issued by hsbc asset management (india) private limited · 3 the trustees present the eighth report...
TRANSCRIPT
Issued by HSBC Asset Management (India) Private Limited
INDEX HSBC Equity Fund 3 HSBC Progressive Themes Fund 20 HSBC Emerging Markets Fund 37 HSBC Dynamic Fund 54 HSBC Tax Saver Equity Fund 75 HSBC India Opportunities Fund 92 HSBC Midcap Equity Fund 112 HSBC Unique Opportunities Fund 129 HSBC Small Cap Fund 149 HSBC MIP 169 HSBC Income Fund 196 HSBC Floating Rate Fund 225 HSBC Ultra Short Term Bond Fund 252 HSBC Cash Fund 273 HSBC Gilt Fund 294 HSBC Flexi Debt Fund 311 HSBC Fixed Term Series 332
Abridged Annual Report 2009 - 2010
HSBC Equity FundAn open-ended diversified equity Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeTo generate long-term capital growth from an actively managed portfolio of equity and equity related securities. HEF offers investors two Options (1) Growth Option (2) Dividend Option. The Dividend Option offers Dividend Payout and Dividend Reinvestment Facilities.
The net assets of HEF amounted to Rs. 1382.78 crores as at March 31, 2010 as against Rs.1092.07 crores as at March 31, 2009. Around 98.30% of the net assets were invested in equities, 2.45% of the net assets were invested in reverse repos / CBLO and (0.75)% were invested in net current assets as at March 31, 2010.
HEF’s approach is to invest across a range of market capitalizations with a preference for medium and large companies. Income is not a primary consideration in the investment policies of HEF.
HEF underperformed over the past 1 year on a defensive portfolio and relatively higher level of cash in a market that rose signifi cantly. Longer term performance has been in line with benchmarks.
Date of Inception: 10 December, 2002 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC Equity Fund – Growth 58.42 11.97 21.37 36.13
BSE 200 92.87 12.19 20.44 26.92
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the
Trustees’ ReportFor the year ended March 31, 2010
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world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Equity Fund 2,779,078 617 1,696,434 50
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Equity Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
i. The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Equity Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
ii. The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC EQUITY FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 33,754.33 39,846.26
2 Reserves & Surplus2.1 Unit Premium Reserves (4,983.57) 2,119.082.2 Unrealised Appreciation Reserve 33,567.40 22.032.3 Other Reserves 75,939.39 67,221.65
3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 2,810.45 1,337.52
TOTAL 141,088.00 110,546.55
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 131,631.74 85,046.831.1.2 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 131,631.74 85,046.83
2 Deposits 4,506.03 6,256.03
3 Other Current Assets3.1 Cash & Bank Balance 55.26 214.243.2 CBLO / Reverse Repo Lending 3,384.73 16,548.573.3 Others 1,510.24 2,480.884 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 141,088.00 110,546.55
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC EQUITY FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 1,581.76 1,130.001.2 Interest 470.71 1,426.941.3 Realised Gain / (Loss) on Foreign Exchange Transactions (10.65) –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of
investments25,786.64 (28,846.88)
1.6 Realised Gains / (Losses) on Derivative Transactions 56.53 1,828.551.7 Other Income 29.70 –
(A) 27,914.69 (24,461.39)
2 EXPENSES2.1 Management fees 1,509.09 697.592.2 Service tax on Management fees** – –2.3 Transfer agents fees and expenses 244.62 215.562.4 Custodian fees 62.63 58.332.5 Trusteeship fees 1.35 0.452.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 828.04 1,205.762.8 Audit fees 7.00 5.502.9 Other operating expenses 248.60 20.45
(B) 2,901.33 2,203.64
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 25,013.36 (26,665.03)
4 Change in Unrealised Depreciation invalue of investments (D) (4,894.10) 16,683.17
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 29,907.46 (43,348.20)
6 Change in unrealised appreciation inthe value of investments (F) 33,545.37 –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 63,452.83 (43,348.20)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 33,545.37 –
7.3 Add / (Less): Equalisation (13,771.15) 31,164.97
8 TOTAL 16,136.31 (12,183.23)
9 Dividend appropriation
9.1 Income Distributed during the year 7,418.57 0.259.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 8,717.74 (12,183.48)
Notes to Accounts – Annexure I
* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC EQUITY FUNDCurrent
Year endedMarch 31, 2010
PreviousYear ended
March 31, 20091. NAV per unit (Rs.): Open Regular Growth Option 60.1737 88.3814 Regular Dividend Option 18.8099 27.6286 High Regular Growth Option 96.0978 97.1612 Regular Dividend Option 29.4924 30.3743 Low Regular Growth Option 60.6698 52.9573 Regular Dividend Option 18.9650 16.5549 End Regular Growth Option 95.3300 60.1737 Regular Dividend Option 27.2661 18.80992. Closing Assets Under Management (Rs. in Lakhs) End 138,278 109,209 Average (AAuM)1 148,727 108,7933. Gross income as % of AAuM2 18.77% -22.48%4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.95% 2.03% Regular Dividend Option 1.95% 2.03% b. Management Fee as % of AAuM (planwise) Regular Growth Option 1.01% 0.64% Regular Dividend Option 1.01% 0.64%5. Net Income as a percentage of AAuM3 16.82% -24.51%6. Portfolio turnover ratio4 1.28 1.107. Total Dividend per unit distributed during the year (planwise) Retail Regular Dividend Option 2.50 – Corporate Regular Dividend Option 2.50 –8. Returns (%): a. Last One Year Scheme Regular Growth Option 58.4247 (31.9159) Regular Dividend Option 58.4242 (31.9190) Benchmark BSE 200 92.8700 (40.9800) b. Since Inception Scheme Regular Growth Option 36.1335 32.9007 Regular Dividend Option 36.1895 32.9640 Benchmark BSE 200 26.9200 18.78001 AAuM = Average daily net assets2 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, 2010
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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 amount to Rs. 417,045,564 and is 3.02% to Net Assets as of year ended March 31, 2010. Open Positions of derivatives amount to Rs. (123,697,400) and is 1.13% to Net Assets as of year ended March 31, 2009.
1.3. Investments in Associates and Group Companies:
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 430,000,000 1,018,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2010 and March 31, 2009 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year 2009-2010 and percentage to net assets are as under:
Company Name Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 3,511,447,614 25.3942% 419,474,916 3.8410%
– Depreciation 154,707,444 1.1188% 921,216,805 8.4354%
Equity Futures
– Appreciation 4,260,464 0.0308% 2,218,589 0.0203%
– Depreciation 16,591,918 0.1200% 15,363 0.0001%
1.7. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 710,496) and sold during the fi nancial year 2009-2010 is Rs. 12,919,307,271 and Rs. 14,698,914,601 respectively being 86.87% and 98.83% of the average daily net assets.
The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 14,024,158) and sold during the fi nancial year 2008-2009 is Rs. 20,051,454,038 and Rs. 15,984,411,730 respectively being 184.31% and 146.93% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2010 and March 31, 2009 is Nil.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-10, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 118,354 and clearing member charges on derivative transactions amounting to Rs. 1,745,886.
During the year 2008-09, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 39,751 and clearing member charges on derivative transactions Rs. 2,429,235.
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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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 2009 - 2010 154.25 28.82 55,132,417 32.27
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 1.01 0.19 526,980 0.31
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /
Nature of Relation
Period Covered
Business Given
[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 224.05 10.03 71,596,880 10.65
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
transactionof the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 123.77 2.70 922,708 1.63
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
Brokeragepaid[Rs.]
(on accrual basis)
% of Total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008 - 2009 5.14 0.09 102,367 0.16
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008 - 2009 222.09 4.09 1,993,781 3.17
The brokerage paid was at rates similar to those offered to other brokers / distributors.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2010 and March 31, 2009.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
82,822,603.543 31,106,227.231 45,988,828.816 67,940,001.958 679,400,020
Regular Dividend Option
315,640,026.026 105,492,570.593 151,529,305.054 269,603,291.565 2,696,032,916
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
47,671,381.108 54,767,475.116 19,616,252.681 82,822,603.543 828,226,035
Regular Dividend Option
230,018,561.715 146,706,869.491 61,085,405.180 315,640,026.026 3,156,400,260
5 Previous years fi gures have been re-grouped / re-arranged where necessary.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income includes exit load collected in excess of 1% of redemption proceeds credited to the Scheme and provision for expenses written back as no longer required.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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.
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Equity Fund (HEF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Progressive Themes FundAn open-ended flexi-theme equity Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHPTF 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. 391.28 crores as at March 31, 2010 as compared to Rs. 357.55 crores as at March 31, 2009. Around 95.84% of the net assets were invested in equities, 1.74% of the net assets were invested in reverse repos / CBLO were invested in reverse repos / CBLO and 2.42% were invested in net current assets as at March 31, 2010.
HPTF underperformed last year on being invested in consumption oriented themes. This was changed w.e.f August 2009 towards economic reforms and infrastructure oriented sectors post the electoral outcome.
Date of Inception: 23 February, 2006 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC Progressive Themes Fund – Growth 55.85 3.38 6.55
BSE 200 92.87 12.19 14.12
Returns data as on March 31, 2010.Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
Trustees’ ReportFor the year ended March 31, 2010
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In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Progressive Themes Fund 814,640 401 1,409,876 86
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Progressive Themes Fund (Formerly HSBC Advantage India Fund) (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us;
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Progressive Themes Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC PROGRESSIVE THEMES FUND(Formerly, HSBC Advantage India Fund)
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 32,633.73 46,572.80
2 Reserves & Surplus2.1 Unit Premium Reserves (24,803.48) (21,788.97)2.2 Unrealised Appreciation Reserve 6,517.15 6.06 2.3 Other Reserves 24,812.55 10,965.28
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 719.06 656.75
TOTAL 39,879.01 36,411.92
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 35,899.96 28,504.02 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds – – 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares – – 1.2.2 Preference Shares – – 1.2.3 Equity Linked Debentures – – 1.2.4 Other Debentures & Bonds – – 1.2.5 Securitised Debt securities – – 1.3 Unlisted Securities1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – – 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 35,899.96 28,504.02
2 Deposits 1,650.00 3,162.50 3 Other Current Assets3.1 Cash & Bank Balance 38.16 28.74 3.2 CBLO / Reverse Repo Lending 680.08 3,291.64 3.3 Others 1,526.69 1,208.12
4 Deferred Revenue Expenditure 84.12 216.90 (to the extent not written off)
TOTAL 39,879.01 36,411.92
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC PROGRESSIVE THEMES FUND(Formerly, HSBC Advantage India Fund)
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 429.59 483.28 1.2 Interest 131.86 453.63 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – 0.18 1.5 Realised Gains / (Losses) on External sale / redemption of
investments8,963.10 (21,835.57)
1.6 Realised Gains / (Losses) on Derivative Transactions 49.71 453.39 1.7 Other Income 0.46 –
(A) 9,574.72 (20,445.09)
2 EXPENSES2.1 Management fees 458.91 484.42 2.2 Service tax on Management fees ** – – 2.3 Transfer agents fees and expenses 72.22 99.75 2.4 Custodian fees 16.45 29.06 2.5 Trusteeship fees 0.38 0.21 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 338.76 384.25 2.8 Audit fees 6.60 5.50 2.9 Other operating expenses 209.10 253.83
(B) 1,102.42 1,257.02
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 8,472.30 (21,702.11)
4 Change in Unrealised Depreciation in value of investments (D) (4,115.64) 4,115.64
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 12,587.94 (25,817.75)
6 Change in unrealised appreciation inthe value of investments (F) 6,511.09 (2,088.22)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 19,099.03 (27,905.97)
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – 2,088.22
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 6,511.09 – 7.3 Add / (Less): Equalisation 1,259.33 (84.87)7.4 Transfer from Reserve Fund – 17,246.54 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 13,847.27 (8,656.08)
9 Dividend Appropriation
9.1 Income Distributed during the year – 2,681.85 9.2 Tax on income distributed during the year – – 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 13,847.27 (11,337.93)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC PROGRESSIVE THEMES FUND(Formerly, HSBC Advantage India Fund)
Current Year endedMarch 31, 2010
Previous Year endedMarch 31, 2009
1. NAV per unit (Rs.): Open Regular Growth Option 8.3228 14.5446 Regular Dividend Option 7.0792 13.3555 High Regular Growth Option 13.5597 15.8630 Regular Dividend Option 11.5335 14.5658 Low Regular Growth Option 8.3959 7.4998 Regular Dividend Option 7.1414 6.3796 End Regular Growth Option 12.9811 8.3228 Regular Dividend Option 11.0414 7.0792 2. Closing Assets Under Management (Rs. in Lakhs) End 39,160 35,755 Average (AAuM)1 44,048 49,971 3. Gross income as % of AAuM2 21.74% -40.91%4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 2.20% 2.22% Regular Dividend Option 2.20% 2.22% b. Management Fee as % of AAuM (planwise) Regular Growth Option 1.04% 0.97% Regular Dividend Option 1.04% 0.97%5. Net Income as a percentage of AAuM3 19.24% -43.43%6. Portfolio turnover ratio4 1.41 1.34 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Dividend Option – 1.00 Corporate Regular Dividend Option – 1.00 8. Returns (%): a. Last One Year Scheme Regular Growth Option 55.8478 (42.7774) Regular Dividend Option 55.8467 (42.8257) Benchmark BSE 200 92.8700 (40.9800) b. Since Inception Scheme Regular Growth Option 6.5478 (5.7477) Regular Dividend Option 6.5243 (5.7750) Benchmark BSE 200 14.1200 (3.6400)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, 2010
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13
HSBC PROGRESSIVE THEMES FUND (Formerly, HSBC Advantage India 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 to Rs. 292,171,950 and 7.46% to Net Assets as of year ended March 31, 2010. Open Positions of derivatives amount to Rs. (32,362,600) and 0.91% to Net Assets as of year ended March 31, 2009.
1.3. Investments in Associates and Group Companies (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 160,000,000 1,018,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2010 and March 31, 2009 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year 2009-2010 and percentage to net assets are as under:
Company Name Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 698,236,771 17.8304% 78,574,286 2.1976%
– Depreciation 50,277,699 1.2839% 490,138,560 13.7082%
Equity Futures
– Appreciation 7,092,309 0.1811% 610,412 0.0171%
– Depreciation 3,336,168 0.0852% 3,982 0.0001%
1.7. The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2009-2010 is Rs. 4,484,625,154 and Rs. 5,700,864,079 respectively being 101.81% and 129.42% of the average daily net assets.
The aggregate value of investments securities purchased (excluding accretion of discount ofRs. 667,794) and sold (including matured) during the fi nancial year 2008-2009 is Rs. 7,016,898,573 and Rs. 7,575,919,895 respectively being 140.42% and 151.61% 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 Nil.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs.15,434 and clearing member charges on derivative transactions amounting to Rs. 328,519.
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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14
During the year 2008-2009, 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. 1,220,316, and clearing member charges on derivative transactions Rs. 2,493.
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 2009-2010 7.27 17.92 5,828,905 19.66
HSBC InvestDirect Securities (India) Limited
Associate 2009-2010 – – 69,317 0.23
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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008-09 8.53 17.90 7,252,023 6.95
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 2009-2010 50.35 3.62 642,935 3.07
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.]
(on accrual basis)
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008-2009 3.70 0.14 73,827 0.24
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008-2009 78.66 2.89 792,780 2.56
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, 2010
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15
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 year ended March 31, 2010 and March 31, 2009.
4 Unit Capital movement during the Years ended March 31, 2010 and March 31, 2009.
Description2009 – 2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
223,981,981.866 15,638,871.735 78,374,072.268 161,246,781.333 1,612,467,813
Regular Dividend Option
241,745,992.961 21,340,849.708 97,996,318.076 165,090,524.593 1,650,905,245
Description2008 – 2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
236,466,762.306 25,953,833.730 38,438,614.170 223,981,981.866 2,239,819,819
Regular Dividend Option
275,824,146.002 19,656,412.037 53,734,565.078 241,745,992.961 2,417,459,930
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Progressive Themes Fund (HPTF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Emerging Markets FundAn open-ended Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHEMF seeks to provide long term capital appreciation by investing in India and in the emerging markets, in equity and equity related instruments, share classes and units / securities issued by overseas mutual funds or unit trusts. The fund may also invest a limited proportion in debt and money market instruments.
The net assets of HEMF amounted to Rs. 87.09 crores as at March 31, 2010 compared to Rs. 84.59 crores as at March 31, 2009. Around 98.70% of the net assets were invested in HSBC GEM Equity Fund (overseas mutual fund), 3.57% of the net assets were invested in reverse repos / CBLO and (2.26)% were invested in net current assets as at March 31, 2010.
HEMF underperformed its benchmark by about 500 bps over the past 1 year period.
Date of Inception: 17 March, 2008 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Emerging Markets Fund – Growth 48.85 (3.44)
MSCI Emerging Markets Index 54.67 0.16
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
Trustees’ ReportFor the year ended March 31, 2010
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In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil.
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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9
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Emerging Markets Fund (“The Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended March 31, 2010, both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us;
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Emerging Markets Fund as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC EMERGING MARKETS FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 9,354.14 13,522.54
2 Reserves & Surplus2.1 Unit Premium Reserves 135.71 259.27 2.2 Unrealised Appreciation Reserve – – 2.3 Other Reserves (780.52) (5,322.96)
3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 208.59 56.23
TOTAL 8,917.92 8,515.08
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – – 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds – – 1.1.5 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 8,595.69 8,095.42
Total Investments 8,595.69 8,095.42
2 Deposits – –
3 Other Current Assets3.1 Cash & Bank Balance 6.46 199.24 3.2 CBLO / Reverse Repo Lending 310.55 177.27 3.3 Others 5.22 43.15 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 8,917.92 8,515.08
Notes to Accounts - Annexure I
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Rs. in Lakhs
HSBC EMERGING MARKETS FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 58.11 – 1.2 Interest 10.90 57.39 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions (37.26) (0.44)1.4 Realised Gains / (Losses) on Interscheme sale of investments – – 1.5 Realised Gains / (Losses) on External sale / redemption of
investments(513.85) (105.09)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income 0.08 –
(A) (482.02) (48.14)
2 EXPENSES2.1 Management fees 5.13 5.02 2.2 Service tax on Management fees** – – 2.3 Transfer agents fees and expenses 12.38 15.71 2.4 Custodian fees 3.94 2.85 2.5 Trusteeship fees 0.09 0.04 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 53.52 82.95 2.8 Audit fees 0.50 0.25 2.9 Other operating expenses 6.45 7.76 2.10 Expenses to be Reimbursed by the Investment Manager (5.03) (39.35)
(B) 76.98 75.23
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR / PERIOD (A - B = C) (559.00) (123.37)
4 Change in Unrealised Depreciation in value of investments *** (D) (4,555.39) 4,975.85
5 NET GAINS / (LOSSES) FOR THE YEAR / PERIOD [E = (C - D)] 3,996.39 (5,099.22)
6 Change in unrealised appreciation in the value of investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR / PERIOD (E + F = G) 3,996.39 (5,099.22)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve – –
7.3 Add / (Less): Equalisation 546.05 (254.85)7.4 Transfer from Reserve Fund – – 7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 4,542.43 (5,354.07)
9 Dividend appropriation9.1 Income Distributed during the year / period – – 9.2 Tax on income distributed during the year / period – – 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 4,542.43 (5,354.07)
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.*** Includes Unrealised Depreciation in the value of Foreign Currency Transactions.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC EMERGING MARKETS FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 6.2554 10.0301
Regular Dividend Option 6.2554 10.0301
High
Regular Growth Option 9.8071 11.8114
Regular Dividend Option 9.8071 11.8114
Low
Regular Growth Option 6.5362 4.9543
Regular Dividend Option 6.5362 4.9543
End
Regular Growth Option 9.3106 6.2554
Regular Dividend Option 9.3107 6.2554
2. Closing Assets Under Management (Rs. in Lakhs)
End 8,709 8,459
Average (AAuM)1 10,264 10,030
3. Gross income as % of AAuM2 -4.70% -0.48%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 0.75% 0.75%
Regular Dividend Option 0.75% 0.75%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.05% 0.05%
Regular Dividend Option 0.05% 0.05%
5. Net Income as a percentage of AAuM3 -5.45% -1.23%
6. Portfolio turnover ratio4 0.05 –
7. Total Dividend per unit distributed during the year / period (planwise)
Retail
Regular Dividend Option – –
Corporate
Regular Dividend Option – –
Key Statistics for the year ended March 31, 2010
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HSBC EMERGING MARKETS FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 48.8450 (37.6300)
Regular Dividend Option 48.8450 (37.6300)
Benchmark
BSE 200 – –
MSCI Emerging Markets Index 54.6700 (38.7900)
b. Since Inception
Scheme
Regular Growth Option (3.4432) (36.3500)
Regular Dividend Option (3.4432) (38.7900)
Benchnmark
BSE 200 – –
MSCI Emerging Markets Index 0.1600 (34.5800)
1 AAuM = Average daily net assets2 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 /
period4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year / period.
Key Statistics for the year ended March 31, 2010 (Contd...)
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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 a % to Net Assets as of 2009-10 and 2008-09 is NIL.
1.3. Investments in Associates and Group Companies:
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits – 10,18,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the year ended March 31, 2010 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 is NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year ended 2009-2010 and their percentages to net assets are as under:
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Units in Mutual Fund
– Appreciation – – – –
– Depreciation 45,518,394 5.2264% 500,876,360 59.2140%
1.7. The aggregate value of investments securities purchased (including matured) and sold during the fi nancial year 2009-2010 is Rs. 48,569,303 and Rs. 402,515,128 respectively being 4.73% and 39.21% of the average daily net assets.
The aggregate value of investments securities purchased (including matured) and sold during the fi nancial year 2008-2009 is Rs. 870,578,912 and Rs. 51,463,615 respectively being 86.76% and 5.13% of the average daily net assets.
1.8. Non-Traded securities in the portfolio as on March 31, 2010 is NIL.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended for the year ended March 31, 2010 is as under :
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 2009 - 2010 9.08 62.94 4,910,499 62.12
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.10 0.72 19,007 0.24
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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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 2008 - 09 47.05 3.83 1.56 25.40
During the year 2009-2010 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. 300.
During the year 2008-2009, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amountingRs. 3,612.
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, 2010 and year ended March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
84,302,484.733 13,367,388.355 35,253,521.112 62,416,351.976 624,163,520
Regular Dividend Option
50,922,901.492 3,579,638.005 23,377,459.166 31,125,080.331 311,250,802
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
61,213,343.633 42,092,615.754 19,003,474.654 84,302,484.733 843,024,847
Regular Dividend Option
41,049,858.510 22,057,963.784 12,184,920.802 50,922,901.492 509,229,015
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.
9. The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Emerging Markets Fund (HEMF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Dynamic FundAn open-ended Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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3
The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Dynamic Fund (HDF) - an open-ended SchemeHDF seeks to provide long term capital appreciation by allocating funds in equity and equity related instruments. It also has the fl exibility to move, entirely if required, into debt instruments in times that the view on equity markets seems negative.
The net assets of HDF amounted to Rs. 238.73 crores as at March 31, 2010 compared to Rs. 234.13 crores as at March 31, 2009. Around 95.17% of the net assets were invested in equities, 1.82% of the net assets were invested in reverse repos / CBLO and 3.01% were invested in net current assets as at March 31, 2010.
HDF underperformed its benchmark on a higher cash call ahead of election results. This was changed in the second half of last year.
Date of Inception: 24 Sepember, 2007 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Dynamic Fund – Growth 51.97 (1.66)
BSE 200 92.87 2.42
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Overview
The fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over
Trustees’ ReportFor the year ended March 31, 2010
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the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Dynamic Fund – – 263,052 10
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Dynamic Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
i. The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Dynamic Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
ii. The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC DYNAMIC FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 24,899.69 37,112.01
2 Reserves & Surplus2.1 Unit Premium Reserves (2,687.00) (437.55)2.2 Unrealised Appreciation Reserve 5,548.39 – 2.3 Other Reserves (3,888.14) (13,261.07)
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 517.96 524.09
TOTAL 24,390.90 23,937.48
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 21,260.01 16,557.67 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds – 1,580.65 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 21,260.01 18,138.32
2 Deposits 1,460.00 2,610.00 3 Other Current Assets3.1 Cash & Bank Balance 20.13 8.85 3.2 CBLO / Reverse Repo Lending 435.37 1,789.24 3.3 Others 1,215.39 1,391.07
4 Deferred Revenue Expenditure – – (to the extent not written off)
TOTAL 24,390.90 23,937.48
Notes to Accounts - Annexure I
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12
Rs. in Lakhs
HSBC DYNAMIC FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 283.90 336.18 1.2 Interest 121.18 673.29 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions (3.74) – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – (76.49)1.5 Realised Gains / (Losses) on External sale / redemption
of investments5,255.18 (16,761.36)
1.6 Realised Gains / (Losses) on Derivative Transactions (363.83) 325.07 1.7 Other Income 0.01 –
(A) 5,292.70 (15,503.31)
2 EXPENSES2.1 Management fees 294.13 338.27 2.2 Service tax on Management fees ** – – 2.3 Transfer agents fees and expenses 44.10 62.10 2.4 Custodian fees 13.49 21.36 2.5 Trusteeship fees 0.24 0.13 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 227.71 237.63 2.8 Audit fees 2.50 1.00 2.9 Other operating expenses 48.37 69.36
(B) 630.54 729.85
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 4,662.16 (16,233.16)
4 Change in Unrealised Depreciationin value of investments (D) (968.84) (3,026.54)
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 5,631.00 (13,206.62)
6 Change in unrealised appreciation in the value of investments (F) 5,548.39 –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 11,179.39 (13,206.62)
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer to Unrealised Appreciation Reserve
5,548.39 –
7.3 Add / (Less): Equalisation 3,741.94 916.08 7.4 Transfer from Reserve Fund – – 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 9,372.94 (12,290.55)
9 Dividend Appropriation
9.1 Income Distributed during the year – – 9.2 Tax on income distributed during the year – – 10 Retained Surplus / (Defi cit) carried forward to
Balance Sheet9,372.94 (12,290.55)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC DYNAMIC FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 6.3088 9.6659
Regular Dividend Option 6.3088 9.6659
High
Regular Growth Option 9.7482 10.5800
Regular Dividend Option 9.7482 10.5800
Low
Regular Growth Option 6.3191 5.7717
Regular Dividend Option 6.3191 5.7717
End
Regular Growth Option 9.5876 6.3088
Regular Dividend Option 9.5876 6.3088
2. Closing Assets Under Management (Rs. in Lakhs)
End 23,873 23,413
Average (AAuM)1 26,914 31,327
3. Gross income as % of AAuM2 19.67% -49.49%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 2.34% 2.33%
Regular Dividend Option 2.34% 2.33%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 1.09% 1.08%
Regular Dividend Option 1.09% 1.08%
5. Net Income as a percentage of AAuM3 17.32% -51.82%
6. Portfolio turnover ratio4 1.57 1.69
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option – –
Corporate
Regular Dividend Option – –
Key Statistics for the year ended March 31, 2010
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HSBC DYNAMIC FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 51.9718 (34.7314)
Regular Dividend Option 51.9718 (34.7314)
Benchmark
BSE200 92.8658 (40.9800)
b. Since Inception
Scheme
Regular Growth Option (1.6588) (26.1763)
Regular Dividend Option (1.6588) (26.1763)
Benchmark
BSE200 2.4233 (32.5000)
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, 2010 (Contd...)
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15
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 to Rs. 144,098,597 and is 6.04% to Net Assets for the year ended March 31, 2010. Open Positions of derivatives amount to Rs. (47,034,850) and is 2.01% to Net Assets for the year ended March 31, 2009.
1.3. Investments in Associates and Group Companies: (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 146,000,000 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the scheme as of the year ended March 31, 2010 and March 31, 2009 are NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 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
2010 2009
Equity Shares
– Appreciation 582,644,211 24.4061% 103,451,368 4.4185%
– Depreciation 30,122,536 1.2618% 198,113,243 8.4615%
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – 384,760 0.0164%
– Depreciation – 1,741,120 0.0744%
Equity Futures
– Appreciation 2,622,855 0.1099% – –
– Depreciation 305,068 0.0128% 865,408 0.0370%
1.7. The aggregate value of investments securities purchased and sold during the fi nancial year 2009-2010 is Rs. 2,745,924,605 and Rs. 3,607,759,880 respectively being 102.03% and 134.05% of the average daily net assets.
The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 11,758,508) and sold during the fi nancial year 2008–2009 is Rs. 10,072,387,041 and Rs. 10,882,064,228 respectively being 321.53% and 347.37% of the average daily net assets.
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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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
2010 2009
Debt Instruments – – 77,003,317 3.2889%
Total – – 77,003,317 3.2889%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year, Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 168,872 and clearing member charges on derivative transactions amounting to Rs. 530,800.
During the year 2008-09, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting toRs. 3,131.
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 2009-2010 3.77 22.30 4,906,397 23.50
HSBC InvestDirect Securities (India) Limited
Associate 2009-2010 0.02 0.12 29,382 0.14
Name of Sponsor /AMC and its associate / related parties / group companies
Nature of Association /
Nature of Relation
Period Covered
Business Given
[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
(on accrual basisi)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008-2009 7.37 9.3 6,140,776 8.57
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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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
transactionof the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009-2010 42.48 3.52 341,708 2.51
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
transactionof the Fund
Brokerage paid[Rs.]
(on accrual basis)
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008-2009 2.30 0.09 45,867 0.18
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008-2009 114.83 4.68 795,165 3.14
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, 2010 and March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009–2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
190,248,100.865 7,916,961.708 59,160,416.082 139,004,646.491 1,390,046,465
Regular Dividend Option
180,871,982.404 11,722,378.320 82,602,130.068 109,992,230.656 1,099,922,305
Description2008–2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
205,008,927.831- 15,555,453.448 30,316,280.414 190,248,100.865 1,902,481,009
Regular Dividend Option
214,284,442.273 12,615,611.127 46,028,070.996 180,871,982.404 1,808,719,824
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the year ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents exit load collected in excess of 1% of redemption proceeds credited to the Scheme.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Dynamic Fund (HDF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
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CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Tax Saver Equity FundAn open-ended Equity Linked Savings Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHTSF seeks to provide long term capital appreciation by investing in a diversifi ed portfolio of equity & equity related instruments of companies across various sectors and industries, with no capitalisation bias. The Fund may also invest in fi xed income securities.
The net assets of HTSF amounted to Rs. 301.54 crores as at March 31, 2010 compared to Rs. 180.58 crores as at March 31, 2009. Around 96.73% of the net assets were invested in equities, 3.46% of the net assets were invested in reverse repos / CBLO and (0.19)% were invested in net current assets as at March 31, 2010.
HTSF marginally underperformed its benchmark over the past 1 year on a marginal defensive positioning ahead of election results. Longer term, the scheme has outperformed its benchmarks.
Date of Inception: 05 January, 2007 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC Tax Saver Equity Fund – Growth 87.14 13.56 10.44
BSE 200 92.87 12.19 9.02
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over
Trustees’ ReportFor the year ended March 31, 2010
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the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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9
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Tax Saver Equity Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agents respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Tax Saver Equity Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The methods used to value equity shares awaiting listing as at March 31, 2010 as determined in good faith by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual Fund are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC TAX SAVER EQUITY FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 22,546.23 24,505.14
2 Reserves & Surplus2.1 Unit Premium Reserves (127.95) 496.142.2 Unrealised Appreciation Reserve 5,394.07 –2.3 Other Reserves 2,341.64 (6,942.74)
3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 461.36 485.36
TOTAL 30,615.35 18,543.90
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 29,138.00 14,385.621.1.2 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 28.67 –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 29,166.67 14,385.62
2 Deposits – 600.00
3 Other Current Assets3.1 Cash & Bank Balance 111.68 38.403.2 CBLO / Reverse Repo Lending 1,044.20 3,113.013.3 Others 292.80 406.874 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 30,615.35 18,543.90
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC TAX SAVER EQUITY FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 301.49 222.191.2 Interest 32.19 249.351.3 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
investments9,283.80 (5,922.92)
1.6 Realised Gains / (Losses) on Derivative Transactions –1.7 Other Income – –
(A) 9,617.48 (5,451.38)
2 EXPENSES2.1 Management fees 295.01 178.132.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 47.50 38.812.4 Custodian fees 9.29 6.582.5 Trusteeship fees 0.28 0.082.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 282.93 203.512.8 Audit fees 1.75 0.752.9 Other operating expenses 52.54 39.192.10 Expenses to be Reimbursed by the Investment Manager (19.24)
(B) 670.06 467.05
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 8,947.42 (5,918.43)
4 Change in Unrealised Depreciation invalue of investments (D) (1,533.86) 1,130.87
5 NET GAINS / (LOSSES) FORTHE YEAR [E = (C - D)] 10,481.28 (7,049.30)
6 Change in unrealised appreciation inthe value of investments (F) 5,394.07 –
7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 15,875.35 (7,049.30)
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 5,394.07 –
7.3 Add / (Less): Equalisation (294.10) (642.87)7.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –
8 TOTAL 10,187.18 (7,692.17)
9 Dividend appropriation9.1 Income Distributed during the year 902.79 –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 9,284.39 (7,692.17)Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC TAX SAVER EQUITY FUNDCurrent
Year endedMarch 31, 2010
PreviousYear ended
March 31, 20091. NAV per unit (Rs.): Open Regular Growth Option 7.3693 10.5427 Regular Dividend Option 7.3693 10.5427 High Regular Growth Option 13.9333 11.6264 Regular Dividend Option 13.9333 11.6264 Low Regular Growth Option 7.4082 6.6234 Regular Dividend Option 7.4082 6.6234 End Regular Growth Option 13.7906 7.3693 Regular Dividend Option 12.7190 7.36932. Closing Assets Under Management (Rs. in Lakhs) End 30,154 18,059 Average (AAuM)1 28,703 19,6473. Gross income as % of AAuM2 33.51% -27.75%4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 2.33% 2.38% Regular Dividend Option 2.33% 2.38% b. Management Fee as % of AAuM (planwise) Regular Growth Option 1.03% 0.91% Regular Dividend Option 1.03% 0.91%5. Net Income as a percentage of AAuM3 31.17% -30.12%6. Portfolio turnover ratio4 1.89 1.697. Total Dividend per unit distributed during the year (planwise) Retail Dividend 1.00 – Corporate Dividend 1.00 –8. Returns (%): a. Last One Year Scheme Regular Growth Option 87.1384 (30.1014) Regular Dividend Option 87.1357 (30.1014) Benchmark BSE 200 92.8700 (40.9800) b. Since Inception Scheme Regular Growth Option 10.4434 (12.7638) Regular Dividend Option 10.4429 (12.7638) Benchmark BSE 200 9.0200 (15.5400)
1 AAuM = Average daily net assets2 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, 2010
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13
HSBC TAX SAVER EQUITY FUND
1 Investments:
1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as a % to Net Assets as of 2009-2010 and 2008-2009 is Nil.
1.3. Investments in Associates and Group Companies are as under :
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Ltd.
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended March 31, 2010 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year ended and their percentages to net assets are as under:
Company Name Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 563,326,418 18.6817% 62,106,058 3.4392%
– Depreciation 23,919,419 0.7932% 215,491,836 11.9330%
1.7. The aggregate value of investments purchased and sold (including matured) during the fi nancial year 2009-2010 is Rs. 5,435,615,688 and Rs. 5,578,682,825 respectively being 189.38% and 194.36% of the average daily net assets.
The aggregate value of investments purchased (excluding accretion of discount of Rs. 5,489,967) and sold (including matured) during the fi nancial year 2008-2009 is Rs. 5,161,259,484 andRs. 4,934,062,477 respectively being 262.69% and 251.13% 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
2010 2009
Equities 2,866,880 0.10% – –
Total 2,866,880 0.10% – –
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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14
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting toRs. 298,444.
During the year 2008-2009, 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. 998.
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 2009 - 2010 0.65 2.39 849,881 3.33
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.11 0.41 65,360 0.26
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 2008 - 2009 1.44 50.14 734,761 1.47
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs. ]
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 1.82 0.17 36,558 0.17
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 27.60 2.55 552,086 2.60
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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15
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. In Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs. ]
(on accrual basis)
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008 - 2009 6.34 0.92 126,269 0.92
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008 - 2009 14.20 2.07 284,435 2.08
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, 2010 and March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Growth 150,646,655.461 12,786,096.898 25,556,593.410 137,876,158.949 1,378,761,588
Dividend 94,404,698.350 9,216,234.324 16,034,814.035 87,586,118.639 875,861,185
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 132,777,868.108 18,336,034.648 467,247.295 150,646,655.461 1,506,466,555
Dividend 83,983,985.503 11,249,049.602 828,336.755 94,404,698.350 944,046,984
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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16
DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Tax Saver Equity Fund (HTSF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue:
Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The Units purchased under the Scheme shall have a lock in period of three years from the date of allotment of Units. Accordingly, the Units can be redeemed (i.e. sold back to the Fund) on every Business Day, at the Applicable NAV (hereinafter defi ned), on expiry of lock-in period of three years from the date of allotment. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: Nil. *No load in case of switches between equity Schemes of HSBC Mutual Fund. Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load. The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively. Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC India Opportunities FundAn open-ended flexi-cap equity Scheme
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1
Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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2
SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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. 283.80 crores as at March 31, 2010 as compared to Rs. 279.93 crores as at March 31, 2009. Around 94.84% of the net assets were invested in equities, 2.01% of the net assets were invested in reverse repos / CBLO and 3.15% were invested in debt and money market instruments as at March 31, 2010.
HIOF underperformed the market in the past 1 year on relatively larger proportion of large caps versus the benchmark and higher levels of cash in the earlier part of the year. Longer term performance has been in line with benchmarks.
Date of Inception: 24 February, 2004 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC India Opportunities Fund – Growth 62.24 6.11 19.69 20.98
BSE 500 96.38 11.75 20.39 20.18
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Overview
The fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to
Trustees’ ReportFor the year ended March 31, 2010
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good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs. 1,00,000 (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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HSCI is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC India Opportunities Fund 990,245 241 363,145 14
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC India Opportunities Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian / others and registrar and transfer agents respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC India Opportunities Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The method used to value equity shares awaiting listing as at March 31, 2010 as determined in good faith by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual fund are fair and reasonable
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 14,295.84 22,075.58
2 Reserves & Surplus2.1 Unit Premium Reserves (8,297.85) (4,967.16)2.2 Unrealised Appreciation Reserve 6,029.11 12.122.3 Other Reserves 16,377.13 10,872.37
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 520.82 500.22
TOTAL 28,925.05 28,493.13
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 25,599.08 23,373.851.1.2 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 16.44 –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 25,615.52 23,373.85
2 Deposits 1,349.02 2,661.52
3 Other Current Assets3.1 Cash & Bank Balance 9.36 8.763.2 CBLO / Reverse Repo Lending 570.08 1,023.253.3 Others 1,381.07 1,425.75
4 Deferred Revenue Expenditure – –(to the extent not written off)
TOTAL 28,925.05 28,493.13
Notes to Accounts - Annexure I
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Rs. in Lakhs
HSBC INDIA OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 319.36 320.061.2 Interest 90.81 367.981.3 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 investments8,690.11 (11,630.40)
1.6 Realised Gains / (Losses) on Derivative Transactions (295.25) 1,184.491.7 Other Income 0.52 –
(A) 8,805.55 (9,757.87)
2 EXPENSES2.1 Management fees 355.31 407.542.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 54.02 76.412.4 Custodian fees 15.47 24.902.5 Trusteeship fees 0.30 0.162.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 256.82 277.192.8 Audit fees 5.00 5.002.9 Other operating expenses 57.10 86.25
(B) 744.02 877.45
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 8,061.53 (10,635.32)
4 Change in Unrealised Depreciation in valueof investments (D) (1,967.69) 1,967.69
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 10,029.22 (12,603.01)
6 Change in unrealised appreciation in the value of investments (F) 6,016.99 (4,812.63)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 16,046.21 (17,415.64)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 4,812.63
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 6,016.99 –
7.3 Add / (Less): Equalisation (3,301.93) (2,090.75)7.4 Transfer from Reserve Fund 3,806.22 –7.5 Transfer from Unit Premium Reserve – –8 TOTAL 10,533.51 (14,693.76)
9 Dividend Appropriation9.1 Income Distributed during the year 1,222.51 (0.02)9.2 Tax on income distributed during the year – – 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 9,311.00 (14,693.74)
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC INDIA OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 19.6995 31.0700
Regular Dividend Option 10.4365 16.4584
High
Regular Growth Option 32.7859 34.4126
Regular Dividend Option 17.0045 18.2294
Low
Regular Growth Option 19.8927 17.4783
Regular Dividend Option 10.5389 9.2599
End
Regular Growth Option 31.9597 19.6995
Regular Dividend Option 15.9300 10.4365
2. Closing Assets Under Management (Rs. in Lakhs)
End 28,408 27,993
Average (AAuM)1 33,032 38,254
3. Gross income as % of AAuM2 26.66% -25.51%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 2.24% 2.29%
Regular Dividend Option 2.24% 2.29%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 1.08% 1.07%
Regular Dividend Option 1.08% 1.07%
5. Net Income as a percentage of AAuM3 24.42% -27.80%
6. Portfolio turnover ratio4 1.34 1.15
7. Total Dividend per unit distributed during the year (planwise)
Retail
Dividend 1.0000 –
Corporate
Dividend 1.0000 –
Key Statistics for the year ended March 31, 2010
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HSBC INDIA OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 62.2361 (36.5964)
Regular Dividend Option 62.2364 (36.5886)
Benchmark
BSE 500 96.3800 (42.7700)
b. Since Inception
Scheme
Regular Growth Option 20.9771 14.2144
Regular Dividend Option 20.9854 14.2237
Benchmark
BSE 500 20.1800 9.1500
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 /
period.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year / period.
Key Statistics for the year ended March 31, 2010 (Contd...)
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HSBC INDIA 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 t of the Scheme’s unitholders.
1.2. Open Positions of derivatives as of March 31, 2010 is Rs. 193,993,801 and is 6.83% to the net assets. Open Positions of derivatives as of March 31, 2009 is Rs. 61,203,450 and is 2.19% to the net assets.
1.3. Investments in Associates and Group Companies (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Ltd.
Fixed deposits 130,000,000 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the scheme as of fi nancial years ended 2010 and 2009 are NIL.
1.5. The NPAs as on March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2010 and March 31, 2009 are as under:
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 619,460,514 21.8061% 216,543,449 7.7357%
– Depreciation 20,612,129 0.7256% 413,312,313 14.7649%
Equity Futures
– Appreciation 4,487,301 0.1580% 2,252,115 0.0805%
– Depreciation 424,303 0.0149% 1,040,116 0.0372%
1.7. The aggregate value of investments purchased and sold during the fi nancial year is Rs. 2,446,418,500 and Rs. 3,886,879,848 respectively being 74.06% and 117.67% of the average daily net assets.
The aggregate value of investments purchased and sold during the fi nancial year 2008 - 2009 (excluding accretion of discount of Rs. 2,875,943) is Rs. 4,802,419,100 and Rs. 5,302,898,939 respectively being 125.54% and 138.62% 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 are as under:
Security Category Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equities 1,643,930.00 0.06% – –
Money Market Instruments – – – –
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended for the year ended March 31, 2010 is as under:
During the year 2009-2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges Rs. 25,830 and Clearing member charges on derivative transactions amounting to Rs. 561,071.
During the year 2008-2009, 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. 23,153 and Clearing member charges on derivative transactions Rs. 445,071.
Commission paid to associates / related parties / group companies of Sponsor / AMC
Name of associate /related parties /group companies of Sponsor / AMC
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 2009-2010 7.37 22.78 8,081,423 37.27
HSBC InvestDirect Securities (India) Limited
Associate 2009-2010 0.03 0.09 55,346 0.26
Name of associate /related parties /group companies of Sponsor / AMC
Nature of Association /
Nature of Relation
Period Covered
Business Given
[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008-2009 13.74 10.03 11,739,935 14.22
Brokerage paid to associates / related parties / group companies of Sponsor / AMC
Name of Associate /related parties / group companies of Sponsor / AMC
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 2009-2010 67.32 5.30 367,945 2.78
Name of Associate /related parties / group companies of Sponsor / AMC
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. in Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs.]
(on accrual basis)
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008-2009 6.70 0.30 134,157 0.60
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008-2009 53.70 2.37 453,714 2.04
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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17
The brokerage paid was at rates similar to those offered to other brokers / distributors.
3 No investors held more than 25% of the Net Assets of the scheme for 2009 and 2010.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009 - 2010
Opening Units Subscription Redemption Closing Units Face Value
Growth 53,478,209.207 5,215,347.572 23,715,936.535 34,977,620.244 349,776,202
Dividend 167,277,543.980 11,264,297.076 70,561,101.060 107,980,739.996 1,079,807,401
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 61,844,387.233 8,005,235.991 16,371,414.017 53,478,209.207 534,782,092
Dividend 200,642,987.346 17,255,087.456 50,620,530.822 167,277,543.980 1,672,775,441
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents exit load collected in excess of 1% of redemption proceeds credited to the Scheme and provision for expenses written back as no longer required.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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18
DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC India Opportunities Fund (HIOF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
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CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Midcap Equity FundAn open-ended diversified equity Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHMEF seeks to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However, it could move a portion of its assets towards fi xed income securities if the fund manager becomes negative on the Indian equity markets.
The net assets of HMEF amounted to Rs. 177.24 crores as at March 31, 2010 as compared to Rs. 93.67 crores as at March 31, 2009. Around 94.09% of the net assets were invested in equities, 3.30% of the net assets were invested in reverse repos / CBLO and 2.61% were invested in debt and money market instruments as at March 31, 2010.
HMEF underperformed the benchmark in the past 1 year on relatively defensive positioning in the earlier part of the year. This was subsequently changed in the second half of the year.
Date of Inception: 19 May, 2005 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC Midcap Equity Fund – Growth 116.01 6.29 17.40
BSE MID CAP 130.23 8.11 16.42
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the
Trustees’ ReportFor the year ended March 31, 2010
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world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Midcap Equity Fund 366,033 263 584,647 17
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Midcap Equity Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Midcap Equity Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The method used to value equity shares awaiting listing and unlisted equity shares in good faith as at March 31, 2010 as determined by HSBC Asset Management (India) Private Limited under procedures approved by the Board of Trustees of HSBC Mutual fund are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC MIDCAP EQUITY FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 10,725.81 11,837.90
2 Reserves & Surplus2.1 Unit Premium Reserves (4,337.15) (4,036.60)2.2 Unrealised Appreciation Reserve 686.20 –2.3 Other Reserves 10,649.36 1,565.75
3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 228.76 155.62
TOTAL 17,952.98 9,522.67
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 16,174.34 7,579.661.1.2 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 16.47 –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 65.14 –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 16,255.95 7,579.66
2 Deposits 432.13 932.13
3 Other Current Assets3.1 Cash & Bank Balance 29.74 335.483.2 CBLO / Reverse Repo Lending 585.36 7.163.3 Others 644.31 624.914 Deferred Revenue Expenditure 5.49 43.33
(to the extent not written off)
TOTAL 17,952.98 9,522.67
Notes to Accounts - Annexure I
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Rs. in Lakhs
HSBC MIDCAP EQUITY FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 184.67 170.951.2 Interest 49.16 171.661.3 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
investments5,742.53 (9,650.58)
1.6 Realised Gains / (Losses) on Derivative Transactions 1,446.46 100.941.7 Other Income 0.09 –
(A) 7,422.91 (9,207.03)
2 EXPENSES2.1 Management fees 177.23 175.732.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 25.36 30.632.4 Custodian fees 9.76 9.642.5 Trusteeship fees 0.13 0.062.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 87.62 100.182.8 Audit fees 1.00 3.002.9 Other operating expenses 66.50 45.71
(B) 367.60 364.95
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 7,055.31 (9,571.98)
4 Change in Unrealised Depreciation invalue of investments (D) (2,556.51) 1,030.14
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 9,611.82 (10,602.12)
6 Change in unrealised appreciation inthe value of investments (F) 686.20 –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 10,298.02 (10,602.12)
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 686.20 –
7.3 Add / (Less): Equalisation 129.19 (563.92)7.4 Transfer from Reserve Fund 860.36 –7.5 Transfer from Unit Premium Reserve – –8 TOTAL 10,601.37 (11,166.04)9 Dividend appropriation9.1 Income Distributed during the year 657.40 –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 9,943.97 (11,166.04)
Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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12
HSBC MIDCAP EQUITY FUNDCurrent
Year endedMarch 31, 2010
PreviousYear ended
March 31, 20091. NAV per unit (Rs.): Open Growth Option 10.1084 20.6339 Dividend Option 6.6851 13.6463 High Growth Option 22.5346 22.6231 Dividend Option 14.0594 14.9616 Low Growth Option 10.2556 9.0046 Dividend Option 6.7825 5.9551 End Growth Option 21.8352 10.1084 Dividend Option 13.4004 6.68512. Closing Assets Under Management (Rs. in Lakhs) End 17,724 9,367 Average (AAuM)1 15,277 15,1903. Gross income as % of AAuM2 48.59% -60.61%4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.41% 2.15% Dividend Option 2.41% 2.15% b. Management Fee as % of AAuM (planwise) Growth Option 1.16% 1.16% Dividend Option 1.16% 1.16%5. Net Income as a percentage of AAuM3 46.18% -63.01%6. Portfolio turnover ratio4 4.23 1.727. Total Dividend per unit distributed during the year (planwise) Retail Dividend 1.00 – Corporate Dividend 1.00 –8. Returns (%): a. Last One Year Scheme Growth Option 116.0144 (51.0107) Dividend Option 116.0027 (51.0116) Benchmark BSE MID CAP 130.2300 (54.0100) b. Since Inception Scheme Growth Option 17.3992 0.2791 Dividend Option 17.3338 0.2102 Benchmark BSE MID CAP 16.4200 (2.4000)
1 AAuM = Average daily net assets2 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, 2010
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HSBC MIDCAP EQUITY FUND
1 Investments: 1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the
benefi t of the Scheme’s Unitholders.
1.2. Open Positions of derivatives amount to Rs. 77,544,688 and is 4.38% to Net Assets as at 31 March, 2010. Open Positions of derivatives amount to Rs. 47,250,950 and is 5.04% to Net Assets as at 31 March, 2009.
1.3. Investments in Associates and Group Companies:
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 42,000,000 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2010 and 2009 are NIL.
1.5. The NPAs as on March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2010 and March 31, 2009 are as under :
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 152,588,178 8.6090% 33,463,640 3.5725%
– Depreciation 86,632,744 4.8878% 288,443,961 30.7935%
Equity Futures
– Appreciation 3,298,026 0.1861% 575,550 0.0614%
– Depreciation 633,589 0.0357% 1,246,651 0.1331%
1.7. The aggregate value of investments purchased and sold (including matured) during the year2009-2010 is Rs. 3,222,984,582 and Rs. 3,250,544,036 respectively being 210.97% and 212.77% of the average daily net assets.
The aggregate value of investments purchased (excluding accretion of discount of Rs. 1,777,294) and sold (including matured) during the year 2008-2009 is Rs. 2,819,476,499 andRs. 3,005,664,350 respectively being 185.61% and 197.87% 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(Rs.)
Percentage to Net Assets
Fair Value(Rs.)
Percentage to Net Assets
2010 2009
Equities 8,160,759 0.4604% – –
Total 8,160,759 0.4604% – –
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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14
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, 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. 30,945 and clearing member charges on derivative transactions amounting to Rs. 552,472.
During the year 2008-2009, 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. 23,153 and clearing member charges on derivative transactions Rs. 445,071.
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 2009 - 2010 17.45 35.98 3,962,653 32.02
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.02 0.04 20,184 0.16
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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 4.04 13.03 3,643,287 11.05
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
transactionof the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.73 0.06 14,526 0.11
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 63.01 4.90 351,893 2.65
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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 the Fund
Brokerage paid[Rs.]
(on accrual basis)
% of Total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008 - 2009 0.96 0.09 19,157 0.16
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008 - 2009 28.78 2.74 179,809 1.50
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, 2010 and March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Growth 42,452,067.060 13,794,502.150 16,515,931.147 39,730,638.063 397,306,381
Dividend 75,926,965.375 17,092,673.068 25,492,181.250 67,527,457.193 675,274,572
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 48,009,622.007 7,377,934.625 12,935,489.572 42,452,067.060 424,520,671
Dividend 100,054,854.569 6,038,463.722 30,166,352.916 75,926,965.375 759,269,654
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income includes exit load collected in excess of 1% of redemption proceeds credited to the Scheme and provision for expenses no longer required written back.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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.
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Midcap Equity Fund (HMEF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Unique Opportunities FundAn open-ended equity Scheme*
HUOF was launched as a close-ended equity scheme with automatic conversion into open-ended equity scheme at the end of three years from the date of allotment of units. In accordance with the terms of the Offer Document of HUOF / Combined Scheme Information Document, the scheme was converted from a close-ended equity scheme into open-ended equity scheme with effect from 22 March 2010.
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 was launched as a close-ended equity scheme with automatic conversion into open-ended equity scheme at the end of three years from the date of allotment of units. In accordance with the terms of the Offer Document of HUOF / Combined Scheme Information Document, the scheme was converted from a close-ended equity scheme into open-ended equity scheme with effect from 22 March, 2010.)
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. 214.98 crores as at March 31, 2010 compared to Rs. 219.50 crores as at March 31, 2009. Around 97.58% of the net assets were invested in equities, 2.12% of the net assets were invested in reverse repos / CBLO and 0.30% was invested in net current assets as at March 31, 2010.
HUOF underperformed its benchmark over the past 1 year on a relatively defensive posturing in the earlier part of the year.
Date of Inception: 21 March, 2007 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC Unique Opportunities Fund – Growth 79.92 (0.02) 0.65
BSE 200 92.87 12.19 12.50
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to
Trustees’ ReportFor the year ended March 31, 2010
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good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI).
The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEME The investment objective of the Scheme has been provided above under the heading “Scheme
Performance, Future Outlook and Operation of the Scheme” (refer Section 1).
4. SIGNIFICANT ACCOUNTING POLICIES The accounting policies are in accordance with Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Unique Opportunities Fund – – 178,696 5
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 0 0 0
I D Interest on delayed payment of Redemption
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Unique Opportunities Fund (The “Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management, as well as evaluating the overall fi nancial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Unique Opportunities Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010, and Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC UNIQUE OPPORTUNITIES FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 21,084.45 38,724.49
2 Reserves & Surplus2.1 Unit Premium Reserves (1,509.48) (2,334.51)2.2 Unrealised Appreciation Reserve 4,421.23 4.10 2.3 Other Reserves (2,485.72) (14,444.07)
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 849.67 1,065.63
TOTAL 22,294.47 23,015.64
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 20,077.60 17,622.29 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 Securities:1.3.1 Equity Shares – – 1.3.2 Preference Shares – – 1.3.3 Equity Linked Debentures – – 1.3.4 Other Debentures & Bonds – – 1.3.5 Securitised Debt securities – – 1.4 Government Securities – – 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits – – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 20,077.60 17,622.29
2 Deposits 900.00 1,650.00
3 Other Current Assets3.1 Cash & Bank Balance 24.12 4.94 3.2 CBLO / Reverse Repo Lending 456.20 2,124.15 3.3 Others 836.55 1,111.71
4 Deferred Revenue Expenditure – 502.55 (to the extent not written off)
TOTAL 22,294.47 23,015.64
Notes to Accounts - Annexure I
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Rs. in Lakhs
HSBC UNIQUE OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 291.56 384.141.2 Interest 76.98 385.311.3 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 investments8,968.35 (24,424.79)
1.6 Realised Gains / (Losses) on Derivative Transactions – (575.58)1.7 Other Income – –
(A) 9,336.89 (24,230.92)
2 EXPENSES2.1 Management fees 299.35 356.272.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 45.29 69.822.4 Custodian fees 15.80 17.172.5 Trusteeship fees 0.24 0.152.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 215.27 256.062.8 Audit fees 6.00 0.752.9 Other operating expenses 462.55 646.642.10 Expenses to be Reimbursed by the Investment Manager – (6.60)
(B) 1,044.50 1,340.26
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR / PERIOD (A - B = C) 8,292.39 (25,571.18)
4 Change in Unrealised Depreciationin value of investments (D) (3,084.05) (3,561.30)
5 NET GAINS / (LOSSES) FOR THE YEAR / PERIOD [E = (C - D)] 11,376.44 (22,009.88)
6 Change in unrealised appreciation in the value of investments (F) 4,417.13 (4.72)
7 NET SURPLUS / (DEFICIT) FOR THE YEAR / PERIOD (E + F = G) 15,793.57 (22,014.60)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 4.72
7.2 Less: Balance transfer to UnrealisedAppreciation Reserve 4,417.13 –
7.3 Add / (Less): Equalisation 581.91 –7.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –8 TOTAL 11,958.35 (22,009.88)
9 Dividend Appropriation9.1 Income Distributed during the year / period – –9.2 Tax on income distributed during the year / period – –10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 11,958.35 (22,009.88)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC UNIQUE OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 5.6683 10.7715
Regular Dividend Option 5.6683 10.7715
High
Regular Growth Option 10.4458 11.9840
Regular Dividend Option 10.4458 11.9840
Low
Regular Growth Option 5.7112 5.0979
Regular Dividend Option 5.7112 5.0979
End
Regular Growth Option 10.2021 5.6683
Regular Dividend Option 10.2021 5.6683
2. Closing Assets Under Management (Rs. in Lakhs)
End 21,510 21,950
Average (AAuM)1 27,706 34,924
3. Gross income as % of AAuM2 33.70% -69.38%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Dividend Option 3.77% 3.84%
Regular Growth Option 3.77% 3.84%
b. Management Fee as % of AAuM (planwise)
Regular Dividend Option 1.08% 1.02%
Regular Growth Option 1.08% 1.02%
5. Net Income as a percentage of AAuM3 29.93% -73.22%
6. Portfolio turnover ratio4 2.79 1.50
7. Total Dividend per unit distributed during the year / period (planwise)
Retail
Dividend – –
Corporate
Dividend – –
Key Statistics for the year ended March 31, 2010
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HSBC UNIQUE OPPORTUNITIES FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 79.9181 (47.3769)
Regular Dividend Option 79.9181 (47.3769)
Benchmark
BSE 200 92.8700 (40.9800)
b. Since Inception
Scheme
Regular Growth Option 0.6501 (24.3940)
Regular Dividend Option 0.6501 (24.3940)
Benchmark
BSE 200 12.5000 (13.7400)
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 /
period.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year / period.
Key Statistics for the year ended March 31, 2010 (Contd...)
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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 t of the Scheme’s Unitholders.
1.2. Open Positions of derivatives amount to Rs. 175,617,653 and is 8.16% to Net Assets as at March 31, 2010. Open Positions of derivatives amount to Rs. 10,647,000 and is 0.49% to Net Assets as at March 31, 2009.
1.3. Investments in Associates and Group Companies : (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 90,000,000 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the scheme as of the year ended March 31, 2010 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year ended and their percentages to net assets are as under:
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Equity Shares
– Appreciation 476,973,223 22.1704% 125,878,670 5.7348%
– Depreciation 34,850,114 1.6201% 435,753,845 19.8521%
Equity Futures
– Appreciation 636,898 0.0296% 410,269 0.0187%
– Depreciation 2,106,828 0.0979% – –
1.7. The aggregate value of investments securities purchased and sold (including matured) during the fi nancial period is Rs. 3,386,000,287 and Rs. 4,667,516,230 respectively being 122.21% and 168.47% of the average daily net assets.
The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year end March 31, 2009 (excluding accretion of discount of Rs. 4,156,301) is Rs. 5,878,551,559 and Rs. 6,358,764,847 respectively being 168.32% and 182.07% 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 Nil.
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, 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. 122,423 and Clearing member charges on derivative transactions amounting to Rs. 759,468.
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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During the year 2008-2009, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid Clearing member charges on derivative transactions amounting to Rs. 565,239.
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 2009 – 2010 2.12 18.54 4,502,804 21.67
HSBC InvestDirect Securities (India) Limited
Associate 2009 – 2010 0.01 0.09 13,668 0.07
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 2008 – 2009 0.92 19.66 6,184,249 8.19
Brokerage paid to Sponsor / AMC and its associates / related parties / group companies
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. in Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 – 2010 68.98 4.10 472,954 2.55
Name of Sponsor /AMC and its associates / related parties / group companies
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. in Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008 – 2009 4.86 0.28 96,405 0.42
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008 – 2009 47.47 2.76 460,976 2.00
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, 2010
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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, 2010 and March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2009 and March 31, 2010.
Description2009 – 2010
Opening Units Subscription Redemption Closing Units Face Value
Growth 146,326,985.344 2,469,971.529 49,265,702.486 99,531,254.387 995,312,544
Dividend 240,917,869.036 9,473,289.843 139,077,906.666 111,313,252.213 1,113,132,523
Description2008 – 2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 167,242,434.576 2,949,276.671 23,864,725.903 146,326,985.344 1,463,269,853
Dividend 315,868,063.747 5,267,633.300 80,217,828.011 240,917,869.036 2,409,178,690
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Unique Opportunities Fund (HUOF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP/SIP Plus, where applicable):Exit: 1% - if redeemed / switched out* within 1 year from date of investment; Otherwise Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
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CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Small Cap FundA close-ended equity Scheme*
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Small Cap Fund (HSCF) – a close ended equity Scheme with automatic conversion into open–ended Equity Scheme at the end of three years from the date of allotment of units.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. 60.91 crores as at March 31, 2010. Around 99.35% of the net assets were invested in equities, 2.86% of the net assets were invested in reverse repos / CBLO and (2.21%) were invested in net current assets as at March 31, 2010.
HSCF underperformed its benchmarks on a relatively defensive posturing in the earlier part of the year.
Date of Inception: 24 March, 2008 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Small Cap Fund – Growth 123.83 4.05
BSE Small Cap 161.73 10.47
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Overview
The fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over
Trustees’ ReportFor the year ended March 31, 2010
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4
the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil.
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore,
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
Pending
Within 30
days
30-60 days
60-180 days
Beyond 180 days
0-3 months
3-6 months
6-9 months
9-12 months
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:
# including against its authorised persons/distributors/employees, etc.
* Non actionable means the complaint which is pending/outside the scope of the mutual fund
**includes correction in investor details
8. STATUTORY DETAILS
a) 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.
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Trustees’ ReportFor the year ended March 31, 2010 (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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Small Cap Fund (“The Scheme”) as at March 31, 2010, and the related Revenue Account for the year ended on that date both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Small Cap Fund as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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11
Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC SMALL CAP FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 5,621.17 7,333.95
2 Reserves & Surplus2.1 Unit Premium Reserves 479.07 405.75 2.2 Unrealised Appreciation Reserve 901.38 – 2.3 Other Reserves (910.97) (4,183.98)
3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 365.52 179.02
TOTAL 6,456.17 3,734.74
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 6,048.19 2,812.09 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 3.13 – 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 6,051.32 2,812.09
2 Deposits – 410.00
3 Other Current Assets3.1 Cash & Bank Balance 0.96 143.48 3.2 CBLO / Reverse Repo Lending 174.11 9.97 3.3 Others 111.36 49.35 4 Deferred Revenue Expenditure 118.42 309.85
(to the extent not written off)
TOTAL 6,456.17 3,734.74
Notes to Accounts – Annexure I
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12
Rs. in Lakhs
HSBC SMALL CAP FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 98.38 95.70 1.2 Interest 10.42 92.65 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – – 1.5 Realised Gains / (Losses) on External sale / redemption of
investments2,032.09 (2,785.58)
1.6 Realised Gains / (Losses) on Derivative Transactions 88.97 6.92 1.7 Other Income 7.00 –
(A) 2,236.86 (2,590.31)
2 EXPENSES2.1 Management fees 70.05 71.53 2.2 Service tax on Management fees ** – – 2.3 Transfer agents fees and expenses 9.77 10.42 2.4 Custodian fees 2.23 1.80 2.5 Trusteeship fees 0.05 0.03 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 45.73 45.48 2.8 Audit fees 1.00 0.50 2.9 Other operating expenses 151.29 181.96
(B) 280.12 311.72
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A – B = C) 1,956.74 (2,902.03)
4 Change in Unrealised Depreciation invalue of investments (D) (1,316.27) 1,316.27
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C – D)] 3,273.01 (4,218.30)
6 Change in unrealised appreciation inthe value of investments (F) 901.38 (78.87)
7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 4,174.39 (4,297.17)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 78.87
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 901.38 –
7.3 Add / (Less): Equalisation – – 7.4 Transfer from Reserve Fund – – 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 3,273.01 (4,218.30)9 Dividend Appropriation9.1 Income Distributed during the year – – 9.2 Tax on income distributed during the year – – 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 3,273.01 (4,218.30)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.** Service Tax on Management Fees is included in Other Operating Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC SMALL CAP FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 4.8483 10.1334
Regular Dividend Option 4.8483 10.1334
High
Regular Growth Option 11.1002 10.8088
Regular Dividend Option 11.1002 10.8088
Low
Regular Growth Option 4.9282 4.3742
Regular Dividend Option 4.9282 4.3742
End
Regular Growth Option 10.8352 4.8483
Regular Dividend Option 10.8352 4.8483
2. Closing Assets Under Management (Rs. in Lakhs)
End 6,091 3,556
Average (AAuM)1 5,821 6,119
3. Gross income as % of AAuM2 38.42% -42.33%
4. Expense Ratio:
a. Total Expense as % of AAuM (Planwise)
Regular Growth Option 2.42% 2.34%
Regular Dividend Option 2.42% 2.34%
b. Management Fee as % of AAuM (Planwise)
Regular Growth Option 1.21% 1.17%
Regular Dividend Option 1.21% 1.17%
5. Net Income as a percentage of AAuM3 33.61% -47.42%
6. Portfolio turnover ratio4 2.06 0.75
7. Total Dividend per unit distributed during the year (Planwise)
Retail
Dividend – –
Corporate
Dividend – –
Key Statistics for the year ended March 31, 2010
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HSBC SMALL CAP FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 123.8286 (52.2332)
Regular Dividend Option 123.8286 (52.2332)
Benchmark
BSE Small Cap 161.7300 (58.6000)
b. Since Inception
Scheme
Regular Growth Option 4.0479 (50.9306)
Regular Dividend Option 4.0479 (50.9306)
Benchnmark
BSE Small Cap 10.4700 (52.6100)
1 AAuM = Average daily net assets2 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, 2010 (Contd...)
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15
HSBC SMALL CAP 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 March 31, 2010 and March 31, 2009 is Nil.
1.3. Investments in Associates and Group Companies are as under :
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Ltd.
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended 31 March, 2010 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 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
2010 2009
Equity Shares
– Appreciation 116,064,144 19.0561% 11,913,805 3.3506%
– Depreciation 25,926,611 4.2568% 143,541,167 40.3690%
1.7. The aggregate value of investments purchased and sold during the fi nancial year 2009-10 isRs. 816,768,026 and Rs. 917,819,629 respectively being 140.31% and 157.66% of the average daily net assets.
The aggregate value of investments purchased and sold during the fi nancial year 2008 – 2009 is Rs. 1,000,285,806 and Rs. 458,524,246 respectively being 163.46% and 74.93% 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
2010 2009
Equities 312,790 0.05% – –
Total 312,790 0.05% – –
2 Disclosure Under Regulation 25(8) of the Securities And Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 42,037 and clearing member charges on derivative transactions amounting to Rs. 63,638.
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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During the year 2008-09, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting toRs. 2,001, and clearing member charges on derivative transactions Rs. 18,271.
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 2009 - 2010 0.13 0.74 288,400 7.41
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 – – 1,462 0.04
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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 – – 298,873 2.39
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
transactionof the Fund
Brokerage paid[Rs.]
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.88 0.36 17,000 0.48
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 2.36 0.97 25,679 0.73
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
transactionof the Fund
Brokerage paid[Rs.]
(on accrual basis)
% of total brokerage paid by the
Fund
HSBC InvestDirect Securities (India) Limited
Associate 2008 - 2009 0.22 0.13 4,270 0.15
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008 - 2009 5.55 3.35 64,968 2.25
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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, 2010 and March 31, 2009.
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009:
Description2009–2010
Opening Units Subscription Redemption Closing Units Face Value
Growth 44,079,840.395 12,466,410.552 18,032,765.900 38,513,485.047 385,134,850
Dividend 29,259,696.530 1,509,540.509 13,070,992.765 17,698,244.274 176,982,442
Description2008–2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 48,849,646.818 53,550.878 4,823,357.301 44,079,840.395 440,798,404
Dividend 35,991,812.396 351,845.309 7,083,961.175 29,259,696.530 292,596,965
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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.
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Small Cap Fund (HSCF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):During close ended period: Exit # : If the investments are redeemed / switched out* within: 1 year - 2%; 2 years - 1.5% and 3 years - 1%.
# Balance proportionate unamortized NFO expenses to be recovered in case of exit within close-ended period.
Upon conversion into an open ended scheme:Exit – Nil.
*No load in case of switches between equity Schemes of HSBC Mutual Fund.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
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The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC MIP*
*An open-ended fund. Monthly income is not assured and is subject to theavailability of distributable surplus.
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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3
The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 an open-ended fund 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 per cent of the corpus invested in equities while the Savings Plan can have up to 25 per cent invested in equities.
The net assets of HMIP - Regular Plan (HMIP – R) amounted to Rs. 219.32 crores as at March 31, 2010 as compared to Rs. 57.26 crores as at March 31, 2009. Around 87.37% in debt and money market instruments & 12.63% of the net assets were invested in equities as at March 31, 2010.
The net assets of HMIP - Savings Plan (HMIP – S) amounted to Rs. 358.31 crores as at March 31, 2010 as compared to Rs. 103.38 crores as at March 31, 2009. Around 79.44% in debt and money market instruments & 20.56% of the net assets were invested in equities as at March 31, 2010.
The performance of HMIP – R and HMIP – S is benchmarked against CRISIL MIP Blended Index. Both the Plans had higher equity allocation towards mid caps which has led to outperformance vis-a-vis the index over the said period.
HMIP – Regular Plan
Date of Inception: 24 February, 2004 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC MIP - Regular Plan – Growth 15.23 10.02 9.21 8.38
CRISIL MIP Blended Index 14.27 8.48 8.42 7.39
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
HMIP – Savings Plan
Date of Inception: 24 February, 2004 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC MIP - Savings Plan – Growth 22.38 11.93 11.51 10.51
CRISIL MIP Blended Index 14.27 8.48 8.42 7.39
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets
Trustees’ ReportFor the year ended March 31, 2010
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4
globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK
(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures,
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
The paid-up equity share capital of the AMC is Rs. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC MIP - Regular Plan 157,299 246 58,400 3
HSBC MIP – Savings Plan 352,321 318 10,000 1
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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8
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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9
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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10
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC MIP (“The Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended on that date, both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC MIP as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The methods used to value non-traded / thinly traded / equity securities awaiting listing as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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11
Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC MIP - REGULAR PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 17,072.93 4,658.77
2 Reserves & Surplus2.1 Unit Premium Reserves 685.38 (21.68)2.2 Unrealised Appreciation Reserve 319.49 110.72 2.3 Other Reserves 3,854.25 978.05
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 435.34 64.31
TOTAL 22,367.39 5,790.17
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 2,750.49 166.02 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 3,600.64 2,905.16 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares 20.18 – 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 303.58 – 1.3.5 Securitised Debt securities 660.56 1,670.96 1.4 Government Securities 286.72 452.37 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits 9,697.10 – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 17,319.27 5,194.51
2 Deposits 352.04 182.04 3 Other Current Assets3.1 Cash & Bank Balance 83.14 9.50 3.2 CBLO / Reverse Repo Lending 4,111.46 219.29 3.3 Others 501.48 184.83
4 Deferred Revenue Expenditure – – (to the extent not written off)
TOTAL 22,367.39 5,790.17
Notes to Accounts – Annexure I
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12
Abridged Balance Sheet as at March 31, 2010 (Contd...)
Rs. in Lakhs
HSBC MIP - SAVINGS PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 26,134.05 8,545.07
2 Reserves & Surplus2.1 Unit Premium Reserves 2,084.92 193.25 2.2 Unrealised Appreciation Reserve 839.91 256.53 2.3 Other Reserves 6,771.99 1,343.32
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 425.27 127.52
TOTAL 36,256.14 10,465.69
ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 7,333.44 542.58 1.1.2 Preference Shares – – 1.1.3 Equity Linked Debentures – – 1.1.4 Other Debentures & Bonds 5,478.57 4,494.42 1.1.5 Securitised Debt securities – – 1.2 Securities Awaited Listing:1.2.1 Equity Shares 32.06 – 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 746.21 497.82 1.3.5 Securitised Debt securities 911.56 2,076.63 1.4 Government Securities 122.88 1,168.78 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits 14,528.40 – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 29,153.12 8,780.23
2 Deposits 477.04 252.04 3 Other Current Assets3.1 Cash & Bank Balance 331.61 9.52 3.2 CBLO / Reverse Repo Lending 5,574.80 1,074.57 3.3 Others 719.57 349.33
4 Deferred Revenue Expenditure – – (to the extent not written off)
TOTAL 36,256.14 10,465.69
Notes to Accounts – Annexure I
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13
Rs. in Lakhs
HSBC MIP - REGULAR PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 12.06 6.96 1.2 Interest 556.78 569.57 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme
sale of investments – (7.54)
1.5 Realised Gains / (Losses) on External sale / redemption of investments
753.81 (310.48)
1.6 Realised Gains / (Losses) on Derivative Transactions (8.15) (20.53)1.7 Other Income – –
(A) 1,314.50 237.98
2 EXPENSES2.1 Management fees 106.52 64.60 2.2 Service tax on Management fees – – 2.3 Transfer agents fees and expenses 10.30 5.23 2.4 Custodian fees 1.89 1.51 2.5 Trusteeship fees 0.19 0.03 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 152.32 63.63 2.8 Audit fees 0.75 0.50 2.9 Other operating expenses 2.05 2.87
(B) 274.02 138.37 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 1,040.48 99.61 4 Change in Unrealised Depreciation
in value of investments (D) (52.60) 34.90
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,093.08 64.71
6 Change in unrealised appreciationin the value of investments (F) 208.77 97.48
7 NET SURPLUS / (DEFICIT)FOR THE YEAR ( E + F = G ) 1,301.85 162.19
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 208.77 97.48
7.3 Add / (Less): Equalisation 2,427.36 167.47 7.4 Transfer from Reserve Fund 11.04 229.48 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 3,531.48 461.66 9 Dividend Appropriation9.1 Income Distributed during the year 558.07 108.03 9.2 Tax on income distributed during the year 86.17 16.98 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 2,887.24 336.65
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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14
Rs. in Lakhs
HSBC MIP - SAVINGS PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend 34.67 23.83 1.2 Interest 816.30 1,042.31 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme
sale of investments – (11.03)
1.5 Realised Gains / (Losses) on External sale / redemption of investments
1,943.51 (1,076.36)
1.6 Realised Gains / (Losses) on Derivative Transactions 19.74 (71.24)1.7 Other Income 2.90 –
(A) 2,817.12 (92.49)
2 EXPENSES2.1 Management fees 169.85 143.55 2.2 Service tax on Management fees – – 2.3 Transfer agents fees and expenses 16.36 10.27 2.4 Custodian fees 3.70 3.29 2.5 Trusteeship fees 0.27 0.05 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 232.83 108.89 2.8 Audit fees 0.75 0.50 2.9 Other operating expenses 2.08 3.82
(B) 425.84 270.37 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 2,391.28 (362.86)4 Change in Unrealised Depreciation
in value of investments (D) (124.93) 46.67
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 2,516.21 (409.53)
6 Change in unrealised appreciationin the value of investments (F) 583.39 255.95
7 NET SURPLUS / (DEFICIT) FORTHE YEAR ( E + F = G ) 3,099.60 (153.58)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve 583.39 255.95
7.3 Add / (Less): Equalisation 4,104.59 (430.86)7.4 Transfer from Reserve Fund – 560.42 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 6,620.80 (279.97)9 Dividend Appropriation9.1 Income Distributed during the year 1,037.23 301.18 9.2 Tax on income distributed during the year 154.90 44.98 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 5,428.67 (626.13)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010 (Contd...)
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15
HSBC MIP – REGULAR PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 14.1825 13.7856
Regular Dividend Option – –
Regular Monthly Dividend Option 10.7325 10.7999
Regular Quarterly Dividend Option 10.8919 10.9470
High
Regular Growth Option 16.3418 14.4007
Regular Dividend Option – –
Regular Monthly Dividend Option 11.7633 10.9894
Regular Quarterly Dividend Option 12.0062 11.1518
Low
Regular Growth Option 14.2534 13.1115
Regular Dividend Option – –
Regular Monthly Dividend Option 10.7861 10.0428
Regular Quarterly Dividend Option 10.9463 10.1535
End
Regular Growth Option 16.3418 14.1825
Regular Dividend Option
Regular Monthly Dividend Option 11.4773 10.7325
Regular Quarterly Dividend Option 11.6340 10.8919
2. Closing Assets Under Management (Rs. in Lakhs)
End 21,932 5,726
Average (AAuM)1 12,657 6,671
3. Gross income as % of AAuM2 10.39% 3.57%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Dividend Option – –
Regular Growth Option 2.16% 2.07%
Regular Monthly Dividend Option 2.16% 2.07%
Regular Quarterly Dividend Option 2.16% 2.07%
b. Management Fee as % of AAuM (planwise)
Regular Dividend Option – –
Regular Growth Option 0.84% 0.97%
Regular Monthly Dividend Option 0.84% 0.97%
Regular Quarterly Dividend Option 0.84% 0.97%
5. Net Income as a percentage of AAuM3 8.23% 1.49%
6. Portfolio turnover ratio4 0.39 0.21
Key Statistics for the year ended March 31, 2010
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16
HSBC MIP – REGULAR PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option – –
Regular Monthly Dividend Option 0.7533 0.3241
Regular Quarterly Dividend Option 0.7796 0.3153
Corporate
Regular Dividend Option – –
Regular Monthly Dividend Option 0.7011 0.3017
Regular Quarterly Dividend Option 0.7256 0.2935
8. Returns (%):
a. Last One Year
Scheme
Regular Dividend Option N/A N/A
Regular Growth Option 15.2251 2.8791
Regular Monthly Dividend Option 14.1546 2.4357
Regular Quarterly Dividend Option 14.1551 2.4554
Benchmark
CRISIL MIP Blended Index 14.2700 0.1900
b. Since Inception
Scheme
Regular Dividend Option N/A N/A
Regular Growth Option 8.3825 7.0896
Regular Monthly Dividend Option 7.6149 6.3775
Regular Quarterly Dividend Option 7.6516 6.4209
Benchnmark
CRISIL MIP Blended Index 7.3900 6.0200 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, 2010 (Contd...)
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17
HSBC MIP – SAVINGS PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 15.0356 15.0714
Regular Dividend Option – 11.2228
Regular Monthly Dividend Option 10.7242 –
Regular Quarterly Dividend Option 10.7209 11.2540
High
Regular Growth Option 18.4223 15.6254
Regular Dividend Option – –
Regular Monthly Dividend Option 12.4013 11.4078
Regular Quarterly Dividend Option 12.4927 11.5104
Low
Regular Growth Option 15.1489 13.9333
Regular Dividend Option – –
Regular Monthly Dividend Option 10.8050 10.0953
Regular Quarterly Dividend Option 10.8017 10.0478
End
Regular Growth Option 18.4006 15.0356
Regular Dividend Option – –
Regular Monthly Dividend Option 12.0933 10.7242
Regular Quarterly Dividend Option 12.1196 10.7209
2. Closing Assets Under Management (Rs. in Lakhs)
End 35,831 10,338
Average (AAuM)1 20,112 13,157
3. Gross income as % of AAuM2 14.01% -0.70%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Dividend Option – –
Regular Growth Option 2.12% 2.05%
Regular Monthly Dividend Option 2.12% 2.05%
Regular Quarterly Dividend Option 2.12% 2.05%
b. Management Fee as % of AAuM (planwise)
Regular Dividend Option – –
Regular Growth Option 0.84% 1.09%
Regular Monthly Dividend Option 0.84% 1.09%
Regular Quarterly Dividend Option 0.84% 1.09%
5. Net Income as a percentage of AAuM3 11.89% -2.76%
Key Statistics for the year ended March 31, 2010 (Contd...)
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18
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC MIP – SAVINGS PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
6. Portfolio turnover ratio4 0.63 0.33
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option – –
Regular Monthly Dividend Option 0.8584 0.4117
Regular Quarterly Dividend Option 0.8409 0.4380
Corporate
Regular Dividend Option – –
Regular Monthly Dividend Option 0.7990 0.3832
Regular Quarterly Dividend Option 0.7827 0.4076
8. Returns (%):
a. Last One Year
Scheme
Regular Dividend Option N/A N/A
Regular Growth Option 22.3802 (0.2375)
Regular Monthly Dividend Option 21.1355 (0.7722)
Regular Quarterly Dividend Option 21.1925 (0.8031)
Benchmark
CRISIL MIP Blended Index 14.2700 0.1900
b. Since Inception
Scheme
Regular Dividend Option N/A N/A
Regular Growth Option 10.5110 8.3229
Regular Monthly Dividend Option 9.5802 7.4477
Regular Quarterly Dividend Option 9.5923 7.4520
Benchnmark
CRISIL MIP Blended Index 7.3900 6.0200
1 AAuM = Average daily net assets 2 Gross income = amount against (A) in the Revenue Account i.e. Income. 3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.
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19
HSBC MIP - REGULAR / SAVINGS PLAN
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 in MIP Regular Plan as at March 31, 2010 is Rs. 24,075,176 and is1.10% to net assets. Open Positions of derivatives in MIP Regular Plan as at March 31, 2009 is Rs. 2,412,200 is 0.42% to net assets.
Open Positions of derivatives in MIP Savings Plan as at March 31, 2010 is Rs. 50,822,111 and is 1.42% to net assets. Open Positions of derivatives in MIP Savings Plan as at March 31, 2009 isRs. 6,935,075 and is 0.67% to net assets.
1.3. Investments in Associates and Group Companies are as under: (Rupees)
Issuer 2010
Instrument Type
Regular Plan Savings Plan AggregateInvestments
by all schemes
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 10,000,000 10,000,000 1,018,000,000
Issuer 2009
Instrument Type
Regular Plan Savings Plan AggregateInvestments
by all schemes
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits 10,000,000 10,000,000 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the MIP Regular Plan as of fi nancial years ended 2010 and 2009 are NIL.
Open positions of Securities Borrowed and / or Lent by the MIP Savings Plan as of fi nancial years ended 2010 and 2009 are NIL.
1.5. The NPAs for MIP Regular Plan as on March 31, 2010 and March 31, 2009 are NIL.
The NPAs for MIP Savings Plan as on March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years 2009 and 2010 and their percentage to net assets are as under :
Security Category
March 31, 2010
Regular Plan Savings Plan
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Equity Shares
– Appreciation 35,159,577 1.6031% 243,422,390 6.7937%
– Depreciation 8,227,405 0.3751% 167,450,117 4.6733%
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 3,093,155 0.1410% 4,437,820 0.1239%
– Depreciation 219,238 0.0100% 325,981 0.0091%
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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20
Security Category
March 31, 2010
Regular Plan Savings Plan
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Non Convertible Debentures and Bonds Privately Placed
– Appreciation – – 576,049 1.6077%
– Depreciation – – – –
Asset Backed Securities
– Appreciation 1,739,064 0.0793% 2,604,039 0.0727%
– Depreciation – – – –
Government of India Securities
– Appreciation 32,116 0.0015% 13,687 0.0004%
– Depreciation – – – –
Equity Futures
– Appreciation 485,963 0.0222% 983,230 0.0274%
– Depreciation 114,450 0.0052% 269,600 0.0075%
Security Category
March 31, 2009
Regular Plan Savings Plan
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Equity Shares
– Appreciation 930,850 0.1626% 2,465,476 0.2385%
– Depreciation 2,615,775 0.4568% 9,075,936 0.8779%
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 12,106,129 2.1143% 24,617,261 2.3812%
– Depreciation 2,573,566 0.4495% 419,690 0.0406%
Non Convertible Debentures and Bonds Privately Placed
– Appreciation – – – –
– Depreciation – – 486,698 0.0471%
Asset Backed Securities
– Appreciation 1,988,647 0.3473% 2,586,070 0.2501%
– Depreciation 449,713 0.0785% 1,131,139 0.1094%
Government of India Securities
– Appreciation – – – –
– Depreciation 3,575,402 0.6244% 5,394,921 0.5218%
Equity Futures
– Appreciation 779 0.0001% – –
– Depreciation – – 1,043 0.0001%
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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1.7. The aggregate value of investment securities purchased and sold (including matured) during the year 2009-2010 (excluding accretion of discount of Rs. 24,603,133 and Rs. 33,480,802 for Regular and Savings Plan respectively) are:
Plan
March 31, 2010
Aggregate Purchases Aggregate Sales
Rupees Percentage of Average Daily
Net Assets
Rupees Percentage of Average Daily
Net Assets
Regular Plan 8,666,663,810 684.74% 7,579,938,462 598.88%
Savings Plan 13,374,285,652 664.99% 11,634,947,422 578.51%
Plan
March 31, 2009
Aggregate Purchases Aggregate Sales
Rupees Percentage of Average Daily
Net Assets
Rupees Percentage of Average Daily
Net Assets
Regular Plan 1,264,636,217 189.56% 1,360,346,341 203.91%
Savings Plan 3,297,754,997 250.65% 3,671,926,696 279.09%
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
Regular Plan
2010 2009
Equities 2,018,410 0.0920% – –
Debt Instruments 381,375,038 17.3889% 439,709,739 76.7936%
Money Market Instruments 969,709,005 44.2142% – –
Total 1,353,102,453 61.6952% 439,709,739 76.7936%
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Savings Plan
2010 2009
Equities 3,205,710 0.0895% – –
Debt Instruments 638,530,506 17.8207% 670,139,321 64.8129%
Money Market Instruments 1,452,839,619 40.5472% – –
Total 2,094,575,835 58.4573% 670,139,321 64.8129%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
During the year 2009-2010, 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. 1,202 and Rs. 1,198 for the Regular Plan and Savings Plan respectively and clearing member charges on derivative transactions amounting to Rs. 26,038 and Rs. 65,477 for the Regular Plan and Savings Plan respectively.
During the year 2008-2009, 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. 169,266 and Rs. 170,403 for the Regular Plan and Savings Plan respectively, and clearing member charges on derivative transactions amounting to Rs. 33,705 and Rs. 95,235 for the Regular Plan and Savings Plan respectively.
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
Regular Plan
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 75.06 38.04 7,582,562 31.68
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.72 0.36 84,829 0.35
Savings Plan
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 93.16 31.40 10,037,894 27.67
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.26 0.09 49,702 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.]
(on accrual basis)
% of Total commission paid by the
Fund
Regular Plan
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 3.14 32.25 558,159 2.87
Savings Plan
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 3.14 50.84 1,097,294 3.44
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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 InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.24 0.05 4,760 0.22
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 1.75 0.35 30,556 1.40
Savings Plan
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.71 0.07 14,280 0.26
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2009 - 2010 4.16 0.44 70,290 1.29
Name of Sponsor /AMC and its associates /related parties / group companies
Nature of Association /
Nature of relation
Period Covered
Value of Transactions
[Rs. in Crores]
% of total value of
transaction of the Fund
Brokerage paid[Rs.](on
accrual basis)
% of total brokerage paid by the
Fund
Regular Plan
HSBC InvestDirect Securities (India) Limited
Associate 2008-2009 0.35 0.21 6,963 0.92
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008-2009 4.38 2.69 25,017 3.31
Savings Plan
HSBC InvestDirect Securities (India) Limited
Associate 2008-2009 1.14 0.28 22,791 1.02
HSBC Securities and Capital Market (India) Private Limited
Sponsor 2008-2009 12.68 3.07 68,515 3.06
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, 2010 and March 31, 2009.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description
Regular Plan
Opening Units Subscription Redemption Closing Units Face Value
2009-2010
Growth 20,343,046.918 36,509,108.348 9,986,763.268 46,865,391.998 468,653,919
Monthly Dividend
11,179,392.387 92,918,786.004 16,733,112.287 87,365,066.104 873,650,662
Quarterly Dividend
15,065,276.417 27,233,449.862 5,799,857.089 36,498,869.190 364,988,692
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 14,987,074.518 11,250,934.216 5,894,961.816 20,343,046.918 203,430,469
Monthly Dividend
24,470,779.653 10,911,102.092 24,202,489.358 11,179,392.387 111,793,924
Quarterly Dividend
15,012,077.635 6,136,651.026 6,083,452.244 15,065,276.417 150,652,764
Description
Savings Plan
Opening Units Subscription Redemption Closing Units Face Value
2009-2010
Growth 27,263,343.045 55,702,716.349 16,283,865.161 66,682,194.233 666,821,943
Monthly Dividend
22,335,867.542 113,309,617.474 17,966,455.504 117,679,029.512 1,176,790,295
Quarterly Dividend
35,851,537.631 50,500,233.466 9,372,525.432 76,979,245.665 769,792,456
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Growth 38,287,542.486 17,735,574.480 28,759,773.921 27,263,343.045 272,633,430
Monthly Dividend
35,289,980.846 9,705,703.652 22,659,816.956 22,335,867.542 223,358,675
Quarterly Dividend
36,071,998.339 14,430,684.202 14,651,144.910 35,851,537.631 358,515,376
5 Prior year amounts have been re-grouped and reclassifi ed, wherever applicable, to confi rm to current year’s presentation.
6 No contingent liabilities for MIP - Regular and MIP - Savings funds for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income in Savings Plan represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC MIP (HMIP) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Regular Plan & Savings Plan -
Exit: 1% - if redeemed / switched out within 1 year from date of investment.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
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26
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Income FundAn open-ended income Scheme
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1
Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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2
SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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3
The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHIF seeks to generate reasonable income for the investor by investing in bonds, debentures, short-term instruments like commercial papers, repos, etc. The Scheme has two Plans - the Investment Plan and the Short Term Plan.
The investment objective of Scheme / Plan(s) is 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 net assets of HSBC Income Fund - Investment Plan (HIF – IP) amounted to Rs. 32.66 crores as at March 31, 2010 as compared to Rs. 114.90 crores as at March 31, 2009. Around 61.29% in debt and money market instruments, 37.49% of the net assets were invested in reverse repos / CBLO and 1.22% in net current assets as at March 31, 2010.
The net assets of HSBC Income Fund - Short Term Plan (HIF – STP) amounted to Rs. 165.26 crores as at March 31, 2010 as compared to Rs. 151.55 crores as at March 31, 2009. Around 93.86% in debt and money market instruments, 5.91% of the net assets were invested in reverse repos / CBLO and 0.22% in net current assets as at March 31, 2010.
HIF-IP has outperformed its benchmark through relatively active management of duration.
HIF – IP
Date of Inception: 10 Decembwr, 2002 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC Income Fund - IP – Regular - Growth 7.39 8.91 7.01 6.58
CRISIL Composite Bond Fund Index 5.38 6.98 5.58 5.26
Returns data as on March 31, 2010.Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
HIF-STP mostly ran a conservative duration bias on expectation of heightened volatility in short end rates.
HIF – STP
Date of Inception: 10 December, 2002 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC Income Fund -STP – Regular – Growth
5.10 8.03 6.82 6.30
CRISIL Short-Term Bond Fund Index 5.85 8.14 6.78 6.00
Returns data as on March 31, 2010.Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets
Trustees’ ReportFor the year ended March 31, 2010
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4
globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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The paid-up equity share capital of the AMC is Rs. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Income Fund - Investment Plan 203,423 476 238,624 16
HSBC Income Fund - Short Term Plan 57,414 23 – –
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Income Fund (“The Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended on that date, both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Income Fund as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010 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 issued by Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 2,418.14 9,489.00
2 Reserves & Surplus2.1 Unit Premium Reserves (602.92) (99.56)2.2 Unrealised Appreciation Reserve – 29.072.3 Other Reserves 1,451.25 2,071.49
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 212.25 191.18
TOTAL 3,478.72 11,681.18
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 813.04 6,139.301.1.5 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 63.92 72.671.4 Government Securities 627.68 4,533.401.5 Treasury Bills – –1.6 Commercial Paper 497.34 –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 2,001.98 10,745.37
2 Deposits 189.55 2.053 Other Current Assets3.1 Cash & Bank Balance 14.24 44.803.2 CBLO / Reverse Repo Lending 1,224.53 346.073.3 Others 48.42 542.89
4 Deferred Revenue Expenditure – –(to the extent not written off)
TOTAL 3,478.72 11,681.18
Notes to Accounts – Annexure I
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC INCOME FUND – SHORT TERM PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 14,887.54 13,700.32
2 Reserves & Surplus2.1 Unit Premium Reserves 372.47 450.992.2 Unrealised Appreciation Reserve 3.45 49.382.3 Other Reserves 1,266.30 953.81
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 84.33 53.97
TOTAL 16,614.09 15,208.47
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 500.66 8,415.761.1.5 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 2,394.53 –1.7 Certifi cate of Deposits 12,616.23 6,021.531.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 15,511.42 14,437.29
2 Deposits 4.04 4.043 Other Current Assets3.1 Cash & Bank Balance 53.89 93.643.2 CBLO / Reverse Repo Lending 977.31 162.993.3 Others 67.43 510.51
4 Deferred Revenue Expenditure – –(to the extent not written off)
TOTAL 16,614.09 15,208.47
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC INCOME FUND – INVESTMENT PLAN
Current Year endedMarch 31, 2010
Previous Year endedMarch 31, 2009
1 INCOME1.1 Dividend – –1.2 Interest 446.43 338.851.3 Realised Gain / (Loss) on Foreign Exchange
Transactions– –
1.4 Realised Gains / (Losses) on Interscheme sale of investments
– (33.67)
1.5 Realised Gains / (Losses) on External sale / redemption of investments
238.82 (61.70)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.38 –
(A) 685.63 243.48
2 EXPENSES2.1 Management fees 95.71 18.382.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 6.33 3.422.4 Custodian fees 0.46 0.502.5 Trusteeship fees 0.11 0.022.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 33.75 101.432.8 Audit fees 1.50 0.502.9 Other operating expenses 1.00 1.822.10 Expenses to be Reimbursed by the Investment
Manager– (58.80)
(B) 138.86 67.273 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 546.77 176.21
4 Change in Unrealised Depreciationin value of investments (D) (157.02) 151.13
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 703.79 25.08
6 Change in unrealised appreciation inthe value of investments (F) (29.07) 25.63
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 674.72 50.71
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve (29.07) 25.63
7.3 Add / (Less): Equalisation (1,078.50) 1,131.117.4 Transfer from Reserve Fund 428.37 17.797.5 Transfer from Unit Premium Reserve – –8 TOTAL 53.66 1,173.98
9 Dividend Appropriation9.1 Income Distributed during the year 213.83 103.739.2 Tax on income distributed during the year 31.70 15.5610 Retained Surplus / (Defi cit)
carried forward to Balance Sheet (191.87) 1,054.69
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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Abridged Revenue Account for the year ended March 31, 2010 (Contd...)
Rs. in Lakhs
HSBC INCOME FUND - SHORT TERM PLAN
Current Year endedMarch 31, 2010
Previous Year endedMarch 31, 2009
1 INCOME1.1 Dividend – –1.2 Interest 1,868.40 459.891.3 Realised Gain / (Loss) on Foreign Exchange
Transactions– –
1.4 Realised Gains / (Losses) on Interscheme sale of investments
– 2.75
1.5 Realised Gains / (Losses) on External sale / redemption of investments
274.99 29.04
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 5.82 –
(A) 2,149.21 491.68
2 EXPENSES2.1 Management fees 241.79 17.482.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 17.55 3.082.4 Custodian fees 4.19 0.962.5 Trusteeship fees 0.51 0.022.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 128.88 38.472.8 Audit fees 1.00 0.502.9 Other operating expenses 1.45 0.412.10 Expenses to be Reimbursed by
the Investment Manager– (14.41)
(B) 395.37 46.513 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 1,753.84 445.17
4 Change in Unrealised Depreciationin value of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,753.84 445.17
6 Change in unrealised appreciation inthe value of investments (F) (45.94) 48.86
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,707.90 494.03
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve (45.94) 48.86
7.3 Add / (Less): Equalisation (14.78) 573.657.4 Transfer from Reserve Fund 10.19 48.637.5 Transfer from Unit Premium Reserve – –8 TOTAL 1,749.25 1,067.45
9 Dividend Appropriation9.1 Income Distributed during the year 1,208.44 343.839.2 Tax on income distributed during the year 218.13 62.3910 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 322.68 661.23
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
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HSBC INCOME FUND – INVESTMENT PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 14.8409 13.6093
Regular Dividend Option 11.1795 10.7078
Regular Weekly Dividend Option
Institutional Growth Option 9.5776 14.1338
Institutional Dividend Option 10.6682 –
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
High
Regular Growth Option 15.9383 16.0096
Regular Dividend Option 11.7989 12.1899
Regular Weekly Dividend Option – –
Institutional Growth Option 10.2803 14.3056
Institutional Dividend Option 11.2616 11.6290
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
Low
Regular Growth Option 14.9264 13.6093
Regular Dividend Option 11.1456 10.5024
Regular Weekly Dividend Option – –
Institutional Growth Option 9.6330 9.4438
Institutional Dividend Option 10.7298 9.9124
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
End
Regular Growth Option 15.9381 14.8409
Regular Dividend Option 11.1692 11.1795
Regular Weekly Dividend Option – –
Institutional Growth Option – 9.5776
Institutional Dividend Option – 10.6682
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Key Statistics for the year ended March 31, 2010
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Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC INCOME FUND – INVESTMENT PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 3,266 11,490
Average (AAuM)1 7,715 4,163
3. Gross income as % of AAuM2 8.89% 5.85%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.86% 1.69%
Regular Dividend Option 1.86% 1.69%
Regular Weekly Dividend Option – –
Institutional Growth Option 1.50% 1.06%
Institutional Dividend Option 1.50% 1.06%
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 1.24% 0.44%
Regular Dividend Option 1.24% 0.44%
Regular Weekly Dividend Option – –
Institutional Growth Option 1.24% 0.44%
Institutional Dividend Option 1.24% 0.44%
Institutional Weekly Dividend Option – –
Institutional Plus Growth Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
5. Net Income as a percentage of AAuM3 7.09% 4.23%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option 0.7183 0.4204
Regular Weekly Dividend Option – –
Institutional Dividend Option 0.3416 0.2102
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
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Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC INCOME FUND – INVESTMENT PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
Corporate
Regular Dividend Option 0.6685 0.3914
Regular Weekly Dividend Option – –
Institutional Dividend Option 0.3179 0.1957
Institutional Weekly Dividend Option – –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 7.3944 (32.2362)
Regular Dividend Option 6.4429 N/A
Regular Weekly Dividend Option N/A N/A
Institutional Growth Option 7.9191 9.0497
Institutional Dividend Option N/A 8.4667
Institutional Weekly Dividend Option N/A N/A
Institutional Plus Growth Option N/A N/A
Institutional Plus Weekly Dividend Option N/A N/A
Institutional Plus Monthly Dividend Option N/A N/A
Benchmark
CRISIL Composite Bond Fund Index (Investment Plan) 5.3800 7.1600
b. Since Inception
Scheme
Regular Growth Option 6.5848 (0.6817)
Regular Dividend Option 5.9678 10.1659
Regular Weekly Dividend Option N/A N/A
Institutional Growth Option 0.3824 6.4571
Institutional Dividend Option N/A 5.8927
Institutional Weekly Dividend Option N/A N/A
Institutional Plus Growth Option N/A N/A
Institutional Plus Weekly Dividend Option N/A N/A
Institutional Plus Monthly Dividend Option N/A N/A
Benchmark
CRISIL Composite Bond Fund Index (Investment Plan) 5.2600 5.2200
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 pur)chase divided by the Average AuM for the year.
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Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 14.8706 13.5866
Regular Dividend Option 10.8304 11.3355
Regular Weekly Dividend Option 10.0712 10.1026
Institutional Growth Option 11.6871 10.6310
Institutional Dividend Option 10.4456 –
Institutional Weekly Dividend Option 10.2542 –
Institutional Plus Growth Option 10.1070 –
Institutional Plus Weekly Dividend Option – –
Institutional Plus Monthly Dividend Option 10.0362 –
High
Regular Growth Option 15.6284 14.8706
Regular Dividend Option 11.0379 11.4947
Regular Weekly Dividend Option 10.2224 10.1189
Institutional Growth Option 12.3381 11.6871
Institutional Dividend Option 10.6486 10.5037
Institutional Weekly Dividend Option 10.4622 10.4660
Institutional Plus Growth Option 10.6740 10.1070
Institutional Plus Weekly Dividend Option 10.1031 10.0220
Institutional Plus Monthly Dividend Option 10.2315 10.0362
Low
Regular Growth Option 14.9072 13.5866
Regular Dividend Option 10.8570 10.6604
Regular Weekly Dividend Option 10.0844 10.0075
Institutional Growth Option 11.7162 10.6310
Institutional Dividend Option 10.4715 10.0004
Institutional Weekly Dividend Option 10.2648 10.0019
Institutional Plus Growth Option 10.1322 10.0105
Institutional Plus Weekly Dividend Option 10.0188 9.9740
Institutional Plus Monthly Dividend Option 10.0611 10.0000
End
Regular Growth Option 15.6284 14.8706
Regular Dividend Option 10.9030 10.8304
Regular Weekly Dividend Option 10.1393 10.0712
Institutional Growth Option 12.3381 11.6871
Institutional Dividend Option 10.5488 10.4456
Institutional Weekly Dividend Option 10.4336 10.2542
Institutional Plus Growth Option – 10.1070
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Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC INCOME FUND – SHORT TERM PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
Institutional Plus Weekly Dividend Option 10.0558 –
Institutional Plus Monthly Dividend Option 10.1482 10.0362
2. Closing Assets Under Management (Rs. in Lakhs)
End 16,530 13,614
Average (AAuM)1 38,875 5,472
3. Gross income as % of AAuM2 5.53% 8.99%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.25% 1.10%
Regular Dividend Option 1.25% 1.10%
Regular Weekly Dividend Option 1.25% 1.10%
Institutional Growth Option 0.80% 0.60%
Institutional Dividend Option 0.80% 0.60%
Institutional Weekly Dividend Option 0.80% 0.60%
Institutional Plus Growth Option 0.75% 0.55%
Institutional Plus Weekly Dividend Option 0.75% 0.55%
Institutional Plus Monthly Dividend Option 0.75% 0.55%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.62% 0.32%
Regular Dividend Option 0.62% 0.32%
Regular Weekly Dividend Option 0.62% 0.32%
Institutional Growth Option 0.62% 0.32%
Institutional Dividend Option 0.62% 0.32%
Institutional Weekly Dividend Option 0.62% 0.32%
Institutional Plus Growth Option 0.62% 0.32%
Institutional Plus Weekly Dividend Option 0.62% 0.32%
Institutional Plus Monthly Dividend Option 0.62% 0.32%
5. Net Income as a percentage of AAuM3 4.51% 8.14%
6. Portfolio turnover ratio4
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Dividend Option 0.4122 1.3100
Regular Weekly Dividend Option 0.3823 0.8238
Institutional Dividend Option 0.4109 0.4346
Institutional Weekly Dividend Option 0.3344 0.5068
Institutional Plus Weekly Dividend Option 0.3679 0.0122
Institutional Plus Monthly Dividend Option 0.3884 –
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HSBC INCOME FUND – SHORT TERM PLAN
Current Year endedMarch 31, 2010
Previous Year ended March 31, 2009
Corporate
Regular Dividend Option 0.3837 1.2193
Regular Weekly Dividend Option 0.3558 0.7667
Institutional Dividend Option 0.3825 0.2541
Institutional Weekly Dividend Option 0.3112 0.4717
Institutional Plus Weekly Dividend Option 0.3424 0.2418
Institutional Plus Monthly Dividend Option 0.3615 –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 5.0960 9.4505
Regular Dividend Option 4.5371 7.6472
Regular Weekly Dividend Option 4.5385 8.0181
Institutional Growth Option 5.5702 9.9342
Institutional Dividend Option N/A N/A
Institutional Weekly Dividend Option 5.0891 N/A
Institutional Plus Growth Option 5.6258 N/A
Institutional Plus Weekly Dividend Option N/A N/A
Institutional Plus Monthly Dividend Option 4.5414 N/A
Benchmark
CRISIL Short-Term Bond Fund Index (Short Term Plan) 5.8500 6.8500
b. Since Inception
Scheme
Regular Growth Option 6.2989 6.4908
Regular Dividend Option 5.6818 5.8644
Regular Weekly Dividend Option 5.6759 6.1596
Institutional Growth Option 2.4616 1.9108
Institutional Dividend Option – 3.8703
Institutional Weekly Dividend Option 5.3322 5.4338
Institutional Plus Growth Option 6.0546 9.5256
Institutional Plus Weekly Dividend Option 3.6402 3.0998
Institutional Plus Monthly Dividend Option 4.8518 26.4260
Benchmark
CRISIL Short-Term Bond Fund Index (Short Term Plan) 6.0000 6.0000
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, 2010 (Contd...)
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HSBC INCOME FUND - INVESTMENT PLAN / SHORT TERM PLAN
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 Income Fund - Investment Plan is Nil as at March 31, 2010 and as at March 31, 2009.
Open Positions of derivatives for Income Fund - Short Term Plan is Nil as at March 31, 2010 and as at March 31, 2009.
1.3. Investments in Associates and Group Companies:
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the Schemes as of the years ended March 31, 2010 and March 31, 2009 are NIL.
1.5. NPAs for the Schemes for the years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years 2009 and 2010 and their percentages to net assets are as under :
SecurityType
March 31, 2010
INVESTMENT PLAN SHORT TERM PLAN
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 250,564 0.0767% 344,566 0.0208%
– Depreciation 306,366 0.0938% – –
Asset Backed Securities
– Appreciation – – – –
– Depreciation 441,583 0.1352% – –
Government of India Securities
– Appreciation 10,873 0.0033% – –
– Depreciation 437,566 0.1340% – –
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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SecurityType
March 31, 2009
INVESTMENT PLAN SHORT TERM PLAN
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 6,317,746 0.5498% 5,080,372 0.3732%
– Depreciation 3,411,111 0.2969% 142,285 0.0105%
Asset Backed Securities
– Appreciation – – – –
– Depreciation 781,228 0.0680% – –
Government of India Securities
– Appreciation – – – –
– Depreciation 15,845,249 1.3790% – –
1.7. The aggregate value of investments purchased (excluding accretion of discount of Rs. 3,669,515 and Rs. 103,649,039 for HSBC Income Fund - Investment Plan and HSBC Income Fund - Short Term Plan respectively) and sold (including matured) during the year are :
2009-2010
Plan Aggregate Purchases Aggregate Sales
Amount(Rs.)
Percentage of Average Daily
Net Assets
Amount(Rs.)
Percentage of Average Daily
Net Assets
Investment Plan 9,142,476,843 1185.04% 10,057,164,104 1303.60%
Short Term Plan 23,963,152,456 616.42% 23,982,294,982 616.91%
The aggregate value of investments purchased (excluding accretion of discount of Rs. 1,815,499 and Rs. 26,773,795 for HSBC Income Fund - Investment Plan and HSBC Income Fund - Short Term Plan respectively) and sold (including matured) during the year 2008 - 2009 are :
2008-2009
Plan Aggregate Purchases Aggregate Sales
Amount(Rs.)
Percentage of Average Daily
Net Assets
Amount(Rs.)
Percentage of Average Daily
Net Assets
Investment Plan 3,159,143,552 762.83% 2,244,998,154 542.10%
Short Term Plan 3,827,871,811 710.63% 2,473,791,637 459.25%
1.8. Non-Traded securities in the portfolio:
Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets are as under:
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Security Category
Fair Value(Rs.)
Percentage to Net Assets
Fair Value(Rs.)
Percentage to Net Assets
INVESTMENT PLAN
2010 2009
Debt Instruments 87,696,285 26.8474% 189,014,345 16.4503%
Money market Instruments 49,732,940 15.2253% – –
Total 137,429,225 42.0726% 189,014,345 16.4503%
Security Category
Fair Value(Rs.)
Percentage to Net Assets
Fair Value(Rs.)
Percentage to Net Assets
SHORT TERM PLAN
2010 2009
Debt Instruments 50,065,916 3.0288% 536,108,823 39.3795%
Money market Instruments 1,501,075,589 90.8105% 602,153,291 44.2308%
Total 1,551,141,505 93.8393% 1,138,262,114 83.6103%
2 Disclosure Under Regulation 25(8) of the Securities nnd Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, 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. 22,806 for the Investment Plan and Rs. 7,865 for the Short Term Plan.
During the year 2008-2009, 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. 41,395 for the Investment Plan and Rs. 3,854 for the 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 /relatedparties / group companies
Nature of Association /
Nature ofRelation
Period Covered
Business Given[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
% of Total commission paid by the
Fund
INVESTMENT PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 16.97 44.20 2,750,823 55.53
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.00~ 0.00~ 5,415 0.11
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
Name of Sponsor / AMC and its associates /relatedparties / group companies
Nature of Association /
Nature ofRelation
Period Covered
Business Given[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
% of Total commission paid by the
Fund
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 253.25 29.71 11,527,114 58.98
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 6.76 0.79 130,877 0.67
Name of Sponsor / AMC and its associates /relatedparties / group companies
Nature of Association /
Nature ofRelation
Period Covered
Business Given[Rs. in Crores]
% of Total Business
received by the Fund
Commission paid[Rs.]
(on accrual basis)
% of Total commission paid by the
Fund
INVESTMENT PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 67.67 5.62 6,807,601 18.98
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 81.63 11.77 2,856,078 24.09
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 Income Fund - Investment Plan and Income Fund - Short Term Plan as at the years ended on March 31, 2010 and March 31, 2009.
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4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009:
INVESTMENT PLAN
Description Opening Units Subscription Redemption Closing Units Face Value
2009-2010
Regular Dividend 58,649,984.489 14,455,550.272 60,784,150.527 12,321,384.234 123,213,843
Regular Growth 25,707,313.077 6,885,022.408 20,732,282.697 11,860,052.788 118,600,528
Regular Weekly Dividend
– – – – –
Institutional Dividend
10,013,416.171 18,672.866 10,032,089.037 – –
Institutional Growth 519,254.435 11,032,977.203 11,552,231.638 – –
Institutional Weekly Dividend
– – – – –
2008 - 2009
Description Opening Units Subscription Redemption Closing Units Face Value
Regular Dividend 6,441,356.823 59,571,503.172 7,362,875.506 58,649,984.489 586,499,845
Regular Growth 11,671,564.647 24,482,272.058 10,446,523.628 25,707,313.077 257,073,131
Regular Weekly Dividend
– – –
Institutional Dividend
– 19,998,982.155 9,985,565.984 10,013,416.171 100,134,162
Institutional Growth 9,264,262.136 1,019,254.435 9,764,262.136 519,254.435 5,192,544
Institutional Weekly Dividend
– – – – –
SHORT TERM PLAN
Description Opening Units Subscription Redemption Closing Units Face Value
2009-2010
Regular Dividend 53,157,406.512 163,384,188.969 176,602,803.140 39,938,792.341 399,387,924
Regular Growth 15,450,409.839 24,352,826.602 25,055,835.671 14,747,400.770 147,474,007
Regular Weekly Dividend
14,467,296.399 73,014,114.879 67,101,961.049 20,379,450.229 203,794,503
Institutional Dividend
4,837,013.350 53,253,516.264 57,604,389.332 486,140.282 4,861,404
Institutional Growth 8,845,986.502 37,282,068.211 34,489,082.752 11,638,971.961 116,389,719
Institutional Weekly Dividend
24,995,115.818 81,693,798.828 76,782,550.358 29,906,364.288 299,063,642
Institutional Plus Option - Growth
14,250,000.000 65,758,134.542 80,008,134.542 – –
Institutional Plus Option - Weekly Dividend
– 219,694,038.845 188,934,556.980 30,759,481.865 307,594,818
Institutional Plus Option - Monthly Dividend
1,000,000.000 84,875,537.437 84,856,733.909 1,018,803.528 10,188,035
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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26
SHORT TERM PLAN
2008 - 2009
Description Opening Units Subscription Redemption Closing Units Face Value
Regular Dividend
4,147,785.788 63,563,188.891 14,553,568.167 53,157,406.512 531,574,065
Regular Growth
4,652,173.505 19,603,247.004 8,805,010.670 15,450,409.839 154,504,098
Regular Weekly Dividend
505,339.613 17,883,545.155 3,921,588.369 14,467,296.399 144,672,964
Institutional Dividend
– 17,532,762.612 12,695,749.262 4,837,013.350 48,370,134
Institutional Growth
500,000.000 11,411,840.508 3,065,854.006 8,845,986.502 88,459,865
Institutional Weekly Dividend
– 83,021,402.762 58,026,286.944 24,995,115.818 249,951,158
Institutional Plus Option - Growth
– 14,250,000.000 – 14,250,000.000 142,500,000
Institutional Plus Option - Weekly Dividend
– 75,804,702.056 75,804,702.056 – –
Institutional Plus Option - Monthly Dividend
– 1,000,000.000 – 1,000,000.000 10,000,000
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, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income in Investment Plan represents provision for expenses written back as no longer required.
Other income in Short Term Plan represents provision for expenses written back as no longer required and amount received from Investment Manager as compensation for an operational incident.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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27
DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Income Fund (HIF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP where applicable):Investment Plan:
Exit : Regular & Institutional Option - 0.5% if redeemed / switched outwithin 6 months from the date of investment.
Short Term Plan:
Exit: Regular, Institutional & Institutional Plus Option - Nil.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
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28
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Floating Rate FundAn open-ended income Scheme
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1
Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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2
SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEME
a) Operations and Performance of the Scheme
HSBC Floating Rate Fund (HFRF) – an open–ended Income SchemeHFRF 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. There can be no assurance that the Scheme objective can be realised. The Scheme has two Plans – Long Term Plan and Short Term Plan.
The net assets of HSBC Floating Rate Fund – Long Term Plan (HFRF – LTP) amounted to Rs. 597.50 crores as at March 31, 2010 as compared to Rs. 454.44 crores as at March 31, 2009. Around 98.68% were invested in money market instruments, 1.40% of the net assets were invested in reverse repos / CBLO and (0.02)% in net current assets as at March 31, 2010.
The net assets of HSBC Floating Rate Fund - Short Term Plan (HFRF – STP) amounted to Rs. 72.22 crores as at March 31, 2010 as compared to Rs. 87.85 crores as at March 31, 2009. Around 99.05% of the net assets were invested in reverse repos/ CBLO and 0.95% in net current assets as at March 31, 2010.
HFRF - LTP has outperformed its benchmark index through active calls at the short end of the curve based on outlook for liquidity and RBI policy rates, among other factors.
HFRF – LTP
Date of Inception: 16 November, 2004
Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC FRF – LTP – Regular Plan – Growth 4.52 7.38 6.70
CRISIL Liquid Fund Index 3.67 6.65 6.14
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
HFRF–STP has underperformed its benchmark as incremental investments have been made very conservatively in line with the general risk environment.
HFRF – STP
Date of Inception:16 November, 2004
Simple Annualized Returns (%)
Compounded Annualized Returns (%)
Schemes (P2P) 3 Months 6 Months 1 Year 3 Years Since Inception
HSBC FRF – STP – Regular Plan – Growth
2.49 2.36 2.24 5.98 5.99
CRISIL Liquid Fund Index 3.69 3.18 3.68 6.65 6.14
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
Trustees’ ReportFor the year ended March 31, 2010
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b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Overview
The fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009–2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de–rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long–term sovereign credit rating to stable from negative. It affi rmed its ‘BBB–’ long–term and ‘A–3’ short–term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009–2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply–constrained and capital–starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much–needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010–2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15–16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010–11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009–10. A few demand–supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de–sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so–called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long–established businesses in fi ve regions: Europe, Asia–Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid–up equity share capital of the AMC.
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 (the 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.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
Scheme
Unclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Floating Rate Fund – Long Term Plan 41,564 56 14,800 4
HSBC Floating Rate Fund – Short Term Plan – – – –
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces – namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company initiated tie–ups for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
of such tie–ups to 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered – STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009–2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Floating Rate Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Floating Rate Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC FLOATING RATE FUND – LONG TERM PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 51,992.65 39,160.20
2 Reserves & Surplus2.1 Unit Premium Reserves 4,917.52 2,722.862.2 Unrealised Appreciation Reserve – 29.052.3 Other Reserves 2,866.22 3,532.21
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 2,576.98 3,395.36
TOTAL 62,353.37 48,839.68
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 – 532.861.1.5 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 – 348.161.3.5 Securitised Debt securities – 1,331.571.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 9,745.17 44,790.021.7 Certifi cate of Deposits 49,212.78 196.451.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 58,957.95 47,199.06
2 Deposits 56.10 25.103 Other Current Assets3.1 Cash & Bank Balance 4.14 5.863.2 CBLO / Reverse Repo Lending 835.52 1,520.033.3 Others 2,499.66 89.634 Deferred Revenue Expenditure
(to the extent not written off) – –
TOTAL 62,353.37 48,839.68
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC FLOATING RATE FUND – SHORT TERM PLAN
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 6,706.37 8,405.84
2 Reserves & Surplus2.1 Unit Premium Reserves 4,186.98 (53.05)2.2 Unrealised Appreciation Reserve – – 2.3 Other Reserves (3,670.33) 431.74 3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 10.53 44.82
TOTAL 7,233.55 8,829.35
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 – –
Total Investments – –
2 Deposits 50.17 50.17 3 Other Current Assets3.1 Cash & Bank Balance 25.51 53.47 3.2 CBLO / Reverse Repo Lending 7,153.52 8,724.47 3.3 Others 4.35 1.24 4 Deferred Revenue Expenditure
(to the extent not written off) – –
TOTAL 7,233.55 8,829.35
Notes to Accounts – Annexure I
Abridged Balance Sheet as at March 31, 2010
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13
Abridged Revenue Account for the year ended March 31, 2010
Rs. in Lakhs
HSBC FLOATING RATE FUND – LONG TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – –1.2 Interest 5,815.31 2,223.761.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – 5.891.5 Realised Gains / (Losses) on External sale /
redemption of investments1,198.53 155.87
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.05 (0.74)
(A) 7,013.88 2,384.78
2 EXPENSES2.1 Management fees 496.32 80.662.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 64.36 16.922.4 Custodian fees 14.89 4.552.5 Trusteeship fees 1.19 0.112.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 253.18 54.982.8 Audit fees 0.25 0.252.9 Other operating expenses 4.17 2.072.10 Expenses to be Reimbursed by the Investment Manager – (10.63)
(B) 834.36 148.913 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 6,179.52 2,235.874 Change in Unrealised Depreciation in
value of investments (D) (6.64) 6.42
5 NET GAINS / (LOSSES)FOR THE YEAR [E = (C–D)] 6,186.16 2,229.45
6 Change in unrealised appreciation inthe value of investments (F) (29.05) 29.05
7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 6,157.11 2,258.50
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve (29.05) 29.05
7.3 Add / (Less): Equalisation (2,869.27) 2,450.757.4 Transfer from Reserve Fund 71.62 23.137.5 Transfer from Unit Premium Reserve – –8 TOTAL 3,388.51 4,703.33
9 Dividend Appropriation9.1 Income Distributed during the year 3,300.21 1,493.429.2 Tax on income distributed during the year 682.67 299.6710 Retained Surplus / (Defi cit)
carried forward to Balance Sheet (594.37) 2,910.24
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
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Rs. in Lakhs
HSBC FLOATING RATE FUND – SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – – 1.2 Interest 212.63 1,091.08 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme
sale of investments– 12.08
1.5 Realised Gains / (Losses) on External sale / redemption of investments
(2.72) 0.24
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income 0.01 (0.01)
(A) 209.92 1,103.39
2 EXPENSES2.1 Management fees 20.29 42.45 2.2 Service tax on Management fees – – 2.3 Transfer agents fees and expenses 3.63 6.20 2.4 Custodian fees 0.11 1.53 2.5 Trusteeship fees 0.07 0.06 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 13.07 26.30 2.8 Audit fees 0.12 1.50 2.9 Other operating expenses 0.57 1.68 2.10 Expenses to be Reimbursed by the Investment Manager – –
(B) 37.86 79.72 3 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A – B = C) 172.06 1,023.67 4 Change in Unrealised Depreciation in
value of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C – D)] 172.06 1,023.67
6 Change in unrealised appreciation in the value of investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 172.06 1,023.67
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve – –
7.3 Add / (Less): Equalisation (4,141.00) (225.10)7.4 Transfer from Reserve Fund 42.36 48.71 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL (3,926.58) 847.28
9 Dividend Appropriation 9.1 Income Distributed during the year 103.75 590.58 9.2 Tax on income distributed during the year 29.39 167.28 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet (4,059.72) 89.42
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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15
Key Statistics for the year ended March 31, 2010
HSBC FLOATING RATE FUND
LONG TERM PLAN SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 13.5781 12.4936 13.3675 12.4236
Regular Daily Dividend Option 10.0114 – 10.0000 10.0000
Regular Weekly Dividend Option 10.0066 – 10.0205 10.0079
Regular Monthly Dividend Option 10.0064 10.0069 – –
Institutional Growth Option 13.7348 12.5862 13.5003 12.5158
Institutional Daily Dividend Option 10.0980 – 10.0623 10.0368
Institutional Weekly Dividend Option 11.2348 11.2291 10.4999 10.0562
Institutional Fortnightly Dividend Option 10.2245 10.0332 – –
Institutional Monthly Dividend Option 10.0614 10.0346 10.1350 10.0658
Institutional Plus Growth Option – – 11.4592 10.6182
Institutional Plus Daily Dividend Option – – – 10.0262
Institutional Plus Weekly Dividend Option – – 10.0373 10.0098
Institutional Plus Monthly Dividend Option – – – –
High
Regular Growth Option 14.1925 13.5781 13.6668 13.3675
Regular Daily Dividend Option 10.0136 10.0114 10.0000 10.0000
Regular Weekly Dividend Option 10.0240 10.0121 10.0222 10.0330
Regular Monthly Dividend Option 10.0688 10.0897 – –
Institutional Growth Option 14.4137 13.7348 13.8138 13.5003
Institutional Daily Dividend Option 10.1799 10.0980 10.1360 10.0623
Institutional Weekly Dividend Option 11.2550 11.2555 10.5018 10.5050
Institutional Fortnightly Dividend Option 10.2468 10.2364 – –
Institutional Monthly Dividend Option 10.1891 10.1915 10.1548 10.1958
Institutional Plus Growth Option – – 11.7344 11.4592
Institutional Plus Daily Dividend Option – – – 10.0262
Institutional Plus Weekly Dividend Option – – 10.0392 10.0500
Institutional Plus Monthly Dividend Option – – – –
Low
Regular Growth Option 13.5915 12.4936 13.3689 12.4236
Regular Daily Dividend Option 10.0114 10.0022 10.0000 9.9996
Regular Weekly Dividend Option 10.0009 10.0002 10.0156 10.0002
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16
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC FLOATING RATE FUND
LONG TERM PLAN SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Regular Monthly Dividend Option 10.0027 10.0000 – –
Institutional Growth Option 13.7486 12.5892 13.5018 12.5158
Institutional Daily Dividend Option 10.1000 10.0048 10.0623 10.0368
Institutional Weekly Dividend Option 10.0990 11.2227 10.4943 10.0508
Institutional Fortnightly Dividend Option 10.1606 10.0022 – –
Institutional Monthly Dividend Option 10.0645 10.0369 10.1296 10.0607
Institutional Plus Growth Option – – 11.4605 10.6182
Institutional Plus Daily Dividend Option – – – 9.9998
Institutional Plus Weekly Dividend Option – – 10.0319 10.0042
Institutional Plus Monthly Dividend Option – – – –
End
Regular Growth Option 14.1925 13.5781 13.6668 13.3675
Regular Daily Dividend Option 10.0126 10.0114 10.0000 10.0000
Regular Weekly Dividend Option 10.0047 10.0066 10.0155 10.0205
Regular Monthly Dividend Option 10.0063 10.0064 – –
Institutional Growth Option 14.4137 13.7348 13.8138 13.5003
Institutional Daily Dividend Option 10.1799 10.0980 10.1363 10.0623
Institutional Weekly Dividend Option 11.2299 11.2348 – 10.4999
Institutional Fortnightly Dividend Option 10.1971 10.2245 – –
Institutional Monthly Dividend Option 10.1891 10.0614 10.1346 10.1350
Institutional Plus Growth Option – – 11.7344 11.4592
Institutional Plus Daily Dividend Option – – – –
Institutional Plus Weekly Dividend Option – – – 10.0373
Institutional Plus Monthly Dividend Option – – – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 59,776 45,444 7,223 8,785
Average (AAuM)1 131,250 27,867 7,720 13,315
3. Gross income as % of AAuM2 5.34% 8.56% 2.72% 8.29%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.00% 0.93% 0.51% 0.70%
Regular Daily Dividend Option 1.00% 0.93% 0.51% 0.70%
Regular Weekly Dividend Option 1.00% 0.93% 0.51% 0.70%
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17
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC FLOATING RATE FUND
LONG TERM PLAN SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Regular Monthly Dividend Option 1.00% 0.93% – –
Institutional Growth Option 0.61% 0.45% 0.44% 0.45%
Institutional Daily Dividend Option 0.61% 0.45% 0.44% 0.45%
Institutional Weekly Dividend Option 0.61% 0.45% 0.44% 0.45%
Institutional Fortnightly Dividend Option 0.61% 0.45% – –
Institutional Monthly Dividend Option 0.61% 0.45% 0.44% 0.41%
Institutional Plus Growth Option – – 0.37% 0.41%
Institutional Plus Daily Dividend Option – – – –
Institutional Plus Weekly Dividend Option – – 0.37% 0.41%
Institutional Plus Monthly Dividend Option – – – –
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.38% 0.26% 0.26% 0.33%
Regular Daily Dividend Option 0.38% 0.26% 0.26% 0.33%
Regular Weekly Dividend Option 0.38% 0.26% 0.26% 0.33%
Regular Monthly Dividend Option 0.38% 0.26% – 0.33%
Institutional Growth Option 0.38% 0.23% 0.26% 0.33%
Institutional Daily Dividend Option 0.38% 0.23% 0.26% 0.33%
Institutional Weekly Dividend Option 0.38% 0.23% 0.26% 0.33%
Institutional Fortnightly Dividend Option 0.38% 0.23% – 0.33%
Institutional Monthly Dividend Option 0.38% 0.23% 0.26% 0.33%
Institutional Plus Growth Option – 0.23% 0.26% 0.27%
Institutional Plus Daily Dividend Option – 0.23% – 0.27%
Institutional Plus Weekly Dividend Option – 0.23% 0.26% 0.27%
Institutional Plus Monthly Dividend Option – 0.23% – 0.27%
5. Net Income as a percentage of AAuM3 4.71% 8.02% 2.23% 7.69%
6. Portfolio turnover ratio4 – – – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.3871 0.3790 0.1726 0.5707
Regular Weekly Dividend Option 0.3897 0.0380 0.1768 0.5616
Regular Monthly Dividend Option 0.3886 0.7322 – –
Institutional Daily Dividend Option 0.3578 0.3012 0.1230 0.5738
Institutional Weekly Dividend Option 0.4792 0.8547 0.0733 0.2585
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18
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC FLOATING RATE FUND
LONG TERM PLAN SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Fortnightly Dividend Option 0.4551 0.5315 – –
Institutional Monthly Dividend Option 0.3157 0.7499 0.1817 0.5431
Institutional Plus Daily Dividend Option – – – 0.4615
Institutional Plus Weekly Dividend Option – – 0.0161 0.5740
Institutional Plus Monthly Dividend Option – – – –
Corporate
Regular Daily Dividend Option 0.3603 0.3530 0.1726 0.2440
Regular Weekly Dividend Option 0.3627 0.0354 0.1768 0.2368
Regular Monthly Dividend Option 0.3617 0.6815 – –
Institutional Daily Dividend Option 0.3330 0.3188 0.1230 0.2553
Institutional Weekly Dividend Option 0.4460 0.7955 0.0733 0.0775
Institutional Fortnightly Dividend Option 0.4236 0.5601 – –
Institutional Monthly Dividend Option 0.2938 0.6979 0.1817 0.2080
Institutional Plus Daily Dividend Option – – – 0.1222
Institutional Plus Weekly Dividend Option – – 0.0161 0.2484
Institutional Plus Monthly Dividend Option – – – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 4.5249 8.6804 2.2390 7.5976
Regular Daily Dividend Option 3.9436 – 1.7359 5.8884
Regular Weekly Dividend Option 3.9506 – 1.7298 5.9603
Regular Monthly Dividend Option 3.9532 7.5578 – –
Institutional Growth Option 4.9429 9.1259 2.3222 7.8661
Institutional Daily Dividend Option 4.4107 – 1.9645 6.1162
Institutional Weekly Dividend Option 4.3116 7.9564 – 7.1468
Institutional Fortnightly Dividend Option 4.2832 8.2000 – –
Institutional Monthly Dividend Option 4.4802 7.9847 1.8045 6.2433
Institutional Plus Growth Option – – 2.4016 7.9204
Institutional Plus Daily Dividend Option – – – 4.5923
Institutional Plus Weekly Dividend Option – – – 6.2365
Institutional Plus Monthly Dividend Option – – – –
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19
HSBC FLOATING RATE FUND
LONG TERM PLAN SHORT TERM PLAN
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Benchmark
CRISIL Liquid Fund Index 3.6700 8.7800 3.6800 8.8000
b. Since Inception
Scheme
Regular Growth Option 6.7022 7.2065 5.9868 6.8630
Regular Daily Dividend Option 5.0434 6.8827 4.8521 5.5818
Regular Weekly Dividend Option 4.0210 4.6593 4.9173 5.7512
Regular Monthly Dividend Option 5.8500 6.2886 – –
Institutional Growth Option 7.0090 7.4872 6.1719 7.0725
Institutional Daily Dividend Option 5.6624 7.7470 5.0985 5.8327
Institutional Weekly Dividend Option 6.4241 6.9132 – 6.0690
Institutional Fortnightly Dividend Option 6.5441 8.1000 – –
Institutional Monthly Dividend Option 6.1640 6.5529 5.1270 5.9019
Institutional Plus Growth Option – – 3.7350 4.1350
Institutional Plus Daily Dividend Option – – – 5.7469
Institutional Plus Weekly Dividend Option – – – 5.2948
Institutional Plus Monthly Dividend Option – – – –
Benchmark
CRISIL Liquid Fund Index 6.1400 6.7000 6.1400 6.7000
1 AAuM = Average daily net assets2 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, 2010 (Contd...)
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20
HSBC FLOATING RATE FUND - LONG TERM PLAN / SHORT TERM PLAN
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 Floating Rate Fund - Long Term Plan and Floating Rate Fund - Short Term Plan as of March 31, 2010 are NIL.
Open Positions of derivatives for Floating Rate Fund - Long Term Plan and Floating Rate Fund - Short Term Plan as of March 31, 2009 are NIL.
1.3. Investments in Associates and Group Companies are as under :
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Ltd.
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2010 and March 31, 2009 are NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year and percentage to net assets are:
Asset Class
LONG TERM PLAN
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non-Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – – – –
– Depreciation – – 663,800 0.0146%
Non-Convertible Debentures and Bonds Privately Placed
– Appreciation – – 837,077 0.0184%
– Depreciation – – – –
Asset Backed Securities
– Appreciation – – 2,068,284 0.0455%
– Depreciation – – – –
Aggregate Unrealised Gain / Loss at the end of the Financial years ended March 31, 2010 and March 31, 2009 for Floating Rate Fund - Short Term Plan are Nil.
1.7. The aggregate value of investments purchased and sold (including matured) during the year (excluding accretion of discount of Rs. 523,693,413 and Rs. 2,730,000 for Long Term and Short Term Plan respectively) are :
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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21
2009-2010
Plan
Aggregate Purchases Aggregate Sales
Amount(Rs.)
Percentage ofAverage Daily
Net Assets
Amount(Rs.)
Percentage ofAverage Daily
Net Assets
Long Term Plan 72,453,262,526 552.03% 71,918,677,941 547.95%
Short Term Plan 797,541,955 103.30% 800,000,000 103.62%
The aggregate value of investments purchased and sold (including matured) during the year (excluding accretion of discount of Rs. 135,102,262 and Rs. 81,656,313 for Long Term and Short Term Plan respectively)
2008-2009
Plan
Aggregate Purchases Aggregate Sales
Amount(Rs.)
Percentage ofAverage Daily
Net Assets
Amount(Rs.)
Percentage ofAverage Daily
Net Assets
Long Term Plan 27,141,086,721 794.97% 23,252,509,827 681.08%
Short Term Plan 2,241,718,740 167.79% 3,687,513,072 276.00%
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 :
2009-2010
Security Category
Fair Value(Rs.)
Percentage to Net Assets
Fair Value(Rs.)
Percentage to Net Assets
LONG TERM PLAN SHORT TERM PLAN
Money market Instruments
5,895,795,487 98.63% – –
Total 5,895,795,487 98.63% – –
2008-2009
Security Category
Fair Value(Rs.)
Percentage to Net Assets
Fair Value(Rs.)
Percentage to Net Assets
LONG TERM PLAN SHORT TERM PLAN
Debt Instruments 167,973,620 3.70% – –
Money market Instruments
4,498,647,018 98.99% – –
Total 4,666,620,638 102.69% – –
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended for the year ended March 31, 2010 is as under.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
During the year 2009-10, 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. 3,831 and Rs. 6,386 in Long Term Plan and Short Term Plan respectively.
During the year 2008-09, 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. 12 and Rs. 1,385 in Long Term Plan and Short Term Plan respectively.
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
LONG TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 271.44 4.44 3,987,136 13.90
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 83.70 1.37 342,379 1.19
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 27.75 30.58 810,250 64.35
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 2.51 2.76 1,542 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.]
(on accrual basis)
% of Total commission paid by the
Fund
LONG TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 304.72 26.50 1,206,401 8.05
SHORT TERM PLAN
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 193.08 12.34 1,529,580 19.46
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, 2010 and March 31, 2009.
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description
LONG TERM PLAN
2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 7,361,353.037 29,072,069.318 27,104,318.750 9,329,103.605 93,291,035
Regular Daily Dividend
4,719,009.792 157,887.379 2,120,152.849 2,756,744.322 27,567,444
Regular Weekly Dividend
5,869,893.642 69,964,899.678 56,312,448.831 19,522,344.489 195,223,446
Regular Monthly Dividend
43,136,652.841 33,002,015.276 51,655,420.827 24,483,247.290 244,832,474
Institutional Growth
88,532,331.128 2,513,293,697.351 2,545,724,227.552 56,101,800.927 561,018,008
Institutional Daily Dividend
12,461,806.332 979,230.716 6,243,549.707 7,197,487.341 71,974,873
Institutional Fortnightly Dividend
545,333.900 2,652,232.224 2,629,103.368 568,462.756 5,684,626
Institutional Weekly Dividend
217,865,967.972 2,158,763,676.331 1,978,538,269.640 398,091,374.663 3,980,913,748
Institutional Monthly Dividend
11,109,646.396 4,073,334.085 13,307,006.495 1,875,973.986 18,759,739
Description
SHORT TERM PLAN
2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 7,967,470.081 5,212,911.625 8,252,785.776 4,927,595.930 49,275,958
Regular Daily Dividend
25,849,979.215 37,428,733.365 42,935,124.056 20,343,588.524 203,435,885
Regular Weekly Dividend
26,900,500.774 25,526,798.856 29,091,427.864 23,335,871.766 233,358,716
Institutional Growth 97,055.445 4,049,696.111 1,634,480.410 2,512,271.146 25,122,711
Institutional Daily Dividend
6,894,975.853 4,840,621.594 11,635,817.106 99,780.341 997,806
Institutional Weekly Dividend
3,440,995.435 9,778.962 3,450,774.397 – –
Institutional Monthly Dividend
4,339,496.053 50,934.139 1,989,139.240 2,401,290.952 24,012,908
Institutional Plus Growth
4,987,332.184 8,737,217.855 281,296.358 13,443,253.681 134,432,537
Institutional Plus Daily Dividend
– – – – –
Institutional Plus Weekly Dividend
3,580,547.191 4,157.938 3,584,705.129 – –
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Description
LONG TERM PLAN
2008-2009
Opening Units
Subscription Redemption Closing Units Face Value
Regular Growth 7,471,705.625 14,683,385.964 14,793,738.552 7,361,353.037 73,613,530
Regular Daily Dividend
– 13,574,854.752 8,855,844.960 4,719,009.792 47,190,098
Regular Weekly Dividend
– 5,879,912.477 10,018.835 5,869,893.642 58,698,936
Regular Monthly Dividend
16,372,183.719 45,848,558.548 19,084,089.426 43,136,652.841 431,366,528
Institutional Growth
16,920,635.005 459,657,983.206 388,046,287.083 88,532,331.128 885,323,311
Institutional Daily Dividend
– 1,113,238,427.088 1,100,776,620.756 12,461,806.332 124,618,063
Institutional Fortnightly Dividend
881,553.972 110,709,121.493 111,045,341.565 545,333.900 5,453,339
Institutional Weekly Dividend
9,287,147.224 682,636,484.183 474,057,663.435 217,865,967.972 2,178,659,680
Institutional Monthly Dividend
11,075,077.247 95,585,424.100 95,550,854.951 11,109,646.396 111,096,464
Description
SHORT TERM PLAN
2008-2009
Opening Units
Subscription Redemption Closing Units Face Value
Regular Growth 11,316,444.277 20,562,687.385 23,911,661.581 7,967,470.081 79,674,701
Regular Daily Dividend
46,612,712.234 57,564,452.273 78,327,185.292 25,849,979.215 258,499,792
Regular Weekly Dividend
21,330,117.806 45,296,245.444 39,725,862.476 26,900,500.774 269,005,008
Institutional Growth 2,558,819.389 22,931,458.891 25,393,222.835 97,055.445 970,554
Institutional Daily Dividend
3,829,950.745 31,051,944.545 27,986,919.437 6,894,975.853 68,949,759
Institutional Weekly Dividend
10,011,518.785 3,733,494.717 10,304,018.067 3,440,995.435 34,409,954
Institutional Monthly Dividend
4,094,365.416 1,730,610.437 1,485,479.800 4,339,496.053 43,394,961
Institutional Plus Growth
6,400,346.993 117,717,572.514 119,130,587.323 4,987,332.184 49,873,322
Institutional Plus Daily Dividend
11,918,438.460 474,478,092.435 486,396,530.895 – –
Institutional Plus Weekly Dividend
17,920,513.941 531,043.585 14,871,010.335 3,580,547.191 35,805,472
5 Prior year’s amounts have been re-grouped and re-classifi ed, wherever applicable, to confi rm to current year’s presentation.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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6 No contingent liabilities for Floating Rate Fund - Long Term Plan and Floating Rate Fund - Short Term Plan for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Miscellaneous income in Long Term Plan and Short Term Plan represents excess provision for brokerage expenses of previous year written back as no longer required.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Floating Rate Fund (HFRF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Long Term Plan and Short Term Plan:
Exit: Nil.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Ultra Short Term Bond FundAn open ended debt Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHUSBF 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. 512.32 crores as at March 31, 2010 as compared to Rs. 984.19 crores as at March 31, 2009. Around 63.87% of the net assets were invested in debt and money market instruments, 29.01% were invested in reverse repos / CBLO and 7.12% was invested in net current assets as at March 31, 2010.
HUSBF has underperformed its benchmark index as incremental investments have been made very conservatively in line with the general risk environment.
Date of Inception: 17 October, 2006 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years Since Inception
HSBC Ultra Short Term Bond Fund -Regular – Growth
3.74 6.65 6.85
CRISIL Liquid Fund Index 3.93 6.80 6.74
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
Trustees’ ReportFor the year ended March 31, 2010
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In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company initiated tie-ups
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
for online distribution of the Mutual Fund’s schemes with several channel partners taking the total number of such tie-ups to 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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8
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0
TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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9
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Ultra Short Term Bond Fund (The “Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Ultra Short Term Bond Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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10
Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 49,298.93 94,848.26
2 Reserves & Surplus2.1 Unit Premium Reserves 16.00 (118.93)2.2 Unrealised Appreciation Reserve 1.21 49.942.3 Other Reserves 1,923.00 3,640.11
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income/Deposits – –4.2 Other Current Liabilities & Provisions 355.22 795.82
TOTAL 51,594.36 99,215.20
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 22,513.75 34,136.321.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities:1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds 8,495.75 18,308.881.3.5 Securitised Debt securities 1,711.12 18,081.131.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – 1,588.051.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 32,720.62 72,114.38
2 Deposits 2,031.00 1,010.00
3 Other Current Assets3.1 Cash & Bank Balance 90.90 458.593.2 CBLO / Reverse Repo Lending 14,862.54 22,483.923.3 Others 1,889.30 3,148.31
4 Deferred Revenue Expenditure – –(to the extent not written off)
TOTAL 51,594.36 99,215.20
Notes to Accounts - Annexure I
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11
Rs. in Lakhs
HSBC ULTRA SHORT TERM BOND FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – –1.2 Interest 4,070.88 26,997.421.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – (14.86)1.5 Realised Gains / (Losses) on External sale /
redemption of investments(54.71) (158.79)
1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 1.88 2.58
(A) 4,018.05 26,826.35
2 EXPENSES2.1 Management fees 701.07 885.112.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 37.33 147.672.4 Custodian fees 5.34 35.622.5 Trusteeship fees 0.72 1.292.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 108.53 329.312.8 Audit fees 0.50 1.502.9 Other operating expenses 2.72 26.03
(B) 856.21 1,426.53
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 3,161.84 25,399.82
4 Change in Unrealised Depreciation in value of investments (D) – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C-D)] 3,161.84 25,399.82
6 Change in unrealised appreciation in the value of investments (F) (48.74) 33.51
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3,113.10 25,433.33
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve
(48.74) 33.51
7.3 Add / (Less): Equalisation (2,459.75) (6,306.61)7.4 Transfer from Reserve Fund 258.83 289.227.5 Transfer from Unit Premium Reserve – 0.738 TOTAL 960.92 19,383.16
9 Dividend Appropriation9.1 Income Distributed during the year 2,075.16 16,632.149.2 Tax on income distributed during the year 344.04 3,218.67
10 Retained Surplus / (Defi cit)carried forward to Balance Sheet (1,458.28) (467.65)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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12
HSBC ULTRA SHORT TERM BOND FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 12.1193 11.2274
Regular Daily Dividend Option 10.0122 10.0122
Regular Weekly Dividend Option 10.0418 10.0340
Institutional Growth Option 12.1702 11.2519
Institutional Daily Dividend Option 10.0125 10.0125
Institutional Weekly Dividend Option 10.0432 10.0348
Institutional Monthly Dividend Option 10.1476 10.0834
Institutional Plus Growth Option 12.2294 11.2737
Institutional Plus Daily Dividend Option 10.0506 10.0126
Institutional Plus Weekly Dividend Option 10.0447 10.0353
Institutional Plus Monthly Dividend Option 10.3369 10.2678
High
Regular Growth Option 12.5727 12.1193
Regular Daily Dividend Option 10.0122 10.0146
Regular Weekly Dividend Option 10.0461 10.0511
Institutional Growth Option 12.6572 12.1702
Institutional Daily Dividend Option 10.0125 10.0150
Institutional Weekly Dividend Option 10.0477 10.0527
Institutional Monthly Dividend Option 10.1780 10.2068
Institutional Plus Growth Option 12.7630 12.2294
Institutional Plus Daily Dividend Option 10.1078 10.0506
Institutional Plus Weekly Dividend Option 10.1661 10.0543
Institutional Plus Monthly Dividend Option 10.3556 10.3995
Low
Regular Growth Option 12.1235 11.2274
Regular Daily Dividend Option 10.0122 10.0122
Regular Weekly Dividend Option 10.0345 10.0269
Institutional Growth Option 12.1852 11.2519
Institutional Daily Dividend Option 10.0125 10.0125
Institutional Weekly Dividend Option 10.0358 10.0275
Institutional Monthly Dividend Option 10.1415 10.0761
Institutional Plus Growth Option 12.2416 11.2737
Institutional Plus Daily Dividend Option 10.0506 10.0126
Institutional Plus Weekly Dividend Option 10.0385 10.0278
Institutional Plus Monthly Dividend Option 10.3330 10.2601
Key Statistics for the year ended March 31, 2010
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13
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC ULTRA SHORT TERM BOND FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
End
Regular Growth Option 12.5727 12.1193
Regular Daily Dividend Option 10.0122 10.0122
Regular Weekly Dividend Option 10.0331 10.0418
Institutional Growth Option 12.6572 12.1702
Institutional Daily Dividend Option 10.0125 10.0125
Institutional Weekly Dividend Option 10.0342 10.0432
Institutional Monthly Dividend Option 10.1446 10.1476
Institutional Plus Growth Option 12.7669 12.2294
Institutional Plus Daily Dividend Option 10.1094 10.0506
Institutional Plus Weekly Dividend Option 10.1637 10.0447
Institutional Plus Monthly Dividend Option 10.3343 10.3369
2. Closing Assets Under Management (Rs. in Lakhs)
End 51,239 98,419
Average (AAuM)1 79,681 308,140
3. Gross income as % of AAuM2 5.04% 8.71%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.30% 0.84%
Regular Daily Dividend Option 1.30% 0.84%
Regular Weekly Dividend Option 1.30% 0.84%
Institutional Growth Option 1.05% 0.60%
Institutional Daily Dividend Option 1.05% 0.60%
Institutional Weekly Dividend Option 1.05% 0.60%
Institutional Monthly Dividend Option 1.05% 0.60%
Institutional Plus Growth Option 0.67% 0.31%
Institutional Plus Daily Dividend Option 0.67% 0.31%
Institutional Plus Weekly Dividend Option 0.67% 0.31%
Institutional Plus Monthly Dividend Option 0.67% 0.31%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.88% 0.29%
Regular Daily Dividend Option 0.88% 0.29%
Regular Weekly Dividend Option 0.88% 0.29%
Institutional Growth Option 0.88% 0.29%
Institutional Daily Dividend Option 0.88% 0.29%
Institutional Weekly Dividend Option 0.88% 0.29%
Institutional Monthly Dividend Option 0.88% 0.29%
Institutional Plus Growth Option 0.88% 0.29%
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14
HSBC ULTRA SHORT TERM BOND FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Plus Daily Dividend Option 0.88% 0.29%
Institutional Plus Weekly Dividend Option 0.88% 0.29%
Institutional Plus Monthly Dividend Option 0.88% 0.29%
5. Net Income as a percentage of AAuM3 3.97% 8.24%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.3222 0.6706
Regular Weekly Dividend Option 0.3306 0.6653
Institutional Daily Dividend Option 0.3441 0.6883
Institutional Weekly Dividend Option 0.3529 0.6824
Institutional Monthly Dividend Option 0.3516 0.6401
Institutional Plus Daily Dividend Option 0.3286 0.6814
Institutional Plus Weekly Dividend Option 0.2764 0.7073
Institutional Plus Monthly Dividend Option 0.3922 0.2864
Corporate
Regular Daily Dividend Option 0.2998 0.6261
Regular Weekly Dividend Option 0.3077 0.6192
Institutional Daily Dividend Option 0.3203 0.6406
Institutional Weekly Dividend Option 0.3284 0.6351
Institutional Monthly Dividend Option 0.3273 0.5958
Institutional Plus Daily Dividend Option 0.3059 0.6342
Institutional Plus Weekly Dividend Option 0.2573 0.6583
Institutional Plus Monthly Dividend Option 0.3650 0.6284
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 3.7411 7.9440
Regular Daily Dividend Option 3.2617 6.9114
Regular Weekly Dividend Option 3.2590 6.9379
Institutional Growth Option 4.0016 8.1613
Institutional Daily Dividend Option 3.4874 7.0995
Institutional Weekly Dividend Option 3.4853 7.1210
Institutional Monthly Dividend Option 3.4918 7.1928
Institutional Plus Growth Option 4.3951 8.4773
Institutional Plus Daily Dividend Option 3.9109 7.3756
Institutional Plus Weekly Dividend Option 3.9919 7.3996
Institutional Plus Monthly Dividend Option 3.8363 7.4691
Key Statistics for the year ended March 31, 2010 (Contd...)
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15
HSBC ULTRA SHORT TERM BOND FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Benchmark
CRISIL Liquid Fund Index 3.9300 8.7800
b. Since Inception
Scheme
Regular Growth Option 6.8513 8.1449
Regular Daily Dividend Option 5.9760 7.1021
Regular Weekly Dividend Option 5.9528 7.0702
Institutional Growth Option 7.0587 8.3297
Institutional Daily Dividend Option 6.1557 7.2623
Institutional Weekly Dividend Option 6.1458 7.2491
Institutional Monthly Dividend Option 6.0791 7.1516
Institutional Plus Growth Option 7.3264 8.5440
Institutional Plus Daily Dividend Option 6.4129 7.4493
Institutional Plus Weekly Dividend Option 6.4134 7.4159
Institutional Plus Monthly Dividend Option 6.5143 7.6249
Benchmark
CRISIL Liquid Fund Index 6.7400 7.8700
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, 2010 (Contd...)
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16
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 March 31, 2010 is NIL. Open Positions of derivatives as of March 31, 2009 end is NIL.
1.3. Investments in Associates and Group Companies: (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the scheme as of fi nancial years ended 2010 and 2009 are NIL.
1.5. The NPAs as on March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2010 and March 31, 2009 are as under :
Company Name Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 118,650 0.0023% 552,846 0.0056%
– Depreciation 10 0.0000% 7 0.0000%
Non Convertible Debentures and Bonds Privately Placed
– Appreciation – – – –
– Depreciation – – – –
Asset Backed Securities
– Appreciation 2,182 0.0000% 4,506,181 0.0458%
– Depreciation – – 64,584 0.0007%
1.7. The aggregate value of investment securities purchased (excluding accretion of discount ofRs. 16,855,956) and sold (including matured) during the fi nancial year 2009-2010 are Rs. Nil and Rs. 3,945,886,455 respectively being 0.00% and 49.52% of the average daily net assets.
The aggregate value of investment purchased (excluding accretion of discount of Rs. 1,434,575,544) and sold (including matured) during the fi nancial year 2008-2009 is Rs. 215,473,358,101 andRs. 236,584,673,590 respectively being 699.27% and 767.78% 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:
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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17
Security Category Fair Value(Rs.)
% to Net Assets
Fair Value(Rs.)
% to Net Assets
2010 2009
Debt Instruments 3,272,062,567 63.8586 7,052,632,706 71.6590
Money market Instruments
– – 158,805,411 1.6136
Total 3,272,062,567 63.8586 7,211,438,117 73.2725
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 62,633.
During the year 2008-09, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting toRs. 3,131.
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 2009-2010 632.82 23.69 6,055,879 49.19
HSBC InvestDirect Securities (India) Limited
Associate 2009-2010 26.40 0.99 26,101 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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008-2009 2,226.38 20.00 12,246,089 11.01
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, 2010 and March 31, 2009.
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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18
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 30,701,774.121 64,545,530.369 70,827,353.932 24,419,950.558 244,199,507
Regular Daily Dividend
325,722,386.273 407,087,307.877 548,342,613.864 184,467,080.286 1,844,670,802
Regular Weekly Dividend
84,576,307.762 121,748,732.303 141,012,552.697 65,312,487.368 653,124,874
Institutional Growth 19,011,827.930 29,588,213.966 39,293,339.097 9,306,702.799 93,067,029
Institutional Daily Dividend
149,222,257.022 310,840,531.571 413,853,348.645 46,209,439.948 462,094,400
Institutional Weekly Dividend
39,216,714.706 55,193,822.795 76,580,969.857 17,829,567.652 178,295,675
Institutional Monthly Dividend
12,394,879.767 4,722,154.825 11,801,253.362 5,315,781.230 53,157,812
Institutional Plus Growth
101,445,807.318 510,642,756.113 581,717,840.944 30,370,722.487 303,707,225
Institutional Plus Daily Dividend
137,853,200.124 773,255,945.564 856,540,145.076 54,569,000.612 545,690,006
Institutional Plus Weekly Dividend
39,471,878.513 231,504,498.928 221,998,411.931 48,977,965.510 489,779,655
Institutional Plus Monthly Dividend
8,865,584.027 1,936,573.988 4,591,528.596 6,210,629.419 62,106,293
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 12,947,562.502 99,469,516.553 81,715,304.934 30,701,774.121 307,017,741
Regular Daily Dividend
342,608,641.233 1,185,144,871.026 1,202,031,125.986 325,722,386.273 3,257,223,863
Regular Weekly Dividend
80,326,610.335 315,343,532.080 311,093,834.653 84,576,307.762 845,763,078
Institutional Growth 43,024,316.645 130,534,514.385 154,547,003.100 19,011,827.930 190,118,279
Institutional Daily Dividend
351,092,342.074 1,242,088,327.212 1,443,958,412.264 149,222,257.022 1,492,222,570
Institutional Weekly Dividend
74,699,504.743 195,730,174.224 231,212,964.261 39,216,714.706 392,167,147
Institutional Monthly Dividend
15,102,418.972 44,563,488.833 47,271,028.038 12,394,879.767 123,948,798
Institutional Plus Growth
258,473,165.696 3,733,880,271.611 3,890,907,629.989 101,445,807.318 1,014,458,073
Institutional Plus Daily Dividend
1,273,900,193.819 7,653,158,455.898 8,789,205,449.593 137,853,200.124 1,378,532,001
Institutional Plus Weekly Dividend
235,516,908.995 1,262,013,895.241 1,458,058,925.723 39,471,878.513 394,718,785
Institutional Plus Monthly Dividend
10,947,069.442 22,715,164.623 24,796,650.038 8,865,584.027 88,655,840
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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19
5 Prior year amounts have been re-grouped and reclassifi ed, wherever applicable, to confi rm to current year’s presentation.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 Other income represents write back of excess provision of prior years as they are no longer required and compensation from an external party for an operational accident.
9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Ultra Short Term Bond Fund (HUSBF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: Nil.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Cash FundAn open-ended liquid Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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3
The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHCF aims to provide reasonable returns, commensurate with low risk while providing a high level of liquidity, through a portfolio of money market and debt securities. However, there can be no assurance that the scheme objective can be realised.
The net assets of HCF amounted to Rs. 470.59 crores as at March 31, 2010 as compared to Rs. 492.65 crores as at March 31, 2009. Around 59.44% were invested in debt and money market instruments, 38.68% of the net assets were invested in reverse repos / CBLO and 1.88% in net current assets as at March 31, 2010.
HCF has underperformed its benchmark index as incremental investments have been made very conservatively in line with the general risk environment.
Date of Inception: 04 December, 2002
Simple Annualized Returns (%)
Compounded Annualized Returns (%)
Scheme & Benchmark 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception
HSBC Cash Fund – Regular – Growth
2.66 2.36 2.16 5.68 5.86 5.58
CRISIL Liquid Fund Index 3.69 3.18 3.68 6.65 6.23 5.63
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Overview
The fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier
Trustees’ ReportFor the year ended March 31, 2010
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4
asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market Outlook
The interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor
HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme has been provided above under the heading “Scheme Performance, Future Outlook and Operation of the Scheme” (refer Section 1).
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
4. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies are in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONSNil
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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8
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:
# including against its authorised persons/distributors/employees, etc.
* Non actionable means the complaint which is pending/outside the scope of the mutual fund
**includes correction in investor details
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.
CASH FUND.indd 10CASH FUND.indd 10 27/07/2010 3:19:32 PM27/07/2010 3:19:32 PM
9
Trustees’ ReportFor the year ended March 31, 2010 (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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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10
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Cash Fund (The “Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Cash Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010, and Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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11
Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC CASH FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 45,365.60 46,008.96
2 Reserves & Surplus2.1 Unit Premium Reserves 50.73 88.812.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 1,643.95 3,166.94
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 1,324.55 1,288.99
TOTAL 48,384.83 50,553.70
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 – 1,483.331.1.5 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 320.26 1,061.951.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 4,995.27 2,259.191.7 Certifi cate of Deposits 22,656.56 193.281.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –
Total Investments 27,972.09 4,997.75
2 Deposits 2,061.88 2,826.383 Other Current Assets3.1 Cash & Bank Balance 127.10 167.733.2 CBLO / Reverse Repo Lending 18,203.02 42,462.323.3 Others 20.74 99.52
4 Deferred Revenue Expenditure – –(to the extent not written off)
TOTAL 48,384.83 50,553.70
Notes to Accounts – Annexure I
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12
Rs. in Lakhs
HSBC CASH FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – – 1.2 Interest 1,715.40 12,212.11 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – 43.68 1.5 Realised Gains / (Losses) on External sale / redemption of
investments(5.07) 64.51
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income 0.03 0.39
(A) 1,710.36 12,320.69
2 EXPENSES2.1 Management fees 216.06 360.50 2.2 Service tax on Management fees – – 2.3 Transfer agents fees and expenses 25.74 73.27 2.4 Custodian fees 2.39 16.85 2.5 Trusteeship fees 0.47 0.63 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 53.49 139.02 2.8 Audit fees 1.00 3.00 2.9 Other operating expenses 3.16 12.49 2.10 Expenses to be Reimbursed by the Investment Manager – –
(B) 302.31 605.76
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 1,408.05 11,714.93
4 Change in Unrealised Depreciation invalue of investments (D) – (0.07)
5 NET GAINS / (LOSSES)FOR THE YEAR [E = (C - D)] 1,408.05 11,715.00
6 Change in unrealised appreciation in the value of investments (F) – –
7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 1,408.05 11,715.00
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –
7.3 Add / (Less): Equalisation (1,720.49) (9,632.76)7.4 Transfer from Reserve Fund 349.19 623.75 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 36.75 2,705.99
9 Dividend Appropriation9.1 Income Distributed during the year 943.35 5,545.32 9.2 Tax on income distributed during the year 267.20 1,570.71 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet (1,173.80) (4,410.04)
Notes to Accounts - Annexure I
* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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13
HSBC CASH FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 14.5744 13.5906
Regular Daily Dividend Option 10.1930 10.1929
Regular Weekly Dividend Option 10.0227 10.0103
Institutional Growth Option 14.6717 13.6538
Institutional Daily Dividend Option 10.4401 10.4400
Institutional Weekly Dividend Option 10.4699 10.4564
Institutional Monthly Dividend Option 10.5277 10.4598
Institutional Plus Growth Option 13.7655 12.7705
Institutional Plus Daily Dividend Option 10.0056 10.0055
Institutional Plus Weekly Dividend Option 10.2411 10.0439
Institutional Plus Monthly Dividend Option 10.0829 10.0153
High
Regular Growth Option 14.8892 14.5744
Regular Daily Dividend Option 10.1930 10.1930
Regular Weekly Dividend Option 10.0246 10.0308
Institutional Growth Option 15.0262 14.6717
Institutional Daily Dividend Option 10.4401 10.4401
Institutional Weekly Dividend Option 10.4720 10.4785
Institutional Monthly Dividend Option 10.5516 10.5786
Institutional Plus Growth Option 14.1546 13.7655
Institutional Plus Daily Dividend Option 10.0056 10.0056
Institutional Plus Weekly Dividend Option 10.2434 10.2498
Institutional Plus Monthly Dividend Option 10.1092 10.1342
Low
Regular Growth Option 14.5761 13.5936
Regular Daily Dividend Option 10.1930 10.1927
Regular Weekly Dividend Option 10.0173 10.0038
Institutional Growth Option 14.6736 13.6568
Institutional Daily Dividend Option 10.4401 10.4399
Institutional Weekly Dividend Option 10.4640 10.4494
Institutional Monthly Dividend Option 10.5219 10.4528
Institutional Plus Growth Option 13.7674 12.7735
Institutional Plus Daily Dividend Option 10.0056 10.0055
Key Statistics for the year ended March 31, 2010
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14
HSBC CASH FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Plus Weekly Dividend Option 10.2350 10.0401
Institutional Plus Monthly Dividend Option 10.0770 10.0083
End
Regular Growth Option 14.8892 14.5744
Regular Daily Dividend Option 10.1930 10.1930
Regular Weekly Dividend Option 10.0169 10.0227
Institutional Growth Option 15.0262 14.6717
Institutional Daily Dividend Option 10.4401 10.4401
Institutional Weekly Dividend Option 10.4635 10.4699
Institutional Monthly Dividend Option 10.5267 10.5277
Institutional Plus Growth Option 14.1546 13.7655
Institutional Plus Daily Dividend Option 10.0056 10.0056
Institutional Plus Weekly Dividend Option 10.2343 10.2411
Institutional Plus Monthly Dividend Option 10.0819 10.0829
2. Closing Assets Under Management (Rs. in Lakhs)
End 47,060 49,265
Average (AAuM)1 54,692 151,680
3. Gross income as % of AAuM2 3.13% 8.12%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.00% 0.79%
Regular Daily Dividend Option 1.00% 0.79%
Regular Weekly Dividend Option 1.00% 0.79%
Institutional Growth Option 0.75% 0.57%
Institutional Daily Dividend Option 0.75% 0.57%
Institutional Weekly Dividend Option 0.75% 0.57%
Institutional Monthly Dividend Option 0.75% 0.57%
Institutional Plus Growth Option 0.35% 0.30%
Institutional Plus Daily Dividend Option 0.35% 0.30%
Institutional Plus Weekly Dividend Option 0.35% 0.30%
Institutional Plus Monthly Dividend Option 0.35% 0.30%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.40% 0.24%
Regular Daily Dividend Option 0.40% 0.24%
Regular Weekly Dividend Option 0.40% 0.24%
Key Statistics for the year ended March 31, 2010 (Contd...)
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15
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC CASH FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Growth Option 0.40% 0.24%
Institutional Daily Dividend Option 0.40% 0.24%
Institutional Weekly Dividend Option 0.40% 0.24%
Institutional Monthly Dividend Option 0.40% 0.24%
Institutional Plus Growth Option 0.40% 0.24%
Institutional Plus Daily Dividend Option 0.40% 0.24%
Institutional Plus Weekly Dividend Option 0.40% 0.24%
Institutional Plus Monthly Dividend Option 0.40% 0.24%
5. Net Income as a percentage of AAuM3 2.57% 7.72%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Daily Dividend Option 0.1698 0.5551
Regular Weekly Dividend Option 0.1714 0.5358
Institutional Daily Dividend Option 0.1942 0.5849
Institutional Weekly Dividend Option 0.1997 0.5756
Institutional Monthly Dividend Option 0.1967 0.5358
Institutional Plus Daily Dividend Option 0.2173 0.5850
Institutional Plus Weekly Dividend Option 0.2277 0.4406
Institutional Plus Monthly Dividend Option 0.2199 0.5357
Corporate
Regular Daily Dividend Option 0.1698 0.2311
Regular Weekly Dividend Option 0.1714 0.2198
Institutional Daily Dividend Option 0.1942 0.2468
Institutional Weekly Dividend Option 0.1997 0.2394
Institutional Monthly Dividend Option 0.1967 0.1986
Institutional Plus Daily Dividend Option 0.2173 0.2517
Institutional Plus Weekly Dividend Option 0.2277 0.2357
Institutional Plus Monthly Dividend Option 0.2199 0.2035
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 2.1600 7.2380
Regular Daily Dividend Option 1.6748 5.6171
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16
HSBC CASH FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Regular Weekly Dividend Option 1.6666 5.6919
Institutional Growth Option 2.4162 7.4543
Institutional Daily Dividend Option 1.8726 5.7669
Institutional Weekly Dividend Option 1.8639 5.8624
Institutional Monthly Dividend Option 1.8763 5.9163
Institutional Plus Growth Option 2.8266 7.7897
Institutional Plus Daily Dividend Option 2.1897 6.0444
Institutional Plus Weekly Dividend Option 2.1811 6.5529
Institutional Plus Monthly Dividend Option 2.1941 6.1813
Benchmark
CRISIL Liquid Fund Index 3.6800 8.8000
b. Since Inception
Scheme
Regular Growth Option 5.5837 6.1353
Regular Daily Dividend Option 4.6354 5.1402
Regular Weekly Dividend Option 4.7894 5.6109
Institutional Growth Option 5.7269 6.3352
Institutional Daily Dividend Option 4.7439 5.2741
Institutional Weekly Dividend Option 4.7669 5.3117
Institutional Monthly Dividend Option 4.7226 5.2443
Institutional Plus Growth Option 6.1378 6.8362
Institutional Plus Daily Dividend Option 5.0510 5.6578
Institutional Plus Weekly Dividend Option 5.1406 5.7793
Institutional Plus Monthly Dividend Option 4.9489 5.5281
Benchnmark
CRISIL Liquid Fund Index 5.6300 5.9400 1 AAuM = Average daily net assets2 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, 2010 (Contd...)
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17
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 March 31, 2010 is NIL. Open Positions of derivatives as of March 31, 2009 end is NIL.
1.3. Investments in Associates and Group Companies: (Rupees)
Issuer Instrument Type
Amount Aggregate Investments
by all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open position of Securities Borrowed and / or Lent by the scheme as of fi nancial years ended 2010 and 2009 are NIL.
1.5. The NPAs as on March 31, 2010 and March 31, 2009 are NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year March 31, 2010 and March 31, 2009 are as under :
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – – – –
– Depreciation – – – –
1.7. The aggregate value of investment securities purchased (excluding accretion of discount of Rs. 60,417,423) and sold (including matured) during the fi nancial year 2009-2010 are Rs. 15,263,572,550 and Rs. 13,026,048,200 respectively being 279.08% and 238.17% of the average daily net assets.
The aggregate value of investment securities purchased (excluding accretion of discount of Rs.765,499,693) and sold (including matured) during the fi nancial year 2008 - 2009 is Rs. 113,034,775,451 and Rs. 126,356,785,527 respectively being 745.22% and 833.05% of the average daily net assets.
1.8. Non-Traded securities in the portfolio:
Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under:
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Debt Instruments 32,026,000.00 0.68% 254,528,096.23 5.17%
Money market Instruments
2,765,182,927.91 58.76% 245,246,153.84 4.98%
Total 2,797,208,927.91 59.44% 499,774,250.07 10.14%
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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18
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.
During the year 2009-2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 99,605.
During the year 2008-09, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting toRs. 56,595.
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 2009 - 2010 176.35 0.32 2,93,023 60.11
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 549.21 0.99 157,182 3.22
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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 2,059.63 97.17 5,425,600 13.18
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 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets):
Name of the Scheme
No. ofholders
% Holdings No. ofholders
% Holdings
2010 2009
HSBC Cash Fund 1 43.56% – –
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option 19,452,526.536 40,702,731.451 47,501,799.529 12,653,458.458 126,534,586
Regular Daily Dividend Option
117,952,996.359 111,772,395.587 152,626,435.077 77,098,956.869 770,989,569
Regular Weekly Dividend Option
17,184,208.603 32,470,981.303 35,083,157.976 14,572, 031.930 145,720,318
Institutional Growth Option
1,626,747.666 13,927,700.773 14,617,535.753 936,912.686 9,369,127
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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19
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Institutional Daily Dividend Option
52,779,357.682 210,724,456.279 258,724,824.761 4,778,989.200 47,789,891
Institutional Weekly Dividend Option
10,930,233.795 4,593,062.717 12,594,405.793 2,928,890.719 29,288,907
Institutional Monthly Dividend Option
554,781.289 545,778.993 545,779.011 554,781.271 5,547,813
Institutional PlusGrowth Option
44,991,905.273 2,543,491,205.051 2,569,936,226.208 18,546,884.116 185,468,841
Institutional Plus Daily Dividend Option
162,235,389.474 50,830,039,645.693 50,696,026,293.396 296,248,741.771 2,962,487,418
Institutional Plus Weekly Dividend Option
26,337,844.437 365,491,499.821 370,661,551.259 21,167,792.999 211,677,932
Institutional Plus Monthly Dividend Option
6,043,642.284 9,782,490.220 11,657,531.577 4,168,600.927 41,686,009
Description2008-2009
Opening Units Subscription Redemption Closing Units Face ValueRegular Growth Option 23,543,346.007 69,745,617.114 73,836,436.585 19,452,526.536 194,525,264
Regular Daily Dividend Option
168,782,960.991 308,519,010.875 359,348,975.507 117,952,996.359 1,179,529,964
Regular WeeklyDividend Option
31,459,108.549 64,387,773.406 78,662,673.352 17,184,208.603 171,842,086
Institutional Growth Option
17,227,982.504 322,060,275.008 337,661,509.846 1,626,747.666 16,267,477
Institutional DailyDividend Option
139,058,165.422 845,679,347.939 931,958,155.679 52,779,357.682 527,793,577
Institutional Weekly Dividend Option
7,110,328.509 35,907,080.000 32,087,174.714 10,930,233.795 109,302,338
Institutional Monthly Dividend Option
2,187,696.477 5,871,186.049 7,504,101.237 554,781.289 5,547,813
Institutional Plus Growth Option
206,514,921.534 14,440,717,782.241 14,602,240,798.502 44,991,905.273 449,919,053
Institutional Plus Daily Dividend Option
608,832,365.711 46,426,054,733.863 46,872,651,710.100 162,235,389.474 1,622,353,895
Institutional Plus Weekly Dividend Option
18,231,462.834 1,132,765,270.417 1,124,658,888.814 26,337,844.437 263,378,444
Institutional Plus Monthly Dividend Option
3,867,165.460 7,243,189.171 5,066,712.347 6,043,642.284 60,436,423
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.8 Miscellaneous Income represents excess provision of previous year written back which is no longer
required.9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and
standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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20
DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Cash Fund (HCF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: Nil.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Gilt FundAn open-ended gilt Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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2
SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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3
The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHGF seeks to generate reasonable returns through investments in Government Securities (G-Secs) of various maturities. The AMC’s view of interest rate trends and the nature of the plans will be refl ected in the maturities of securities in which the Plans are invested.The net assets of HGF amounted to Rs. 0.42 crores as at March 31, 2010 as compared to Rs. 17.96 crores as at March 31, 2009. Around 96.85% of the net assets were invested in reverse repos / CBLO and 3.15% was invested in net current assets as at March 31, 2010.HGF underperformed its benchmark index as low assets under management for an extended period had constrained ability to actively manage the scheme. However, as active duration management started with some growth in assets over recent years, the scheme has outperformed the benchmark over the last 1 year.
Date of Inception: 05 December, 2003 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception
HSBC Gilt Fund – Growth 7.57 1.16 2.41 2.36
I Sec Composite Index 4.42 8.74 7.24 6.07
Returns data as on March 31, 2010.Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
Trustees’ ReportFor the year ended March 31, 2010
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4
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market Overview
Bond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market Outlook
Financial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-crisis that had led to recession in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvemnet in the economic recovery process with growth in emerging economics picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Gilt Fund 7,396 2 – –
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met,
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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8
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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9
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Gilt Fund (“The Scheme”) as at March 31, 2010, the related Revenue Account for the year ended on that date and the Cash Flow Statement for the year ended on that date which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of unit capital balances as at March 31, 2010 by correspondence with the registrar and transfer agent. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, Revenue Account and Cash Flow Statement referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us,
(i) The Balance Sheet, Revenue Account and Cash Flow Statement together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable, and also give respectively, a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Gilt Fund as at March 31, 2010, its net surplus and its cash fl ows for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon have been prepared in all material respects 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 as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC GILT FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 38.03 1,952.68
2 Reserves & Surplus2.1 Unit Premium Reserves (26.34) 22.24 2.2 Unrealised Appreciation Reserve – – 2.3 Other Reserves 30.56 (179.28)
3 Loans & Borrowings – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 0.98 15.88
TOTAL 43.23 1,811.52
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 – – 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 – 1,269.30 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 – 1,269.30
2 Deposits – –
3 Other Current Assets3.1 Cash & Bank Balance 2.31 2.30 3.2 CBLO / Reverse Repo Lending 40.91 476.92 3.3 Others 0.01 63.00
4 Deferred Revenue Expenditure – – (to the extent not written off)
TOTAL 43.23 1,811.52
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC GILT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – – 1.2 Interest 25.78 458.99 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments – – 1.5 Realised Gains / (Losses) on External sale / redemption of
investments(3.42) (580.67)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income – –
(A) 22.36 (121.68)
2 EXPENSES2.1 Management fees 1.77 22.83 2.2 Service tax on Management fees – – 2.3 Transfer agents fees and expenses 0.41 6.07 2.4 Custodian fees – 0.57 2.5 Trusteeship fees 0.01 0.03 2.6 Commission to Agents * – – 2.7 Marketing & Distribution expenses 1.62 24.85 2.8 Audit fees 0.12 0.05 2.9 Other operating expenses 0.02 0.55
(B) 3.95 54.95
3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 18.41 (176.63)
4 Change in Unrealised Depreciation in value of investments (D) (48.48) 48.48
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 66.89 (225.11)
6 Change in unrealised appreciation inthe value of investments (F) – –
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 66.89 (225.11)
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve
– –
7.3 Add / (Less): Equalisation 142.95 354.28 7.4 Transfer from Reserve Fund – 0.02 7.5 Transfer from Unit Premium Reserve – – 8 TOTAL 209.84 129.19
9 Dividend Appropriation9.1 Income Distributed during the year – 267.69 9.2 Tax on income distributed during the year – 47.85
10 Retained Surplus / (Defi cit)carried forward to Balance Sheet
209.84 (186.35)
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC GILT FUNDCurrent
Year endedMarch 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 10.7725 11.6677
Monthly Dividend Option 9.4995 10.7428
Weekly Dividend Option 8.8405 –
High
Regular Growth Option 11.5879 12.2999
Monthly Dividend Option 10.2186 10.8465
Weekly Dividend Option 9.5097 10.1128
Low
Regular Growth Option 10.8152 10.6929
Monthly Dividend Option 9.5372 9.4294
Weekly Dividend Option 8.9398 8.7753
End
Regular Growth Option 11.5879 10.7725
Monthly Dividend Option 10.2186 9.4995
Weekly Dividend Option 9.5097 8.8405
2. Closing Assets Under Management (Rs. in Lakhs)
End 42.24 1,796
Average (AAuM)1 522.75 7,314
3. Gross income as % of AAuM2 4.28% -1.66%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 0.75% 0.75%
Monthly Dividend Option 0.75% 0.75%
Weekly Dividend Option 0.75% 0.75%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.34% 0.31%
Monthly Dividend Option 0.34% 0.31%
Weekly Dividend Option 0.34% 0.31%
5. Net Income as a percentage of AAuM3 3.52% -2.41%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Monthly Dividend Option – 0.4071
Weekly Dividend Option – 0.1046
Key Statistics for the year ended March 31, 2010
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Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC GILT FUNDCurrent
Year endedMarch 31, 2010
PreviousYear ended
March 31, 2009
Corporate
Monthly Dividend Option – 0.1278
Weekly Dividend Option – 0.0974
8. Returns (%):
a. Last One Year
Scheme
Monthly Dividend Option 7.5699 (8.1709)
Regular Growth Option 7.5693 (7.6725)
Weekly Dividend Option 7.5697 –
Benchmark
I-Sec Composite Index 4.4200 12.8300
b. Since Inception
Scheme
Monthly Dividend Option 2.1060 1.1110
Regular Growth Option 2.3581 1.4077
Weekly Dividend Option (2.6716) (22.6382)
Benchmark
I-Sec Composite Index 6.0700 6.3800 1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.
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HSBC GILT 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 March 31, 2010 is NIL. Open Positions of derivatives as of March 31, 2009 end is NIL.
1.3. Investments in Associates and Group Companies (Rupees)
Issuer Instrument Type
Amount Aggregate Investments by
all schemes
Amount Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Limited
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2010 and March 31, 2009 are NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 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
2010 2009
Government of India Securities
– Appreciation – – – –
– Depreciation – – 4,848,166 2.70%
1.7. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 187,184) and sold during the fi nancial year 2009-2010 is Rs. 829,684,134 and Rs. 961,307,513 respectively being 1587.15% and 1838.94% of the average daily net assets.
The aggregate value of investments securities purchased (excluding accretion of discount of Rs.NIL) and sold during the fi nancial year 2008-2009 is Rs. 1,184,011,556 and Rs. 994,165,715 respectively being 161.74% and 135.80% of the average daily net assets.
1.8. Non-Traded securities in the portfolios as at March 31, 2010 and March 31, 2009 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 2008-09, 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. 23.
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
Commissionpaid[Rs.]
% of Total commission paid
by the Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009-2010 0.43 6.64 11,295 7.50
HSBC InvestDirect Securities (India) Limited
Associate 2009-2010 – – 564 0.37
Notes to Accounts – Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 53.67 35.34 135,100 1.73
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 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets).
Name of Scheme No. of holders % Holding No. of holders % Holding
2010 2009
HSBC Gilt Fund – – 1 31.12%
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description2009-2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
2,554,537.361 93,544.839 2,371,930.759 276,151.441 2,761,513
Monthly Dividend Option
3,037,397.103 448,522.876 3,437,292.390 48,627.589 486,275
Weekly Dividend Option
13,934,870.718 6,553,849.420 20,433,246.964 55,473.174 554,731
Description2008-2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth Option
425,297.259 30,587,968.620 28,458,728.518 2,554,537.361 25,545,374
Monthly Dividend Option
449,571.839 133,376,429.531 130,788,604.267 3,037,397.103 30,373,971
Weekly Dividend Option
– 455,468,300.800 441,533,430.082 13,934,870.718 139,348,707
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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, 2010
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Gilt Fund (HGF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Exit: 0.5% if redeemed / switched out with 6 months from date of investment.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Flexi Debt FundAn open ended debt Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
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 SchemeHFDF seeks to deliver returns in the form of interest income and capital gains, along with high liquidity, commensurate with the current view on the markets and the interest rate cycle, through active investment in debt and money market instruments.
The net assets of HFDF amounted to Rs. 102.42 crores as at March 31, 2010 as compared to Rs. 316.84 crores as at March 31, 2009. Around 96.32% of the net assets were invested in debt and money market instruments, 4.10% were invested in net current assets and (0.42)% was invested in reverse repos / CBLO as at March 31, 2010.
HFDF has outperformed its benchmark index through relatively active management of duration.
Date of Inception: 05 October, 2007 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Flexi Debt Fund – Growth 6.90 9.25
CRISIL Composite Bond Fund Index 5.38 6.50
Returns data as on March 31, 2010.
Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
Trustees’ ReportFor the year ended March 31, 2010
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In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure, infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed Redemptions
Amount (Rs.)
No. of Investors
Amount (Rs.)
No. of Investors
HSBC Flexi Debt Fund 17 1 – –
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:
Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
III A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAI
July 20, 2010
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Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Flexi Debt Fund (The “Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended on that date both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Flexi Debt Fund as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-
Vivek PrasadPartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC FLEXI DEBT FUND
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 9,307.33 29,868.43
2 Reserves & Surplus2.1 Unit Premium Reserves (58.18) 1,014.82 2.2 Unrealised Appreciation Reserve 6.00 141.50 2.3 Other Reserves 992.29 659.15
3 Loans & Borrowings – – 4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – 4.2 Other Current Liabilities & Provisions 53.62 428.67
TOTAL 10,301.06 32,112.57
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 1,597.55 17,391.36 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 9.89 206.94 1.3.5 Securitised Debt securities – – 1.4 Government Securities – 11,625.91 1.5 Treasury Bills – – 1.6 Commercial Paper – – 1.7 Certifi cate of Deposits 8,257.15 – 1.8 Bill Rediscounting – – 1.9 Units of Domestic Mutual Fund – – 1.10 Foreign Securities – –
Total Investments 9,864.59 29,224.21
2 Deposits – –
3 Other Current Assets3.1 Cash & Bank Balance 6.46 8.00 3.2 CBLO / Reverse Repo Lending 419.91 1,488.59 3.3 Others 10.10 1,391.77 4 Deferred Revenue Expenditure – –
(to the extent not written off)
TOTAL 10,301.06 32,112.57
Notes to Accounts – Annexure I
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Rs. in Lakhs
HSBC FLEXI DEBT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – – 1.2 Interest 859.56 1,378.18 1.3 Realised Gain / (Loss) on Foreign Exchange Transactions – – 1.4 Realised Gains / (Losses) on Interscheme sale of investments (28.31) 1.5 Realised Gains / (Losses) on External sale / redemption of
investments848.63 (242.09)
1.6 Realised Gains / (Losses) on Derivative Transactions – – 1.7 Other Income 0.31 –
(A) 1,708.50 1,107.78
2 EXPENSES2.1 Management fees 117.66 103.23 2.2 Transfer agents fees and expenses 8.56 9.58 2.3 Custodian fees 4.27 2.14 2.4 Trusteeship fees 0.25 0.07 2.5 Commission to Agents* – – 2.6 Marketing & Distribution expenses 122.76 140.36 2.7 Audit fees 0.50 1.00 2.8 Other operating expenses 0.59 1.61
(B) 254.59 257.99
3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 1,453.91 849.79
4 Change in Unrealised Depreciation in value of investments (D) (391.46) 301.81
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1,845.37 547.98
6 Change in unrealised appreciation inthe value of investments (F) (135.50) 128.82
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,709.87 676.80
7.1 Add: Balance transfer fromUnrealised Appreciation Reserve – –
7.2 Less: Balance transfer toUnrealised Appreciation Reserve (135.50) 128.82
7.3 Add / (Less): Equalisation (876.61) 821.97 7.4 Transfer from Reserve Fund 13.65 108.28 7.5 Transfer from Unit Premium Reserve – 6.62 8 TOTAL 982.41 1,484.85 9 Dividend Appropriation9.1 Income Distributed during the year 546.20 876.79 9.2 Tax on income distributed during the year 89.41 170.83 10 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 346.80 437.23
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
Abridged Revenue Account for the year ended March 31, 2010
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HSBC FLEXI DEBT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 11.6483 10.4155
Regular Fortnightly Dividend Option 10.3662 10.0315
Regular Monthly Dividend Option 10.2553 10.0065
Regular Quarterly Dividend Option 10.7885 –
Regular Half Yearly Dividend Option 9.8005 –
Institutional Growth Option 11.7088 10.4333
Institutional Fortnightly Dividend Option 9.7535 10.0302
Institutional Monthly Dividend Option 10.5214 10.0706
Institutional Quarterly Dividend Option 10.6734 –
Institutional Half Yearly Dividend Option – –
High
Regular Growth Option 12.4521 12.6161
Regular Fortnightly Dividend Option 10.9247 11.2275
Regular Monthly Dividend Option 10.8078 11.1826
Regular Quarterly Dividend Option 11.3698 11.7939
Regular Half Yearly Dividend Option 10.3551 10.6149
Institutional Growth Option 12.5608 12.6714
Institutional Fortnightly Dividend Option 10.2659 10.7002
Institutional Monthly Dividend Option 11.0906 11.4083
Institutional Quarterly Dividend Option 11.2508 11.6816
Institutional Half Yearly Dividend Option – 10.1428
Low
Regular Growth Option 11.7127 10.4134
Regular Fortnightly Dividend Option 10.4236 9.9126
Regular Monthly Dividend Option 10.3033 9.9361
Regular Quarterly Dividend Option 10.8482 9.9886
Regular Half Yearly Dividend Option 9.8548 9.6569
Institutional Growth Option 11.7739 10.4315
Institutional Fortnightly Dividend Option 9.8076 9.6087
Institutional Monthly Dividend Option 10.5177 10.0689
Institutional Quarterly Dividend Option 10.7327 9.8912
Institutional Half Yearly Dividend Option – 9.9835
Key Statistics for the year ended March 31, 2010
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13
HSBC FLEXI DEBT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
End
Regular Growth Option 12.4521 11.6483
Regular Fortnightly Dividend Option 10.7340 10.3662
Regular Monthly Dividend Option 10.3129 10.2553
Regular Quarterly Dividend Option 11.1163 10.7885
Regular Half Yearly Dividend Option 10.2541 9.8005
Institutional Growth Option 12.5608 11.7088
Institutional Fortnightly Dividend Option 10.0592 9.7535
Institutional Monthly Dividend Option 10.5441 10.5214
Institutional Quarterly Dividend Option 10.9411 10.6734
Institutional Half Yearly Dividend Option – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 10,247 31,684
Average (AAuM)1 16,219 16,822
3. Gross income as % of AAuM2 10.53% 6.59%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.86% 1.77%
Regular Fortnightly Dividend Option 1.86% 1.77%
Regular Monthly Dividend Option 1.86% 1.77%
Regular Quarterly Dividend Option 1.86% 1.77%
Regular Half Yearly Dividend Option 1.86% 1.77%
Institutional Growth Option 1.51% 0.72%
Institutional Fortnightly Dividend Option 1.51% 0.72%
Institutional Monthly Dividend Option 1.51% 0.72%
Institutional Quarterly Dividend Option 1.51% 0.72%
Institutional Half Yearly Dividend Option 1.51% 0.72%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 0.73% 0.61%
Regular Fortnightly Dividend Option 0.73% 0.61%
Regular Monthly Dividend Option 0.73% 0.61%
Regular Quarterly Dividend Option 0.73% 0.61%
Regular Half Yearly Dividend Option 0.73% 0.61%
Institutional Growth Option 0.73% 0.61%
Institutional Fortnightly Dividend Option 0.73% 0.61%
Key Statistics for the year ended March 31, 2010 (Contd...)
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14
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC FLEXI DEBT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Monthly Dividend Option 0.73% 0.61%
Institutional Quarterly Dividend Option 0.73% 0.01
Institutional Half Yearly Dividend Option 0.73% 0.01
5. Net Income as a percentage of AAuM3 8.96% 5.05%
6. Portfolio turnover ratio4 – –
7. Total Dividend per unit distributed during the year (planwise)
Retail
Regular Fortnightly Dividend Option 0.3027 0.7083
Regular Monthly Dividend Option 0.5592 0.8004
Regular Quarterly Dividend Option 0.3591 0.3217
Regular Half Yearly Dividend Option 0.1927 –
Institutional Fortnightly Dividend Option 0.3482 1.2836
Institutional Monthly Dividend Option 0.6357 0.6767
Institutional Quarterly Dividend Option 0.4380 0.3392
Institutional Half Yearly Dividend Option – –
Corporate
Regular Fortnightly Dividend Option 0.2817 0.5265
Regular Monthly Dividend Option 0.5205 0.7451
Regular Quarterly Dividend Option 0.3343 0.1794
Regular Half Yearly Dividend Option 0.1794 –
Institutional Fortnightly Dividend Option 0.3241 1.1947
Institutional Monthly Dividend Option 0.5917 0.6299
Institutional Quarterly Dividend Option 0.4076 0.1957
Institutional Half Yearly Dividend Option – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 6.9006 11.8362
Regular Fortnightly Dividend Option 6.4777 10.7470
Regular Monthly Dividend Option 6.0895 10.6170
Regular Quarterly Dividend Option 6.4166 –
Regular Half Yearly Dividend Option 6.6180 –
Institutional Growth Option 7.2766 12.2253
Institutional Fortnightly Dividend Option 6.7516 10.2613
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HSBC FLEXI DEBT FUND
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Monthly Dividend Option 6.3702 11.2484
Institutional Quarterly Dividend Option 6.6757 –
Institutional Half Yearly Dividend Option – –
Benchmark
CRISIL Composite Bond Fund Index 5.3800 7.2400
b. Since Inception
Scheme
Regular Growth 9.2478 10.8635
Regular Fortnightly Dividend Option 8.2764 9.5093
Regular Monthly Dividend Option 8.2167 9.6786
Regular Quarterly Dividend Option 8.9021 11.4951
Regular Half Yearly Dividend Option 3.4705 (6.9350)
Institutional growth 9.6314 11.2524
Institutional Fortnightly Dividend Option 8.3344 9.4175
Institutional Monthly Dividend Option 8.6806 10.2706
Institutional Quarterly Dividend Option 10.4923 17.8091
Institutional Half Yearly Dividend Option – 74.4600
Benchmark
CRISIL Composite Bond Fund Index 6.5000 7.1800
1 AAuM = Average daily net assets2 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, 2010 (Contd...)
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HSBC FLEXI DEBT 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 a % to Net Assets as of year ended March 31, 2010 is Nil. Open Positions of derivatives as a % to Net Assets as of year ended March 31, 2009 is NIL.
1.3. Investments made in Associates and Group Companies:
Issuer Instrument Type
Amount(Rs.)
Aggregate Investments
by all schemes
Amount(Rs.)
Aggregate Investments
by all schemes
2010 2009
The Hongkong & Shanghai Banking Corporation Ltd.
Fixed deposits – 1,018,000,000 – 43,000,000
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of the years ended March 31, 2010 and March 31, 2009 is NIL.
1.5. NPAs as at years ended March 31, 2010 and March 31, 2009 is NIL.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year 2009-10 and percentages to net assets.
Security Category
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non-Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 592,346 0.0578% 19,512,641 0.6159%
– Depreciation – – 5,741,501 0.1812%
Non-Convertible Debentures and Bonds Privately Placed
– Appreciation 7,612 0.0007% 403,039 0.0127%
– Depreciation – – 24,486 0.0008%
Government of India Securities
– Appreciation – – – –
– Depreciation – – 39,145,803 1.2355%
1.7 The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 13,501,279) and sold during the fi nancial year 2009-2010 is Rs. 19,227,187,601 andRs. 21,287,109,534 respectively being 1185.45% and 1312.46% of the average daily net assets.
The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 7,919,570) and sold during the fi nancial year 2008-2009 is Rs. 15,365,196,103 andRs. 14,298,039,929 respectively being 869.38% (annualized) and 809.00% (annualized) of the average daily net assets.
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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17
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(Rs.)
% to Net Assets
Fair Value(Rs.)
% to Net Assets
2010 2009Equities – – – –Debt Instruments 160,743,327 15.6862% 1,057,584,131 33.3792%Money market Instruments
825,716,153 80.5778% – –
Total 986,459,480 96.2639% 1,057,584,131 33.3792%
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended, for the year ended March 31, 2010 is as under :
During the year 2009-10, 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. 1,680.
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 2009 - 2010 20.83 43.85 7,355,753 54.76
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.30 0.63 293,137 2.18
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.]
(on accrual basis)
% of Total commission paid by the
Fund
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 231.60 7.80 4,721,864 11.66
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 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets).
Name of Scheme No. of holders % Holding No. of holders % Holding
2010 2009
HSBC Flexi Debt Fund 2 57.03% – –
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
2009-2010Description Opening Units Subscription Redemption Closing Units Face ValueRegular Growth 11,320,074.613 5,141,823.875 11,635,454.773 4,826,443.715 48,264,437
Regular Monthly Dividend 22,377,892.041 2,013,779.622 21,266,996.303 3,124,675.360 31,246,753
Regular Fortnightly Dividend
2,851,879.905 503,018.935 2,637,996.105 716,902.735 7,169,028
Regular QuarterlyDividend Option
6,647,539.396 1,500,941.400 4,949,894.749 3,198,586.047 31,985,860
Regular Half Yearly Dividend Option
197,382.137 1,341,015.203 197,382.137 1,341,015.203 13,410,152
Institutional Growth 77,479,560.708 9,205,154.887 64,201,243.320 22,483,472.275 224,834,723
Institutional Monthly Dividend
61,694,176.890 15,784,931.042 65,717,185.349 11,761,922.583 117,619,226
Institutional Fortnightly Dividend
99,822,416.031 2,048,808.411 67,689,414.002 34,181,810.440 341,818,104
Institutional Quarterly Dividend Option
16,293,401.195 4,653,040.877 9,508,005.882 11,438,436.190 114,384,362
Institutional Half Yearly Dividend Option
– – – – –
2008 - 2009Description Opening Units Subscription Redemption Closing Units Face ValueRegular Growth 635,935.451 12,591,260.792 1,907,121.630 11,320,074.613 113,200,746
Regular Monthly Dividend 6,654,260.050 23,117,440.320 7,393,808.329 22,377,892.041 223,778,920
Regular Fortnightly Dividend
3,972,727.223 3,894,517.663 5,015,364.981 2,851,879.905 28,518,799
Regular Quarterly Dividend Option
– 7,180,810.305 533,270.909 6,647,539.396 66,475,394
Regular Half Yearly Dividend Option
– 197,382.137 – 197,382.137 1,973,821
Institutional Growth 69,174,404.939 146,234,661.989 137,929,506.220 77,479,560.708 774,795,607
Institutional Monthly Dividend
7,868,437.619 116,478,386.310 62,652,647.039 61,694,176.890 616,941,769
Institutional Fortnightly Dividend
143,490,168.848 229,828,000.535 273,495,753.352 99,822,416.031 998,224,160
Institutional Quarterly Dividend Option
– 21,443,255.956 5,149,854.761 16,293,401.195 162,934,012
Institutional Half Yearly Dividend Option
– 2,819,475.063 2,819,475.063 – –
5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.6 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.8 Other income represents excess expense provision of previous year written back as the same are no
longer payable.9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and
standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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.
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19
DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Flexi Debt Fund (HFDF) is the name of the Scheme and does not in any manner indicate the quality of the Scheme or its future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):Regular & Institutional Options -
Exit: 0.25% if redeemed / switched out within 3 months from the date of investment.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
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20
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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Abridged Annual Report 2009 - 2010
HSBC Fixed Term SeriesA close-ended income Scheme
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Dear Investor,
We thank you for investing with HSBC Mutual Fund.
We are pleased to inform you that HSBC MIP – Savings Plan has been rated CPR1 by CRISIL, in the Open end MIP Aggressive Fund category, among 21 schemes, for its 2 year performance, ended March 31, 2010 (Monthly income is not assured and is subject to availability of distributable surplus). We have also been rated the top performing fund manager for a one year period, on the Employees’ Provident Fund Organisation (EPFO) mandate, which is one of the largest provident funds in India, amongst the 4 fund managers who have been provided with this mandate. (Past performance may or may not be sustained in the future and is no guarantee of future results).
At the global level, HSBC Global Asset Management continues to be one of the leading players in emerging markets with assets of USD 90 bn as at December 31, 2009. The Group continues to be committed to our asset management business in India which is a core market for the Group.
HSBC Asset Management (India) Private Limited through its mutual fund business as well as Portfolio Management Services (PMS) business (including EPFO money deployed till date) manages assets of about Rs. 40,161 Crores as at June 30, 2010.
HSBC Asset Management (India) also offers Portfolio Management Services (PMS) which aims to provide long-term wealth creation for high net-worth individuals through active portfolio management and manages mandates for large institutional clients.
The core to our winning strategy is our endeavour to deliver consistent performance over the medium to long term for our investors in a risk controlled environment and aim for consistent wealth creation under varying market conditions.
We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and look forward to your continued investments in HSBC Mutual Fund.
Yours sincerely,
VikramaadityaChief Executive Offi cerHSBC Asset Management (India) Private Limited
* Please refer Ranking methodology and disclaimers mentioned at the end of the Abridged Annual Report for the year ended March 31, 2010.
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SPONSOR
HSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.
TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.
ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.
CUSTODIANJP Morgan Chase Bank N.A.Corp. & Regd. Offi ce: J.P. Morgan Tower, C.T.S. No. 5435, Off CST Road,Kalina, Santacruz (East), Mumbai 400 098.
AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai – 400 028.
LEGAL ADVISORSBharucha & PartnersHague Building, Sprott Road, Ballard Estate, Mumbai – 400 001
REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai – 600 002.
BOARD OF TRUSTEES
Mr. N. P. Gidwani – Chairman
Dr. Rudolf Apenbrink
Mr. Nasser Munjee
Mr. Manu Tandon
Mr. Mehli Mistri
Mr. Dilip J. Thakkar
BOARD OF DIRECTORS
Ms. Naina Lal Kidwai – Chairman
Mr. Ayaz Ebrahim
Mr. S. P. Mustafa
Mr. Ashok Jha*
Ms. Kishori J. Udeshi
Mr. Vikramaaditya – Chief Executive Offi cer
* Mr. Ashok Jha has been appointed as a Director with effect from August 20, 2009 andMr. Vithal Palekar has resigned as a Director with effect from August 10, 2009.
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The Trustees present the eighth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2010.
1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES
a) Operations and Performance of the Schemes
HSBC Fixed Term Series (HFTS) – a close-ended Income SchemeHFTS seeks generation of returns by investing in a portfolio of fi xed income instruments normally maturing in line with the time profi le of the respective plan(s). The Plans which matured during the year were HSBC Fixed Term Series 41, HSBC Fixed Term Series 42, HSBC Fixed Term Series 44, HSBC Fixed Term Series 45, HSBC Fixed Term Series 46, HSBC Fixed Term Series 49, HSBC Fixed Term Series 50, HSBC Fixed Term Series 52, HSBC Fixed Term Series 53, HSBC Fixed Term Series 54, HSBC Fixed Term Series 56, HSBC Fixed Term Series 57, HSBC Fixed Term Series 59, HSBC Fixed Term Series 61, HSBC Fixed Term Series 62, HSBC Fixed Term Series 63.
The Fixed Term Series as on 31 March, 2010 are as follows:
Scheme Name Date of Launch (NFO Open date)
Tenure Date of Maturity
Net Assets as on 31 March, 2010(in Rs. Crores)
HSBC Fixed Term Series 30 03-May-2007 3 years 10-June-2010 91.31
HSBC Fixed Term Series 66 18-September-2008 18 months 05-April-2010 69.15
Date of Inception : 11 June, 2007 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Fixed Term Series 30 – Regular - Growth 11.58 9.64
CRISIL Short Term Bond Fund Index 5.88 7.93
Returns data as on March 31, 2010. Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
Date of Inception : 03 October, 2008 Compounded Annualized Returns (%)
Scheme & Benchmark 1 Year Since Inception
HSBC Fixed Term Series 66 – Regular - Growth 7.62 8.90
CRISIL Short Term Bond Fund Index 5.88 8.67
Returns data as on March 31, 2010. Past performance may or may not be sustained in future. ‘Since inception’ returns are calculated on Rs. 10 invested at inception. Calculations are based on Growth NAVs.
b) Market Overview & Outlook
MARKET OVERVIEW(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OverviewThe fi nancial year ended 31st March, 2010 turned out to be equally eventful as last year. The main difference between the two being that last year marked lot of negative events for the equity markets globally while FY10 was a very positive one with positive events both at global and domestic level for India. Globally, we saw the fi scal / monetary stimuli by various governments to take the credit crisis head on continue thereby leading to economic improvement in most parts of the world. And domestically, we saw the United Progressive Alliance (UPA) sweeping victory in the central elections thereby ensuring stability, policy continuity, and a great degree of space to implement reforms. With the fragmented nature of the opposition leaving it too weak to deter the reform process, everyone expected to see a boost to investment growth and policy initiatives thereby leading to an upward bias to growth. The second budget from the present government continues to underpin on its key focus areas of infrastructure and social sector spending.
For the fi nancial year 2009-2010, BSE SENSEX was up by 80.5%. The BSE Midcap was up by 130.2% and the broader indices like BSE 200, 96.3% and BSE 500, 99.8% also refl ected the sharp up move across the markets.
Trustees’ ReportFor the year ended March 31, 2010
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Economic data points coming out globally remained positive thereby indicating the sustainability of the global recovery process. This led to improving risk appetite globally and investors buying most of the riskier asset classes hence lot of money fl owed into the emerging markets and India benefi ted as it was one of the few economies which grew very well even in the downturn thereby indicating the broad strength of the country. The second half of last year saw improvement in most of the economic indicators leading to good performance by equity markets globally. But over the last couple of months, we are seeing investor focus globally shift to monetary and fi scal tightening by the Central Bank’s and Government’s around the world. And hence there is a fear that this might de-rail the recovery process what we are witnessing over the last few months thereby leading to correction in most of the asset classes like commodities, equities around the world.
In another important event, we saw S&P revise its outlook on India’s long-term sovereign credit rating to stable from negative. It affi rmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook upgrade driven by consolidation in fi scal defi cit and strong growth.
Debt Market OverviewBond yields rose for most of the fi nancial year 2009-2010 as market was hit by a huge borrowing calendar of the government. This was a consequence of the fi scal expansion that was undertaken since 2008 to enhance public expenditure in the face of the global crisis that had hit the economy. Supply fatigue soon set into the market, leading to a gradual rise in bond yields over the year. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. 10 year benchmark sovereign yield rose approximately 80 bps over the fi scal.
System liquidity remained abundant for most of the year on the back of aggressive cuts in Cash Reserve Ratio (CRR) undertaken by the RBI between October 2008 – January 2009. Liquidity was also aided by the open market purchases of government bonds by the RBI done between December 2008 – September 2009. Consequently, system liquidity as measured by excess balances parked by banks under the RBI liquidity adjustment facility (LAF) window averaged approximately INR 100,000 crores during the fi scal. Consequently, short end rates rallied by 150 – 200 bps over the fi scal. Sentiment on short end rates was further aided by the RBI’s stated intention of a ‘calibrated’ exit from the monetary policy accommodation put in place late 2008. It hiked CRR by 75 bps in the policy review in January 2010 and repo, reverse repo rates by 25 bps each in March 2010.
MARKET OUTLOOK(as furnished by HSBC Asset Management (India) Private Limited)
Equity Market OutlookFinancial Year (FY) 2009-10 was a year marked by most of the governments and Central banks around their world doing their best to enable the economies to come out of the sub-prime crisis that had led to credit market freezing and recessionary conditions in developed nations and slowdown in emerging economies. And these efforts led to slow and gradual improvement in the economic recovery process with growth in emerging economies picking up sharply even though the developed economies continued to improve slowly. But over the last few months, we saw the Greek crisis become bigger which eventually culminated in a ~1 trillion Euros headline package by the European Union and International Monetary Fund to support fi scally strained Euro Area member countries, all of which comes with severe austerity measures, has once again brought to the fore issues regarding defi cits and debt sustainability. This led to enormous uncertainty and nervousness in all the asset markets globally thereby leading to contraction in the investors risk appetite. So now apart from concerns on China’s overheated property market focus shifted to the Euro region uncertainty. So overall the next year is going to be very crucial with respect to the direction of the economic environment amidst all this uncertainty.
In spite of the uncertainty in other parts of the globe, India continued to do very well with the GDP for FY10 growing at 7.4%. Agriculture posted below trend growth rate of 0.2% due to bad monsoons and industry grew 9.3% with services growing by 8.5%. IIP grew by a strong 10.4% versus 2.7% growth in FY09. India remains a supply-constrained and capital-starved economy with signifi cant latent unmet demand. GDP growth is likely to accelerate to 8.0% and 8.5% in FY11 and FY12, respectively. Robust domestic demand, driven by private consumption and investment, may be complemented by improving external demand. The key to track will be the strength of the upturn in the investment cycle. Even though there are concerns on monetary tightening, we feel RBI may not derail the growth upturn and adopt a more gradual tightening process keeping in view the recovery is still fragile. We believe the RBI managed the economic downturn exceptionally well, and is doing the right things to position growth at an elevated level without either fuelling a sustained rise in infl ation or pushing the banks to lend more aggressively. Fiscal consolidation will be credible as the government has little choice but to begin the much-needed process of fi scal consolidation. Overall, the broad themes that are driving domestic growth viz. capital expenditure,
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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5
infrastructure building and domestic consumption are still intact. The key concerns at this point stem from the uncertainty in the developed economies and any fallout of the same on India and the domestic infl ations which seems to be very high.
The next fi nancial year 2010-2011 is likely to be one where specifi c sectors and company performances may be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. Given that markets valuations have come off the trough seen in early March 2009 with the markets now trading at valuations of around 15-16X FY2011 earnings, in the near term we expect markets to enter a phase of consolidation.
Debt Market OutlookThe interest rate view for the year ahead is set against the following backdrop:
l Domestic non agricultural growth has rebounded sharply led by manufacturing over last 2 quarters. While this has been helped by the fi scal and monetary stimulus in place since early last year, the last few months are showing defi nitive signs of pick up in private sector momentum as well.
l Infl ation has surged largely on the back of rise in food prices. However, with a manufacturing rebound underway demand side pressures are rapidly building. Recent fall in commodity prices, if sustained, along with expectation of normal monsoons domestically may be incrementally benefi cial for supply side infl ation.
l Even after 2 rate hikes of 25 bps each in March and April 2010, current real policy rates of the Reserve Bank of India (RBI) are signifi cantly negative. However, the central bank is showing a decided bias towards ‘calibrated’ rate hikes.
l The recent European crisis has led to weakness in asset markets and a drop in commodity prices globally. Even though domestic rebound remains strong, international linkages from trade, fi nance, and portfolio fl ows have made policy makers more watchful in the near term.
l Gross market borrowing for FY 2010-11 is pegged at INR 4,57,000 crores versus INR 4,51,000 crores in 2009-10. A few demand-supply dynamics for government securities are as follows:
l Demand for government bonds may not be as strong in the year ahead given rising infl ation, lower liquidity, expectations of policy rate rise and relatively better credit growth. However, demand may improve if the European situation were to cause a signifi cant change in market’s growth versus infl ation expectations.
l Absence of RBI OMO and MSS de-sequestering imply that net supply of government securities to the market will be higher than last year by almost INR 1,00,000 crores.
l 3G + BWA auctions may result in more than 3 times budgeted proceeds for GoI. While prospects of additional expenditures (particularly on subsidy) remain, there are tentative expectations of some reduction in second half borrowing.
Overall, while suffi cient risks remain to bond yields, some factors as discussed above have turned bond positive. These, if sustained, could ensure against a very sharp rise in yields thus providing opportunities for select duration plays. Moreover, if market were to get more comfort that the government’s fi scal defi cit would progressively reduce in the year ahead, some of the so-called ‘supply premium’ that has been built on the curve since last year may begin to unwind thus leading to softening of yields later in the year. Also, given that system liquidity is expected to progressively reduce going into the October – December 2009 quarter, we expect the curve to start to fl atten thereon.
2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANYa) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The
Sponsor is the Settlor 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 is a member of the HSBC Group, one of the largest banking and fi nancial services organisations, in the world. Headquartered in London, HSBC operates through long-established businesses in fi ve regions: Europe, Asia-Pacifi c region, Middle East, America and Africa. Through its global network of some 10,000 offi ces in 83 countries and territories, HSBC provides a comprehensive range of fi nancial services to personal, commercial, corporate, institutional and investment and private banking clients.
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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6
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) and is also a category I merchant banker registered with Securities and Exchange Board of India.
HSCI holds 100% of the paid-up equity share capital of the AMC.
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 (the 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 unitholders. 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 thereunder 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 314, D. 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. 9 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 SCHEMEThe investment objective of the Scheme 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 and Exchange Board of India (Mutual Funds) Regulations, 1996.
5. UNCLAIMED DIVIDENDS & REDEMPTIONS
Summary of number of Investors & corresponding amount as on 31 March 2010
SchemeUnclaimed Dividends Unclaimed RedemptionsAmount
(Rs.)No. of
InvestorsAmount
(Rs.)No. of
InvestorsHSBC Fixed Term Series – 30 5,738 4 – –
HSBC Fixed Term Series – 66 – – – –
6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 206 locations. In addition to the offi ces of the Registrar & Transfer agents, the Asset Management Company has Investor Service Centres in 14 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore,
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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7
Lucknow and Vadodara. With a view to enhancing customer convenience, the Asset Management Company has extended the facility of crediting investor bank accounts directly by way of NEFT / RTGS (for credit of redemption and dividend proceeds). Dividend payouts are normally done within 5 working days from the record date in all schemes. The internal standards on redemption payouts have been consistently met, with very few exceptions. The number of locations for the ECS Auto Debit facility for investments through Systematic Investment Plan also increased to about 87 by March 2010.
On the distribution front, the number of empanelled distributors increased from 8632 as on 31 March, 2009 to 8859 as of 31 March, 2010. During the year, the Asset Management Company 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 32 (Angel Capital & Dept Market Ltd, Bajaj Capital Ltd, Bonanza Portfolio Ltd., CITIBANK NA, Citigroup Wealth Advisors India Private Limited, DawnayDay AV India Advisors Pvt.Ltd., HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., HSBC Corporate Investment Solution Services, ICICI Securities Limited, iFAST Financial India Pvt.Ltd., INDIA INFOLINE LTD., IndusInd Bank Limited, ING Vysya Bank Ltd., Karvy Stock Broking Ltd., Kotak Mahindra Bank Limited, Kotak Securities Limited, Motilal Oswal Securities Limited, NJ India Invest Pvt. Ltd., Reliance Securities Limited, Religare Securities Limited, RR Investors Capital Services Pvt. Ltd., SBICAP Securities Ltd., Sharekhan Limited, Shriram Insight Share Brokers Ltd., SMC Global Securities Limited, Standard Chartered - STCI Capital Markets Ltd., Standard Chartered Bank, Tom Distribution Services Ltd., Yes Bank Limited, IDBI Capital Market Services Ltd., JRG Securities Limited).
Call centre operations have been extended to cover the entire country. The Asset Management Company has outsourced certain back offi ce services including call Centre Services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE).
7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during 2009-2010 are as follows:Total Number of Folios: 5,22,334
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 Dividend on Units
1 61 62 0 0 0 0 0 0 0 0
I B Interest on delayed payment of Dividend
0 0 0 0 0 0 0 0 0 0 0
I C Redemption Proceeds
2 57 59 0 0 0 0 0 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
0 101 101 0 0 0 0 0 0 0 0
II B Discrepancy in Statement of Account
0 0 0 0 0 0 0 0 0 0 0
II C Non receipt of Annual Report/Abridged Summary
0 0 0 0 0 0 0 0 0 0 0
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
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8
Trustees’ ReportFor the year ended March 31, 2010 (Contd...)
Comp-laintCode
Type of complaint #
(a) No. of complaints
pending at the
beginning of the year
(b) No. of complaints
received during the
year
Action on (a) and (b)
Resolved Non Actio-nable*
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 A Wrong Switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III B Unauthorised switch between schemes
0 0 0 0 0 0 0 0 0 0 0
III C Deviation from Scheme attributes
0 3 3 0 0 0 0 0 0 0 0
III D Wrong or excess charges/load
0 1 1 0 0 0 0 0 0 0 0
III E Non updation of changes viz. address, PAN, bank details, nomination etc.
0 2 2 0 0 0 0 0 0 0 0
IV Others** 10 1621 1631 0 0 0 0 0 0 0 0TOTAL 13 1846 1859 0 0 0 0 0 0 0 0
Note:# including against its authorised persons/distributors/employees, etc.* Non actionable means the complaint which is pending/outside the scope of the mutual fund**includes correction in investor details
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/-N. P. GidwaniChairman
MUMBAIJuly 20, 2010
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9
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Fixed Term Series 30 (The “Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended on that date both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2010 by correspondence with the custodian and others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Fixed Term Series 30 as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010, and the Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
(iii) The methods used to value non-traded / thinly traded securities as at March 31, 2010, 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 issued by the Securities and Exchange Board of India are fair and reasonable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-Vivek Prasad PartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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10
Auditors’ Report
To the Board of Trustees of
HSBC MUTUAL FUND
1. We have audited the Balance Sheet of HSBC Mutual Fund – HSBC Fixed Term Series 66 (The “Scheme”) as at March 31, 2010 and the related Revenue Account for the year ended on that date both of which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of unit capital balances as at March 31, 2010 by correspondence with the registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. 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. The Balance Sheet and Revenue Account referred to above are in agreement with the books of account of the Scheme.
4. In our opinion and to the best of our information and according to the explanations given to us ;
(i) The Balance Sheet and Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund – HSBC Fixed Term Series 66 as at March 31, 2010 and its net surplus for the year ended on that date.
(ii) The Balance Sheet as at March 31, 2010 and the Revenue Account for the year ended on that date, together with the notes thereon, have been prepared in all material respects 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, as applicable.
For PRICE WATERHOUSEFirm Registration Number: 301112EChartered Accountants
Sd/-Vivek Prasad PartnerMembership No. F-104941
Place : Mumbai Date : July 20, 2010
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11
Abridged Balance Sheet as at March 31, 2010
Rs. in Lakhs
HSBC FIXED TERMSERIES 30
HSBC FIXED TERMSERIES 66
As atMarch 31, 2010
As atMarch 31, 2009
As atMarch 31, 2010
As atMarch 31, 2009
LIABILITIES
1 Unit Capital 7,354.45 7,693.37 6,159.94 6,259.57
2 Reserves & Surplus2.1 Unit Premium Reserves (248.72) (170.35) (14.00) (2.76)2.2 Unrealised Appreciation Reserve 69.58 7.46 – 40.372.3 Other Reserves 1,953.26 1,177.28 769.16 282.36
3 Loans & Borrowings – – – –
4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – – – –4.2 Other Current Liabilities & Provisions 94.32 87.65 61.79 11.71
TOTAL 9,222.89 8,795.41 6,976.89 6,591.25
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 1,970.87 2,554.25 – 2,027.081.1.5 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 4,884.51 4,274.34 – –1.3.5 Securitised Debt securities 2,075.07 1,877.77 – 1,107.281.4 Government Securities – – – –1.5 Treasury Bills – – – –1.6 Commercial Paper – – – –1.7 Certifi cate of Deposits – – – 1,968.221.8 Bill Rediscounting – – – 1,180.651.9 Units of Domestic Mutual Fund – – – –1.10 Foreign Securities – – – –
Total Investments 8,930.45 8,706.36 – 6,283.23
2 Deposits – – – –3 Other Current Assets3.1 Cash & Bank Balance 1.12 13.87 20.61 0.573.2 CBLO / Reverse Repo Lending 282.97 24.19 6,924.22 243.933.3 Others 0.51 0.01 32.06 63.524 Deferred Revenue Expenditure
(to the extent not written off) 7.84 50.98 – –
TOTAL 9,222.89 8,795.41 6,976.89 6,591.25
Notes to Accounts – Annexure I
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12
Abridged Revenue Account for the year ended March 31, 2010
Rs. in Lakhs
HSBC FIXED TERMSERIES 30
HSBC FIXED TERMSERIES 66
CurrentYear ended
March 31, 2010
CurrentYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1 INCOME1.1 Dividend – – – –1.2 Interest 893.93 1,010.80 577.60 321.641.3 Realised Gain / (Loss) on Foreign Exchange
Transactions– – – –
1.4 Realised Gains / (Losses) on Interscheme sale of investments
– (19.08) – –
1.5 Realised Gains / (Losses) on External sale / redemption of investments
22.77 (71.36) 24.84 11.91
1.6 Realised Gains / (Losses) on Derivative Transactions – – – –1.7 Other Income 3.49 – 0.69 7.18
(A) 920.19 920.36 603.13 340.732 EXPENSES2.1 Management fees 109.36 45.73 60.14 5.142.2 Service tax on Management fees – – – –2.3 Transfer agents fees and expenses 2.00 1.97 1.37 0.722.4 Custodian fees 0.83 1.18 0.70 0.362.5 Trusteeship fees 0.08 0.04 0.06 0.032.6 Commission to Agents * – – – –2.7 Marketing & Distribution expenses 9.35 10.01 37.66 26.302.8 Audit fees 0.12 0.10 0.12 0.052.9 Other operating expenses 41.66 54.53 0.03 0.112.10 Expenses to be Reimbursed by the Investment Manager (0.48) – (31.09) –
(B) 162.92 113.56 68.99 32.713 NET REALISED GAINS / (LOSSES)
FOR THE YEAR (A - B = C) 757.27 806.80 534.14 308.024 Change in Unrealised Depreciation in
value of investments (D) (166.66) 166.66 – –
5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 923.93 640.14 534.14 308.02
6 Change in Unrealised Appreciation in the value of investments (F) 62.12 (144.48) (40.37) 40.37
7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 986.05 495.66 493.77 348.39
7.1 Add: Balance transfer from Unrealised Appreciation Reserve – 144.48 40.37 –
7.2 Less: Balance transfer to Unrealised Appreciation Reserve 62.12 – – 40.37
7.3 Add / (Less): Equalisation – – – –7.4 Transfer from Reserve Fund 36.04 56.05 2.68 –7.5 Transfer from Unit Premium Reserve – – – –8 TOTAL 959.97 696.19 536.82 308.02
9 Dividend Appropriation9.1 Income Distributed during the year 129.38 145.93 41.34 22.419.2 Tax on income distributed during the year 18.56 21.25 6.00 3.2610 Retained Surplus / (Defi cit)
carried forward to Balance Sheet 812.03 529.01 489.48 282.35
Notes to Accounts – Annexure I* Commission to Agents is included in Marketing & Distribution Expenses.
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13
Key Statistics for the year ended March 31, 2010
HSBC FIXED TERMSERIES 30
HSBC FIXED TERMSERIES 66
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
1. NAV per unit (Rs.):
Open
Regular Growth Option 11.6034 10.9311 10.5506 –
Regular Dividend Option 10.0762 10.4450 10.1051 –
Institutional Growth Option 11.6034 10.9311 10.5506 –
Institutional Dividend Option – 10.4346 – –
High
Regular Growth Option 12.9466 11.6034 11.3548 10.5506
Regular Dividend Option 10.4523 10.5824 10.3393 10.3455
Institutional Growth Option 12.9466 11.6034 11.3548 10.5506
Institutional Dividend Option – 10.5719 – 10.0166
Low
Regular Growth Option 11.6348 10.5148 10.5542 10.0064
Regular Dividend Option 10.0087 9.5131 10.0040 10.0064
Institutional Growth Option 11.6348 10.5148 10.5542 10.0064
Institutional Dividend Option – 9.5131 – 10.0064
End
Regular Growth Option 12.9466 11.6034 11.3548 10.5506
Regular Dividend Option 10.1491 10.0762 10.0215 10.1051
Institutional Growth Option 12.9466 11.6034 11.3548 10.5506
Institutional Dividend Option – – – –
2. Closing Assets Under Management (Rs. in Lakhs)
End 9,129 8,708 6,915 6,580
Average (AAuM)4 9,046 9,630 6,759 6,497
3. Gross income as % of AAuM1 10.17% 9.56% 8.92% 10.58%
4. Expense Ratio:
a. Total Expense as % of AAuM (planwise)
Regular Growth Option 1.80% 1.18% 1.02% 1.02%
Regular Dividend Option 1.80% 1.18% 1.02% 1.02%
Institutional Growth Option 1.80% 1.18% 1.02% 1.02%
Institutional Dividend Option 1.80% 1.18% 1.02% 1.02%
b. Management Fee as % of AAuM (planwise)
Regular Growth Option 1.21% 0.47% 0.89% 0.16%
Regular Dividend Option 1.21% 0.47% 0.89% 0.16%
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14
Key Statistics for the year ended March 31, 2010 (Contd...)
HSBC FIXED TERMSERIES 30
HSBC FIXED TERMSERIES 66
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
CurrentYear ended
March 31, 2010
PreviousYear ended
March 31, 2009
Institutional Growth Option 1.21% 0.47% 0.89% 0.16%
Institutional Dividend Option 1.21% 0.47% 0.89% 0.16%
5. Net Income as a percentage of AAuM2 8.37% 8.38% 7.90% 9.56%
6. Portfolio turnover ratio3 – – – –
7. Total Dividend per unit distributed during the year / period (planwise)
Individual / HUF
Regular Dividend Option 0.9200 0.3667 0.7283 0.3842
Institutional Dividend Option – – – –
Corporate – –
Regular Dividend Option 0.8562 0.3413 0.6779 0.3575
Institutional Dividend Option – – – –
8. Returns (%):
a. Last One Year
Scheme
Regular Growth Option 11.5759 6.1503 7.62 NA
Regular Dividend Option 10.1850 4.9175 6.55 NA
Institutional Growth Option 11.5759 6.1503 7.62 NA
Institutional Dividend Option – – NA NA
Benchmark
CRISIL Short-Term Bond Fund Index 5.8800 9.7900 5.8800 NA
CRISIL Liquid Fund Index NA NA NA NA
b. Since Inception
Scheme
Regular Growth Option 9.6421 8.5855 8.90 11.2273
Regular Dividend Option 8.4854 7.5554 7.78 10.0903
Institutional Growth Option 9.6421 8.5855 8.90 11.2273
Institutional Dividend Option – – NA NA
Benchmark
CRISIL Short-Term Bond Fund Index 7.93 9.0800 8.67 6.7900
CRISIL Liquid Fund Index NA NA NA NA
1 Gross income = amount against (A) in the Revenue Account i.e. Income. 2 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year / period3 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year / period. 4 AAuM = Average daily net assets
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15
HSBC FIXED TERM SERIES
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 amount is NIL as at March 31, 2010 and March 31, 2009.
1.3. Investments in Associates and Group Companies as of March 31, 2010 and March 31, 2009 is NIL.
1.4. Open positions of Securities Borrowed and / or Lent by the Scheme as of years ended 2010 and 2009 are NIL.
1.5. No NPAs as at March 31, 2010 and March 31, 2009.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial year 2009 - 10 and percentage to net assets are:
Security Category
HSBC FIXED TERM SERIES 30
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation 1,586,951 0.17% – –
– Depreciation – – 6,587,393 0.76%
Non Convertible Debentures and Bonds Privately Placed
– Appreciation 4,123,253 0.45% – –
– Depreciation – – 10,079,072 1.16%
Asset Backed Securities
– Appreciation 1,247,634 0.14% 745,872 0.09%
– Depreciation – – – –
Security Category
HSBC FIXED TERM SERIES 66
Amount(Rs.)
Percentage to Net Assets
Amount(Rs.)
Percentage to Net Assets
2010 2009
Non Convertible Debentures and Bonds Listed / Awaiting Listing
– Appreciation – – 775,539 0.12%
– Depreciation – – – –
Non Convertible Debentures and Bonds Privately Placed
– Appreciation – – – –
– Depreciation – – – –
Asset Backed Securities
– Appreciation – – 3,261,080 0.50%
– Depreciation – – – –
Notes to Accounts – Annexure ITo the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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1.7 Aggregate Value of Purchase and Sale of Investments
The aggregate value of investment securities purchased and sold (including matured) during the year / period (excluding accretion of discount) are as follows:
2010
Name of the Scheme
Accretion of Discount
Aggregate Purchase Aggregate Sale
Rupees Rupees
Percentage of Average Daily Net
Assets
Rupees
Percentage of Average Daily Net
Assets
HSBC Fixed Term Series 30
88,801,584 – – 91,548,798 10.12%
HSBC Fixed Term Series 66
36,683,862 775,886,624 114.81% 1,439,340,461 212.99%
2009
Name of the Scheme
Accretion of Discount
Aggregate Purchase Aggregate Sale
Rupees Rupees
Percentage of Average Daily Net
Assets
Rupees
Percentage of Average Daily Net
Assets
HSBC Fixed Term Series 30
101,170,058 11,907,733 1.24% 243,259,449 25.26%
HSBC Fixed Term Series 66*
22,172,816 1,552,743,929 484.59% 951,822,774 297.05%
* Annualized
1.8. Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as
under :
HSBC FIXED TERM SERIES 30
Security Category Fair Value (Rs.) % to Net Assets Fair Value (Rs.)
% to Net Assets
2010 2009
Debt Instruments 893,044,686 97.83% 870,636,238 99.98%
Total 893,044,686 97.83% 870,636,238 99.98%
HSBC FIXED TERM SERIES 66
Security Category Fair Value (Rs.) % to Net Assets
Fair Value (Rs.)
% to Net Assets
2010 2009
Debt Instruments – – 313,435,704 47.64%
Money market Instruments
– – 314,886,920 47.86%
Total – – 628,322,624 95.50%
Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended, for the year ended March 31, 2010.
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
HSBC FIXED TERM SERIES 30
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 0.13 3.13 53,174 5.72
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.00 ~ 0.01 5,905 0.63
HSBC FIXED TERM SERIES 66
The Hongkong and Shanghai Banking Corporation Limited
Associate 2009 - 2010 1.18 25.41 – –
HSBC InvestDirect Securities (India) Limited
Associate 2009 - 2010 0.02 0.42 – –
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.]
(on accrual basis)
% of Total commission paid by the
Fund
HSBC FIXED TERM SERIES 30
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 0.03 2.00 54,620 5.44
HSBC FIXED TERM SERIES 66
The Hongkong and Shanghai Banking Corporation Limited
Associate 2008 - 2009 28.92 7.12 2,549,041 12.61
~ Indicates less than 0.01
The brokerage paid was at rates similar to those offered to other distributors.
3 None of the Investors held more than 25% of the total net assets of the Scheme at the years ended March 31, 2010 and March 31, 2009.
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Notes to Accounts – Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2010
4 Unit Capital movement during the years ended March 31, 2010 and March 31, 2009.
Description
HSBC FIXED TERM SERIES 30
2009 - 2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 53,156,931.064 2,521,000.000 5,604,699.500 50,073,231.564 500,732,315
Regular Dividend 14,352,566.066 1,107,590.021 1,413,080.466 14,047,075.621 140,470,756
Institutional Growth
9,424,237.930 – – 9,424,237.930 94,242,379
Institutional Dividend
– – – – –
Description2008 - 2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 66,659,279.315 513,000.000 14,015,348.251 53,156,931.064 531,569,311
Regular Dividend 17,128,539.151 1,013,052.321 3,789,025.406 14,352,566.066 143,525,661
Institutional Growth
11,400,000.000 – 1,975,762.070 9,424,237.930 94,242,379
Institutional Dividend
2,000,000.000 – 2,000,000.000 – –
Description
HSBC FIXED TERM SERIES 66
2009 - 2010
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth 40,902,819.241 1,934,412.712 3,341,499.720 39,495,732.233 394,957,322
Regular Dividend 5,542,888.156 421,919.944 11,131.699 5,953,676.401 59,536,764
Institutional Growth
16,150,000.000 1,000,000.000 1,000,000.000 16,150,000.000 161,500,000
Institutional Dividend
– – – – –
Description2008 - 2009
Opening Units Subscription Redemption Closing Units Face Value
Regular Growth – 43,547,532.076 2,644,712.835 40,902,819.241 409,028,192
Regular Dividend – 8,263,358.455 2,720,470.299 5,542,888.156 55,428,882
Institutional Growth
– 16,150,000.000 – 16,150,000.000 161,500,000
Institutional Dividend
– 1,000,000.000 1,000,000.000 – –
4 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.
5 No contingent liabilities for the years ended March 31, 2010 and March 31, 2009.
6 Expenses other than Management Fees are Inclusive of Service Tax where applicable.
7 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 20, 2010. 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.
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DISCLAIMERSThis content of this report has been prepared by HSBC Asset Management (India) Private Limited (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. The information is for general information only and 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 information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. 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 may obtain Statement of Additional Information, Scheme Information Document and Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314 D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.
Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs. 1 lakh). The Sponsor / associates of the Sponsor / Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.
Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Fixed Term Series 30 and HSBC Fixed Term Series 66 (HFTS) are the names of the Schemes and does not in any manner indicate the quality of the Schemes or their future prospects or returns.
Terms of Issue: Units of the Scheme(s) are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAVs and offers for sale, redemption and switch outs, units of the Scheme(s) on all Business Days, at the Applicable NAV for all Schemes (at least once a week, i.e., every Wednesday and daily during the period of redemption in case of HSCF). HSCF & HFTS will not be open for ongoing subscriptions / switch-ins. HSCF would be available for sale on an ongoing basis (after a period of 3 years from the date of allotment). Conversion of HSCF to an open-ended scheme will be done only after the balance unamortized amount has been fully recovered from the Scheme. Units can be redeemed / switched out on every Business Day at NAV based prices, subject to prevailing exit loads. In case of HSCF, units can be redeemed / switched-out on a monthly basis on the stipulated date i.e. last 3 Business Days of every month at NAV based prices, subject to provisions of exit load, if any, and recovery of balance proportionate unamortized NFO expenses.
Load Structure (includes SIP/STP, where applicable):For HFTS 30:
Exit Load: 2% if exited before maturity. No Exit Load on redemption / switch out of Units on the maturity date.
For HFTS 66:
Exit Load: 3% if exited before maturity. No Exit Load on redemption / switch out of Units on the maturity date.
Consult the nearest investor service centre for details. The applicable exit loads (if any) at the time of allotment of the Schemes of HSBC Mutual Fund shall also be charged on investments made by all investors. Bonus units and units issued on reinvestment of dividends shall not be subject to exit load.
The exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively.
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Mutual Fund investments are subject to market risks. Read the Scheme Information Document and Scheme Additional Information carefully before investing.
CRISIL Ranking MethodologyCRISIL~CPR 1 Open End MIP Aggressive Schemes, March 2010 *CRISIL~CPR 1 – The composite performance of HSBC MIP - Savings is “Very Good” in the Open End MIP Aggressive Fund Category, and ranks within the top 10% of the 21 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2-year period ended March 31, 2010, Concentration, Liquidity, Asset Quality and Average Maturity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL Limited.
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