non_desc_investment_advisory.pdf

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DISCLOSURE DOCUMENT

NON DISCRETIONARY INVESTMENT ADVISORY SERVICES

(As required under Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993)

The Disclosure Document (hereinafter referred to as the Document) has been filed with

the Securities and Exchange Board of India (SEBI) along with the certificate in theprescribed format in terms of Regulation 14 of the SEBI (Portfolio Managers)Regulations, 1993.

The purpose of the Document is to provide essential information about the Non-discretionary Portfolio Management Services (PMS) in a manner to assist and enable theinvestors in making informed decision for engaging a Portfolio Manager.

The Document gives the necessary information about the Portfolio Manager required by

an investor before investing, and the investor may also be advised to retain the documentfor future reference.

Details of the Principal Officer

STUART MILNEChief Executive Officer

The Hongkong and Shanghai Banking Corporation Limited

52/60, Mahatma Gandhi Road, Fort Mumbai 400 001

This Disclosure Document is dated 10thJune 2013.

Portfolio Management Services

The Hongkong and Shanghai Banking Corporation LimitedSEBI Registration No: INP000000795


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TABLE OF CONTENTS

Sr. No. Contents Page Number

1 Disclaimer 3

2 Definitions 3

3 Description 7

4 Penalties, pending litigation orproceedings, findings of inspection orinvestigations for which action may havebeen taken or initiated by anyregulatory authority

17

5 Services Offered 21

6 Risk Factors 23

7 Client Representation 27

8 The Financial Performance of thePortfolio Manager

28

9 Nature of Expenses 30

10 Taxation 32

11 Accounting Policies 36

12 Investor Services 37


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1. DisclaimerThis Disclosure Document has been prepared in accordance with the SEBI (PortfolioManagers) Regulations, 1993, as amended from time to time and filed with SEBI. ThisDocument has neither been approved nor disapproved by SEBI, nor has SEBI certifiedthe accuracy or adequacy of the contents of the Document.

2. DefinitionsAct The Securities and Exchange Board of India Act, 1992 (15

of 1992).

CharteredAccountant

A chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act,1949 (38 of 1949) and who has obtained a certificate ofpractice under sub-section (1) of section 6 of that Act.

Client Anybody corporate, partnership firm, individual, HUF,association of persons, body of individuals, trust, statutory

authority, or any other person, who enters into anInvestment Services agreement with the Portfolio Managerfor provision of services.

DiscretionaryPortfolioManager

A Portfolio Manager who exercises or may, under a contractrelating to portfolio management, exercise any degree ofdiscretion as to the investments or management of theportfolio of securities or the funds of the client, as the casemay be.

Non-DiscretionaryInvestment

Advisory Service

Means the offering, wherein the Portfolio Manager who,under the Agreement with the client offers investmentadvisory service and does not exercise any degree of

discretion as to the investments or management of portfolioof securities or of the funds of the Client and shall solely acton instructions given by the Client.

CustodialServices

Means: (a) in relation to securities in physical form,safekeeping of securities of the Client, and (b) in relation tosecurities to be dematerialized or in a dematerialized form,in addition to any demat services enumerated in a depositaryparticipant agreement entered into by the Client with theBank, services of takeover and custody of physical securitycertificates (where relevant), dispatch and follow-up ofsecurities for dematerialization, receipt, settlement and

registration of securities purchased or sold, and allincidental services in connection with both (a) and (b),including but not limited to, tracking of corporate actions,namely issue of dividends on shares, issue of bonus shares,split of share certificates, buy back offers, etc.

ExecutionServices

Means the execution and/or settlement of transactions inInvestment Products, based on instructions from the Client


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and includes execution of instructions as a Power ofAttorney holder, pursuant to the terms of the Power ofAttorney, on behalf of the Client.

IntroductionFacilities/ReferralServices

Means the referrals provided by the Bank to a Customerfrom time to time; providing Introduction or ReferralFacilities to the Customer by introducing the Customer to

Service Providers; providing the Third Party Services andassisting the Client in contacting such third parties to enablethe Client to avail the Third Party Services from the ServiceProviders. The Client acknowledges that the Bank is merelyacting as a facilitator in order to enable the Client to meetthe Service Provider and neither has the Bank agreed toprovide such services nor shall the Bank be responsible forany action or omission whatsoever on the part of the ServiceProvider.

InvestmentAdvisory

Services

Means the investment advisory services provided by theBank to a Client in relation to the Investment Products that

the Bank may recommend to the Client and such InvestmentProducts as the Bank reasonably believes to be suitable forthe Client and which are in accordance with the Customersinvestment objectives, as stated in the Profiling Documentcompleted by the client.

Portfolio Means all the assets advised or administered under theInvestment Services Agreement signed between the Clientand the Bank

ProfilingDocument

Means the profiling document comprising of Know YourCustomer information, and a Risk Profiler; as may beamended by the Client in writing, from time to time, and

which is used by the Bank to generate proposals forInvestment Products in respect of the Portfolio.

Risk-Profiler Means the questionnaire forming part of the ProfilingDocument setting out the Clients investment objectives,investment horizon, attitude towards risk, investmentexperience and preferences in respect of InvestmentProducts, as may be amended by the Client in writing, fromtime to time.

InvestmentProducts

Means various financial products issued/ offered byincorporated companies, trusts, governments, statutorycorporations and other persons, whether incorporated or not,

including but not limited to, equity and preference shares,equity and fixed income derivatives, fixed incomeinstruments, mutual funds, government securities, treasurybills and such other products as the Bank and the Client mayagree from time to time.

InvestmentServicesAgreement

Means the Agreement entered into between the Bank andthe Client for the services offered, that defines the terms andconditions of the services offered and shall include the


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Schedules to Investment Services Agreement and anysupplemental letters or terms and conditions, appendicesand accompanying documents, as from time to timeamended.

Person directlyor indirectly

connected

Any person being an associate, subsidiary, inter connectedcompany or a company under the same management, within

the meaning of section 370(1B) of the Companies Act,1956, or in the same group.

PortfolioManager

The Hongkong and Shanghai Banking Corporation Limited,India Branches, who has obtained certificate of registrationfrom SEBI to act as a Portfolio Manager under Securitiesand Exchange Board of India (Portfolio Managers) Rulesand Regulations, 1993, vide Registration no.INP000000795and providing non-discretionary investment advisoryservices through its Private Banking division.

Principal Officer Means one who is responsible for the activities of portfolio

management and has been designated as the PrincipalOfficer by the Portfolio Manager.

Rules The Securities and Exchange Board of India (PortfolioManagers) Rules, 1993.

Regulations The Securities and Exchange Board of India (PortfolioManagers) Regulations, 1993, and as may be amended bySEBI from time to time.

SEBI / Board The Securities and Exchange Board of India establishedunder the Securities and Exchange Board of India Act,1992.

Securities Securities as per Securities Contracts (Regulation) Act,

1956 include: Shares, scrips, stocks, bonds, debentures, debenture

stock or other marketable securities of a like nature,in or of any incorporated company or other bodycorporate

Derivatives (contracts which derive their value fromthe prices, or index of prices, of underlyingsecurities)

Units or any other instrument issued by anycollective investment scheme to the investors insuch schemes

Security receipts, as defined in clause (zg) of section2 of the Securitisation and Reconstruction ofFinancial Assets and Enforcement of SecurityInterest Act, 2002

Any certificate or instrument (by whatever namecalled), issued to an investor by any issuer being aspecial purpose distinct entity which possesses any


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debt or receivable, including mortgage debt,assigned to such entity, and acknowledgingbeneficial interest of such investor in such debt orreceivable, including mortgage debt, as the casemay be.

Units or any other such instrument issued to the

investors under any mutual fund scheme Government securities.

Such other instruments as may be declared by theCentral Government to be securities.

Rights or interests in securities.Certificate Means the Certificate of Registration issued to the Portfolio

Manager by SEBI to enable the Portfolio Manager to offerthe Investment Advisory Service under the InvestmentServices Agreement.

ComplianceOfficer

Means the officer of the Portfolio Manager, coordinatingwith the regulatory authorities like SEBI, GOI, RBI etc., in

various matters pertaining to the portfolio management andwho ensures that the Portfolio Manager complies with allrules, regulations and guidelines, etc.

Depository Means the Depository, as defined in the Depositories Act,1996 (22 of 1996).

Party or Parties Refers to the Client and/or the Portfolio Manager as the casemay be, or as the context may require.

RBI Means the Reserve Bank of India established under theReserve Bank of India Act, 1934 (2 of 1934).

Offering Means the Investment Advisory Services offered by thePortfolio Manager under the Investment ServicesAgreement.

The Hongkongand ShanghaiBankingCorporation (orthe Bank orHSBC India)

Means a company incorporated under the CompaniesOrdinance of the Hong Kong Special Administrative Region(HKSAR), having its registered office at 1, Queens RoadCentral, Hong Kong and its India corporate office at 52/60Mahatma Gandhi Road, Fort, Mumbai 400 001, actingthrough its branch/ office in India (the Bankor HSBCIndia)


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3. Description

3.1. History, Present Business and Background of the Portfolio Manager:

The Hongkong and Shanghai Banking Corporation Limited opened its first branch officein India in 1867. In 1959, the branch network was extended by the predecessors in the

title of The Mercantile Bank. The Mercantile Bank Limited, originally established as theMercantile Bank of Bombay, as early as 1853, had its own distinguished history on AsianBanking.

Presently, The Hongkong and Shanghai Banking Corporation Limited, India Branches,offer its customers services in the areas of personal banking, private banking andcorporate banking (including cash management, trade treasury, custody and clearing)besides a variety of other services through its associate companies. The Bank in Indiahas presence of 50 branches, covering amongst other Ahmedabad, Bangalore, Chennai,Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana,Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam. The bank

also has multi-channel services, including internet and phone banking, and a wide ATMNetwork.

The Bank was granted Certificate of Registration as Portfolio Manager from SEBI withRegistration No. INP000000795. The Registration has since been renewed for a periodof 3 years i.e. from 1 May 2012 till 30 April 2015.

Besides the Portfolio Management Services i.e. non-discretionary investment advisoryservices offered through the Private Banking division of the Bank, it also offers a widerange of other products and services to various client segments such as:

Bank Accounts and Fixed Deposits;

Debit and Credit Cards;

Fund and non-fund based loans and advances to corporate and individual clients;

Wealth Management Services including distribution of mutual funds, sale ofinsurance products and referral of third party products;

Remittance services;

Foreign exchange services;

Treasury Services;

Payments and Cash Management services;

Factoring Solutions;

Trade Services; Custody and Depository Services;

Ancillary services like safe deposit vaults, travelers cheques etc.


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Marjorie Yang Mun Tak*(Chairman, Esquel Holdings Inc.)

Francis Yeoh Sock Ping*, CBE(Managing Director of YTL Corporation Berhad)

* non-executive Director

The Hongkong and Shanghai Banking Corporation Limited (India Branches)

3.1.3. Members of Executive Committee of HSBC India

Stuart M ilne (Chairman): Chief Executive Off icer

Stuart Milne joined HSBC Holdings plc in 1981, having graduated with Honours in

Modern Arabic Studies from the University of Durham, England.

In his 31 years with HSBC, he has worked in a number of businesses and in a variety ofgeographic locations, including the Arabian Gulf, Hong Kong, Philippines, New York,Paris and Tokyo.

Stuart moved to New York in 1996 as head of HSBCs Treasury Credit unit, providing

credit support for HSBCs Treasury and Capital Markets business in the United States of

America and managing relationships with hedge fund clients. After two years in NewYork, Stuart moved to Tokyo as Chief Operating Officer for HSBCs business in Japan.

He moved to Hong Kong in December 2001 as Head of Institutional Banking, AsiaPacific and was subsequently appointed as Head of Corporate and Institutional Banking,Asia-Pacific in March 2004. In this role, he was responsible for managing HSBCsrelationships with large corporate and institutional clients across the Asia Pacific region,based in Hong Kong.

In February 2007, he was appointed Country Manager Japan, in which role he serves asPresident and Chief Executive Officer of The Hongkong and Shanghai BankingCorporation Limited, Japan branches and Chairman of HSBC Securities (Japan) Limitedand Chairman of HSBC Global Asset Management (Japan) K.K.

Stuart served as Vice Chairman of the International Bankers Association whichrepresents the foreign banking sector in Japan. He was also an active Board member ofthe British Chamber of Commerce in Japan and the Japan British Society.

Stuart was appointed as CEO, HSBC India in March 2012.


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Stephen O'Leary: Chief Risk Off icer

Stephen is an HSBC International Manager who joined the HSBC Group in Hong Kongin 1988, immediately after growing up and graduating in his native Ireland. As an HSBCInternational Manager, Stephen has been privileged to work in countries ranging fromHong Kong to Malaysia, UK, USA and Indonesia. His assignments have been largely

focused on wholesale banking but he has also enjoyed stints in Branch Banking, Trade,Loan Recovery and Training & Development. In Stephen's most recent roles in AsiaPacific, he had capital management oversight of Large Corporates and CommercialBanking's portfolios which saw unprecedented growth and Return on Equityimprovement. Cross sell of the entire franchise to HSBCs customers was a cornerstoneof this success, whether linkages with overseas offices or introduction of value addservices such as Investment Banking or Private Banking, or a combination of all theabove!

Stephen is delighted to take up his first Chief Risk Officer position in what is one of ourmost successful businesses globally.

Devesh M athur : Chief Operating Off icer

Chief Operating Officer, India, HSBCApril 2009Present

Responsible for the Information Technology, Services (Operations), Change Delivery(Business Transformation/Six Sigma), Corporate Real Estate, Procurement,Administration, Fraud Risk, Banking Security and BCM portfolios of HSBC, India .

Director and Centre Manager, HSBC Technology and Services - Service

DeliveryApril 2007April 2009 (2 years 1 month)

As a Director for HSBC Electronic Data Processing Enterprises Pvt Ltd, India, hewas a part of the senior management of the world's largest banking outsourcing hub,spanning five countries. He was also responsible for the management of the 3000member BPO/KPO site in Hyderabad, which provided world class services to HSBCGroup entities, spanning five global regions.

CEO, HSBC Operations and Processing Enterprises Ltd.,HSBCApril 2003April 2007 (4 years 1 month)

Established and ran as its CEO the company responsible for the domestic processingoperations of HSBC, India with centres of excellence spanning Chennai, Mumbai andKolkatta.

Head of Banking Services,HSBCAugust 1999March 2003 (3 years 8 months)
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Relationship Manager, Corporate Banking,HSBCFebruary 1992March 1995 (3 years 2 months)

Rating Analyst, CRISIL19911991 (less than a year)

H itendra Dave: Head - Global Markets

Hitendra Dave, Managing Director, Head of Global Markets, India, is responsible formanaging the Foreign Exchange, Fixed Income and Derivatives Sales and Tradingbusinesses. He is also responsible for the Debt Capital Markets, Balance SheetManagement and Equities businesses for the Bank in India. Hitendra has more than 20years of experience in the Indian Financial Markets, spanning Fixed Income, ForeignExchange, Derivatives and Debt Capital Markets.

Abadaan Viccaji : H ead - Compliance

Abadaan Viccaji joined HSBC in April 1998 and is responsible for Compliance forHSBC India. He has an experience of 14 years in Compliance and has worked inNational Stock Exchange Of India (NSE) for 3 years.

Ami t Moghay- General Counsel

Amit Moghay qualified as a lawyer from National Law School of India University andjoined the HSBC Group in 2003 in the Legal and Compliance function of HSBCSecurities and Capital Markets (India) Private Limited. Amit has handled key M&A andadvisory transactions including those for the HSBC Group in India. Amit specializes inbanking and commercial law with strong emphasis on corporate law and structured

finance. As Deputy General Counsel since 2010, Amit has been instrumental in drivinglegal policies as well as implementing procedures and processes to manage legal risks inIndia.During his nine years with the HSBC Group, Amit has been closely associated with mostbusinesses and functions and has been a key resource in strengthening the Legal functionin India over the last two years.

Shantanu Ambedkar- Head of Private Banki ng, India

Shantanu Ambedkar joined the firm in 1994 on the 'Money Desk' in what used to becalled the Treasury Department and thereafter moved to the Institutional Sales function,

and took over as the Head in Q3 2006. Before this move as Head of Private Bank, India,he was the Managing Director and Head of Institutional Sales for Global Markets, India.

The Institutional Sales segment in India is highly relationship driven and personalcontacts and relationships often matter - Shantanu is credited with HSBC retaining topmarket share in this segment.

Shantanu is a Mechanical Engineer and a MBA from the University of Mumbai.
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Ravi Menon: Head - Strategy and Business Development

Ravi Menon has been with the HSBC Group since June 1998 and has held variousleadership positions across businesses. He currently Heads the Group Strategy functionfor HSBC India.Ravi is responsible for the articulation and delivery of strategic initiatives to develop the

India business and ensure that it is positioned to achieve its strategic and financialobjectives, long term growth and market leadership in an efficient and sustainablemanner.

Ravi is also responsible for setting up new businesses, monitoring all acquisitions as wellas large alliance initiatives across the Group entities in India.

He was earlier Managing Director & Co-Head of Investment Banking and also the CEOof HSBC Private Equity for Real Estate in India.

Richard Collie: Chief F inancial Off icer

Richard joined HSBC India in August 2009 as the Chief Financial Officer. He has beenassociated with the HSBC Group since 1994 and has held various leadership positionswithin the Global Finance function, across geographies in Emerging Markets.

Richard is a qualified Chartered Accountant from the Institute of Chartered Accountantsin England and Wales and has extensive banking and audit experience from Coopers &Lybrand, prior to joining the HSBC Group in London in 1994.

Sandeep Uppal: Head - Commercial Banking

Sandeep Uppal, is the Managing Director and Head of Commercial Banking for HSBCIndia, which covers a wide spectrum of businesses, ranging from large internationalcorporate clients, mid corporates and small businesses.

He is an International Manager with the HSBC Group. Prior to his move to India inMarch 2011, Sandeep was the Chief Executive Officer of HSBC in Mauritius.

He is a key member of the HSBC India top team and is a member of the BanksExecutive Committee in the country.

Sandeep has extensive experience in banking and over the last 19 years has worked in

India, Philippines, Hong Kong, UK & Mauritius. During this period, he has worked in avariety of areas, which include Personal Banking, Trade Services, Corporate Banking,Strategic Planning, Private Banking and Commercial Banking.

He holds an MBA from XLRI, India and is an economics graduate from DelhiUniversity.


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Suni l Sanghai: Head - Global Banking

Sunil Sanghai joined HSBC in September 2010 as the Head of Global Banking, India.

Prior to joining HSBC, he was Managing Director and Co-Head Investment BankingIndia at Goldman Sachs. Sunil joined Goldman Sachs in 2006. Prior to that, he spent

many years with JM Morgan Stanley (a joint venture between JM Financial and MorganStanley), based in Mumbai and with Morgan Stanley in Singapore.

Sunil started his investment banking career 1992 and has rich experience in mergers andacquisitions, corporate restructuring, advisory and domestic and global capital markets.He has been involved in many significant and large capital market and M&A transactionsin India. His coverage experience includes managing key relationships, including largeIndian corporates, large conglomerates, global corporates, banks, financial institutions,financial sponsors, Government agencies and the Regulators.

At HSBC, Sunil is responsible for Corporate & Investment Banking, Capital Markets and

Project Finance.

Tarun Balr am: MD and Head - Client Management

Tarun joined HSBC in Mumbai in 1990. During his 23 years with the Bank, Tarun hasworked in Corporate Banking in the Western, Southern & Northern Regions. In hisprevious role, Tarun headed Corporate Banking in Northern India. Besides this role,Tarun was also the CEOs Representative for the Northern Region.

Tarun moved to Mumbai in January 2010 and is presently Managing Director, Head ofCorporate Banking for HSBC in India.

Tarun represents HSBC on British Business Group and European Business Group. Healso represents HSBC on the Banking & Finance Committee of ASSOCHAM and FICCI.

Vikram Tandon: H ead - Human Resources

Vikram Tandon is the Head of Human Resources for HSBC in India, and has the

responsibility for driving HSBCs People Strategy in India and working towards building

a high performance organisation.

Mr. Tandon is a Human Resources professional with 20+ years experience in the settingup and rapid scaling up of multiple businesses Life Insurance, General Insurance,Private Equity, Asset Management, Real Estate Development & Investments, MortgageGuaranty, Consumer Finance, Software Services, Business Process Outsourcing (BPO)and Wealth Management in different Geographies across the Mediterranean, Middle Eastand South Asia region.

Mr. Tandon has experience in leading teams of 150+ H R Professionals and has played akey role in enabling diverse businesses to succeed quickly by acquiring Top Management


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talent, leveraging Leadership Development & Training and instituting a strongPerformance and Accountability orientation. He also has a thorough exposure toBanking, Grocery Retailing, FMCG distribution and Hospitality sectors.

Before taking up his current role in November 2010, Mr. Tandon was the RegionalHuman Resources Director, Mediterranean, Middle East & South Asia Region forAmerican International Group (AIG).

3.2. Group Companies of the Portfoli o Manager in India

1 HSBC Agency (India) Private Limited2 HSBC Asset Management (India) Private Limited3 HSBC Electronic Data Processing (India) Private Limited4 HSBC Global Shared Services (India) Private Limited (formerly known as HSBC

Insurance Brokers (India) Private Limited)5 HSBC Professional Services (India) Pvt Ltd6 HSBC Securities and Capital Markets (India) Private Limited7 HSBC Software Development (India) Private Limited8 HSBC InvestDirect (India) Limited (formerly known as IL&FS Investsmart Limited)

(HIDL)9 HSBC InvestDirect Securities (India) Limited (formerly known as IL & FS

Investsmart Securities Limited) (HISL)10 Investsmart Financial Services Limited11 HSBC InvestDirect Distribution Services (India) Limited(formerly known as HSBC

InvestDirect Commodities (India) Limited)12 HSBC InvestDirect Academy for Insurance and Finance (India) Limited13 HSBC InvestDirect Sales & Marketing (India) Limited

3.3. Details of the services being off ered: Discretionary/ Non-discretionar y/

Advisory.

Non-Discretionary Investment Advisory ServiceNon-Discretionary Investment Advisory services relates to the service whereby, thePortfolio Manager will provide the advise on Investment Products to help the client tomake investment decisions. The client will handle funds/securities held in their name andtake their own decision, and the Portfolio Manager will not have any discretion to makeinvestments decisions (buy or sell or otherwise) on behalf of the client and shall solely

act on the instructions given by the Client. The non-discretionary Investment AdvisoryServices will be in the nature that the Bank may recommend to the Client suchInvestment Products as the Bank reasonably believes to be suitable for the Customer andwhich are in accordance with the Customers investment objectives as derived using theProfiling Document completed by the client. The recommendations will be in the formof portfolio discussions, proposals and research reports such that the recommendationswill provide the rational for investment decisions (buy or sell or otherwise) of a particularstock, bond or mutual fund or any other security. Moreover, the Portfolio Managers
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investment professionals will help the client to reconstruct his/her portfolio as per theclientsinvestment objectives.

The following are the characteristics of the service:

Investment decision

The Client will have total discretion to handle his/her portfolio and make investmentdecisions pertaining to the securities held in their portfolio.

Bank and Demat accountThe Portfolio Manager will help the client to open a bank account and a demat account inthe clients name. The Portfolio Manager will act only on the Clients instructions.

Execution services/settlement servicesExecution Services/Settlement services means the execution and/or settlement oftransactions in Investment Products based on instructions from the Client and includesexecution of instructions as a Power of Attorney holder pursuant to the terms of the

Power of Attorney, on behalf of the Client provided for the purposes of execution orsettlement .

Custodial Services

Custodial services means: (a) in relation to securities in physical form, safekeeping ofsecurities of the Client, and (b) in relation to securities to be dematerialized or in adematerialized form, in addition to any demat services enumerated in a depositaryparticipant agreement entered into by the Client with the Bank, services of takeover andcustody of physical security certificates (where relevant), dispatch and follow-up ofsecurities for dematerialization, receipt, settlement and registration of securitiespurchased or sold, and all incidental services in connection with both (a) and (b),

including but not limited to, tracking of corporate actions namely issue of dividends onshares, issue of bonus shares, split of share certificates, buy back offers, etc.

Introduction Facilities/Referral Services

Introduction Facilities/Referral Services means the referrals provided by the Bank to aCustomer from time to time provide Introduction or Referral Facilities to the Customerby introducing the Customer to Service Providers providing the Third Party Services andassisting the Customer in contacting such third parties to enable the Customer to avail theThird Party Services from the Service Providers. The Customer acknowledges that theBank is merely acting as a facilitator in order to enable the Customer to meet the ServiceProvider and neither has the Bank agreed to provide such services directly nor shall the

Bank be responsible for any action or omission whatsoever on the part of the ServiceProvider.


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4. Penalties, pending litigation or proceedings, findings of inspection or

investigations for which action may have been taken or initiated by any regulatory

authority.

4.1 Al l cases of penal ties imposed by the SEBI or dir ections issued by SEBI under the

Act or Rules or Regulations made there under. The nature of the penal ty/direction.

Penal ties imposed for any economic off ence and/ or f or violati on of any secur iti es laws.

Violations and penalty levied pertained to FX and Derivative transactions executedwith clients and documentation requirements pertaining to the same are as follows:i) A penalty of Rs. 10,000/- was levied by the Reserve Bank of India vide order dated01 July 2010 under section 11(3) of the Foreign Exchange Management Act, 1999;andii) A penalty of Rs. 500,000/- was levied by the Reserve Bank of India vide orderdated 26 April 2011 under section 47A(1)(b) read with section 46(4) of the BankingRegulation Act, 1949.

A penalty of INR 10,000/- was paid on 26 September 2012, pursuant to the orderreceived from the Reserve Bank of India w.r.t erroneous renewal of FCNR (B)deposits of The Thattai Hindu Mercantile Community (TTHMC), an erstwhileOverseas Corporate Body (OCB).

Enquiries initiated and censures passed by the Reserve Bank of India.

Penalties amounting to INR 17,625/- levied by National Securities DepositoryLimited in the normal course of business during the period 1 January 2006 to 10 May2012.

There are no penal ties imposed on the Portf olio Manager for any economic off enceand / or f or violation of any secur iti es laws.

4.2 Any pending mater ial li tigation / legal proceedings against the Portfolio Manager /

key personnel wi th separate disclosur e regarding pending criminal cases, if any.

There are local court cases by the Bank/Banks customers in the normal course ofbanking business.

Other disputes that are pending / settled are:

1. The Supreme Court of India, Civil Appeal No. 5281/2004 (Original SuitNo. 4644 of 1993, High Court Mumbai)

The Hongkong and Shanghai Banking Corp Ltd.Vs.Canbank Financial Services Ltd. & Anr.

No change- still pending


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2. Special Court, Mumbai Suit No. 12/2002 (Original Suit No. 3984 of 1995,High Court, Mumbai)

The Hongkong and Shanghai Banking Corp Ltd.Vs.

Canara Bank and 7 others


3. The High Court, OOCJ Suit No. 885 of 1996The Hongkong and Shanghai Banking Corp Ltd.Vs.Canbank Financial Services Ltd.


4. The court of Senior Civil Judge, TIS Hazari Delhi , CC. No. 573/04

Dumpy Holdings LimitedVs.The Hongkong and Shanghai Banking Corporation Limited.

This dispute is now closed.

5. National Consumer Dispute Redressal Commission, New Delhi CCno.169 of 2011.

B. N Addappa & another

Vs.The Hongkong and Shanghai Banking Corporation Limited & Ors

No Change - still pending

6. The Session Court, Tis Hazari CC no. RCA 6/2013.

Dumpy Holdings Limited

Vs.The Hongkong and Shanghai Banking Corporation Limited.

Addition of new dispute


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Any deficiency in the systems and operations of the Portfoli o Manager observed by

SEBI or any regulatory agency.

There has been no deficiency in the systems and operations of the Portfolio Managerobserved by SEBI or any regulatory agency.

4.3 Any enqui ry/ adjudication proceedings in iti ated by SEBI against the Port fol io

Manager or its directors, principal off icer or employee or any person dir ectly or

indirectly connected with the Portf olio M anager or i ts directors, pri ncipal of fi cer or

employee, under the Act or Rules or Regulations made thereunder .

Enquiries against HSBC Securities and Capital Markets (India) Private Limited

SEBI has initiated an enquiry against HSBC Securities and Capital Markets (India)Private Limited (HSCI) and accordingly issued a Show Cause Notice dated 30 July2008 calling upon HSCI to show cause as to why further action should not be taken

against HSCI for the violations alleged to the have been committed by HSCI underRegulations 25 and 38 of the SEBI (Intermediaries) Regulations, 2008. HSCI hadfiled a detailed response in this regard on 10 September 2008 and had sought apersonal hearing in the matter. Accordingly, submissions were made by HSCIscounsel at the hearing held on 6 October 2008. Pursuant to the said hearing, SEBI hasvide its letter dated March 4, 2009 informed HSCI of the enquiry officersrecommendation i.e. the matter is not a fit case to levy any penalty.

An enquiry was held under the SEBI (Procedure for Holding Enquiry by the EnquiryOfficer and Imposing Penalty) Regulations, 2002 in the matter of a voluntary openoffer by Mr. V.K. Modi, Dr. B.K. Modi, Mod Fashions and Securities Private Limited

and Modikem Limited in concert with Witta International Inc. and Sidh InternationalLimited (collectively the Acquirers) to the shareholders of Modi Rubber Limited.Subsequent to the enquiry officers recommendations of a major penalty a show causenotice dated 1 August 2003 was issued requiring HSCI to show cause as to whyHSCIs certificate of registration should not be suspended for 6 months. HSCIsubmitted its reply and sought a personal hearing, wherein submissions were made byHSCIs counsel at the hearing held on 9 October 2003. SEBI vide its order dated 9

December 2003, confirmed that HSCI had not acted negligently warrantingimposition of a penalty.

Penalties issued against HSBC Securities and Capital Markets (India) Private

Limited

SEBI had initiated an enquiry against HSBC Securities and Capital Markets (India)Limited (HSCI) under the SEBI (Procedure for Holding Enquiry by the Enquiry

Officer and Imposing Penalty) Regulations, 2002 in the matter of the Open Offermade by Global Green Company Limited to the shareholders of Saptarishi AgroIndustries Limited in September 2000 under the SEBI (Substantial Acquisition ofShares and Takeovers) Regulations, 1997. Subsequent to the enquiry officers


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recommendations of a minor penalty i.e. HSCI be censured, a show cause notice hasbeen issued by SEBI requiring HSCI to show cause as to why the said penalty shouldnot be imposed. SEBI had subsequently vide its order dated 7th March 2007 imposeda minor penalty of censure on the certificate of registration of HSCI. Thereafter,HSCI had appealed against the said order before the Securities Appellate Tribunal,Mumbai on 23rd April 2007 wherein SAT upheld the Order passed by SEBI.

A Show cause Notice was issued to HSCI vide a letter dated 9 June 2000 in thematter of the rights issue of Siemens Limited in which HSCI was acting as the LeadManager requiring HSCI to show cause as to why action should not be taken againstHSCI for non-disclosure in the offer document of certain litigation against SiemensLimited involving ex-employees. Subsequently SEBI vide its letter dated 26September 2000 advised HSCI to be cautious in future assignments.

Show Cause notice and warning against HSBC Asset Management (India) PrivateLimited : SEBI issued a Show Cause notice dated August 07, 2009 to the Trustees ofthe Mutual Fund, Mutual Fund, AMC & CEO pertaining to the changes made in the

Scheme Information Document of HSBC Gilt Fund via an Addendum. SEBI statedin the said Show Cause notice that the change made to the name, benchmark indexand duration of the Scheme would be construed as a change in the fundamentalattribute of the Scheme and hence the applicable provisions of the SEBI (MutualFunds) Regulations, 1996 with respect to the same should have been complied with.Subsequently, the personal hearing took place before the Wholetime Member, SEBI.After considering the submissions made by the AMC, Wholetime Member, SEBIvide its order dated April 23, 2010 disposed off the show cause notice dated August07, 2009 and warned the Board of Trustees of the Mutual Fund, the Mutual Fund,AMC and its CEO that they should strictly comply with the law governing theconduct and business of mutual fund in securities market.

Save as disclosed below and basis the information available on our records, there isno action by SEBI pending against HSBC InvestDirect Securities (India) Limited.

On 24-Nov-04, SEBI has sent a notice of Enquiry under Regulation 6 of SEBI(Procedure of Holding Enquiry and Imposing Penalty) Regulations, 2003 to IL&FSInvestsmart Limited (IIL). Further on 31-Jul-09, HSBC InvestDirect Securities(India) Limited (HISL) [successor-in-title post transfer of broking business by IIL in2006] received a Show Cause Notice (SCN) enclosing a copy of the enquiry officerreport dated 09-Feb-09. The report alleged violation of provisions of- Regulation 4 (a), (b), (c) and (d) of the SEBI (PFUTP) Regulations, 1995

- Regulation 7 read with Clauses A (1), (2), (3) & (4) and (5) of the Code ofConduct for Stock Brokers, specified in Schedule II of the Stock Broker Regulations

The matter pertains to transactions undertaken for certain clients (alleged KPentities) between December 2000 and February 2001 in the scrip Adani Exports

Ltd. by Investsmart India Limited (IIL).


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Comprehensive response was filed with SEBI on 29-Sep-09 submitting that therewas no violation committed on the aspects brought out in the SCN. It was submittedthat- the transactions under question were only delivery based sale transactions andcould not have resulted in the upward price movement contended in the said notice- the sale transactions were executed only on 3 days in December 2000, during

which time, the price of the security had risen by only 3.69% (INR 22)- Basis media reports, IIL had stopped all further dealings for the said clientseffective 07-Mar-01, much before the investigations into the alleged pricemanipulation.

HISL received SEBI letter dated 28-Jun-11 advising a hearing before the WholetimeMember (WTM) but sought adjournments to the same as it was proposed to settle thematter under consent proceedings. On 28-Sep-11, HISL voluntarily filed consentapplication with SEBI on a 'no-fault' basis and thereafter vide letter dated 15-Feb-12filed revised consent/ settlement term of INR 25 Lakhs. SEBI vide letter dated 18-Sep-12 has rejected the said consent application. HISL awaits further communication

in this regard from SEBI."

5. Services Offered

The Portfolio Manager offers the following service:

Non-Discretionary Investment Advisory Service

The present investment objectives and policies are concisely stated in the documentbelow for easy understanding of the potential investor.

Investment ObjectivesThe Investment Objectives are based on the clients Risk Tolerance, as generated by theclient completing the Risk Profiler. There are five levels of risk tolerance defined,depending on the level of risk that the client is willing to take. The five levels of risktolerance from the lower to the higher degree of risk tolerance for the client are: a) RiskAverse, b) Conservative, c) Balanced, d) Growth and e) Aggressive.

a)Risk AverseObjective is primarily preserving the original principal over the investment time horizonwith low volatility of principal value and a low level of capital risk. You are willing to

accept lower (on a historical basis relative to more traditional debt/equity investments)returns in exchange for high liquidity/lower risk.

b)ConservativeObjective is to obtain a continuing income stream from reliable debt and equityinvestments, and other sources. You are willing to forego capital appreciation and toutilise principal (potentially at a loss), if necessary, to fund the desired level of sustainedcurrent income.


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6. Risk factors

General Risk Factors

Investments in Securities are subject to market risks and the Portfolio Managerdoes not, in any manner whatsoever, assure or guarantee that the objectives of the

Services will be achieved.

The Portfolio Manager is neither responsible nor liable for any losses resultingfrom the operations of the Portfolios by the Client, or any investment adviseprovided to the client.

The Portfolio may be affected by the changes in the interest rates prevailing forfixed income securities and volumes of trading.

The Portfolio may be affected by settlement periods and transfer procedures.

The liquidity of the investments is inherently restricted by trading volumes in theSecurities of companies in which the Services are offered.

Clients under the Services are not being offered any guaranteed/assured returns.

The Non-Discretionary Investment Advisory Service is subject to risk arisingfrom the investment objective, investment strategy and asset allocation selectedby the client.

The Non-Discretionary Investment Advisory Service is subject to risk arising outof non-diversification when the Portfolio is not sufficiently diversified byinvesting in a wide variety of instruments so as to spread the individual risk of theinvestment across a basket of investments in the portfolio.

Past investment performance of the Portfolio Manager with respect to Non-Discretionary Investment Advisory Service does not indicate its futureperformance.

Securities investments are subject to market and other risks and there can be noguarantee against loss resulting from investing in the Portfolio(s) of the Client.The various factors which may impact the value of the Portfolios' investmentsinclude, but are not limited to, fluctuations in the equity and bond markets,fluctuations in interest rates, prevailing political and economic environment,changes in government policy, factors specific to the issuer of the securities, taxlaws, liquidity of the underlying instruments, settlement periods, trading volumesetc.

Investment advise provided by the Portfolio Manager to the Client may notalways be profitable.


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The tax benefits described in this Disclosure Document are as available under thepresent taxation laws and are available subject to conditions. The informationgiven is included for general purpose only and is based on advice received by thePortfolio Manager regarding the law and practice in force in India and the Clientsshould be aware that the relevant fiscal rules or their interpretation may changeand will not be applicable to the customers not resident in India. As is the case

with any investment, there can be no guarantee that the tax position or theproposed tax position prevailing at the time of an investment in the Portfolio willendure indefinitely. In view of the individual nature of tax consequences, eachinvestor is advised to consult his/ her own professional tax advisor.

Prospective investors should review / study this Disclosure Document carefullyand in its entirety and shall not construe the contents hereof or regard thesummaries contained herein as advice relating to legal, taxation, or financial /investment matters and are advised to consult their own professional advisor(s) asto the legal, tax, financial or any other requirements or restrictions relating to thesubscription, gifting, acquisition, holding, disposal (sale or conversion into

money) of Portfolio and to the treatment of income (if any), apitalization,capital gains, any distribution, and other tax consequences relevant to theirportfolio, acquisition, holding, apitalization, disposal (sale, transfer orconversion into money) of portfolio within their jurisdiction of nationality,residence, incorporation, domicile etc. or under the laws of any jurisdiction towhich they or any managed funds to be used to purchase/gift portfolio ofsecurities are subject, and also to determine possible legal, tax, financial or otherconsequences of subscribing / gifting, purchasing or holding portfolio ofsecurities before making an investment.

Investments are subject to certain risks viz. limited liquidity in the market,

settlement risk, impeding readjustment of portfolio composition, highly volatilestock markets in India, etc. Such loss could arise due to factors which, by way ofillustration, include, default or non-performance of a third party, companysrefusal to register a security due to legal stay or otherwise, or disputes raised bythird parties. Mis-judgment by the Portfolio Manager or his incapacitation due toany reason, however remote is also a risk. Thus the investment in Indian capitalmarkets involves an above average risk for investors, compared with other typesof investment opportunities. Investments will be of a longer duration compared totrading in securities. There is a possibility of the value of investment and theincome there from falling as well as rising, depending upon the market situation.There is also a risk of total loss of value of a Security and possibilities of

recovery of loss in investments only through legal process.

The investments made are subject to external risks such as War, naturalcalamities, policy changes of Local / International Markets, which affects stockmarkets.

Any policy change / technology change / obsolescence of technology would affectthe investments made in a particular industry.


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The Client has perused and understood the disclosures made by the PortfolioManager in the Disclosure Document before entering into the Investment ServicesAgreement.

The value of the Portfolio may increase or decrease depending upon variousmarket forces affecting the capital markets, such as de-listing of Securities,

market closureor a relatively small number of scripts accounting for a largeproportion of trading volume.

The Client stands a risk of loss due to lack of adequate external systems fortransferring, pricing, accounting and safekeeping or record keeping of securities.Transfer risk may arise due to the process involved in registering the shares inphysical and demat, while price risk may arise on account of availability of shareprice from stock exchanges during the day and at the close of the day.

Equity instruments carry both company specific and market risks and hence noassurance of returns can be made for these investments.

Macro-economic risks: Overall economic slowdown, unanticipated corporateperformance, environmental or political problems, changes to governmentpolicies and regulations with regard to industry and exports may have direct orindirect impact on the investments, and consequently the growth of theinvestments held in the Portfolio of the client.

Liquidity Risks: Liquidity of investments in equity related securities are oftenrestricted by factors such as trading volumes, settlement periods and transferprocedures. If a particular Security does not have a market at the time of sale, thenthe Investment portfolio of the client may have to bear an impact depending on its

exposure to that particular security. While Securities that are listed on a stockexchange generally carry a lower liquidity risk, the ability to sell theseinvestments is limited by overall trading volume on the stock exchange. Moneymarket Securities, while fairly liquid, lack a well-developed secondary market,which may restrict the selling ability of such Securities, thereby resulting in a lossto the Investment Portfolio of the client, until such Securities are finally sold.

Credit Risk: Debt Securities are subject to the risk of the issuers inability tomeet the principal and interest payment on the obligations and may also besubject to the price volatility due to such factors as interest sensitivity, marketperception, or the credit worthiness of the issuer and general market risk.

Interest Rate Risk: Clients intending to invest in securities linked to interest are

aware that such securities are associated with movements in interest rate, whichdepend on various factors such as government borrowing, inflation, economicperformance etc. The value of investment will appreciate/depreciate if the interestrates fall/rise. Fixed income investments are subject to the risk of interest ratefluctuations, which may accordingly increase or decrease the rate of returnthereon. Acts of state, or sovereign action, acts of nature, acts of war, civildisturbance etc. may also cause the Interest rate to fluctuate and accordinglyimpact the market value of fixed income investments.


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Legal Risk: The Client stands the risk of total loss of value of an asset, whichforms part of the Portfolio. The Client also bears the risk of its recover throughlegal process, which could be expensive. Some of the risks by way of illustrationinclude default or non performance of a third party, companys refusal to register

a Security due to legal stay or otherwise or disputes raised by third parties.

Derivative risks: The derivatives will entail a counter party risk to the extent ofamount that can become due from the party. The cost of the hedge can be higherthan adverse impact of market movements. An exposure to derivatives can alsolimit the profits from a genuine investment transaction. Efficiency of a derivativesmarket depends on the developments of a liquid and efficient market forunderlying securities and also on the suitable and acceptable benchmarks.

Mutual Fund Risk: This risk arises from investing in units of mutual funds. Riskfactors inherent to equities and debt securities are also applicable to investmentsin mutual fund units. In addition, events like change in name of the Fund Manager

of the Scheme, take over and mergers of mutual funds, foreclosure of Schemes orplans, change in government policies could affect performance of the investmentin mutual fund units.

Price/Volatility Risk: Equity Markets can show large fluctuations in prices, evenin short periods of time. Investors should be aware of this and only invest inequity or equity related products if their investment horizon is long enough tosupport these important price movements.

General Risk Factors Disclaimer: The investment pattern as advised by the Portfoliomanager should not be construed as an offer or recommendation or solicitation of any

offer to buy or sell or hold any security or other financial instruments. The

material/information contained herein is not to be construed as tax, investmentprofessional or legal advice. In the event that a client seeks to incest its funds on the basis

of the advice of the Portfolio Manager, the client must do so at its sole risk and must

consult with his/her own legal, business, professional and tax advisors to determine the

appropriateness and the consequences of such an investment and arrive at anindependent evaluation of the same. HSBC. Shall not, in any manner, be liable for the

consequences arising out of such investment made by the client. The Client assumes the

entire risk of any use made of the statement/material/information enclosed/provided

herein. HSBC And its Employees/Agents are no in any way representing as to having anyinterest therein and to the truth, and/or completeness, and/or accuracy of any

information contained herein/attached here with and the same us subject to change

without notice or intimation and is intended only for the person or entity to which it isaddressed to and may contain confidential and/or privileged material and is not for any

type of circulation. It may not (directly or indirectly) be reproduced, further distributed

to any person or published, in whole or in part, for any purpose whatsoever. Theinvestment patterns as advised may not be suitable for all investors. Clients/Investors

churning their portfolio based on this Portfolio Manager advice shall be doing so

entirely at his/her risk and HSBC and its Employees/Agents shall not be liable for thesame.


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7. Client Representation7.1

Category of clients No. of

Clients

Assets Under

Management

(Rs. Cr)

Discretionary/ Non

Discretionary (if

available)Associates / Group

companies

As at 31 March2013

1 INR 111 CR Non discretionaryInvestment advisoryservices

As at 30 September2012


As at 31 March2012

1 INR 40 CR Non discretionaryInvestment advisory

servicesAs at 31 March2011

1 INR 252 CR. Non discretionaryInvestment advisoryservices

As at 31 March2010


Others

As at 31 March2013

1240 INR 13793 CR Non discretionaryInvestment advisory

servicesAs at 30 September2012


As at 31 March2012


As at 31 March2011


As at 31 March

2010

1343 INR 4916 CR. Non discretionary

Investment advisoryservices

7.2. Complete disclosure in respect of transactions with related parties as per the

standards specified by the Institute of Chartered Accountants of India.

Please refer Annexure I


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8. The Financial Performance of the Portfolio Manager (based on auditedfinancial statements)

Balance Sheet (Currency: Indian rupees in thousands)

2011-12 2010-11 2009-10

A) CAPITAL AND

LIABILITIES

Capital 44,991,660 44,991,660 44,991,660

Reserves and surplus 104,545,247 91,883,062 76,360,692

Deposits 614,233,213 541,067,115 557,478,247

Borrowings 104,774,729 50,263,098 59,208,139

Other liabilities andprovisions

223,697,929 183,279,813 166,297,148

TOTAL 1,092,242,778 911,484,748 904,335,886

B) ASSETS

Cash and balances withReserve Bank of India

39,295,649 48,578,316 39,716,165

Balances with banks andmoney at call and shortnotice

76,178,823 33,543,694 41,823,856

Investments 403,238,487 372,790,845 412,890,656

Advances 355,122,822 274,006,211 234,747,670

Fixed assets 8,420,477 8,744,309 8,928,756

Other assets 209,986,520 173,821,373 166,228,783

TOTAL 1,092,242,778 911,484,748 904,335,886

Contingent liabilities 10,096,856,027 9,911,193,025 8,509,535,228

Bills for collection 1,28,621,115 93,972,841 89,817,220


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Profit and Loss

(Currency: Indian rupees in thousands)

2011-12 2010-11 2009-10

INCOME

Interest earned 61,962,603 51,949,586 51,658,815

Other income 22,007,660 17,886,488 21,354,836

TOTAL 83,970,263 69,836,074 73,013,651

EXPENDITURE

Interest expended 24,505,025 18,591,228 19,146,572

Operating expenses 24,182,963 21,909,495 19,501,215

Provisions and contingencies 15,405,573 14,059,416 26,266,735

TOTAL 64,093,561 54,560,139 64,914,522

Net profit for the year 19,876,702 15,275,935 8,099,129

Profit brought forward 18,616,495 15,468,006 9,264,515

TOTAL 38,493,197 30,743,941 17,363,644

APPROPRIATIONS

Transfer to statutory reserve 4,969,176 3,818,984 2,024,782

Transfer to (from) investmentreserve

704,987 297,636 (335,667)

Transfer to specific reserve 237,204 213,348 206,523

Transfer to Remittable Surplus

retained in India for Capital toRisk-weighted Assets Ratio(CRAR) requirements

3,790,834 7,797,478 -

Profit Remitted to Head Office 7,670,528

Transfer to Capital Reserve -Surplus on sale of immovableproperties

236,150

Balance carried over to balancesheet

20,884,318 18,616,495 15,468,006

TOTAL 38,493,197 30,743,941 17,363,644


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9. Nature of expenses

The following are the general costs and expenses to be borne by the client availing theservices of the Portfolio Manager.

Portfolio Advisory Charges Fixed Fee, payable quarterly (based on theoverall relationship with PortfolioManager) or as a % based fee, charged onthe average quarterly Direct EquityPortfolio Value, payable quarterly, subjectto a maximum of 1.50%, plus anyapplicable governmental taxes and levies.

Portfolio Administration Charges Fixed Fee, payable quarterly (based on theoverall relationship with PortfolioManager) or as a % based fee, charged on

the average Direct Equity Portfolio Value,payable quarterly, subject to a maximum of1.50% ,plus any applicable governmentaltaxes and levies.

Direct Equity Transaction SettlementCharges for purchases/sales

Transaction Charges: Subject to amaximum of 1.4% of the value of thetransaction, plus any applicablegovernmental taxes and levies.

Mutual Fund Service Fee Fixed Fee, (based on the overall

relationship with Portfolio Manager) or asa % based fee, charged on the averagemonthly Equity and Equity oriented mutualfund schemes Portfolio Value, payablemonthly, subject to a maximum of 1.50%,plus any applicable governmental taxes andlevies.

Minimum Service Charge for availment ofPrivate Banking Services

Fixed fee-upto a maximum of INR 30,000per month, plus any applicablegovernmental taxes and levies.

Mutual Fund TransactionCharges

Transaction Charges: Subject to amaximum of 2% of the value of thetransaction, plus any applicablegovernmental taxes and levies chargeableon the transaction value of the Equity andEquity Oriented mutual funds.


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Advisory fees on Bond transactions % based fee, charged on the Bondtransaction value, subject to a maximum of1% ,plus any applicable governmentaltaxes and levies.

Total Portfolio Fee Total Portfolio fee levied based on the

daily average Total Investment PortfolioValue with HSBC. Total InvestmentPortfolio Value with HSBC includes AllMutual Funds (Equity, Debt, Hybrid etc.),Stocks and Bonds covered under AdvisoryModule. It does not include Equity-LinkedDebentures and PMS (PortfolioManagement Services) with third-partyproviders.It is subject to a maximum of 0.50%, plusany applicable governmental taxes and

levies.Stamp duty and service charges Actuals.

Demat Charges Demat Charges As levied by the Depository.

Demat Account Maintenance Charges Flat fee, subject to maximum of INR 600,plus applicable governmental taxes andlevies payable annually

RBI Approvals for Non ResidentIndividuals (For the purpose of investing

in stocks and debentures in the IndianStock Markets through the PortfolioInvestment Scheme. It is charged as a flatone-time fee per approval)

Flat fee, subject to maximum of INR 500,plus applicable governmental taxes and

levies payable annually

Other costs which shall be debited to the Clients account include, but are not restrictedto:Transfer Stamp ChargesCustodian FeesClearing Fee, Stock Exchange Fee & SEBI Turnover Fee

Legal Fees (including CA Certification charges)Long Distance courier and call charges, if any, specifically made on behalf of the ClientOut of pocket expenses incurred directly in respect of Clients business by the Custodianor the Portfolio Manager.


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10. Taxation Implications and Benefits for Clients-Discloses the implications of

investments in securities and the tax provisions on Income/ Loss or Tax Deduction

at Source on various investors.

It may be noted that the information given hereinafter is only for general informationpurposes and is based on the advice received by the Portfolio Manager regarding the law

and practice currently in force in India and the Investors should be aware that the relevantfiscal rules or their interpretation may change or it may not be acceptable to the taxauthorities. As is the case with any interpretation of any law, there can be no assurancethat the tax position or the proposed tax position prevailing at the time of an investmentin the Scheme/option will be accepted by the tax authorities or will continue to beaccepted by them indefinitely.

Further statements with regard to tax benefits mentioned herein below are mereexpressions of opinion and are not representations of the Portfolio Manager to induce anyinvestor to invest, whether directly from the Portfolio Manager or indirectly from anyother persons, by the secondary market operations. In view of the above, and since the

individual nature of tax consequence may differ in each case on its merit and facts, eachInvestor is advised to consult his/her or its own professional tax advisor with respect tothe specific tax implications arising out of its particular Portfolio or Investmenttransactions made, as an investor.

In view of the above, it is advised that the investors appropriately consult their

investment/tax advisors in this regard

i. GeneralIn view of the individual nature of tax consequences, each client is advised to consult his

or her tax advisor with respect to the specific consequences to him/her for the Investmenttransactions or Portfolio. The following provisions are as per the existing Income TaxAct, 1961 (the Act). The Portfolio Manager shall not be responsible for assisting in or

completing the fulfillment of the clients tax obligations.

Tax deduction at source

If any tax is required to be withheld on account of any present or future legislation, thePortfolio Manager will be obliged to act in accordance with the regulatory requirement inthis regard.

Advance tax installment obligations

It will be the responsibility of the Client to meet the advance tax obligation installmentspayable on the due dates under the Income tax Act, 1961.


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ii. Interest on SecuritiesIncome by way of interest on securities taxed at the slab rates applicable to the assesseeunder the head Income from other sources

iii. DividendDividends declared, distributed or paid on or after April 1, 2003, by domestic companieswill be exempt in the hands of the shareholder recipient, but a tax on distributed profits of15 percent (as increased by surcharge @ 5 per cent) will be payable by the domesticcompany.

Income distributed on or after April 1, 2003, by a mutual fund specified u/s 10(23D) ofthe Act will be exempt in the hands of the unitholders, but a tax on distributed incomewill be paid as under:

In case of distribution by a money market mutual fund or a liquid fund: 25 per cent (as increased by surcharge @10 per cent#) when income is distributed to

any person being individual or Hindu Undivided Family and NRI; and 30% (plus surcharge @ 10 per cent#) when income is distributed to Domestic Company

In case of distribution by a Debt fund other than money market and liquid fund: 12.5* per cent (plus surcharge @ 10 per cent#) in case of distribution to an individual or

Hindu Undivided Family and NRI; and 30 per cent (plus surcharge @10 per cent#) when income is distributed to Domestic

Company.

In case of distribution by a IDF fund:

25 per cent (plus surcharge @ 10 per cent#) in case of distribution to an individual orHindu Undivided Family; and

30 per cent (plus surcharge @10 per cent#) when income is distributed to DomesticCompany.

5** per cent (plus surcharge @ 10 per cent#) in case of distribution to NRI and

However, no tax on such distributed income is payable by an equity oriented mutual fund.

Further, the tax and surcharge on distribution as stated above will be increased by the EducationCess @ 2% and Secondary and Higher Education Cess @ 1%.

# increase in surcharge @10% as per finance Act 2013 effective from 01 April 2013.

* 25 % as proposed by Finance Act 2013 effective from 01 June 2013** 5 % as proposed by Finance Act 2013 effective from 01 June 2013

iv. Capital Gains TaxProfit on sale of investments, (being shares in a company or any other securities listed ona recognised stock exchange in India or units of the Unit Trust of India established underthe Unit Trust of India Act, 1963 (52 of 1963) or units of a Mutual Fund specified under


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Section 10(23D)) held for a period of more than 12 months (36 months in case of anyother investments) immediately preceding the date of transfer, will be treated as longterm capital gains; in all other cases, it would be treated as short-term capital gains. Thetaxability of long-term and short-term capital gains is discussed below:

A. Transactions in securities on recognized stock exchange and in units of an equityoriented fund:

Long term Capital Gain

Long term capital gains on sale of listed securities and on units of an equity oriented fundare exempt from tax when the transactions for sale take place on recognized stockexchanges and are subject to the securities transaction tax (STT). However, such longTerm Capital Gains arising to a company shall be taken into account in computing the book profitand income tax payable u/s 115JB of the Act

Short term Capital Gain

Short term capital gains on sale of listed securities and units of an equity oriented fundare taxable at the rate of 15 percent (plus surcharge and education cess whereverapplicable) ,when the transactions for sale take place on recognized stock exchanges andare subject to the STT

B. Transactions in Other securities or transactions not on recognized stock exchangesLong term Capital Gain

On long-term capital gains (other than long-term capital gains exempted by Sec 10(38) of

the Act discussed elsewhere in this document) in respect of:

security listed in any recognized stock exchange in India; or

unit of Mutual Fund (whether listed in a recognized stock exchange or not); or

unlisted securities (means other than listed securities)

For Domestic Companies:

Long-term Capital Gains will be chargeable under Section 112 of the Income-tax Act,1961, @20 percent^ with indexation or 10 percent^ without indexation.

For Resident Individuals and HUFs :

Long-term Capital Gains will be chargeable under Section 112 of the Income-tax Act,1961, @ 20 percent^ with indexation or 10 percent ^without indexation.

Where the taxable income as reduced by long term capital gains is below the exemptionlimit, the long term capital gains will be reduced to the extent of the shortfall and only thebalance long term capital gains will be charged at the flat rate of 20 percent^.


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For NRIs:

Long-term capital gains on sale of unlisted securities will be taxed at the rate of 10percent^. However, no benefit of Cost Inflation Index is available and the requirement ofcomputation of gains in foreign exchange will not apply.

However, Long Term Capital Gains (other than unlisted securities) are taxable @ 20percent^ with indexation or 10 percent^ without indexation.

These are the tax rates applicable to capital gains, in case the rate of tax is lower than20% and if the NRI does not have a Permanent Account Number, then for the purpose ofTDS, the withholding tax rate would be 20%

The tax rates are subject to DTAA benefits available to NRIs.

^ Plus applicable surcharge, if any and education cess at 3 percent on tax and surcharge, if any.

A surcharge of 10% will be applicable to the capital gains tax rate in case the total income of the

Individual / HUF and NRI exceeds INR 1 Crore

In case of a domestic company, surcharge of 5% will be levied if the total income exceeds Rs. INR 1 Crore,

and 10 % if the total income exceeds INR 10 Crore

v. Securities Transaction TaxSTT is levied on the value of taxable securities transactions as follows:

Sr.

No.

Taxable securities transaction Rate (per cent) Payabl

Upto 31

May 2013

from 01 June

20131 Purchase of an equity share in a company or a

unit of an equity oriented fund, where

(a) the transaction of such purchase is entered into in

a recognized stock exchange; and

(b) the contract for the purchase of such share or unit

is settled by the actual delivery or transfer of

such share or unit

0.1Nil Purchase

2 Sale of an equity share in a company or a unit of an

equity oriented fund, where -

(a) the transaction of such sale is entered into in a

recognized stock exchange; and

(b) the contract for the sale of such share or unit is

settled by the actual delivery or transfer of such

share or unit

0.1 0.001 Seller

3 Sale of an equity share in a company or a unit of

an equity oriented fund, where

(a) the transaction of such sale is entered into in a

0.025 0.025 Seller


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Commodity Transaction Tax (CTT)

CTT is proposed to be levied (effective from a date to be notified) on the value of taxablecommodities transactions as follows:

Transaction Rate Payable by

Sale of commodity derivative (other than agriculturalcommodities) entered in a recognised association

0.1% Seller

Disclaimer: The above is only a summary; the Client should take proper advice on the

above matters through a qualified Chartered Accountant/Tax Practitioner.

11. Accounting PoliciesThe offering envisages Non-Discretionary Investment Advisory Service and hence, theportfolio transaction per se will not be reflected in the books of the portfolio manager.However, the fee-based income of the portfolio manager will be accounted based on theguidelines issued from time to time by Reserve Bank of India/Securities Exchange Boardof India/Institute of Chartered Accountants of India.

recognized stock exchange; and

(b) the contract for the sale of such share or unit is

settled otherwise than by the actual delivery or

transfer of such share or unit

4 (a) Sale of an option in securities 0.017 0.017 Seller

(b) Sale of an option in securities, where option is

exercised

0.125 0.125 Purchas

(c) Sale of a futures in securities 0.017 0.01 Seller

5 Sale of a unit of an equity oriented fund to the Mutual

Fund

0.25 0.001 Seller

6 Sale of unlisted equity shares under an offer for sale as

part of an initial public offer and shares of the company

are subsequently listed on the stock exchange

0.2 0.2 Seller


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12. Investor Services

12.1 Name, address and telephone number of the investor relation officer who shall

attend to the investor queries and complaints.

Name of the Investor Relations Officer

Prashanti NagarkattiChief Nodal OfficerThe Hongkong and Shanghai Banking Corporation LimitedShiv, CTS No. 139-140B.Sahar RoadVile Parle EastMumbai 400 057

Email:[email protected]>

You may also contact the Nodal Officer Team between 09:30 AM to 06:00 PM, Monday

to Friday on contact number: +91 44 - 3911 1217, fax number : +91-044-30134046

Grievance Redressal and dispute settlement mechanismThe Portfolio Manager has constituted a Non-Discretionary Investment Advisory ServiceGrievance Redressal Cell (NDIASGRC).All correspondence in this regard shall be addressed to:

NDIAS Grievance Redressal Cell:

The Hongkong and Shanghai Banking Corporation Limited.

Private Banking department,1stFloor, 52/60, Mahatma Gandhi Road,Fort, Mumbai: 400 001

MechanismThe Portfolio Manager shall attend to and address any client query or concern as soon aspossible to mutual satisfaction.The clients shall send a written complaint addressed to the NDIASGRC or Nodal Officer. Onreceipt of the complaint, the NDIASGRC or Nodal Officer/team on a best effort basis shallresolve the complaint within 10 days. In the event the complaint is not resolved within 10days, the client and the Portfolio Manager and any person designated by the PortfolioManager shall endeavor to resolve the complaint by mutual dialogue and the dispute shall beattempted to be settled amicably by prompt negotiations between parties, failing which itshall be resolved in terms of the agreement.As per the terms of Investment service agreement any dispute, controversy or claims arising

out of, or relating to, agreement or the breach, termination or invalidity thereof, shall besettled by arbitration in accordance with the provisions of the Indian Arbitration andConciliation Act, 1996. The arbitral tribunal shall comprise of a sole arbitrator appointed bythe Bank. The place of arbitration shall be Mumbai and any award whether interim or final,shall be made, and shall be deemed for all purposes between the Parties to be made, inMumbai. The arbitral procedure shall be conducted in the English language and any award orawards shall be rendered in English. The procedural law of the arbitration shall be Indianlaw.
mailto:[email protected]:[email protected]:[email protected]


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Annexure I

Related parties Transactions

1. The related parties of the Bank are broadly classified as follows:1.1.Parent:

The Hongkong and Shanghai Banking Corporation Limited, Hong Kong is theHead office of the Bank and HSBC Holdings plc is the ultimate holding companyof the bank.

1.2Branch OfficesBranch offices comprise all branches of The Hongkong and Shanghai Banking

Corporation Limited outside India.

1.3Fellow subsidiariesFellow subsidiaries comprise companies, which have a common ultimate holdingcompany, HSBC Holdings plc, i.e. HSBC Bank plc, Hang Seng Bank Limited,HSBC Bank Brasil S.A Banco Multiplo, HSBC Global Resourcing (UK)Limited, HSBC Securities and Capital Markets (India) Private Limited, HSBCAsset Management (India) Private Limited, HSBC Professional Services (India)Private Limited, HSBC Electronic Data Processing India Private Limited, HSBCOperations and Processing Enterprise (India) Private Limited, HSBC Private

Equity Management (Mauritius) Limited (Liaison office), HSBC SoftwareDevelopment (India) Private Limited, HSBC Global Shared services (India)Private Limited, HSBC Bank of Middle East, HSBC Bank Canada, HSBC PrivateBanking Holdings (Suisse) SA, HSBC Republic Bank (UK) Ltd., HSBC BankMalaysia Berhad, HSBC Trinkaus and Burkhardt AG, British Arab CommercialBank Limited, HSBC Bank Mauritius Limited, HSBC Bank Australia Ltd, HSBCBank Argentina S.A., HSBC Bank Egypt S.A.E., SB HSBC Bank KazakhistanJSC, HSBC Bank International Limited, HSBC France, HSBC InvestDirect(India) Limited, HSBC InvestDirect Securities (India) Ltd, Investsmart FinancialServices Ltd, HSBC InvestDirect Distribution Services (India) Limited, IL&FSInvestsmart Asia Pacific Private Limited, HSBC InvestDirect Academy for

Insurance and Finance (India) Ltd, Investsmart Insurance Agency PrivateLimited, HSBC Bank USA, N.A


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1.4 Key management personnel and subsidiariesThe Chief Executive Officer (CEO) is considered the Key ManagementPersonnel of the Bank. HSBC Agency (India) Private Limited is the onlysubsidiary of the Bank.

2 The transactions of the Bank with related parties are detailed below exceptwhere there is only one related party (i.e. key management personnel and

subsidiary):(Rs 000)

Parent Fellow Subsidiaries

31 March 2012 31 March 2011 31 March 2012 31 March 2011

Interest Paid - - 748,834 442,618

Interest Received - - 5,449 10,255

Rendering of Services - - 382,382 394,897Receiving of Services 1,842,955 1,377,973 1,890,294 1,809,665

(Rs 000)

Branch offices

31 March 2012 1 March 2011Interest Paid 180,653 113,723Interest Received 5,215 50,303Rendering of Services 37,599 10,503Receiving of Services 2,749,890 189,745

3 Balances with related parties are as follows:(Rs 000)

Parent

As at

1 March

012

Maximum1during

the year 2012

As at

31 March2011

Maximum duringthe year 2011

Borrowings - - - -Deposit - - - -Placement ofdeposits - - - -Advances - - - -

Nostro balances - - - -Other liabilities 1,842,955 1,842,955 1,377,973 1,377,973Non FundedCommitments - - - -


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(Rs 000)

Branch offices

As at

31 March

2012

Maximum1

during the year

2012

As at

31 March2011

aximum duringhe year 2011

Borrowings 46,126,837 69,404,789 - 27,647,297Deposit 1,186,026 2,506,422 127,499 1,669,235

Placement ofdeposits 29,075 15,962,680 10,297 31,009,021Advances - - - -Nostro balances 34,026 260,060 127,054 261,375Positive MTMs 8,825,815 15,032,393 10,466,810 12,583,014Negative MTMs 11,108,441 12,794,601 8,995,679 13,647,496Derivativenotionals

398,889,141 410,301,121 332,189,104 390,704,703

Non FundedCommitments 2,227,240 2,275,380 3,795,559 3,910,248

(Rs 000)

Fellow

Subsidiaries

As at

1 March

012

Maximum1

during the year

2012

As at

31 March2011

Maximum duringthe year 2011

Borrowings 7,631,521 19,392,059 8,932,523 17,887,122Deposit 21,473,723 52,104,197 21,811,159 25,263,476Placement ofdeposits 25,496,972 25,745,980 12,212,785 17,844,435Advances - -Nostro balances 11,728,795 12,155,550 757,327 5,930,433

Positive MTMs 31,183,415 42,951,638 31,526,403 36,392,860Negative MTMs 26,999,498 32,617,848 18,497,702 26,911,321Derivativenotionals

955,278,877 1,091,001,952 882,039,878 958,861,262

Investments 100 100 100 200Non FundedCommitments 1,221,426 1,443,626 9,554,940 10,849,149

1Maximum balances are determined based on comparison of the total outstanding

balances at each quarter end during the financial year.

Material related party transactionsA related party transaction is disclosed as a material related party transaction wherever itexceeds 10% of all related party transactions in that category. Following are such relatedparty transactions. All amounts are Indian Rupees in thousands.


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Interest received:

Interest received from The Hongkong and Shanghai Banking Corporation Limited,Hongkong Branch Rs. 4,002 (previous year:Rs. 18,742), The Hongkong and ShanghaiBanking Corporation Limited, Singapore branch Rs. 1,213 (previous year: Rs. 31,515)and Hang Seng Bank Limited Rs. 3,825 (previous year: Rs. 46) HSBC Bank plc Rs.1,390 (previous year: Rs. 9,979).

Interest paid:

Payment of interest to The Hongkong and Shanghai Banking Corporation Limited,Hongkong Branch Rs. 180,438 (previous year: Rs. 113,259), HSBC SoftwareDevelopment (India) Private Limited Rs. 261,552 (previous year: 38,177) and HSBCElectronic Data Processing India Private Limited Rs. 354,364 (previous year: 256,059).

Rendering of services:Income from HSBC InvestDirect Securities (India) Limited Rs. 42,399 (previous year:Rs.32,325), HSBC Electronic Data Processing India Private Limited Rs. 118,919(previous year: Rs. 160,924), HSBC Securities and Capital Markets (India) Private

Limited Rs. 77,540 (previous year: Rs. 47,919) and HSBC Asset Management (India)Private Limited Rs. 51,106 (previous year:Rs. 35,301).

Receiving of services:

Expenses for receiving of services from The Hongkong and Shanghai BankingCorporation, Hongkong Branch Rs. 2,674,227 (previous year: Rs. 186,635), HSBCElectronic Data Processing India Private Limited Rs. 1,351,093 (previous year: Rs.1,385,751) and The Hongkong and Shanghai Banking Corporation Limited, Hongkong(Head Office) Rs. 1,842,955 (previous year: Rs. 1,377,973).

Borrowings:The Hongkong and Shanghai Banking Corporation, Hong Kong branch Rs. 46,126,837(previous year: Nil) and HSBC Private Banking Holdings (Suisse) SA, Rs. 7,631,250(previous year: Nil).

Placement of deposits :Hang Seng Bank Limited Rs. 25,437,500 (previous year: Rs. 12,122,850).

Nostros:Fellow subsidiaries-HSBC Bank, USA, N.A- Rs. 11,653,590 (previous year: Nil).

Deposits:HSBC Software Development Rs. 9,130,943 (previous year: Rs. 5,525,721) and HSBCElectronic Data Processing (India) Private Limited Rs. 7,467,494 (previous year: Rs.7,257,689).


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Non Funded Commitments:

HSBC Securities and Capital Markets (India) Private Limited Rs. 809,750 (previous year:Rs. 933,000) and The Hongkong and Shanghai Banking Corporation, Singapore Rs.2,046,193 (previous year: Rs. 1,567,136).

Notionals: The Hongkong and Shanghai Banking Corporation Limited, Hongkong

Branch Rs. 303,857,094 (previous year: Rs. 263,215,243) Hong Kong Branch of HBAPRs. 94,532,674 (previous year: Rs. 68,873,862) HSBC Bank plc Rs. 663,669,360(previous year: Rs. 630,751,778) HSBC Bank USA, N.A Rs.193,269,857 (previous year:Rs. 178,439,928).

Positive MTM: The Hongkong and Shanghai Banking Corporation Limited, HongkongBranch Rs. 8,172,782 (previous year: Rs. 9,175,981) Hong Kong Branch of HBAP Rs.652,890 (previous year: Rs. 1,290,539) HSBC Bank plc Rs. 25,557,772 (previous year:Rs. 28,315,776) HSBC Bank USA, N.A Rs. 2,846,152 (previous year: Rs. 1,736,165).

Negative MTM: The Hongkong and Shanghai Banking Corporation Limited, Hongkong

Branch Rs. 9,565,113 (previous year: Rs. 7,971,864) Hong Kong Branch of HBAP Rs.1,542,623 (previous year: Rs. 1,023,815) HSBC Bank plc Rs. 18,444,358 (previous year:Rs. 13,554,277) HSBC Bank USA, N.A Rs. 7,690,020 (previous year: Rs. 4,211,439).


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FORM CSecurities and Exchange Board of India (Portfolio Managers) Regulations, 1993

(Regulation 14)

The Hongkong and Shanghai Banking Corporation Limited, India branches

52/60 Mahatma Gandhi Road,Fort, MUMBAI 400001

Telephone No. : (022) 2268 1180Fax No. : (022) 2268 5577E-mail :[email protected]

We confirm that:

i) the Disclosure Document forwarded to SEBI is in accordance with the SEBI

(PortfolioManagers) Regulations, 1993 and the guidelines and directives issued by SEBIfrom time to time;

ii) the disclosures made in the document are true, fair and adequate to enable theinvestors to make a well informed decision regarding entrusting the management of theportfolio to us/ Investment in the Portfolio Management Services;

iii) the Disclosure Document has been duly certified on June 10, 2013 by Mr Vinay D.Balse ,Partner, M/s N. M Raiji & Co, Universal Insurance Building, Pherozshah

Mehta Road, Mumbai 400 001, Tel No. 2287 0068, bearing registration no. 39434(enclosed is a copy of the chartered accountants' certificate to the effect that the

disclosures made in the document are true, fair and adequate to enable the investors tomake a well informed decision).

Date: 10 June 2013

SD/-____________________________Stuart MilnePrincipal OfficerPlace: Mumbai

Name and address of the Principal Officer:Name: Stuart Milne

The Hongkong and Shanghai Banking Corporation Limited

52/60, M.G.Road, Fort Mumbai 400 001

NOTE F C d f h t d t t tifi t t th t ff t t t d b
mailto:[email protected]:[email protected]:[email protected]:[email protected]

non_desc_investment_advisory.pdf

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