Year ended
March 31, 2016
Benchmark
CRISIL Composite Bond Fund Index 11.0896 8.2153
b. Since Inception
Scheme
Regular Plan - Growth Option 8.4768 8.3480
Growth Option 8.8057 8.6832
Direct Plan - Growth Option 8.8234 8.2526
Benchmark
CRISIL Composite Bond Fund Index 8.0154 7.6587
1. AAUM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the year4. Portfolio Turnover = Lower of sales or purchase divided by the Average AUM for the year
**** Earlier known as Institutional Plan
19
HSBC Cash Fund 7
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FLEXI DEBT FUND
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as a % to Net Assets as of years ended March 31, 2017 and March 31, 2016 are NIL.
1.3. Investments in Associates and Group Companies:(Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2017 2016
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
241,299,360 1,452,436,300 251,212,500 402,773,900
Equities – 94,659,583 – 47,680,367
Bharti Airtel Ltd. Equities – 1,025,985 – 421,271,947
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 12,769,868 0.29 2,939,840 0.06
– Depreciation 6,446,817 0.15 – –
Certifi cate of Deposit
– Appreciation – – 1,298,638 0.03
– Depreciation – – – –
Government Securities
– Appreciation 9,473,501 0.21 34,470,469 0.76
– Depreciation 12,458,818 0.28 – –
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 14,606,682,662 and Rs. 15,186,637,563 respectively being 315.56% and 328.09% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-16 (excluding accretion of discount) are
20
7 HSBC FLEXI DEBT FUND
Rs. 21,291,657,158 and Rs. 22,283,708,745 respectively being 392.44% and 410.73% of the average daily net assets.
1.8. Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under :
Security Category Fair Value (Rupees)
Percentage to Net Assets
Fair Value (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 1,223,699,243 27.66 776,657,440 17.02
Money Market Instruments – – 362,417,090 7.94
Total 1,223,699,243 27.66 1,139,074,530 24.97
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :
Commission paid to Sponsor/AMC and its associates/related parties/group companies
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given[Rs. In Crores]
% of Total Business
received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 37.71 28.67 9,350,362.85 54.97
Name of Sponsor / AMC and its associate / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid [Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 87.22 40.09 10,412,353.62 49.37
The brokerage paid was at rates similar to those offered to other brokers / distributors and the Commission/Brokerage paid to related party includes both upfront and trail and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
21
HSBC Cash Fund 7
Name of Associates: Hongkong & Shanghai Banking Corporation Limited
Name of Scheme Name of Security Year Type of Security
Amount(Rs in Crores)
HSBC Flexi Debt Fund 8.30% REC M - 10-Apr-2025 March 31, 2016 Corporate Debt
50
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016**.
Description
2016–2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan - Growth Option
7,109,564.906 – 3,251,059.044 3,858,505.862 10
Regular Plan - Monthly Dividend Option
2,407,266.489 – 527,507.867 1,879,758.622 10
Regular Plan - Fortnightly Dividend Option
92,654.868 – 92,277.381 377.487 10
Regular Plan - Quarterly Dividend Option
1,195,506.105 – 432,776.962 762,729.143 10
Regular Plan - Half Yearly Dividend Option
1,675.319 – – 1,675.319 10
Growth Option **** 120,332,741.286 33,976,967.615 52,162,883.598 102,146,825.303 10
Monthly Dividend Option ****
6,601,113.574 3,305,056.048 5,707,891.067 4,198,278.555 10
Fortnightly Dividend Option ****
2,510,660.003 9,774,904.203 11,034,898.698 1,250,665.508 10
Quarterly Dividend Option ****
12,404,532.442 197,277.681 821,950.384 11,779,859.739 10
Half Yearly Dividend Option ****
912,478.569 – 886,332.798 26,145.771 10
Direct Plan - Growth Option
81,165,000.171 10,218,973.964 11,332,570.656 80,051,403.479 10
Direct Plan - Fortnightly Dividend Option
– – – – 10
Direct Plan - Quarterly Dividend Option
10,771.073 7,793.709 13,546.686 5,018.096 10
Direct Plan - Monthly Dividend Option
– – – – 10
Direct Plan - Half Yearly Dividend Option
14,531.582 942.279 – 15,473.861 10
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
22
7 HSBC FLEXI DEBT FUND
Description
2015–2016
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Plan - Growth Option
12,228,000.551 – 5,118,435.645 7,109,564.906 10
Regular Plan - Monthly Dividend Option
3,253,531.638 – 846,265.149 2,407,266.489 10
Regular Plan - Fortnightly Dividend Option
729,867.238 – 637,212.370 92,654.868 10
Regular Plan - Quarterly Dividend Option
3,166,359.604 – 1,970,853.499 1,195,506.105 10
Regular Plan - Half Yearly Dividend Option
1,675.319 – – 1,675.319 10
Growth Option **** 131,864,931.070 76,565,825.915 88,098,015.699 120,332,741.286 10
Monthly Dividend Option ****
19,180,693.285 9,820,368.662 22,399,948.373 6,601,113.574 10
Fortnightly Dividend Option ****
4,793,696.072 7,942,370.428 10,225,406.497 2,510,660.003 10
Quarterly Dividend Option ****
15,624,305.041 1,246,062.025 4,465,834.624 12,404,532.442 10
Half Yearly Dividend Option ****
450,142.531 1,823,808.489 1,361,472.451 912,478.569 10
Direct Plan - Growth Option
117,190,185.166 20,841,387.082 56,866,572.077 81,165,000.171 10
Direct Plan - Fortnightly Dividend Option
1,779,077.056 55,621.698 1,834,698.754 – 10
Direct Plan - Quarterly Dividend Option
8,012.503 7,104.029 4,345.459 10,771.073 10
Direct Plan - Monthly Dividend Option
19,922.544 19,147.836 39,070.380 – 10
Direct Plan - Half Yearly Dividend Option
13,630.963 900.619 – 14,531.582 10
** Units held by the AMC (Seed Capital) in Direct Plan Growth Option as on 31/03/2017 is 254,406.317 & as on 31/03/2016 is 254,406.317
**** Earlier known as Institutional Plan
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income for the year ended March 31, 2017 is Nil (2016: Nil)
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
23
HSBC Cash Fund 7
9 Investor Education Awareness In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund)
accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during the year/period 182.34
Less: Transferred to AMFI 83.24
Less: Payable to AMFI (March 2017 accrual) 7.93
Add: Investment Income FY 2016-17 11.24
Less: Spent during FY 2016-17 58.41
Closing Balance as on March 31, 2017 44.00
10 Garnishee Notices
An Income tax demand of Rs. 32.58 crores was purported to be recovered under garnishee proceedings, by Income Tax Authorities in respect of investments made in Pass through Certifi cates (PTC) by some of the debt schemes (including matured schemes) of HSBC Mutual Fund (HSBC MF), for A.Y. 2009-2010.The said demand, impacting various mutual fund players in the industry, raised originally on the trusts sponsored by IL&FS Trust Company Ltd., (Appellants) was sought to be also recovered u/s 177(3) of the Income Tax Act, from HSBC MF. Against the demand an appeal was fi led by the Appellant with the fi rst Appellate Authority CIT(A)] and thereafter with ITAT. ITAT decided the issue in favour of the Appelant. Similar to AY 2009-10, HSBC MF had received a demand notice from the Income Tax authorities for AY 2010-11 for Rs. 6.95 crores. ITAT has passed an order in favour of the appellant for this year as well.
Assessment for the A.Y. 2007-2008 has also been reopened by the Income Tax Authorities and demand has been made of Rs. 2.04 Crores on the trust sponsored by IL&FS Trust Company Ltd. HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year. ITAT has passed an order in favour of the appellant for this year as well No intimation of tax department fi ling further appeal has been received by the appellate or HSBC MF.
11 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
24
7 HSBC FLEXI DEBT FUND
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
HSBC FLEXI DEBT FUND 7
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC Capital Protection Oriented Fund 11
HSBC Capital Protection Oriented FundA Close-ended Capital Protection Oriented Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Capital Protection Oriented Fund 11
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
11 HSBC Capital Protection Oriented Fund
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
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HSBC Capital Protection Oriented Fund 11
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
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11 HSBC Capital Protection Oriented Fund
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Capital Protection Oriented Fund – a close ended Capital Protection Oriented Scheme The scheme seeks protection of capital by investing a portion of the portfolio in high quality debt securities and money market instruments and also to provide capital appreciation by investing in equities through NIFTY (Index) Call Options. Currently, the Fund has two capital protection oriented funds viz. HSBC Capital Protection Oriented Fund – Series II – Plan I and Plan II.
Being close ended fund, the performance of the scheme is not provided.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
Trustees’ ReportFor the year ended March 31, 2017
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HSBC Capital Protection Oriented Fund 11
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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11 HSBC Capital Protection Oriented Fund
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC Capital Protection Oriented Fund 11
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
Scheme
Unclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC Capital Protection Oriented Fund Series I Plan I
– – 2724584.40 1
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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11 HSBC Capital Protection Oriented Fund
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC Capital Protection Oriented Fund 11
** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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11 HSBC Capital Protection Oriented Fund
(RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
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HSBC Capital Protection Oriented Fund 11
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Capital Protection Oriented Fund Series II – Plan I
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Capital Protection Oriented Fund Series II Plan I (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
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11 HSBC Capital Protection Oriented Fund
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
13
HSBC Capital Protection Oriented Fund 11
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund – HSBC Capital Protection Oriented Fund Series II – Plan II
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Capital Protection Oriented Fund Series II Plan II (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
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11 HSBC Capital Protection Oriented Fund
Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3) In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
15
HSBC Capital Protection Oriented Fund 11
Abridged Balance Sheet as at March 31, 2017
Rs. in Lakhs
HSBC CAPITAL PROTECTIONORIENTED FUND SERIES II – PLAN I
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 6,967.57 6,967.57 2 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 94.48 36.87 2.3 Other Reserves 577.25 68.93 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 9.45 11.41
TOTAL 7,648.75 7,084.78 ASSETS
1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 6,356.38 5,914.21 1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 6,356.38 5,914.21 2 Deposits 0.14 0.44 3 Other Current Assets3.1 Cash & Bank Balance 9.18 0.25 3.2 CBLO / Reverse Repo Lending 376.65 409.91 3.3 Others 906.40 759.97 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 7,648.75 7,084.78
Notes to Accounts - Annexure I
16
11 HSBC Capital Protection Oriented Fund
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC CAPITAL PROTECTIONORIENTED FUND SERIES II – PLAN II
As at March 31, 2017
As at March 31, 2016
LIABILITIES1 Unit Capital 5,761.20 5,761.20 2 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 17.50 – 2.3 Other Reserves 442.03 8.67 3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 6.96 7.92
TOTAL 6,227.69 5,777.79
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 5,308.68 4,828.41 1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 5,308.68 4,828.41
2 Deposits 0.13 0.82 3 Other Current Assets3.1 Cash & Bank Balance 8.20 0.24 3.2 CBLO / Reverse Repo Lending 297.23 377.94 3.3 Others 613.45 570.38 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 6,227.69 5,777.79
Notes to Accounts - Annexure I
17
HSBC Capital Protection Oriented Fund 11
Abridged Revenue Account for the year ended March 31, 2017
Rs. in Lakhs
HSBC CAPITAL PROTECTIONORIENTED FUND SERIES II – PLAN I
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 530.50 497.25 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments(0.04) (0.05)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 530.46 497.20 2 EXPENSES2.1 Management fees 36.57 34.99 2.2 Service tax on Management fees 5.46 4.91 2.3 Transfer agents fees and expenses 1.67 1.59 2.4 Custodian fees 0.33 0.30 2.5 Trusteeship fees – –2.6 Commission to Agents 31.81 30.89 2.7 Marketing & Distribution expenses – –2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 1.46 1.40 2.10 Other operating expenses 1.33 0.47 2.11 Less: Expenses to be Reimbursed by the Investment Manager (0.23) (0.06)
(B) 78.60 74.69 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A - B = C) 451.86 422.51 4 Change in Unrealised Depreciation
in value of investments (D) 56.46 (363.87)5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 508.32 58.64 6 Change in unrealised appreciation
in the value of investments (F) 57.61 (61.38)
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 565.93 (2.74)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 61.38 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 57.61 –7.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund 68.93 10.29 7.5 Transfer from Unit Premium Reserve – –
8 Total 577.25 68.93
9 Dividend Appropriation9.1 Income Distributed during the period – –9.2 Tax on income distributed during the period – –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 577.25 68.93
Notes to Accounts – Annexure I
18
11 HSBC Capital Protection Oriented Fund
Abridged Revenue Account for the period ended March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC CAPITAL PROTECTIONORIENTED FUND SERIES II – PLAN II
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –1.2 Interest 453.29 414.88 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments(0.04) (0.10)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 453.25 414.78
2 EXPENSES2.1 Management fees 24.21 22.75 2.2 Service tax on Management fees 3.61 3.19 2.3 Transfer agents fees and expenses 1.36 1.29 2.4 Custodian fees 0.49 0.25 2.5 Trusteeship fees – –2.6 Commission to Agents 21.73 20.97 2.7 Marketing & Distribution expenses – –2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 1.19 1.09 2.10 Other operating expenses 1.47 0.57 2.11 Less: Expenses to be Reimbursed by the Investment Manager – (1.01)
(B) 54.26 49.30 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A - B = C) 398.99 365.48 4 Change in Unrealised Depreciation
in value of investments (D) 34.37 (356.81)5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 433.36 8.67 6 Change in unrealised appreciation
in the value of investments (F) 17.50 – 7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 450.86 8.67
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 17.50 – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 8.67 – 7.5 Transfer from Unit Premium Reserve – – 8 Total 442.03 8.67 9 Dividend Appropriation9.1 Income Distributed during the period – –9.2 Tax on income distributed during the period – –10 Retained Surplus / (Defi cit) carried forward
to Balance sheet442.03 8.67
Notes to Accounts – Annexure I
19
HSBC Capital Protection Oriented Fund 11
Key Statistics for the year ended March 31, 2017
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN I
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 10.1518 10.1558
Dividend Option 10.1518 10.1558
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
High
Growth Option 10.9641 10.3185
Dividend Option 10.9641 10.3185
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
Low
Growth Option 9.9893 9.5230
Dividend Option 9.9893 9.5230
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
End
Growth Option 10.9641 10.1518
Dividend Option 10.9641 10.1518
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 7,639 7,073
Average (AAuM)1 7,314 7,003
3. Gross income as % of AAuM2* 7.25% 7.10%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)*
Regular Growth Option 1.07% 1.07%
b. Management Fee as % of AAuM (planwise)*
Regular Growth Option 0.50% 0.50%
5. Net Income as a percentage of AAuM3* 6.18% 6.03%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
20
11 HSBC Capital Protection Oriented Fund
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN I
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
Retail
Regular Dividend Option – –
Corporate
Regular Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 8.0015 (0.0393)
Direct Plan - Growth Option N.A. N.A.
Benchmark
CRISIL MIP Blended Index 12.2956 5.6525
b. Since Inception
Scheme
Regular Growth Option 4.6703 1.4933
Direct Plan - Growth Option N.A. N.A.
Benchnmark
CRISIL MIP Blended Index 8.6693 6.2407
1. AAuM = Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
Key Statistics for the year ended March 31, 2017 (Contd...)
21
HSBC Capital Protection Oriented Fund 11
Key Statistics for the period ended March 31, 2017 (Contd...)
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN II
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 10.0150 N.A.
Dividend Option 10.0150 N.A.
Direct Plan - Growth Option – N.A.
Direct Plan - Dividend Option – N.A.
High
Growth Option 10.7976 10.1626
Dividend Option 10.7976 10.1626
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
Low
Growth Option 9.8598 9.5950
Dividend Option 9.8598 9.5950
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
End
Growth Option 10.7976 10.0150
Dividend Option 10.7976 10.0150
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 6,221 5,770
Average (AAuM)1 5,965 5,695
3. Gross income as % of AAuM2* 7.60% 7.28%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)*
Regular Growth Option 0.91% 0.91%
b. Management Fee as % of AAuM (planwise)*
Regular Growth Option 0.41% 0.42%
5. Net Income as a percentage of AAuM3* 6.69% 6.42%
6. Portfolio turnover ratio4 – –
22
11 HSBC Capital Protection Oriented Fund
Key Statistics for the period ended March 31, 2017 (Contd...)
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN II
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option – –
Corporate
Regular Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.8143 N.A.
Regular Dividend Option 7.8143 N.A.
Direct Plan - Growth Option N.A. N.A.
Benchmark
CRISIL MIP Blended Index 12.2956 N.A.
b. Since Inception
Scheme
Regular Growth Option 4.0009 0.1500
Regular Dividend Option 4.0009 0.1500
Direct Plan - Growth Option N.A. N.A.
Benchnmark
CRISIL MIP Blended Index 8.6693 5.2940
1. AAuM = Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
23
HSBC Capital Protection Oriented Fund 11
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN I
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 :
Hedging Positions through Options as on March 31, 2017 :
Scheme Name Underlying Number of contracts
Option Price when purchased
Current Price
NIL
Total Exposure through options as a percentage of net assets : NIL
For the Period ended March 31, 2017 specify the following for hedging transactions through options which have already been exercised/expired :
Total Number of contracts entered into : NIL
Gross Notional Value of contracts : NIL
Net Profi t/Loss on all contracts (premium paid treated as loss) : NIL
Hedging Positions through Options as on March 31, 2016:
Scheme Name Underlying Number of contracts
Option Price when purchased
Current Price
NIL
Total Exposure through options as a percentage of net assets : NIL
For the Period ended March 31, 2015 specify the following for hedging transactions through options which have already been exercised / expired :
Total Number of contracts entered into : NIL
Gross Notional Value of contracts : NIL
Net Profi t / Loss on all contracts (premium paid treated as loss) : NIL
Other than Hedging Positions through Options as on March 31, 2017:
Scheme Name Underlying Call / put Number of contracts
Option Price when purchased
Current Price
HCPOF SII PI Nifty Index Call Option 576 2191.45 1480.45
Total Exposure through options as a percentage of net assets : 8.37%
For the Period ended March 31, 2017 following details specifi ed with regard to non-hedging transactions through options which have already been exercised/expired : NILTotal Number of contracts entered into : NILGross Notional Value of contracts : NILNet Profi t/Loss on all contracts (premium paid treated as loss) : NIL
24
11 HSBC Capital Protection Oriented Fund
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Other than Hedging Positions through Options as on March 31, 2016:
Scheme Name Underlying Call / put Number of contracts
Option Price when purchased
Current Price
HCPOF SII PI Nifty Index Call Option 576 2191.45 1349.75
Total Exposure through options as a percentage of net assets : 8.24%
For the Period ended March 31, 2016 following details specifi ed with regard to non-hedging transactions through options which have already been exercised/expired : NIL
Total Number of contracts entered into : 576
Gross Notional Value of contracts : Rs. 94,696,560/-
Net Profi t/Loss on all contracts (premium paid treated as loss) : NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 and March 31, 2016 are NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPA as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 9,448,169 1.24 3,687,535 0.52
– Depreciation – – – –
Derivatives (Options)
– Appreciation – – – –
– Depreciation 30,741,120 4.02 36,387,360 5
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-17 (excluding accretion of discount) are Rs. 45,157,832 and Rs. 7,000,000 respectively being 6.17% and 0.96% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is NIL.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 635,638,363 83.21 541,404,055 76.54
Total 635,638,363 83.21 541,404,055 76.54
25
HSBC Capital Protection Oriented Fund 11
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2016-2017 – – 2,673,369.53 91.76
Name of Sponsor/AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2015-2016 0.06 6.93 2,630,698.73 91.52
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the year ended March 31, 2017.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016 :
Description 2016–2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 68,645,883.086 – – 68,645,883.086 10
Dividend Option 1,029,852.818 – – 1,029,852.818 10
26
11 HSBC Capital Protection Oriented Fund
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Description 2015–2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 68,645,883.086 – – 68,645,883.086 10
Dividend Option 1,029,852.818 – – 1,029,852.818 10
5 No contingent liabilities for the year ended March 31, 2017.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
27
HSBC Capital Protection Oriented Fund 11
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2017
HSBC CAPITAL PROTECTION ORIENTED FUND SERIES II – PLAN II
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 :
Hedging Positions through Options as on March 31, 2017 :
Scheme Name Underlying Number of contracts
Option Price when purchased
Current Price
NIL
Total Exposure through options as a percentage of net assets : NIL
For the Period ended March 31, 2017 specify the following for hedging transactions through options which have already been exercised / expired :Total Number of contracts entered into : NILGross Notional Value of contracts : NILNet Profi t/Loss on all contracts (premium paid treated as loss) : NIL
Other than Hedging Positions through Options as on March 31, 2017:
Scheme Name Underlying Call / put Number of contracts
Option Price when purchased
Current Price
HCPOF SII PII Nifty Index Call Option 460 2250.20 1316.20
Total Exposure through options as a percentage of net assets : 7.30%
For the Period ended March 31, 2017 following details specifi ed with regard to non-hedging transactions through options which have already been exercised/expired : NILTotal Number of contracts entered into : NILGross Notional Value of contracts : NIL Net Profi t/Loss on all contracts (premium paid treated as loss) : NIL
Hedging Positions through Options as on March 31, 2016 :
Scheme Name Underlying Number of contracts
Option Price when purchased
Current Price
NIL
Total Exposure through options as a percentage of net assets : NIL
For the Period ended March 31, 2016 specify the following for hedging transactions through options which have already been exercised / expired :Total Number of contracts entered into : NILGross Notional Value of contracts : NILNet Profi t/Loss on all contracts (premium paid treated as loss) : NIL
Other than Hedging Positions through Options as on March 31, 2016 :
Scheme Name Underlying Call / put Number of contracts
Option Price when purchased
Current Price
HCPOF SII PII Nifty Index Call Option 460 2250.20 1258.70
Total Exposure through options as a percentage of net assets : 7.53%
For the Period ended March 31, 2016 following details specifi ed with regard to non-hedging transactions through options which have already been exercised/expired : NILTotal Number of contracts entered into : 460Gross Notional Value of contracts :Rs. 77,652,600/-Net Profi t/Loss on all contracts (premium paid treated as loss) : NIL
28
11 HSBC Capital Protection Oriented Fund
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2017
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
- Appreciation 2,874,083 0.46 347,500 0.06
- Depreciation 1,123,734 0.18 1,800,623 0.31
Derivetives (Options)
- Appreciation – – – –
- Depreciation 32,243,700 5.18 34,227,450 5.93
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2016-2017 (excluding accretion of discount) is Rs. 50,013,603 and Rs. 11,000,000 respectively being 8.38% and 1.84% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 479,246,488 being 84.15% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 530,867,729 85.34 432,823,924 75.01
Total 530,867,729 85.34 432,823,924 75.01
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 1,822,580.84 91.66
29
HSBC Capital Protection Oriented Fund 11
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2017
Name of Sponsor / AMC and its associates / related parties / group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 57.61 97.35 1,699,644.33 91.12
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the year ended March 31, 2017.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016 :
Description 2016–2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 56,437,012.044 – – 56,437,012.044 10
Dividend Option 1,175,000.000 – – 1,175,000.000 10
Description 2015–2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option – 56,437,012.044 – 56,437,012.044 10
Dividend Option – 1,175,000.000 – 1,175,000.000 10
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
30
11 HSBC Capital Protection Oriented Fund
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF (Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2017
31
HSBC Capital Protection Oriented Fund 11
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
32
11 HSBC Capital Protection Oriented Fund
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
HSBC Fixed Term Series (FTS) 21
HSBC Fixed Term SeriesA Close-ended Income Scheme
Abridged Annual Report 2016 - 2017
1
HSBC Fixed Term Series (FTS) 21
Dear Investor,
We are living in interesting times of great changes. Some of these changes are transformative and we believe provide the foundations of a strong growth phase for our economy.
Post the global fi nancial crisis of 2007, global economic activity is picking up after almost a decade with a long-awaited cyclical recovery in investment, manufacturing and trade. It may surprise you that even during this very diffi cult period equity markets have produced signifi cant returns, with the US markets generating returns in excess of 15% and the Indian markets even higher. IMF forecasts world growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018.
The cumulative impact of demonetisation, digitisation and GST will lead to far reaching positive outcomes. And this is perhaps just the beginning. To our mind, the most signifi cant change will be the formalisation of economic activities leading to greater transparency.
This formalisation besides leading to greater tax revenues and transparency will also lead to a shift from savings from physical assets such as gold and real estate into fi nancial assets. At present, fi nancial savings are 40 per cent of the Gross Domestic Savings and within fi nancial savings, equity and equity mutual funds constitute only 8 per cent. The proportion of fi nancial savings is likely to rise which will provide support to the markets and also bring down the reliance on external fl ows. The domestic mutual fund industry is today at its infl ection point. SIP investments from retail investors has touched a new high. This along with fl ows from the NPS, EPFO and insurance companies today provides a pool of domestic liquidity which we haven’t seen in the past.
Whilst our highly experienced fund managers bring their strong personal investment capabilities, I would like to emphasise that HSBC investment philosophy is effectively embedded in this process. Our proprietary fund management framework helps us take consistent investment decisions while mitigating risks to help you realise your goals.
2
21 HSBC Fixed Term Series (FTS)
We at HSBC Global Asset Management, always believe that it is your dreams we care for by nurturing your investments. Thank you for the trust you have bestowed upon us.
Warm regards,
Ravi Menon
Chief Executive Offi cer,
HSBC Global Asset Management, India
3
HSBC Fixed Term Series (FTS) 21
SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001.
TRUSTEEBoard of TrusteesOffi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 16, Veer Nariman Road, Fort, Mumbai 400 001.
CUSTODIANStandard Chartered Bank (SCB)Corp. & Regd. Offi ce: Crescenzo, Securities Services, 3rd Floor, C-38/39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai – 400051.
AUDITORS TO THE SCHEMEBSR & Co. LLPChartered Accountants5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011.
LEGAL ADVISORSBharucha & PartnersBharucha & Partners, Hague Building, Sprott Road, Ballard Estate, Mumbai - 400 001.
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)No. 4. Nehru Nagar West, Kalapatti Main Road, Civil Aerodrome Post, Coimbatore - 641 014
BOARD OF TRUSTEESMr. N. P. Gidwani - Chairman
Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Glenn Berry
BOARD OF DIRECTORSMs. Kishori J. Udeshi - Chairperson
Mr. S. P. MustafaMr. Dinesh MittalMr. Ravi Menon - Chief Executive Offi cer
4
21 HSBC Fixed Term Series (FTS)
The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.
As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.
During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.
The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a. Operations and Performance of the Schemes
HSBC Fixed Term Series – close ended income schemes The scheme seeks to generate returns by investing in a portfolio of fi xed income instruments which mature on or before the maturity date of the plans under the scheme.
Details of scheme launched since last annual report :
Scheme Name Date of Launch
HSBC Fixed Term Series 129 June 07, 2017
HSBC Fixed Term Series 128 April 20, 2017
Details of schemes rolled-over during the period :
Scheme Name Date of roll-over
HSBC Fixed Term Series 94October 26, 2016
HSBC Fixed Term Series 96
Being close ended fi xed maturity plans, the performance of these schemes are not provided.
b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)
EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.
Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of
Trustees’ ReportFor the year ended March 31, 2017
5
HSBC Fixed Term Series (FTS) 21
net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.
Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)
S&P BSE Sensex 16.9%
NSE CNX Nifty 18.5%
S&P BSE 100 21.2%
S&P BSE 200 22.5%
S&P BSE 500 24.0%
S&P BSE Midcap 32.7%
Source: Bloomberg
Our view on the key aspects related to equity markets are presented below -
The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.
Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.
The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.
Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.
DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.
Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.
Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
6
21 HSBC Fixed Term Series (FTS)
demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.
UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.
In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:
• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.
• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.
• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.
• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.
• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.
• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY
a. Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000/- (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
HSCI offers integrated investment banking services, securities and corporate fi nance & advisory. HSCI is a member of the Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid up equity share capital of HSBC Asset Management (India) Private Limited.
b. HSBC Mutual Fund
HSBC Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002.
The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities for the purpose of providing facilities for participation by persons as benefi ciaries in such investments and in the profi ts / income arising therefrom.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
7
HSBC Fixed Term Series (FTS) 21
c. Board of Trustees (the Trustees)
The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the schemes fl oated there under are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.
d. Asset Management Company (the AMC)
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.
HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity share capital of the AMC.
3. INVESTMENT OBJECTIVE OF THE SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet
of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:
SchemeUnclaimed Dividend Unclaimed Redemption
Amount (Rs.) No. of Investors
Amount (Rs.) No. of Investors
HSBC FTS 89 Plan – – 631006.12 1
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.
On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC initiated tie-ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 40.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
8
21 HSBC Fixed Term Series (FTS)
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:
2016-2017
Com-plaintCode
Type of complaint (a) No. of complaints pending at the
beginning of the year
(b) No. of com-plaints
receivedduring
theyear
Action on (a) and (b)
Resolved Non Actiona-
ble*
Pending
Within 30
days
30 - 60 days
60 - 180 days
Beyond 180 days
0 - 3 months
3 - 6 months
6 - 9 months
9 - 12 months
I A Non receipt of Dividend on Units
0 6 4 2 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 6 5 0 0 0 0 1 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
II A Non receipt of Statement of Account/Unit Certifi cate
0 0 0 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Data corrections in Investor details**
1 34 35 0 0 0 0 0 0 0 0
II D Non receipt of Annual Report / Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorized switch between Schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 0 0 0 0 0 0 0 0 0 0
III D Wrong or excess charges / load
0 0 0 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination, etc
0 6 6 0 0 0 0 0 0 0 0
IV Others 0 21 20 0 0 0 0 1 0 0 0
Total 1 73 70 2 0 0 0 2 0 0 0
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
9
HSBC Fixed Term Series (FTS) 21
Summary of Complaints for FY 2016-17
Particulars Count
Total complaints received 73
Total number of folios 156459
% of complaints against the folio 0.046%
# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on
Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category
* Non actionable means the complaint is incomplete / outside the scope of the mutual fund
8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.
9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.
The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:
Quarter Total no. of resolutions
Break-up of vote decision
For Against Abstained
June 2016 124 101 0 23
September 2016 1,005 880 27 98
December 2016 58 42 9 7
March 2017 39 33 3 3
Total 1,226 1,056 39 131
In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.
Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.
10. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of
the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.
b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
10
21 HSBC Fixed Term Series (FTS)
c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the Mutual Fund. Present and prospective unit holders can obtain copy of the Trust Deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.
11. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.
The Trustees look forward to the continued support of everyone.
For and on behalf of the Board of Trustees of HSBC Mutual Fund
Sd/-
N. P. Gidwani
Chairman
MumbaiJuly 18, 2017.
Trustees’ ReportFor the year ended March 31, 2017 (Contd...)
11
HSBC Fixed Term Series (FTS) 21
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 94
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 94 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
12
21 HSBC Fixed Term Series (FTS)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
13
HSBC Fixed Term Series (FTS) 21
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 96
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 96 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report (Contd...)
14
21 HSBC Fixed Term Series (FTS)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
15
HSBC Fixed Term Series (FTS) 21
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 98
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 98 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report (Contd...)
16
21 HSBC Fixed Term Series (FTS)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
17
HSBC Fixed Term Series (FTS) 21
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 105
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 105 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
Independent Auditors’ Report (Contd...)
18
21 HSBC Fixed Term Series (FTS)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
Independent Auditors’ Report (Contd...)
19
HSBC Fixed Term Series (FTS) 21
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 107
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 107 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
20
21 HSBC Fixed Term Series (FTS)
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
21
HSBC Fixed Term Series (FTS) 21
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 109
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 109 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
22
21 HSBC Fixed Term Series (FTS)
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
23
HSBC Fixed Term Series (FTS) 21
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 125
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 125 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.
24
21 HSBC Fixed Term Series (FTS)
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
25
HSBC Fixed Term Series (FTS) 21
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund - HSBC Fixed Term Series 126
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Fixed Term Series 126 (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the period from 20 May 2016 (i.e. the date of allotment) to 31 March 2017 (the ‘Period’), and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.
Management’s Responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, 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 Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;
(ii) in the case of the revenue account, of the net surplus for the Period ended on that date; and
(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the Period ended on that date.
26
21 HSBC Fixed Term Series (FTS)
Independent Auditors’ Report (Contd...)
Report on other Legal and Regulatory Requirements1 As required by Regulation 55(4) to the Regulations, we report that:
(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;
(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
2 As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.
3 In our opinion and on the basis of information and explanations given to us, the methods used to value non - traded securities, as at 31 March 2017, as determined by the Board of Directors of AMC, are in accordance with the Regulations and other guidelines issued by the Securities and Exchange Board of India as applicable and approved by the Board of Trustees are fair and reasonable.
For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022
Sd/-
Milind RanadePartnerMembership No: 100564
Place : MumbaiDate : July 18, 2017.
27
HSBC Fixed Term Series (FTS) 21
Rs. in Lakhs
HSBC FIXED TERM SERIES 94As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 938.42 7,833.36 2 Reserves & Surplus2.1 Unit Premium Reserves (4,191.49) (1,967.56)2.2 Unrealised Appreciation Reserve – – 2.3 Other Reserves 4,527.23 4,068.52 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 8.41 11.46
TOTAL 1,282.57 9,945.78
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 1,157.74 9,434.72 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – – 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 1,157.74 9,434.72
2 Deposits 0.25 0.21 3 Other Current Assets3.1 Cash & Bank Balance 1.44 1.82 3.2 CBLO / Reverse Repo Lending 58.51 129.90 3.3 Others 64.63 379.13 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 1,282.57 9,945.78
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017
28
21 HSBC Fixed Term Series (FTS)
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 96As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 96.24 4,122.48 2 Reserves & Surplus2.1 Unit Premium Reserves (2,295.40) (1,025.04)2.2 Unrealised Appreciation Reserve – 10.02 2.3 Other Reserves 2,329.08 2,094.88 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 5.88 4.82
TOTAL 135.80 5,207.16
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 91.38 4,735.54 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – – 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 91.38 4,735.54
2 Deposits 0.14 1.06 3 Other Current Assets3.1 Cash & Bank Balance 1.80 1.36 3.2 CBLO / Reverse Repo Lending 37.32 301.02 3.3 Others 5.16 168.18 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 135.80 5,207.16
Notes to Accounts - Annexure I
29
HSBC Fixed Term Series (FTS) 21
Rs. in Lakhs
HSBC FIXED TERM SERIES 98As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 313.95 4,659.26 2 Reserves & Surplus2.1 Unit Premium Reserves (2,186.84) (981.70)2.2 Unrealised Appreciation Reserve – 12.87 2.3 Other Reserves 2,285.66 2,029.52 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 4.74 6.45
TOTAL 417.51 5,726.40
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 335.19 3,250.41 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – 2,012.91 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 335.19 5,263.32
2 Deposits 0.25 0.87 3 Other Current Assets3.1 Cash & Bank Balance 1.53 0.14 3.2 CBLO / Reverse Repo Lending 62.11 209.68 3.3 Others 18.43 252.39 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 417.51 5,726.40
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017 (Contd...)
30
21 HSBC Fixed Term Series (FTS)
Rs. in Lakhs
HSBC FIXED TERM SERIES 105As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 5,657.28 5,657.28 2 Reserves & Surplus2.1 Unit Premium Reserves (2,194.53) (2,194.53)2.2 Unrealised Appreciation Reserve 0.71 0.50 2.3 Other Reserves 3,786.17 3,280.73 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 10.83 7.63
TOTAL 7,260.46 6,751.60
ASSETS – – 1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 3,174.06 5,370.68 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – 866.79 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 3,174.06 6,237.47
2 Deposits 5.55 0.48 3 Other Current Assets3.1 Cash & Bank Balance 90.80 0.19 3.2 CBLO / Reverse Repo Lending 3,732.50 291.44 3.3 Others 257.55 222.02 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 7,260.46 6,751.60
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2017 (Contd...)
31
HSBC Fixed Term Series (FTS) 21
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 107As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 3,222.86 3,222.86 2 Reserves & Surplus2.1 Unit Premium Reserves (1,169.94) (1,169.94)2.2 Unrealised Appreciation Reserve 0.40 0.28 2.3 Other Reserves 2,048.39 1,762.45 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 8.33 4.50
TOTAL 4,110.04 3,820.15
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 1,794.39 3,035.58 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – 488.83 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 1,794.39 3,524.41
2 Deposits 3.13 0.29 3 Other Current Assets3.1 Cash & Bank Balance 51.47 0.12 3.2 CBLO / Reverse Repo Lending 2,115.38 169.83 3.3 Others 145.67 125.50 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 4,110.04 3,820.15
Notes to Accounts - Annexure I
32
21 HSBC Fixed Term Series (FTS)
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 109As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 7,723.41 7,723.41 2 Reserves & Surplus2.1 Unit Premium Reserves (2,148.33) (2,148.33)2.2 Unrealised Appreciation Reserve 0.95 0.67 2.3 Other Reserves 4,193.07 3,508.13 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – – 4.2 Other Current Liabilities & Provisions 9.94 8.67
TOTAL 9,779.05 9,092.56
ASSETS – 1 Investments1.1 Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 4,262.70 7,228.34 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – 1,164.12 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 4,262.70 8,392.46
2 Deposits 7.41 0.69 3 Other Current Assets3.1 Cash & Bank Balance 122.61 0.25 3.2 CBLO / Reverse Repo Lending 5,040.04 400.82 3.3 Others 346.29 298.34 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 9,779.05 9,092.56
Notes to Accounts - Annexure I
33
HSBC Fixed Term Series (FTS) 21
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 125As at
March 31, 2017As at
March 31, 2016
LIABILITIES1 Unit Capital 11,855.35 11,855.35 2 Reserves & Surplus2.1 Unit Premium Reserves – – 2.2 Unrealised Appreciation Reserve 110.16 3.22 2.3 Other Reserves 970.84 7.78 3 Loans & Borrowings – –4 Current Liabilities & Provisions – –4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 15.63 1,037.70
TOTAL 12,951.98 12,904.05
ASSETS 0.01 – 1 Investments1.1 Listed Securities:1.1.1 Equity Shares1.1.2 Preference Shares1.1.3 Equity Linked Debentures1.1.4 Other Debentures & Bonds 12,042.90 8,514.94 1.1.5 Securitised Debt securities1.2 Securities Awaited Listing: – –1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities – –1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – 987.94 1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 12,042.90 9,502.88
2 Deposits 1.02 – 3 Other Current Assets3.1 Cash & Bank Balance 18.08 56.37 3.2 CBLO / Reverse Repo Lending 729.14 3,290.07 3.3 Others 160.84 54.73 4 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 12,951.98 12,904.05
Notes to Accounts - Annexure I
34
21 HSBC Fixed Term Series (FTS)
Abridged Balance Sheet as at March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 126 #As at
March 31, 2017
LIABILITIES1 Unit Capital 3,101.93 2 Reserves & Surplus2.1 Unit Premium Reserves – 2.2 Unrealised Appreciation Reserve 27.84 2.3 Other Reserves 209.27 3 Loans & Borrowings – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – 4.2 Other Current Liabilities & Provisions 4.66
TOTAL 3,343.70 ASSETS
1 Investments1.1 Listed Securities:1.1.1 Equity Shares – 1.1.2 Preference Shares – 1.1.3 Equity Linked Debentures – 1.1.4 Other Debentures & Bonds 3,044.13 1.1.5 Securitised Debt securities – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – 1.2.2 Preference Shares – 1.2.3 Equity Linked Debentures – 1.2.4 Other Debentures & Bonds – 1.2.5 Securitised Debt securities – 1.3 Unlisted Securities1.3.1 Equity Shares – 1.3.2 Preference Shares – 1.3.3 Equity Linked Debentures – 1.3.4 Other Debentures & Bonds – 1.3.5 Securitised Debt securities – 1.4 Government Securities – 1.5 Treasury Bills – 1.6 Commercial Paper – 1.7 Certifi cate of Deposits – 1.8 Bill Rediscounting – 1.9 Units of Domestic Mutual Fund – 1.10 Foreign Securities –
Total Investments 3,044.13
2 Deposits 0.17 3 Other Current Assets3.1 Cash & Bank Balance 4.85 3.2 CBLO / Reverse Repo Lending 194.60 3.3 Others 99.95 4 Deferred Revenue Expenditure (to the extent not written off) –
TOTAL 3,343.70
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year
35
HSBC Fixed Term Series (FTS) 21
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 94
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 539.87 862.37 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(57.54) (0.05)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 482.33 862.32 2 EXPENSES2.1 Management fees 24.04 35.56 2.2 Service tax on Management fees 3.60 5.13 2.3 Transfer agents fees and expenses 0.72 1.08 2.4 Custodian fees 0.22 0.62 2.5 Trusteeship fees – – 2.6 Commission to Agents – – 2.7 Marketing & Distribution expenses 0.11 0.03 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 1.27 1.91 2.10 Other operating expenses 0.06 0.29 2.11 Less : Expenses to be Reimbursed by
the Investment Manager– –
(B) 30.22 44.82 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A - B = C) 452.11 817.50 4 Change in Unrealised Depreciation in
value of investments (D) 6.92 (11.72)5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 459.03 805.78 6 Change in unrealised appreciation in the
value of investments (F) – (64.59)7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 459.03 741.19 7.1 Add: Balance transfer from Unrealised Appreciation
Reserve– 64.59
7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 4,068.52 3,262.74 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 4,527.55 4,068.52 9 Dividend appropriation9.1 Income Distributed during the period 0.23 – 9.2 Tax on income distributed during the period 0.09 –
10 Retained Surplus / (Defi cit) carried forwardto Balance sheet 4,527.23 4,068.52
Notes to Accounts - Annexure I
36
21 HSBC Fixed Term Series (FTS)
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 96
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – –
1.2 Interest 255.56 435.80
1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –
1.4 Realised Gains / (Losses) on Interscheme sale of investments – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(6.51) (0.07)
1.6 Realised Gains / (Losses) on Derivative Transactions – –
1.7 Other Income – – (A) 249.05 435.73
2 EXPENSES2.1 Management fees 7.06 13.14 2.2 Service tax on Management fees 1.06 1.89 2.3 Transfer agents fees and expenses 0.35 0.57 2.4 Custodian fees 0.11 0.42 2.5 Trusteeship fees – – 2.6 Commission to Agents 3.31 5.56 2.7 Marketing & Distribution expenses 0.11 0.03 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 0.62 1.00 2.10 Other operating expenses 1.51 0.21 2.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 14.33 23.02 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A - B = C) 234.72 412.71 4 Change in Unrealised Depreciation in
value of investments (D) (0.37) –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 234.35 412.71
6 Change in unrealised appreciation in the value of investments (F) (10.02) (26.72)
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 224.33 385.99
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 10.02 26.72 7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 2,094.88 1,682.17 7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 2,329.23 2,094.88
9 Dividend appropriation
9.1 Income Distributed during the period 0.11 –
9.2 Tax on income distributed during the period 0.04 –
10 Retained Surplus / (Defi cit) carried forwardto Balance sheet 2,329.08 2,094.88
Notes to Accounts - Annexure I
37
HSBC Fixed Term Series (FTS) 21
Rs. in Lakhs
HSBC FIXED TERM SERIES 98
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 290.96 479.86 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(19.28) (0.07)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 271.68 479.79 2 EXPENSES2.1 Management fees 10.80 16.44 2.2 Service tax on Management fees 1.62 2.36 2.3 Transfer agents fees and expenses 0.40 0.62 2.4 Custodian fees 0.08 0.35 2.5 Trusteeship fees – – 2.6 Commission to Agents 4.01 6.65 2.7 Marketing & Distribution expenses 0.11 0.03 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 0.70 1.10 2.10 Other operating expenses 0.07 0.25 2.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 17.99 28.00 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A -B = C) 253.69 451.79 4 Change in Unrealised Depreciation in
value of investments (D) 8.57 (9.98)
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 262.26 441.81 6 Change in unrealised appreciation in the
value of investments (F) (12.87) (14.14)
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 249.39 427.67 7.1 Add: Balance transfer from Unrealised Appreciation
Reserve12.87 14.14
7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 2,029.52 1,587.71 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 2,291.78 2,029.52 9 Dividend appropriation9.1 Income Distributed during the period 4.42 – 9.2 Tax on income distributed during the period 1.70 –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 2,285.66 2,029.52
Notes to Accounts - Annexure I
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
38
21 HSBC Fixed Term Series (FTS)
Rs. in Lakhs
HSBC FIXED TERM SERIES 105
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 577.49 582.90 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(58.98) (0.94)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 518.51 581.96 2 EXPENSES2.1 Management fees 18.73 16.25 2.2 Service tax on Management fees 2.81 2.34 2.3 Transfer agents fees and expenses 0.80 0.78 2.4 Custodian fees 0.25 0.25 2.5 Trusteeship fees – – 2.6 Commission to Agents 13.01 12.98 2.7 Marketing & Distribution expenses 0.01 0.05 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 1.40 1.38 2.10 Other operating expenses 0.13 0.08 2.11 Less : Expenses to be Reimbursed by the Investment Manager (0.74) –
(B) 36.60 34.31 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A -B = C) 481.91 547.65 4 Change in Unrealised Depreciation in
value of investments (D) 23.53 (22.59)
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 505.44 525.06
6 Change in unrealised appreciation inthe value of investments (F) 0.21 0.50
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 505.65 525.56 7.1 Add: Balance transfer from Unrealised Appreciation
Reserve(0.21) (0.50)
7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 3,280.73 2,769.32 7.5 Transfer from Unit Premium Reserve – – 8 Total 3,786.17 3,294.38 9 Dividend appropriation9.1 Income Distributed during the period – 9.86 9.2 Tax on income distributed during the period – 3.79 10 Retained Surplus / (Defi cit) carried forward to
Balance sheet 3,786.17 3,280.73
Notes to Accounts - Annexure I
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
39
HSBC Fixed Term Series (FTS) 21
Rs. in Lakhs
HSBC FIXED TERM SERIES 107
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 326.85 329.40 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(33.46) (1.22)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 293.39 328.18 2 EXPENSES2.1 Management fees 9.84 8.48 2.2 Service tax on Management fees 1.47 1.22 2.3 Transfer agents fees and expenses 0.45 0.44 2.4 Custodian fees 0.14 0.15 2.5 Trusteeship fees – – 2.6 Commission to Agents 8.20 7.97 2.7 Marketing & Distribution expenses 0.01 0.05 2.8 Audit fees 0.23 0.20 2.9 Investor Education Expenses 0.79 0.78 2.10 Other operating expenses 0.13 0.07 2.11 Less : Expenses to be Reimbursed by the Investment Manager (0.50) –
(B) 20.76 19.36 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A - B = C) 272.63 308.82 4 Change in Unrealised Depreciation in
value of investments (D) 13.31 (12.22)5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 285.94 296.60 6 Change in unrealised appreciation in
the value of investments (F) 0.12 0.28
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 286.06 296.88
7.1 Add: Balance transfer from Unrealised Appreciation Reserve (0.12) (0.28)7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 1,762.45 1,473.58 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 2,048.39 1,770.18 9 Dividend appropriation9.1 Income Distributed during the period – 5.58 9.2 Tax on income distributed during the period – 2.15
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 2,048.39 1,762.45
Notes to Accounts - Annexure I
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
40
21 HSBC Fixed Term Series (FTS)
Rs. in Lakhs
HSBC FIXED TERM SERIES 109
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 778.02 770.23 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of
investments– –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(82.19) (0.11)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 695.83 770.12 2 EXPENSES2.1 Management fees 24.55 20.45 2.2 Service tax on Management fees 3.68 2.94 2.3 Transfer agents fees and expenses 1.08 1.03 2.4 Custodian fees 0.33 0.36 2.5 Trusteeship fees – – 2.6 Commission to Agents 14.80 14.56 2.7 Marketing & Distribution expenses 0.01 0.04 2.8 Audit fees 0.23 0.20 2.9 Investor Education Expenses 1.89 1.83 2.10 Other operating expenses 0.11 0.08 2.11 Less : Expenses to be Reimbursed by the Investment Manager (1.47) –
(B) 45.21 41.49 3 NET REALISED GAINS / (LOSSES)
FOR THE PERIOD (A -B = C) 650.62 728.63 4 Change in Unrealised Depreciation in
value of investments (D) 34.32 (34.32)5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 684.94 694.31 6 Change in unrealised appreciation in
the value of investments (F) 0.28 0.09
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 685.22 694.40 7.1 Add: Balance transfer from Unrealised
Appreciation Reserve(0.28) (0.09)
7.2 Less: Balance transfer to Unrealised Appreciation Reserve – – 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 3,508.13 2,819.21 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 4,193.07 3,513.52 9 Dividend appropriation9.1 Income Distributed during the period – 3.89 9.2 Tax on income distributed during the period – 1.50 10 Retained Surplus / (Defi cit) carried forward to
Balance sheet 4,193.07 3,508.13
Notes to Accounts - Annexure I
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
41
HSBC Fixed Term Series (FTS) 21
Abridged Revenue Account for the year ended March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 125
CurrentPeriod ended
March 31, 2017
CurrentYear ended
March 31, 2016
1 INCOME1.1 Dividend – – 1.2 Interest 1,026.79 7.98 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – – 1.5 Realised Gains / (Losses) on External sale / redemption of
investments0.60 (0.04)
1.6 Realised Gains / (Losses) on Derivative Transactions 0.11 – 1.7 Other Income – –
(A) 1,027.50 7.94 2 EXPENSES2.1 Management fees 31.73 0.03 2.2 Service tax on Management fees 4.75 – 2.3 Transfer agents fees and expenses 1.42 0.11 2.4 Custodian fees 0.56 – 2.5 Trusteeship fees – – 2.6 Commission to Agents 25.03 0.07 2.7 Marketing & Distribution expenses 0.01 – 2.8 Audit fees 0.20 0.20 2.9 Investor Education Expenses 2.49 0.01 2.10 Other operating expenses 0.05 0.34 2.11 Less: Expenses to be Reimbursed by the Investment Manager (1.80) (0.60)
(B) 64.44 0.16
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A -B = C) 963.06 7.78
4 Change in Unrealised Depreciation in value of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 963.06 7.78
6 Change in unrealised appreciation inthe value of investments (F) 106.94 3.22
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 1,070.00 11.00
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – – 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 106.94 3.22 7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund 7.78 – 7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 970.84 7.78
9 Dividend appropriation9.1 Income Distributed during the period – – 9.2 Tax on income distributed during the period – –
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 970.84 7.78
Notes to Accounts - Annexure I
42
21 HSBC Fixed Term Series (FTS)
Abridged Revenue Account for the period ended March 31, 2017 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 126 #
Currentperiod ended
March 31, 2017
1 INCOME1.1 Dividend – 1.2 Interest 224.16 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – 1.5 Realised Gains / (Losses) on External sale / redemption of
investments(0.05)
1.6 Realised Gains / (Losses) on Derivative Transactions – 1.7 Other Income –
(A) 224.11 2 EXPENSES2.1 Management fees 6.95 2.2 Service tax on Management fees 1.04 2.3 Transfer agents fees and expenses 0.34 2.4 Custodian fees 0.12 2.5 Trusteeship fees – 2.6 Commission to Agents 5.82 2.7 Marketing & Distribution expenses 0.01 2.8 Audit fees 0.20 2.9 Investor Education Expenses 0.56 2.10 Other operating expenses 0.10 2.11 Less : Expenses to be Reimbursed by the Investment Manager (0.30)
(B) 14.84
3 NET REALISED GAINS / (LOSSES) FOR THE PERIOD (A -B = C) 209.27
4 Change in Unrealised Depreciation in value of investments (D) –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C+D)] 209.27
6 Change in unrealised appreciation in the value of investments (F) 27.84
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 237.11
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 27.84 7.3 Add / (Less): Equalisation – 7.4 Transfer from Reserve Fund – 7.5 Transfer from Unit Premium Reserve – 8 TOTAL 209.27 9 Dividend appropriation9.1 Income Distributed during the period – 9.2 Tax on income distributed during the period – 10 Retained Surplus / (Defi cit) carried forward to
Balance sheet 209.27
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year
43
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017
HSBC FIXED TERM SERIES 94
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 12.6714 11.7305
Dividend Option 11.4599 10.6089
Direct Plan - Growth Option 12.7861 11.7895
Direct Plan - Dividend Option – –
High
Growth Option 13.5778 12.6714
Dividend Option 11.9471 11.4599
Direct Plan - Growth Option 13.6531 12.7861
Direct Plan - Dividend Option – –
Low
Growth Option 12.6875 11.7511
Dividend Option 11.4744 10.6275
Direct Plan - Growth Option 12.8029 11.8110
Direct Plan - Dividend Option – –
End
Growth Option 13.5778 12.6714
Dividend Option – 11.4599
Direct Plan - Growth Option 13.6531 12.7861
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 1,274 9,934
Average (AAuM)1 6,356 9,562
3. Gross income as % of AAuM2 7.59% 9.02%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 0.51% 0.51%
Direct Plan - Growth Option 0.11% 0.11%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.38% 0.37%
Direct Plan - Growth Option 0.38% 0.37%
5. Net Income as a percentage of AAuM3 7.11% 8.55%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option 1.4063 –
Direct Plan - Dividend Option – –
44
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 94
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
Corporate
Regular Dividend Option 1.3029 –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.1531 7.9982
Direct Plan - Growth Option 6.7808 8.4292
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.8321 9.4815
Direct Plan - Growth Option 8.9988 9.8596
Benchnmark
CRISIL Short-Term Bond Fund Index 9.8371 10.1188
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the
period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
Key Statistics for the year ended March 31, 2017 (Contd...)
45
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 96
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 12.6057 11.6762
Dividend Option 11.4158 10.5740
Direct Plan - Growth Option 12.7185 11.7337
Direct Plan - Dividend Option – –
High
Growth Option 13.4961 12.6057
Dividend Option 11.8969 11.4158
Direct Plan - Growth Option 13.6860 12.7185
Direct Plan - Dividend Option – –
Low
Growth Option 12.6220 11.6973
Dividend Option 11.4306 10.5932
Direct Plan - Growth Option 12.7355 11.7557
Direct Plan - Dividend Option – –
End
Growth Option 13.4961 12.6057
Dividend Option 11.4158
Direct Plan - Growth Option 13.6860 12.7185
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 130 5,202
Average (AAuM)1 3,101 5,008
3. Gross income as % of AAuM2 8.03% 8.70%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 0.51% 0.51%
Direct Plan - Growth Option 0.11% 0.11%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.23% 0.26%
Direct Plan - Growth Option 0.23% 0.26%
5. Net Income as a percentage of AAuM3 7.57% 8.24%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option 1.3699 –
Direct Plan - Dividend Option – –
46
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 96
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
Corporate
Regular Dividend Option 1.2692 –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.0635 7.9380
Direct Plan - Growth Option 7.6070 8.3691
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.7473 9.4082
Direct Plan - Growth Option 9.1731 9.7873
Benchnmark
CRISIL Short-Term Bond Fund Index 9.7119 9.9488
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
Key Statistics for the year ended March 31, 2017 (Contd...)
47
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 98
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 12.2838 11.3655
Dividend Option 11.2782 10.4350
Direct Plan - Growth Option 12.3863 11.4145
Direct Plan - Dividend Option – –
High
Growth Option 13.1478 12.2838
Dividend Option 11.7481 11.2782
Direct Plan - Growth Option 12.9318 12.3863
Direct Plan - Dividend Option – –
Low
Growth Option 12.2998 11.3819
Dividend Option 11.2929 10.4501
Direct Plan - Growth Option 12.4030 11.4318
Direct Plan - Dividend Option – –
End
Growth Option 13.1478 12.2838
Dividend Option – 11.2782
Direct Plan - Growth Option – 12.3863
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 413 5,720
Average (AAuM)1 3,521 5,506
3. Gross income as % of AAuM2 7.72% 8.71%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise)
Regular Growth Option 0.51% 0.51%
Direct Plan - Growth Option 0.11% 0.11%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.31% 0.30%
Direct Plan - Growth Option 0.31% 0.30%
5. Net Income as a percentage of AAuM3 7.20% 8.21%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option 1.2625 –
Direct Plan - Dividend Option – –
48
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 98
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
Corporate
Regular Dividend Option 1.1697 –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.0337 8.0568
Direct Plan - Growth Option N.A 8.4895
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.2436 8.7405
Direct Plan - Growth Option N.A 9.1092
Benchnmark
CRISIL Short-Term Bond Fund Index 9.3410 9.4376
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
Key Statistics for the year ended March 31, 2017 (Contd...)
49
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 105
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 11.9208 11.0513
Dividend Option 10.7745 11.0513
Direct Plan - Growth Option 12.0093 11.0953
Direct Plan - Dividend Option – –
High
Growth Option 12.8145 11.9208
Dividend Option 11.5819 11.0677
Direct Plan - Growth Option 12.9614 12.0093
Direct Plan - Dividend Option – –
Low
Growth Option 11.9446 11.0675
Dividend Option 10.7960 10.0000
Direct Plan - Growth Option 12.0338 11.1072
Direct Plan - Dividend Option – –
End
Growth Option 12.8145 11.9208
Dividend Option 11.5819 10.7745
Direct Plan - Growth Option 12.9614 12.0093
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 7,250 6,744
Average (AAuM)1 7,012 6,923
3. Gross income as % of AAuM2 * 7.39% 8.41%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) *
Regular Growth Option 0.52% 0.50%
Direct Plan - Growth Option 0.12% 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.27% 0.23%
Direct Plan - Growth Option 0.27% 0.23%
5. Net Income as a percentage of AAuM3 * 6.87% 7.91%
6. Portfolio turnover ratio4 – –
50
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 105
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option – 0.7710
Corporate
Regular Dividend Option – 0.71 43
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.4970 7.8455
Direct Plan - Growth Option 7.9280 8.2143
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.2338 8.5808
Direct Plan - Growth Option 8.6281 8.9577
Benchnmark
CRISIL Short-Term Bond Fund Index 9.4071 9.5493
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
Key Statistics for the year ended March 31, 2017 (Contd...)
51
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 107
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 11.8415 10.9777
Dividend Option 10.7715 10.9777
Direct Plan - Growth Option 11.9259 11.0125
Direct Plan - Dividend Option – –
High
Growth Option 12.7293 11.8415
Dividend Option 11.5791 10.9934
Direct Plan - Growth Option 12.8714 11.9259
Direct Plan - Dividend Option – –
Low
Growth Option 11.8651 10.9934
Dividend Option 10.7930 10.0000
Direct Plan - Growth Option 11.9502 11.0288
Direct Plan - Dividend Option – –
End
Growth Option 12.7293 11.8415
Dividend Option 11.5791 10.7715
Direct Plan - Growth Option 12.8714 11.9259
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 4,102 3,816
Average (AAuM)1 3,968 3,921
3. Gross income as % of AAuM2 * 7.39% 8.37%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) *
Regular Growth Option 0.52% 0.49%
Direct Plan - Growth Option 0.12% 0.10%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.25% 0.22%
Direct Plan - Growth Option 0.25% 0.22%
5. Net Income as a percentage of AAuM3 * 6.87% 7.88%
6. Portfolio turnover ratio4 – –
52
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 107
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option – 0.7175
Corporate
Regular Dividend Option – 0.6647
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.4974 7.8464
Direct Plan - Growth Option 7.9281 8.2706
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.2202 8.5737
Direct Plan - Growth Option 8.6142 8.9496
Benchnmark
CRISIL Short-Term Bond Fund Index 9.3762 9.5089
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
Key Statistics for the year ended March 31, 2017 (Contd...)
53
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 109
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option 11.7535 10.9008
Dividend Option 10.7692 10.9008
Direct Plan - Growth Option 11.8299 10.9283
Direct Plan - Dividend Option – –
High
Growth Option 12.6345 11.7535
Dividend Option 11.5764 10.7692
Direct Plan - Growth Option 12.7676 11.8299
Direct Plan - Dividend Option – –
Low
Growth Option 11.7770 10.9140
Dividend Option 10.7908 10.0000
Direct Plan - Growth Option 11.8541 10.9421
Direct Plan - Dividend Option – –
End
Growth Option 12.6345 11.7535
Dividend Option 11.5764 10.7692
Direct Plan - Growth Option 12.7676 11.8299
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,769 9,084
Average (AAuM)1 9,448 9,159
3. Gross income as % of AAuM2 * 7.36% 8.41%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) *
Regular Growth Option 0.52% 0.50%
Direct Plan - Growth Option 0.12% 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.26% 0.22%
Direct Plan - Growth Option 0.26% 0.22%
5. Net Income as a percentage of AAuM3 * 6.89% 7.96%
6. Portfolio turnover ratio4 – –
54
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 109
Current Year ended
March 31, 2017
Previous Year ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option – 0.6603
Corporate
Regular Dividend Option – 0.6118
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.4956 7.8002
Direct Plan - Growth Option 7.9265 8.2267
Benchmark
CRISIL Short-Term Bond Fund Index 9.1042 8.4419
b. Since Inception
Scheme
Regular Growth Option 8.0608 8.3422
Direct Plan - Growth Option 8.4369 8.6909
Benchnmark
CRISIL Short-Term Bond Fund Index 9.3198 9.4269
1. AAuM=Average daily net assets2. Gross income = amount against (A) in the Revenue account i.e. Income3. Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
Key Statistics for the year ended March 31, 2017 (Contd...)
55
HSBC Fixed Term Series (FTS) 21
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 125
Current Year ended
March 31, 2017
Previous Period ended
March 31, 2016
1. NAV per unit (Rs.):
Open
Growth Option – N.A.
Dividend Option – N.A.
Direct Plan - Growth Option – N.A.
Direct Plan - Dividend Option – N.A.
High
Growth Option 10.9106 –
Dividend Option 10.9106 –
Direct Plan - Growth Option 10.9478 –
Direct Plan - Dividend Option – –
Low
Growth Option 10.0263 –
Dividend Option 10.0263 –
Direct Plan - Growth Option 10.0267 –
Direct Plan - Dividend Option – –
End
Growth Option 10.9106 –
Dividend Option 10.9106 –
Direct Plan - Growth Option 10.9478 –
Direct Plan - Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 12,936 11,866
Average (AAuM)1 12,449 11,866
3. Gross income as % of AAuM2 * 4.17% 0.07%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) *
Regular Growth Option 0.53% 0.51%
Direct Plan - Growth Option 0.19% 0.17%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.25% 0.10%
Direct Plan - Growth Option 0.25% 0.10%
5. Net Income as a percentage of AAuM3 * 7.73% 0.07%
6. Portfolio turnover ratio4 – –
56
21 HSBC Fixed Term Series (FTS)
Key Statistics for the year ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 125
Current Year ended
March 31, 2017
Previous Period ended
March 31, 2016
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option – –
Corporate
Regular Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option N.A N.A
Direct Plan - Growth Option N.A N.A
Benchmark
CRISIL Short-Term Bond Fund Index N.A N.A
b. Since Inception
Scheme
Regular Growth Option 9.1060 N.A
Direct Plan - Growth Option 9.4780 N.A
Benchnmark
CRISIL Short-Term Bond Fund Index 11.0896 N.A
1.AAuM=Average daily net assets
2.Gross income = amount against (A) in the Revenue account i.e. Income
3.Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period
4.Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
5.HSBC Fixed Term Series 125 is computed NAV on March 31, 2016,the fi rst NAV is declared on 4th April 2016
* Indicates annualised value
57
HSBC Fixed Term Series (FTS) 21
Key Statistics for the period ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 126#
Current Period ended
March 31, 2017
1. NAV per unit (Rs.):
Open
Growth Option N.A.
Dividend Option N.A.
Direct Plan - Growth Option N.A.
Direct Plan - Dividend Option N.A.
High
Growth Option 10.7644
Dividend Option 10.7644
Direct Plan - Growth Option 10.7962
Direct Plan - Dividend Option N.A.
Low
Growth Option 9.9994
Dividend Option 9.9994
Direct Plan - Growth Option 10.0000
Direct Plan - Dividend Option N.A.
End
Growth Option 10.7644
Dividend Option 10.7644
Direct Plan - Growth Option 10.7962
Direct Plan - Dividend Option N.A.
2. Closing Assets Under Management (Rs. in Lakhs)
End 3,339
Average (AAuM)1 3,235
3. Gross income as % of AAuM2 * 6.93%
4. Expense Ratio:
a. Total Expense as % of AAuM (including service tax on Management fees) (planwise) *
Regular Growth Option 0.53%
Direct Plan - Growth Option 0.19%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.21%
Direct Plan - Growth Option 0.21%
5. Net Income as a percentage of AAuM3 * 6.47%
6. Portfolio turnover ratio4 –
58
21 HSBC Fixed Term Series (FTS)
Key Statistics for the period ended March 31, 2017 (Contd...)
HSBC FIXED TERM SERIES 126#
Current Period ended
March 31, 2017
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option –
Corporate
Regular Dividend Option –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option N.A
Direct Plan - Growth Option N.A
Benchmark
CRISIL Short-Term Bond Fund Index N.A
b. Since Inception
Scheme
Regular Growth Option 7.6440
Direct Plan - Growth Option 7.9620
Benchnmark
CRISIL Short-Term Bond Fund Index 9.6890
# Scheme launched during the current fi nancial year
1.AAuM=Average daily net assets
2.Gross income = amount against (A) in the Revenue account i.e. Income
3.Net income = amount against (C) in the Revenue account i.e. Net Realised Gains / (Losses) for the period
4. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the period
* Indicates annualised value
59
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 94
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of period ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years and percentage to net assets.
(Rupees)
Security Category Amount Percentage to Net Assets
Amount Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 18,227 0.01 1,167,036 0.12
– Depreciation 498,037 0.39 2,339,122.5000 0.2355
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 124,046,481 and Rs. 950,789,335 respectively being 19.52% and 149.59% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 73,704,817 and Rs. 5,000,000 respectively being 7.71% and 0.52% of the average daily net assets.
1.8. Non -Traded securities in the portfolios as at March 31, 2017 and March 31, 2016 are NIL.
Aggregate Value of Equity, Debt & Money Market Instruments and their percentages to Net assets are as under :
(Rupees)
Security Category Fair Value % to Net Assets
Fair Value % to Net Assets
2017 2016
Debt Instruments 115,774,479 90.86 943,471,874.50 94.97
Total 943,471,874.50 0.95
60
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – – –
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business
received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 0.95 29.96 – –
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 There is 1 investor who held more than 25% of the total net assets of the Scheme as on March 31, 2017. None of the investors held more than 25% of the net assets of the Scheme as on March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016.
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 70,871,574.397 – 61,488,367.621 9,383,206.776 10
Dividend Option 16,500.000 – 16,500.000 0.000 10
Direct Plan – Growth Option
7,445,500.471 – 7,444,500.471 1,000.000 10
61
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 70,871,574.397 – – 70,871,574.397 10
Dividend Option 16,500.000 – – 16,500.000 10
Direct Plan - Growth Option
7,445,500.471 – – 7,445,500.471 10
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Rollover of Schemes:
The HSBC Asset Management (India) Private Limited (AMC) has rolled over the following close ended schemes post receipt of no-objection from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date
Revised Maturity date
Period of Rollover
Units on Maturity date
Units Rolled over
HFTS94 26-Oct-16 16-Jul-18 628 days 78,333,574.868 9,384,206.776
A notice providing the rationale, terms and features of rollover of the aforesaid schemes have been published in the newspapers and is also available on the website of the AMC. All the unit holders who have not consented for the rollover in writing have been redeemed and payouts have been made.
Note: The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc.
Hence previous fi gures are strictly not comparable.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
62
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 96
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years and percentage to net assets:
(Rupees)
Security Category Amount Percentage to Net Assets
Amount Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 1,657 0.01 2,025,798 0.39
– Depreciation 38,547 0.30 1,024,083.5000 0.1969
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 34,499,382 and Rs. 500,515,225 respectively being 11.12% and 161.40% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 20,127,585 and Rs. 5,000,000 respectively being 4.02% and 1.00% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 9,137,868 70.34 473,554,123.50 91.03
Total 9,137,868 70.34 473,554,124 91.03
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 329,132 99.68
63
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 1.55 36.51 463,978.36 91.29
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 There is 1 investor who held more than 25% of the total net assets of the Scheme as on March 31, 2017. None of the investors held more than 25% of the net assets of the scheme as on March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
2016-2017Description Opening Units Subscription Redemption Closing Units Face
Value per unit (Rupees)
Growth Option 36,103,440.433 – 35,154,377.918 949,062.515 10
Dividend Option 8,000.000 – 8,000.000 – 10
Direct Plan - Growth Option
5,113,374.566 – 5,100,000.000 13,374.566 10
2015-2016Description Opening Units Subscription Redemption Closing Units Face
Value per unit (Rupees)
Growth Option 36,103,440.433 – – 36,103,440.433 10
Dividend Option 8,000.000 – – 8,000.000 10
Direct Plan - Growth Option
5,113,374.566 – – 5,113,374.566 10
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
64
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Rollover of Schemes:
The HSBC Asset Management (India) Private Limited (AMC) has rolled over the following close ended schemes post receipt of no-objection from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date
Revised Maturity date
Period of Rollover
Units on Maturity date
Units Rolled over
HFTS96 26-Oct-16 16-Jul-18 628 days 41,224,814.999 962,437.081
A notice providing the rationale, terms and features of rollover of the aforesaid schemes have been published in the newspapers and is also available on the website of the AMC. All the unit holders who have not consented for the rollover in writing have been redeemed and payouts have been made.
Note: The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc.
Hence previous fi gures are strictly not comparable.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
65
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 98
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years and percentage to net assets:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 4,971 0.01 80,150 0.01
– Depreciation 145,248 0.35 1,077,653 0.1884
Government Securities
– Appreciation – – 1,286,600 0.22
– Depreciation – – – –
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 49,243,698 and Rs.542,933,750 respectively being 13.98% and 154.18% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 20,169,540 and Rs. 0 respectively being 3.66% and 0% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 33,519,037 81.20 325,041,281 56.83
Total 33,519,037 325,041,281 56.83
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 392,421 98.97
66
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 0.11 4.81 555,878 91.37
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 There were 2 investors who held more than 25% of the total net assets of the Scheme as on March 31, 2017. None of the investors held more than 25% of the net assets of the Scheme as on March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 46,104,973.844 – 42,965,497.912 3,139,475.932 10
Dividend Option 350,000.000 – 350,000.000 – 10
Direct Plan - Growth Option
137,650.888 – 137,650.888 – 10
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 46,104,973.844 – – 46,104,973.844 10
Dividend Option 350,000.000 – – 350,000.000 10
Direct Plan - Growth Option
137,650.888 – – 137,650.888 10
67
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Rollover of Schemes:
The HSBC Asset Management (India) Private Limited (AMC) has rolled over the following close ended schemes post receipt of no-objection from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date
Revised Maturity date
Period of Rollover
Units on Maturity date
Units Rolled over
HFTS98 26-Oct-16 16-Jul-18 628 days 46,592,624.732 3,139,475.932
A notice providing the rationale, terms and features of rollover of the aforesaid schemes have been published in the newspapers and is also available on the website of the AMC. All the unit holders who have not consented for the rollover in writing have been redeemed and payouts have been made.
Note: The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc.
Hence previous fi gures are strictly not comparable.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
68
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 105
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
- Appreciation 71,006 0.01 61,264 0.01
- Depreciation – – 2,414,294 0.36
Government Securities
- Appreciation – – 50,052 0 .00~
- Depreciation – – – –
~ Indicates less than 0.01
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 40,178,556 and Rs. 349,000,000 respectively being 5.73% and 49.77% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 620,445,061 and Rs. 3,288,614,860 respectively being 89.62% and 475.04% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 317,406,402 43.78 537,068,097 79.64
Total 317,406,402 43.78 537,068,097 79.64
69
HSBC Fixed Term Series (FTS) 21
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate ofInvestmentManager
2016-2017 – – 1,052,456 89.05
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate ofInvestmentManager
2015-2016 – – 1,051,926 88.52
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 56,457,813.243 – – 56,457,813.243 10
Dividend Option 5,000.000 – – 5,000.000 10
Direct Plan - Growth Option
110,000.000 – – 110,000.000 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
70
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 196,431,734.063 – 139,973,920.820 56,457,813.243 10
Dividend Option 1,278,679.328 – 1,273,679.328 5,000.000 10
Direct Plan - Growth Option
63,070,299.730 – 62,960,299.730 110,000.000 10
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 -
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
9 Rollover of Schemes:
The AMC rolled over the following close ended schemes after requisite approvals from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date Revised Maturity date Period of Rollover
HFT105 07-Apr-15 11-Apr-17 735 days
HSBC Asset Management (India) Private Limited had published a notice in newspapers for each of the schemes proposing a rollover .The notice explained the rationale for proposed rollover and also time lines with in which written consents were to be submitted by the Investors for rolling over his units.
The details of Units on the date of maturity of the Scheme and units rolled over were as follows:
Scheme Units on Maturity date Rolled over units
HFT105 260,780,713.12 56,572,813.24
All the investors who did not consent for rollover in writing were redeemed and pay outs were made.
The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc. Hence previous fi gures are strictly not comparable.
71
HSBC Fixed Term Series (FTS) 21
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
72
21 HSBC Fixed Term Series (FTS)
HSBC FIXED TERM SERIES 107
1 Investments:-
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 40,141 0.01 34,672 0.01
– Depreciation – – 1,365,921 0.36
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 23,127,642 and Rs. 197,500,000 respectively being 5.83% and 49.78% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs. 350,580,149 and Rs. 1,590,000,000 respectively being 89.41% and 405.50% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 179,439,155 43.75 303,558,323 79.56
Total 179,439,155 43.75 303,558,323 79.56
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 637,776 85.26
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
73
HSBC Fixed Term Series (FTS) 21
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 – – 625,528 86.94
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 32,143,594.348 – – 32,143,594.348 10
Dividend Option 66,004.049 – – 66,004.049 10
Direct Plan - Growth Option
19,000.000 – – 19,000.000 10
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 149,613,222.486 – 117,469,628.138 32,143,594.348 10
Dividend Option 777,591.591 – 711,587.542 66,004.049 10
Direct Plan - Growth Option
310,525.697 – 291,525.697 19,000.000 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
74
21 HSBC Fixed Term Series (FTS)
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 –
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
9 Rollover of Schemes:
The AMC rolled over the following close ended schemes after requisite approvals from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date Revised Maturity date Period of Rollover
HFT107 07-Apr-15 11-Apr-17 735 days
HSBC Asset Management (India) Private Limited had published a notice in newspapers for each of the schemes proposing a rollover .The notice explained the rationale for proposed rollover and also time lines with in which written consents were to be submitted by the Investors for rolling over his units.
The details of Units on the date of maturity of the scheme and units rolled over were as follows:
Scheme Units on Maturity date Rolled over units
HFT107 150,701,339.77 32,228,598.40
All the investors who did not consent for rollover in writing were redeemed and pay outs were made.
The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc. Hence previous fi gures are strictly not comparable.
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
75
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 109
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of years ended March 31, 2017 and March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2017 and March 31, 2016 are NIL.
1.5. NPAs as at years ended March 31, 2017 and March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 95,358 0.01 82,474 0.01
– Depreciation – – 3,513,999 0.39
Government Securities
– Appreciation – – 67,221 0.01
– Depreciation – – – –
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs.56,161,188 and Rs. 472,500,000 respectively being 5.94% and 50.01% of the average daily net assets.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2015-2016 (excluding accretion of discount) is Rs.835,106,440 and Rs. 3,370,000,000 respectively being 91.18% and 367.95% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 426,270,162 43.63 722,833,710 79.57
Total 426,270,162 43.63 722,833,710 79.57
76
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 1,230,598 91.03
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 – – 1,209,539.07 90.87
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfornt and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 68,690,101.464 – – 68,690,101.464 10
Dividend Option 30,000.000 – – 30,000.000 10
Direct Plan - Growth Option
8,514,000.000 – – 8,514,000.000 10
77
HSBC Fixed Term Series (FTS) 21
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 242,819,742.154 – 174,129,640.690 68,690,101.464 10
Dividend Option 589,877.197 – 559,877.197 30,000.000 10
Direct Plan - Growth Option
67,570,860.474 – 59,056,860.474 8,514,000.000 10
5 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 -
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
8 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
9 Rollover of Schemes:
The AMC rolled over the following close ended schemes after requisite approvals from SEBI. The details of rollover are as under:
Scheme Name Existing Maturity date Revised Maturity date Period of Rollover
HFT109 06-Apr-15 11-Apr-17 736 days
HSBC Asset Management (India) Private Limited had published a notice in newspapers for each of the schemes proposing a rollover .The notice explained the rationale for proposed rollover and also time lines with in which written consents were to be submitted by the Investors for rolling over his units.
The details of Units on the date of maturity of the scheme and units rolled over were as follows:
Scheme Units on Maturity date Rolled over units
HFT109 310,980,479.83 77,234,101.46
All the investors who did not consent for rollover in writing were redeemed and pay outs were made.
The Rollover of schemes resulted in material change in unit capital, investment activities by AMC etc. Hence previous fi gures are strictly not comparable.
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
78
21 HSBC Fixed Term Series (FTS)
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
HSBC FIXED TERM SERIES 125
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of year ended March 31, 2017 and period ended March 31, 2016 are NIL
1.3. Investments in Associates and Group Companies as of year ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the year ended March 31, 2017 and period ended March 31, 2016 are NIL.
1.5. NPAs as at year ended March 31, 2017 and period ended March 31, 2016 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 11,023,586 0.85 541,207 0.05
– Depreciation 7,600 0.00 279,700 0.02
Certifi cates of Deposit/Commercial Paper
– Appreciation – – 60,281 0.01
– Depreciation – – – –
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 332,086,762 and Rs. 101,882,800 respectively being 26.68% and 8.18% of the average daily net assets.
The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2015-2016 (excluding accretion of discount) is Rs. 949,876,100 being 80.05% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets
2017 2016
Debt Instruments 1,204,290,438 93.09 444,464,190 37.46
Money Market Instruments – – 98,794,300 8.33
Total 1,204,290,438 93.09 543,258,490 45.78
79
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2017
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 – – 2,035,442.46 89.11
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2015-2016 111.74 94.26 – –
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
Further, The Hong kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil. (Previous year also Nil)
(ii) Devolvement - Nil. (Previous year also Nil)
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil. (Previous year also Nil)
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil. (Previous year also Nil)
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2017 and March 31, 2016.
4 Unit Capital movement during the years ended March 31, 2017 and March 31, 2016:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 113,940,623.092 – – 113,940,623.092 10
Dividend Option 602,259.015 – – 602,259.015 10
Direct Plan - Growth Option
4,010,666.600 – – 4,010,666.600 10
80
21 HSBC Fixed Term Series (FTS)
Description 2015-2016
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option – 113,940,623.092 – 113,940,623.092 10
Dividend Option – 602,259.015 – 602,259.015 10
Direct Plan - Growth Option
– 4,010,666.600 – 4,010,666.600 10
6 No contingent liabilities for the years ended March 31, 2017 and March 31, 2016.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 -
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
10 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Period ended March 31, 2017
81
HSBC Fixed Term Series (FTS) 21
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Period ended March 31, 2017
HSBC FIXED TERM SERIES 126 #
1 Investments:
1.1. It is confi rmed that investments of the Scheme are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of period ended March 31, 2017 is NIL
1.3. Investments in Associates and Group Companies as of period ended March 31, 2017 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the period ended March 31, 2017 is NIL.
1.5. NPAs as at period ended March 31, 2017 is NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the fi nancial years end and their percentages to net assets are as under:
Security Category Amount (Rupees)
Percentage to Net Assets
2017
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 2,817,169 0.84
– Depreciation 33,000 0.01
1.7. The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2016-2017 (excluding accretion of discount) is Rs. 306,397,530 and Rs. 10,000,000 respectively being 94.72% and 3.09% of the average daily net assets.
1.8. Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :
Security Category Amount (Rupees) Percentage to Net Assets
2017
Debt Instruments 304,413,275 91.17
Total 304,413,275 91.17
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
Commission paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor/AMC and its associates/related parties/group companies
Nature of Association / Nature of
Relation
Period Covered
Business Given [Rs. In Crores]
% of Total Business received by the Fund
Commission paid
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2016-2017 30.64 97.40 464,888 88.86
The brokerage paid was at rates similar to those offered to other distributors and the Commission/Brokerage paid to related party includes both upfront and trial and hence not comparable with the % of business brought and % of commission paid.
82
21 HSBC Fixed Term Series (FTS)
Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.
(i) Any underwriting obligations undertaken by the schemes of the mutual funds with respect to issue of securities associate companies - Nil.
(ii) Devolvement - Nil.
(iii) Subscription by the schemes in the issues lead managed by associate companies - Nil.
(iv) Subscription to any issue of equity or debt on private placement basis where the sponsor or its associate companies have acted as arranger or manager - Nil.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2017.
4 Unit Capital movement during the period ended March 31, 2017:
Description 2016-2017
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option – 30,079,373.552 – 30,079,373.552 10
Dividend Option – 923,968.739 – 923,968.739 10
Direct Plan - Growth Option
– 16,000.000 – 16,000.000 10
5 As these are the fi rst fi nancial statements of the schemes since the date of launch, there are no prior period comparatives.
6 No contingent liabilities for the period ended March 31, 2017.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Investor Education Awareness
In view of the AMFI Best Practices Guidelines Circular No. 56/2015-16, the IEF ( Investor Education Fund) accrual is set aside in a separate bank account and the consolidated balance across all schemes as on March 31, 2017. The break-up of which is as under:
Particulars Amount (Rs. in Lakhs)
Opening Balance as on April 01, 2016 -
Add: Accrual during FY 2016-17 182
Less: Transferred to AMFI 83
Less: Payable to AMFI (March 2017 accrual) 8
Add: Investment Income FY 2016-17 11
Less: Spent during FY 2016-17 58
Closing Balance as on March 31, 2017 44
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meetings held on July 17, 2017 and July 18, 2017 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir8/132968/2008 dated July 24, 2008.
# Scheme launched during the current fi nancial year
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the Period ended March 31, 2017
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HSBC Fixed Term Series (FTS) 21
Voting Policy and Procedures
In view of SEBI guidelines related to “Role of Mutual Funds in Corporate Governance of Public Listed Companies”, AMIN has formulated its “Policy for Proxy Voting in Public Listed Companies”. The said policy and details of actual exercise of proxy votes along with the summary of votes cast and the auditors certifi cation during the Financial Year 2016–17 is available on its website – http://www.assetmanagement.hsbc.com/in and in full Annual Report for the Financial Year 2016–17.
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21 HSBC Fixed Term Series (FTS)
Statutory Details & Disclaimers
All returns have been sourced from Mutual Funds India Explorer software unless otherwise stated. With regard to equity schemes (including the equity component of MIPs), Fund performance is calculated on a total return basis (i.e. it includes dividends re-invested) while the benchmark is calculated on a price return basis (i.e. it does not consider dividends re-invested). This document has been prepared by HSBC Asset Management (India) Private Ltd (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources HSBC, the third party believes to be reliable but which it has not independently verifi ed and HSBC, the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this document. Investors should seek fi nancial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Investors should not invest in the Scheme solely based on the information provided in this document and should read the Scheme Information Document and Statement of Additional Information of the Fund for details. This document does not constitute an offering document.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Ltd.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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