Abridged SchemewiseAnnual Reports 2013 - 2014
► INDEX HSBC Equity Fund 1 HSBC Progressive Themes Fund 23 HSBC Emerging Markets Fund 45 HSBC Brazil Fund 67 HSBC Dynamic Fund 89 HSBC Tax Saver Equity Fund 111 HSBC India Opportunities Fund 133 HSBC Midcap Equity Fund 155 HSBC Unique Opportunities Fund 177 HSBC Small Cap Fund 199 HSBC Asia Pacific (Ex Japan) Dividend Yield Fund 221 HSBC MIP 242 HSBC Income Fund 272 HSBC Floating Rate Fund 306 HSBC Ultra Short Term Bond Fund 330 HSBC Cash Fund 354 HSBC Gilt Fund 380 HSBC Flexi Debt Fund 402 HSBC Capital Protection Oriented Fund 427 HSBC Fixed Term Series 448
HSBC Equity Fund
HSBC Equity FundAn Open-ended Diversifi ed Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC Equity Fund
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC Equity Fund
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC Equity Fund
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
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. 453.11 crores as at March 31, 2014 as against Rs. 537.32 crores as at March 31, 2013. Around 97.81% of the net assets were invested in equities, 2.51% of the net assets were invested in reverse repos / CBLO and (- 0.32%) was in the net current assets as at March 31, 2014.
HEF remained invested in a diversifi ed portfolio across large capitalization stocks. The relative overweight in Technology resulted in outperformance against Scheme benchmark for the period 2013-14.
Date of Inception : 10 December 2002 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Equity Fund - Growth 16.82 4.20 -8.90 24.34
S&P BSE 200 (Scheme Benchmark) 16.65 5.41 -9.55 18.72
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 17.67
Rs. 10,000, if invested in HEF, would have become 11,682 10,420 9,110 118,277
Rs. 10,000, if invested in S&P BSE 200, would have become
11,665 10,541 9,045 69,977
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 63,309
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Equity Fund 5,575,816.87 1274 5,595,376.62 201
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC Equity Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC Equity Fund
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Equity Fund, (the
“Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC Equity Fund
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC Equity Fund
Rs. in Lakhs
HSBC EQUITY FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 9,855.25 13,256.092 Reserves & Surplus2.1 Unit Premium Reserves (15,203.70) (17,803.76)2.2 Unrealised Appreciation Reserve 11,231.68 9,521.792.3 Other Reserves 39,394.99 48,757.803 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 1,109.59 557.17
TOTAL 46,387.81 54,289.10
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 44,318.29 53,308.921.1.2 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 44,318.29 53,308.92
2 Deposits 1.00 1.003 Other Current Assets3.1 Cash & Bank Balance 19.12 37.643.2 CBLO / Reverse Repo Lending 1,137.61 795.753.3 Others 911.79 145.794 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 46,387.81 54,289.10
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC Equity Fund
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC EQUITY FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 861.98 1,026.191.2 Interest 134.18 68.711.3 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
investments5,902.11 6,533.88
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 26.89 29.84
(A) 6,925.16 7,658.62
2 EXPENSES2.1 Management fees 706.63 727.962.2 Service tax on Management fees 87.34 89.982.3 Transfer agents fees and expenses 68.13 96.302.4 Custodian fees 7.06 25.592.5 Trusteeship fees 1.92 0.182.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 340.16 472.312.8 Audit fees 6.66 7.612.9 Investor Education Expenses 9.50 6.052.10 Other operating expenses 27.83 38.812.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 1,255.23 1,464.79
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 5,669.93 6,193.83
4 Change in Unrealised Depreciation in value ofinvestments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 5,669.93 6,193.83
6 Change in unrealised appreciation in the value ofinvestments and derivatives (F) 1,709.88 (3,111.58)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 7,379.81 3,082.257.1 Add: Balance transfer from Unrealised Appreciation Reserve – 3,111.587.2 Less: Balance transfer to Unrealised Appreciation Reserve 1,709.88 –7.3 Add / (Less): Equalisation (15,032.74) (11,814.42)
7.4 Transfer from Reserve Fund 48,757.80 56,919.34
8 TOTAL 39,394.99 51,298.75
9 Dividend Appropriation9.1 Income Distributed during the year – 2,540.959.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 39,394.99 48,757.80
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC Equity Fund
Key Statistics for the year ended March 31, 2014
HSBC EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 100.1318 95.8173
Regular Plan Dividend Option 22.7836 24.1020
Direct Plan - Growth Option 100.4499 N.A.
Direct Plan - Dividend Option 22.8591 N.A.
High
Regular Plan Growth Option 117.6396 109.5778
Regular Plan Dividend Option 26.7672 27.5632
Direct Plan - Growth Option 118.8405 109.6683
Direct Plan - Dividend Option 27.0442 27.5837
Low
Regular Plan Growth Option 90.9956 87.1089
Regular Plan Dividend Option 20.7047 21.9114
Direct Plan - Growth Option 91.5430 99.5302
Direct Plan - Dividend Option 20.8322 22.6498
End
Regular Plan Growth Option 117.5733 100.1318
Regular Plan Dividend Option 26.7521 22.7836
Direct Plan - Growth Option 118.7803 100.4499
Direct Plan - Dividend Option 27.0305 22.8591
2. Closing Assets Under Management (Rs. in Lakhs)
End 45,278 53,732
Average (AAuM)1 47,510 62,169
3. Gross income as % of AAuM2 14.58% 12.32%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.65% 2.36%
Direct Plan 1.95% 1.38%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.49% 1.17%
Direct Plan 1.49% 1.17%
5. Net Income as a percentage of AAuM3 11.93% 9.96%
6. Portfolio turnover ratio4 0.91 0.08
14
HSBC Equity Fund
HSBC EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – 2.50
Direct Plan - Dividend Option – 2.50
Corporate
Regular Plan Dividend Option – 2.50
Direct Plan - Dividend Option – 2.50
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 16.8650 5.0066
Direct Plan - Growth Option 17.6906 N.A.
Benchmark
S&P BSE200 16.6967 8.2600
b. Since Inception
Scheme
Regular Plan Growth Option 24.3410 25.0890
Direct Plan - Growth Option 8.5983 (5.7500)
Benchmark
S&P BSE200 18.7170 18.8800
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, 2014 (Contd...)
15
HSBC Equity Fund
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
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, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 555,832,950 – –
Bharti Airtel Ltd. Equities 20,120,275 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4 Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2014 and March 31, 2013 and percentage to net assets are as under :
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 1,146,109,304 25.31 1,243,676,670 23.15
– Depreciation 22,941,434 0.51 291,496,330 5.43
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 4,334,871,643 and Rs. 5,995,132,778 respectively being 91.24% and 126.19% 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 2012-2013 (excluding accretion of discount) is Rs. 485,389,142 and Rs. 2,124,443,280 respectively being 7.81% and 34.17% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the years ended March 31, 2014 and March 31, 2013 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 2013-2014, 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. 19,200 and clearing member charges on derivative transactions amounting to Rs. Nil.
16
HSBC Equity Fund
During the year 2012-2013, 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. 14,400 and clearing member charges on derivative transactions amounting to Rs. Nil.
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 2013-2014 2.26 5.83 4,129,159 10.61
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 48,214 0.12
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 2012-2013 12.08 9.92 5,761,578 14.25
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.11 0.09 89,870 0.22
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 2013-2014 28.73 2.78 344,690 2.80
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 2012-2013 14.65 0.67 239,600 6.70
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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, 2014
17
HSBC Equity Fund
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description 2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Plan Growth Option
30,349,642.128 2,660,563.229 12,415,819.744 20,594,385.613 10
Regular Plan Dividend Option
101,946,741.042 1,309,815.487 25,904,767.082 77,351,789.447 10
Direct Plan - Growth Option
70,466.051 225,127.027 69,297.398 226,295.680 10
Direct Plan - Dividend Option
194,070.056 206,484.161 20,571.479 379,982.738 10
Description 2012-2013
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Plan Growth Option
36,910,347.173 8,665,639.949 15,226,344.994 30,349,642.128 10
Regular Plan Dividend Option
137,141,222.324 7,763,992.960 42,958,474.242 101,946,741.042 10
Direct Plan - Growth Option
– 70,796.605 330.554 70,466.051 10
Direct Plan - Dividend Option
– 194,180.482 110.426 194,070.056 10
5 Previous year fi gures have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 2,689,085 (2013: Rs. 2,983,825) represents Exit load (net of service tax) credited to the Scheme and Provision for expenses written back since no longer required.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC Equity Fund
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC Equity Fund
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC Equity Fund
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HSBC Equity Fund
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 Combined 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 Progressive Themes Fund
HSBC Progressive Themes FundAn open-ended Flexi-theme Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC Progressive Themes Fund
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC Progressive Themes Fund
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC Progressive Themes Fund
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC Progressive Themes Fund
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Progressive Themes Fund (HPTF) - an open-ended fl exi-theme Equity Scheme
HPTF seeks to generate long term capital growth from an actively managed portfolio of equity and equity related securities by investing primarily in sectors, areas and themes that play an important role in, and / or benefi t from, India’s progress, reform process and economic development.
The net assets of HPTF amounted to Rs. 110.41 crores as at March 31, 2014 as compared to Rs. 130.40 crores as at March 31, 2013. Around 99.88% of the net assets were invested in equities, 0.93% of the net assets were invested in reverse repos / CBLO and (-0.81%) were in the net current assets as at March 31, 2014.
HPTF is a theme based Scheme. The focus of the Scheme being on Infrastructure and Economic Reforms suffered due to delay in the government policy, high interest rates, etc. as against a more diversifi ed benchmark. However, post-election the fund has managed to recover sharply on expectations of increased infrastructure thrust, improvement in investment cycle, easing of regulatory hurdles etc.
Date of Inception : 23 February 2006 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Progressive Themes Fund - Growth 4.65 -10.58 -4.28 1.06
S&P BSE 200 (Scheme Benchmark) 16.65 5.41 -9.55 9.56
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 10.15
Rs. 10,000, if invested in HPTF, would have become 10,465 8,942 9,572 10,896
Rs. 10,000, if invested in S&P BSE 200, would have become
11,665 10,541 9,045 20,962
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 21,900
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Trustees’ ReportFor the year ended March 31, 2014
5
HSBC Progressive Themes Fund
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
6
HSBC Progressive Themes Fund
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
7
HSBC Progressive Themes Fund
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Progressive Themes Fund 674,622.48 341 4,660,382.71 366
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
8
HSBC Progressive Themes Fund
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
9
HSBC Progressive Themes Fund
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Progressive
Themes Fund, (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date; and
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report has been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC Progressive Themes Fund
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC Progressive Themes Fund
Rs. in Lakhs
HSBC PROGRESSIVE THEMES FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 10,894.48 13,710.362 Reserves & Surplus2.1 Unit Premium Reserves (14,443.44) (17,930.00)2.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 14,584.77 17,259.993 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 195.42 340.76
TOTAL 11,231.23 13,381.11
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 11,030.42 12,995.971.1.2 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 11,030.42 12,995.972 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 4.41 44.843.2 CBLO / Reverse Repo Lending 102.81 181.713.3 Others 93.59 158.594 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 11,231.23 13,381.11
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC Progressive Themes Fund
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC PROGRESSIVE THEMES FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 344.65 409.761.2 Interest 11.19 14.761.3 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
investments(2,398.98) 574.68
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.84 3.54
(A) (2,042.30) 1,002.74
2 EXPENSES2.1 Management fees 172.98 199.982.2 Service tax on Management fees 21.38 24.722.3 Transfer agents fees and expenses 15.03 25.002.4 Custodian fees 1.87 6.732.5 Trusteeship fees 0.42 0.052.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 79.92 147.022.8 Audit fees 1.62 1.852.9 Investor Education Expenses 2.09 1.592.10 Other operating expenses 6.90 10.322.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 302.21 417.26
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) (2,344.51) 585.48
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) 2,810.02 2,041.49
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 465.51 (1,456.01)
6 Change in unrealised appreciation inthe value of investments and derivatives (F) – –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 465.51 (1,456.01)7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (3,140.73) (4,977.07)
7.4 Transfer from Reserve Fund 17,259.99 23,693.07
8 TOTAL 14,584.77 17,259.99
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 14,584.77 17,259.99
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC Progressive Themes Fund
Key Statistics for the year ended March 31, 2014
HSBC PROGRESSIVE THEMES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Growth Option 10.2116 11.3220
Dividend Option 8.6860 9.6304
Direct Plan - Growth Option 10.2383 N.A.
Direct Plan - Dividend Option 8.7084 N.A.
High
Growth Option 10.8952 12.6761
Dividend Option 9.2675 10.7823
Direct Plan - Growth Option 11.0005 12.6790
Direct Plan - Dividend Option 9.3568 10.7844
Low
Growth Option 7.2629 9.6862
Dividend Option 6.1778 8.2391
Direct Plan - Growth Option 7.3000 10.0409
Direct Plan - Dividend Option 6.2091 8.5404
End
Growth Option 10.8952 10.2116
Dividend Option 9.2675 8.6860
Direct Plan - Growth Option 11.0005 10.2383
Direct Plan - Dividend Option 9.3568 8.7084
2. Closing Assets Under Management (Rs. in Lakhs)
End 11,036 13,040
Average (AAuM)1 10,469 16,214
3. Gross income as % of AAuM2 -19.51% 6.18%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.89% 2.57%
Direct Plan 2.19% 1.95%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.65% 1.23%
Direct Plan 1.65% 1.23%
5. Net Income as a percentage of AAuM3 -22.39% 3.61%
6. Portfolio turnover ratio4 0.24 0.25
14
HSBC Progressive Themes Fund
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC PROGRESSIVE THEMES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
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 4.6586 (7.9867)
Direct Plan - Growth Option 5.3947 N.A.
Benchmark
S&P BSE200 16.6967 8.2600
b. Since Inception
Scheme
Growth Option 1.0636 0.5690
Direct Plan - Growth Option (9.5483) (16.0600)
Benchmark
S&P BSE200 9.5592 8.5400
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.
15
HSBC Progressive Themes Fund
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC PROGRESSIVE THEMES 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, 2014 and March 31, 2013 are NIL
1.3 Investments in Associates and Group Companies as of year ended March 31, 2014 is NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year 2013 -2014 and 2012-2013 and percentage to net assets are as under :
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 211,874,667 19.20 113,032,612 8.67
– Depreciation 254,500,462 23.06 436,659,966 33.49
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 247,066,449 and Rs. 484,724,745 respectively being 23.60% and 46.30% 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 2012-2013 (excluding accretion of discount) is Rs. 409,284,702 and Rs. 792,465,732 respectively being 25.24% and 48.87% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 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 2013-2014 0.09 4.63 586,358 10.71
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 10,687 0.20
16
HSBC Progressive Themes Fund
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 2012-2013 2.30 35.55 1,468,093 16.11
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.00~ 0.02 21,632 0.24
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
transaction of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2013-2014 1.72 2.35 20,643 2.40
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
transaction of the fund
Brokerage paid [Rs.]
% of total brokerage paid by the
fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2012-2013 4.72 0.83 90,222 4.75
~ Indicates less than 0.01
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013 :
Description
2013 - 2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 74,154,312.625 363,981.803 17,049,155.139 57,469,139.289 10
Dividend Option 62,923,931.960 505,585.706 12,198,096.623 51,231,421.043 10
Direct Plan - Growth Option
13,105.277 255,828.419 44,045.255 224,888.441 10
Direct Plan - Dividend Option
12,268.093 12,122.647 5,003.128 19,387.612 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC Progressive Themes Fund
Description
2012 - 2013
Opening Units Subscription Redemption Closing Units Face Value
per unit (Rupees)
Growth Option 92,850,425.492 2,741,427.354 21,437,540.221 74,154,312.625 10
Dividend Option 82,005,162.903 1,754,167.782 20,835,398.725 62,923,931.960 10
Direct Plan - Growth Option
– 13,362.802 257.525 13,105.277 10
Direct Plan - Dividend Option
– 12,268.093 – 12,268.093 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 84,445 (2013: Rs.354,038) represents Exit load (net of service tax) credited to the Scheme, provision for expenses written back since no longer required and IPO expenses written back.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC Progressive Themes Fund
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC Progressive Themes Fund
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC Progressive Themes Fund
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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 Combined 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 Progressive Themes Fund
HSBC EMERGING MARKETS FUND
HSBC Emerging Markets FundAn open-ended Scheme
Abridged Annual Report 2013 - 2014
1
HSBC EMERGING MARKETS FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC EMERGING MARKETS FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC EMERGING MARKETS FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Emerging Markets Fund (HEMF) - an open-ended Scheme
HEMF 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. 14.47 crores as at March 31, 2014 compared to Rs. 19.11 crores as at March 31, 2013. Around 97.56% of the net assets were invested in HSBC GEM Equity Fund (overseas mutual fund), 0.50% of the net assets were invested in reverse repos / CBLO and 1.94% was in the net current assets as at March 31, 2014.
While the underlying fund under-performed its benchmark, INR denominated HEMF has outperformed its benchmark during the period 2013-14 mainly on account of ~10% depreciation of the INR vis-à-vis USD.
Date of Inception : 17 March 2008 Absolute (%) Compounded Annualized
(%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Emerging Markets Fund - Growth 3.94 4.55 -6.74 1.37
MSCI Emerging Market Index (Scheme Benchmark) 0.81 1.77 -7.26 1.21
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 6.81
Rs. 10,000, if invested in HMEF, would have become 10,394 10,455 9,326 10,856
Rs. 10,000, if invested in MSCI Emerging Market Index, would have become
10,081 10,177 9,274 10,754
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 14,891
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Emerging Markets Fund – – 817,423.30 25
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC EMERGING MARKETS FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC EMERGING MARKETS FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Emerging Markets
Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC EMERGING MARKETS FUND
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
Independent Auditors’ Report (Contd...)
11
HSBC EMERGING MARKETS FUND
Rs. in Lakhs
HSBC EMERGING MARKETS FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 1,332.58 1,825.022 Reserves & Surplus2.1 Unit Premium Reserves (453.70) (410.20)2.2 Unrealised Appreciation Reserve 111.20 165.862.3 Other Reserves 456.88 331.133 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 61.88 13.06
TOTAL 1,508.84 1,924.87
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 – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 1,411.91 1,861.29
Total Investments 1,411.91 1,861.29
2 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.73 0.383.2 CBLO/Reverse Repo Lending 7.24 60.823.3 Others 88.96 2.384 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 1,508.84 1,924.87
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC EMERGING MARKETS FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC EMERGING MARKETS FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 51.91 62.911.2 Interest 4.79 9.871.3 Realised Gain / (Loss) on Foreign Exchange Transactions 33.28 8.561.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments128.70 200.61
1.6 Realised Gains / (Losses) on Derivative Transactions 0.35 –1.7 Other Income – 1.83
(A) 219.03 283.78
2 EXPENSES2.1 Management fees 16.34 22.042.2 Service tax on Management fees 2.02 2.722.3 Transfer agents fees and expenses 1.81 2.992.4 Custodian fees 1.97 4.332.5 Trusteeship fees 0.07 0.012.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 10.75 18.742.8 Audit fees 0.21 0.272.9 Investor Education Expenses 0.36 0.242.10 Other operating expenses 1.82 1.782.11 Less:Expenses to be Reimbursed by the Investment Manager (0.11) (0.55)
(B) 35.24 52.57
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 183.79 231.21
4 Change in Unrealised Depreciation invalue of investments*** (D) (0.40) 0.22
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 183.39 231.436 Change in unrealised appreciation in
the value of investments and derivatives (F) (54.66) (86.24)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 128.73 145.19
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 54.66 86.247.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (57.64) 189.70
7.4 Transfer from Reserve Fund 331.13 (90.00)
8 Total 456.88 331.13
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 456.88 331.13
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions
13
HSBC EMERGING MARKETS FUND
Key Statistics for the year ended March 31, 2014
HSBC EMERGING MARKETS FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 10.4742 9.9633
Regular Plan Dividend Option 10.4742 9.9633
Direct Plan - Growth Option 10.5035 N.A.
Direct Plan - Dividend Option 10.5035 N.A.
High
Regular Plan Growth Option 12.0770 11.4394
Regular Plan Dividend Option 12.0770 11.4394
Direct Plan - Growth Option 12.1574 11.4398
Direct Plan - Dividend Option 12.1574 11.2938
Low
Regular Plan Growth Option 9.5462 9.0969
Regular Plan Dividend Option 9.5462 9.0969
Direct Plan - Growth Option 9.5876 10.3809
Direct Plan - Dividend Option 9.5876 10.3809
End
Regular Plan Growth Option 10.8552 10.4742
Regular Plan Dividend Option 10.8552 10.4742
Direct Plan - Growth Option 10.9610 10.5035
Direct Plan - Dividend Option 10.9610 10.5035
2. Closing Assets Under Management (Rs. in Lakhs)
End 1,447 1,912
Average (AAuM)1 1,801 2,988
3. Gross income as % of AAuM2 12.16% 9.50%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 1.97% 1.76%
Direct Plan 1.26% 0.93%
b. Management Fee as % of AAuM (planwise)
Regular Plan 0.91% 0.74%
Direct Plan 0.91% 0.74%
5. Net Income as a percentage of AAuM3 10.20% 7.74%
6. Portfolio turnover ratio4 0.44 0.07
14
HSBC EMERGING MARKETS FUND
HSBC EMERGING MARKETS FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
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 3.9529 4.7893
Direct Plan - Growth Option 4.6853 N.A.
Benchmark
MSCI Emerging Markets Index 0.8137% 1.9900%
b. Since Inception
Scheme
Regular Plan Growth Option 1.3676 0.8657
Direct Plan - Growth Option (2.4682) (7.2100)
Benchmark
MSCI Emerging Markets Index 1.2101% 1.2900%
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, 2014 (Contd...)
15
HSBC EMERGING MARKETS FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
HSBC EMERGING MARKETS 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, 2014 and March 31, 2013 are NIL
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years ended March 31, 2014 and March 31, 2013 and their percentages to net assets are as under:
Security Category Amount (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2014 2013
Units in Mutual Fund
– Appreciation 11,120,491 7.69 16,586,375 8.68
– Depreciation – – – –
Foreign Currency denominated Assets and Liabilities
– Appreciation – – – –
– Depreciation 40,470 0.03 – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 80,153,528 and 132,495,844 respectively being 44.50% and 73.56% 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 2012-2013 (excluding accretion of discount) is Rs. 20,876,905 and 340,785,692 respectively being 6.99% and 114.03% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 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 2013-2014 1.74 26.77 923,486 21.14
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 4,031 0.09
16
HSBC EMERGING MARKETS 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 2012-2013 1.97 50.43 352,295 20.52
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.00~ 0.02 1,302 0.08
~ Indicates less than 0.01
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31,2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit
(Rs.)
Regular Plan Growth Option
11,313,428.246 7,389,196.572 10,175,023.228 8,527,601.590 10
Regular Plan Dividend Option
6,876,751.497 67,877.241 2,514,674.804 4,429,953.934 10
Direct Plan - Growth Option
58,219.214 331,350.058 26,966.110 362,603.162 10
Direct Plan - Dividend Option
1,802.309 8,828.999 5,019.994 5,611.314 10
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per Unit
(Rs.)
Regular Plan Growth Option
32,345,458.109 2,812,825.449 23,844,855.312 11,313,428.246 10
Regular Plan Dividend Option
19,200,996.091 590,701.678 12,914,946.272 6,876,751.497 10
Direct Plan - Growth Option
– 58,396.186 176.972 58,219.214 10
Direct Plan - Dividend Option
– 1,802.309 – 1,802.309 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC EMERGING MARKETS FUND
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 35,287 (2013: 183,257) represents Exit load (net of service tax) credited to the scheme.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
18
HSBC EMERGING MARKETS FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC EMERGING MARKETS FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC EMERGING MARKETS FUND
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HSBC EMERGING MARKETS FUND
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 Combined 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#
HSBC Brazil FundAn Open ended Fund of Funds Scheme
Abridged Annual Report 2013 - 2014
1
HSBC BRAZIL FUND#
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC BRAZIL FUND#
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC BRAZIL FUND#
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC BRAZIL FUND#
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Brazil Fund (HBF) - an open ended Fund of Funds Scheme
HBF 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. 94.05 crores as at March 31, 2014 compared to Rs. 184.79 crores as at March 31, 2013. Around 99.05% of the net assets were invested in HSBC Brazil Equity Fund (overseas mutual fund), 1.11% of the net assets were invested in reverse repos / CBLO and (-0.16%) were in the net current assets as at March 31, 2014.
HBF had outperformed its Scheme benchmark during the period 2013-14 mainly on account of depreciation of the INR vis-à-vis the USD.
Date of Inception : 6 May 2011 Absolute (%) Compounded Annualized
(%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
Since Inception
HSBC Brazil Fund - Growth -11.37 -2.50 -4.90
MSCI Brazil 10/40 Index (Scheme Benchmark) -14.46 -14.53 -13.38
CNX Nifty (Standard Benchmark) 17.53 6.93 6.71
Rs. 10,000, if invested in HBF, would have become 8,863 9,750 8,642
Rs. 10,000, if invested in MSCI Brazil 10/40 Index, would have become
8,554 8,547 6,587
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 12,079
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity Schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
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).
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex
5
HSBC BRAZIL FUND#
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted
6
HSBC BRAZIL FUND#
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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.
7
HSBC BRAZIL FUND#
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Brazil Fund – – 8,389.10 1
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0I B Interest on delayed payment of
Dividend0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
8
HSBC BRAZIL FUND#
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 A Non receipt of Statement of Account/Unit Certifi cate
0 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:* active folios# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC BRAZIL FUND#
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Brazil Fund (the
“Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net defi cit for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account, dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC BRAZIL FUND#
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account, dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC BRAZIL FUND#
Abridged Balance Sheet as at March 31, 2014
Rs. in Lakhs
HSBC BRAZIL FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 10,877.20 18,947.212 Reserves & Surplus2.1 Unit Premium Reserves (29.59) (28.48)2.2 Unrealised Appreciation Reserve – –2.3 Other Reserves (1,446.19) (438.77)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 222.61 212.86
TOTAL 9,624.03 18,692.82
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 – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 9,315.81 18,190.40
Total Investments 9,315.81 18,190.402 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 1.50 3.133.2 CBLO / Reverse Repo Lending 104.58 497.983.3 Others 202.14 1.314 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 9,624.03 18,692.82
Notes to Accounts - Annexure I
12
HSBC BRAZIL FUND#
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2014
Previous Period ended
March 31, 2013
1 INCOME1.1 Dividend 362.12 553.721.2 Interest 19.27 55.811.3 Realised Gain / (Loss) on Foreign Exchange Transactions 11.95 (70.32)1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments(597.64) (308.89)
1.6 Realised Gains / (Losses) on Derivative Transactions 2.41 –1.7 Other Income – 4.63
(A) (201.89) 234.95
2 EXPENSES2.1 Management fees 129.26 184.832.2 Service tax on Management fees 15.98 22.842.3 Transfer agents fees and expenses 10.34 25.382.4 Custodian fees 2.69 3.612.5 Trusteeship fees 0.53 0.082.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 90.92 177.572.8 Audit fees 1.38 2.622.9 Investor Education Expenses 2.65 2.142.10 Other operating expenses 6.14 13.242.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 259.89 432.31
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) (461.78) (197.36)
4 Change in Unrealised Depreciation in valueof investments*** (D) (1,093.82) (279.51)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] (1,555.60) (476.87)
6 Change in unrealised appreciation in thevalue of investments and derivatives (F) – (123.68)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (1,555.60) (600.55)7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 123.687.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 548.18 389.167.4 Transfer from Reserve Fund (438.77) (351.08)
8 Total (1,446.19) (438.79)
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 (1,446.19) (438.79)
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions
13
HSBC BRAZIL FUND#
Key Statistics for the year ended March 31, 2014
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2014
Previous Period ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 9.7534 9.9308
Regular Plan Dividend Option 9.7534 9.9308
Direct Plan - Growth Option 9.7767 N.A.
Direct Plan - Dividend Option 9.7767 N.A.
High
Regular Plan Growth Option 10.1499 10.2586
Regular Plan Dividend Option 10.1499 10.2586
Direct Plan - Growth Option 10.2146 10.2624
Direct Plan - Dividend Option 10.2146 10.2624
Low
Regular Plan Growth Option 7.7129 8.5769
Regular Plan Dividend Option 7.7129 8.5769
Direct Plan - Growth Option 7.7833 9.5178
Direct Plan - Dividend Option 7.7833 9.5178
End
Regular Plan Growth Option 8.6430 9.7534
Regular Plan Dividend Option 8.6430 9.7534
Direct Plan - Growth Option 8.7244 9.7767
Direct Plan - Dividend Option 8.7244 9.7767
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,401 18,480
Average (AAuM)1 13,231 24,391
3. Gross income as % of AAuM2 -1.53% 0.96%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 1.96% 1.77%
Direct Plan 1.26% 0.91%
b. Management Fee as % of AAuM (planwise)
Regular Plan 0.98% 0.76%
Direct Plan 0.98% 0.76%
5. Net Income as a percentage of AAuM3 -3.49% -0.81%
6. Portfolio turnover ratio4 0.05 0.08
14
HSBC BRAZIL FUND#
HSBC BRAZIL FUNDCurrent
Year ended March 31, 2014
Previous Period ended
March 31, 2013
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 Year
Scheme
Regular Plan Growth Option (11.3981) (1.8287)
Direct Plan - Growth Option (10.8002) N.A.
Benchmark
MSCI Brazil 10/40 Index (14.4967%) (14.5300%)
b. Since Inception
Scheme
Regular Plan Growth Option (4.8977) (1.3277)
Direct Plan - Growth Option (10.5773) (2.4200)
Benchmark
MSCI Brazil 10/40 Index (13.3777%) (12.4400%)
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, 2014 (Contd...)
15
HSBC BRAZIL FUND#
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC BRAZIL 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, 2014 and March 31, 2013 are NIL
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years 2013-2014 and 2012-2013 their percentages to net assets are as under:
Security Category Amount (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2014 2013
Units in Mutual Fund
– Appreciation – – – –
– Depreciation 137,247,817 14.60 27,951,384 0.95
Foreign Currency denominated Assets and Liabilities
– Appreciation – – – –
– Depreciation 85,680.00 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 2013-2014 (excluding accretion of discount) is Rs. 66,102,316 and Rs. 78,4501,593 respectively being 5.00% and 59.29% 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 2012-2013 (excluding accretion of discount) is Rs. 207,241,698 and Rs. 1,121,144,051 respectively being 8.50% and 45.96% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 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 2013-2014 2.29 21.52 6,539,913 74.51
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 213,963 2.44
16
HSBC BRAZIL 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 2012-2013 50.61 78.44 12,282,223 79.03
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.14 0.21 324,782 2.09
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Regular Plan Growth Option
117,282,062.611 8,621,990.218 52,585,456.908 73,318,595.921 10
Regular Plan Dividend Option
72,060,624.981 476,739.659 37,475,303.542 35,062,061.098 10
Direct Plan - Growth Option
127,498.072 263,450.629 35,281.472 355,667.229 10
Direct Plan - Dividend Option
1,901.307 33,803.262 – 35,704.569 10
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Regular Plan Growth Option
168,248,230.925 42,415,202.897 93,381,371.211 117,282,062.611 10
Regular Plan Dividend Option
127,974,218.193 20,858,983.529 76,772,576.741 72,060,624.981 10
Direct Plan - Growth Option
– 127,498.072 – 127,498.072 10
Direct Plan - Dividend Option
– 1,901.307 – 1,901.307 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC BRAZIL FUND#
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
5 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income of Rs. 240,751 (2013: Rs 462,999) represents Exit load (net of service tax) credited to the scheme.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
18
HSBC BRAZIL FUND#
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC BRAZIL FUND#
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC BRAZIL FUND#
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HSBC BRAZIL FUND#
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 Combined 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
HSBC Dynamic FundAn open-ended Scheme
Abridged Annual Report 2013 - 2014
1
HSBC DYNAMIC FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC DYNAMIC FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC DYNAMIC FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Dynamic Fund (HDF) - an open-ended Scheme
HDF 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. 76.12 crores as at March 31, 2014 compared to Rs. 132.97 crores as at March 31, 2013. Around 80.16% of the net assets were invested in equities, 21.01% of the net assets were invested in reverse repos / CBLO and (-1.17%) were in net current assets as at March 31, 2014.
HDF has underperformed its benchmark over the period 2013-14 due to high cash balance. The Scheme allocates capital across equity and debt securities dynamically. In a year when equity market was rising, thus becoming more expensive, and debt market being cheap, the dynamic allocation to cash kept on rising through the year. An average cash balance of approx. 14% through the year was the main reason of underperformance.
Date of Inception : 24 September 2007 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Dynamic Fund - Growth 13.20 1.59 -8.24 1.70
S&P BSE 200 (Scheme Benchmark) 16.65 5.41 -9.55 4.04
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 4.82
Rs. 10,000, if invested in HDF, would have become 11,320 10,159 9,176 11,160
Rs. 10,000, if invested in S&P BSE 200, would have become
11,665 10,541 9,045 12,950
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 13,594
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Dynamic Fund – – 2,217,484.91 90
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC DYNAMIC FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC DYNAMIC FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Dynamic Fund
(the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account, dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC DYNAMIC FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC DYNAMIC FUND
Rs. in Lakhs
HSBC DYNAMIC FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 6,816.14 13,582.762 Reserves & Surplus2.1 Unit Premium Reserves (5,180.88) (8,972.94)2.2 Unrealised Appreciation Reserve 1,506.61 1,364.342.3 Other Reserves 4,464.60 7,323.183 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 123.84 217.84
TOTAL 7,730.31 13,515.18
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 6,100.21 12,678.491.1.2 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 6,100.21 12,678.492 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 2.62 2.063.2 CBLO / Reverse Repo Lending 1,599.41 795.723.3 Others 28.07 38.914 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 7,730.31 13,515.18
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC DYNAMIC FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC DYNAMIC FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 171.49 154.751.2 Interest 115.65 180.941.3 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
investments981.45 399.99
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 23.97 21.42
(A) 1,292.56 757.10
2 EXPENSES2.1 Management fees 166.19 151.362.2 Service tax on Management fees 20.54 18.712.3 Transfer agents fees and expenses 14.29 18.532.4 Custodian fees 1.47 4.262.5 Trusteeship fees 0.41 0.032.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 80.72 99.492.8 Audit fees 1.12 1.882.9 Investor Education Expenses 2.03 1.442.10 Other operating expenses 5.63 18.082.11 Less:Expenses to be Reimbursed by the Investment Manager – (1.79)
(B) 292.40 311.99
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 1,000.16 445.11
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,000.16 445.11
6 Change in unrealised appreciation inthe value of investments and derivatives (F) 142.28 (218.49)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,142.44 226.627.1 Add: Balance transfer from Unrealised Appreciation Reserve – 218.497.2 Less: Balance transfer to Unrealised Appreciation Reserve 142.28 –7.3 Add / (Less): Equalisation (3,858.74) 3,166.61
7.4 Transfer from Reserve Fund 7,323.18 3,711.46
8 TOTAL 4,464.60 7,323.18
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 4,464.60 7,323.18
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC DYNAMIC FUND
Key Statistics for the year ended March 31, 2014
HSBC DYNAMIC FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 9.7899 9.6041
Regular Plan Dividend Option 9.7899 9.6041
Direct Plan - Growth Option 9.8125 N.A.
Direct Plan - Dividend Option 9.8125 N.A.
High
Regular Plan Growth Option 11.1668 10.8461
Regular Plan Dividend Option 11.1668 10.8461
Direct Plan - Growth Option 11.2706 10.8448
Direct Plan - Dividend Option 11.2706 10.8448
Low
Regular Plan Growth Option 9.1227 8.9789
Regular Plan Dividend Option 9.1227 8.9789
Direct Plan - Growth Option 9.1689 9.7067
Direct Plan - Dividend Option 9.1689 9.7067
End
Regular Plan Growth Option 11.1594 9.7899
Regular Plan Dividend Option 11.1594 9.7899
Direct Plan - Growth Option 11.2637 9.8125
Direct Plan - Dividend Option 11.2637 9.8125
2. Closing Assets Under Management (Rs. in Lakhs)
End 7,606 13,297
Average (AAuM)1 10,151 11,837
3. Gross income as % of AAuM2 12.73% 6.40%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.88% 2.64%
Direct Plan 2.20% 1.87%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.64% 1.28%
Direct Plan 1.64% 1.28%
5. Net Income as a percentage of AAuM3 9.85% 3.76%
6. Portfolio turnover ratio4 0.83 0.33
14
HSBC DYNAMIC FUND
HSBC DYNAMIC FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
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 13.2366 2.6271
Direct Plan - Growth Option 14.0308 N.A.
Benchmark
S&P BSE200 16.6967 8.2600
b. Since Inception
Scheme
Regular Plan Growth Option 1.6966 (0.2584)
Direct Plan - Growth Option 4.3599 (7.5100)
Benchmark
S&P BSE200 4.0420 1.8300
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, 2014 (Contd...)
15
HSBC DYNAMIC FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
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, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds /
Debentures
– 555,832,950 – –
Bharti Airtel Ltd. Equities 33,484,367 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 153,932,096 20.24 188,393,378 14.17
– Depreciation 3,270,760 0.43 51,959,733 3.91
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013 - 2014 (excluding accretion of discount) is Rs. 847,412,218 and Rs. 1,617,613,014 respectively being 83.48% and 159.35% 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 2012 - 2013 (excluding accretion of discount) is Rs. 941,179,687 and Rs. 388,715,249 respectively being 79.51% and 32.84% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
16
HSBC DYNAMIC FUND
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 2013-2014 1.84 16.64 4,344,043 51.90
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 4,527 0.05
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 2012-2013 88.26 66.89 7,561,694 45.39
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 – – 9,372 0.06
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 2013-2014 35.33 14.33 424,370 14.35
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 2012-2013 12.84 0.23 202,536 9.49
The brokerage paid was at rates similar to those offered to other brokers / distributors.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC DYNAMIC FUND
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit
(Rs.)
Regular Plan Growth Option
79,606,995.946 8,055,856.308 48,571,799.273 39,091,052.981 10
Regular Plan Dividend Option
56,212,092.195 533,306.963 27,764,761.839 28,980,637.319 10
Direct Plan - Growth Option
6,205.078 86,323.250 7,098.603 85,429.725 10
Direct Plan - Dividend Option
2,270.830 2,789.356 774.863 4,285.323 10
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per Unit
(Rs.)
Regular Plan Growth Option
51,881,376.863 71,278,095.980 43,552,476.897 79,606,995.946 10
Regular Plan Dividend Option
26,843,351.580 60,334,667.352 30,965,926.737 56,212,092.195 10
Direct Plan - Growth Option
– 6,205.078 – 6,205.078 10
Direct Plan - Dividend Option
– 2,270.830 – 2,270.830 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013:
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 2,397,119 (2013: 2,141,873) represents Exit load (net of service tax) credited to the Scheme, Compensation for trade error and Provision for expenses written back since no longer required.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC DYNAMIC FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC DYNAMIC FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC DYNAMIC FUND
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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 Combined 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
HSBC TAX SAVER EQUITY FUND
HSBC Tax Saver Equity FundAn open-ended Equity Linked Savings Scheme
Abridged Annual Report 2013 - 2014
1
HSBC TAX SAVER EQUITY FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC TAX SAVER EQUITY FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC TAX SAVER EQUITY FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC TAX SAVER EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Tax Saver Equity Fund (HTSF) - an open ended Equity linked Savings Scheme
HTSF 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 capitalisation bias. The Fund may also invest in fi xed income securities.
The net assets of HTSF amounted to Rs. 180.73 crores as at March 31, 2014 compared to Rs 183.75 crores as at March 31, 2013. Around 99.43% of the net assets were invested in equities, 0.70% of the net assets were invested in reverse repos / CBLO and (-0.13%) was in the net current assets as at March 31, 2014.
HTSF outperformed its benchmark during most of the time frames due to reasonable stock selection and the approach of creating a stable and quality portfolio which can do well in different market conditions. Going forward, our endeavour would be to manage the portfolio in a similar fashion of bottom up stock picking approach, keeping in mind the risk profi le of the portfolio.
Date of Inception : 5 January 2007 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Tax Saver Equity Fund - Growth 22.52 11.90 -4.42 9.52
S&P BSE 200 (Scheme Benchmark) 16.65 5.41 -9.55 6.82
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 7.46
Rs. 10,000, if invested in HTSF, would have become 12,252 11,190 9,558 19,315
Rs. 10,000, if invested in S&P BSE 200, would have become
11,665 10,541 9,045 16,122
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 16,834
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC TAX SAVER EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC TAX SAVER EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC TAX SAVER EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Tax Saver Equity Fund 570,128.97 457 2,538,381.23 139
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC TAX SAVER EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC TAX SAVER EQUITY FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Tax Saver Equity
Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC TAX SAVER EQUITY FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2013
11
HSBC TAX SAVER EQUITY FUND
Rs. in Lakhs
HSBC TAX SAVER EQUITY FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 9,631.01 12,071.172 Reserves & Surplus2.1 Unit Premium Reserves (2,445.58) (2,331.86)2.2 Unrealised Appreciation Reserve 4,580.00 2,778.222.3 Other Reserves 6,308.09 5,857.413 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 343.96 566.01
TOTAL 18,417.48 18,940.95
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 17,972.08 17,734.081.1.2 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 – 163.181.2.2 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 17,972.08 17,897.262 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 227.91 152.813.2 CBLO / Reverse Repo Lending 126.28 129.023.3 Others 91.21 761.864 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 18,417.48 18,940.95
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC TAX SAVER EQUITY FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC TAX SAVER EQUITY FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 234.98 266.961.2 Interest 14.85 36.231.3 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 2,019.55 3,220.471.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.00~ –
(A) 2,269.38 3,523.66
2 EXPENSES2.1 Management fees 266.21 262.212.2 Service tax on Management fees 32.90 32.412.3 Transfer agents fees and expenses 24.59 31.112.4 Custodian fees 2.54 8.222.5 Trusteeship fees 0.69 0.062.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 157.93 159.622.8 Audit fees 2.66 2.602.9 Investor Education Expenses 3.40 2.022.10 Other operating expenses 10.55 12.52
2.11 Less:Expenses to be Reimbursed by the Investment Manager (26.00) –
(B) 475.47 510.76
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 1,793.91 3,012.90
4 Change in Unrealised Depreciation in value ofinvestments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,793.91 3,012.90
6 in unrealised appreciation in the value of investments and derivatives (F) 1,801.78 (568.26)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3,595.69 2,444.64
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 568.267.2 Less: Balance transfer to Unrealised Appreciation Reserve 1,801.78 –7.3 Add / (Less): Equalisation (1,343.23) (1,111.66)7.4 Transfer from Reserve Fund 5,857.41 3,956.17
8 TOTAL 6,308.09 5,857.41
9 Dividend Appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forwardto Balance sheet 6,308.09 5,857.41
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses~ Indicates less than 0.01
13
HSBC TAX SAVER EQUITY FUND
Key Statistics for the year ended March 31, 2014
HSBC TAX SAVER EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Growth Option 15.6680 13.9463
Dividend Option 14.4505 12.8626
Direct Plan - Growth Option 15.7114 N.A.
Direct Plan - Dividend Option 14.4900 N.A.
High
Growth Option 19.3105 17.1357
Dividend Option 17.8100 15.8041
Direct Plan - Growth Option 19.5010 17.1368
Direct Plan - Dividend Option 17.9850 15.8046
Low
Growth Option 13.6595 12.8604
Dividend Option 12.5980 11.8611
Direct Plan - Growth Option 13.7376 15.4322
Direct Plan - Dividend Option 12.6697 14.2325
End
Growth Option 19.3105 15.6680
Dividend Option 17.8100 14.4505
Direct Plan - Growth Option 19.5010 15.7114
Direct Plan - Dividend Option 17.9850 14.4900
2. Closing Assets Under Management (Rs. in Lakhs)
End 18,073 18,375
Average (AAuM)1 17,021 20,057
3. Gross income as % of AAuM2 13.33% 17.57%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.80% 2.55%
Direct Plan 2.09% 1.79%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.56% 1.31%
Direct Plan 1.56% 1.31%
5. Net Income as a percentage of AAuM3 10.54% 15.02%
6. Portfolio turnover ratio4 0.79 0.72
14
HSBC TAX SAVER EQUITY FUND
HSBC TAX SAVER EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
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 22.5826 12.9387
Direct Plan - Growth Option 23.4492 N.A.
Benchmark
S&P BSE200 16.6967 14.8100
b. Since Inception
Scheme
Growth Option 9.5174 7.5620
Direct Plan - Growth Option 11.8803 (6.7300)
Benchmark
S&P BSE200 6.8183 5.2500
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, 2014 (Contd...)
15
HSBC TAX SAVER EQUITY FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC TAX SAVER EQUITY 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, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 555,832,950 – –
Bharti Airtel Ltd. Equities 9,859,610 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5. NPAs as at years ended March 31, 2014 and March 31, 2013 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:
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 478,762,105 26.49 377,882,008 20.57
– Depreciation 20,762,515 1.15 100,060,423 5.45
1.7. The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 1,351,963,079 and Rs. 1,726,612,915 respectively being 79.43% and 101.44% 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 year 2012-2013 (excluding accretion of discount) is Rs. 1,437,347,379 and Rs. 1,937,849,379 respectively being 71.66% and 96.62% 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
Fair Value (Rs.) Percentage to Net Assets
Fair Value (Rs.) Percentage to Net Assets
2014 2013
Equities – – 16,318,384 0.89
Total – – 16,318,384 0.89
16
HSBC TAX SAVER EQUITY FUND
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 2013-2014 0.50 5.60 307,232 2.37
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 26,654 0.21
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 2012-2013 0.39 5.78 315,743 2.24
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.00~ 0.06 41,681 0.30
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 2013-2014 2.65 0.86 31,844 0.86
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 2012-2013 7.62 0.52 128,505 2.50
~ Indicates less than 0.01
The brokerage paid was at rates similar to those offered to other brokers / distributors.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC TAX SAVER EQUITY FUND
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Growth Option
76,390,937.051 2,940,014.266 18,286,538.683 61,044,412.634 10
Dividend Option
44,168,772.227 1,282,537.730 10,534,681.861 34,916,628.096 10
Direct Plan - Growth Option
113,998.957 154,116.193 – 268,115.150 10
Direct Plan - Dividend Option
37,948.627 42,968.242 – 80,916.869 10
Description
2012-2013
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Growth Option
96,224,714.815 2,078,076.366 21,911,854.130 76,390,937.051 10
Dividend Option
57,627,155.322 938,436.664 14,396,819.759 44,168,772.227 10
Direct Plan - Growth Option
– 113,998.957 – 113,998.957 10
Direct Plan - Dividend Option
– 37,948.627 – 37,948.627 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC TAX SAVER EQUITY FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC TAX SAVER EQUITY FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC TAX SAVER EQUITY FUND
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HSBC TAX SAVER EQUITY FUND
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 Combined 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
HSBC India Opportunities FundAn open-ended Flexi-cap Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC INDIA OPPORTUNITIES FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC INDIA OPPORTUNITIES FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC INDIA OPPORTUNITIES FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC INDIA OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC India Opportunities Fund (HIOF) - an open-ended fl exi-cap Equity Scheme
HIOF seeks long term capital growth through investments across all market capitalisations, 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. 177.60 crores as at March 31, 2014 as compared to Rs. 212.70 crores as at March 31, 2013. Around 98.47% of the net assets were invested in equities, 3.09% of the net assets were invested in reverse repos / CBLO and (-1.56%) were in the net current assets as at March 31, 2014.
HIOF outperformed its benchmark on a 1-year, 3-year basis and since its inception. The overweight in Technology resulted in outperformance against its benchmark for the period 2013-14. In addition, stock selections in sectors like Consumer Discretionary, Healthcare, Industrials, Materials and Utility contributed to the outperformance during this period.
Date of Inception : 24 February 2004 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC India Opportunities Fund - Growth 27.93 0.21 -3.60 15.97
S&P BSE 500 (Scheme Benchmark) 16.44 4.14 -9.47 13.76
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 13.77
Rs. 10,000, if invested in HIOF, would have become 12,793 10,021 9,640 44,698
Rs. 10,000, if invested in S&P BSE 500, would have become
11,644 10,414 9,053 36,805
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 36,822
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC INDIA OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC INDIA OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC INDIA OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC India Opportunities Fund 1,566,726.04 507 1,894,358.86 70
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC INDIA OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC INDIA OPPORTUNITIES FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC India Opportunities
Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC INDIA OPPORTUNITIES FUND
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
Independent Auditors’ Report (Contd...)
11
HSBC INDIA OPPORTUNITIES FUND
Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 7,242.77 10,471.132 Reserves & Surplus2.1 Unit Premium Reserves (9,926.70) (12,772.78)2.2 Unrealised Appreciation Reserve 5,036.63 2,543.412.3 Other Reserves 15,403.48 21,028.033 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 563.99 184.68
TOTAL 18,320.17 21,454.47
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 17,491.41 20,787.041.1.2 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 17,491.41 20,787.04
2 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 12.79 9.513.2 CBLO / Reverse Repo Lending 548.51 623.993.3 Others 267.46 33.934 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 18,320.17 21,454.47
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC INDIA OPPORTUNITIES FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 284.25 361.901.2 Interest 49.14 104.471.3 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
investments2,100.49 1,964.86
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 18.99 35.20
(A) 2,452.87 2,466.432 EXPENSES2.1 Management fees 290.36 274.022.2 Service tax on Management fees 35.89 33.872.3 Transfer agents fees and expenses 26.11 37.092.4 Custodian fees 2.71 9.572.5 Trusteeship fees 0.74 0.072.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 133.94 223.102.8 Audit fees 2.61 3.012.9 Investor Education Expenses 3.64 2.382.10 Other operating expenses 10.26 14.832.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 506.26 597.943 NET REALISED GAINS / (LOSSES) FOR
THE YEAR (A - B = C) 1,946.61 1,868.49
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,946.61 1,868.49
6 Change in unrealised appreciation inthe value of investments and derivatives (F) 2,493.22 (1,119.94)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 4,439.83 748.557.1 Add: Balance transfer from Unrealised Appreciation Reserve – 1,119.947.2 Less: Balance transfer to Unrealised Appreciation Reserve 2,493.22 –7.3 Add / (Less): Equalisation (7,571.15) 3,661.297.4 Transfer from Reserve Fund 21,028.02 16,631.60
8 TOTAL 15,403.48 22,161.38
9 Dividend Appropriation9.1 Income Distributed during the year – 1,133.359.2 Tax on income distributed during the year – –
10 Retained Surplus / (Defi cit) carried forwardto Balance sheet 15,403.48 21,028.03
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC INDIA OPPORTUNITIES FUND
Key Statistics for the year ended March 31, 2014
HSBC INDIA OPPORTUNITIES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 34.6079 34.3676
Regular Plan Dividend Option 14.9168 16.1900
Direct Plan - Growth Option 34.7042 N.A.
Direct Plan - Dividend Option 14.9589 N.A.
High
Regular Plan Growth Option 44.6802 38.7765
Regular Plan Dividend Option 19.2581 18.2670
Direct Plan - Growth Option 45.1199 38.7999
Direct Plan - Dividend Option 19.4485 18.2768
Low
Regular Plan Growth Option 31.9568 32.2268
Regular Plan Dividend Option 13.7741 14.7749
Direct Plan - Growth Option 32.1352 34.3701
Direct Plan - Dividend Option 13.8515 15.0520
End
Regular Plan Growth Option 44.6802 34.6079
Regular Plan Dividend Option 19.2581 14.9168
Direct Plan - Growth Option 45.1199 34.7042
Direct Plan - Dividend Option 19.4485 14.9589
2. Closing Assets Under Management (Rs. in Lakhs)
End 17,756 21,270
Average (AAuM)1 18,217 23,720
3. Gross income as % of AAuM2 13.46% 10.40%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.78% 2.52%
Direct Plan 2.08% 1.66%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.59% 1.16%
Direct Plan 1.59% 1.16%
5. Net Income as a percentage of AAuM3 10.69% 7.88%
6. Portfolio turnover ratio4 0.84 0.34
14
HSBC INDIA OPPORTUNITIES FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC INDIA OPPORTUNITIES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend Option – 1.5000
Direct Plan - Dividend Option – 1.5000
Corporate
Regular Plan Dividend Option – 1.5000
Direct Plan - Dividend Option – 1.5000
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 28.0042 1.6136
Direct Plan - Growth Option 28.9045 N.A.
Benchmark
S&P BSE 500 16.4870 7.0700
b. Since Inception
Scheme
Regular Plan Growth Option 15.9689 14.7211
Direct Plan - Growth Option 14.1639 (8.3800)
Benchmark
S&P BSE 500 13.7607 13.4100
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.
15
HSBC INDIA OPPORTUNITIES FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
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, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 555,832,950 – –
Bharti Airtel Ltd. Equities 12,842,030 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2014 and 2013 are NIL.
1.5 The NPAs as on March 31, 2014 and March 31, 2013 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2014 and March 31, 2013 are as under :
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 506,221,525 28.51 396,108,991 18.62
– Depreciation 2,558,061 0.14 141,767,777 6.67
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs.1,530,778,108 and Rs. 2,319,712,274 respectively being 84.03% and 127.34% 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 2012-2013 (excluding accretion of discount) is Rs.1,183,106,635 and Rs. 816,609,273 respectively being 49.88% and 34.43% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 are Nil.
16
HSBC INDIA OPPORTUNITIES FUND
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 2013-2014 5.80 26.77 5,566,261 48.11
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 15,679 0.14
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 2012-2013 130.88 61.23 170,20,740 52.49
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.08 0.04 37,227 0.11
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 2013-2014 11.46 3.02 137,287 3.06
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 2012-2013 2.88 0.08 44,052 1.31
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC INDIA OPPORTUNITIES FUND
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Plan Growth Option
28,672,213.039 3,888,068.582 17,709,613.678 14,850,667.943 10
Regular Plan Dividend Option
76,009,239.085 2,217,961.655 20,851,869.135 57,375,331.605 10
Direct Plan - Growth Option
21,869.368 110,598.896 7,023.675 125,444.589 10
Direct Plan - Dividend Option
8,011.816 80,894.093 12,627.837 76,278.072 10
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Plan Growth Option
23,354,216.844 36,103,279.373 30,785,283.178 28,672,213.039 10
Regular Plan Dividend Option
61,414,775.256 53,049,124.197 38,454,660.368 76,009,239.085 10
Direct Plan - Growth Option
– 21,923.340 53.972 21,869.368 10
Direct Plan - Dividend Option
– 8,011.816 – 8,011.816 10
5 Previous years fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 1,898,871 (2013: Rs.3,519,620) represents Exit load (net of service tax) credited to the Scheme.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC INDIA OPPORTUNITIES FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC INDIA OPPORTUNITIES FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC INDIA OPPORTUNITIES FUND
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HSBC INDIA OPPORTUNITIES FUND
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 Combined 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
HSBC Midcap Equity FundAn open-ended Diversifi ed Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC MIDCAP EQUITY FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC MIDCAP EQUITY FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC MIDCAP EQUITY FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC MIDCAP EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Midcap Equity Fund (HMEF) - an open-ended diversifi ed Equity Scheme
HMEF 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. 82.03 crores as at March 31, 2014 as compared to Rs. 82.29 crores as at March 31, 2013. Around 98.61% of the net assets were invested in equities, 2.12% of the net assets were invested in reverse repos / CBLO and (-0.73 %) were in the net current assets as at March 31, 2014.
HMEF has done well in terms of outperformance v/s benchmark due to stock selection across various sectors for the period 2013-14. The focus on reasonable growth oriented companies available at attractive valuations (PB/ROE) paid off. HMEF continues to be overweight in Auto Ancillary, Agro Chemicals, Capital Goods, Pharma and underweight in FMCG sector.
Date of Inception : 19 May 2005 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Midcap Equity Fund - Growth 28.40 -8.82 -8.51 9.51
S&P BSE Midcap (Scheme Benchmark) 13.86 -4.30 -9.14 9.19
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 14.67
Rs. 10,000, if invested in HMEF, would have become 12,840 9,118 9,149 22,400
Rs. 10,000, if invested in S&P BSE Midcap, would have become
11,386 9,570 9,086 21,818
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 33,688
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC MIDCAP EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC MIDCAP EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC MIDCAP EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Midcap Equity Fund 699,118.94 384 1,319,682.89 67
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC MIDCAP EQUITY FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC MIDCAP EQUITY FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Midcap Equity
Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC MIDCAP EQUITY FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC MIDCAP EQUITY FUND
Rs. in Lakhs
HSBC MIDCAP EQUITY FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 4,957.91 6,497.062 Reserves & Surplus2.1 Unit Premium Reserves (2,252.20) (2,909.89)2.2 Unrealised Appreciation Reserve 1,362.05 –2.3 Other Reserves 4,174.38 4,642.233 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 106.80 129.33
TOTAL 8,348.94 8,358.73
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 8,086.13 8,192.241.1.2 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 8,086.13 8,192.242 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 58.12 10.453.2 CBLO / Reverse Repo Lending 173.87 58.443.3 Others 30.82 97.604 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 8,348.94 8,358.73
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC MIDCAP EQUITY FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC MIDCAP EQUITY FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 177.41 288.661.2 Interest 5.89 4.671.3 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(1,534.62) 605.62
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 1.36 4.10
(A) (1,349.96) 903.05
2 EXPENSES2.1 Management fees 127.59 144.472.2 Service tax on Management fees 15.77 17.862.3 Transfer agents fees and expenses 10.76 15.852.4 Custodian fees 1.20 4.272.5 Trusteeship fees 0.30 0.032.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 51.08 82.572.8 Audit fees 1.21 1.172.9 Investor Education Expenses 1.49 1.002.10 Other operating expenses 12.38 6.302.11 Less:Expenses to be Reimbursed by the Investment Manager (5.23) –
(B) 216.55 273.52
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) (1,566.51) 629.53
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) 2,291.92 (1,216.06)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 725.41 (586.53)
6 Change in unrealised appreciation inthe value of investments and derivatives (F) (1,362.05) –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (636.64) (586.53)7.1 Add: Balance transfer from Unrealised Appreciation Reserve 1,362.05 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –
7.3 Add / (Less): Equalisation (1,193.26) (1,282.04)
7.4 Transfer from Reserve Fund 4,642.23 6,510.80
8 TOTAL 4,174.38 4,642.23
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 4,174.38 4,642.23
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC MIDCAP EQUITY FUND
Key Statistics for the year ended March 31, 2014
HSBC MIDCAP EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 16.9866 18.3697
Regular Plan Dividend Option 9.0813 9.8208
Direct Plan - Growth Option 17.0314 N.A.
Direct Plan - Dividend Option 9.1048 N.A.
High
Regular Plan Growth Option 22.3943 21.2628
Regular Plan Dividend Option 11.9724 11.3674
Direct Plan - Growth Option 22.6130 21.2677
Direct Plan - Dividend Option 12.0885 11.3694
Low
Regular Plan Growth Option 13.5512 16.5260
Regular Plan Dividend Option 7.2447 8.8351
Direct Plan - Growth Option 13.6212 16.8184
Direct Plan - Dividend Option 7.2817 8.9909
End
Regular Plan Growth Option 22.3943 16.9866
Regular Plan Dividend Option 11.9724 9.0813
Direct Plan - Growth Option 22.6130 17.0314
Direct Plan - Dividend Option 12.0885 9.1048
2. Closing Assets Under Management (Rs. in Lakhs)
End 8,242 8,229
Average (AAuM)1 7,435 10,266
3. Gross income as % of AAuM2 -18.16% 8.80%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.91% 2.66%
Direct Plan 2.21% 1.90%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.72% 1.41%
Direct Plan 1.72% 1.41%
5. Net Income as a percentage of AAuM3 -21.07% 6.13%
6. Portfolio turnover ratio4 0.64 0.35
14
HSBC MIDCAP EQUITY FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC MIDCAP EQUITY FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 28.4783 (5.0342)
Direct Plan - Growth Option 29.3915 N.A.
Benchmark
S&P BSE Mid Cap 13.8967 (0.7900)
b. Since Inception
Scheme
Regular Plan Growth Option 9.5138 7.3199
Direct Plan - Growth Option 7.4221 (15.2900)
Benchmark
S&P BSE Mid Cap 9.1895 8.4400
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.
15
HSBC MIDCAP EQUITY FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
HSBC MIDCAP EQUITY 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, 2014 and March 31, 2013 are NIL
1.3 Investments in Associates and Group Companies as of year ended March 31, 2014 is NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the year ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2014 and March 31, 2013 are as under :
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 238,178,364 28.90 75,367,764 9.16
– Depreciation 101,973,744 12.37 304,560,068 37.01
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013 - 2014 (excluding accretion of discount) is Rs. 474,013,676 and Rs. 696,560,504 respectively being 63.75% and 93.69% 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 2012 - 2013 (excluding accretion of discount) is Rs. 358,966,528 and Rs. 563,798,304 respectively being 34.97% and 54.92% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 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 2013-2014 1.74 26.77 923,486 21.14
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 4,031 0.09
16
HSBC MIDCAP EQUITY 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 2012-2013 10.46 60.85 1,874,815 27.09
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.03 0.16 10,363 0.15
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 2013-2014 1.55 1.32 18,595 1.33
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 2012-2013 2.22 0.95 34,810 2.21
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
29,433,413.197 2,499,255.878 9,890,097.589 22,042,571.486 10
Regular Plan Dividend Option
35,498,219.471 725,397.190 8,797,415.087 27,426,201.574 10
Direct Plan - Growth Option
30,411.628 147,858.915 93,134.338 85,136.205 10
Direct Plan - Dividend Option
8,570.423 31,592.214 14,927.493 25,235.144 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC MIDCAP EQUITY FUND
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
35,519,574.108 5,578,599.945 11,664,760.856 29,433,413.197 10
Regular Plan Dividend Option
45,104,884.583 5,166,475.725 14,773,140.837 35,498,219.471 10
Direct Plan - Growth Option
– 30,411.628 – 30,411.628 10
Direct Plan - Dividend Option
– 8,570.423 – 8,570.423 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 135,909 (2013: Rs.410,045) represents Exit load (net of service tax) credited to the scheme, Recovery from CAMS towards error in redemption processing, Written off of old reconciliation items, provision for expenses written back as no longer required and IPO expenses written back.
9 HSBC Small Cap Fund merged into HSBC Midcap Equity Fund, with effect from April 26, 2014 in accordance with applicable guidelines issued by SEBI. Accordingly, HSBC Small Cap Fund ceased to exist from this date. The merger was approved by the Board of Directors of the HSBC Asset Management India Private Limited and Board of Trustees of the Fund as well as SEBI.
10 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC MIDCAP EQUITY FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC MIDCAP EQUITY FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC MIDCAP EQUITY FUND
Det
ails
of t
he P
roxy
Vot
es e
xerc
ised
in G
ener
al M
eetin
gs o
f the
Lis
ted
Com
pani
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HSBC MIDCAP EQUITY FUND
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 Combined 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 UNIQUE OPPORTUNITIES FUND
HSBC Unique Opportunities FundAn open-ended Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC UNIQUE OPPORTUNITIES FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC UNIQUE OPPORTUNITIES FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC UNIQUE OPPORTUNITIES FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC UNIQUE OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Unique Opportunities Fund (HUOF) - an open ended Equity Scheme*
HUOF seeks to provide long-term capital growth from a diversifi ed portfolio of equity and equity related instruments. The focus would be to invest in stocks of companies facing “out-of-ordinary” conditions.
The net assets of HUOF amounted to Rs. 46.12 crores as at March 31, 2014 compared to Rs. 51.50 crores as at March 31, 2013. Around 98.93% of the net assets were invested in equities, 1.64% of the net assets were invested in reverse repos / CBLO and (-0.57%) were in net current assets as at March 31, 2014.
During the period 2013 - 2014, HUOF was slightly overweight in cyclical sectors like Financials and Materials and hence outperformed the Scheme benchmark driven by a cyclical rally towards the end of the fi nancial year.
Date of Inception : 21 March 2007 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Unique Opportunities Fund - Growth 17.03 4.82 -9.79 3.31
S&P BSE 200 (Scheme Benchmark) 16.65 5.41 -9.55 8.21
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 8.55
Rs. 10,000, if invested in HUOF, would have become 11,703 10,482 9,021 12,572
Rs. 10,000, if invested in S&P BSE 200, would have become
11,665 10,541 9,045 17,422
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 17,813
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
*HUOF is undergoing a change in its investment objective, investment strategy etc. and will be re-named as the HSBC Dividend Yield Equity Fund. The changes being in the nature of fundamental attribute changes, the investors have been notifi ed of the same giving then an option to redeem from the Fund. The change will be effective from July 18, 2014. Kindly refer the notice dated May 26, 2014 (published in Financial Express and Navshakti newspapers dated May 27, 2014 and available on www.assetmanagement.hsbc.com/in) for more details.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC UNIQUE OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC UNIQUE OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC UNIQUE OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Unique Opportunities Fund – – 1,795,620.43 71
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC UNIQUE OPPORTUNITIES FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC UNIQUE OPPORTUNITIES FUND
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Unique
Opportunities Fund, (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date; and
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account dealt with by this report has been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
10
HSBC UNIQUE OPPORTUNITIES FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC UNIQUE OPPORTUNITIES FUND
Rs. in Lakhs
HSBC UNIQUE OPPORTUNITIES FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 3,666.09 4,826.272 Reserves & Surplus2.1 Unit Premium Reserves (4,292.13) (5,333.72)2.2 Unrealised Appreciation Reserve 1,285.15 774.472.3 Other Reserves 3,949.46 4,883.483 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 52.71 59.80
TOTAL 4,661.28 5,210.30
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 4,564.74 4,942.621.1.2 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 4,564.74 4,942.62
2 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 1.63 1.793.2 CBLO / Reverse Repo Lending 75.65 249.783.3 Others 19.26 16.114 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 4,661.28 5,210.30
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC UNIQUE OPPORTUNITIES FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC UNIQUE OPPORTUNITIES FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 98.69 114.621.2 Interest 11.24 17.561.3 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
investments259.76 288.77
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.04 0.89
(A) 369.73 421.842 EXPENSES2.1 Management fees 79.27 87.262.2 Service tax on Management fees 9.80 10.792.3 Transfer agents fees and expenses 6.68 9.622.4 Custodian fees 0.70 2.542.5 Trusteeship fees 0.19 0.022.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 33.57 50.812.8 Audit fees 0.68 0.732.9 Investor Education Expenses 0.93 0.602.10 Other operating expenses 3.13 3.912.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 134.95 166.28
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 234.78 255.56
4 Change in Unrealised Depreciation invalue of investments and derivatives (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 234.78 255.56
6 Change in unrealised appreciation inthe value of investments and derivatives (F) 510.67 131.97
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 745.45 387.537.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 510.67 (131.97)7.3 Add / (Less): Equalisation (1,168.80) (1,891.17)7.4 Transfer from Reserve Fund 4,883.48 6,519.09
8 TOTAL 3,949.46 4,883.48
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 toBalance sheet 3,949.46 4,883.48
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC UNIQUE OPPORTUNITIES FUND
Key Statistics for the year ended March 31, 2014
HSBC UNIQUE OPPORTUNITIES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan - Growth Option 10.6718 10.1530
Regular Plan - Dividend Option 10.6718 10.1530
Direct Plan - Growth Option 10.6923 N.A.
Direct Plan - Dividend Option 10.6923 N.A.
High
Regular Plan - Growth Option 12.5708 11.8946
Regular Plan - Dividend Option 12.5708 11.8946
Direct Plan - Growth Option 12.6839 11.8881
Direct Plan - Dividend Option 12.6839 11.7715
Low
Regular Plan - Growth Option 9.3616 9.4010
Regular Plan - Dividend Option 9.3616 9.4010
Direct Plan - Growth Option 9.4070 10.5988
Direct Plan - Dividend Option 9.4070 10.5988
End
Regular Plan - Growth Option 12.5708 10.6718
Regular Plan - Dividend Option 12.5708 10.6718
Direct Plan - Growth Option 12.6839 10.6923
Direct Plan - Dividend Option 12.6839 10.6923
2. Closing Assets Under Management (Rs. in Lakhs)
End 4,609 5,151
Average (AAuM)1 4,643 6,222
3. Gross income as % of AAuM2 7.96% 6.78%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.91% 2.67%
Direct Plan 2.20% 1.80%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.71% 1.40%
Direct Plan 1.71% 1.40%
5. Net Income as a percentage of AAuM3 5.06% 4.11%
6. Portfolio turnover ratio4 0.56 0.27
14
HSBC UNIQUE OPPORTUNITIES FUND
HSBC UNIQUE OPPORTUNITIES FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
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 17.0759 5.7595
Direct Plan - Growth Option 17.9029 N.A.
Benchmark
S&P BSE200 16.6967 8.2600
b. Since Inception
Scheme
Regular Plan - Growth Option 3.3067 1.1923
Direct Plan - Growth Option 6.1399 (8.7400)
Benchmark
S&P BSE200 8.2099 6.8000
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, 2014 (Contd...)
15
HSBC UNIQUE OPPORTUNITIES FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC UNIQUE OPPORTUNITIES 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, 2014 and March 31, 2013 is NIL
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 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
2014 2013
Equity Shares
– Appreciation 134,340,015 29.13 106,022,228 20.58
– Depreciation 5,824,968 1.26 28,574,444 5.55
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 258,237,640 and Rs. 373,069,489 respectively being 55.62% and 80.36% 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 2012-2013 (excluding accretion of discount) is Rs. 166,631,396 and Rs. 378,367,446 respectively being 26.78% and 60.81% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 and March 31, 2013 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 2013 - 2014 0.04 5.49 368,858 11.85
HSBC InvestDirect Securities (India) Limited
Associate 2013 - 2014 – – 4,198 0.13
16
HSBC UNIQUE 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 2012 - 2013 1.72 67.68 637,405 14.52
HSBC InvestDirect Securities (India) Limited
Associate 2012 - 2013 – – 6,562 0.15
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 2013 - 2014 1.39 2.21 16,754 2.22
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 2012 - 2013 1.94 0.33 39,019 4.42
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013 - 2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
27,842,762.493 110,672.073 7,276,352.686 20,677,081.880 10
Regular Plan Dividend Option
20,418,156.050 8,501.969 4,450,058.721 15,976,599.298 10
Direct Plan - Growth Option
797.516 4,561.300 1,137.126 4,221.690 10
Direct Plan - Dividend Option
997.530 3,984.230 1,992.317 2,989.443 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC UNIQUE OPPORTUNITIES FUND
Description
2012 - 2013
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Plan Growth Option
36,527,470.498 1,066,815.395 9,751,523.400 27,842,762.493 10
Regular Plan Dividend Option
29,979,954.272 818,590.124 10,380,388.346 20,418,156.050 10
Direct Plan - Growth Option
– 1,240.502 442.986 797.516 10
Direct Plan - Dividend Option
– 997.530 – 997.530 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 3,691 (2013: 88,547) represents Exit load (net of service tax) credited to the Scheme and provision for expenses written back since no longer required.
9 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC UNIQUE OPPORTUNITIES FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC UNIQUE OPPORTUNITIES FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC UNIQUE OPPORTUNITIES FUND
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HSBC UNIQUE OPPORTUNITIES FUND
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 Combined 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 SMALL CAP FUND
HSBC Small Cap FundAn open-ended Equity Scheme
Abridged Annual Report 2013 - 2014
1
HSBC SMALL CAP FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC SMALL CAP FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC SMALL CAP FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC SMALL CAP FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Small Cap Fund (HSCF) - an open ended Equity Scheme*
HSCF seeks to provide long-term capital appreciation primarily from a diversifi ed portfolio of equity and equity related instruments of small cap companies.
The net assets of HSCF amounted to Rs. 15.08 crores as at March 31, 2014 compared to Rs. 13.77 crores as at March 31, 2013. Around 98.21% of the net assets were invested in equities, 3.92% of the net assets were invested in reverse repos / CBLO and (-2.13%) were in the net current assets as at March 31, 2014.
HSCF had shown better performance across different time periods against its Scheme benchmark. Stock selection had improved the performance vis-a-vis benchmark. Further, the valuation difference between large and small cap is not justifi ed and unlikely to sustain, thus creating opportunities for better risk-return in mid-small cap segment.
Date of Inception : 24 March 2008 Absolute (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Small Cap Fund - Growth 35.67 -6.02 -18.39 2.93
S&P BSE Small Cap (Scheme Benchmark) 19.09 -14.05 -20.74 0.29
CNX Nifty (Standard Benchmark) 17.53 6.93 -9.13 6.42
Rs. 10,000, if invested in HSCF, would have become 13,567 9,398 8,161 11,903
Rs. 10,000, if invested in S&P BSE Smallcap, would have become
11,909 8,595 7,926 10,175
Rs. 10,000, if invested in CNX Nifty, would have become 11,753 10,693 9,087 14,546
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI for long term equity schemes and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
* HSBC Small Cap Fund merged with HSBC Midcap Equity Fund with effect from April 26, 2014 and consequently ceases to exist.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC SMALL CAP FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC SMALL CAP FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC SMALL CAP FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Small Cap Fund 17,500.00 9 583,203.78 23
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC SMALL CAP FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC SMALL CAP FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Small Cap Fund
(the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement
7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC SMALL CAP FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC SMALL CAP FUND
Rs. in Lakhs
HSBC SMALL CAP FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 1,297.32 1,639.022 Reserves & Surplus2.1 Unit Premium Reserves (269.25) (344.97)2.2 Unrealised Appreciation Reserve 30.24 –2.3 Other Reserves 447.91 83.273 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 46.11 84.69
TOTAL 1,552.33 1,462.01
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 1,481.71 1,264.801.1.2 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 – 112.471.2.2 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 1,481.71 1,377.272 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 3.09 1.243.2 CBLO / Reverse Repo Lending 59.05 75.033.3 Others 8.48 8.474 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 1,552.33 1,462.01Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC SMALL CAP FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC SMALL CAP FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 40.47 42.121.2 Interest 5.29 5.641.3 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(549.91) 68.76
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.01 0.84
(A) (504.14) 117.36
2 EXPENSES2.1 Management fees 21.55 27.452.2 Service tax on Management fees 2.66 3.392.3 Transfer agents fees and expenses 1.88 2.902.4 Custodian fees 0.21 0.802.5 Trusteeship fees 0.05 0.012.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 9.09 14.492.8 Audit fees 0.22 0.202.9 Investor Education Expenses 0.26 0.182.10 Other operating expenses 3.47 1.322.11 Less:Expenses to be Reimbursed by the Investment Manager (2.06) –
(B) 37.33 50.74
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) (541.47) 66.62
4 Change in Unrealised Depreciation in value ofinvestments and derivatives (D) 948.18 89.43
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 406.71 (22.81)
6 Change in unrealised appreciation in the valueof investments and derivatives (F) (30.24) –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 376.47 (22.81)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 30.24 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (42.07) (117.17)7.4 Transfer from Reserve Fund 83.27 223.25
8 TOTAL 447.91 83.27
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 447.91 83.27
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC SMALL CAP FUND
Key Statistics for the year ended March 31, 2014
HSBC SMALL CAP FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option 8.6077 9.0526
Regular Plan Dividend Option 8.0059 8.4196
Direct Plan - Growth Option 8.6318 N.A.
Direct Plan - Dividend Option 8.0261 N.A.
High
Regular Plan Growth Option 11.9016 11.0504
Regular Plan Dividend Option 11.0694 10.2777
Direct Plan - Growth Option 12.0169 11.0530
Direct Plan - Dividend Option 11.1735 10.1499
Low
Regular Plan Growth Option 7.1114 8.1289
Regular Plan Dividend Option 6.6142 7.5604
Direct Plan - Growth Option 7.1496 8.4830
Direct Plan - Dividend Option 6.6479 7.8877
End
Regular Plan Growth Option 11.9016 8.6077
Regular Plan Dividend Option 11.0694 8.0059
Direct Plan - Growth Option 12.0169 8.6318
Direct Plan - Dividend Option 11.1735 8.0261
2. Closing Assets Under Management (Rs. in Lakhs)
End 1,506 1,377
Average (AAuM)1 1,292 1,890
3. Gross income as % of AAuM2 -39.01% 6.21%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 2.89% 2.68%
Direct Plan 2.21% 1.97%
b. Management Fee as % of AAuM (planwise)
Regular Plan 1.67% 1.45%
Direct Plan 1.67% 1.45%
5. Net Income as a percentage of AAuM3 -41.90% 3.52%
6. Portfolio turnover ratio4 0.45 0.11
14
HSBC SMALL CAP FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC SMALL CAP FUND Current
Year ended March 31, 2014
Previous Year ended
March 31, 2013
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Plan Dividend – –
Direct Plan - Dividend Option – –
Corporate
Regular Plan Dividend – –
Direct Plan - Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Plan Growth Option 35.7690 (3.0837)
Direct Plan - Growth Option 36.60 N.A.
Benchmark
S&P BSE Small Cap 19.1457 (10.0300)
b. Since Inception
Scheme
Regular Plan Growth Option 2.9331 (2.5729)
Direct Plan - Growth Option 10.45 (17.0900)
Benchmark
S&P BSE Small Cap 0.2890 (3.5300)
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.
15
HSBC SMALL CAP FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC SMALL CAP 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, 2014 and March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open position of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2014 and March 31, 2013 are Nil.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2014 and March 31, 2013 are as under :
Security Category Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Equity Shares
– Appreciation 39,555,058 26.26 7,606,417 5.52
– Depreciation 36,530,725 24.25 102,424,200 74.36
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 57,576,202 and Rs. 89,983,672 respectively being 44.55% and 69.63% 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 2012-2013 (excluding accretion of discount) is Rs. 20,878,065 and Rs. 80,282,423 respectively being 11.04% and 42.47% of the average daily net assets.
1.8. Non -Traded securities in the portfolio:
Aggregate Value of Equity and percentages to net assets are as under :
Security Category
Fair Value (Rs.)
Percentage to Net Assets
Fair Value (Rs.)
Percentage to Net Assets
2014 2013
Equities – – 11,247,000 8.17
16
HSBC SMALL CAP FUND
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 2013-2014 0.01 0.63 43,495 5.11
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 220 0.03
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 2012-2013 0.44 30.66 85,435 6.87
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 – – 453 0.04
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 2013-2014 – – – –
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 2012-2013 0.37 0.20 4,487 3.21
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC SMALL CAP FUND
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013 :
Description2013-2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs)
Regular Plan Growth Option
10,813,156.446 399,721.540 2,867,126.176 8,345,751.810 10
Regular Plan Dividend Option
5,556,091.299 362,561.366 1,397,083.279 4,521,569.386 10
Direct Plan - Growth Option
9,719.687 71,781.161 9,989.629 71,511.219 10
Direct Plan - Dividend Option
11,277.109 37,556.380 14,421.386 34,412.103 10
Description2012-2013
Opening Units Subscription Redemption Closing Units Face Value per unit (Rs)
Regular Plan Growth Option
15,420,442.948 783,987.960 5,391,274.462 10,813,156.446 10
Regular Plan Dividend Option
8,098,805.342 312,480.070 2,855,194.113 5,556,091.299 10
Direct Plan - Growth Option
– 9,719.687 – 9,719.687 10
Direct Plan - Dividend Option
– 12,257.347 980.238 11,277.109 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 1,492 (2013: 83,754) represents Exit load (net of service tax) credited to the Scheme and provision for expenses written back since no longer required.
9 HSBC Small Cap Fund merged into HSBC Midcap Equity Fund, with effect from April 26, 2014 in accordance with applicable guidelines issued by SEBI. Accordingly, HSBC Small Cap Fund ceased to exist from this date. The merger was approved by the Board of Directors of the HSBC Asset Management India Private Limited and Board of Trustees of the Fund as well as SEBI.
10 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC SMALL CAP FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC SMALL CAP FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC SMALL CAP FUND
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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 Combined 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 SMALL CAP FUND
HSBC TAX SAVER EQUITY FUND
HSBC Asia Pacifi c (Ex Japan) Dividend Yield FundAn open ended Fund of Funds Scheme
Abridged Annual Report 2013 - 2014
1
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund (HAPDF)- an open ended Fund of Funds Scheme
HAPDF 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 (HEHDF). 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 HADPF amounted to Rs. 56.26 crores as at March 31, 2014. Around 97.42% of the net assets were invested in HSBC Global Investment Funds (HGIF) Asia Pacifi c Ex Japan Equity High Dividend Fund (overseas mutual fund), 2.78% of the net assets were invested in reverse repos / CBLO and (-0.20%) were in the net current assets as at March 31, 2014.
The Scheme was launched on February 03, 2014. The performance of the Scheme is benchmarked against MSCI AC Asia Pacifi c Ex Japan. Performance data has not been provided as the Scheme has not completed 1 year period from its launch.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
5
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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.
6
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil.
7
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0I B Interest on delayed payment of
Dividend0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
To the Board of Trustees of
HSBC Mutual Fund
1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the period February 03, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net defi cit for the period February 03, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Rs. in Lakhs
HSBC ASIA PACIFIC (EX JAPAN)DIVIDEND YIELD FUND#
As at March 31, 2014
LIABILITIES1 Unit Capital 5,725.862 Reserves & Surplus2.1 Unit Premium Reserves 0.00~2.2 Unrealised Appreciation Reserve –2.3 Other Reserves (99.89)3 Loans & Borrowings –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits –4.2 Other Current Liabilities & Provisions 15.53
TOTAL 5,641.50
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 –1.7 Certifi cate of Deposits –1.8 Bill Rediscounting –1.9 Units of Domestic Mutual Fund –1.10 Foreign Securities 5,480.58
Total Investments 5,480.582 Deposits –3 Other Current Assets3.1 Cash & Bank Balance 0.113.2 CBLO / Reverse Repo Lending 156.293.3 Others 4.524 Deferred Revenue Expenditure (to the extent not written off) –
TOTAL 5,641.50
~ Indicates less than 0.01Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year
Abridged Balance Sheet as at March 31, 2014
12
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Abridged Revenue Account for the period ended March 31, 2014
Rs. in Lakhs
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND
YIELD FUND#Current Period ended
March 31, 2014
1 INCOME1.1 Dividend –1.2 Interest 11.251.3 Realised Gain / (Loss) on Foreign Exchange Transactions 8.701.4 Realised Gains / (Losses) on Interscheme sale of investments –1.5 Realised Gains / (Losses) on External sale / redemption of investments (0.04)1.6 Realised Gains / (Losses) on Derivative Transactions –1.7 Other Income
(A) 19.91
2 EXPENSES2.1 Management fees 3.832.2 Service tax on Management fees 0.472.3 Transfer agents fees and expenses 1.502.4 Custodian fees 0.372.5 Trusteeship fees –2.6 Commission to Agents * –2.7 Marketing & Distribution expenses 4.082.8 Audit fees 0.832.9 Investor Education Expenses 0.112.10 Other operating expenses 1.11
2.11 Less:Expenses to be Reimbursed by the Investment Manager (2.76)
(B) 9.54
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 10.37
4 Change in Unrealised Depreciation in value of investments*** (D) (111.12)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] (100.75)
6 Change in unrealised appreciation in the value ofinvestments and derivatives (F) –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (100.75)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve –7.2 Less: Balance transfer to Unrealised Appreciation Reserve –7.3 Add / (Less): Equalisation 0.867.4 Transfer from Reserve Fund –
8 Total (99.89)
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 (99.89)
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses# Scheme launched during the current fi nancial year*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions
13
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Key Statistics for the period ended March 31, 2014
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND
YIELD FUND# Current Period ended
March 31, 2014
1. NAV per unit (Rs.):
Open
Regular Plan Growth Option N.A.
Regular Plan Dividend Option N.A.
Direct Plan - Growth Option N.A.
Direct Plan - Dividend Option N.A.
High
Regular Plan Growth Option 9.9754
Regular Plan Dividend Option 9.9754
Direct Plan - Growth Option 9.9764
Direct Plan - Dividend Option 9.9764
Low
Regular Plan Growth Option 9.5965
Regular Plan Dividend Option 9.5965
Direct Plan - Growth Option 9.6011
Direct Plan - Dividend Option 9.6011
End
Regular Plan Growth Option 9.8254
Regular Plan Dividend Option 9.8254
Direct Plan - Growth Option 9.8322
Direct Plan - Dividend Option 9.8322
2. Closing Assets Under Management (Rs. in Lakhs)
End 5,626
Average (AAuM)1 5,625
3. Gross income as % of AAuM2 * 3.59%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Plan 1.74%
Direct Plan 1.04%
b. Management Fee as % of AAuM (planwise) *
Regular Plan 0.69%
Direct Plan 0.69%
5. Net Income as a percentage of AAuM3 * –
6. Portfolio turnover ratio4 –
14
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND
YIELD FUND# Current Period ended
March 31, 2014
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 N.A.
Direct Plan - Growth Option N.A.
Benchmark
MSCI AC Asia Pacifi c ex Japan. N.A.
b. Since Inception
Scheme
Regular Plan Growth Option (1.7460)
Direct Plan - Growth Option (1.6780)
Benchmark
MSCI AC Asia Pacifi c ex Japan. 2.5746
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.
# Scheme launched during the current fi nancial year.
* Indicates annualised value
Key Statistics for the period ended March 31, 2014 (Contd...)
15
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD 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 for the period ended March 31, 2014 is NIL
1.3 Investments in Associates and Group Companies for the period ended March 31, 2014 is NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme for the period ended March 31, 2014 is NIL.
1.5 NPAs as at period ended March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets.
Security Category Amount (Rs.) Percentage toNet Assets (%)
2014
Units in Mutual Fund
– Appreciation – –
– Depreciation 11,112,136 1.98
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) is Rs. 559,174,226 and Nil respectively being 1007.94% and 0.00% of the average daily net assets.
1.8 Non-Traded securities in the portfolio as on March 31, 2014 is 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 2013-2014 54.62 93.94 – –
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – – –
The brokerage paid was at rates similar to those offered to other brokers / distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
16
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
4 Unit Capital movement during the period ended March 31, 2014:
Description
2013-2014
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Plan Growth Option
49,434,979.211 182,487.621 850,000.092 48,767,466.740 10
Regular Plan Dividend Option
7,286,076.401 112,156.749 30,000.000 7,368,233.150 10
Direct Plan - Growth Option
1,095,969.256 21,443.152 – 1,117,412.408 10
Direct Plan - Dividend Option
– 25,500.000 20,000.000 5,500.000 10
5 No contingent liabilities for the period ended March 31, 2014.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 Other income credited to the Scheme is Nil.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
17
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
18
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
19
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
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20
HSBC ASIA PACIFIC (EX JAPAN) DIVIDEND YIELD FUND
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 Combined 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 MIP FUND
HSBC MIPAn open-ended Fund with Regular & Savings Plans*
Abridged Annual Report 2013 - 2014*Monthly income is not assured and is subject tothe availability of distributable surplus.
1
HSBC MIP
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC MIP
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC MIP
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC MIP
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC MIP (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 Scheme offers two plans: Regular Plan and Savings Plan. The Regular Plan can have up to 15% of the corpus invested in equities while the Savings Plan can have up to 25% invested in equities. The net assets of HMIP - Regular Plan (HMIP - R) amounted to Rs. 111.44 crores as at March 31, 2014 as compared to Rs. 190.42 crores as at March 31, 2013. Around 82.16% of the net assets were invested in debt and money market instruments & 15.29% of the net assets were invested in equities as at March 31, 2014. The net assets of HMIP - Savings Plan (HMIP - S) amounted to Rs. 186.36 crores as at March 31, 2014 as compared to Rs. 317.36 crores as at March 31, 2013. Around 71.55% of the net assets were invested in debt and money market instruments & 26.60% of the net assets were invested in equities as at March 31, 2014.
HMIP-R and HMIP-S also faced higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
HMIP - Regular Plan
Date of Inception : 24 February 2004 Simple Annualized (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC MIP - Regular Plan - Growth 6.60 10.07 5.20 7.67
CRISIL MIP Blended Index (Scheme Benchmark) 6.42 9.09 5.26 7.12
CRISIL 1 Year T-Bill Index (Standard Benchmark) 5.78 8.37 6.59 5.45
CRISIL 10 Year Gilt Index (Standard Benchmark) -0.79 11.31 2.41 4.21
Rs. 10,000, if invested in HMIP - R, would have become 10,660 11,007 10,520 21,103
Rs. 10,000, if invested in CRISIL MIP Blended Index, would have become
10,642 10,909 10,526 20,049
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,578 10,837 10,659 17,090
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
9,921 11,131 10,241 15,170
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
5
HSBC MIP
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
HMIP - Savings Plan
Date of Inception : 24 February 2004 Simple Annualized (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC MIP - Savings Plan - Growth 8.99 10.74 4.94 9.30
CRISIL MIP Blended Index (Scheme Benchmark) 6.42 9.09 5.26 7.12
CRISIL 1 Year T-Bill Index (Standard Benchmark) 5.78 8.37 6.59 5.45
CRISIL 10 Year Gilt Index (Standard Benchmark) -0.79 11.31 2.41 4.21
Rs. 10,000, if invested in HMIP - S, would have become 10,899 11,074 10,494 24,561
Rs. 10,000, if invested in CRISIL MIP Blended Index, would have become
10,642 10,909 10,526 20,049
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,578 10,837 10,659 17,090
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
9,921 11,131 10,241 15,170
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to
6
HSBC MIP
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
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HSBC MIP
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
8
HSBC MIP
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC MIP - Regular Plan 449,666.85 622 263,667.06 14
HSBC MIP - Savings Plan 621,985.96 751 91,953.03 14
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 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
9
HSBC MIP
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
10
HSBC MIP
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC MIP (the “Scheme”),
which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
11
HSBC MIP
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
12
HSBC MIP
Abridged Balance Sheet as at March 31, 2014
Rs. in Lakhs
HSBC MIP - REGULAR PLANAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 8,031.08 14,589.362 Reserves & Surplus2.1 Unit Premium Reserves 218.48 615.712.2 Unrealised Appreciation Reserve 524.81 336.922.3 Other Reserves 2,369.14 3,500.023 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 67.83 323.87
TOTAL 11,211.34 19,365.88
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 1,704.99 2,678.891.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 5,365.42 9,710.991.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – 37.861.2.2 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 – 505.131.3.5 Securitised Debt securities – –1.4 Government Securities 963.531.5 Treasury Bills – 2,324.081.6 Commercial Paper – –1.7 Certifi cate of Deposits 2,829.75 477.951.8 Bill Rediscounting – 2,535.841.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 10,863.69 18,270.742 Deposits 9.87 58.193 Other Current Assets3.1 Cash & Bank Balance 1.12 128.613.2 CBLO / Reverse Repo Lending 22.33 152.683.3 Others 314.33 755.664 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 11,211.34 19,365.88
Notes to Accounts - Annexure I
13
HSBC MIP
Abridged Balance Sheet as at March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC MIP - SAVINGS PLANAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 11,402.41 21,284.722 Reserves & Surplus2.1 Unit Premium Reserves 961.11 2,211.512.2 Unrealised Appreciation Reserve 1,059.58 516.362.3 Other Reserves 5,213.17 7,723.533 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 163.37 429.50
TOTAL 18,799.64 32,165.62
ASSETS1 Investments1.1 Listed Securities:1.1.1 Equity Shares 4,956.02 6,779.521.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 7,116.17 14,288.291.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – 149.681.2.2 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 – 505.131.3.5 Securitised Debt securities – –1.4 Government Securities 1,652.33 –1.5 Treasury Bills – 4,751.921.6 Commercial Paper – –1.7 Certifi cate of Deposits 4,563.56 –1.8 Bill Rediscounting – 4,068.841.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 18,288.08 30,543.382 Deposits – 67.323 Other Current Assets3.1 Cash & Bank Balance 36.79 205.473.2 CBLO / Reverse Repo Lending 26.04 244.283.3 Others 448.73 1,105.174 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 18,799.64 32,165.62
Notes to Accounts - Annexure I
14
HSBC MIP
Rs. in Lakhs
HSBC MIP - REGULAR PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 37.97 33.721.2 Interest 1,174.11 1,336.991.3 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(66.28) 398.61
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 10.42 20.55
(A) 1,156.22 1,789.872 EXPENSES2.1 Management fees 223.86 184.042.2 Service tax on Management fees 27.67 22.752.3 Transfer agents fees and expenses 12.95 18.342.4 Custodian fees 0.91 2.972.5 Trusteeship fees 0.85 0.162.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 143.10 216.332.8 Audit fees 1.64 2.702.9 Investor Education Expenses 3.17 1.942.10 Other operating expenses 8.67 11.412.11 Expenses to be Reimbursed by the Investment Manager (14.30) (56.01)
(B) 408.52 404.64
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 747.70 1,385.23
4 Change in Unrealised Depreciation invalue of investments (D) (26.80) (46.96)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 720.90 1,432.17
6 Change in Unrealised appreciation inthe value of investments (F) 187.89 278.16
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 908.79 1,710.33
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 187.89 (278.16)7.3 Add / (Less): Equalisation (1,184.47) 618.467.4 Transfer from Reserve Fund 3,500.02 2,282.07
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 3,036.45 4,332.70
9 Dividend Appropriation9.1 Income Distributed during the year (523.95) 728.749.2 Tax on income distributed during the year (143.36) 104.0010 Retained Surplus / (Defi cit) carried forward to
Balance sheet 2,369.14 3,500.02
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
Abridged Revenue Account for the year ended March 31, 2014
15
HSBC MIP
Abridged Revenue Account for the year ended March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC MIP - SAVINGS PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend 109.41 96.341.2 Interest 1,703.53 1,810.571.3 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
investments351.63 883.09
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 22.33 23.45
(A) 2,186.90 2,813.452 EXPENSES2.1 Management fees 359.43 276.442.2 Service tax on Management fees 44.43 34.172.3 Transfer agents fees and expenses 21.34 28.452.4 Custodian fees 1.62 5.402.5 Trusteeship fees 1.40 0.242.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 209.29 266.252.8 Audit fees 2.74 4.492.9 Investor Education Expenses 5.24 2.862.10 Other operating expenses 13.70 17.212.11 Expenses to be Reimbursed by the Investment Manager (12.75) (29.45)
(B) 646.44 606.06
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 1,540.46 2,207.39
4 Change in Unrealised Depreciation invalue of investments (D) (36.21) (54.90)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,504.25 2,262.29
6 Change in Unrealised appreciation inthe value of investments (F) 543.22 472.74
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 2,047.47 2,735.03
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 543.22 (472.74)7.3 Add / (Less): Equalisation (3,123.95) 1,320.627.4 Transfer from Reserve Fund 7,723.53 5,167.66
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 6,103.83 8,750.57
9 Dividend Appropriation9.1 Income Distributed during the year (699.70) 899.069.2 Tax on income distributed during the year (190.96) 127.97
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 5,213.17 7,723.53
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
16
HSBC MIP
Key Statistics for the year ended March 31, 2014
HSBC MIP - REGULAR PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Growth Option 19.7509 17.9418
Monthly Dividend Option 11.2060 10.8567
Quarterly Dividend Option 11.4663 11.1707
Direct Plan - Growth Option 19.8072 N.A.
Direct Plan - Monthly Dividend Option – N.A.
Direct Plan - Quarterly Dividend Option – N.A.
High
Growth Option 21.0971 19.8650
Monthly Dividend Option 11.6288 11.4517
Quarterly Dividend Option 11.9620 11.7334
Direct Plan - Growth Option 21.2729 19.8746
Direct Plan - Monthly Dividend Option 11.1174 N.A.
Direct Plan - Quarterly Dividend Option – N.A.
Low
Growth Option 19.1241 17.9188
Monthly Dividend Option 10.6080 10.7503
Quarterly Dividend Option 10.8953 11.0965
Direct Plan - Growth Option 19.2191 19.6523
Direct Plan - Monthly Dividend Option 10.9079 –
Direct Plan - Quarterly Dividend Option – –
End5
Growth Option 21.1288 19.7509
Monthly Dividend Option 11.1767 11.2060
Quarterly Dividend Option 11.4112 11.4663
Direct Plan - Growth Option 21.3058 19.8072
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 11,144 19,042
Average (AAuM)1 15,846 17,531
3. Gross income as % of AAuM2 7.30% 10.21%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Growth Option 2.58% 2.31%
Direct Plan - Growth Option 2.06% 1.31%
17
HSBC MIP
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC MIP - REGULAR PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
b. Management Fee as % of AAuM (planwise)
Growth Option 1.41% 1.05%
Direct Plan - Growth Option 1.41% 1.05%
5. Net Income as a percentage of AAuM3 4.72% 7.90%
6. Portfolio turnover ratio4 2.37 0.04
7. Total Dividend per unit distributed during the year (planwise)
Retail
Monthly Dividend Option 0.6097 0.6298
Quarterly Dividend Option 0.6390 0.7047
Direct Plan - Monthly Dividend Option 0.1013 –
Direct Plan - Quarterly Dividend Option – –
Corporate
Monthly Dividend Option 0.5784 0.5398
Quarterly Dividend Option 0.6120 0.6040
Direct Plan - Monthly Dividend Option 0.0970 –
Direct Plan - Quarterly Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Growth Option 6.6025 10.2900
Direct Plan - Growth Option 7.1936 –
Benchmark
CRISIL MIP Blended Index 6.4349% 9.4300%
b. Since Inception
Scheme
Growth Option 7.6694 7.7900
Direct Plan - Growth Option 6.7307 1.1700
Benchnmark
CRISIL MIP Blended Index 7.1246% 7.2000%
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day), and not the last declared NAV.
18
HSBC MIP
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC MIP - SAVINGS PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Growth Option 22.4490 20.2618
Monthly Dividend Option 12.1235 11.6161
Quarterly Dividend Option 12.1257 11.6955
Direct Plan - Growth Option 22.5006 N.A.
Direct Plan - Monthly Dividend Option 12.1546 N.A.
Direct Plan - Quarterly Dividend Option 12.2505 N.A.
High
Growth Option 24.5358 22.8713
Monthly Dividend Option 12.6437 12.5338
Quarterly Dividend Option 12.7077 12.5566
Direct Plan - Growth Option 24.7143 22.8753
Direct Plan - Monthly Dividend Option 12.7338 12.5391
Direct Plan - Quarterly Dividend Option 12.8546 12.5333
Low
Growth Option 21.5800 19.9892
Monthly Dividend Option 11.4139 11.3915
Quarterly Dividend Option 11.4507 11.5232
Direct Plan - Growth Option 21.6770 22.3945
Direct Plan - Monthly Dividend Option 11.4691 12.1502
Direct Plan - Quarterly Dividend Option 11.5962 12.1927
End5
Growth Option 24.5876 22.4490
Monthly Dividend Option 12.4529 12.1235
Quarterly Dividend Option 12.4115 12.1257
Direct Plan - Growth Option 24.7675 22.5006
Direct Plan - Monthly Dividend Option 12.6961 12.1546
Direct Plan - Quarterly Dividend Option 12.8823 12.2505
2. Closing Assets Under Management (Rs. in Lakhs)
End 18,636 31,736
Average (AAuM)1 26,185 27,006
3. Gross income as % of AAuM2 8.35% 10.42%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Growth Option 2.47% 2.24%
Direct Plan - Growth Option 1.97% 1.35%
19
HSBC MIP
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC MIP - SAVINGS PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
b. Management Fee as % of AAuM (planwise)
Growth Option 1.37% 1.02%
Direct Plan - Growth Option 1.37% 1.02%
5. Net Income as a percentage of AAuM3 5.88% 8.17%
6. Portfolio turnover ratio4 2.27 0.13
7. Total Dividend per unit distributed during the year (planwise)
Retail
Monthly Dividend Option 0.6097 0.6298
Quarterly Dividend Option 0.6390 0.7047
Direct Plan - Monthly Dividend Option 0.5084 0.1586
Direct Plan - Quarterly Dividend Option 0.4442 0.0881
Corporate
Monthly Dividend Option 0.5784 0.5398
Quarterly Dividend Option 0.6120 0.6040
Direct Plan - Monthly Dividend Option 0.4814 0.1359
Direct Plan - Quarterly Dividend Option 0.4254 0.0755
8. Returns (%):
a. Last One Year
Scheme
Growth Option 8.9944 11.1600
Direct Plan - Growth Option 9.5397 N.A.
Benchmark
CRISIL MIP Blended Index 6.4349% 9.4300%
b. Since Inception
Scheme
Growth Option 9.2981 9.3300
Direct Plan - Growth Option 7.2971 (0.4900)
Benchnmark
CRISIL MIP Blended Index 7.1246% 7.2000%
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day), and not the last declared NAV.
20
HSBC MIP
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
HSBC MIP
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 in Regular Plan as at years ended March 31, 2014 and March 31, 2013 are NIL.
Open Positions of derivatives in Savings Plan as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of year ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Regular Plan as of fi nancial years March 31, 2014 and March 31, 2013 are NIL.
Open positions of Securities Borrowed and / or Lent by the Savings Plan as of fi nancial years March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs for Regular Plan as on March 31, 2014 and March 31, 2013 are NIL.
NPAs for Savings Plan as on March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial years 2014 and 2013 and their percentage to net assets are as under :
Security Category 2014
REGULAR PLAN SAVINGS PLAN
Amount(Rs.)
Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
Equity Shares
– Appreciation 59,389,511 5.33 144,223,781 7.74
– Depreciation 8,162,567 0.73 40,632,343 2.18
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 422,064 0.04 689,898 0.04
– Depreciation 4,822,519 0.43 7,138,757 0.38
Government of India Securities
– Appreciation 465,058 0.04 782,081 0.04
– Depreciation 127,658 0.01 242,756 0.01
Commercial Paper / Certifi cate of Deposit
– Appreciation 916,790 0.08 1,827,357 0.10
– Depreciation – – – –
21
HSBC MIP
Security Category 2013
REGULAR PLAN SAVINGS PLAN
Amount(Rs.)
Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
Equity Shares
– Appreciation 48,561,692 2.55 127,061,686 4.00
– Depreciation 20,598,243 1.08 81,373,606 2.56
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 5,650,545 0.30 5,865,369 0.18
– Depreciation – – – –
Government of India Securities
– Appreciation – – 189,898 0.01
– Depreciation 1,720,404 0.09 3,017,800 0.10
Commercial Paper / Certifi cate of Deposit
– Appreciation 81,420 0.00~ 88,308 0.00~
– Depreciation 3,434 0.00~ 5,726 0.00~
~ 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 2013-2014 (excluding accretion of discount) are Rs. 3,750,015,905 and Rs. 451,1519,961 respectively being 236.66% and 284.72% of the average daily net assets for Regular Plan and Rs. 5,930,974,359 and Rs. 7,255,655,401 respectively being 226.50% and 277.09% of the average daily net assets for Savings Plan.
The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2012-2013 (excluding accretion of discount) are Rs. 10,122,146,971 and Rs. 9,540,484,450 respectively being 577.37% and 544.19% of the average daily net assets for Regular Plan and Rs. 14,268,398,507 and Rs. 13,673,132,468 respectively being 528.34% and 506.30% of the average daily net assets for Savings Plan.
1.8 Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as
under :
2014
REGULAR PLAN SAVINGS PLANSecurity Category Amount
(Rs.)Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
Equities – – – –
Debt Instruments – – – –
Money Market Instruments 49,905,770 4.48 – –Total 49,905,770 4.48 – –
2013
REGULAR PLAN SAVINGS PLANSecurity Category Amount
(Rs.)Percentage to Net Assets (%)
Amount(Rs.)
Percentage to Net Assets (%)
Equities 3,785,589 0.20 14,967,937 0.47
Debt Instruments 1,021,612,127 53.65 1,479,342,102 46.61
Money Market Instruments 301,378,978 15.83 406,884,335 12.82Total 1,326,776,693 69.68 1,901,194,375 59.91
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
22
HSBC MIP
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
REGULAR PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 8.82 20.71 6,281,007 45.97
HSBC InvestDirect Securities (India) Limited Associate 2013-2014 – – 23,257 0.17
SAVINGS PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 21.37 33.51 9,287,870 49.06
HSBC InvestDirect Securities (India) Limited Associate 2013-2014 – – 5,717 0.03
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
REGULAR PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2012-2013 124.13 67.78 11,110,386 46.43
HSBC InvestDirect Securities (India) Limited Associate 2012-2013 1.45 0.79 119,601 0.50
SAVINGS PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2012-2013 139.55 62.54 10,085,595 35.36
HSBC InvestDirect Securities (India) Limited Associate 2012-2013 0.03 0.01 10,830 0.04
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
REGULAR PLAN
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2013-2014 0.96 0.44 11,546 2.70
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
23
HSBC MIP
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
SAVINGS PLAN
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2013-2014 2.14 0.60 25,682 2.07
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
REGULAR PLAN
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2012-2013 0.92 0.03 11,336 2.55
SAVINGS PLAN
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2012-2013 1.37 0.03 21,363 1.82
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Schemes at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
REGULAR PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2013-2014
Growth Option 30,599,797.881 15,251,551.850 24,487,138.662 21,364,211.069 10
Monthly Dividend Option
85,184,893.885 5,590,854.544 49,365,485.930 41,410,262.499 10
Quarterly Dividend Option
30,107,808.250 1,277,319.049 13,849,930.728 17,535,196.571 10
Direct Plan - Growth Option
1,102.368 – – 1,102.368 10
Direct Plan - Monthly Dividend Option
– 1,598,553.821 1,598,553.821 – –
Direct Plan - Quarterly Dividend Option
– – – – –
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
24
HSBC MIP
REGULAR PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2012-2013
Growth Option 25,190,883.853 27,369,946.094 21,961,032.066 30,599,797.881 10
Monthly Dividend Option
47,890,665.602 93,426,770.016 56,132,541.733 85,184,893.885 10
Quarterly Dividend Option
27,637,190.189 22,119,104.233 19,648,486.172 30,107,808.250 10
Direct Plan - Growth Option
N.A 1,102.368 – 1,102.368 10
Direct Plan - Monthly Dividend Option
N.A – – – –
Direct Plan - Quarterly Dividend Option
N.A – – – –
SAVINGS PLAN
Description Opening Units Subscription Redemption Closing Units Face Value
per Unit (Rs.)
2013-2014
Growth Option 57,181,395.711 18,492,745.290 39,327,285.898 36,346,855.103 10
Monthly Dividend Option
107,809,474.513 8,196,425.002 68,836,307.105 47,169,592.410 10
Quarterly Dividend Option
47,537,058.894 3,262,495.214 20,827,301.445 29,972,252.663 10
Direct Plan - Growth Option
253,338.899 201,592.190 144,315.268 310,615.821 10
Direct Plan - Monthly Dividend Option
31,718.984 203,143.415 10,357.349 224,505.050 10
Direct Plan - Quarterly Dividend Option
34,214.030 469.870 34,442.262 241.638 10
2012-2013
Description Opening Units Subscription Redemption Closing Units Face Value
per Unit (Rs.)
Growth Option 47,426,311.868 35,143,406.073 25,388,322.230 57,181,395.711 10
Monthly Dividend Option
65,944,933.379 100,688,078.917 58,823,537.783 107,809,474.513 10
Quarterly Dividend Option
61,863,124.889 15,385,623.348 29,711,689.343 47,537,058.894 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
25
HSBC MIP
Direct Plan - Growth Option
N.A 253,338.899 – 253,338.899 10
Direct Plan - Monthly Dividend Option
N.A 31,718.984 – 31,718.984 10
Direct Plan - Quarterly Dividend Option
N.A 34,214.030 – 34,214.030 10
5 Prior year amounts have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for Regular Plan and Savings Plan for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income of Rs. 1,041,659 in Regular Plan (2013: Rs.2,055,098) and 2,233,284 (2013: Rs.2,344,638) in Savings Plan represents Exit Load (net of service tax) credited to the Scheme and Provision for Expense written back since no longer required.
9 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
26
HSBC MIP
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
27
HSBC MIP
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
28
HSBC MIPHSBC MIP FUND
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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 Combined 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
HSBC Income FundAn open-ended Income Scheme
Abridged Annual Report 2013 - 2014
1
HSBC INCOME FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC INCOME FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC INCOME FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
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. 61.65 crores as at March 31, 2014 as compared to Rs. 89.77 crores as at March 31, 2013. Around 94.86% of the net assets were invested in debt and money market instruments, 1.26% of the net assets were invested in reverse repos / CBLO and 3.88% were in net current assets as at March 31, 2014. The net assets of HSBC Income Fund - Short Term Plan (HIF - STP) amounted to Rs. 727.27 crores as at March 31, 2014 as compared to Rs. 1035.16 crores as at March 31, 2013. Around 96.70% of the net assets were invested in debt and money market instruments, 0.23% of the net assets were invested in reverse repos / CBLO and 3.07% were in net current assets as at March 31, 2014.
HIF-IP and HIF - STP underperformed their benchmark due to higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
HIF - IP
Date of Inception : 10 December 2002 Simple Annualized (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Income Fund - Investment Plan - Growth 1.85 11.19 8.86 6.65
CRISIL Composite Bond Fund Index (Scheme Benchmark)
4.34 9.27 7.68 5.72
CRISIL 10 Year Gilt Index (Standard Benchmark) -0.79 11.31 2.41 5.03
Rs. 10,000, if invested in HIF - IP, would have become
10,185 11,119 10,886 20,725
Rs. 10,000, if invested in CRISIL Composite Bond Fund Index, would have become
10,434 10,927 10,768 18,767
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
9,921 11,131 10,241 17,431
HIF - STP
Date of Inception : 10 December 2002 Simple Annualized (%) Compounded Annualized (%)
Date of Inception : 10 December 2002 Simple Annualized (%) Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Income Fund - S T P - Growth 7.23 9.26 8.41 6.80
5
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Date of Inception : 10 December 2002 Simple Annualized (%) Compounded Annualized (%)
CRISIL Short Term Bond Fund Index (Scheme Benchmark)
8.79 9.09 8.28 6.64
CRISIL 1 Year T-Bill Index (Standard Benchmark) 5.78 8.37 6.59 5.44
Rs. 10,000, if invested in HIF -ST, would have become
10,723 10,926 10,841 21,047
Rs. 10,000, if invested in CRISIL Short Term Bond Fund Index, would have become
10,879 10,909 10,828 20,691
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,578 10,837 10,659 18,205
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
6
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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.
7
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
8
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Income Fund - Investment Plan 451,115.42 863 256,393.67 26
HSBC Income Fund - Short Term Plan 57,619.92 43 – –
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 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
9
HSBC INCOME FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
10
HSBC INCOME FUND
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Income Fund
(the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and cash fl ow 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
11
HSBC INCOME FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
12
HSBC INCOME FUND
Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLANAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 3,248.83 5,270.04
2 Reserves & Surplus2.1 Unit Premium Reserves (622.35) (700.59)2.2 Unrealised Appreciation Reserve 4.11 11.542.3 Other Reserves 3,534.24 4,396.633 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 21.60 315.83
TOTAL 6,186.43 9,293.45
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 2,977.66 4,260.571.1.5 Securitised Debt securities 20.06 –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 – 28.201.4 Government Securities 1,827.14 2,164.571.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits 1,021.83 1,838.171.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 5,846.69 8,291.512 Deposits 10.35 9.603 Other Current Assets3.1 Cash & Bank Balance 8.47 133.403.2 CBLO / Reverse Repo Lending 77.82 158.473.3 Others 243.10 700.474 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 6,186.43 9,293.45
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
13
HSBC INCOME FUND
Abridged Balance Sheet as at March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC INCOME FUND – SHORT TERM PLANAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 49,741.50 89,064.58
2 Reserves & Surplus2.1 Unit Premium Reserves 3,752.01 4,661.022.2 Unrealised Appreciation Reserve 51.93 300.802.3 Other Reserves 19,181.96 9,489.233 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 351.33 600.44
TOTAL 73,078.73 104,116.07
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 42,206.73 51,849.281.1.5 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 – 2,834.951.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 2,289.96 3,152.411.7 Certifi cate of Deposits 25,860.81 42,637.521.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 70,357.50 100,474.162 Deposits 29.04 12.453 Other Current Assets3.1 Cash & Bank Balance 159.07 64.563.2 CBLO / Reverse Repo Lending 166.41 908.963.3 Others 2,366.71 2,655.944 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 73,078.73 104,116.07
Notes to Accounts - Annexure I
14
HSBC INCOME FUND
Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 878.88 408.331.3 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(520.49) 139.74
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 5.78 10.33
(A) 364.17 558.402 EXPENSES2.1 Management fees 99.08 43.582.2 Service tax on Management fees 12.25 5.392.3 Transfer agents fees and expenses 5.99 3.102.4 Custodian fees 0.41 0.482.5 Trusteeship fees 0.07 0.00~2.6 Commission to Agents* – –2.7 Marketing & Distribution expenses 83.74 49.322.8 Audit fees 0.20 0.202.9 Investor Education Expenses 2.08 0.582.10 Other operating expenses 1.52 0.772.11 Less:Expenses to be Reimbursed by the Investment Manager (0.74) (14.62)
(B) 204.60 88.803 NET REALISED GAINS / (LOSSES) FOR
THE YEAR (A - B = C) 159.57 469.60
4 Change in Unrealised Depreciation invalue of investments (D) (93.76) 4.65
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 65.81 464.95
6 Change in unrealised appreciation inthe value of investments (F) (7.42) (7.51)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 58.39 457.44
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 7.42 7.517.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation (816.33) 2,388.077.4 Transfer from Reserve Fund 4,396.63 1,727.75
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 3,646.11 4,580.77
9 Dividend Appropriation9.1 Income Distributed during the year (86.97) 161.169.2 Tax on income distributed during the year (24.90) 22.97
10 Retained Surplus / (Defi cit) carried forward to Balance Sheet 3,534.24 4,396.64
~ Indicates less than 0.01Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.
Abridged Revenue Account for the year ended March 31, 2014
15
HSBC INCOME FUND
Abridged Revenue Account for the year ended March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC INCOME FUND – SHORT TERM PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 9,118.75 7,873.121.3 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(656.80) 281.13
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 1.06 27.26
(A) 8,463.01 8,181.512 EXPENSES2.1 Management fees 406.82 336.312.2 Service tax on Management fees 50.28 41.572.3 Transfer agents fees and expenses 50.72 42.312.4 Custodian fees 7.17 16.582.5 Trusteeship fees 0.57 0.032.6 Commission to Agents* – –2.7 Marketing & Distribution expenses 603.66 527.022.8 Audit fees 1.90 1.662.9 Investor Education Expenses 20.35 10.272.10 Other operating expenses 9.34 6.422.11 Less:Expenses to be Reimbursed by the Investment Manager – –
(B) 1,150.81 982.173 NET REALISED GAINS / (LOSSES) FOR
THE YEAR (A - B = C) 7,312.20 7,199.34
4 Change in Unrealised Depreciation invalue of investments (D) (264.83) (89.04)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 7,047.37 7,288.38
6 Change in unrealised appreciation inthe value of investments (F) (248.87) 300.80
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 6,798.50 7,589.18
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 248.87 (300.80)7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 6,189.32 4,290.227.4 Transfer from Reserve Fund 9,489.23 3,092.03
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 22,725.92 14,670.63
9 Dividend Appropriation9.1 Income Distributed during the year (2,788.71) 4,480.329.2 Tax on income distributed during the year (755.25) 701.09
10 Retained Surplus / (Defi cit) carried forward toBalance Sheet 19,181.96 9,489.22
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
16
HSBC INCOME FUND
Key Statistics for the year ended March 31, 2014
HSBC INCOME FUND –INVESTMENT PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
1. NAV per unit (Rs.):
Open
Regular Growth Option 20.3378 18.3173
Regular Dividend Option – –
Regular Quarterly Dividend Option 11.3637 11.1764
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 20.3949 N.A.
Direct Plan - Dividend Option – N.A.
Direct Plan - Weekly Dividend Option – N.A.
Direct Plan - Monthly Dividend Option – N.A.
Direct Plan - Quarterly Dividend Option – N.A.
High
Regular Growth Option 21.3223 20.3373
Regular Dividend Option 11.9141 11.6100
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option 10.0000 –
Institutional Dividend Option 10.0000 –
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 21.4215 20.3949
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
17
HSBC INCOME FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC INCOME FUND –INVESTMENT PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
Low
Regular Growth Option 19.4048 18.3125
Regular Dividend Option 10.6130 11.1735
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option – –
Regular Monthly Dividend Option – –
Institutional Growth Option 10.0000 –
Institutional Dividend Option 10.0000 –
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 19.5283 20.0436
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
End5
Regular Growth Option 20.8029 20.3378
Regular Dividend Option 10.7132 11.3637
Regular Quarterly Dividend Option – –
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 21.0320 20.3949
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
18
HSBC INCOME FUND
HSBC INCOME FUND –INVESTMENT PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
2. Closing Assets Under Management (Rs. in Lakhs)
End 6,165 8,978
Average (AAuM)1 10,404 4,647
3. Gross income as % of AAuM2 3.50% 12.02%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.97% 1.91%
Institutional Growth Option – –
Institutional Plus Growth Option – –
Direct Plan - Growth Option 0.98% 0.67%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.95% 0.94%
Institutional Growth Option – –
Institutional Plus Growth Option – –
Direct Plan - Growth Option 0.95% 0.94%
5. Net Income as a percentage of AAuM3 1.53% 10.11%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option – –
Regular Weekly Dividend Option – –
Regular Quarterly Dividend Option 0.7013 0.8809
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
Corporate
Regular Dividend Option – –
Regular Weekly Dividend Option – –
Key Statistics for the year ended March 31, 2014 (Contd...)
19
HSBC INCOME FUND
HSBC INCOME FUND –INVESTMENT PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
Regular Quarterly Dividend Option 0.6717 0.7550
Regular Monthly Dividend Option – –
Institutional Growth Option – –
Institutional Dividend Option – –
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
Direct Plan - Monthly Dividend Option – –
Direct Plan - Quarterly Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 1.8450 11.0400
Institutional Growth Option N.A. N.A.
Institutional Plus Growth Option N.A. N.A.
Direct Plan - Growth Option 2.672 N.A.
Benchmark
CRISIL Composite Bond Fund Index 4.3172 9.3000
b. Since Inception
Scheme
Regular Growth Option 6.6524 7.1300
Institutional Growth Option N.A. N.A.
Institutional Plus Growth Option N.A. N.A.
Direct Plan - Growth Option 3.7052 1.8200
Benchmark
CRISIL Composite Bond Fund Index 5.7214 5.8600
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business
Day), and not the last declared NAV.
Key Statistics for the year ended March 31, 2014 (Contd...)
20
HSBC INCOME FUND
HSBC INCOME FUND –SHORT TERM PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
1. NAV per unit (Rs.):
Open
Regular Growth Option 19.5968 17.9326
Regular Dividend Option 10.9993 10.9290
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option 10.2024 10.1597
Regular Monthly Dividend Option – –
Institutional Growth Option 15.6467 14.2427
Institutional Dividend Option 10.6388 10.4851
Institutional Weekly Dividend Option 11.5522 10.5156
Institutional Monthly Dividend Option
Institutional Plus Growth Option 11.3291 10.3022
Institutional Plus Weekly Dividend Option 10.0164 10.0577
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 19.6364 N.A.
Direct Plan - Dividend Option 11.0004 N.A.
Direct Plan - Weekly Dividend Option 10.2032 N.A.
Direct Plan - Monthly Dividend Option N.A. N.A.
Direct Plan - Quarterly Dividend Option N.A. N.A.
High
Regular Growth Option 21.0455 19.5968
Regular Dividend Option – 11.0861
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option 10.3313 10.2477
Regular Monthly Dividend Option 11.1843 –
Institutional Growth Option 16.8953 15.6467
Institutional Dividend Option – 10.6414
Institutional Weekly Dividend Option 12.4741 11.5522
Institutional Monthly Dividend Option 11.4878 –
Institutional Plus Growth Option 12.2451 11.3291
Institutional Plus Weekly Dividend Option 10.1429 10.0948
Institutional Plus Monthly Dividend Option 10.0000 –
Direct Plan - Growth Option 21.2481 19.6364
Direct Plan - Dividend Option – 11.1040
Direct Plan - Weekly Dividend Option 10.3329 10.2172
Direct Plan - Monthly Dividend Option 11.1925 –
Direct Plan - Quarterly Dividend Option – –
Key Statistics for the year ended March 31, 2014 (Contd...)
21
HSBC INCOME FUND
HSBC INCOME FUND –SHORT TERM PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
Low
Regular Growth Option 19.6018 17.9504
Regular Dividend Option – 10.9228
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option 9.9771 10.1540
Regular Monthly Dividend Option 10.7871 –
Institutional Growth Option 15.6747 14.2571
Institutional Dividend Option – 10.4791
Institutional Weekly Dividend Option 11.5729 10.5263
Institutional Monthly Dividend Option 10.6579 –
Institutional Plus Growth Option 11.3494 10.3127
Institutional Plus Weekly Dividend Option 9.8006 10.0000
Institutional Plus Monthly Dividend Option 10.0000 –
Direct Plan - Growth Option 19.6720 19.2638
Direct Plan - Dividend Option – 10.9920
Direct Plan - Weekly Dividend Option 9.9874 10.1800
Direct Plan - Monthly Dividend Option 10.7989 –
Direct Plan - Quarterly Dividend Option – –
End5
Regular Growth Option 21.0588 19.5968
Regular Dividend Option – 10.9993
Regular Quarterly Dividend Option – –
Regular Weekly Dividend Option 10.1987 10.2024
Regular Monthly Dividend Option 10.9979 –
Institutional Growth Option 16.9067 15.6467
Institutional Dividend Option – 10.6388
Institutional Weekly Dividend Option 12.4826 11.5522
Institutional Monthly Dividend Option 11.4956 –
Institutional Plus Growth Option 12.2535 11.3291
Institutional Plus Weekly Dividend Option 10.0428 10.0164
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 21.2629 19.6364
Direct Plan - Dividend Option – 11.0004
Direct Plan - Weekly Dividend Option 10.2237 10.2032
Direct Plan - Monthly Dividend Option 11.0402 N.A.
Direct Plan - Quarterly Dividend Option – N.A.
Key Statistics for the year ended March 31, 2014 (Contd...)
22
HSBC INCOME FUND
HSBC INCOME FUND –SHORT TERM PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
2. Closing Assets Under Management (Rs. in Lakhs)
End 72,727 103,516
Average (AAuM)1 101,742 86,024
3. Gross income as % of AAuM2 8.32% 9.51%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.30% 1.25%
Institutional Growth Option 0.75% 0.72%
Institutional Plus Growth Option 0.65% 0.62%
Direct Plan - Growth Option 0.54% 0.45%
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 7.19% 8.37%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option – 0.7993
Regular Weekly Dividend Option 0.5884 0.7593
Regular Quarterly Dividend Option – –
Regular Monthly Dividend Option 0.6248 –
Institutional Growth Option – –
Institutional Dividend Option – 0.7401
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option 0.6066 0.3727
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – 0.1442
Direct Plan - Weekly Dividend Option 0.6326 0.0898
Direct Plan - Monthly Dividend Option 0.6625 –
Direct Plan - Quarterly Dividend Option – –
Corporate
Regular Dividend Option – 0.6850
Regular Weekly Dividend Option 0.5517 0.6508
Key Statistics for the year ended March 31, 2014 (Contd...)
23
HSBC INCOME FUND
HSBC INCOME FUND –SHORT TERM PLAN
Current Year ended March 31,
2014
Previous Year ended March 31,
2013
Regular Quarterly Dividend Option – –
Regular Monthly Dividend Option 0.5920 –
Institutional Growth Option – –
Institutional Dividend Option – 0.6343
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option 0.5684 0.3195
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option – –
Direct Plan - Dividend Option – 0.1236
Direct Plan - Weekly Dividend Option 0.5929 0.0769
Direct Plan - Monthly Dividend Option 0.6274 –
Direct Plan - Quarterly Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.2303 9.4200
Institutional Growth Option 7.8215 10.0000
Institutional Plus Growth Option 7.9282 10.1100
Direct Plan - Growth Option 8.0500 N.A.
Benchmark
CRISIL Short-Term Bond Fund Index 8.7808 9.10
b. Since Inception
Scheme
Regular Growth Option 6.7980 6.7600
Institutional Growth Option 4.5922 4.2600
Institutional Plus Growth Option 4.0416 3.1200
Direct Plan - Growth Option 8.2662 2.1100
Benchmark
CRISIL Short-Term Bond Fund Index 6.6371 6.4300
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business
Day), and not the last declared NAV.
Key Statistics for the year ended March 31, 2014 (Contd...)
24
HSBC INCOME FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC INCOME 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 of years ended March 31, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
303,181,609 555,832,950 – –
Bharti Airtel Ltd. Equities – 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs for the Scheme for the years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial years 2014 and 2013 and their percentages to net assets are as under :
Security Category 2014
INVESTMENT PLAN SHORT TERM PLAN
Amount (Rupees)
Percentage to Net Assets
Amount (Rupees)
Percentage to Net Assets (%)
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 115,305 0.02 7,233,573 0.10
– Depreciation 10,574,567 1.72 34,190,434 0.47
Certifi cate of Deposits
– Appreciation 411,394 0.07 5,648,608 0.08
– Depreciation – – 455,397 0.01
Asset Backed Securities
– Appreciation – – – –
– Depreciation 96,818 0.02 – –
Government of India Securities
– Appreciation 166,829 0.03 – –
– Depreciation 419,959 0.07 – –
25
HSBC INCOME FUND
Security Category 2013
INVESTMENT PLAN SHORT TERM PLAN
Amount (Rupees)
Percentage to Net Assets (%)
Amount (Rupees)
Percentage to Net Assets (%)
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 1,063,680 0.12 29,555,616 0.29
– Depreciation 23,530 0.00~ 1,472,104 0.01
Certifi cate of Deposits
– Appreciation 196,778 0.02 2,017,844 0.02
– Depreciation 83,264 0.01 2,491,787 0.02
Asset Backed Securities
– Appreciation – – – –
– Depreciation 144,464 0.02 – –
Government of India Securities
– Appreciation 14,545 0.00~ – –
– Depreciation 1,303,656 0.15 – –
~ 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 2013-2014 (excluding accretion of discount) are Rs. 3,352,599,512 and Rs. 3,537,242,887 respectively being 322.24% and 339.98% of the average daily net assets for Investment Plan and Rs.23,614,085,753 and Rs. 26,833,445,848 respectively being 232.10% and 263.74% 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 2012-2013 (excluding accretion of discount) are Rs. 4,706,833,538 and Rs. 4,208,469,888 respectively being 1,012.93% and 905.68% of the average daily net assets for Investment Plan and Rs.22,701,435,356 and Rs. 17,761,204,981 respectively being 263.90% and 206.47% 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:
Security Category 2014
INVESTMENT PLAN SHORT TERM PLAN
Fair Value (Rupees)
Percentage to Net Assets (%)
Fair Value (Rupees)
Percentage to Net Assets (%)
Debt Instruments – – 151,127,906 2.08
Money market Instruments 9,981,154 1.62 163,212,843 2.24
Total 9,981,154 1.62 314,340,749 4.32
Security Category 2013
INVESTMENT PLAN SHORT TERM PLAN
Fair Value (Rupees)
Percentage to Net Assets (%)
Fair Value (Rupees)
Percentage to Net Assets (%)
Debt Instruments 428,876,612 47.77 5,468,424,161 52.83
Money market Instruments 183,816,745 20.47 4,578,993,084 44.23
Total 612,693,357 68.25 10,047,417,245 97.06
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
26
HSBC INCOME FUND
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended
During the year 2013-14, 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 2012-13, The Hong Kong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 14,400 for the Investment and Nil for Short Term 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 2013-2014 18.12 22.92 1,887,298 18.85
HSBC InvestDirect Securities (India) Limited Associate 2013-2014 – – 6,891 0.07
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 484.45 52.83 28,126,764 51.51
HSBC InvestDirect Securities (India) Limited Associate 2013-2014 – – 5,192 0.01
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 2012-2013 7.04 7.53 1,443,592 16.80
HSBC InvestDirect Securities (India) Limited Associate 2012-2013 1.34 0.01 7,603 0.09
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2012-2013 926.80 70.41 38,057,492 79.93
HSBC InvestDirect Securities (India) Limited Associate 2012-2013 36.56 0.03 9,215 0.02
The brokerage paid was at rates similar to those offered to other distributors.
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.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
27
HSBC INCOME FUND
3 None of the Investors held more than 25% of the total net assets of Investment Plan and Short Term as at the years ended on March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
INVESTMENT PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit
(Rs.)
2013-2014
Regular Dividend Option 19,394,182.657 4,321,548.694 17,830,108.388 5,885,622.963 10
Regular Growth Option 33,035,257.618 33,616,852.305 40,122,448.660 26,529,661.263 10
Direct Plan - Growth Option
270,964.576 54,344.680 252,331.240 72,978.016 10
SHORT TERM PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2013-2014
Regular Dividend Option
370,705,152.327 121,941,485.695 319,715,551.495 172,931,086.527 10
Regular Growth Option
62,296,842.748 278,038,211.224 174,685,689.266 165,649,364.706 10
Regular Weekly Dividend Option
229,344,801.286 140,614,152.923 273,918,246.045 96,040,708.164 10
Institutional Dividend Option
574,716.029 – – 574,716.029 10
Institutional Growth Option
1,150,179.747 – – 1,150,179.747 10
Institutional Weekly Dividend Option
599,442.020 – – 599,442.020 10
Institutional Plus Growth Option
187,486,390.279 – 167,054,914.663 20,431,475.616 10
Institutional Plus Weekly Dividend Option
20,163,437.936 – – 20,163,437.936 10
Institutional Plus Monthly Dividend Option
– – – – –
Direct Plan - Growth Option
17,929,537.776 24,629,333.385 23,257,134.565 19,301,736.596 10
Direct Plan - Dividend Option
286,992.438 369,748.973 245,211.630 411,529.781 10
Direct Plan - Weekly Dividend Option
108,286.444 11,487,365.067 11,434,378.172 161,273.339 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
28
HSBC INCOME FUND
INVESTMENT PLAN
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
2012-2013
Regular Dividend Option 12,511,711.693 32,246,431.523 25,363,960.559 19,394,182.657 10
Regular Growth Option 11,289,177.633 28,107,872.695 6,361,792.710 33,035,257.618 10
Direct Plan - Growth Option
– 270,964.576 – 270,964.576 10
SHORT TERM PLAN
Description Opening Units Subscription Redemption Closing Units Face Valueper unit (Rs.)
2012-2013
Regular Dividend Option
189,739,498.135 485,522,821.357 304,557,167.165 370,705,152.327 10
Regular Growth Option
37,385,177.849 78,505,777.953 53,594,113.054 62,296,842.748 10
Regular Weekly Dividend Option
164,471,325.280 336,961,936.550 272,088,460.544 229,344,801.286 10
Institutional Dividend Option
5,802,837.692 2,537,627.329 7,765,748.992 574,716.029 10
Institutional Growth Option
5,567,054.565 421,884.758 4,838,759.576 1,150,179.747 10
Institutional Weekly Dividend Option
599,442.020 – – 599,442.020 10
Institutional Plus Growth Option
25,660,026.111 198,640,821.722 36,814,457.554 187,486,390.279 10
Institutional Plus Weekly Dividend Option
11,488,632.894 25,434,885.608 16,760,080.566 20,163,437.936 10
Institutional Plus Monthly Dividend Option
– – – – –
Direct Plan - Growth Option
– 17,929,537.776 – 17,929,537.776 10
Direct Plan - Dividend Option
– 286,992.438 – 286,992.438 10
Direct Plan - Weekly Dividend Option
– 108,286.444 – 108,286.444 10
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, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
29
HSBC INCOME FUND
8 Other Income of Rs. 578,425 (2013: Rs.1,032,995) in Investment Plan and Rs. 105,952 (2013: Rs.2,726,345) in Short Term Plan represents Exit load (net of service tax) credited to the Scheme.
9 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 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.
11 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
30
HSBC INCOME FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
31
HSBC INCOME FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
32
HSBC INCOME FUND
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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 Combined 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
HSBC Floating Rate Fund - Long Term Plan An open-ended Income Scheme
Abridged Annual Report 2013 - 2014
HSBC FLOATING RATE FUND - LONG TERM PLAN
1
HSBC FLOATING RATE FUND - LONG TERM PLAN
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC FLOATING RATE FUND - LONG TERM PLAN
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC FLOATING RATE FUND - LONG TERM PLAN
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC FLOATING RATE FUND - LONG TERM PLAN
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Floating Rate Fund - Long Term Plan (HFRF - LTP) - an open-ended Income Scheme
HFRF seeks to generate reasonable return with commensurate risk from a portfolio comprised of fl oating rate debt instruments and fi xed rate debt instruments swapped for fl oating rate returns. The Scheme may also invest in fi xed rate money market and debt instruments.
The net assets of the HFRF - LTP amounted to Rs. 112.48 crores as at March 31, 2014 as compared to Rs. 232.34 crores as at March 31, 2013. Around 99.94% of the net assets were invested in money market instruments, 0.48% was invested in reverse repos / CBLO and (-0.42%) were in net current assets as at March 31, 2014.
HFRF-LTP performed close to its benchmark by focusing on accruals and investing in the shorter-end of the yield curve. Short end yield curve also faced higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency.
Date of Inception : 16 November 2004 Simple Annualized (%) Compounded Annualized
(%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC FRF - LTP - Growth 9.21 9.17 9.38 7.68
CRISIL Liquid Fund Index (Scheme Benchmark) 9.46 8.22 8.45 6.96
CRISIL 1 Year T-Bill Index (Standard Benchmark) 5.78 8.37 6.59 5.67
Rs. 10,000, if invested HFRF - LTP, would have become 10,921 10,917 10,938 20,014
Rs. 10,000, if invested in CRISIL Liquid Fund Index, would have become
10,946 10,822 10,845 18,798
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become
10,578 10,837 10,659 16,776
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC FLOATING RATE FUND - LONG TERM PLAN
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC FLOATING RATE FUND - LONG TERM PLAN
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC FLOATING RATE FUND - LONG TERM PLAN
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Floating Rate Fund - Long Term Plan 41,940.78 60 14,800.65 5
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC FLOATING RATE FUND - LONG TERM PLAN
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 0 0 0 0 0 0 0 0II D Non receipt of Annual Report /
Abridged Summary0 0 0 0 0 0 0 0 0 0 0
III A Wrong switch between Schemes 0 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC FLOATING RATE FUND - LONG TERM PLAN
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Floating Rate
Fund - Long Term Plan (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
10
HSBC FLOATING RATE FUND - LONG TERM PLAN
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC FLOATING RATE FUND - LONG TERM PLAN
Rs. in Lakhs
HSBC FLOATING RATE FUND – LONG TERM PLAN
As at March 31, 2014
As at March 31, 2013
LIABILITIES1 Unit Capital 8,827.33 18,381.342 Reserves & Surplus2.1 Unit Premium Reserves 570.86 1,518.782.2 Unrealised Appreciation Reserve 19.04 2.522.3 Other Reserves 1,830.83 3,331.193 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 64.14 2,545.87
TOTAL 11,312.20 25,779.70
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 1,578.24 3,419.041.7 Certifi cate of Deposits 8,462.99 19,837.481.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 10,041.23 23,256.52
2 Deposits 1,203.98 2.443 Other Current Assets3.1 Cash & Bank Balance 9.67 8.633.2 CBLO / Reverse Repo Lending 54.31 20.053.3 Others 3.01 2,492.064 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 11,312.20 25,779.70
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC FLOATING RATE FUND - LONG TERM PLAN
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC FLOATING RATE FUND – LONG TERM PLAN
Current Year ended
March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 1,532.76 3,496.951.3 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 38.62 (18.41)1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 1,571.38 3,478.54
2 EXPENSES2.1 Management fees 57.79 82.272.2 Service tax on Management fees 7.14 10.172.3 Transfer agents fees and expenses 7.22 17.562.4 Custodian fees 1.17 7.312.5 Trusteeship fees 0.09 0.032.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 37.06 45.132.8 Audit fees 0.29 0.372.9 Investor Education Expenses 3.34 3.282.10 Other operating expenses 1.76 2.682.11 Expenses to be Reimbursed by the Investment Manager – –
(B) 115.86 168.80
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 1,455.52 3,309.74
4 Change in Unrealised Depreciation invalue of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,455.52 3,309.74
6 Change in unrealised appreciation inthe value of investments (F) 16.52 2.52
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,472.04 3,312.26
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 16.52 2.527.3 Add / (Less): Equalisation (1,824.69) 1,370.577.4 Transfer from Reserve Fund 3,331.19 1,308.29
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 2,962.02 5,988.60
9 Dividend Appropriation9.1 Income Distributed during the year (860.06) 2,070.749.2 Tax on income distributed during the year (271.13) 586.67
10 Retained Surplus / (Defi cit) carried forward toBalance sheet 1,830.83 3,331.19
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC FLOATING RATE FUND - LONG TERM PLAN
Key Statistics for the year ended March 31, 2014
HSBC FLOATING RATE FUND – LONG TERM PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):Open
Regular Growth Option 17.6333 16.3062
Regular Daily Dividend Option – 10.1111
Regular Weekly Dividend Option 10.0110 10.0073
Regular Monthly Dividend Option 10.0064 10.0028
Institutional Growth Option 18.3376 16.7933
Institutional Daily Dividend Option – –
Institutional Weekly Dividend Option 11.2390 11.2330
Institutional Fortnightly Dividend Option – –
Institutional Monthly Dividend Option 10.2196 10.1380
Direct Plan - Growth Option 18.3444 N.A.
Direct Plan - Weekly Dividend Option 10.0083 N.A.
Direct Plan - Fortnightly Dividend Option 11.2402 N.A.
Direct Plan - Monthly Dividend Option 10.1840 N.A.High
Regular Growth Option 19.1460 17.6333
Regular Daily Dividend Option – 10.3707
Regular Weekly Dividend Option 10.0375 10.0293
Regular Monthly Dividend Option 10.0984 10.0830
Institutional Growth Option 20.0309 18.3376
Institutional Daily Dividend Option 10.0255 –
Institutional Weekly Dividend Option 11.2705 11.2594
Institutional Fortnightly Dividend Option 10.0319 10.0346
Institutional Monthly Dividend Option 10.6996 10.2289
Direct Plan - Growth Option 20.1371 18.3444
Direct Plan - Weekly Dividend Option 11.2711 11.2519
Direct Plan - Fortnightly Dividend Option 10.0459 10.0353
Direct Plan - Monthly Dividend Option 10.2558 10.2129Low
Regular Growth Option 17.6536 16.3112
Regular Daily Dividend Option – 10.0000
Regular Weekly Dividend Option 9.9886 10.0045
Regular Monthly Dividend Option 10.0055 10.0000
Institutional Growth Option 18.3598 16.7985
Institutional Daily Dividend Option 9.9792 –
Institutional Weekly Dividend Option 11.2109 11.2290
Institutional Fortnightly Dividend Option 9.9912 10.0000
Institutional Monthly Dividend Option 10.2319 10.1312
Direct Plan - Growth Option 18.3666 17.9976
Direct Plan - Weekly Dividend Option 11.2152 11.2311
Direct Plan - Fortnightly Dividend Option 10.0014 10.0006
Direct Plan - Monthly Dividend Option 10.1433 10.1765
14
HSBC FLOATING RATE FUND - LONG TERM PLAN
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC FLOATING RATE FUND – LONG TERM PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
End5
Regular Growth Option 19.1583 17.6333
Regular Daily Dividend Option – –
Regular Weekly Dividend Option 10.0118 10.0110
Regular Monthly Dividend Option 10.0064 10.0064
Institutional Growth Option 20.0445 18.3376
Institutional Daily Dividend Option 10.0323 –
Institutional Weekly Dividend Option 11.2552 11.2390
Institutional Fortnightly Dividend Option – –
Institutional Monthly Dividend Option 10.4768 10.2196
Direct Plan - Growth Option 20.1518 18.3444
Direct Plan - Weekly Dividend Option 11.2392 10.0083
Direct Plan - Fortnightly Dividend Option – 11.2402
Direct Plan - Monthly Dividend Option – 10.1840
2. Closing Assets Under Management (Rs. in Lakhs)
End 11,248 23,234
Average (AAuM)1 16,707 37,932
3. Gross income as % of AAuM2 9.41% 9.17%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.31% 1.27%
Institutional Growth Option 0.68% 0.31%
Direct Plan - Growth Option 0.20% 0.16%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.35% 0.22%
Institutional Growth Option 0.35% 0.22%
Direct Plan - Growth Option 0.35% 0.22%
5. Net Income as a percentage of AAuM3 8.71% 8.73%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.4929 0.4204
Regular Weekly Dividend Option 0.6587 0.4294
Regular Monthly Dividend Option 0.6555 0.6884
Institutional Daily Dividend Option – –
Institutional Weekly Dividend Option 0.7816 0.8657
Institutional Fortnightly Dividend Option 0.1149 0.1180
Institutional Monthly Dividend Option 0.5635 0.7165
15
HSBC FLOATING RATE FUND - LONG TERM PLAN
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC FLOATING RATE FUND – LONG TERM PLANCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Direct Plan - Weekly Dividend Option 0.8392 0.1925
Direct Plan - Fortnightly Dividend Option 0.2040 0.1872
Direct Plan - Monthly Dividend Option 0.4075 0.0321
Corporate
Regular Daily Dividend Option 0.4720 0.3603
Regular Weekly Dividend Option 0.6194 0.3680
Regular Monthly Dividend Option 0.6215 0.5900
Institutional Daily Dividend Option – –
Institutional Weekly Dividend Option 0.7346 0.7420
Institutional Fortnightly Dividend Option 0.1053 0.1011
Institutional Monthly Dividend Option 0.5396 0.6141
Direct Plan - Weekly Dividend Option 0.7894 0.1650
Direct Plan - Fortnightly Dividend Option 0.1826 0.1604
Direct Plan - Monthly Dividend Option 0.3796 0.0275
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 8.5541 8.2300
Institutional Growth Option 9.2103 9.2800
Direct Plan - Growth Option 9.7574 N.A.
Benchmark
CRISIL Liquid Fund Index 9.4613 8.2300
b. Since Inception
Scheme
Regular Growth Option 7.1616 7.0000
Institutional Growth Option 7.6793 7.5000
Direct Plan - Growth Option 9.5258 2.0300
Benchmark
CRISIL Liquid Fund Index 6.9618 6.6600
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
16
HSBC FLOATING RATE FUND - LONG TERM PLAN
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC FLOATING RATE FUND – LONG TERM PLAN1 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, 2014 and year ended March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years and percentage to net assets are as follows:
Company Name Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2014 2013
Certifi cate of Deposits / Commercial Papers
– Appreciation 1,904,102 0.17 434,216 0.02
– Depreciation – – 181,770 0.01
1.7 The aggregate value of investments (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the year 2013-2014 (excluding accretion of discount) are Rs. 10,945,217,531 and Rs. 12,411,736,363 respectively being 655.13% and 742.91% of the average daily net assets.
The aggregate value of investments (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the year 2012-2013 (excluding accretion of discount) are Rs. 23,256,068,971 and Rs. 24,089,451,720 respectively being 613.09% and 635.06% 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 Percentage to Net Assets
Fair Value Percentage to Net Assets
2013-2014 2012-2013
Money market Instruments 321,019,101 19.21 2,325,651,516 100.10
Total 321,019,101 19.21 2,325,651,516 100.10
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 2013-2014 5.51 1.47 218,001 6.59
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 440 0.01
17
HSBC FLOATING RATE FUND - LONG TERM PLAN
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 2012-2013 144.39 14.61 725,878 18.81
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 3.05 0.31 21,286 0.55
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets) as at the years ended March 31, 2014 and March 31, 2013 are NIL
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Growth Option 6,469,771.109 – 4,273,858.288 2,195,912.821 10
Regular Daily Dividend Option
– 51,932,441.619 39,830,554.648 12,101,886.971 10
Regular Weekly Dividend Option
11,007,140.947 – 8,257,597.171 2,749,543.776 10
Regular Monthly Dividend Option
4,579,516.848 15,525.507 1,671,052.496 2,923,989.859 10
Institutional Growth Option
32,761,712.353 67,181,598.871 85,065,005.379 14,878,305.845 10
Institutional Daily Dividend Option
– – – – 10
Institutional Fortnightly Dividend Option
– 2,958,669.938 2,958,669.938 – 10
Institutional Weekly Dividend Option
114,074,209.503 120,349,751.242 201,493,460.111 32,930,500.634 10
Institutional Monthly Dividend Option
1,945,183.690 2,170,933.262 2,983,029.286 1,133,087.666 10
Direct Plan - Growth Option
671,514.944 5,563,700.242 5,538,618.178 696,597.008 10
Direct Plan - Weekly Dividend Option
12,233,819.948 37,615,998.934 31,186,330.803 18,663,488.079 10
Direct Plan - Fortnightly Dividend Option
2,032.230 41.796 2,074.026 – 10
Direct Plan - Monthly Dividend Option
68,515.829 2,800.084 71,315.913 – 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
18
HSBC FLOATING RATE FUND - LONG TERM PLAN
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per unit (Rupees)
Regular Growth Option 11,174,112.002 38,029,962.220 42,734,303.113 6,469,771.109 10
Regular Daily Dividend Option
65,411.670 2,746.207 68,157.877 – 10
Regular Weekly Dividend Option
35,580,736.918 46,852,394.637 71,425,990.608 11,007,140.947 10
Regular Monthly Dividend Option
7,910,957.546 4,389,781.941 7,721,222.639 4,579,516.848 10
Institutional Growth Option
7,724,187.118 168,689,501.929 143,651,976.694 32,761,712.353 10
Institutional Daily Dividend Option
– – – – 10
Institutional Fortnightly Dividend Option
– 893,755.031 893,755.031 – 10
Institutional Weekly Dividend Option
180,724,113.239 485,252,257.384 551,902,161.120 114,074,209.503 10
Institutional Monthly Dividend Option
5,243,549.160 7,042,265.016 10,340,630.486 1,945,183.690 10
Direct Plan - Growth Option
– 737,320.531 65,805.587 671,514.944 10
Direct Plan - Weekly Dividend Option
– 19,585,073.537 7,351,253.589 12,233,819.948 10
Direct Plan - Fortnightly Dividend Option
– 2,032.230 – 2,032.230 10
Direct Plan - Monthly Dividend Option
– 68,515.829 – 68,515.829 10
5 Prior year amounts have been re-grouped/ re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
19
HSBC FLOATING RATE FUND - LONG TERM PLAN
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
9. HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
20
HSBC FLOATING RATE FUND - LONG TERM PLAN
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
21
HSBC FLOATING RATE FUND - LONG TERM PLAN
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
22
HSBC FLOATING RATE FUND - LONG TERM PLAN
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23
HSBC FLOATING RATE FUND - LONG TERM PLAN
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 Combined 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 FUND
HSBC Ultra Short Term Bond FundAn open-ended Debt Scheme
Abridged Annual Report 2013 - 2014
1
HSBC ULTRA SHORT TERM BOND FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC ULTRA SHORT TERM BOND FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC ULTRA SHORT TERM BOND FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC ULTRA SHORT TERM BOND FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Ultra Short Term Bond Fund (HUSBF) - an open ended Debt Scheme
HUSBF 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 HUSBF amounted to Rs. 153.71 crores as at March 31, 2014 as compared to Rs. 45.73 crores as at March 31, 2013. Around 95.64% of the net assets were invested in debt and money market instruments, 4.38% were invested in reverse repos / CBLO and (-0.02%) were in net current assets as at March 31, 2014.
HUSBF outperformed its benchmark due to focus on better placed positions on the yield curve. HUSBF also faced higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency.
Date of Inception : 17 October 2006 Simple Annualized (%)
Compounded Annualized (%)
Scheme Name & Benchmarks April ‘13 - March ‘14
Since Inception
HSBC Ultra Short Term Bond Fund - Growth $ 9.04 8.91
Customized Benchmark Index (Scheme Benchmark)* 8.60 8.18
CRISIL 1 Year T-Bill Index (Standard Benchmark) 5.78 6.59
Rs. 10,000, if invested in HUSTBF, would have become 10,904 11,365
Rs. 10,000, if invested in Customized Benchmark Index, would have become
10,860 11,250
Rs. 10,000, if invested in CRISIL 1 Year T-Bill Index, would have become 10,578 11,004
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
$ 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 ‘Since Inception’. The inception date of HSBC Ultra Short Term Bond Fund however is October 17, 2006.
*Composite index of CRISIL Liquid Fund Index (90%) and CRISIL Short Term Bond Fund Index (10%).
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC ULTRA SHORT TERM BOND FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC ULTRA SHORT TERM BOND FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC ULTRA SHORT TERM BOND FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Ultra Short Term Bond Fund – – 74,903.12 8
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC ULTRA SHORT TERM BOND FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details
0 132 132 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 4 4 0 0 0 0 0 0 0 0III B Unauthorized switch between
Schemes0 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 0III D Wrong or excess charges / load 0 0 0 0 0 0 0 0 0 0 0III E Non updation of changes viz.
address, PAN, bank detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC ULTRA SHORT TERM BOND FUND
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Ultra Short Term
Bond Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
10
HSBC ULTRA SHORT TERM BOND FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustee of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC ULTRA SHORT TERM BOND FUND
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 14,523.81 4,401.122 Reserves & Surplus2.1 Unit Premium Reserves (49.91) (47.00)2.2 Unrealised Appreciation Reserve 36.85 1.922.3 Other Reserves 860.37 217.033 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 424.84 21.32
TOTAL 15,795.96 4,594.39
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 1,000.02 –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 1,270.64 477.951.7 Certifi cate of Deposits 11,130.13 3,951.241.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 13,400.79 4,429.192 Deposits 1,300.00 –3 Other Current Assets3.1 Cash & Bank Balance 374.95 0.743.2 CBLO / Reverse Repo Lending 672.79 162.383.3 Others 47.43 2.084 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 15,795.96 4,594.39
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC ULTRA SHORT TERM BOND FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 686.41 528.181.3 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
investments11.29 0.75
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.24
(A) 697.70 529.17
2 EXPENSES2.1 Management fees 37.70 37.562.2 Service tax on Management fees 4.66 4.642.3 Transfer agents fees and expenses 3.07 2.412.4 Custodian fees 0.46 0.792.5 Trusteeship fees 0.05 0.00 ~2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 24.01 14.272.8 Audit fees 0.40 0.202.9 Investor Education Expenses 1.49 0.622.10 Other operating expenses 1.58 0.74
2.11 Expenses to be Reimbursed by the Investment Manager (1.21) –
(B) 72.21 61.23
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 625.49 467.93
4 Change in Unrealised Depreciation in value ofinvestments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 625.49 467.93
6 Change in Unrealised appreciation in the valueof investments (F) 34.93 1.92
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 660.42 469.857.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 34.93 1.927.3 Add / (Less): Equalisation 459.06 (72.17)7.4 Transfer from Reserve Fund 217.03 248.17
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 1,301.58 643.93
9 Dividend Appropriation9.1 Income Distributed during the year (345.13) 364.609.2 Tax on income distributed during the year (96.08) 62.31
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 860.37 217.03
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC ULTRA SHORT TERM BOND FUND
Key Statistics for the year ended March 31, 2014
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):Open
Regular Growth Option 15.3224 14.1772
Regular Daily Dividend Option 10.0083 10.0046
Regular Weekly Dividend Option 10.0393 10.0356
Institutional Growth Option 10.4003 14.3440
Institutional Daily Dividend Option 10.0077 10.0035
Institutional Weekly Dividend Option 10.0410 10.0368
Institutional Monthly Dividend Option 10.1454 10.1411
Institutional Plus Growth Option – ! – !
Institutional Plus Daily Dividend Option 11.3786 10.4233
Institutional Plus Weekly Dividend Option 10.1708 10.1665
Institutional Plus Monthly Dividend Option – ! – !
Direct Plan - Growth Option 10.4016 N.A.
Direct Plan - Daily Dividend Option 10.0119 N.A.
Direct Plan - Weekly Dividend Option 10.0413 N.A.High
Regular Growth Option 16.6518 15.3224
Regular Daily Dividend Option 10.0021 10.0083
Regular Weekly Dividend Option 10.0688 10.0595
Institutional Growth Option 11.3586 14.5575
Institutional Daily Dividend Option 10.0009 10.0077
Institutional Weekly Dividend Option 10.0715 10.0621
Institutional Monthly Dividend Option 10.2611 10.2305
Institutional Plus Growth Option – – !
Institutional Plus Daily Dividend Option 12.4955 11.3788
Institutional Plus Weekly Dividend Option 10.2019 10.1925
Institutional Plus Monthly Dividend Option – –
Direct Plan - Growth Option 11.4199 10.4016
Direct Plan - Daily Dividend Option 10.0960 10.0150
Direct Plan - Weekly Dividend Option 10.0837 10.0628Low
Regular Growth Option 15.3583 14.1810Regular Daily Dividend Option 9.9400 9.9938Regular Weekly Dividend Option 9.9753 10.0331Institutional Growth Option 10.4251 10.0000Institutional Daily Dividend Option 9.9401 9.9933Institutional Weekly Dividend Option 9.9782 10.0342Institutional Monthly Dividend Option 10.1107 10.1385Institutional Plus Growth Option – – !Institutional Plus Daily Dividend Option 11.4061 10.4262Institutional Plus Weekly Dividend Option 10.1086 10.1637Institutional Plus Monthly Dividend Option – –
14
HSBC ULTRA SHORT TERM BOND FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Direct Plan - Growth Option 10.4266 10.3706
Direct Plan - Daily Dividend Option 10.0058 10.0013
Direct Plan - Weekly Dividend Option 9.9798 10.0342
End5
Regular Growth Option 16.6623 15.3224
Regular Daily Dividend Option 10.0084 10.0083
Regular Weekly Dividend Option 10.0063 10.0393
Institutional Growth Option 11.3660 10.4003
Institutional Daily Dividend Option 10.0074 10.0077
Institutional Weekly Dividend Option 10.0271 10.0410
Institutional Monthly Dividend Option 10.1334 10.1454
Institutional Plus Growth Option – – !
Institutional Plus Daily Dividend Option 12.5044 11.3786
Institutional Plus Weekly Dividend Option 10.1699 10.1708
Institutional Plus Monthly Dividend Option – – !
Direct Plan - Growth Option 11.4279 10.4016
Direct Plan - Daily Dividend Option 10.0911 10.0119
Direct Plan - Weekly Dividend Option 10.0692 10.0413
2. Closing Assets Under Management (Rs. in Lakhs)
End 15,371 4,573
Average (AAuM)1 7,450 5,874
3.Gross income as % of AAuM2 9.37% 9.01%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.32% 1.31%
Institutional Growth Option 0.89% 0.56%
Institutional Plus Growth Option 0.27% –
Direct Plan - Growth Option 0.33% 0.17%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.51% 0.64%Institutional Growth Option 0.51% 0.64%Institutional Plus Growth Option 0.51% 0.64%Direct Plan - Growth Option 0.51% 0.64%
5. Net Income as a percentage of AAuM3 8.40% 7.97%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.6682 0.4306
Regular Weekly Dividend Option 0.6942 0.4229
Institutional Daily Dividend Option 0.7084 0.7358
Institutional Weekly Dividend Option 0.7188 0.7388
Institutional Monthly Dividend Option 0.7223 0.7485
15
HSBC ULTRA SHORT TERM BOND FUND
HSBC ULTRA SHORT TERM BOND FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Institutional Plus Daily Dividend Option – –
Institutional Plus Weekly Dividend Option 0.7636 0.4780Institutional Plus Monthly Dividend Option – –Direct Plan - Daily Dividend Option 0.6856 0.1634Direct Plan - Weekly Dividend Option 0.7302 0.1794Direct Plan - Monthly Dividend Option – –
Corporate
Regular Daily Dividend Option 0.6259 0.3691Regular Weekly Dividend Option 0.6516 0.3625Institutional Daily Dividend Option 0.6632 –Institutional Weekly Dividend Option 0.6741 0.6307Institutional Monthly Dividend Option 0.6833 0.6332Institutional Plus Daily Dividend Option – 0.6415Institutional Plus Weekly Dividend Option 0.7164 0.4097Institutional Plus Monthly Dividend Option – –Direct Plan - Daily Dividend Option 0.6491 0.1401Direct Plan - Weekly Dividend Option 0.6845 0.1538Direct Plan - Monthly Dividend Option – –
8. Returns (%):
a. Last One Year
SchemeRegular Growth Option 8.5009 8.2900Institutional Growth Option 9.0378 –Institutional Plus Growth Option – –Direct Plan - Growth Option 9.6206 N.A.
Benchmark
CRISIL Composite Index ^^ 8.6030 N.A.
b. Since Inception
SchemeRegular Growth Option 7.0823 6.8600Institutional Growth Option 1.7321 8.0600Institutional Plus Growth Option – –Direct Plan - Growth Option 9.8249 0.4700
Benchmark
CRISIL Composite Index ^^ 8.1777 7.8800
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.! No Units Outstnding.^^ Composite Index of CRISIL Liquid Find Index (90%) and CRISIL Short Term Bond Fund Index (10%).
Key Statistics for the year ended March 31, 2014 (Contd...)
16
HSBC ULTRA SHORT TERM BOND FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
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 years ended March 31, 2014 and March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2014 and 2013 are NIL.
1.5 NPAs as on March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2014 and March 31, 2013 are as under :
Company Name Amount (Rs.) Percentage to Net Assets
Amount (Rs.) Percentage to Net Assets
2014 2013
Certifi cate of Deposit / Commercial Paper
– Appreciation 3,368,791 0.22 383,341 0.08
– Depreciation – – 191,720 0.04
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 316,150 0.02 – –
– Depreciation – – – –
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) are Rs. 4,722,715,370 and Rs. 3,888,897,110 respectively being 633.95% and 522.02% 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 2012-2013 (excluding accretion of discount) are Rs. 3,653,270,169 and Rs. 3,636,083,139 respectively being 621.99% and 619.06% 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 (Rs.)
% to Net Assets
Fair Value (Rs.)
% to Net Assets
2014 2013
Money market Instruments 108,738,098 7.07 442,918,256 96.81
Total 108,738,098 7.07 442,918,256 96.81
17
HSBC ULTRA SHORT TERM BOND FUND
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 2013-2014 190.36 66.20 685,012 37.33
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 563 0.03
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 [Rs.]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2012-2013 39.96 38.97 423,316 35.38
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.03 0.03 756 0.06
~ Indicates less than 0.01
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Growth Option 2,436,001.458 – 1,030,232.904 1,405,768.554 10
Regular Daily Dividend Option 15,390,605.713 – 6,766,181.721 8,624,423.992 10
Regular Weekly Dividend Option 6,645,619.910 – 2,738,031.292 3,907,588.618 10
Institutional Growth Option 7,082,404.822 96,722,173.398 53,628,950.563 50,175,627.657 10
Institutional Daily Dividend Option
5,271,465.429 119,928,894.674 72,451,018.234 52,749,341.869 10
Institutional Weekly Dividend Option
3,516,678.792 28,051,043.465 14,733,586.912 16,834,135.345 10
Institutional Monthly Dividend Option
812,072.786 15,211,105.152 9,429,623.277 6,593,554.661 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
18
HSBC ULTRA SHORT TERM BOND FUND
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Institutional Plus Growth Option – – – – –
Institutional Plus Daily Dividend Option
200,543.261 – – 200,543.261 10
Institutional Plus Weekly Dividend Option
2,475,971.582 – 2,016,228.18 459,743.404 10
Institutional Plus Monthly Dividend Option
– – – – 10
Direct Plan - Growth Option 964.41 3,502,936.42 485,695.73 3,018,205.091 10
Direct Plan - Daily Dividend Option
156,334.81 1,410,995.77 553,639.420 1,013,691.156 10
Direct Plan - Weekly Dividend Option
22,508.55 303,254.88 70,298.42 255,465.010 10
Direct Plan - Monthly Dividend Option
– – – –
Description
2012-2013
Opening Units Subscription Redemption Closing Units Face Value per Unit (Rs.)
Regular Growth Option 4,086,285.399 1,912,875.503 3,563,159.444 2,436,001.458 10
Regular Daily Dividend Option 27,489,098.477 22,089,882.061 34,188,374.825 15,390,605.713 10
Regular Weekly Dividend Option 14,659,248.751 6,171,951.664 14,185,580.505 6,645,619.910 10
Institutional Growth Option 392,324.569 7,669,618.269 979,538.016 7,082,404.822 10
Institutional Daily Dividend Option
2,384,465.606 57,625,950.204 54,738,950.381 5,271,465.429 10
Institutional Weekly Dividend Option
2,558,153.268 3,541,344.466 2,582,818.942 3,516,678.792 10
Institutional Monthly Dividend Option
739,032.754 1,412,608.247 1,339,568.215 812,072.786 10
Institutional Plus Growth Option – – – – –
Institutional Plus Daily Dividend Option
200,543.261 – – 200,543.261 10
Institutional Plus Weekly Dividend Option
2,362,320.532 113,651.050 – 2,475,971.582 10
Institutional Plus Monthly Dividend Option
– – – – 10
Direct Plan - Growth Option – 964.41 – 964.407 10
Direct Plan - Daily Dividend Option
– 186,408.24 30,073.435 156,334.806 10
Direct Plan - Weekly Dividend Option
– 22,508.55 – 22,508.549 10
Direct Plan - Monthly Dividend Option
– – – – –
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
19
HSBC ULTRA SHORT TERM BOND FUND
5 Prior year amounts have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. NIL (2013: Rs. 23,667) represents Exit load ( net of service tax) credited to the Scheme.
9 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
20
HSBC ULTRA SHORT TERM BOND FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
21
HSBC ULTRA SHORT TERM BOND FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
22
HSBC ULTRA SHORT TERM BOND FUND
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23
HSBC ULTRA SHORT TERM BOND FUND
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 Combined 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 FundAn open-ended Liquid Scheme
Abridged Annual Report 2013 - 2014
HSBC Cash Fund
1
HSBC Cash Fund
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC Cash Fund
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC Cash Fund
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Cash Fund (HCF) - an open-ended Liquid Scheme*
HCF 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. 1394.74 crores as at March 31, 2014 as compared to Rs. 469.01 crores as at March 31, 2013. The entire net asset remains invested in debt and money market instruments including reverse repos / CBLO as at March 31, 2014.
HCF performed broadly in line with its benchmark for a year due to conservative investments in line with the internal guidelines alongwith focus on accruals and credits.
Date of Inception : 4 December 2002 Simple Annualized (%) Compounded Annualized
(%)
Scheme Name & Benchmarks Last 7 Days as on 31
March 2014
Last 15 Days as on 31
March 2014
Last 30 Days as on 31
March 2014
April ‘13 - March ‘14
Since Inception
HSBC Cash Fund - Growth 10.31 9.92 9.44 9.42 8.98
CRISIL Liquid Fund Index (Scheme Benchmark)
13.20 12.94 11.69 9.46 8.76
CRISIL 91 Day T-Bill Index (Standard Benchmark)
12.05 11.69 10.15 8.55 8.24
Rs. 10,000, if invested in HCF, would have become
10,020 10,041 10,078 10,942 12,802
Rs. 10,000, if invested in CRISIL Liquid Fund Index, would have become
10,025 10,053 10,096 10,946 12,727
Rs. 10,000, if invested in CRISIL 91 Day T-Bill Index, would have become
10,023 10,048 10,083 10,855 12,554
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
* 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 19 May 2011, returns since the said date have been considered for calculating performance. The inception date of HSBC Cash Fund however is December 04, 2002.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex
5
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
6
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / investments and in the profi ts / income arising therefrom.
7
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014 (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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Cash Fund – – 958,148.72 13
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
8
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9
HSBC Cash Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
10
HSBC Cash Fund
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Cash Fund (the
“Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account, dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
11
HSBC Cash Fund
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities, where applicable, as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
Independent Auditors’ Report (Contd...)
12
HSBC Cash Fund
Rs. in Lakhs
HSBC CASH FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 122,593.78 45,002.622 Reserves & Surplus2.1 Unit Premium Reserves 1,740.81 1,797.752.2 Unrealised Appreciation Reserve 18.68 0.782.3 Other Reserves 15,120.83 99.653 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 18,245.35 1,568.09
TOTAL 157,719.45 48,468.89
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 7,423.92 –1.6 Commercial Paper 27,244.36 10,416.311.7 Certifi cate of Deposits 81,048.03 35,786.921.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 115,716.31 46,203.23
2 Deposits 40,001.00 1,641.003 Other Current Assets3.1 Cash & Bank Balance 144.37 101.473.2 CBLO / Reverse Repo Lending 1,574.72 511.253.3 Others 283.05 11.944 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 157,719.45 48,468.89
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
13
HSBC Cash Fund
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC CASH FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 17,441.79 3,401.351.3 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
investments25.75 2.13
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.22 –
(A) 17,467.76 3,403.48
2 EXPENSES2.1 Management fees – 33.222.2 Service tax on Management fees – 4.112.3 Transfer agents fees and expenses 43.73 17.572.4 Custodian fees 5.14 4.552.5 Trusteeship fees 1.08 0.022.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 94.46 39.902.8 Audit fees 4.62 1.572.9 Investor Education Expenses 38.06 5.092.10 Other operating expenses 19.17 5.612.11 Expenses to be Reimbursed by the Investment Manager (90.41) (7.59)
(B) 115.85 104.05
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 17,351.91 3,299.43
4 Change in Unrealised Depreciation invalue of investments (D) (1.85) –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 17,350.06 3,299.43
6 Change in Unrealised appreciation inthe value of investments (F) 17.90 0.78
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 17,367.96 3,300.21
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 17.90 0.78
7.3 Add / (Less): Equalisation 8,272.12 2,197.95
7.4 Transfer from Reserve Fund 99.65 (3,059.51)
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 25,721.83 2,437.87
9 Dividend Appropriation9.1 Income Distributed during the year (7,958.31) 1,786.629.2 Tax on income distributed during the year (2,642.69) 551.6010 Retained Surplus / (Defi cit) carried forward to Balance sheet 15,120.83 99.65
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
14
HSBC Cash Fund
Key Statistics for the year ended March 31, 2014
HSBC CASH FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):Open
Regular Growth Option 1,832.4527 16.9586
Regular Daily Dividend Option 1,020.0185 10.1958
Regular Weekly Dividend Option 1,002.3966 10.0197
Institutional Growth Option 1,866.8709 17.1827
Institutional Daily Dividend Option 1,086.0890 10.4430
Institutional Weekly Dividend Option – 10.8656
Institutional Monthly Dividend Option – 10.5243
Institutional Plus Growth Option 1,169.7318 10.7376
Institutional Plus Daily Dividend Option 1,001.3459 10.0085
Institutional Plus Weekly Dividend Option 1,111.3623 10.8389
Institutional Plus Monthly Dividend Option 1,000.7958 –
Direct Plan - Growth Option 1,169.7357 N.A.
Direct Plan - Daily Dividend Option 1,001.3457 N.A.
Direct Plan - Weekly Dividend Option 1,111.3632 N.A.
Direct Plan - Monthly Dividend Option N.A. N.A.High
Regular Growth Option 1,984.2385 1,832.4454
Regular Daily Dividend Option 1,019.3000 1,020.0175
Regular Weekly Dividend Option 1,003.8159 1,003.3051
Institutional Growth Option 2,034.5807 1,866.8594
Institutional Daily Dividend Option 1,097.1197 1,086.0742
Institutional Weekly Dividend Option – 10.9655
Institutional Monthly Dividend Option – 10.6078
Institutional Plus Growth Option 1,278.7433 1,169.7357
Institutional Plus Daily Dividend Option 1,000.5600 1,001.3457
Institutional Plus Weekly Dividend Option 1,113.2171 1,112.5219
Institutional Plus Monthly Dividend Option 1,010.7483 1,008.0930
Direct Plan - Growth Option 1,278.8880 1,169.7357
Direct Plan - Daily Dividend Option 1,000.5600 1,001.3457
Direct Plan - Weekly Dividend Option 1,113.2216 1,112.5230
Direct Plan - Monthly Dividend Option 1,008.9963 1,006.2828Low
Regular Growth Option 1,832.8752 16.9636
Regular Daily Dividend Option 1,017.0751 10.1930
Regular Weekly Dividend Option 1,000.6227 10.0169
Institutional Growth Option 1,867.3306 17.1877
Institutional Daily Dividend Option 1,086.3483 10.4401
Institutional Weekly Dividend Option – 10.0000
Institutional Monthly Dividend Option – 10.0000
Institutional Plus Growth Option 1,170.0418 10.7408
Institutional Plus Daily Dividend Option 998.9353 10.0056
15
HSBC Cash Fund
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC CASH FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Institutional Plus Weekly Dividend Option 1,109.4241 10.8413
Institutional Plus Monthly Dividend Option 1,000.4834 10.0000
Direct Plan - Growth Option 1,170.0418 1,145.7387
Direct Plan - Daily Dividend Option 998.9356 1,000.5600
Direct Plan - Weekly Dividend Option 1,109.4268 1,110.4903
Direct Plan - Monthly Dividend Option 1,000.0000 1,000.0000End
Regular Growth Option 1,985.7907 1,832.4527
Regular Daily Dividend Option 1,020.0973 1,020.0185
Regular Weekly Dividend Option 1,002.3480 1,002.3966
Institutional Growth Option 2,036.2810 1,866.8709
Institutional Daily Dividend Option 1,098.0366 1,086.0890
Institutional Weekly Dividend Option – –
Institutional Monthly Dividend Option – –
Institutional Plus Growth Option 1,279.8467 1,169.7318
Institutional Plus Daily Dividend Option 1,001.4233 1,001.3459
Institutional Plus Weekly Dividend Option 1,111.4480 1,111.3623
Institutional Plus Monthly Dividend Option 1,000.9211 1,000.7958
Direct Plan - Growth Option 1,279.9925 1,169.7357
Direct Plan - Daily Dividend Option 1,001.4241 1,001.3457
Direct Plan - Weekly Dividend Option 1,111.4621 1,111.3632
Direct Plan - Monthly Dividend Option 1,000.8667 N.A.
2. Closing Assets Under Management (Rs. in Lakhs)
End 139,474 46,901
Average (AAuM)1 190,295 39,362
3. Gross income as % of AAuM2 9.18% 8.65%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan 1.00% 0.98%Institutional Plan 0.35% 0.39%Institutional Plus Plan 0.04% 0.11%Direct Plan 0.03% 0.01%
b. Management Fee as % of AAuM (planwise)
Regular Plan 0.00% 0.08%
Institutional Plan 0.00% 0.08%
Institutional Plus Plan 0.00% 0.08%
Direct Plan 0.00% 0.08%
5. Net Income as a percentage of AAuM3 9.12% 8.38%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)Retail
Regular Daily Dividend Option 63.7781 37.6071Regular Weekly Dividend Option 62.8257 36.0313
16
HSBC Cash Fund
HSBC CASH FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013Institutional Daily Dividend Option 64.9057 35.9359
Institutional Weekly Dividend Option – 19.8053
Institutional Monthly Dividend Option – 29.9757
Institutional Plus Daily Dividend Option 70.0957 67.0423
Institutional Plus Weekly Dividend Option 77.8469 52.5814
Institutional Plus Monthly Dividend Option 70.2989 31.0377
Direct Plan - Daily Dividend Option 70.1844 15.8912
Direct Plan - Weekly Dividend Option 77.9366 18.2730
Direct Plan - Monthly Dividend Option 45.0764 4.9433Corporate
Regular Daily Dividend Option 61.0817 36.0717
Regular Weekly Dividend Option 60.1694 34.5602
Institutional Daily Dividend Option 62.1615 34.4686
Institutional Weekly Dividend Option – 18.9967
Institutional Monthly Dividend Option – 28.7518
Institutional Plus Daily Dividend Option 67.1321 64.3051
Institutional Plus Weekly Dividend Option 74.5556 50.4346
Institutional Plus Monthly Dividend Option 67.3268 29.7705
Direct Plan - Daily Dividend Option 67.2171 15.2424
Direct Plan - Weekly Dividend Option 74.6415 17.5269
Direct Plan - Monthly Dividend Option 43.1706 4.7414
8. Returns (%):a. Last One Year
SchemeRegular Growth Option 8.3712 8.0700Institutional Growth Option 9.0780 8.9500Institutional Plus Growth Option 9.4161 8.6600Direct Plan - Growth Option 9.4286 N.A.BenchmarkCRISIL Liquid Fund Index 9.4613% 8.2300%
b. Since InceptionSchemeRegular Growth Option 6.2436 6.0400Institutional Growth Option 6.5431 8.7300Institutional Plus Growth Option 2.5427 6.2800Direct Plan - Growth Option 9.3219 2.1000BenchmarkCRISIL Liquid Fund Index 8.7613% 6.5100%
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, 2014 (Contd...)
17
HSBC Cash Fund
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the Year ended March 31, 2014
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, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
– 555,832,950 – –
Bharti Airtel Ltd. Equities – 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
1,243,550,000 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
492,702,500 492,702,500 – –
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as on March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial years March 31, 2014 and March 31, 2013 are as under:
Security Category Amount (Rs.) Percentage to Net Assets
(%)
Amount (Rs.) Percentage to Net Assets
(%)
2014 2013
Certifi cates of Deposit / Commercial Paper
– Appreciation 1,997,166 0.01 77,953 0.00~
– Depreciation 128,715 0.00~ – –
~ 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 2013-2014 (excluding accretion of discount) are Rs. 164,379,504,252 and Rs. 158,919,151,021 respectively being 863.82% and 835.12% 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 2012-2013 (excluding accretion of discount) are Rs. 30,505,690,868 and Rs. 27,015,271,218 respectively being 775.00% and 686.33% of the average daily net assets.
18
HSBC Cash Fund
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
(%)
2014 2013
Money market Instruments 10,586,567,433 75.90 4,620,323,377 98.51
Total 10,586,567,433 75.90 4,620,323,377 98.51
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 2013-2014 1,009.56 2.09 2,095,639 24.44
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 4,810 0.06
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 2012-2013 661.49 4.58 1,479,963 48.26
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 1,225.00 8.48 123,911 4.04
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
19
HSBC Cash Fund
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Growth Option
44,875.018 – 16,627.341 28,247.677 1,000
Regular Daily Dividend Option
287,455.100 – 49,320.250 238,134.850 1,000
Regular Weekly Dividend Option
143,127.096 – 50,904.919 92,222.177 1,000
Institutional Growth Option
3,205.031 – – 3,205.031 1,000
Institutional Daily Dividend Option
8,676.627 – 275.228 8,401.399 1,000
Institutional Weekly Dividend Option
– – – – 1,000
Institutional Monthly Dividend Option
– – – – 1,000
Institutional Plus Growth Option
304,502.783 49,925,334.362 45,376,873.834 4,852,963.311 1,000
Institutional Plus Daily Dividend Option
2,089,629.300 129,633,386.427 127,258,208.996 4,464,806.731 1,000
Institutional Plus Weekly Dividend Option
296,441.035 356,912.566 539,826.401 113,527.200 1,000
Institutional Plus Monthly Dividend Option
131,532.689 246,995.058 262,603.264 115,924.483 1,000
Direct Plan - Growth Option
300,784.943 126,571,885.154 125,901,631.124 971,038.973 1,000
Direct Plan - Daily Dividend Option
862,991.501 131,118,497.514 130,614,321.975 1,367,167.040 1,000
Direct Plan - Weekly Dividend Option
27,040.690 26,658.302 53,643.579 55.413 1,000
Direct Plan - Monthly Dividend Option
– 29,267.378 25,582.589 3,684.789 1,000
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
20
HSBC Cash Fund
Description
2012-2013
Opening Units
Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Regular Growth Option 109,317.863 487,742.491 552,185.336 44,875.018 1,000
Regular Daily Dividend Option
344,224.272 416,928.998 473,698.170 287,455.100 1,000
Regular Weekly Dividend Option
172,201.535 258,641.809 287,716.247 143,127.096 1,000
Institutional Growth Option
19,372.826 54,051.284 70,219.079 3,205.031 1,000
Institutional Daily Dividend Option
246,775.055 230,471.699 468,570.127 8,676.627 1,000
Institutional Weekly Dividend Option
4,748.391 369,417.671 374,166.061 – 1,000
Institutional Monthly Dividend Option
3,181.374 – 3,181.374 – 1,000
Institutional Plus Growth Option
65,030.584 16,995,102.624 16,755,630.425 304,502.783 1,000
Institutional Plus Daily Dividend Option
884,909.549 96,040,425.912 94,835,706.161 2,089,629.300 1,000
Institutional Plus Weekly Dividend Option
567.587 745,690.344 449,816.897 296,441.035 1,000
Institutional Plus Monthly Dividend Option
– 209,370.663 77,837.974 131,532.689 1,000
Direct Plan - Growth Option
– 3,060,288.687 2,759,503.744 300,784.943 1,000
Direct Plan - Daily Dividend Option
– 16,845,387.408 15,982,395.907 862,991.501 1,000
Direct Plan - Weekly Dividend Option
– 62,295.874 35,255.184 27,040.690 1,000
Direct Plan - Monthly Dividend Option
– – – – 1,000
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 22,193 / - (2013: Rs. NIL) represents Reimbursement from Investment Manager for backdated transactions.
9 Garnishee Notice from Income Tax Authorities An Income tax demand of Rs. 32.58 crore-s 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.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
21
HSBC Cash Fund
The said demand, impacting various 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 Change in the Face Value of Units of HSBC Cash Fund
Pursuant to approval from Board of Directors of HSBC Asset Management (India) Private Limited and Trustees of the Fund, the following changes were effected in HSBC Cash fund during the fi nancial year ended March 31, 2013. The Net Asset Value (NAV) per unit under all the Plans / Options of the Scheme was reset to refl ect the change in face value of units of the Scheme from Rs. 10/- to Rs. 1000/- and the balance unit holding of existing investors under all the Plans / Options of the Scheme was also adjusted with effect from December 30, 2012. The change did not impact the current value of the unit holder’s investments in the Scheme. Further, unit holders did not incur any tax liability due to change in face value of the units of the Scheme. As a result, the applicable NAV per unit of all the Plans / Options of the Scheme was based on Rs. 1000/- for all valid Purchases / Switch-in and valid Redemptions / Switch-out requests to be effected from NAV on December 30, 2012 and thereafter
11 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
22
HSBC Cash Fund
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
23
HSBC Cash Fund
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
24
HSBC Cash Fund
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10
Oth
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HSBC Cash Fund
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 Combined 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 Gilt FundAn open-ended Gilt Scheme
Abridged Annual Report 2013 - 2014
HSBC GILT FUND
1
HSBC GILT FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC GILT FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC GILT FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC GILT FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Gilt Fund (HGF) - an open-ended Gilt Scheme
HGF seeks to generate reasonable returns through investments in Government Securities of various maturities. The AMC’s view of interest rate trends will be refl ected in the maturities of securities in which the scheme is invested.
The net assets of HGF amounted to Rs. 2.64 crores as at March 31, 2014 as compared to Rs. 2.20 crores as at March 31, 2013. Around 28.54% of the net assets were invested in reverse repos / CBLO and 69.24 % were invested in government securities and 2.22% were in net current assets as at March 31, 2014.
HGF underperformed its benchmark due to higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
Date of Inception : 5 December 2003 Simple Annualized (%) Compounded Annualized
(%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Gilt Fund - Growth 1.99 12.37 8.15 4.30
I-Sec Composite Bond Fund Index (Scheme Benchmark) 3.95 11.71 6.77 6.50
CRISIL 10 Year Gilt Index (Standard Benchmark) -0.79 11.31 2.41 4.20
Rs. 10,000, if invested in HGF, would have become 10,199 11,237 10,815 15,453
Rs. 10,000, if invested in I-Sec Composite Bond Fund Index, would have become
10,395 11,171 10,677 19,156
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
9,921 11,131 10,241 15,295
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC GILT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC GILT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC GILT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Gilt Fund 7,395.57 2 – –
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC GILT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC GILT FUND
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Gilt Fund (the
“Scheme”), which comprise the Balance Sheet as at March 31, 2014 and the related Revenue Account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet and Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
Independent Auditors’ Report
10
HSBC GILT FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet and Revenue Account dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC GILT FUND
Rs. in Lakhs
HSBC GILT FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 176.12 154.502 Reserves & Surplus2.1 Unit Premium Reserves 48.27 56.792.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 39.38 9.543 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 0.99 6.04
TOTAL 264.76 226.87
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 182.62 116.411.5 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 182.62 116.41
2 Deposits 0.59 –3 Other Current Assets3.1 Cash & Bank Balance 0.68 0.623.2 CBLO / Reverse Repo Lending 75.27 82.083.3 Others 5.60 27.764 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 264.76 226.87
Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC GILT FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC GILT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 22.76 14.511.3 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 (15.04) 7.391.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.02 0.06
(A) 7.74 21.96
2 EXPENSES2.1 Management fees 1.23 0.752.2 Service tax on Management fees 0.15 0.092.3 Transfer agents fees and expenses 0.16 0.122.4 Custodian fees 0.00~ –2.5 Trusteeship fees 0.00 0.00~2.6 Commission to Agents* – –2.7 Marketing & Distribution expenses 0.99 0.552.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.06 0.022.10 Other operating expenses 0.28 0.222.11 Less:Expenses to be Reimbursed by the Investment Manager (0.17) (0.31)
(B) 2.90 1.64
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 4.84 20.32
4 Change in Unrealised Depreciation in value ofinvestments (D) 0.31 0.36
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 5.15 19.96
6 Change in Unrealised appreciation in the valueof investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 5.15 19.96
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 25.11 (22.42)7.4 Transfer from Reserve Fund 9.54 13.21
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 39.80 10.74
9 Dividend Appropriation9.1 Income Distributed during the year (0.37) 1.079.2 Tax on income distributed during the year (0.05) 0.14
10 Retained Surplus / (Defi cit) carried forward toBalance Sheet 39.38 9.54
~ Indicates less than 0.01Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC GILT FUND
Key Statistics for the year ended March 31, 2014
HSBC GILT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
Open
Growth Option 15.1621 13.5187
Dividend Option 13.3705 11.9213
Weekly Dividend Option 9.9928 9.9259
Direct Plan - Growth Option 15.1841 N.A.
Direct Plan - Dividend Option – N.A.
Direct Plan - Weekly Dividend Option – N.A.
High
Growth Option 15.9852 15.1731
Dividend Option 14.0963 13.3802
Weekly Dividend Option 10.1249 10.1452
Direct Plan - Growth Option 16.0230 15.1911
Direct Plan - Dividend Option 15.6888 –
Direct Plan - Weekly Dividend Option 10.0603 –
Low
Growth Option 14.5809 13.5095
Dividend Option 12.8579 11.9131
Weekly Dividend Option 9.1317 9.9191
Direct Plan - Growth Option 14.6320 14.8115
Direct Plan - Dividend Option 15.1754 –
Direct Plan - Weekly Dividend Option 9.8559 –
End5
Growth Option 15.5459 15.1621
Dividend Option 13.7088 13.3705
Weekly Dividend Option 9.7361 9.9928
Direct Plan - Growth Option 15.6482 15.1841
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 264 221
Average (AAuM)1 277 179
3. Gross income as % of AAuM2 2.80% 12.27%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Growth Option 1.05% 0.92%
Dividend Option 1.05% 0.92%
Weekly Dividend Option 1.05% 0.84%
Direct Plan - Growth Option 0.55% 0.45%
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option 0.55% –
14
HSBC GILT FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC GILT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
b. Management Fee as % of AAuM (planwise)
Growth Option 0.44% 0.42%
Dividend Option 0.44% 0.42%
Weekly Dividend Option 0.44% 0.42%
Direct Plan - Growth Option 0.44% 0.42%
Direct Plan - Dividend Option – –
Direct Plan - Weekly Dividend Option – –
5. Net Income as a percentage of AAuM3 1.75% 11.36%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Weekly Dividend Option 0.4476 0.9541
Direct Plan - Weekly Dividend Option 0.0468 –
Corporate
Weekly Dividend Option 0.3814 0.8178
Direct Plan - Weekly Dividend Option 0.0399 –
8. Returns (%):
a. Last One Year
Scheme
Growth Option 1.9943 12.0200
Direct Plan - Growth Option 2.5166 –
Benchmark
I-Sec Composite Index 3.9054 11.6600
b. Since Inception
Scheme
Growth Option 4.3040 4.5500
Direct Plan - Growth Option 4.0413 2.4400
Benchmark
I-Sec Composite Index 6.4959 6.7800
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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
15
HSBC GILT FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC GILT 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, 2014 and March 31, 2013 are NIL
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 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
2014 2013
Government of India Securities
– Appreciation 1,188 0.00~ 3,662 0.0166
– Depreciation 36,311 0.14 70,126 0.3176
~ 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 2013-2014 (excluding accretion of discount) are Rs. 112,384,923 and Rs. 104,295,237 respectively being 405.94% and 376.72% 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 2012-2013 (excluding accretion of discount) are Rs. 339,031,566 and Rs. 3,30,124,445 respectively being 1,894.03% and 1,844.28% of the average daily net assets.
1.8 Non-Traded securities in the portfolios as at March 31, 2014 and March 31, 2013 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 2.72 62.95 32,642 33.78
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – – –
16
HSBC GILT FUND
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 2012-2013 0.51 27.08 12,593 27.74
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 – – – –
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the year ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
Description
2013-2014
Opening Units
Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 929,165.878 1,516,449.358 1,170,921.396 1,274,693.840 10
Dividend Option 531,932.957 1,329,212.240 1,412,272.688 448,872.509 10
Weekly Dividend Option 75,352.097 3,436.528 47,942.547 30,846.078 10
Direct Plan - Growth Option
8,522.373 24,012.255 25,780.655 6,753.973 10
Direct Plan - Weekly Dividend Option
– 55,055.903 55,055.903 – 10
Description
2012-2013
Opening Units
Subscription Redemption Closing Units Face Value per unit (Rupees)
Growth Option 647,560.833 735,836.637 454,231.592 929,165.878 10
Dividend Option 198,080.264 574,592.200 240,739.507 531,932.957 10
Weekly Dividend Option 111,306.586 72,850.739 108,805.228 75,352.097 10
Direct Plan - Growth Option
– 8,522.373 – 8,522.373 10
Direct Plan - Weekly Dividend Option
– – – – 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
17
HSBC GILT FUND
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 1,796 (2013: 6,320) represents Exit load (net of service tax) credited to the scheme.
9 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 Litigations Pending
Pursuant to a complaint fi led by certain investors, SEBI had issued a Show Cause notice dated August 7, 2009 to the Board of Trustees of the Fund, the Fund, HSBC Asset Management (India) Private Limited and the then CEO of the HSBC Asset Management (India) Private Limited, (together the “respondents”) pertaining to changes made in the Scheme Information Document of HSBC Gilt Fund via Addendums dated January 05, 2009 and March 02, 2009. However, after considering the submissions made by the respondents, SEBI, vide its order dated April 23, 2010 disposed off the Show Cause Notice dated August 7, 2009. Aggrieved by this Order, two appeals were fi led with the Securities Appellate Tribunal (SAT) by certain investors (the “appellant”) of HSBC Gilt Fund. SAT issued Orders dated May 03, 2011 and July 05, 2012 in response to these appeals, directing the respondents to comply with Regulation 18(15A) of the SEBI (Mutual Funds) Regulations, 1996 and provide an exit option to the appellants of the case at the then prevailing Net Asset Value. An appeal was fi led against these Orders by the respondents before the Supreme Court. . During the year, the Supreme Court upheld the Order of SAT and dismissed the appeal of the respondents through its Order dated January 15, 2014. Accordingly, HSBC Asset Management India Private Limited has complied with the Order of the Supreme Court read with the SAT Order by making the required payment to the investors.
11 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
18
HSBC GILT FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
19
HSBC GILT FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
20
HSBC GILT FUND
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10
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HSBC GILT FUND
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 Combined 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
HSBC Flexi Debt FundAn open-ended Debt Scheme
Abridged Annual Report 2013 - 2014
1
HSBC FLEXI DEBT FUND
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC FLEXI DEBT FUND
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC FLEXI DEBT FUND
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC FLEXI DEBT FUND
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Flexi Debt Fund (HFDF) - an open ended Debt Scheme
HFDF 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. 540.42 crores as at March 31, 2014 as compared to Rs. 792.49 crores as at March 31, 2013. Around 97.11% of the net assets were invested in debt and money market instruments, 0.18% was invested in reverse repos / CBLO and 2.71% were in the net current assets as at March 31, 2014.
HFDF underperformed its benchmark due to higher volatility in rates during the year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
Date of Inception : 5 October 2007 Simple Annualized (%) Compounded Annualized
(%)
Scheme Name & Benchmarks April ‘13 - March ‘14
April ‘12 - March ‘13
April ‘11 - March ‘12
Since Inception
HSBC Flexi Debt Fund - Growth 3.69 11.26 9.54 8.38
CRISIL Composite Bond Fund Index (Scheme Benchmark) 4.34 9.27 7.68 6.54
CRISIL 10 Year Gilt Index (Standard Benchmark) -0.79 11.31 2.41 5.49
Rs. 10,000, if invested in HFDF, would have become 10,369 11,126 10,954 16,862
Rs. 10,000, if invested in CRISIL Composite Bond Fund Index, would have become
10,434 10,927 10,768 15,091
Rs. 10,000, if invested in CRISIL 10 Year Gilt Index, would have become
9,921 11,131 10,241 14,147
Past performance may or may not be sustained in future. Returns data as on March 31, 2014. Data for the period April to March has been considered in all cases, except for Since Inception. ‘Since Inception’ returns are calculated on Rs. 10 invested at inception. Standard benchmark is prescribed by SEBI and is used for comparison purposes. Returns on Rs. 10,000 are point-to-point returns for the specifi c time period, invested at the start of the period. The returns provided above have been rounded off and hence there may be a minor difference between point-to-point returns vis-à-vis returns indicated above. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
5
HSBC FLEXI DEBT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate.
6
HSBC FLEXI DEBT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the HSBC Mutual Fund by the Trustee vide
7
HSBC FLEXI DEBT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2014 :
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs)
No. of Investors
Amount (Rs)
No. of Investors
HSBC Flexi Debt Fund 17 1 – –
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
8
HSBC FLEXI DEBT FUND
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC FLEXI DEBT FUND
Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Flexi Debt Fund
(the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “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 and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014; and
(b) in the case of the Revenue Account, of the net surplus for the year ended on that date.
(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
10
HSBC FLEXI DEBT FUND
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC FLEXI DEBT FUND
Rs. in Lakhs
HSBC FLEXI DEBT FUNDAs at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 34,546.76 58,640.482 Reserves & Surplus2.1 Unit Premium Reserves 2,191.00 2,731.382.2 Unrealised Appreciation Reserve 58.16 156.892.3 Other Reserves 17,245.94 17,720.273 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 295.96 2,727.75
TOTAL 54,337.82 81,976.77
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 25,937.05 33,416.531.1.5 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 8,559.04 14,444.111.5 Treasury Bills – –1.6 Commercial Paper – 2,944.991.7 Certifi cate of Deposits 17,985.74 22,216.251.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 52,481.83 73,021.882 Deposits 66.16 –3 Other Current Assets3.1 Cash & Bank Balance 5.25 1,326.463.2 CBLO / Reverse Repo Lending 94.91 2,521.393.3 Others 1,689.67 5,107.044 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 54,337.83 81,976.77Notes to Accounts - Annexure I
Abridged Balance Sheet as at March 31, 2014
12
HSBC FLEXI DEBT FUND
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1 INCOME1.1 Dividend – –1.2 Interest 8,898.03 4,050.171.3 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(4,805.31) 1,502.56
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 3.87 19.00
(A) 4,096.59 5,571.73
2 EXPENSES2.1 Management fees 590.99 351.652.2 Service tax on Management fees 73.05 43.462.3 Transfer agents fees and expenses 44.49 24.722.4 Custodian fees 4.12 5.042.5 Trusteeship fees 0.68 0.032.6 Commission to Agents* – –2.7 Marketing & Distribution expenses 951.35 809.062.8 Audit fees 1.41 1.272.9 Investor Education Expenses 21.02 6.222.10 Other operating expenses 7.79 4.712.11 Less:Expenses to be Reimbursed by the Investment Manager – (420.59)
(B) 1,694.90 825.57
3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 2,401.69 4,746.16
4 Change in Unrealised Depreciationin value of investments (D) (573.76) 70.02
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,827.93 4,676.14
6 Change in unrealised appreciation in the value ofinvestments (F) (98.73) 134.68
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,729.20 4,810.82
7.1 Add: Balance transfer from Unrealised Appreciation Reserve 98.73 –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 134.687.3 Add / (Less): Equalisation (1,189.46) 12,089.80
7.4 Transfer from Reserve Fund 17,720.27 3,364.13
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 18,358.74 20,130.07
9 Dividend Appropriation9.1 Income Distributed during the year (874.30) 2,057.739.2 Tax on income distributed during the year (238.50) 352.0710 Retained Surplus / (Defi cit) carried forward to Balance Sheet 17,245.94 17,720.27
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
13
HSBC FLEXI DEBT FUND
Key Statistics for the year ended March 31, 2014
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
1. NAV per unit (Rs.):
OpenRegular Plan - Growth Option 15.9387 14.3775
Regular Plan - Fortnightly Dividend Option 10.7422 10.7344
Regular Plan - Monthly Dividend Option 10.3235 10.3039
Regular Plan - Quarterly Dividend Option 11.8526 11.4909
Regular Plan - Half Yearly Dividend Option 11.2716 10.9104
Growth Option **** 16.2393 14.6048
Fortnightly Dividend Option **** 10.0451 10.0045
Monthly Dividend Option **** 10.5732 10.5337
Quarterly Dividend Option **** 11.7590 11.3730
Half Yearly Dividend Option **** 10.5850 –
Direct Plan - Growth Option 10.6297 N.A.
Direct Plan - Fortnightly Dividend Option 10.1531 N.A.
Direct Plan - Monthly Dividend Option 16.2765 N.A.
Direct Plan - Quarterly Dividend Option 11.7912 N.A.
Direct Plan - Half Yearly Dividend Option 10.6143 N.A.
HighRegular Plan - Growth Option 16.6673 15.9387Regular Plan - Fortnightly Dividend Option 11.1136 10.9839Regular Plan - Monthly Dividend Option 10.7269 10.5988Regular Plan - Quarterly Dividend Option 12.3945 12.0686Regular Plan - Half Yearly Dividend Option 11.7869 11.6629Growth Option **** 16.9888 16.2393Fortnightly Dividend Option **** 10.3899 10.2695Monthly Dividend Option **** 10.9739 10.8407Quarterly Dividend Option **** 12.3015 11.9737Half Yearly Dividend Option **** 11.0733 10.9757Direct Plan - Growth Option 17.0550 16.2765Direct Plan - Fortnightly Dividend Option 10.5076 10.2727Direct Plan - Monthly Dividend Option 11.0403 10.7117Direct Plan - Quarterly Dividend Option 12.3551 12.0001Direct Plan - Half Yearly Dividend Option 11.1220 10.9999
LowRegular Plan - Growth Option 15.4727 14.3848
Regular Plan - Fortnightly Dividend Option 10.1785 10.7201
Regular Plan - Monthly Dividend Option 9.7843 10.3022
Regular Plan - Quarterly Dividend Option 11.2658 11.4967
Regular Plan - Half Yearly Dividend Option 10.9421 10.9159
Growth Option **** 15.7801 14.6126
Fortnightly Dividend Option **** 9.5174 10.0001
Monthly Dividend Option **** 10.0109 10.5315
Quarterly Dividend Option **** 11.1921 11.3791
14
HSBC FLEXI DEBT FUND
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Half Yearly Dividend Option **** 10.2855 10.0050Direct Plan - Growth Option 15.8687 16.0200Direct Plan - Fortnightly Dividend Option 9.6559 10.1196Direct Plan - Monthly Dividend Option 10.1222 10.5984Direct Plan - Quarterly Dividend Option 11.2612 11.7072Direct Plan - Half Yearly Dividend Option 10.2296 10.5893
End5
Regular Plan - Growth Option 16.5344 15.9387
Regular Plan - Fortnightly Dividend Option 10.8766 10.7422Regular Plan - Monthly Dividend Option 10.4554 10.3235Regular Plan - Quarterly Dividend Option 11.3803 11.8526Regular Plan - Half Yearly Dividend Option 11.6926 11.2716Growth Option **** 16.8883 16.2393Fortnightly Dividend Option **** 10.1042 10.0451Monthly Dividend Option **** 10.5917 10.5732Quarterly Dividend Option **** 11.3127 11.7590Half Yearly Dividend Option **** 11.0077 10.5850Direct Plan - Growth Option 17.0615 10.6297Direct Plan - Fortnightly Dividend Option 10.0000 10.1531Direct Plan - Monthly Dividend Option 10.7214 16.2765Direct Plan - Quarterly Dividend Option 11.4404 11.7912Direct Plan - Half Yearly Dividend Option 10.7112 10.6143
2. Closing Assets Under Management (Rs. in Lakhs)
End 54,042 79,249
Average (AAuM)1 105,078 46,775
3. Gross income as % of AAuM2 3.90% 11.91%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Plan - Growth Option 1.90% 1.90%
Growth Option **** 1.65% 1.62%
Direct Plan - Growth Option 0.87% 0.50%
b. Management Fee as % of AAuM (planwise)
Regular Plan - Growth Option 0.56% 0.75%
Growth Option **** 0.56% 0.75%
Direct Plan - Growth Option 0.56% 0.75%
5. Net Income as a percentage of AAuM3 2.29% 10.15%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
RetailRegular Plan - Fortnightly Dividend Option 0.2251 0.5297Regular Plan - Monthly Dividend Option 0.2031 0.9257Regular Plan - Quarterly Dividend Option 0.7013 0.7488Regular Plan - Half Yearly Dividend Option – 0.7047
15
HSBC FLEXI DEBT FUND
HSBC FLEXI DEBT FUNDCurrent
Year ended March 31, 2014
Previous Year ended
March 31, 2013
Fortnightly Dividend Option **** 0.2823 0.9060
Monthly Dividend Option **** 0.3211 0.9576
Quarterly Dividend Option **** 0.7013 0.7488
Half Yearly Dividend Option **** – 0.3524
Direct Plan - Fortnightly Dividend Option 0.2197 0.2500
Direct Plan - Monthly Dividend Option 0.3299 0.1262
Direct Plan - Quarterly Dividend Option 0.7013 0.1982
Direct Plan - Half Yearly Dividend Option 0.3117 0.3524
CorporateRegular Plan - Fortnightly Dividend Option 0.1981 0.4540
Regular Plan - Monthly Dividend Option 0.1884 0.7934
Regular Plan - Quarterly Dividend Option 0.6717 0.6418
Regular Plan - Half Yearly Dividend Option – 0.6040
Fortnightly Dividend Option **** 0.2534 0.7766
Monthly Dividend Option **** 0.2997 0.8208
Quarterly Dividend Option **** 0.6717 0.6418
Half Yearly Dividend Option **** – 0.3020
Direct Plan - Fortnightly Dividend Option 0.1920 0.2143
Direct Plan - Monthly Dividend Option 0.3072 0.1081
Direct Plan - Quarterly Dividend Option 0.6717 0.1699
Direct Plan - Half Yearly Dividend Option 0.2985 0.3020
8. Returns (%):
a. Last One YearSchemeRegular Plan - Growth Option 3.4293 10.9000Growth Option **** 3.6875 11.2300Direct Plan - Growth Option 4.5093 N.A.BenchmarkCRISIL Composite Bond Fund Index 4.3172% 9.3000%
b. Since InceptionSchemeRegular Plan - Growth Option 8.0258 8.8900Growth Option **** 8.3792 9.2600Direct Plan - Growth Option 4.6538 1.0900BenchmarkCRISIL Composite Bond Fund Index 6.5428% 6.9500%
1 AAuM = Average daily net asets.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 net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
**** Earlier known as Institutional Plan
Key Statistics for the year ended March 31, 2014 (Contd...)
16
HSBC FLEXI DEBT FUND
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC FLEXI DEBT 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 a % to Net Assets as of years ended March 31, 2014 and March 31, 2013 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
2014 2013
Shriram Transport Finance Company Ltd.
Corporate Bonds / Debentures
252,651,341 555,832,950 – –
Bharti Airtel Ltd. Equities – 76,306,283 – –
Steel Authority of India Ltd.
Commercial Paper
– 1,243,550,000 – –
Shriram Equipment Finance Co. Ltd.
Commercial Paper
– 492,702,500 – –
1.4 Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as at years ended March 31, 2014 and March 31, 2013 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 (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2014 2013
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 2,927,225 0.05 12,581,202 0.16
– Depreciation 68,900,964 1.27 211,766 0.00~
Non Convertible Debentures and Bonds Privately Placed
– Appreciation – – – –
– Depreciation – – – –
Certifi cate of Deposit
– Appreciation 5,235,263 0.10 3,636,945 0.05
– Depreciation – – 317,282 0.00~
Government of India Securities
– Appreciation 2,045,089 0.04 313,987 0.00~
– Depreciation 1,464,589 0.03 8,911,694 0.11
~ Indicates less than 0.01
17
HSBC FLEXI DEBT FUND
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-1204 (excluding accretion of discount) are Rs. 52,960,634,052 and Rs. 54,532,561,866 respectively being 504.01% and 518.97% 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 2012-2013 (excluding accretion of discount) are Rs. 46,631,145,182 and Rs. 41,102,155,477 respectively being 996.93% and 878.72% 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 (%)
2014 2013
Debt Instruments – – 3,341,653,270 42.17
Money Market Instruments 89,830,386 1.66 2,516,124,243 31.75
Total 89,830,386 1.66 5,857,777,513 73.92
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 2013-2014 297.38 27.97 31,556,246 34.05
HSBC InvestDirect Securities (India) Limited
Associate 2013-2014 – – 23,251 0.03
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 2012-2013 362.94 38.09 19,097,181 30.25
HSBC InvestDirect Securities (India) Limited
Associate 2012-2013 0.02 0.00~ 4,948 0.01
~ Indicates less than 0.01
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
18
HSBC FLEXI DEBT FUND
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013.
Description
2013-2014
Opening Units Subscription Redemption Closing Units Face Value per Unit
(Rs.)
Regular Plan - Growth Option
65,550,202.718 – 48,149,879.892 17,400,322.826 10
Regular Plan - Monthly Dividend Option
67,912,782.802 – 53,878,054.464 14,034,728.338 10
Regular Plan - Fortnightly Dividend Option
16,150,700.868 – 10,370,425.019 5,780,275.849 10
Regular Plan - Quarterly Dividend Option
25,435,688.203 – 18,700,932.718 6,734,755.485 10
Regular Plan - Half Yearly Dividend Option
874,336.267 – 828,076.773 46,259.494 10
Growth Option **** 212,292,099.227 491,625,691.718 475,972,525.260 227,945,265.685 10
Monthly Dividend Option ****
101,601,051.426 66,083,490.823 147,671,376.378 20,013,165.871 10
Fortnightly Dividend Option ****
34,411,242.042 18,380,618.830 48,381,122.120 4,410,738.752 10
Quarterly Dividend Option ****
35,941,878.775 18,439,493.351 34,753,913.652 19,627,458.474 10
Half Yearly Dividend Option ****
3,719,886.542 131,534.539 3,810,134.695 41,286.386 10
Direct Plan - Growth Option
22,230,898.287 31,587,272.973 24,570,157.447 29,248,013.813 10
Direct Plan - Fortnightly Dividend Option
154,753.120 10,241,538.107 10,396,291.227 – 10
Direct Plan - Quarterly Dividend Option
8,545.110 117,524.960 63,002.444 63,067.626 10
Direct Plan - Monthly Dividend Option
108,228.854 33,183,915.848 33,182,781.376 109,363.326 10
Direct Plan - Half Yearly Dividend Option
12,479.863 376.874 – 12,856.737 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
19
HSBC FLEXI DEBT FUND
Description
2012-2013
Opening Units Subscription Redemption Closing UnitsFace
Value per Unit (Rs.)
Regular Plan - Growth Option
22,165,759.599 76,320,520.241 32,936,077.122 65,550,202.718 10
Regular Plan - Monthly Dividend Option
19,722,985.322 107,176,907.191 58,987,109.711 67,912,782.802 10
Regular Plan - Fortnightly Dividend Option
2,787,007.878 29,621,933.552 16,258,240.562 16,150,700.868 10
Regular Plan - Quarterly Dividend Option
11,437,491.825 40,099,905.687 26,101,709.309 25,435,688.203 10
Regular Plan - Half Yearly Dividend Option
266,406.608 4,659,124.666 4,051,195.007 874,336.267 10
Growth Option **** 47,962,900.448 215,412,026.659 51,082,827.880 212,292,099.227 10
Monthly Dividend Option ****
1,912,701.096 141,587,681.216 41,899,330.886 101,601,051.426 10
Fortnightly Dividend Option ****
4,613,865.180 41,226,710.907 11,429,334.045 34,411,242.042 10
Quarterly Dividend Option ****
17,412,594.071 53,685,359.523 35,156,074.819 35,941,878.775 10
Half Yearly Dividend Option ****
– 3,722,657.623 2,771.081 3,719,886.542 10
Direct Plan - Growth Option
– 22,230,898.287 – 22,230,898.287 10
Direct Plan - Fortnightly Dividend Option
– 154,753.120 – 154,753.120 10
Direct Plan - Quarterly Dividend Option
– 8,545.110 – 8,545.110 10
Direct Plan - Monthly Dividend Option
– 108,228.854 – 108,228.854 10
Direct Plan - Half Yearly Dividend Option
– 12,479.863 – 12,479.863 10
**** 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, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other Income of Rs. 276,161 (2013: Rs. 1,899,886) represents Exit load (net of service tax) credited to the scheme & Rs. 110,708 (2013: NIL) represents Excess interest received on settlement of trade now written off.
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
20
HSBC FLEXI DEBT FUND
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
9 Garnishee Notice from Income Tax Authorities
An Income tax demand of Rs. 32.58 crore-s 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 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. HSBC MF, through its trustees fi led Writ petitions before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. During last week of April 2013, the fi rst Appellate Authority passed its order giving part relief to Appellant. Against the order granting part relief, the Appellant as well as the income-tax department has fi led an appeal before Income-tax Appellate Tribunal. The matter is scheduled for hearing on on July 14, 2014.
Similar to AY 2009-2010, HSBC MF has received a demand notice from the Income Tax Authorities for the A.Y. 2010-2011 for Rs. 6.95 crores. HSBC MF, through its trustees, fi led a writ petition before the Bombay High Court and obtained necessary reliefs for stay of the impugned demand till the adjudication of the appeal by the fi rst Appellate Authority and six weeks thereafter. The Appellate had fi led an appeal against the fi rst Appellate Authority who disposed of the same by passing an order granting part relief on similar lines of AY 2009-2010. The Appellant has preferred an appeal to Income-tax Appellate Tribunal against the fi rst appellate authority’s order.
Similar to the above, the 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. The trust has fi led an appeal before fi rst Appellate Authority. The HSBC MF has not received any demand notice from the Income Tax authorities for this assessment year.
10 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
21
HSBC FLEXI DEBT FUND
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
22
HSBC FLEXI DEBT FUND
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
HSBC FLEXI DEBT FUND
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24
HSBC FLEXI DEBT FUND
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 Combined 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 FundA Close ended Capital Protection Oriented Scheme
Abridged Annual Report 2013 - 2014
HSBC Capital Protection Oriented Fund
1
HSBC Capital Protection Oriented Fund
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC Capital Protection Oriented Fund
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC Capital Protection Oriented Fund
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC Capital Protection Oriented Fund
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
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.
The Scheme launched one plan namely, HSBC Capital Protection Oriented Fund - Series I - Plan I having a tenure of 790 days. HSBC Capital Oriented Protection Fund - Series I - Plan I was launched on April 18, 2013. The performance of the Scheme is benchmarked against CRISIL MIP Blended Index. Being a close ended Scheme, the performance of the Scheme is not provided.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government
5
HSBC Capital Protection Oriented Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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
6
HSBC Capital Protection Oriented Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
(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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the 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. 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 SCHEMESThe 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 POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil.
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
7
HSBC Capital Protection Oriented Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
8
HSBC Capital Protection Oriented Fund
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC Capital Protection Oriented Fund
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Capital Protection
Oriented Fund (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period April 18, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period April 18, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period April 18, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report
10
HSBC Capital Protection Oriented Fund
Independent Auditors’ Report (Contd...)
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014
11
HSBC Capital Protection Oriented Fund
Rs. in Lakhs
HSBC CAPITAL PROTECTION ORIENTED FUND #
As at March 31, 2014
LIABILITIES1 Unit Capital 8,877.522 Reserves & Surplus2.1 Unit Premium Reserves –2.2 Unrealised Appreciation Reserve 283.832.3 Other Reserves 383.633 Loans & Borrowings –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits –4.2 Other Current Liabilities & Provisions 22.05
TOTAL 9,567.03ASSETS
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 7,363.181.1.5 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 501.641.3.5 Securitised Debt securities –1.4 Government Securities –1.5 Treasury Bills –1.6 Commercial Paper –1.7 Certifi cate of Deposits 37.871.8 Bill Rediscounting –1.9 Units of Domestic Mutual Fund –1.10 Foreign Securities –
Total Investments 7,902.692 Deposits –3 Other Current Assets3.1 Cash & Bank Balance 45.163.2 CBLO / Reverse Repo Lending 63.803.3 Others 1,555.384 Deferred Revenue Expenditure (to the extent not written off) –
TOTAL 9,567.03
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year
Abridged Balance Sheet as at March 31, 2014
12
HSBC Capital Protection Oriented Fund
Abridged Revenue Account for the period ended March 31, 2014
Rs. in Lakhs
HSBC CAPITAL PROTECTION
ORIENTED FUND #Current Period ended
March 31, 2014
1 INCOME1.1 Dividend –1.2 Interest 683.461.3 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 –1.6 Realised Gains / (Losses) on Derivative Transactions –1.7 Other Income –
(A) 683.46
2 EXPENSES2.1 Management fees 72.222.2 Service tax on Management fees 8.932.3 Transfer agents fees and expenses 1.882.4 Custodian fees 0.772.5 Trusteeship fees –2.6 Commission to Agents * –2.7 Marketing & Distribution expenses 61.232.8 Audit fees 0.202.9 Investor Education Expenses 1.642.10 Other operating expenses 0.38
2.11 Less : Expenses to be Reimbursed by the Investment Manager (0.31)
(B) 146.94
3 NET REALISED GAINS / (LOSSES) FOR THE PERIOD (A - B = C) 536.52
4 Change in Unrealised Depreciation in value of investments (D) (152.89)
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 383.63
6 Change in unrealised appreciation in the value of investments (F) 283.83
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 667.46
7.1 Add: Balance transfer from Unrealised Appreciation Reserve –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 283.837.3 Add / (Less): Equalisation –7.4 Transfer from Reserve Fund –7.5 Transfer from Unit Premium Reserve –
8 Total 383.63
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 383.63
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year
13
HSBC Capital Protection Oriented Fund
Key Statistics for the period ended March 31, 2014
HSBC CAPITAL PROTECTION
ORIENTED FUND # Current Period ended
March 31, 2014
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 10.7462
Dividend Option 10.7462
Direct Plan - Growth Option 10.8132
Direct Plan - Dividend Option N.A.
Low
Growth Option 9.8696
Dividend Option 9.8696
Direct Plan - Growth Option 9.8893
Direct Plan - Dividend Option N.A.
End
Growth Option 10.7514
Dividend Option 10.7514
Direct Plan - Growth Option 10.8190
Direct Plan - Dividend Option N.A.
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,545
Average (AAuM)1 9,145
3. Gross income as % of AAuM2 * 8.37%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Plan 1.80%
Direct Plan 1.10%
b. Management Fee as % of AAuM (planwise) *
Regular Plan 0.88%
Direct Plan 0.88%
5. Net Income as a percentage of AAuM3 * 6.57%
6. Portfolio turnover ratio4 –
14
HSBC Capital Protection Oriented Fund
HSBC CAPITAL PROTECTION
ORIENTED FUND # Current Period ended
March 31, 2014
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option N.A
Direct Plan - Growth Option N.A
Benchmark
CRISIL MIP Blended Index N.A
b. Since Inception
Scheme
Regular Growth Option 7.5576%
Direct Plan - Growth Option 8.2345%
Benchmark
CRISIL MIP Blended Index 8.0044%
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.
# Scheme launched during the current fi nancial year.
* Indicates annualised value
Key Statistics for the period ended March 31, 2014 (Contd...)
15
HSBC Capital Protection Oriented Fund
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC CAPITAL PROTECTION ORIENTED 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 for the period ended March 31, 2014 are as given below:-
Hedging Positions through Options as on March 31, 2014
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 year ended March 31, 2014 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, 2014
Scheme Name
Underlying Call / put Number of contracts
Option Price when purchased
Current Price
HCPOF Nifty Index Call Option 1496 946.25 1325.70
Total Exposure through options as a percentage of net assets : 10.39%
For the year ended March 31, 2014 following details specifi ed with regard to non-hedging transactions through options which have already been exercised / expired : NILTotal Number of contracts entered into : 1496Gross Notional Value of contracts : Rs. 70,779,500 / -Net Profi t / Loss on all contracts (premium paid treated as loss) : NIL
1.3 Investments in Associates and Group Companies for the period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme for the fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets(%)2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – –
– Depreciation 14,368,002 1.51
Privately Placed Non Convertible Debentures / Bonds
– Appreciation – –
– Depreciation 916,150 0.10
Certifi cate of Deposit
– Appreciation – –
– Depreciation 4,561 0.00~
Derivetives (Options)
– Appreciation 28,382,860 2.97
– Depreciation – –
~ Indicates less than 0.01
16
HSBC Capital Protection Oriented Fund
1.7 The aggregate value of investment securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013-2014 (excluding accretion of discount) are Rs. 876,212,502 being 98.81% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate of the Investment Manager
2013-2014 90.80 97.18 4,933,276 89.21
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
4 Unit Capital movement during the period ended March 31, 2014:
Description
2013-2014
Opening Units Subscription Redemption Closing UnitsFace Value
per unit (Rupees)
Growth Option 83,605,660.321 – – 83,605,660.321 10
Dividend Option 4,550,697.931 – – 4,550,697.931 10
Direct Plan - Growth Option
618,870.409 – – 618,870.409 10
Direct Plan - Dividend Option
– – – – 10
5 As these are the fi rst fi nancial statements of the Scheme since the date of launch, there are no prior period comparatives.
6 No contingent liabilities for the period ended March 31, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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, 2014
17
HSBC Capital Protection Oriented Fund
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
18
HSBC Capital Protection Oriented Fund
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
19
HSBC Capital Protection Oriented Fund
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20
HSBC Capital Protection Oriented FundHSBC Capital Protection Oriented Fund
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 Combined 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 SeriesA close-ended Income Scheme
Abridged Annual Report 2013 - 2014
HSBC FTP Series
1
HSBC FTP Series
Dear Investor,
Greetings from HSBC Global Asset Management, India.
I am delighted to be writing to you again and as always I want to start by expressing my gratitude to you for the faith you have reposed in the company.
2013-14 was an important year for us where we continued to signifi cantly enhance our capabilities and more importantly we undertook measures that are designed to benefi t our investors. I am pleased to share some of these with you:
Treating Customers Fairly: Effective 1 March 2013, HSBC Global Asset Management, India was perhaps the only AMC in India to demise exit loads from all its mutual fund schemes for prospective investments. We took this step because we are committed to treating our customers fairly. We therefore do not want to create any exit costs/barriers for investors. We believe investors should stay invested in our schemes due to the benefi ts they see,not due to penal levies.
Portfolio Rebalancing: An area of concern for the industry has been the excessive churn that sometimes takes place in investor portfolios under the guise of portfolio rebalancing. We believe a strong contributor to this is the upfront commissions that are paid by AMCs. You will be pleased to know that the endeavour which we took last year, to link our distributor commissions to the persistency of the assets,has been extended to all our channel partners. We believe this will promote the right behavior across all stakeholders.
Offshore Advisory Services: In an increasingly interconnected world, it is critical that investment management functions in a country are able to draw on the experiences/developments in other markets. Last year I had informed you that the investment management team of our company in India had commenced sub-advising the India strategies of the fi xed income schemes managed by HSBC Global Asset Management globally. I am extremely pleased to share that effective September 2014, we are now sub-advising the India strategies of the equity schemes that we offer globally as well. This is tremendous vote of confi dence for the team in India.
You would also be aware that we are the only foreign asset manager to the Employees’ Provident Fund Organisation. This effectively means that our funds under management/sub-advise cumulatively account for close to USD 17.67 Bn of assets making us one of the largest managers/sub-advisors of Indian assets(Data as on 31 March 2014, Source: HSBC Global Asset Management, India).
Further we were also the 4th fastest growing asset management company in India in the fi nancial year 2013-14 ie we grew our domestic average assets under management by 46% as compared to the industry growth of 11% for the period March 2013 - March 2014 (Source: AMFI).
Market Outlook
As we know markets are inherently unpredictable, more so capital markets. That said, a range of macroeconomic trends that we are observing suggest an optimistic outlook for equities. With GDP growth tending to bottomout, a decisive mandate for the new government, expectations of earnings upgrades, fair valuations and increased interest from foreign investors, we could be poised for a period of growth in the equity markets.
2
HSBC FTP Series
Equity: As proven historically, equities tend to outperform other asset classes and provide returns that beat infl ation. Fundamentally the India growth story remains strong and given the recent positive developments this may be a good time to increase equity allocation.
Fixed Income: Infl ation is showing a moderating trend which may pave the way for interest rate cuts in the future. This would be positive for long term bond funds. In the interim, short term bond funds continue to offer good value for investors who have a moderate appetite for volatility.
We have been and continue to be of the view that investors should make allocations in keeping with their risk appetite and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
In April 2014, we introduced HSBC Managed Solutions, a fi rst of its kind active asset allocation based solution in India. Investors have a choice of three options within Managed Solutions that caters to different risk profi les - Conservative, Moderate and Growth. You may wish to fi nd out more about Managed Solutions while planning your investments.
In summary,
- if your risk appetite is high and your investment horizon is over fi ve years you could consider investing in equity funds.
- if you are of a moderate risk profi le you may wish to allocate across equity and debt products or even consider hybrid products like a Dynamic Fund or a Monthly Income Plan.
- if you are a conservative investor, you may prefer accrual products like short term debt funds and liquid funds.
Alternatively, you may consider investing in an asset allocation fund like HSBC Managed Solutions and choose the option that fi ts your risk appetite.
In closing please accept, once again, my sincere thanks for choosing us as your provider. And I look forward to a long and mutually benefi cial relationship.
Yours sincerely,
Puneet Chaddha
Chief Executive Offi cer
HSBC Asset Management (India) Private Limited
3
HSBC FTP Series
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.
Effective from May 11, 2013
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.
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. Naina Lal Kidwai - Chairperson
Mr. S. P. MustafaMs. Kishori J. UdeshiMr. Dinesh MittalMr. Puneet Chaddha - Chief Executive Offi cer
4
HSBC FTP Series
Trustees’ ReportFor the year ended March 31, 2014
The Trustees present the twelfth report and the audited abridged fi nancial statements of the Schemes of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2014.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Fixed Term Series - a close ended Income Scheme
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 Schemes launched during the period are provided below -
Name of Scheme Date of Launch
HSBC Fixed Term Series 91 August 01, 2013
HSBC Fixed Term Series 94 August 16, 2013
HSBC Fixed Term Series 95 August 23, 2013
HSBC Fixed Term Series 98 October 14, 2013
HSBC Fixed Term Series 97 October 24, 2013
HSBC Fixed Term Series 99 November 08, 2013
HSBC Fixed Term Series 100 November 27, 2013
HSBC Fixed Term Series 101 January 15, 2014
HSBC Fixed Term Series 105 February 05, 2014
HSBC Fixed Term Series 106 February 24, 2014
HSBC Fixed Term Series 107 March 06, 2014
HSBC Fixed Term Series 109 March 24, 2014
HSBC Fixed Term Series 102 April 28, 2014
Being close ended fi xed maturity plans, the performance of these Schemes are not provided.
b) Market Overview & Outlook
EQUITY OUTLOOK
The Sensex returned 18.8% for the FY ended March 2014. It is the highest fi scal year return since FY10. While the rally looks strong on annual basis, it wasn’t without its share of ups and downs. In fact, Sensex gave negative returns over the fi rst fi ve months when hopes of economic recovery were completely negated by ballooning current account defi cit and depreciating currency. The market rebounded smartly over the next 7 months of the fi scal to post smart gains. The market gain was largely linked to hope of pro-reform government formation at the center as state election results and opinion poll results poured in through this period. Improvement in current account helped too.
Returns (April 1, 2013 - March 31, 2014) 1 Year (%)
NIFTY 18.0
Sensex 18.8
S&P BSE 100 18.1
S&P BSE 200 17.2
S&P BSE 500 17.1
CNX Midcap 15.3
Source: Bloomberg
5
HSBC FTP Series
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Our view in respect of key issues facing equity market currently is presented below based upon which we expect continuation of prevailing positive sentiment in the market -
� Macro: We expect improvement in all the macro parameters on YoY basis. GDP growth, Industrial production growth, and Capital formation growth are likely to see recovery from last year. Key risk to our call on growth recovery is weak monsoons.
� Infl ation: While elevated level of infl ation continues to remain a worry for policy makers and somewhat constrain their ability to maneuver the economy on the recovery path, we are also cognizant of the fact that trajectory of infl ation is likely to be downward sloping.
� Interest rates: Our expectation of interest rates is based on infl ation level, their trajectory, and fi scal position of the government. Based upon which we opine that there is limited room for rate reduction in the near term but it is expected to happen in 2015.
� Reforms: The seminal event of FY14 is the General Election and its mandate. We believe, the mandate, which exceeded most optimistic expectations, underlines nation’s desire to shun identity based politics and parochial considerations for development and economic growth. Expectations from the government are high but we are placing our faith in the government’s ability to deliver (albeit over 3-5 years).
� Valuations: (for large Sensex companies) is 16.2x on FY15e and 13.8x on FY16e earnings, which is right in the middle of long-term averages. Despite run-up, a large number of mid-caps are available at a signifi cant discount to large cap peer.
DEBT OUTLOOK
Fixed Income market in FY 2014 faced higher volatility in rates this year as RBI hiked the short end rates substantially in July 2013 to counter pressure on currency. Although the measures were gradually rolled back, long end of the curve remained anchored to 8.75-9% range due to supply and absence of open market operations.
First half of the year saw rate cuts of 75 bps which led to substantial positive sentiments in the fi xed income markets. RBI had been cutting rates despite high infl ation readings largely to support growth impetus carried on by the government. This momentum was carried on till May 2013 as the rates were also supported by FII infl ows in fi xed income markets.
After Federal Reserve meeting in May 2013, which indicated tapering of the quantitative easing in the US, most emerging markets including India faced currency weakness? The fear of withdrawal of excess liquidity caused weakness in all emerging market currency including India. Higher current account defi cit due to higher gold import requirements and inelastic oil imports requirement also accentuated pressure on the currency. Foreign investors especially in fi xed income segment withdrew in large quantum in June, July and August 2013 which pushed INR / USD rates closer to 68.
RBI in order to protect the INR increased the short term operative rates by 300 bps in July 2013. These pressures created highly inverted yield curve and mark to market losses in most of the security. Respite came in after September 2013, when RBI launched FCNR scheme with discounted forward rates. This benefi tted forex situation and the rates came back closer to 62 from 68 levels earlier. Gradually over next 3 months, RBI reduced the overnight rates while hiking the repo rate by 50 bps (till Dec 13).
The resultant volatility due to increase in rates and currency volatility impacted the funds returns in last year.
In the current year, RBI has hiked 25 bps and has targeted infl ation. However, it has also charted a path for the infl ation. If infl ation follows the glide path, rates may not move higher from the current 8% repo rate. RBI also took initiative for the liquidity management and has shown proactiveness in managing needs of the market in March and June 2014.
We expect the current stable government will take up many measures to contain infl ation and fi scal consolidation. This would lead to RBI holding on the rates for a while before expectation of rate cuts set in. However, there is a need to focus on key variables in the economy to judge future directions. These are:
� Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts.
� 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 ease in second quarter of FY 14-15.
6
HSBC FTP Series
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
� Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. GDP will be bottoming out in couple of quarters.
� Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve.
� Current account defi cit / BoP situation: CAD 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 / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / 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 the 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. 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 SCHEMESThe 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).
7
HSBC FTP Series
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
4. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil.
6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 198 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 5 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bengaluru and Chennai. With a view to enhance customer convenience, the AMC has extended the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. Call Center number has now been converted to a single Toll Free number which can be dialed from anywhere in India. The call center service is being managed by the Registrar and Transfer Agents. The AMC continues to retain the outsourced back offi ce services with HSBC Electronic Data Processing India Private Limited.
On the distribution front, the number of empanelled distributors was 664 as on March 31, 2014. 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 46.
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2013- March 2014 are as follows:
Total Number of Folios: 2,19,898*
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 3 2 1 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 1 1 0 0 0 0 0 0 0 0
I C Non receipt of Redemption Proceeds
0 44 24 14 0 0 0 6 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 7 7 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
1 2 3 0 0 0 0 0 0 0 0
II C Data corrections in Investor details 0 132 132 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 4 4 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
8
HSBC FTP Series
Trustees’ ReportFor the year ended March 31, 2014 (Contd...)
Com-plaintCode
Type of complaint#
(a) No. ofcomplaints
pendingat the
beginningof 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 detai ls, nomination, etc.
0 13 12 0 0 0 0 1 0 0 0
IV Others 0 18 15 2 0 0 0 1 0 0 0
Total 1 224 200 17 0 0 0 8 0 0 0
Note:
* active folios
# including against its authorized persons / distributors / employees etc.
8. 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 holder 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.
9. 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 service 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/-
Dilip J. Thakkar
Trustee
MumbaiJuly 15, 2014
9
HSBC FTP Series
Independent Auditors’ Report
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
89 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the year ended March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the year ended March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
10
HSBC FTP Series
Independent Auditors’ Report (Contd...)
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
11
HSBC FTP Series
Independent Auditors’ Report (Contd...)
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
90 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the year ended March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the year ended March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
12
HSBC FTP Series
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
13
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 91 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period August 01, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period August 01, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period August 01, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
14
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
15
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 94 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period August 16, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period August 16, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period August 16, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
16
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
17
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 95 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period August 23, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period August 23, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period August 23, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and
Independent Auditors’ Report (Contd...)
18
HSBC FTP Series
belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
19
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 96 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period August 30, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period August 30, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period August 30, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and
Independent Auditors’ Report (Contd...)
20
HSBC FTP Series
belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
21
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 97 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period October 24, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period October 24, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period October 24, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and
Independent Auditors’ Report (Contd...)
22
HSBC FTP Series
belief, were necessary for the purposes of our audit; and
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
23
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term
Series 98 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period October 14, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period October 14, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period October 14, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
24
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
25
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
99 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period November 08, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period November 08, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period November 08, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
26
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
27
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
100 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period November 27, 2013 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period November 27, 2013 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period November 27, 2013 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
28
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
29
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
101 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period January 15, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period January 15, 2014 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period January 15, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
30
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
31
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
105 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period February 05, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period February 05, 2014 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period February 05, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
32
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5(ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
33
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
106 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period February 24, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period February 24, 2014 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period February 24, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
34
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
35
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
107 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period March 06, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period March 06, 2014to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period March 06, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
36
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
37
HSBC FTP Series
To the Board of Trustees of
HSBC Mutual Fund
Report on the Financial Statements1. We have audited the accompanying fi nancial statements of HSBC Mutual Fund - HSBC Fixed Term Series
109 (the “Scheme”), which comprise the Balance Sheet as at March 31, 2014, the related Revenue Account and Cash Flow Statement for the period March 24, 2014 to March 31, 2014, and a summary of signifi cant accounting policies and other explanatory information, which we have signed under reference to this report.
Trustee’s and Management’s Responsibility for the Financial Statements2. The Board of Trustees of HSBC Mutual Fund (the “Trustee”) and the Management of HSBC Asset
Management (India) Private Limited (the “Management”) are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows 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 and amendments thereto (the “Regulations”). This responsibility includes the design, implementation and maintenance of internal control 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.
Auditors’ Responsibility3. Our 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 and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. 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.
4. In making those risk assessments, the auditors consider internal control relevant to the preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2014 by correspondence with the custodian/others and registrar and transfer agent, respectively.
5. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion6. In our opinion, and to the best of our information and according to the explanations given to us, the
accompanying 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at March 31, 2014;
(b) in the case of the Revenue Account, of the net surplus for the period March 24, 2014 to March 31, 2014; and
(c) in the case of the Cash Flow Statement, of the cash fl ows for the period March 24, 2014 to March 31, 2014.
Report on Other Legal and Regulatory Requirement7. As required by section 55(4) of the Regulations, we report that:
(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit; and
Independent Auditors’ Report (Contd...)
38
HSBC FTP Series
(b) In our opinion, the Balance Sheet, Revenue Account and Cash Flow Statement dealt with by this report have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.
8. As required by clause 5 (ii)(2) of the Eleventh Schedule to the Regulations, we report that the Balance Sheet, Revenue Account, and Cash Flow Statement dealt with by this Report are in agreement with the books of account of the Scheme.
9. In our opinion, the methods used to value non-traded securities as at March 31, 2014, as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund in accordance with the guidelines for valuation of securities for mutual funds as mentioned in the Eighth Schedule of the Regulations issued by the Securities and Exchange Board of India, are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership Number: 104941
Place : MumbaiDate : July 15, 2014.
Independent Auditors’ Report (Contd...)
39
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 89As at March
31, 2014As at March
31, 2013#
LIABILITIES1 Unit Capital 8,472.47 8,472.472 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 735.87 9.193 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 28.33 1,009.31
TOTAL 9,236.67 9,490.97
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 689.95 –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 – 688.441.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits 8,453.69 7,789.341.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 9,143.64 8,477.782 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 12.85 0.00 ~3.2 CBLO / Reverse Repo Lending 79.37 3.783.3 Others 0.81 1,009.414 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 9,236.67 9,490.97
Notes to Accounts - Annexure I # Scheme launched during the current fi nancial year.~ Indicates less than 0.01
Abridged Balance Sheet as at March 31, 2014
40
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 90As at
March 31, 2014As at
March 31, 2013
LIABILITIES1 Unit Capital 6,429.58 6,429.582 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 569.70 7.963 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 7.15 0.43
TOTAL 7,006.43 6,437.97
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 – –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 6,990.73 6,424.851.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 6,990.73 6,424.852 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.02 0.00 ~3.2 CBLO / Reverse Repo Lending 15.66 12.913.3 Others 0.02 0.214 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 7,006.43 6,437.97Notes to Accounts - Annexure I ~ Indicates less than 0.01
Abridged Balance Sheet as at March 31, 2014
41
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 91#
HSBC FIXED TERM SERIES 94#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 19,207.30 26,394.492 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 7.80 140.112.3 Other Reserves 1,193.17 1,681.963 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 32.41 25.99
TOTAL 20,440.68 28,242.55
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 – 3,157.071.1.5 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 20,367.77 24,831.441.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 20,367.77 27,988.512 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.05 0.053.2 CBLO / Reverse Repo Lending 72.73 58.183.3 Others 0.13 195.814 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 20,440.68 28,242.55
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
Abridged Balance Sheet as at March 31, 2014
42
HSBC FTP Series
Abridged Balance Sheet as at March 31, 2014
Rs. in Lakhs
HSBC FIXED TERM SERIES 95#
HSBC FIXED TERM SERIES 96#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 8,517.33 13,903.062 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 190.79 67.822.3 Other Reserves 465.87 838.843 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 10.82 13.47
TOTAL 9,184.81 14,823.19
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 8,553.24 –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 206.64 14,783.671.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 8,759.88 14,783.672 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.06 0.033.2 CBLO / Reverse Repo Lending 64.57 39.413.3 Others 360.30 0.084 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 9,184.81 14,823.19
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
43
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 97#
HSBC FIXED TERM SERIES 98#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 5,546.14 15,725.792 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve – 7.582.3 Other Reserves 198.75 605.913 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 5.18 15.4
TOTAL 5,750.07 16,354.68
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 999.66 2,988.501.1.5 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 4,676.45 13,196.321.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 5,676.11 16,184.822 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.03 0.043.2 CBLO / Reverse Repo Lending 27.65 47.543.3 Others 46.28 122.284 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 5,750.07 16,354.68
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
Abridged Balance Sheet as at March 31, 2014
44
HSBC FTP Series
Abridged Balance Sheet as at March 31, 2014
Rs. in Lakhs
HSBC FIXED TERM SERIES 99#
HSBC FIXEDTERM SERIES 100#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 7,478.08 6,274.612 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 6.17 0.172.3 Other Reserves 248.95 185.753 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 6.60 5.07
TOTAL 7,739.80 6,465.60
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 2,995.25 1,000.961.1.5 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 4,600.14 5,409.861.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 7,595.39 6,410.822 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.02 0.023.2 CBLO / Reverse Repo Lending 23.14 20.473.3 Others 121.25 34.294 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 7,739.80 6,465.60
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
45
HSBC FTP Series
Rs. in Lakhs
HSBC FIXEDTERM SERIES 101#
HSBC FIXEDTERM SERIES 105#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 18,069.81 26,078.072 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 1.20 65.562.3 Other Reserves 333.61 326.293 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 8.95 13.09
TOTAL 18,413.57 26,483.01
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 4,503.38 10,243.581.1.5 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 13,745.51 16,018.781.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 18,248.89 26,262.362 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.05 0.073.2 CBLO / Reverse Repo Lending 66.19 104.433.3 Others 98.44 116.154 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 18,413.57 26,483.01
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
Abridged Balance Sheet as at March 31, 2014
46
HSBC FTP Series
Abridged Balance Sheet as at March 31, 2014
Rs. in Lakhs
HSBC FIXEDTERM SERIES 106#
HSBC FIXEDTERM SERIES 107#
As at March 31, 2014
As at March 31, 2014
LIABILITIES1 Unit Capital 12,157.89 15,070.132 Reserves & Surplus2.1 Unit Premium Reserves – –2.2 Unrealised Appreciation Reserve 32.54 35.802.3 Other Reserves 114.52 76.173 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 4.48 3.42
TOTAL 12,309.43 15,185.52
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 3,464.93 5,908.601.1.5 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 8,763.17 9,168.851.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 12,228.10 15,077.452 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 0.05 0.043.2 CBLO / Reverse Repo Lending 58.87 57.753.3 Others 22.41 50.284 Deferred Revenue Expenditure (to the extent not written off) – –
TOTAL 12,309.43 15,185.52
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
47
HSBC FTP Series
Rs. in Lakhs
HSBC FIXEDTERM SERIES 109#
As at March 31, 2014
LIABILITIES1 Unit Capital 31,098.052 Reserves & Surplus2.1 Unit Premium Reserves – 2.2 Unrealised Appreciation Reserve 19.452.3 Other Reserves 45.973 Loans & Borrowings – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – 4.2 Other Current Liabilities & Provisions 1.84
TOTAL 31,165.31
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 – 1.7 Certifi cate of Deposits 31,059.291.8 Bill Rediscounting – 1.9 Units of Domestic Mutual Fund – 1.1 Foreign Securities –
Total Investments 31,059.292 Deposits – 3 Other Current Assets3.1 Cash & Bank Balance 0.073.2 CBLO / Reverse Repo Lending 105.573.3 Others 0.384 Deferred Revenue Expenditure (to the extent not written off) –
TOTAL 31,165.31
Notes to Accounts - Annexure I# Scheme launched during the current fi nancial year.
Abridged Balance Sheet as at March 31, 2014
48
HSBC FTP Series
Abridged Revenue Account for the year ended March 31, 2014
Rs. in Lakhs
HSBC FIXED TERM SERIES 89Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
1 INCOME1.1 Dividend – –1.2 Interest 759.01 13.061.3 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
investments0.14 –
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.06 –
(A) 759.21 13.062 EXPENSES2.1 Management fees 28.01 0.082.2 Service tax on Management fees 3.46 0.012.3 Transfer agents fees and expenses 0.99 0.082.4 Custodian fees 1.00 0.012.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses – –2.8 Audit fees 0.20 0.202.9 Investor Education Expenses 1.76 0.032.10 Other operating expenses 0.13 0.192.11 Less : Expenses to be Reimbursed by the Investment Manager – (0.01)
(B) 35.55 0.59
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR / PERIOD (A - B = C) 723.66 12.47
4 Change in Unrealised Depreciation in value of investments (D) 3.02 3.28
5 NET GAINS / (LOSSES) FOR THEYEAR / PERIOD [E = (C - D)] 726.68 9.19
6 Change in unrealised appreciation in the value of investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THEYEAR / PERIOD (E + F = G) 726.68 9.19
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund 9.19 –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 735.87 9.19
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 735.87 9.19
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched previous the current fi nancial year.
49
HSBC FTP Series
Abridged Revenue Account for the year ended March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 90Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
1 INCOME1.1 Dividend – –1.2 Interest 571.25 10.181.3 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
investments0.07 –
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 571.32 10.182 EXPENSES2.1 Management fees 7.28 0.052.2 Service tax on Management fees 0.90 0.012.3 Transfer agents fees and expenses 0.75 0.062.4 Custodian fees 0.90 0.012.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses – –2.8 Audit fees 0.20 0.202.9 Investor Education Expenses 1.34 0.022.10 Other operating expenses 0.14 0.092.11 Less : Expenses to be Reimbursed by the Investment Manager – (0.19)
(B) 11.51 0.25
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR / PERIOD (A - B = C) 559.81 9.93
4 Change in Unrealised Depreciation in value of investments (D) 1.93 1.97
5 NET GAINS / (LOSSES) FOR THEYEAR / PERIOD [E = (C - D)] 561.74 7.96
6 Change in unrealised appreciation in the value of investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THEYEAR / PERIOD (E + F = G) 561.74 7.96
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund 7.96 –7.5 Transfer from Unit Premium Reserve – –
8 Total 569.70 7.96
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 569.70 7.96
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the previous fi nancial year.
50
HSBC FTP Series
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 91 #
HSBC FIXED TERM SERIES 94 #
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 1,245.70 1,729.621.3 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 – –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 1,245.70 1,729.622 EXPENSES2.1 Management fees 27.95 22.902.2 Service tax on Management fees 3.45 2.832.3 Transfer agents fees and expenses 1.48 2.052.4 Custodian fees 0.55 0.542.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 15.88 15.352.8 Audit fees 0.20 0.202.9 Investor Education Expenses 2.62 3.362.10 Other operating expenses 0.40 0.432.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 52.53 47.66
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 1,193.17 1,681.96
4 Change in Unrealised Depreciation invalue of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 1,193.17 1,681.96
6 Change in unrealised appreciation in thevalue of investments (F) 7.80 140.11
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 1,200.97 1,822.077.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 7.80 140.117.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 1,193.17 1,681.96
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 1,193.17 1,681.96
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
51
HSBC FTP Series
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
Rs. in Lakhs
HSBC FIXED TERM SERIES 95 #
HSBC FIXED TERM SERIES 96 #
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 484.62 862.791.3 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 – –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 484.62 862.792 EXPENSES2.1 Management fees 8.93 11.582.2 Service tax on Management fees 1.10 1.432.3 Transfer agents fees and expenses 0.66 0.942.4 Custodian fees 0.20 0.352.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 6.39 7.552.8 Audit fees 0.20 0.202.9 Investor Education Expenses 1.05 1.662.10 Other operating expenses 0.21 0.242.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 18.74 23.95
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 465.88 838.84
4 Change in Unrealised Depreciation invalue of investments (D) -0.01 –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 465.87 838.84
6 Change in unrealised appreciation in thevalue of investments (F) 190.79 67.82
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 656.66 906.667.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 190.79 67.827.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 465.87 838.84
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 465.87 838.84
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
52
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 97#
HSBC FIXED TERM SERIES 98#
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 219.64 652.281.3 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 – –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 219.64 652.282 EXPENSES2.1 Management fees 3.67 11.652.2 Service tax on Management fees 0.45 1.442.3 Transfer agents fees and expenses 0.32 0.902.4 Custodian fees 0.11 0.302.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 3.22 9.672.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.49 1.462.10 Other operating expenses 0.17 0.322.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 8.63 25.94
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 211.01 626.34
4 Change in Unrealised Depreciation invalue of investments (D) -12.26 -20.43
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 198.75 605.91
6 Change in unrealised appreciation in thevalue of investments (F) – 7.58
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 198.75 613.497.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – 7.587.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 198.75 605.91
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 198.75 605.91
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
53
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 99#
HSBC FIXED TERM SERIES 100#
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 266.17 197.111.3 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 – –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 266.17 197.112 EXPENSES2.1 Management fees 4.30 3.082.2 Service tax on Management fees 0.53 0.382.3 Transfer agents fees and expenses 0.36 0.302.4 Custodian fees 0.12 0.092.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 3.96 2.962.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.58 0.432.10 Other operating expenses 0.26 0.192.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 10.31 7.63
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 255.86 189.48
4 Change in Unrealised Depreciation invalue of investments (D) -6.91 -3.73
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 248.95 185.75
6 Change in unrealised appreciation in thevalue of investments (F) 6.17 0.17
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 255.12 185.927.1 Add: Balance transfer from Unrealised Appreciation Reserve – -0.177.2 Less: Balance transfer to Unrealised Appreciation Reserve 6.17 –7.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 248.95 185.75
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 248.95 185.75
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
54
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 101#
HSBC FIXED TERM SERIES 105#
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 344.61 339.531.3 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 – –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 344.61 339.532 EXPENSES2.1 Management fees 4.93 6.362.2 Service tax on Management fees 0.61 0.792.3 Transfer agents fees and expenses 0.42 0.492.4 Custodian fees 0.14 0.112.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 3.63 4.082.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.74 0.702.10 Other operating expenses 0.33 0.512.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 11.00 13.24
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 333.61 326.29
4 Change in Unrealised Depreciation invalue of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 333.61 326.29
6 Change in unrealised appreciation in thevalue of investments (F) 1.20 65.56
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 334.81 391.857.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 1.20 65.567.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 333.61 326.29
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 333.61 326.29
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
55
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 106#
HSBC FIXED TERM SERIES 107#
Current Period ended
March 31, 2014
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend – –1.2 Interest 108.87 79.591.3 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 10.24 –1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –
(A) 119.11 79.592 EXPENSES2.1 Management fees 1.81 1.132.2 Service tax on Management fees 0.22 0.142.3 Transfer agents fees and expenses 0.23 0.142.4 Custodian fees 0.04 0.022.5 Trusteeship fees – –2.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 1.59 1.232.8 Audit fees 0.20 0.202.9 Investor Education Expenses 0.23 0.172.10 Other operating expenses 0.27 0.392.11 Less : Expenses to be Reimbursed by the Investment Manager – –
(B) 4.59 3.42
3 NET REALISED GAINS / (LOSSES)FOR THE PERIOD (A - B = C) 114.52 76.17
4 Change in Unrealised Depreciation invalue of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 114.52 76.17
6 Change in unrealised appreciation in thevalue of investments (F) 32.54 35.80
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 147.06 111.977.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 32.54 35.807.3 Add / (Less): Equalisation – –7.4 Transfer from Reserve Fund – –
7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 114.52 76.17
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 114.52 76.17
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.# Scheme launched during the current fi nancial year.
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
56
HSBC FTP Series
Rs. in Lakhs
HSBC FIXED TERM SERIES 109#
Current Period ended
March 31, 2014
1 INCOME1.1 Dividend –1.2 Interest 47.581.3 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 –1.6 Realised Gains / (Losses) on Derivative Transactions –1.7 Other Income –
(A) 47.58
2 EXPENSES2.1 Management fees 0.262.2 Service tax on Management fees 0.032.3 Transfer agents fees and expenses 0.292.4 Custodian fees 0.022.5 Trusteeship fees –2.6 Commission to Agents * –2.7 Marketing & Distribution expenses 0.512.8 Audit fees 0.202.9 Investor Education Expenses 0.102.10 Other operating expenses 0.432.11 Less : Expenses to be Reimbursed by the Investment Manager -0.23
(B) 1.61
3 NET REALISED GAINS / (LOSSES) FOR THE PERIOD (A - B = C) 45.97
4 Change in Unrealised Depreciation in value of investments (D) –
5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 45.97
6 Change in unrealised appreciation in the value of investments (F) 19.45
7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 65.42
7.1 Add: Balance transfer from Unrealised Appreciation Reserve –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 19.457.3 Add / (Less): Equalisation –7.4 Transfer from Reserve Fund –7.5 Transfer from Unit Premium Reserve –
8 TOTAL 45.97
9 Dividend Appropriation
9.1 Income Distributed during the period –9.2 Tax on income distributed during the period –
10 Retained Surplus / (Defi cit) carried forward to Balance sheet 45.97
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution expenses.
# Scheme launched during the current fi nancial year.
Abridged Revenue Account for the period ended March 31, 2014 (Contd...)
57
HSBC FTP Series
Key Statistics for the year ended March 31, 2014
HSBC FIXED TERM SERIES 89Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
1. NAV per unit (Rs.):
Open
Regular Growth Option 10.0108 –
Regular Dividend Option 10.0022 –
Direct Plan - Regular Growth Option 10.0554 –
Direct Plan - Regular Dividend Option – –
High
Regular Growth Option 10.8592 10.0108
Regular Dividend Option 10.8592 10.0108
Direct Plan - Regular Growth Option 10.8921 10.0113
Direct Plan - Regular Dividend Option – –
Low
Regular Growth Option 10.0280 10.0029
Regular Dividend Option 10.0280 10.0029
Direct Plan - Regular Growth Option 10.0287 10.0029
Direct Plan - Regular Dividend Option – –
End5
Regular Growth Option 10.8680 10.0108
Regular Dividend Option 10.8680 10.0022
Direct Plan - Regular Growth Option 10.9012 10.0554
Direct Plan - Regular Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,208 8,482
Average (AAuM)1 8,819 8,476
3. Gross income as % of AAuM2 8.61% 9.37%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 0.41% 0.41%
Direct Plan - Growth Option 0.11% 0.11%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.32% 0.06%
Direct Plan - Growth Option 0.32% 0.06%
5. Net Income as a percentage of AAuM3 8.21% 8.95%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A N.A
Direct Plan - Regular Dividend Option N.A N.A
58
HSBC FTP Series
HSBC FIXED TERM SERIES 89Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
Corporate
Regular Dividend Option N.A N.A
Direct Plan - Regular Dividend Option N.A N.A
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 8.5508% N.A
Direct Plan - Regular Growth Option 8.8900% N.A
Benchmark
CRISIL Short-Term Bond Fund Index 8.7791% N.A
b. Since Inception
Scheme
Regular Growth Option 8.5432% 0.0400%
Direct Plan - Regular Growth Option 8.8700% N.A
Benchmark
CRISIL Short-Term Bond Fund Index 8.7791% 0.0400%
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 The net asset value disclosed represents the computed NAV on March 31,2014 (Non-business Day),
and not the last declared NAV.
# Scheme launched during the previous fi nancial year
Key Statistics for the year ended March 31, 2014 (Contd...)
59
HSBC FTP Series
Key Statistics for the year ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 90Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
1. NAV per unit (Rs.):
Open
Growth Option 10.0122 N.A
Dividend Option 10.0122 N.A
Direct Plan - Growth Option 10.0126 N.A
Direct Plan - Dividend Option – N.A
High
Growth Option 10.8679 10.0122
Dividend Option 10.8679 10.0122
Direct Plan - Growth Option 10.8866 10.0126
Direct Plan - Dividend Option – N.A
Low
Growth Option 10.0342 10.0020
Dividend Option 10.0342 10.0020
Direct Plan - Growth Option 10.0346 10.0021
Direct Plan - Dividend Option – N.A
End5
Growth Option 10.8768 10.0122
Dividend Option 10.8768 10.0122
Direct Plan - Growth Option 10.8957 10.0126
Direct Plan - Dividend Option – N.A
2. Closing Assets Under Management (Rs. in Lakhs)
End 6,999 6,438
Average (AAuM)1 6,702 6,435
3. Gross income as % of AAuM2 * 8.52% 8.25%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.255% 0.25%
Direct Plan - Growth Option 0.085% 0.08%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.11% 0.04%
Direct Plan - Growth Option 0.11% 0.04%
5. Net Income as a percentage of AAuM3 * 8.35% 8.04%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A N.A
Direct Plan - Dividend Option N.A N.A
Corporate
Regular Dividend Option N.A N.A
Direct Plan - Dividend Option N.A N.A
60
HSBC FTP Series
HSBC FIXED TERM SERIES 90Current
Year ended March 31, 2014
Previous Period ended
March 31, 2013#
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 8.6160% N.A
Direct Plan - Growth Option 8.8200% N.A
Benchmark
CRISIL Short-Term Bond Fund Index 8.7808% N.A
b. Since Inception
Scheme
Regular Growth Option 8.6053% 0.0600%
Direct Plan - Growth Option 8.8400% 0.0849%
Benchmark
CRISIL Short-Term Bond Fund Index 8.7628% 0.0500%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the previous fi nancial year
Key Statistics for the year ended March 31, 2014 (Contd...)
61
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 91#Current Period ended
March 31, 2014
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 10.6175
Dividend Option 10.6175
Direct Plan - Growth Option 10.6391
Direct Plan - Dividend Option 10.6391
Low
Growth Option 9.9478
Dividend Option 9.9478
Direct Plan - Growth Option 9.9494
Direct Plan - Dividend Option 9.9494
End5
Growth Option 10.6249
Dividend Option 10.6249
Direct Plan - Growth Option 10.6467
Direct Plan - Dividend Option 10.6467
2. Closing Assets Under Management (Rs. in Lakhs)
End 20,408
Average (AAuM)1 19,784
3. Gross income as % of AAuM2 * 9.50%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.41%
Direct Plan - Growth Option 0.10%
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 * 9.10%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
62
HSBC FTP Series
HSBC FIXED TERM SERIES 91#Current Period ended
March 31, 2014
8. Returns (%):
a. Last One Year Scheme
Regular Growth Option N.ADirect Plan - Growth Option N.A
BenchmarkCRISIL Short-Term Bond Fund Index N.A
b. Since Inception Scheme
Regular Growth Option 6.2174%Direct Plan - Growth Option 6.4356%
BenchmarkCRISIL Short-Term Bond Fund Index 6.9590%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
63
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 94#Current Period ended
March 31, 2014
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 10.6781
Dividend Option 10.6781
Direct Plan - Growth Option 10.6949
Direct Plan - Dividend Option –
Low
Growth Option 10.0131
Dividend Option 10.0131
Direct Plan - Growth Option 10.0133
Direct Plan - Dividend Option –
End5
Growth Option 10.6855
Dividend Option 10.6855
Direct Plan - Growth Option 10.7026
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 28,217
Average (AAuM)1 27,403
3. Gross income as % of AAuM2 * 10.28%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.10%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.14%
Direct Plan - Growth Option 0.14%
5. Net Income as a percentage of AAuM3 * 10.00%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
64
HSBC FTP Series
HSBC FIXED TERM SERIES 94#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 6.8060%
Direct Plan - Growth Option 6.9774%
Benchnmark
CRISIL Short-Term Bond Fund Index 7.4321%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
65
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 95#
Current Period endedMarch 31, 2014
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 10.7632
Dividend Option 10.7632
Direct Plan - Growth Option 10.7795
Direct Plan - Dividend Option –
Low
Growth Option 9.9981
Dividend Option 9.9981
Direct Plan - Growth Option 9.9983
Direct Plan - Dividend Option –
End5
Growth Option 10.7709
Dividend Option 10.7709
Direct Plan - Growth Option 10.7875
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,174
Average (AAuM)1 8,904
3. Gross income as % of AAuM2 * 9.20%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.10%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.17%
Direct Plan - Growth Option 0.17%
5. Net Income as a percentage of AAuM3 * 8.84%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
66
HSBC FTP Series
HSBC FIXED TERM SERIES 95#
Current Period endedMarch 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
8. Returns (%):
a. Last One YearSchemeRegular Growth Option N.ADirect Plan - Growth Option N.A
BenchmarkCRISIL Short-Term Bond Fund Index N.A
b. Since InceptionSchemeRegular Growth Option 7.6043%Direct Plan - Growth Option 7.7697%
BenchnmarkCRISIL Short-Term Bond Fund Index 7.1127%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
67
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 96#Current Period ended
March 31, 2014
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 10.6407
Dividend Option 10.6407
Direct Plan - Growth Option 10.6564
Direct Plan - Dividend Option –
Low
Growth Option 10.0626
Dividend Option 10.0626
Direct Plan - Growth Option 10.0629
Direct Plan - Dividend Option –
End5
Growth Option 10.6480
Dividend Option 10.6480
Direct Plan - Growth Option 10.6639
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 14,810
Average (AAuM)1 14,420
3. Gross income as % of AAuM2 * 10.40%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.10%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.14%
Direct Plan - Growth Option 0.14%
5. Net Income as a percentage of AAuM3 * 10.11%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
68
HSBC FTP Series
HSBC FIXED TERM SERIES 96#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
8. Returns (%):
a. Last One YearSchemeRegular Growth Option N.ADirect Plan - Growth Option N.A
BenchmarkCRISIL Short-Term Bond Fund Index N.A
b. Since InceptionSchemeRegular Growth Option 6.4424%Direct Plan - Growth Option 6.6018%
BenchnmarkCRISIL Short-Term Bond Fund Index 6.6106%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
69
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 97#Current Period ended
March 31, 2014
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 10.3511
Dividend Option 10.3511
Direct Plan - Growth Option 10.3626
Direct Plan - Dividend Option –
Low
Growth Option 10.0058
Dividend Option 10.0058
Direct Plan - Growth Option 10.0073
Direct Plan - Dividend Option –
End5
Growth Option 10.3583
Dividend Option 10.3583
Direct Plan - Growth Option 10.3699
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 5,745
Average (AAuM)1 5,630
3. Gross income as % of AAuM2 * 9.01%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.10%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.15%
Direct Plan - Growth Option 0.15%
5. Net Income as a percentage of AAuM3 * 8.66%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
70
HSBC FTP Series
HSBC FIXED TERM SERIES 97#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
8. Returns (%):
a. Last One YearSchemeRegular Growth Option N.ADirect Plan - Growth Option N.A
BenchmarkCRISIL Short-Term Bond Fund Index N.A
b. Since InceptionSchemeRegular Growth Option 3.5429%Direct Plan - Growth Option 3.6594%
BenchnmarkCRISIL Short-Term Bond Fund Index 3.9686%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
71
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 98#Current Period ended
March 31, 2014
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 10.3830
Dividend Option 10.3830
Direct Plan - Growth Option 10.3946
Direct Plan - Dividend Option –
Low
Growth Option 10.0174
Dividend Option 10.0174
Direct Plan - Growth Option 10.0178
Direct Plan - Dividend Option –
End5
Growth Option 10.3901
Dividend Option 10.3901
Direct Plan - Growth Option 10.4020
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 16,339
Average (AAuM)1 16,002
3. Gross income as % of AAuM2 * 8.96%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.16%
Direct Plan - Growth Option 0.16%
5. Net Income as a percentage of AAuM3 * 8.61%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
72
HSBC FTP Series
HSBC FIXED TERM SERIES 98#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 3.8622%
Direct Plan - Growth Option 3.9817%
Benchnmark
CRISIL Short-Term Bond Fund Index 4.1998%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
73
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 99#Current Period ended
March 31, 2014
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 10.3340
Dividend Option 10.3340
Direct Plan - Growth Option 10.3441
Direct Plan - Dividend Option –
Low
Growth Option 9.9953
Dividend Option 9.9953
Direct Plan - Growth Option 9.9955
Direct Plan - Dividend Option –
End5
Growth Option 10.3411
Dividend Option 10.3411
Direct Plan - Growth Option 10.3514
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 7,733
Average (AAuM)1 7,591
3. Gross income as % of AAuM2 * 9.14%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.35%
Direct Plan - Growth Option 0.09%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.15%
Direct Plan - Growth Option 0.15%
5. Net Income as a percentage of AAuM3 * 8.79%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
74
HSBC FTP Series
HSBC FIXED TERM SERIES 99#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 3.3597%
Direct Plan - Growth Option 3.4622%
Benchnmark
CRISIL Short-Term Bond Fund Index 3.8008%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
75
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 100#Current Period ended
March 31, 2014
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 10.2893
Dividend Option 10.2893
Direct Plan - Growth Option 10.2981
Direct Plan - Dividend Option –
Low
Growth Option 10.0079
Dividend Option 10.0079
Direct Plan - Growth Option 10.0082
Direct Plan - Dividend Option –
End5
Growth Option 10.2963
Dividend Option 10.2963
Direct Plan - Growth Option 10.3053
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 6,461
Average (AAuM)1 6,354
3. Gross income as % of AAuM2 * 9.21%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.35%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.14%
Direct Plan - Growth Option 0.14%
5. Net Income as a percentage of AAuM3 * 8.85%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
76
HSBC FTP Series
HSBC FIXED TERM SERIES 100#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 2.9073%
Direct Plan - Growth Option 2.9969%
Benchnmark
CRISIL Short-Term Bond Fund Index 3.2590%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
77
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 101#Current Period ended
March 31, 2014
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 10.1772
Dividend Option 10.1772
Direct Plan - Growth Option 10.1823
Direct Plan - Dividend Option –
Low
Growth Option 10.0004
Dividend Option 10.0004
Direct Plan - Growth Option 10.0014
Direct Plan - Dividend Option –
End5
Growth Option 10.1841
Dividend Option 10.1841
Direct Plan - Growth Option 10.1895
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 18,405
Average (AAuM)1 18,189
3. Gross income as % of AAuM2 * 9.34%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.35%
Direct Plan - Growth Option 0.09%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.13%
Direct Plan - Growth Option 0.13%
5. Net Income as a percentage of AAuM3 * 9.05%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
78
HSBC FTP Series
HSBC FIXED TERM SERIES 101#Current Period ended
March 31, 2014
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 1.7822%
Direct Plan - Growth Option 1.8357%
Benchnmark
CRISIL Short-Term Bond Fund Index 1.9048%
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 The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
79
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 105#Current Period ended
March 31, 2014
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 10.1422
Dividend Option 10.1422
Direct Plan - Growth Option 10.1466
Direct Plan - Dividend Option –
Low
Growth Option 9.9997
Dividend Option 9.9997
Direct Plan - Growth Option 10.0001
Direct Plan - Dividend Option –
End5
Growth Option 10.1491
Dividend Option 10.1491
Direct Plan - Growth Option 10.1539
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 26,470
Average (AAuM)1 26,233
3. Gross income as % of AAuM2 * 9.64%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.46%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.18%
Direct Plan - Growth Option 0.18%
5. Net Income as a percentage of AAuM3 * 9.27%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
80
HSBC FTP Series
HSBC FIXED TERM SERIES 105#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 1.4352%
Direct Plan - Growth Option 1.4832%
Benchnmark
CRISIL Short-Term Bond Fund Index 1.4512%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
81
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 106#Current Period ended
March 31, 2014
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 10.1140
Dividend Option 10.1140
Direct Plan - Growth Option 10.1166
Direct Plan - Dividend Option –
Low
Growth Option 10.0024
Dividend Option 10.0024
Direct Plan - Growth Option 10.0029
Direct Plan - Dividend Option –
End5
Growth Option 10.1209
Dividend Option 10.1209
Direct Plan - Growth Option 10.1238
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 12,305
Average (AAuM)1 12,225
3. Gross income as % of AAuM2 * 10.46%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.41%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.16%
Direct Plan - Growth Option 0.16%
5. Net Income as a percentage of AAuM3 * 10.06%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
82
HSBC FTP Series
HSBC FIXED TERM SERIES 106#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 1.1461%
Direct Plan - Growth Option 1.1742%
Benchnmark
CRISIL Short-Term Bond Fund Index 1.1127%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
83
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 107#Current Period ended
March 31, 2014
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 10.0674
Dividend Option 10.0674
Direct Plan - Growth Option 10.0688
Direct Plan - Dividend Option –
Low
Growth Option 10.0065
Dividend Option 10.0065
Direct Plan - Growth Option 10.0068
Direct Plan - Dividend Option –
End5
Growth Option 10.0743
Dividend Option 10.0743
Direct Plan - Growth Option 10.0760
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 15,182
Average (AAuM)1 15,125
3. Gross income as % of AAuM2 * 9.60%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.41%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.14%
Regular Dividend Option 0.14%
Direct Plan - Growth Option 0.14%
Direct Plan - Dividend Option –
5. Net Income as a percentage of AAuM3 * 9.19%
6. Portfolio turnover ratio4 –
84
HSBC FTP Series
HSBC FIXED TERM SERIES 107#Current Period ended
March 31, 2014
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 0.6740%
Direct Plan - Growth Option 0.6912%
Benchnmark
CRISIL Short-Term Bond Fund Index 0.6424%
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. The net asset value disclosed represents the computed NAV on March 31, 2013 (Non-business Day),
and not the last declared NAV
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
85
HSBC FTP Series
Key Statistics for the period ended March 31, 2014 (Contd...)
HSBC FIXED TERM SERIES 109#Current Period ended
March 31, 2014
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 10.0143
Dividend Option 10.0143
Direct Plan - Growth Option 10.0145
Direct Plan - Dividend Option –
Low
Growth Option 10.0143
Dividend Option 10.0143
Direct Plan - Growth Option 10.0145
Direct Plan - Dividend Option –
End5
Growth Option 10.0210
Dividend Option 10.0210
Direct Plan - Growth Option 10.0214
Direct Plan - Dividend Option –
2. Closing Assets Under Management (Rs. in Lakhs)
End 31,163
Average (AAuM)1 31,138
3. Gross income as % of AAuM2 * 9.30%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise) *
Regular Growth Option 0.36%
Direct Plan - Growth Option 0.11%
b. Management Fee as % of AAuM (planwise) *
Regular Growth Option 0.05%
Direct Plan - Growth Option 0.05%
5. Net Income as a percentage of AAuM3 * 8.98%
6. Portfolio turnover ratio4 –
7. Total Dividend per unit distributed during the period (planwise)
Retail
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
86
HSBC FTP Series
HSBC FIXED TERM SERIES 109#Current Period ended
March 31, 2014
Corporate
Regular Dividend Option N.A
Direct Plan - Dividend Option N.A
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 0.1364%
Direct Plan - Growth Option 0.1407%
Benchnmark
CRISIL Short-Term Bond Fund Index 0.1411%
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. The net asset value disclosed represents the computed NAV on March 31, 2014 (Non-business Day),
and not the last declared NAV.
* Indicates annualised value
# Scheme launched during the current fi nancial year.
Key Statistics for the period ended March 31, 2014 (Contd...)
87
HSBC FTP Series
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC FIXED TERM SERIES 89
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, 2014 and March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial year ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as on March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial year and percentage to net assets is as under:
Security Category Amount (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2014 2013
Certifi cate of Deposits
– Appreciation – – 737 0.00 ~
– Depreciation 20,864 0.00 ~ 172,761 0.02
Non Convertible Debentures and Bonds
– Appreciation – – – –
– Depreciation 5,120 0.00 ~ 15,639 0.00 ~
~ 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 period 2013-14 (excluding accretion of discount) are Rs. 81,8048,782 and 821,072,928 respectively being 92.76% and 93.10% 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 period 2012-13 (excluding accretion of discount) are Rs. 847,136,141 and Nil respectively being 99.94% and 0.00% 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 (%)
2014 2013
Debt Instruments 68,994,880 7.49 68,843,609 8.12
Money Market Instruments 845,368,664 91.80 778,934,346 91.84
Total 914,363,544 99.30 847,777,955 99.95
88
HSBC FTP Series
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 2013-2014 4.37 87.36 – –
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 2012-2013 42.05 49.63 – –
* Borne by HSBC Asset Management (India) Private Limited
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
2013-2014
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option 83,045,723.689 – – 83,045,723.689 10
Dividend Option 1,394,000.000 – – 1,394,000.000 10
Direct Plan- Growth Option
285,000.000 – – 285,000.000 10
Direct Plan- Dividend Option
– – – – 10
2012-2013
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 83,045,723.689 – 83,045,723.689 10
Dividend Option – 1,394,000.000 – 1,394,000.000 10
Direct Plan- Growth Option
– 285,000.000 – 285,000.000 10
Direct Plan- Dividend Option
– – – – 10
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
89
HSBC FTP Series
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the period ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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 ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
90
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
HSBC FIXED TERM SERIES 90
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, 2014 and March 31, 2013 are NIL.
1.3 Investments in Associates and Group Companies as of years ended March 31, 2014 and March 31, 2013 are NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended March 31, 2014 and March 31, 2013 are NIL.
1.5 NPAs as on March 31, 2014 and March 31, 2013 are NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial years and percentage to net assets is as under:
Security Category Amount (Rs.) Percentage to Net Assets (%)
Amount (Rs.) Percentage to Net Assets (%)
2014 2013
Certifi cate of Deposits
– Appreciation – – – –
– Depreciation 4,415 0.00~ 197,386 0.03
~ 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 period 2013-14 (excluding accretion of discount) are Rs. 687,855,986 and 688,495,018 respectively being 102.64% and 102.73% 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 period 2012-2013 (excluding accretion of discount) are Rs. 641,988,547 and Nil respectively being 99.76% 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 (%)
2014 2013
Money Market Instruments 699,073,437 99.88 642,484,771 99.80
Total 699,073,437 99.88 642,484,771 99.80
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 2013-2014 0.15 100 – –
91
HSBC FTP Series
Notes to Accounts - Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2014
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 2012-2013 32.43 50.44 – –
* Borne by HSBC Asset Management (India) Private Limited
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2014 and March 31, 2013.
4 Unit Capital movement during the years ended March 31, 2014 and March 31, 2013:
2013-2014
Description Opening Units Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option 32,841,344.877 – – 32,841,344.877 10
Dividend Option 1,000.000 – – 1,000.000 10
Direct Plan - Growth Option
31,453,409.939 – – 31,453,409.939 10
Direct Plan - Dividend Option
– – – – 10
2012-2013
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 32,841,344.877 – 32,841,344.877 10
Dividend Option – 1,000.000 – 1,000.000 10
Direct Plan - Growth Option – 31,453,409.939 – 31,453,409.939 10
Direct Plan - Dividend Option – – – – 10
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the period ended March 31, 2014 and March 31, 2013.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
92
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 91#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Certifi cates of Deposit / Commercial Paper
– Appreciation 780,136 0.04
– Depreciation – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs. 1,913,198,663 and NIL respectively being 96.70% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the Years ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 167.68 82.09 1,534,316 69.13
HSBC InvestDirect Securities (India) Limited Associate 2013-2014 – – 301 0.01
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
93
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 185,198,156.484 – 185,198,156.484 10
Dividend Option – 3,187,563.377 – 3,187,563.377 10
Direct Plan - Growth Option
– 3,187,241.341 – 3,187,241.341 10
Direct Plan - Dividend Option
– 500,000.000 – 500,000.000 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
94
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 3,731,211 0.13
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation 10,280,081 0.36
– Depreciation – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs. 2,634,355,169 and NIL respectively being 96.13% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 188.83 70.04 1,358,248 81.82
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
95
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 188,178,109.126 – 188,178,109.126 10
Dividend Option – 1,559,322.547 – 1,559,322.547 10
Direct Plan - Growth Option
– 74,207,500.471 – 74,207,500.471 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
96
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 95#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 19,078,603 2.08
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation – –
– Depreciation 1,238 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 period 2013-2014 (excluding accretion of discount) are Rs.849,876,342 and NIL respectively being 95.44% 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 (Rs.) Percentage to Net Assets (%)
2014
Money Market Instruments 20,663,828 2.25
Total 20,663,828 2.25
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 2013-2014 85.09 94.97 707,243 75.43
97
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 843,762,006.970 – 843,762,006.970 10
Dividend Option – 5,280,183.210 – 5,280,183.210 10
Direct Plan - Growth Option
– 2,690,938.200 – 2,690,938.200 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
98
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Certifi cates of Deposit / Commercial Paper
– Appreciation 6,781,571 0.46
– Depreciation – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs.1,386,170,280 and NIL respectively being 96.13% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the Year ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 97.26 68.24 589,076 73.43
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
99
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 102,457,387.642 – 102,457,387.642 10
Dividend Option – 369,321.999 – 369,321.999 10
Direct Plan - Growth Option
– 36,203,925.450 – 36,203,925.450 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
100
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 97#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – –
– Depreciation 58,800 0.01
Certifi cates of Deposit / Commercial Paper
– Appreciation – –
– Depreciation 1,166,939 0.20
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs. 551,659,532 and NIL respectively being 97.99% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 53.90 97.10 206,806 74.00
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
101
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 54,309,381.244 – 54,309,381.244 10
Dividend Option – 631,068.467 – 631,068.467 10
Direct Plan - Growth Option
– 521,000.000 – 521,000.000 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
102
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 758,100 0.05
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation – –
– Depreciation 2,043,400 0.13
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs.1,567,564,376 and NIL respectively being 97.96% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 156.08 98.52 627,381 77.00
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
103
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 156,156,762.928 – 156,156,762.928 10
Dividend Option – 923,500.000 – 923,500.000 10
Direct Plan - Growth Option
– 177,650.888 – 177,650.888 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
104
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 99#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 758,100 0.10
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation – –
– Depreciation 2,043,400 0.26
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial period 2013-2014 (excluding accretion of discount) are Rs. 744,238,040 and NIL respectively being 98.04% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 73.90 98.51 234,682 72.59
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
105
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 73,400,941.029 – 73,400,941.029 10
Dividend Option – 959,217.480 – 959,217.480 10
Direct Plan - Growth Option
– 420,667.417 – 420,667.417 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
106
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 100#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 16,650 0.00~
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation – –
– Depreciation 372,859 0.06
~ 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 period 2013-2014 (excluding accretion of discount) are Rs. 625,499,978 and NIL respectively being 98.44% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 73.90 98.51 234,681.57 72.59
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
107
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 60,945,076.515 – 60,945,076.515 10
Dividend Option – 1,800,000.000 – 1,800,000.000 10
Direct Plan - Growth Option
– 1,000.000 – 1,000.000 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
108
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 101#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 63,300 0.00~
– Depreciation 47,750 0.00~
Certifi cates of Deposit / Commercial Paper
– Appreciation 124,304 0.01
– Depreciation 19,788 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 period 2013-2014 (excluding accretion of discount) are Rs. 1,800,657,680 and NIL respectively being 98.99% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 139.53 76.98 86,438.99 33.57
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
109
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 139,903,168.192 – 139,903,168.192 10
Dividend Option – 750,000.000 – 750,000.000 10
Direct Plan - Growth Option
– 40,044,917.423 – 40,044,917.423 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
110
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 1,047,705 0.04
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation 5,508,735 0.21
– Depreciation – –
~ 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 period 2013-2014 (excluding accretion of discount) are Rs. 2,598,936,840 and Nil respectively being 99.07% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 144.46 95.67 – –
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
111
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 196,431,734.063 – 196,431,734.063 10
Dividend Option – 1,278,679.328 – 1,278,679.328 10
Direct Plan - Growth Option
– 63,070,299.730 – 63,070,299.730 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
112
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
HSBC FIXED TERM SERIES 106#
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, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 611,875 0.05
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation 2,641,850 0.21
– Depreciation – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013 - 2014 (excluding accretion of discount) is Rs. 1,441,440,791 and Rs. 230,418,750 respectively being 117.90% and 18.85% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 116.00 94.63 – –
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
113
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 118,914,782.784 – 118,914,782.784 10
Dividend Option – 1,569,092.562 – 1,569,092.562 10
Direct Plan - Growth Option
– 1,095,000.000 – 1,095,000.000 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
114
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 743,300 0.05
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation 2,836,998 0.19
– Depreciation – –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013 - 2014 (excluding accretion of discount) is Rs. 1,500,952,688 and NIL respectively being 99.23% and 0% of the average daily net assets.
1.8 Non-Traded securities in the portfolio of the Scheme as of the period ended March 31, 2014 is 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
[Rupees]
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2013-2014 116.00 94.63 – –
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
115
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 149,613,222.486 – 149,613,222.486 10
Dividend Option – 777,591.591 – 777,591.591 10
Direct Plan - Growth Option
– 310,525.697 – 310,525.697 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
116
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
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 period ended March 31, 2014 is NIL.
1.3 Investments in Associates and Group Companies as of period ended March 31, 2014 is NIL.
1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial period ended March 31, 2014 is NIL.
1.5 NPAs as on March 31, 2014 is NIL.
1.6 Aggregate Unrealised Gain / Loss as at the end of the fi nancial period and percentage to net assets:
Security Category Amount (Rs.) Percentage to Net Assets (%)
2014
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – –
– Depreciation – –
Certifi cates of Deposit / Commercial Paper
– Appreciation 2,415,397 0.08
– Depreciation 470,580 –
1.7 The aggregate value of investments securities (excluding CBLO and Reverse Repos) purchased and sold (including matured) during the fi nancial year 2013 - 2014 (excluding accretion of discount) is Rs. 3,099,866,384 and NIL respectively being 99.55% 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 (Rs.) Percentage to Net Assets (%)
2014
Money Market Instruments 122,824,023 3.94
Total 122,824,023 3.94
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 2013-2014 240.60 77.37 – –
117
HSBC FTP Series
Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2014
The brokerage paid was at rates similar to those offered to other distributors.
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.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the period ended March 31, 2014.
4 Unit Capital movement during the period ended March 31, 2014:
2013-2014
Description Opening Units
Subscription Redemption Closing Units Face Value per unit (Rs.)
Growth Option – 247,819,742.154 – 247,819,742.154 10
Dividend Option – 589,877.197 – 589,877.197 10
Direct Plan - Growth Option
– 62,570,860.474 – 62,570,860.474 10
Direct Plan - Dividend Option
– – – – 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, 2014.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 HSBC Mutual Fund has changed its Fund Accountant and Custodian from JPMorgan Chase Bank to Standard Chartered Bank, with effect from May 11, 2013.
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 on July 10, 2014 and July 15, 2014 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.
118
HSBC FTP Series
INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).
The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.
PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and
other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the
fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.
B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of
increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.
C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are
evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.
D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN
will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.
E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors
of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.
F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group
companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.
Voting Policy and Procedures
119
HSBC FTP Series
ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority
of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.
iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely
manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.
iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns
about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.
v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance
with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.
vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters
such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.
DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.
Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.
AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.
ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.
Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.
120
HSBC FTP Series
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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 Combined 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.