Schemewise Annual Reports :

Transcription

1 HSBC Global Asset Management Schemewise Annual Reports : Issued by HSBC Asset Management (India) Private Limited

2 INDEX Trustees Report...4 HSBC Equity Fund...16 HSBC India Opportunities Fund...25 HSBC Midcap Equity Fund...33 HSBC Progressive Themes Fund...41 HSBC Tax Saver Equity Fund...48 HSBC Dynamic Fund...56 HSBC Emerging Markets Fund...64 HSBC Unique Opportunities Fund...72 HSBC Small Cap Fund...80 HSBC MIP...88 HSBC Income Fund HSBC Gilt Fund HSBC Floating Rate Fund HSBC Ultra Short Term Bond Fund HSBC Flexi Debt Fund HSBC Cash Fund HSBC Fixed Term Series

3 Dear Investor, Greetings from HSBC Asset Management in India. I am delighted to be able to write to you in my capacity as the new CEO of the company, a role that I assumed in March Above all else I want to start by expressing my gratitude to you for the faith you have reposed in the company. For this I am truly grateful. Global Developments: As you are aware HSBC Global Asset Management continues to be a leading player both globally with assets of over USD bn as on December 31, 2010 and in the emerging markets, which is a key focus area, with assets of over USD 145 bn as on December 31, Following recent leadership changes, our parent company the HSBC Group, has committed to focusing on Wealth Management as a key strategic initiative. This makes the Asset Management business of the Group an even more prominent contributor and we are therefore investing further to play this important role. New Investment Philosophy: Whilst our core operating principals remain unchanged, several key changes are being made to the business model which will position us strongly for the future. Prominent amongst these is a new global investment philosophy which introduces a more scientifically developed approach to stock selection to augment our existing processes. Back testing is underway and indicates this model to be very effective in producing investment performance. India Operations: India remains a key market for HSBC s Asset Management business. Our Indian operations are now in their tenth year with a full range of products. This experience has given us a deep insight into India, across investment cycles, that is so necessary for success. We too are making several changes in our business model so as to be more efficient and effective. We are very excited about the new global investment philosophy which we are in the process of adopting. It is our belief that, given the rapid progress we are seeing in data transparency, such an approach will prove to be much more beneficial in the current environment, particularly in the aftermath of the global financial crisis. Though we are still to receive formal communication, based on our discussions with the Employee Provident Fund Organisation, it pleases me to inform you that recently HSBC Asset Management India edged out some of the major financial players in the country to be amongst the four entities selected to manage a part of the prestigious EPFO s corpus of about USD 80 bn. This, to me, is a reflection of the reputation we have developed as a fund house and also a result of our being named the best performing fund manager on basis of the composite scores (which considers the returns, asset quality and maturity profile) during the last mandate**. Ladies and Gentlemen, there are now 45 mutual fund houses in India and this has led to investors being presented with multiple choices. Whilst this is a welcome development, it also exposes investors to the risks associated with frequent switches. According to the data* we have reviewed, over the long term such frequent changes do not result in higher benefits vis-à-vis staying invested in a well managed fund which follows a disciplined investments approach. 1

4 I would therefore encourage you to bear this in mind. Short term volatility in fund performance is natural and should not be the only criteria to judge performance. The long term track record is to me a more important criterion as mutual fund investments are generally held for an extended period of time. Our approach to fund management is in line with this philosophy i.e. we aim to offer consistent wealth generation to our clients over the long term. HSBC Asset Management also remains committed to bringing to India global best practices, hand-picked from our established expertise across the globe. The recently introduced innovative investment model which has been proven globally is one such example. In addition to our local offerings, we also aim to bring to our investors world-class product offerings from our global range of products. As you are aware we recently launched the HSBC Brazil Fund which offers our investors an opportunity to benefit from the strong growth prospects of the Brazilian economy. From an investor perspective, it is a great way to diversify one s investments outside India and benefit from the other strong growth stories across the world. I am happy to advise that following its launch, the HSBC Brazil Fund has become one of the largest in its category. We aim to continue to leverage our global platform to bring many more such offers for our investors in India. In closing, I thank you once again for choosing us as your trusted partner. We remain committed to our philosophy of aiming for consistent wealth creation and service excellence and I look forward to your continued investments in the HSBC Mutual Fund. Yours sincerely, Puneet Chaddha Chief Executive Officer HSBC Asset Management (India) Private Limited * Date source: MutualFundsIndia Explorer software ** Source: Employee Provident Fund Organisation (EPFO) 2

5 SPONSOR HSBC Securities and Capital Markets (India) Private Limited Regd. Office: 52/60, Mahatma Gandhi Road, Fort, Mumbai TRUSTEE Board of Trustees Office: 314, D. N. Road, Fort, Mumbai ASSET MANAGEMENT COMPANY HSBC Asset Management (India) Private Limited Corp. & Regd. Office: 314, D. N. Road, Fort, Mumbai CUSTODIAN JP Morgan Chase Bank N. A. Corp. & Regd. Office: J. P. Morgan Tower, C.T.S. No. 5435, Kalina, Santacruz (East), Mumbai AUDITORS TO THE SCHEME Price Waterhouse Chartered Accountants 252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai LEGAL ADVISORS Bharucha & Partners Cecil Court, 4th Floor, M. K. Bhushan Marg, Colaba, Mumbai REGISTRAR & TRANSFER AGENTS Computer Age Management Services (P) Ltd. (CAMS) Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai BOARD OF TRUSTEES* Mr. N. P. Gidwani - Chairman Mr. Nasser Munjee Mr. Manu Tandon Mr. Mehli Mistri Mr. Dilip J. Thakkar Ms. Joanna Munro * Dr. Rudolf Apenbrink has resigned as a Trustee with effect from October 11, Further, Ms. Joanna Munro has been appointed as the Trustee of HSBC Mutual Fund with effect from June 16, BOARD OF DIRECTORS** Ms. Naina Lal Kidwai - Chairperson Mr. S. P. Mustafa Mr. Ashok Jha Ms. Kishori J. Udeshi Mr. Puneet Chaddha - Chief Executive Officer Mr. Glenn Berry ** Mr. Vikramaaditya & Mr. Ayaz Ebrahim have resigned as Directors with effect from March 11, 2011 and May 13, 2011 respectively. Further, Mr. Puneet Chaddha and Mr. Glenn Berry have been appointed as the Directors with effect from March 14, 2011 and July 14, 2011 respectively. 3

6 Trustees Report For the year ended March 31, 2011 The Trustees present the ninth report and the audited abridged financial statements of the Scheme(s) of HSBC Mutual Fund (the Fund ), for the year ended March 31, SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES a) Operations and Performance of the Scheme HSBC Equity Fund (HEF) an open-ended diversified Equity Scheme To generate long-term capital growth from an actively managed portfolio of equity and equity related securities. The net assets of HEF amounted to Rs crores as at March 31, 2011 as against Rs. 1, crores as at March 31, Around 90.51% of the net assets were invested in equities, 8.24% of the net assets were invested in reverse repos / CBLO and 1.25% were in the net current assets as at March 31, HEF s approach is to invest across a range of market capitalizations with a preference for large cap companies. The fund follows a growth oriented investment bias. HEF outperformed the benchmark BSE 200 over the past 1 year after underperforming the benchmark in FY10 on high cash and defensive portfolio. Since inception, the fund has beaten its benchmark. Date of Inception : 10 December, 2002 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC Equity Fund Growth BSE Returns data as on March 31, 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. HSBC India Opportunities Fund (HIOF) an open-ended flexi-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 significant portion of its assets towards fixed income securities if the fund manager becomes negative on equity markets. The net assets of HIOF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 88.32% of the net assets were invested in equities, 7.37% of the net assets were invested in reverse repos / CBLO and 4.31% were in the net current assets as at March 31, HIOF outperformed the benchmark over the past 1 year beating its benchmark BSE 500. Since inception, the fund has beaten its benchmark. Date of Inception : 24 February, 2004 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC India Opportunities Fund Growth BSE Returns data as on March 31, 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. HSBC Midcap Equity Fund (HMEF) an open-ended diversified Equity Scheme HMEF seeks to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However, it could move a portion of its assets towards fixed income securities if the fund manager becomes negative on the Indian equity markets. The net assets of HMEF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 88.40% of the net assets were invested in equities, 7.63% of the net assets were invested in reverse repos / CBLO and 3.97% were in the net current assets as at March 31, The midcap carnage witnessed in the markets since October 2010, led to underperformance in the fund. The top holdings of the fund fell more than the benchmark in the second half of FY11. 4

7 Trustees Report For the year ended March 31, 2011 (Contd...) Date of Inception : 19 May, 2005 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC Midcap Equity Fund Growth BSE MID CAP Returns data as on March 31, 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. HSBC Progressive Themes Fund (HPTF) an open-ended flexi-theme Equity Scheme HPTF seeks to generate long term capital growth from an actively managed portfolio of equity and equity related securities by investing primarily in sectors, areas and themes that play an important role in, and / or benefit from, India s progress, reform process and economic development. The net assets of HPTF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 84.77% of the net assets were invested in equities, 12.72% of the net assets were invested in reverse repos / CBLO and 2.51% were in the net current assets as at March 31, HPTF s investments in the Indian infrastructure and economic reforms oriented themes saw the fund underperforming benchmark. Both sectors have seen de-rating over the past years. Date of Inception : 23 February, 2006 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC Progressive Themes Fund Growth BSE Returns data as on March 31, 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. HSBC Tax Saver Equity Fund (HTSF) - an open-ended Equity Linked Savings Scheme HTSF seeks to provide long term capital appreciation by investing in a diversified portfolio of equity & equity related instruments of companies across various sectors and industries, with no capitalisation bias. The Fund may also invest in fixed income securities. The net assets of HTSF amounted to Rs crores as at March 31, 2011 compared to Rs crores as at March 31, Around 98.45% of the net assets were invested in equities, 1.59% of the net assets were invested in reverse repos / CBLO and (0.04)% were in the net current assets as at March 31, HTSF underperformed the index over the past 1 year on relatively higher weight towards capital goods and autos - both of which underperformed the benchmark in the second half year. However, since inception the fund outperformed the benchmark. Date of Inception : 05 January, 2007 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Tax Saver Equity Fund Growth BSE Returns data as on March 31, 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. HSBC Dynamic Fund (HDF) - an open-ended Scheme HDF seeks to provide long term capital appreciation by allocating funds in equity and equity related instruments. It also has the flexibility 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 crores as at March 31, 2011 compared to Rs crores as at March 31, Around 83.38% of the net assets were invested in equities, 10.61% of the net assets were invested in reverse repos / CBLO and 6.01% were in the net current assets as at March 31,

8 Trustees Report For the year ended March 31, 2011 (Contd...) HDF outperformed its benchmark over the past 1 year beating its benchmark BSE 200. Date of Inception : 24 September, 2007 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Dynamic Fund Growth BSE Returns data as on March 31, 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. HSBC Emerging Markets Fund (HEMF) - an open-ended Scheme HEMF seeks to provide long term capital appreciation by investing in India and in the emerging markets, in equity and equity related instruments, share classes and units / securities issued by overseas mutual funds or unit trusts. The fund may also invest a limited proportion in debt and money market instruments. The net assets of HEMF amounted to Rs crores as at March 31, 2011 compared to Rs crores as at March 31, Around 98.98% of the net assets were invested in HSBC GEM Equity Fund (overseas mutual fund), 2.73% of the net assets were invested in reverse repos / CBLO and (1.71)% were in the net current assets as at March 31, HEMF outperformed its benchmark over past 1 year beating its benchmark, MSCI Emerging Market Index. Date of Inception : 17 March, 2008 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Emerging Markets Fund Growth MSCI Emerging Markets Index Returns data as on March 31, 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. HSBC Unique Opportunities Fund (HUOF) - an open-ended Equity Scheme HUOF seeks to provide long-term capital growth from a diversified 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 crores as at March 31, 2011 compared to Rs crores as at March 31, Around 85.68% of the net assets were invested in equities, 11.95% of the net assets were invested in reverse repos / CBLO and 2.37% were in net current assets as at March 31, HUOF outperformed its benchmark over past 1 year beating its benchmark BSE 200. Date of Inception : 21 March, 2007 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Unique Opportunities Fund Growth BSE Returns data as on March 31, 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. HSBC Small Cap Fund (HSCF) an open-ended Equity Scheme (the Scheme had got converted from a close ended Equity Scheme into an open-ended Equity Scheme with effect from March 25, 2011) HSCF seeks to provide long-term capital appreciation primarily from a diversified portfolio of equity and equity related instruments of small cap companies. 6

9 Trustees Report For the year ended March 31, 2011 (Contd...) The net assets of HSCF amounted to Rs crores as at March 31, 2011 compared to Rs crores as at March 31, Around 99.98% of the net assets were invested in equities, 2.93% of the net assets were invested in reverse repos / CBLO and (2.91%) were in the net current assets as at March 31, Correction in the markets in the second half FY11 led to underperformance in the small cap fund after posting good performance in the first half. Small caps corrected much more than the large caps in the second half. Overall, the performance was better than benchmark for the year. Date of Inception : 24 March, 2008 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Small Cap Fund Growth BSE Small Cap Returns data as on March 31, 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. 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 which seeks to generate reasonable returns through investments in Debt and Money Market Instruments. The secondary objective of the Scheme is to invest in equity and equity related instruments to seek capital appreciation. The Scheme offers two Plans: Regular Plan and Savings Plan. The Regular Plan can have up to 15 percent of the corpus invested in equities while the Savings Plan can have up to 25 percent invested in equities. The net assets of HMIP Regular Plan (HMIP R) amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 83.83% of the net assets were invested in debt and money market instruments & 13.51% of the net assets were invested in equities as at March 31, The net assets of HMIP Savings Plan (HMIP S) amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 75.78% of the net assets were invested in debt and money market instruments & 23.04% of the net assets were invested in equities as at March 31, 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 was since reduced. 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 CRISIL MIP Blended Index Returns data as on March 31, 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 CRISIL MIP Blended Index Returns data as on March 31, 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. 7

10 Trustees Report For the year ended March 31, 2011 (Contd...) HSBC Income Fund (HIF) an open-ended Income Scheme HIF seeks to generate reasonable income through a diversified portfolio of fixed income securities. The AMC s view of interest rate trends and the nature of the Plans will be reflected in the type and maturities of securities in which the Short Term and Investment Plans are invested. The Scheme has two Plans the Investment Plan and the Short Term Plan. The net assets of HSBC Income Fund Investment Plan (HIF IP) amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 91% of the net assets were invested in debt and money market instruments, 11.19% of the net assets were invested in reverse repos / CBLO and (2.19)% were in net current assets as at March 31, The net assets of HSBC Income Fund Short Term Plan (HIF STP) amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 96.78% of the net assets were invested in debt and money market instruments, 3.92% of the net assets were invested in reverse repos / CBLO and (0.70)% were in net current assets as at March 31, HIF - IP outperformed its benchmark through relatively active management of duration. HIF IP Date of Inception : 10 December, 2002 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC Income Fund IP Regular - Growth CRISIL Composite Bond Fund Index Returns data as on March 31, 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 but still managed to outperform the benchmark over the past 1 year. 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 CRISIL Short-Term Bond Fund Index Returns data as on March 31, 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. HSBC Gilt Fund (HGF) an open-ended Gilt Scheme HGF seeks to generate reasonable returns through investments in Government Securities of various maturities. The AMC s view of interest rate trends will be reflected in the maturities of securities in which the Scheme is invested. The net assets of HGF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 92.04% of the net assets were invested in reverse repos / CBLO and 0.80% were in net current assets as at March 31, HGF underperformed its benchmark index since inception as low assets under management for an extended period had constrained ability to actively manage the Scheme. However, the Scheme had outperformed the benchmark over the last 1 year as the Scheme has taken active calls in line with other duration funds. Date of Inception : 5 December, 2003 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC Gilt Fund Growth I Sec Composite Index Returns data as on March 31, 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. 8

11 Trustees Report For the year ended March 31, 2011 (Contd...) HSBC Floating Rate Fund (HFRF) an open-ended Income Scheme HFRF seeks to generate reasonable return with commensurate risk from a portfolio comprised of floating rate debt instruments and fixed rate debt instruments swapped for floating rate returns. The Scheme may also invest in fixed rate money market and debt instruments. 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 crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 99.39% of the net assets were invested in money market instruments, 0.46% of the net assets were invested in reverse repos / CBLO and 0.16% in net current assets as at March 31, The net assets of HSBC Floating Rate Fund Short Term Plan (HFRF STP) amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 89.56% of the net assets were invested in reverse repos / CBLO and 10.44% in net current assets as at March 31, HFRF-LTP outperformed its benchmark index since inception, through focus on accruals and investment in shorter end of the curve HFRF LTP Date of Inception : Compounded Annualized Returns (%) 16 November, 2004 Scheme & Benchmark 1 Year 3 Years 5 Years Since Inception HSBC FRF LTP Regular Plan Growth CRISIL Liquid Fund Index Returns data as on March 31, 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 underperformed its benchmark as incremental investments have been made very conservatively in line with the risk practices for Liquid funds. HFRF STP Date of Inception : 16 November, 2004 Simple Annualized Returns (%) Compounded Annualized Returns (%) Scheme & Benchmark 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception HSBC FRF - STP - Regular Plan - Growth CRISIL Liquid Fund Index Returns data as on March 31, 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. HSBC Cash Fund (HCF) an open-ended Liquid Scheme HCF aims to provide reasonable returns, commensurate with low risk while providing a high level of liquidity, through a portfolio of money market and debt securities. The net assets of HCF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 70.68% were invested in debt and money market instruments, 22.43% of the net assets were invested in reverse repos / CBLO and 6.89% in net current assets as at March 31, HCF underperformed its benchmark index as incremental investments have been made very conservatively in line with the risk environment and risk practices for liquid funds. Date of Inception : 4 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 CRISIL Liquid Fund Index

12 Trustees Report For the year ended March 31, 2011 (Contd...) Returns data as on March 31, 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. HSBC Ultra Short Term Bond Fund (HUSBF) an open-ended Debt Scheme HUSBF seeks to provide liquidity and reasonable returns by investing primarily in a mix of short term debt and money market instruments. The net assets of HUSBF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 73.59% of the net assets were invested in debt and money market instruments, 19.11% were invested in reverse repos / CBLO and 7.30% were in net current assets as at March 31, HUSBF 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 CRISIL Liquid Fund Index Returns data as on March 31, 2011.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. HSBC Flexi Debt Fund (HFDF) an open-ended Debt Scheme HFDF seeks to deliver returns in the form of interest income and capital gains, along with high liquidity, commensurate with the current view on the markets and the interest rate cycle, through active investment in debt and money market instruments. The net assets of HFDF amounted to Rs crores as at March 31, 2011 as compared to Rs crores as at March 31, Around 90.46% of the net assets were invested in debt and money market instruments, 8.35% was invested in reverse repos / CBLO and 1.18% were in the net current assets as at March 31, HFDF has outperformed its benchmark index through relatively active management of duration. Date of Inception : 5 October, 2007 Compounded Annualized Returns (%) Scheme & Benchmark 1 Year 3 Years Since Inception HSBC Flexi Debt Fund Growth CRISIL Composite Bond Fund Index Returns data as on March 31, 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. HSBC Fixed Term Series (HFTS) a close-ended Income Scheme with three plans namely Series 79, Series 80 and Series 81 HFTS seeks to generate returns by investing in a portfolio of fixed income instruments normally maturing in line with the time profile of the respective plan(s). The Scheme launched two series i.e. Series 79 and Series 80, each having tenure of 370 days. Series 79 was launched on March 22, 2011 and Series 80 was launched on June 17, The performance of the plans is benchmarked against CRISIL Short Term Bond Fund Index. Being closed ended fixed maturity plans, the performance of the schemes are not provided. 10

13 Trustees Report For the year ended March 31, 2011 (Contd...) b) Market Overview & Outlook Equity Financial year was a year of two halves. The first half saw a euphoric period culminating with the highly successful Coal India IPO. Banks led the way through first half on buoyant credit growth, soft interest rates, listing of parallel loan origination agencies like microfinance / gold lending firms and an overall improvement in asset quality. However, continuing tightness in monetary policy and a spike in crude oil prices led to Indian markets moving into a corrective phase from November onwards. The surge in commodity prices following the launch of QEII (Quantitative Easing) from the US contributed to India s de-rating. Second half FY2011 also saw a pronounced tilt towards large caps in the Indian market on the back of two factors.: (a) lack of equity mobilisation in domestic institutional investors (MF s / Insurance etc.) leading to a market increasingly dominated by FIIs and (b) Within FIIs a shift towards emerging market funds, ETF s etc. (rather than India centric funds) meant that FIIs were more focussed towards larger Indian stocks. Governments attention getting diverted towards corruption (commonwealth, 2G spectrum, bribes for loan, Adarsh housing etc. to name a few) meant fewer officials taking decisions fearing repurcussions. To add, environment ministry tightening screws on go, no-go areas led to slowdown in investments into mining, power and metal sectors. BSE capital goods index ended 6.4% lower for FY11. The polarisation of the market towards large caps is illustrated below in the table. Performance is skewed towards the large cap indices. Returns ( April 1, 2010 March 31, 2011) 1 Year (%) NIFTY 11.1 Sensex 10.9 BSE BSE BSE CNX Midcap 4.4 Source: Bloomberg Looking ahead the market continues to witness external risks arising from the US which is still in the threshold of a nascent economic recovery and the lack of a follow up to QEII could well lead to another leg down in economic data. Periphery of Europe remains a minefield with fiscal deficits and refinancing needs far in excess of what would be desirable. These have the potential to hurt global growth / commodity prices. As emerging economies battle inflation (refer for details in the fixed income market overview) by raising rates, cooling off of growth rates seems inevitable. It is forecasted that the corporate earnings growth would be 15% for FY12, from 18-20% earlier. India is likely to witness a bulk of its downgrade in the first financial year 2012 and in post the rate tightening cycle and downgrade of corporate earnings growth, it is expected that India will be a second half story into FY12. Debt Fixed income markets remained pressured under various concern for the year FY Starting with rate hikes from the early 2010, liquidity concerns on back of 3G outflows / large IPOs, government s borrowing requirements and inflation affected the bond market outlook. The market levels for 10 year government securities ranged from 7.50% to 8.20% with more pressure being felt due to supply towards the end of the year. Liquidity remained major concern for the large part of the year with overnight borrowing of banking system from RBI hitting numbers beyond RBI s comfort. RBI tried to support the liquidity by conducting Open Market Operations. Domestic economic data started to improve towards late calendar year thus further curbing appetite for bonds. Inflation has remained a major concern for the entire year. Annual Wholesale Price Index eased from double digit level to 9%. However, the easing in inflation was not in line with expectation. This was due to higher 11

14 Trustees Report For the year ended March 31, 2011 (Contd...) non food manufacturing inflation. Earlier part of inflation was regarded as supply side inflation. However, it turned to demand push inflation in later part of year. This movement in inflation prompted RBI action during the entire year. Weakness in global economic data and infusion of further liquidity via QEII remained important considerations for policy makers. Commodity prices (esp. Oil) shot up substantially after the announcement of QEII, which further fired up inflation. The market is expected to wait for a pause / end in rate hike cycle as and when inflation plateaus and growth concerns become more alarming. This may take place after the overnight operative rate (repo rate) touches 8% following a series of small step hikes. Inflation may remain stubborn till September since the recent fuel price hikes will reflect its impact on the market. Inflation also depends on good monsoon leading to reasonable food production. Global concerns over Europe and the US economic recovery may also determine course of RBI s action, if situation weakens further. Government securities supply continues to remain concern for bond market with continued pressure on rates. 2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENT COMPANY a) Sponsor HSBC Mutual Fund is sponsored by HSBC Securities and Capital Markets (India) Private Limited (HSCI). The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs.1,00,000 (Rupees One Lakh only) to the Trustee as the initial contribution towards the corpus of the Mutual Fund. HSCI offers integrated investment banking services, securities and corporate finance & advisory. HSCI is a member of The Bombay Stock Exchange Limited and National Stock Exchange (capital and derivative market segments). HSCI holds 100% of the paid-up equity share capital of HSBC Asset Management (India) Private Limited. b) HSBC Mutual Fund HSBC Mutual Fund ( the Mutual Fund or the Fund ) has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Trustee has entered into an Investment Management Agreement dated February 7, 2002 with HSBC Asset Management (India) Private Limited (AMC) to function as the Investment Manager for all the Schemes of the Fund. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 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 beneficiaries in such properties / investments and in the profits / 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 benefit of the unit holders. The Trustees have been discharging their duties and carrying out the responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees seek to ensure that the Fund and the Schemes floated 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 Office at 314, D. N. Road, Fort, Mumbai 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,

15 Trustees Report For the year ended March 31, 2011 (Contd...) 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 respective Schemes has been provided above under the heading Scheme Performance, Future Outlook and Operation of the Scheme (Refer Section 1). 4. SIGNIFICANT ACCOUNTING POLICIES The accounting policies are in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of Investors & corresponding amount Scheme-wise as on March 31, 2011: Scheme Unclaimed Dividends Amount (Rs.) No. of Investors Unclaimed Redemptions Amount (Rs.) No. of Investors HSBC Equity Fund 4,077, ,379, HSBC India Opportunities Fund 1,209, , HSBC Midcap Equity Fund 458, , HSBC Progressive Themes Fund 718, ,675, HSBC Tax Saver Equity Fund 596, , HSBC Dynamic Fund 1,348, HSBC Emerging Markets Fund 91, HSBC Unique Opportunities Fund 1,026, HSBC Small Cap Fund 77, HSBC MIP - Regular Plan 303, , HSBC MIP Savings Plan 476, , HSBC Income Fund - Investment Plan 235, , HSBC Income Fund - Short Term Plan 56, HSBC Gilt Fund 7, HSBC Floating Rate Fund Long Term Plan 41, , HSBC Ultra Short Term Bond Fund 66, HSBC Flexi Debt Fund INVESTOR SERVICES During the year, the number of official points of acceptance of transactions increased significantly to about 229 locations. In addition to the offices of the Registrar & Transfer agents, the AMC has Investor Service Centres in 14 locations at its own offices - namely Mumbai, New Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Indore, Chandigarh, Kochi, Coimbatore, Lucknow and Vadodara. With a view to enhancing customer convenience, the AMC 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. 13

16 Trustees Report For the year ended March 31, 2011 (Contd...) On the distribution front, the number of empanelled distributors increased from 8859 as on 31 March, 2010 to 8985 as of 31 March, 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 34. Call centre operations have been extended to cover the entire country. The AMC has outsourced certain back office services including call centre services to HSBC Operations and Processing Enterprise (India) Private Limited. 7. DETAILS OF INVESTOR GRIEVANCE REDRESSAL The details of the redressal of investor complaints received against HSBC Mutual Fund during April March 2011 are as follows: Total Number of Folios: 3,75,572 Complaint Code Type of complaint# (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year Within 30 days days Resolved days Action on (a) and (b) Beyond 180 days Non Actionable* 0-3 months 3-6 months Pending 6-9 months 9-12 months I A Non receipt of Dividend on Units I B Interest on delayed payment of Dividend I C Non receipt of Redemption Proceeds I D Interest on delayed 5 5 payment of Redemption II A Non receipt of 1 1 Statement of Account / Unit Certificate II B Discrepancy in 5 5 Statement of Account II C Non receipt of Annual Report / Abridged Summary III A Wrong switch between Schemes III B Unauthorized switch between Schemes III C Deviation from Scheme attributes III D Wrong or excess 1 1 charges / load III E Non updation of changes viz. address, PAN, bank details, nomination, etc. IV Others ** 1,114 1, Total 1,161 1, 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 14

17 Trustees Report For the year ended March 31, 2011 (Contd...) 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 fluctuations in the market value of its underlying investments. c) Full Annual Report shall be disclosed on the website at and shall be available for inspection at the Head Office 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. ACKNOWLEDGEMENTS The Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the service provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated. The Trustees look forward to the continued support of everyone. For and on behalf of the Board of Trustees of HSBC Mutual Fund Sd/- Dilip J. Thakkar Trustee MUMBAI July 15,

18 HSBC Global Asset Management HSBC Equity Fund An open-ended Diversified Equity Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

19 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, 2011, 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

20 Abridged Balance Sheet as at March 31, 2011 HSBC EQUITY FUND As at March 31, 2011 Rs. in Lakhs As at March 31, 2010 LIABILITIES 1 Unit Capital 22, , Reserves & Surplus 2.1 Unit Premium Reserves (18,873.82) (4,983.57) 2.2 Unrealised Appreciation Reserve 25, , Other Reserves 66, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions 1, , TOTAL 98, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 87, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 87, , Deposits 5, , Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending 3, , Others 1, , Deferred Revenue Expenditure (to the extent not written off) TOTAL 98, , Notes to Accounts - Annexure I 18

21 Abridged Revenue Account for the year ended March 31, 2011 HSBC EQUITY FUND Current Year ended March 31, 2011 Rs. in Lakhs Previous Year ended March 31, INCOME 1.1 Dividend 1, , Interest 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 19, , investments 1.6 Realised Gains / (Losses) on Derivative Transactions 1, Other Income (A) 22, , EXPENSES 2.1 Management fees 1, , Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Less: Expenses to be Reimbursed by the Investment Manager (72.93) (B) 2, , NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 20, , Change in Unrealised Depreciation in value of investments (D) (123.31) (4,894.10) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 20, , Change in unrealised appreciation in the value of investments (F) (7,579.15) 33, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 13, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (7,579.15) 33, Add / (Less): Equalisation (22,275.63) (13,771.15) 7.4 Transfer from Reserve Fund 7, TOTAL 5, , Dividend appropriation 9.1 Income Distributed during the year 7, , Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet (1,681.74) 8, 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. 19

22 Key Statistics for the year ended March 31, 2011 HSBC EQUITY FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 96, ,278 Average (AAuM) 1 114, , Gross income as % of AAuM % 18.77% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.01% 1.95% Dividend Option 2.01% 1.95% b. Management Fee as % of AAuM (planwise) Growth Option 1.02% 1.01% Dividend Option 1.02% 1.01% 5. Net Income as a percentage of AAuM % 16.82% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE 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. 20

23 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC EQUITY FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives amount to Rs. 473,661,900 and is 4.90% to Net Assets as of year ended March 31, Open Positions of derivatives amount to Rs. 417,045,564 and is 3.02% to Net Assets as of year ended March 31, Investments in Associates and Group Companies: (Rupees) Issuer Instrument Type Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes The Hongkong & Fixed Shanghai Banking deposits Corporation Limited 430,000, ,000, ,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of the year ended March 31, 2011 and March 31, 2010 is NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2011 and March 31, 2010 and percentage to net assets are as under : Company Name Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares Appreciation 2,662,127, % 3,511,447, % Depreciation 85,078, % 154,707, % Non Convertible Debentures and Bonds Appreciation 2,912, % Depreciation Equity Futures Appreciation 18,863, % 4,260, % Depreciation 16,591, % 1.7. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 279,250) and sold during the financial year is Rs. 4,247,546,108 and Rs. 9,832,182,896 respectively being 37.08% and 85.82% of the average daily net assets. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 710,496) and sold during the financial year 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. 21

24 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and their percentages to Net assets are as under : Security Category Fair Value (Rs.) Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Debt Instruments 2,912, % Total 2,912, % 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. 35,506 and clearing member charges on derivative transactions amounting to Rs. 1,708,650. 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. 118,354 and clearing member charges on derivative transactions amounting to Rs. 1,745,886. Commission paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,868, Associate , Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Associate Associate Business Given [Rs. In Crores] % of Total Business received by the Fund Commission paid [Rs.] % of Total commission paid by the Fund ,132, ,

25 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor Nature of Period Value of % of total Brokerage % of Total / AMC and its Association Covered Transactions value of paid [Rs.] brokerage associates / related / Nature of [Rs. in transactions paid by the parties / group Relation Crores] of the Fund Fund companies HSBC Securities and Capital Market (India) Private Limited Sponsor , Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of Relation Period Covered Value of Transactions [Rs. in Crores] % of total value of transactions of the Fund Brokerage paid [Rs.] % of Total brokerage paid by the Fund Associate , 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 67,940, ,108, ,487, ,560, ,606,284 Dividend Option 269,603, ,686, ,342, ,946, ,839,469,555 Description Growth Option Dividend Option Opening Units Subscription Redemption Closing Units Face Value 82,822, ,106, ,988, ,940, ,400, ,640, ,492, ,529, ,603, ,696,032,916 5 Previous year s figures have been re-grouped / re-arranged where necessary. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Managenent 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. 23

26 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

27 HSBC Global Asset Management HSBC India Opportunities Fund An open-ended Flexi-cap Equity Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

28 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, 2011, the related Revenue Account for the year ended on that date and Cash Flow Statement for the year ended on that date, which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agents respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

29 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC INDIA OPPORTUNITIES FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 8, , Reserves & Surplus 2.1 Unit Premium Reserves (11,139.11) (8,297.85) 2.2 Unrealised Appreciation Reserve 4, , Other Reserves 16, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 19, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 16, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 16, , Deposits 1, , Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others 1, , Deferred Revenue Expenditure (to the extent not written off) TOTAL 19, , Notes to Accounts - Annexure I 27

30 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC INDIA OPPORTUNITIES FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 3, , investments 1.6 Realised Gains / (Losses) on Derivative Transactions (295.25) 1.7 Other Income (A) 4, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 4, , Change in Unrealised Depreciation in value of investments (D) (1,967.69) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 4, , Change in unrealised appreciation in the value of investments (F) (1,179.24) 6, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 2, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (1,179.24) 6, Add / (Less): Equalisation (3,354.55) (3,301.93) 7.4 Transfer from Reserve Fund , Transfer from Unit Premium Reserve 8 TOTAL 1, , Dividend Appropriation 9.1 Income Distributed during the year , Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet , 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. 28

31 Key Statistics for the year ended March 31, 2011 HSBC INDIA OPPORTUNITIES FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 18,991 28,404 Average (AAuM) 1 23,126 33, Gross income as % of AAuM % 26.66% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.36% 2.24% Dividend Option 2.36% 2.24% b. Management Fee as % of AAuM (planwise) Growth Option 1.11% 1.08% Dividend Option 1.11% 1.08% 5. Net Income as a percentage of AAuM % 24.42% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE 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 / (Lossed) for the year. 4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year. 29

32 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC INDIA OPPORTUNITIES FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as of March 31, 2011 is Rs. 76,968,000 and is 4.05% to the net assets. Open Positions of derivatives as of March 31, 2010 is Rs. 193,993,801 and is 6.83% to the net assets. 1.3 Investments in Associates and Group Companies Issuer The Hongkong & Shanghai Banking Corporation Ltd. Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes ,000, ,000, ,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the scheme as of financial years ended 2011 and 2010 are NIL. 1.5 The NPAs as on March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2011 and March 31, 2010 are as under : Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares Appreciation 495,568, % 619,460, % Depreciation 13,803, % 20,612, % Equity Futures - Appreciation 3,222, % 4,487, % - Depreciation 424, % 1.7 The aggregate value of investments purchased and sold during the financial year is Rs. 561,742,276 and Rs. 1,728,760,483 respectively being 24.29% and 74.75% of the average daily net assets. The aggregate value of investments purchased and sold during the financial year is Rs. 2,446,418,500 and Rs. 3,886,879,848 respectively being 74.06% and % 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 Equities 1,643, % Money Market Instruments 30

33 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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, 2011 is as under: During the year , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges Rs. 210 and Clearing member charges on derivative transactions amounting to Rs. 493,792. During the year , 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,711, Associate , Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,081, Associate , Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of Relation Period Covered Value of % of Total Transactions Transaction (Rs. in of the crores) Fund Brokerage paid (Rs.) % of Total Brokerage paid by the Fund Sponsor ,

34 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of Relation Period Covered Value of % of Total Transactions Transaction (Rs. in of the crores) Fund Brokerage paid (Rs.) % of Total Brokerage paid by the Fund Sponsor , 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 34,977, ,674, ,903, ,748, ,487,049 Dividend Option 107,980, ,187, ,340, ,827, ,276, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 53,478, ,215, ,715, ,977, ,776,202 Dividend Option 167,277, ,264, ,561, ,980, ,079,807,401 5 Previous year s figures have been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Managenent Fees are Inclusive of Service Tax where applicable. 8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

35 HSBC Global Asset Management HSBC Midcap Equity Fund An open-ended Diversified Equity Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

36 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, 2011, 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net deficit and its cash flows for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

37 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC MIDCAP EQUITY FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 9, , Reserves & Surplus 2.1 Unit Premium Reserves (4,465.91) (4,337.15) 2.2 Unrealised Appreciation Reserve Other Reserves 8, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 14, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 12, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 12, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure 5.49 (to the extent not written off) TOTAL 14, , Notes to Accounts - Annexure I 35

38 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC MIDCAP EQUITY FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 2, , investments 1.6 Realised Gains / (Losses) on Derivative Transactions (166.92) 1, Other Income (A) 2, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Less:Expenses to be Reimbursed by the Investment Manager (4.75) (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 2, , Change in Unrealised Depreciation in value of investments (D) 3, (2,556.51) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = ( C - D)] (858.04) 9, Change in unrealised appreciation in the value of investments (F) (686.20) NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (1,544.24) 10, Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (686.20) Add / (Less): Equalisation (75.57) Transfer from Reserve Fund 1, Transfer from Unit Premium Reserve 8 TOTAL , Dividend Appropriation 9.1 Income Distributed during the year 1, Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet (933.61) 9, 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. 36

39 Key Statistics for the year ended March 31, 2011 HSBC MIDCAP EQUITY FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 13,869 17,724 Average (AAuM) 1 17,181 15, Gross income as % of AAuM % 48.59% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.36% 2.41% Dividend Option 2.36% 2.41% b. Management Fee as % of AAuM (planwise) Growth Option 1.15% 1.16% Dividend Option 1.15% 1.16% 5. Net Income as a percentage of AAuM % 46.18% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Corporate Dividend Returns(%): a. Last One Year Scheme Growth Option (9.9300) Dividend Option (9.9300) Benchmark BSE MID CAP b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE MID CAP 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 / (Lossed) for the year. 4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year 37

40 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC MIDCAP EQUITY FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s Unitholders. 1.2 Open Positions of derivatives amount to Rs. 147,187,500 and is 10.61% to Net Assets as at 31 March, Open Positions of derivatives amount to Rs. 77,544,688 and is 4.38% to Net Assets as at 31 March, Investments in Associates and Group Companies: (Rupees) Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes ,000, ,000,000 42,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the Scheme as of financial years ended 2011 and 2010 are NIL. 1.5 The NPAs as on March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2011 and March 31, 2010 are as under : Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares - Appreciation 65,529, % 152,588, % - Depreciation 391,068, % 86,632, % Equity Futures - Appreciation 101, % 3,298, % - Depreciation 1,681, % 633, % 1.7 The aggregate value of investments purchased and sold (including matured) during the year is Rs. 1,784,678,836 and Rs. 2,067,737,077 respectively being % and % of the average daily net assets. The aggregate value of investments purchased and sold (including matured) during the year is Rs. 3,222,984,582 and Rs. 3,250,544,036 respectively being % and % 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 Equities 3,530, % 8,160, % Total 3,530, % 8,160, % 38

41 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended: During the year , 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. 586 and clearing member charges on derivative transactions amounting to Rs. 254,340. During the year , 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,038, Associate , 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 Associate ,962, Associate , Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of Relation Period Covered Value of Transactions [Rs. in Crores] % of Total Value of Transactions of the Fund Brokerage paid [Rs.] % of Total brokerage paid by the Fund Sponsor ,

42 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Name of Sponsor / AMC and its associates / related parties / group companies HSBC InvestDirect Securities (India) Limited HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of Relation Period Covered Value of Transactions [Rs. in Crores] % of Total Value of Transactions of the Fund Brokerage paid [Rs.] (on accrual basis) % of Total brokerage paid by the Fund Associate , Sponsor , 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 fixed 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, 2011 and March 31, Unit Capital movement during the year ended March 31, 2011 and March 31, 2010: Description Opening Units Subscription Redemption Closing Units Face Value Growth 39,730, ,070, ,610, ,190, ,901,390 Dividend 67,527, ,732, ,642, ,618, ,180,597 Description Opening Units Subscription Redemption Closing Units Face Value Growth 42,452, ,794, ,515, ,730, ,306,381 Dividend 75,926, ,092, ,492, ,527, ,274,572 5 Previous year s figures have been re grouped / re-arranged where appropriate. 6 No contingent liabilities for the year ended March 31, 2011 and March 31, Expenses other than Management Fees are Inclusive of Service Tax where applicable. 8 Other Income of Rs. 4,434 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 specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

43 HSBC Global Asset Management HSBC Progressive Themes Fund An open-ended Flexi-theme Equity Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

44 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 ( The Scheme ) as at March 31, 2011, 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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 equity shares awaiting listing as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

45 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC PROGRESSIVE THEMES FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 20, , Reserves & Surplus 2.1 Unit Premium Reserves (27,126.28) (24,803.48) 2.2 Unrealised Appreciation Reserve 6, Other Reserves 28, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 22, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 18, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 18, , Deposits 1, , Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending 1, Others , Deferred Revenue Expenditure (to the extent not written off) TOTAL 22, , Notes to Accounts - Annexure I 43

46 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC PROGRESSIVE THEMES FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 / 8, , redemption of investments 1.6 Realised Gains / (Losses) on Derivative Transactions (612.60) Other Income (A) 8, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Amortisation of Deferred Revenue Expenditure Other operating expenses (B) , NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 7, , Change in Unrealised Depreciation in value of investments (D) 2, (4,115.64) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 4, , Change in unrealised appreciation in the value of investments (F) (6,517.15) 6, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (1,521.64) 19, Add: Balance transfer from Unrealised 6, Appreciation Reserve 7.2 Less: Balance transfer to Unrealised 6, Appreciation Reserve 7.3 Add / (Less): Equalisation (935.86) 1, Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL 4, , Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet 4, , 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. 44

47 Key Statistics for the year ended March 31, 2011 HSBC PROGRESSIVE THEMES FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 22,445 39,160 Average (AAuM) 1 31,790 44, Gross income as % of AAuM % 21.74% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.22% 2.20% Dividend Option 2.22% 2.20% b. Management Fee as % of AAuM (planwise) Growth Option 1.08% 1.04% Dividend Option 1.08% 1.04% 5. Net Income as a percentage of AAuM % 19.24% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option 8. Returns (%): a. Last One Year Scheme Growth Option ( ) Dividend Option ( ) Benchmark BSE b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE 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. 45

48 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC PROGRESSIVE THEMES FUND 1 Investments: 1.1 It is confirmed that investments of the schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders. 1.2 Open Positions of derivatives amount to Rs. 314,697,425 and 14.02% to Net Assets as of year ended 31 March Open Positions of derivatives amount to Rs. 292,171,950 and 7.46% to Net Assets as of year ended 31 March, Investments in Associates and Group Companies: (Rupees) Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes ,000, ,000, ,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year and percentage to net assets are as under : Company Name Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares Appreciation 152,103, % 698,236, % Depreciation 388,521, % 50,277, % Equity Futures Appreciation 1,573, % 7,092, % Depreciation 3,089, % 3,336, % 1.7 The aggregate value of investments securities purchased and sold (including matured) during the financial year is 2,800,932,603 and 4,428,734,789 respectively being 88.11% and % of the average daily net assets. The aggregate value of investments securities purchased and sold (including matured) during the financial year is 4,484,625,154 and 5,700,864,079 respectively being % and % 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 follows: Security Category Fair Value (Rs.) Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Equities 3,391, % 46

49 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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. 210 and clearing member charges on derivative transactions amounting to Rs. 853,247. 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.15,434 and clearing member charges on derivative transactions amounting to Rs. 328,519. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associate / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,440, Associate , 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 Associate ,828, Associate , Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor Nature of Period Value of % of total Brokerage % of total / AMC and its Association Covered Transactions value of paid [Rs.] brokerage associate / related / Nature of [Rs. In transaction paid by the parties / group relation Crores] of the Fund companies Fund HSBC Securities and Capital Market (India) Private Limited Sponsor , Name of Sponsor / AMC and its associate / related parties / group companies HSBC Securities and Capital Market (India) Private Limited 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 Sponsor , The brokerage paid was at rates similar to those offered to other brokers / distributors. 47

50 HSBC Global Asset Management HSBC Tax Saver Equity Fund An open-ended Equity Linked Savings Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

51 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 ), 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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: a) equity shares awaiting listing b) non-traded debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

52 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC TAX SAVER EQUITY FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 17, , Reserves & Surplus 2.1 Unit Premium Reserves (1,720.38) (127.95) 2.2 Unrealised Appreciation Reserve 4, , Other Reserves 4, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 25, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 24, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 24, , Deposits 3 Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending , Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 25, , Notes to Accounts - Annexure I 50

53 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC TAX SAVER EQUITY FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 3, , investments 1.6 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income (A) 3, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (8.35) (19.24) (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 3, , Change in Unrealised Depreciation in value of investments (D) (1,533.86) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 3, , Change in unrealised appreciation in the value of investments (F) (1,263.53) 5, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (1,263.53) 5, Add / (Less): Equalisation (616.17) (294.10) 7.4 Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL 2, , Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet 2, , 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. 51

54 Key Statistics for the year ended March 31, 2011 HSBC TAX SAVER EQUITY FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 24,830 30,154 Average (AAuM) 1 27,502 28, Gross income as % of AAuM % 33.51% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.34% 2.33% Dividend Option 2.34% 2.33% b. Management Fee as % of AAuM (planwise) Growth Option 1.09% 1.03% Dividend Option 1.09% 1.03% 5. Net Income as a percentage of AAuM % 31.17% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option 1.00 Corporate Dividend Option Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE 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. 52

55 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC TAX SAVER EQUITY FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as of March 31, 2011 is Nil. Open Positions of derivatives as of March 31, 2010 is Nil. 1.3 Investments in Associates and Group Companies are as under : Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes ,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended 31 March, 2011 is NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year and their percentages to net assets are as under: Company Name Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares Appreciation 469,428, % 563,326, % Depreciation 57,257, % 23,919, % Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 882, % Depreciation 1.7 The aggregate value of investments purchased and sold (including matured) during the financial year is Rs.2,937,507,052 and Rs. 3,624,594,914 respectively being % and % of the average daily net assets. The aggregate value of investments purchased and sold (including matured) during the financial year is Rs. 5,435,615,688 and Rs. 5,578,682,825 respectively being % and % 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 Equities 2,210, % 2,866, % Debt Instruments Money market Instrument Total 2,210, % 2,866, % 53

56 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended: During the year , 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. 1,831. During the year , 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. 298,444. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate , Associate , Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate , Associate , Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association /Nature of relation Period Covered Value of Transactions [Rs. In Crores] % of total Brokerage value of paid [Rs.] transaction of the Fund % of total brokerage paid by the Fund Sponsor ,

57 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Name of Sponsor/ AMC and its associates/related parties/group companies HSBC InvestDirect Securities (India) Limited HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of relation Period Covered Value of Transactions [Rs. In Crores] % of total Brokerage value of paid [Rs.] transaction of the Fund % of total brokerage paid by the Fund Associate , Sponsor , 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, 2010: Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 137,876, ,745, ,023, ,597, ,085,979,369 Dividend Option 87,586, ,447, ,272, ,760, ,606,618 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 150,646, ,786, ,556, ,876, ,378,761,588 Dividend Option 94,404, ,216, ,034, ,586, ,861,185 5 Previous year s figures have 0been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Managenent Fees are Inclusive of Service Tax where applicable. 8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

58 HSBC Global Asset Management HSBC Dynamic Fund An open-ended Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

59 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, 2011, 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

60 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC DYNAMIC FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 10, , Reserves & Surplus 2.1 Unit Premium Reserves (7,067.46) (2,687.00) 2.2 Unrealised Appreciation Reserve 3, , Other Reserves 4, (3,888.14) 3 Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 11, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 9, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 9, , Deposits , Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others , Deferred Revenue Expenditure (to the extent not written off) TOTAL 11, , Notes to Accounts - Annexure I 58

61 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC DYNAMIC FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest Realised Gain / (Loss) on Foreign Exchange (3.74) Transactions 1.4 Realised Gains / (Losses) on Interscheme sale of investments 1.5 Realised Gains / (Losses) on External sale / 4, , redemption of investments 1.6 Realised Gains / (Losses) on Derivative Transactions (363.83) 1.7 Other Income (A) 4, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 4, , Change in Unrealised Depreciation in value of investments (D) (968.84) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 4, , Change in unrealised appreciation in the value of investments (F) (2,255.23) 5, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1, , Add: Balance transfer from Unrealised Appreciation Reserve 2, Less: Balance transfer to Unrealised 5, Appreciation Reserve 7.3 Add / (Less): Equalisation 3, , Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL 8, , Dividend Appropriation 9.1 Income Distributed during the year 9.2 Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet 8, , 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. 59

62 Key Statistics for the year ended March 31, 2011 HSBC DYNAMIC FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 11,479 23,873 Average (AAuM) 1 16,588 26, Gross income as % of AAuM % 19.67% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.40% 2.34% Dividend Option 2.40% 2.34% b. Management Fee as % of AAuM (planwise) Growth Option 1.15% 1.09% Dividend Option 1.15% 1.09% 5. Net Income as a percentage of AAuM % 17.32% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option 8. Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE b. Since Inception Scheme Growth Option (1.6588) Dividend Option (1.6588) Benchmark BSE 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. 60

63 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC DYNAMIC FUND 1 Investments: 1.1 It is confirmed that investments of the schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders. 1.2 Open Positions of derivatives amount to Rs. 116,264,800 and is 10.13% to Net Assets for the year ended March 31, Open Positions of derivatives amount to Rs. 144,098,597 and is 6.04% to Net Assets for the year end March 31, Investments in Associates and Group Companies : (Rupees) Issuer Instrument Type Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes The Hongkong & Shanghai Banking Corporation Limited Fixed deposits 96,000, ,000, ,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year and percentage to net assets. Security Category Equity Shares Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Appreciation 330,488, % 582,644, % Depreciation 7,037, % 30,122, % Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 317, % Depreciation Equity Futures Appreciation 5,547, % 2,622, % Depreciation 305, % 1.7 The aggregate value of investments securities purchased and sold during the financial year is Rs. 244,139,085 and Rs. 1,608,937,198 respectively being 14.72% and 97.00% of the average daily net assets. The aggregate value of investments securities purchased and sold during the financial year is Rs. 2,745,924,605 and Rs. 3,607,759,880 respectively being % and % of the average daily net assets. 61

64 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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 Debt Instruments 317, % Total 317, % 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. 110 and clearing member charges on derivative transactions amounting to Rs. 421,989. 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associate / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate ,830, Associate , 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 Associate ,906, Associate ,

65 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 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 Brokerage value of paid [Rs.] transaction of the Fund % of total brokerage paid by the Fund HSBC Securities and Capital Market (India) Private Limited Sponsor , Name of Sponsor/ AMC and its associate/related parties/group companies HSBC Securities and Capital Market (India) Private Limited 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 Sponsor , 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 139,004, ,058, ,707, ,355, ,556,324 Dividend Option 109,992, ,425, ,210, ,207, ,074,369 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 190,248, ,916, ,160, ,004, ,390,046,465 Dividend Option 180,871, ,722, ,602, ,992, ,099,922,305 5 Previous year s figures have been re-grouped / re-arranged where appropriate. 6. No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Managenent Fees are Inclusive of Service Tax where applicable. 8. The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

66 HSBC Global Asset Management HSBC Emerging Markets Fund An open-ended Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

67 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, 2011 and the related Revenue Account for the year ended March 31, 2011, which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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 the 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 the 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, 2011 and its net surplus for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

68 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC EMERGING MARKETS FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 5, , Reserves & Surplus 2.1 Unit Premium Reserves (117.31) Unrealised Appreciation Reserve Other Reserves (47.53) (780.52) 3 Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 6, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities 5, , Total Investments 5, , Deposits 3 Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 6, , Notes to Accounts - Annexure I 66

69 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC EMERGING MARKETS FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest Realised Gain / (Loss) on Foreign Exchange Transactions 1.54 (37.26) 1.4 Realised Gains / (Losses) on Interscheme sale of investments 1.5 Realised Gains / (Losses) on External sale / redemption of investments (88.26) (513.85) 1.6 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 0.00~ 0.08 (A) (75.63) (482.02) 2 EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (14.67) (5.03) (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) (150.45) (559.00) 4 Change in Unrealised Depreciation in value of investments *** (D) (455.18) (4,555.39) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] , Change in unrealised appreciation in the value of investments (F) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 7.3 Add / (Less): Equalisation Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL , Dividend Appropriation 9.1 Income Distributed during the year 9.2 Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet , Notes to Accounts - Annexure I ~ Indicates less than 0.01 * 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. 67

70 Key Statistics for the year ended March 31, 2011 HSBC EMERGING MARKETS FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 5,969 8,709 Average (AAuM) 1 6,813 10, Gross income as % of AAuM % -4.70% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 1.10% 0.75% Dividend Option 1.10% 0.75% b. Management Fee as % of AAuM (planwise) Growth Option 0.32% 0.05% Dividend Option 0.32% 0.05% 5. Net Income as a percentage of AAuM % -5.45% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option 8. Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark MSCI Emerging Markets Index

71 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC EMERGING MARKETS FUND Current Year ended March 31, 2011 Previous Year ended March 31, 2010 b. Since Inception Scheme Growth Option (3.4432) Dividend Option (3.4432) Benchnmark MSCI Emerging Markets Index 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. 69

72 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC EMERGING MARKETS FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as a % to Net Assets as of and are NIL. 1.3 Investments in Associates and Group Companies (Rupees) Issuer Instrument Type Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes The Hongkong & Shanghai Banking Corporation Limited Fixed deposits 970,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of financial year ended 2011 and 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2011 & March 31, 2010 and their percentages to net assets are as under: Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Units in Mutual Fund - Appreciation 48,474, % - Depreciation 45,518, % 1.7 The aggregate value of investments securities purchased and sold (including matured) during the financial year is Rs. NIL and Rs. 353,991,928 respectively being 0.00% and 51.90% of the average daily net assets. The aggregate value of investments securities purchased and sold (including matured) during the financial year is Rs. 48,569,303 and Rs. 402,515,128 respectively being 4.73% and 39.21% of the average daily net assets. 1.8 Non-Traded securities in the portfolio as on March 31, 2011 and March 31, 2010 are 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, 2011 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,179, Associate ~ ,

73 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 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 Associate ,910, Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Associate , ~ Indicates less than 0.01 During the year , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. Nil During the year , 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 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 62,416, ,525, ,052, ,889, ,891,436 Dividend Option 31,125, ,405, ,930, ,599, ,993,537 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 84,302, ,367, ,253, ,416, ,163,520 Dividend Option 50,922, ,579, ,377, ,125, ,250,802 5 Previous year s figures have been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, 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 specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

74 HSBC Global Asset Management HSBC Unique Opportunities Fund An open-ended Equity Scheme Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

75 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, 2011, 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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 Unique Opportunities Fund as at March 31, 2011, its net surplus and its cash flows for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

76 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC UNIQUE OPPORTUNITIES FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 8, , Reserves & Surplus 2.1 Unit Premium Reserves (4,544.95) (1,509.48) 2.2 Unrealised Appreciation Reserve 1, , Other Reserves 4, (2,485.72) 3 Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 9, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 8, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 8, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 9, , Notes to Accounts - Annexure I 74

77 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC UNIQUE OPPORTUNITIES FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 5, , investments 1.6 Realised Gains / (Losses) on Derivative Transactions (168.84) 1.7 Other Income (A) 5, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (4.48) (B) , NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 4, , Change in Unrealised Depreciation in value of investments (D) (14.70) (3,084.05) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 4, , Change in unrealised appreciation in the value of investments (F) (2,979.40) 4, NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (2,979.40) 4, Add / (Less): Equalisation 1, Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL 6, , Dividend Appropriation 9.1 Income Distributed during the year 9.2 Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet 6, , 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. 75

78 Key Statistics for the year ended March 31, 2011 HSBC UNIQUE OPPORTUNITIES FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 9,650 21,510 Average (AAuM) 1 14,022 27, Gross income as % of AAuM % 33.70% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.43% 3.77% Dividend Option 2.43% 3.77% b. Management Fee as % of AAuM (planwise) Growth Option 1.18% 1.08% Dividend Option 1.18% 1.08% 5. Net Income as a percentage of AAuM % 29.93% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Corporate Dividend Option 8. Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE 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. 76

79 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC UNIQUE OPPORTUNITIES FUND 1 Investments: 1.1 It is confirmed that Investments of the Schemes are registered in the name of the Trustees for the benefits of the Scheme s Unitholders. 1.2 Open Positions of derivatives amount to Rs. 129,703,300 and is 13.44% to Net Assets as at March 31, Open Positions of derivatives amount to Rs. 175,617,653 and is 8.16% to Net Assets as at March 31, Investments in Associates and Group Companies : (Rupees) Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes ,000, ,000,000 90,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the scheme as of the year ended 31 March, 2011 is NIL. 1.5 NPAs as at year ended March 31, 2011 and March 31, 2010 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 Equity Shares Appreciation 174,104, % 476,973, % Depreciation 31,422, % 34,850, % Equity Futures Appreciation 2,432, % 636, % Depreciation 932, % 2,106, % 1.7 The aggregate value of investments securities purchased and sold (including matured) during the financial year is Rs.1,098,866,929 and Rs. 2,449,716,820 respectively being 78.19% and % of the average daily net assets. The aggregate value of investments securities purchased and sold (including matured) during the financial year (excluding accretion of discount of Rs. 4,156,301) is Rs. 3,386,000,287 and Rs. 4,667,516,230 respectively being % and % 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 Fair Value (Rs.) Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Equities 928, % Total 928, % 77

80 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 As Amended: During the year , 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. 2,618 and clearing member charges on derivative transactions amounting to Rs. 354,783. During the year , 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. 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 Nature of / AMC and its Association/ associates/related Nature of parties / group Relation companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate ,453, Associate , 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 Associate ,502, Associate , Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited Nature of Association /Nature of relation Period Covered Value of Transactions [Rs. In Crores] % of total Brokerage value of paid [Rs.] transaction of the Fund % of total brokerage paid by the Fund Sponsor , 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 Sponsor ,

81 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 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 fixed 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, 2011 and March 31, Unit Capital movement during the year ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 99,531, ,460, ,301, ,690, ,902,935 Dividend Option 111,313, ,149, ,113, ,349, ,490,351 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option Dividend Option 146,326, ,469, ,265, ,531, ,312, ,917, ,473, ,077, ,313, ,113,132,522 5 Previous year s figures have been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Managenent Fees are Inclusive of Service Tax where applicable. 8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

82 HSBC Global Asset Management HSBC Small Cap Fund An open-ended Equity Scheme* Abridged Annual Report * With An effect open-ended from March fund. 25, 2011 Monthly the Scheme income got converted is not assured from a close-ended and is subject Scheme to the an availability open-ended Scheme. of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

83 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, 2011, and the related Revenue Account for the year ended on that date which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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 the 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 the 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, 2011 and its net surplus for the year ended on that date. ii. The Balance Sheet as at March 31, 2011 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 specified 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, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

84 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC SMALL CAP FUND As at As at March 31, 2011 March 31, 2010 LIABILITIES 1 Unit Capital 3, , Reserves & Surplus 2.1 Unit Premium Reserves (59.97) Unrealised Appreciation Reserve Other Reserves (910.97) 3 Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 3, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 3, , Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 3, , Deposits 3 Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 3, , Notes to Accounts - Annexure I 82

85 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC SMALL CAP FUND Current Year Previous Year ended ended March 31, 2011 March 31, INCOME 1.1 Dividend Interest Realised Gain / (Loss) on Foreign Exchange Transactions 1.4 Realised Gains / (Losses) on Interscheme sale of investments 1.5 Realised Gains / (Losses) on External sale / redemption of investments 2, , Realised Gains / (Losses) on Derivative Transactions Other Income (1.52) 7.00 (A) 2, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 2, , Change in Unrealised Depreciation in value of investments (D) (1,316.27) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1, , Change in unrealised appreciation in the value of investments (F) (901.38) NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (901.38) Add / (Less): Equalisation (39.87) 7.4 Transfer from Reserve Fund 7.5 Transfer from Unit Premium Reserve 8 TOTAL 1, , Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year 10 Retained Surplus / (Deficit) carried forward to Balance Sheet 1, , 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. 83

86 Key Statistics for the year ended March 31, 2011 HSBC SMALL CAP FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option High Growth Option Dividend Option Low Growth Option Dividend Option End Growth Option Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 3,460 6,091 Average (AAuM) 1 5,647 5, Gross income as % of AAuM % 38.42% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.48% 2.42% Dividend Option 2.48% 2.42% b. Management Fee as % of AAuM (planwise) Growth Option 1.24% 1.21% Dividend Option 1.24% 1.21% 5. Net Income as a percentage of AAuM % 33.61% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Dividend Option 1.00 Corporate Dividend Option Returns (%): a. Last One Year Scheme Growth Option Dividend Option Benchmark BSE Small Cap (3.7840) b. Since Inception Scheme Growth Option Dividend Option Benchmark BSE Small Cap 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. 84

87 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC SMALL CAP FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as of March 31, 2011 and March 31, 2010 is Nil. 1.3 Investments in Associates and Group Companies: (Rupees) Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes 970,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the scheme as of the year ended March 31, 2011 and March 31, 2010 are Nil. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years March 31, 2011 and March 31, 2010 are as under : Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Equity Shares - Appreciation 24,489, % 116,064, % - Depreciation 95,511, % 25,926, % 1.7 The aggregate value of investments purchased and sold during the financial year is Rs. 448,031,735 and Rs. 761,923,988 respectively being 79.34% and % of the average daily net assets. The aggregate value of investments purchased and sold during the financial year is Rs. 816,768,026 and Rs. 917,819,629 respectively being % and % 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 Equities 787, % 312, % Total 787, % 312, % 85

88 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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. Nil and clearing member charges on derivative transactions amounting to Rs. Nil. 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associate / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate , Associate ~ 0.00~ 1, 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 Associate , Associate ~ 0.00~ 1, 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 Brokerage value of paid [Rs.] transaction of the Fund % of total brokerage paid by the Fund HSBC InvestDirect Securities (India) Limited HSBC Securities and Capital Market (India) Private Limited Associate Sponsor ,

89 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 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) Associate , Limited HSBC Securities and Capital Market (India) Private Limited Sponsor , ~ Indicates less than 0.01 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, 2010 : Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 38,513, , ,435, ,431, ,314,282 Dividend Option 17,698, , ,579, ,282, ,826,744 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 44,079, ,466, ,032, ,513, ,134,850 Dividend Option 29,259, ,509, ,070, ,698, ,982,442 5 Previous year s figures have been re-grouped / re-arranged where appropriate. 6. No contingent liabilities for the years ended March 31, 2011 and March 31, 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 specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

90 HSBC Global Asset Management HSBC MIP An open-ended Fund with Regular & Savings Plans. Monthly income is not assured and is subject to the availability of distributable surplus. Abridged Annual Report Issued by HSBC Asset Management (India) Private Limited

91 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, 2011 and the related Revenue Account for the year ended on that date which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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 the 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 the 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, 2011 and its net surplus for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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: a) equity shares awaiting listing b) non-traded debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

92 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC MIP - REGULAR PLAN As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 18, , Reserves & Surplus 2.1 Unit Premium Reserves Unrealised Appreciation Reserve Other Reserves 3, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 22, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 2, , Preference Shares Equity Linked Debentures Other Debentures & Bonds 4, , Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities Government Securities Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 13, , Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 21, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending , Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 22, , Notes to Accounts - Annexure I 90

93 Abridged Balance Sheet as at March 31, 2011 (Contd...) Rs. in Lakhs HSBC MIP - SAVINGS PLAN As at As at March 31, 2011 March 31, 2010 LIABILITIES 1 Unit Capital 50, , Reserves & Surplus 2.1 Unit Premium Reserves 5, , Unrealised Appreciation Reserve Other Reserves 11, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 68, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares 15, , Preference Shares Equity Linked Debentures Other Debentures & Bonds 12, , Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities Government Securities Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 37, , Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 66, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending , Others 1, Deferred Revenue Expenditure (to the extent not written off) TOTAL 68, , Notes to Accounts - Annexure I 91

94 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC MIP - REGULAR PLAN Current Previous Year ended Year ended March 31, 2011 March 31, INCOME 1.1 Dividend Interest 1, 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 Realised Gains / (Losses) on Derivative Transactions (42.17) (8.15) 1.7 Other Income (A) 1, , EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A B = C) 1, , Change in Unrealised Depreciation in value of investments (D) (52.60) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1, , Change in unrealised appreciation in the value of investments (F) (268.82) NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (268.82) Add / (Less): Equalisation (299.42) 2, Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL 1, , Dividend appropriation 9.1 Income Distributed during the year 1, Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet , Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses. 92

95 Abridged Revenue Account for the year ended March 31, 2011 (Contd...) Rs. in Lakhs HSBC MIP - SAVINGS PLAN Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend Interest 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 , Realised Gains / (Losses) on Derivative Transactions (46.29) Other Income (A) 3, , EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (21.14) 2.08 (B) 1, NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 2, , Change in Unrealised Depreciation in value of investments (D) (124.93) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 2, , Change in unrealised appreciation in the value of investments (F) (776.52) NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (776.52) Add / (Less): Equalisation 6, , Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL 9, , Dividend appropriation 9.1 Income Distributed during the year 3, , Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet 5, , Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses. 93

96 Key Statistics for the year ended March 31, 2011 HSBC MIP - REGULAR PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Monthly Dividend Option Quarterly Dividend Option High Growth Option Monthly Dividend Option Quarterly Dividend Option Low Growth Option Monthly Dividend Option Quarterly Dividend Option End Growth Option Monthly Dividend Option Quarterly Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 22,257 21,932 Average (AAuM) 1 24,219 12, Gross income as % of AAuM % 10.39% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 2.10% 2.16% Monthly Dividend Option 2.10% 2.16% Quarterly Dividend Option 2.10% 2.16% b. Management Fee as % of AAuM (planwise) Growth Option 1.10% 0.84% Monthly Dividend Option 1.10% 0.84% Quarterly Dividend Option 1.10% 0.84% 5. Net Income as a percentage of AAuM % 8.23% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Monthly Dividend Option Quarterly Dividend Option Corporate Monthly Dividend Option Quarterly Dividend Option

97 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC MIP - REGULAR PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Returns (%): a. Last One Year Scheme Growth Option Monthly Dividend Option Quarterly Dividend Option Benchmark CRISIL MIP Blended Index b. Since Inception Scheme Growth Option Monthly Dividend Option Quarterly Dividend Option Benchmark CRISIL MIP Blended Index 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. 95

98 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC MIP - SAVINGS PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Monthly Dividend Option Quarterly Dividend Option High Growth Option Monthly Dividend Option Quarterly Dividend Option Low Growth Option Monthly Dividend Option Quarterly Dividend Option End Growth Option Monthly Dividend Option Quarterly Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 67,610 35,831 Average (AAuM) 1 57,121 20, Gross income as % of AAuM % 14.01% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Growth Option 1.96% 2.12% Monthly Dividend Option 1.96% 2.12% Quarterly Dividend Option 1.96% 2.12% b. Management Fee as % of AAuM (planwise) Growth Option 1.04% 0.84% Monthly Dividend Option 1.04% 0.84% Quarterly Dividend Option 1.04% 0.84% 5. Net Income as a percentage of AAuM % 11.89% 6. Portfolio turnover ratio Total Dividend per unit distributed during the year (planwise) Retail Monthly Dividend Option Quarterly Dividend Option Corporate Monthly Dividend Option Quarterly Dividend Option

99 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC MIP - SAVINGS PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Returns (%): a. Last One Year Scheme Growth Option Monthly Dividend Option Quarterly Dividend Option Benchmark CRISIL MIP Blended Index b. Since Inception Scheme Growth Option Monthly Dividend Option Quarterly Dividend Option Benchmark CRISIL MIP Blended Index 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. 97

100 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC MIP - REGULAR / SAVINGS PLAN 1 Investments: 1.1. It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders Open Positions of derivatives in MIP - Regular Plan as at March 31, 2011 is NIL. Open Positions of derivatives in MIP - Regular Plan as at March 31, 2010 is Rs. 24,075,176 and is 1.10% to net assets. Open Positions of derivatives in MIP - Savings Plan as at March 31, 2011 is NIL. 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 Investments in Associates and Group Companies are as under : Issuer 2011 The Hongkong & Shanghai Banking Corporation Limited Instrument Type Regular Plan Savings Plan (Rupees) Aggregate Investments by all schemes Fixed deposits 10,000,000 22,000, ,000,000 Issuer 2010 The Hongkong & Shanghai Banking Corporation Limited Instrument Type Regular Plan Savings Plan Aggregate Investments by all schemes Fixed deposits 10,000,000 10,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the MIP - Regular Plan as of financial year ended 2011 and 2010 are NIL. Open positions of Securities Borrowed and / or Lent by the MIP - Savings Plan as of financial year ended 2011 and 2010 are NIL The NPAs for MIP - Regular Plan as on March 31, 2011 and March 31, 2010 are NIL. The NPAs for MIP - Savings Plan as on March 31, 2011 and March 31, 2010 are NIL Aggregate Unrealised Gain / Loss as at the end of the Financial years 2011 and 2010 and their percentage to net assets are as under : Security Category Amount (Rs.) Regular Plan Percentage to Net Assets March 31, 2011 Amount (Rs.) Savings Plan Percentage to Net Assets Equity Shares Appreciation 22,867, % 101,566, % Depreciation 18,930, % 117,550, % Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 510, % 1,854, % Depreciation 9,361, % 23,312, % Privately Placed Non Convertible Debentures / Bonds Appreciation Depreciation 98

101 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Security Category Amount (Rs.) Regular Plan Percentage to Net Assets March 31, 2011 Amount (Rs.) Savings Plan Percentage to Net Assets Asset Backed Securities Appreciation Depreciation Government of India Securities Appreciation Depreciation 18, % 52, % Equity Futures Appreciation Depreciation Commercial Paper / Certificate of Deposit Appreciation 3,094, % 9,114, % Depreciation 1,963, % 2,775, % Security Category Amount (Rs.) Regular Plan Percentage to Net Assets March 31, 2010 Amount (Rs.) Savings Plan Percentage to Net Assets Equity Shares Appreciation 35,159, % 243,422, % Depreciation 8,227, % 167,450, % Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 3,093, % 4,437, % Depreciation 219, % 325, % Privately Placed Non Convertible Debentures / Bonds Appreciation 576, % Depreciation Asset Backed Securities Appreciation 1,739, % 2,604, % Depreciation Government of India Securities Appreciation 32, % 13, % Depreciation Equity Futures Appreciation 485, % 983, % Depreciation 114, % 269, % Commercial Paper / Certificate of Deposit Appreciation Depreciation 99

102 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, The aggregate value of investments purchased and sold (including matured) during the year (excluding accretion of discount of Rs. 69,304,417 and Rs. 155,284,947 for Regular and Savings Plan respectively) and The aggregate value of investment securities purchased and sold (including matured) during the year (excluding accretion of discount of Rs. 24,603,133 and Rs. 33,480,802 for Regular and Savings Plan respectively) are : Plan March 31, 2011 Aggregate Purchases Aggregate Sales Rupees Percentage of Average Daily Net Assets Rupees Percentage of Average Daily Net Assets Regular Plan 18,102,936, % 17,758,495, % Savings Plan 40,066,934, % 36,428,116, % 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, % 7,579,938, % Savings Plan 13,374,285, % 11,634,947, % 1.8. Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under : Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Security Category Regular Plan Equities 1,091, % 2,018, % Debt Instruments 454,113, % 381,375, % Money Market Instruments 1,368,593, % 969,709, % Total 1,823,797, % 1,353,102, % Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Security Category Savings Plan Equities 6,039, % 3,205, % Debt Instruments 1,294,867, % 638,530, % Money Market Instruments 3,735,193, % 1,452,839, % Total 5,036,101, % 2,094,575, % 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 and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid Collection / Bank charges amounting to Rs. 640 and Rs. 1,086 for the Regular Plan and Savings Plan respectively and clearing member charges 100

103 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 on derivative transactions amounting to Rs. 33,223 and Rs. 149,601 for the Regular Plan and Savings Plan respectively. During the year , 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor/ AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] Regular Plan % of Total Business received by the Fund Commission paid [Rs.] % of Total commission paid by the Fund Associate ,662, Associate , Savings Plan Associate ,244, Associate , Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] Regular Plan % of Total Business received by the Fund Commission paid [Rs.] (on accrual basis) % of Total commission paid by the Fund Associate ,582, Associate , Savings Plan Associate ,037, Associate ,

104 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Brokerage paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associates / related parties / group companies HSBC Securities and Capital Market (India) Private Limited HSBC Securities and Capital Market (India) Private Limited Name of Sponsor / AMC and its associates / related parties / group companies HSBC InvestDirect Securities (India) Limited HSBC Securities and Capital Market (India) Private Limited HSBC InvestDirect Securities (India) Limited HSBC Securities and Capital Market (India) Private Limited Nature of Association / Nature of relation Period Covered Value of Transactions [Rs. In Crores] Regular Plan % of total value of transaction of the Fund Brokerage paid [Rs.] % of total brokerage paid by the Fund Sponsor , Savings Plan Sponsor , Nature of Association / Nature of relation Period Covered Value of Transactions [Rs. In Crores] Regular Plan % of total value of transaction of the Fund Brokerage paid [Rs.] (on accrual basis) % of total brokerage paid by the Fund Associate , Sponsor , Savings Plan Associate , Sponsor , 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 fixed 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, 2011 and March 31,

105 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, 2010: Description Regular Plan Opening Units Subscription Redemption Closing Units Face Value Growth Option 46,865, ,353, ,000, ,218, ,185,782 Monthly Dividend Option 87,365, ,344, ,540, ,169, ,697,397 Quarterly Dividend Option 36,498, ,551, ,304, ,745, ,457,413 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 20,343, ,509, ,986, ,865, ,653,919 Monthly Dividend Option 11,179, ,918, ,733, ,365, ,650,662 Quarterly Dividend Option 15,065, ,233, ,799, ,498, ,988,692 Savings Plan Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 66,682, ,504, ,525, ,661, ,226,610,843 Monthly Dividend 117,679, ,267, ,281, ,665, Option 2,466,656,145 Quarterly Dividend Option 76,979, ,884, ,427, ,436, ,364,367,366 Description Opening Units Subscription Redemption Closing Units FaceValue Growth Option 27,263, ,702, ,283, ,682, ,821,943 Monthly Dividend Option 22,335, ,309, ,966, ,679, ,176,790,295 Quarterly Dividend Option 35,851, ,500, ,372, ,979, ,792,456 5 Prior year amounts have been re-grouped and reclassified, wherever applicable, to confirm to current year s presentation. 6 No contingent liabilities for MIP - Regular and MIP - Savings funds for the years ended March 31, 2011 and March 31, Expenses other than Managenent 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 specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

106 HSBC Global Asset Management HSBC Income Fund An open-ended Income Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

107 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 ) and the related Revenue Account for the year ended on that date which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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 the 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 the 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, 2011 and its net surplus for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

108 Abridged Balance Sheet as at March 31, Rs. in Lakhs HSBC INCOME FUND - INVESTMENT PLAN As at As at March 31, 2011 March 31, 2010 LIABILITIES 1 Unit Capital 1, , Reserves & Surplus 2.1 Unit Premium Reserves (672.29) (602.92) 2.2 Unrealised Appreciation Reserve Other Reserves 1, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 2, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities Government Securities Treasury Bills 1.6 Commercial Paper Certificate of Deposits Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 1, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending , Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 2, , Notes to Accounts - Annexure I

109 Abridged Balance Sheet as at March 31, 2011 (Contd...) Rs. in Lakhs HSBC INCOME FUND - SHORT TERM PLAN As at As at March 31, 2011 March 31, 2010 LIABILITIES 1 Unit Capital 14, , Reserves & Surplus 2.1 Unit Premium Reserves Unrealised Appreciation Reserve Other Reserves 1, , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 17, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1, , Certificate of Deposits 14, , Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 15, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 17, , Notes to Accounts - Annexure I 107

110 Abridged Revenue Account for the year ended March 31, Rs. in Lakhs HSBC INCOME FUND - INVESTMENT PLAN Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest Realised Gain / (Loss) on Foreign Exchange Transactions 1.4 Realised Gains / (Losses) on Interscheme sale of investments (15.25) 1.5 Realised Gains / (Losses) on External sale / redemption of investments Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 0.38 (A) EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) Change in Unrealised Depreciation in value of investments (D) (4.40) (157.02) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] Change in unrealised appreciation in the value of investments (F) 4.85 (29.07) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 4.86 (29.07) 7.3 Add / (Less): Equalisation (173.72) (1,078.50) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet (29.12) (191.87) Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses.

111 Abridged Revenue Account for the year ended March 31, 2011 (Contd...) 109 Rs. in Lakhs HSBC INCOME FUND - SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest , 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 (44.67) Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 5.82 (A) , EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (23.92) (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) , Change in Unrealised Depreciation in value of investments (D) NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] , Change in unrealised appreciation in the value of investments (F) (45.94) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (45.94) 7.3 Add / (Less): Equalisation (374.26) (14.78) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL , Dividend Appropriation 9.1 Income Distributed during the year , Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet (91.74) Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses.

112 Key Statistics for the year ended March 31, 2011 HSBC INCOME FUND - INVESTMENT PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option High Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Low Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option End Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 2. Closing Assets Under Management (Rs. in Lakhs) End 2,111 3,266 Average (AAuM) 1 2,811 7,

113 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC INCOME FUND - INVESTMENT PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Gross income as % of AAuM % 8.89% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.85% 1.86% Regular Dividend Option 1.85% 1.86% Regular Weekly Dividend Option Institutional Growth Option 1.50% 1.50% Institutional Dividend Option 1.50% 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 1.25% 1.24% Regular Dividend Option 1.25% 1.24% Regular Weekly Dividend Option Institutional Growth Option 1.25% 1.24% Institutional Dividend Option 1.24% 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 AAuM % 7.09% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Corporate Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 111

114 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC INCOME FUND - INVESTMENT PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Returns (%): a. Last One Year Scheme Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option N/A N/A Institutional Growth Option N/A Institutional Dividend Option N/A N/A 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) b. Since Inception Scheme Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option N/A N/A Institutional Growth Option N/A Institutional Dividend Option N/A N/A 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) 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 / (Lossed) for the year. 4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year 112

115 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC INCOME FUND - SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option High Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Low Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option End Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Closing Assets Under Management (Rs. in Lakhs) End 16,421 16,530 Average (AAuM) 1 14,951 38,

116 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC INCOME FUND - SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Gross income as % of AAuM % 5.53% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.01% 1.25% Regular Dividend Option 1.01% 1.25% Regular Weekly Dividend Option 1.01% 1.25% Institutional Growth Option 0.70% 0.80% Institutional Dividend Option 0.70% 0.80% Institutional Weekly Dividend Option 0.70% 0.80% Institutional Plus Growth Option 0.60% 0.75% Institutional Plus Weekly Dividend Option 0.60% 0.75% Institutional Plus Monthly Dividend Option 0.60% 0.75% b. Management Fee as % of AAuM (planwise) Regular Growth Option 0.44% 0.62% Regular Dividend Option 0.44% 0.62% Regular Weekly Dividend Option 0.44% 0.62% Institutional Growth Option 0.44% 0.62% Institutional Dividend Option 0.44% 0.62% Institutional Weekly Dividend Option 0.44% 0.62% Institutional Plus Growth Option 0.44% 0.62% Institutional Plus Weekly Dividend Option 0.44% 0.62% Institutional Plus Monthly Dividend Option 0.44% 0.62% 5. Net Income as a percentage of AAuM % 4.51% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Corporate Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option

117 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC INCOME FUND - SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, Returns (%): a. Last One Year Scheme Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option (0.8300) N/A Institutional Weekly Dividend Option Institutional Plus Growth Option N/A Institutional Plus Weekly Dividend Option N/A Institutional Plus Monthly Dividend Option Benchmark CRISIL Short Term Bond Fund Index (Short Term Plan) b. Since Inception Scheme Regular Growth Option Regular Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Dividend Option Institutional Weekly Dividend Option Institutional Plus Growth Option N/A Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Short Term Bond Fund Index (Short Term Plan) 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 / (Lossed) for the year. 4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year 115

118 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC INCOME FUND 1 Investments: 1.1 It is confirmed that investments of the schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders. 1.2 Open Positions of derivatives for HSBC Income Fund - Investment Plan is Nil as at March 31, 2011 and as at March 31, Open Positions of derivatives for HSBC Income Fund - Short Term Plan is Nil as at March 31, 2011 and as at March 31, Investments in Associates and Group Companies: Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes 970,000,000 1,018,000, Open position of Securities Borrowed and / or Lent by the schemes as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs for the schemes for the years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years 2011 and 2010 and their percentages to net assets are as under : Security Category March 31, 2011 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 215, % Depreciation 139, % 1, % Certificate of Deposits Appreciation 409, % 4,487, % Depreciation Asset Backed Securities Appreciation Depreciation 477, % Government of India Securities Appreciation Depreciation 6, % 116

119 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Security Category March 31, 2010 INVESTMENT PLAN Amount (Rs.) Percentage to Net Assets SHORT TERM PLAN Amount (Rs.) Percentage to Net Assets Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 250, % 344, % Depreciation 306, % Asset Backed Securities Appreciation Depreciation 441, % Government of India Securities Appreciation 10, % Depreciation 437, % 1.7 The aggregate value of investments purchased (excluding accretion of discount of Rs. 8,9754,342 and Rs. 3,298,815 for HSBC Income Fund - Investment Plan and HSBC Income Fund - Short Term Plan respectively) and sold (including matured) during the year are: Plan Aggregate Purchases Aggregate Sales Amount (Rs.) Percentage of Average Daily Net Assets Amount (Rs.) Percentage of Average Daily Net Assets Investment Plan 5,342,626, % 5,353,400, % Short Term Plan 4,513,345, % 4,564,642, % 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 : 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, % 10,057,164, % Short Term Plan 23,963,152, % 23,982,294, % 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 Fair Value (Rs.) INVESTMENT PLAN Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Debt Instruments 70,421, % 87,696, % Money market Instruments 93,186, % 49,732, % Total 163,607, % 137,429, % 117

120 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Security Category Fair Value (Rs.) SHORT TERM PLAN 118 Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Debt Instruments 50,065, % Money market Instruments 1,537,500, % 1,501,075, % Total 1,537,500, % 1,551,141, % 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 and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 9,188 for the Investment Plan and Rs. 33,644 for the Short Term Plan. During the year , 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. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] INVESTMENT PLAN % of Total Business received by the Fund Commission paid [Rs.] % of Total commission paid by the Fund Associate , Associate , SHORT TERM PLAN Associate ,767, Associate ~ 0.00~ 3, Nature of Association / Nature of Relation Period Covered Business Given [Rs. In Crores] INVESTMENT PLAN % of Total Business received by the Fund Commission paid [Rs.] (on accrual basis) % of Total commission paid by the Fund Associate ,750, Associate ~ 0.00~ 5, SHORT TERM PLAN Associate ,527, Associate ,

121 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 ~ Indicates less than 0.01 The brokerage paid was at rates similar to those offered to other distributors. Further, The Hong Kong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fixed 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 HSBC Income Fund - Investment Plan and Short Term Plan as at the years ended on March 31, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, INVESTMENT PLAN Description Opening Units Subscription Redemption Closing Units Face Value Regular Dividend 12,321, ,333, ,208, ,446, ,462,715 Option Regular Growth 11,860, , ,945, ,659, ,597,767 Option Regular Weekly Dividend Option Institutional Dividend Option Institutional Growth Option 5,000, ,000, Description Opening Units Subscription Redemption Closing Units Face Value Regular Dividend 58,649, ,455, ,784, ,321, ,213,843 Option Regular Growth Option 25,707, ,885, ,732, ,860, ,600,528 Regular Weekly Dividend Option Institutional Dividend Option 10,013, , ,032, Institutional Growth Option 519, ,032, ,552, SHORT TERM PLAN Description Opening Units Subscription Redemption Closing Units Face Value Regular Dividend 39,938, ,276, ,454, ,760, ,604,172 Option Regular Growth 14,747, ,132, ,886, ,993, ,933,410 Option Regular Weekly 20,379, ,793, ,370, ,803, ,033,393 Dividend Option Institutional Dividend Option 486, ,238, ,712, ,012, ,123,325 Institutional 11,638, ,014, ,638, ,014, ,141,635 Growth Option Institutional Weekly Dividend Option 29,906, ,590, ,932, , ,645,320 Institutional Plus Growth Option 50,264, ,264,

122 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 SHORT TERM PLAN Description Opening Units Subscription Redemption Closing Units Face Value Institutional Plus 30,759, ,399, ,388, ,770, ,705,166 Weekly Dividend Option Institutional Plus 1,018, ,108, ,078, ,048, ,485,309 Monthly Dividend Option Description Opening Units Subscription Redemption Closing Units Face Value Regular Dividend 53,157, ,384, ,602, ,938, ,387,924 Option Regular Growth 15,450, ,352, ,055, ,747, ,474,007 Option Regular Weekly 14,467, ,014, ,101, ,379, ,794,503 Dividend Option Institutional Dividend Option 4,837, ,253, ,604, , ,861,404 Institutional 8,845, ,282, ,489, ,638, ,389,719 Growth Option Institutional 24,995, ,693, ,782, ,906, ,063,642 Weekly Dividend Option Institutional Plus - 14,250, ,758, ,008, Growth Option Institutional Plus - 219,694, ,934, ,759, ,594,818 Weekly Dividend Option Institutional Plus - 1,000, ,875, ,856, ,018, ,188,035 Monthly Dividend Option 5 Previous year s figures 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, 2011 and March 31, Expenses other than Management Fees are Inclusive of Service Tax where applicable. 8 Transition to New valuation norms : SEBI circular no. SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and SEBI Circular Cir /IMD/ DF/4/2010 dated June 21, 2010 required Mutual Funds to implement revised valuation norms for debt securities, floating rate securities and money market securities with effect from August 01, As a measure of best practice and in order to ensure a non disruptive transition from old valuation norms to the new valuation norms applicable with effect from August 01, 2010, non-traded debt securities, floating rate securities and money market securities were progressively so valued that the impact due to transition was spread out from June 11, 2010 to July 31, 2010 to reflect the valuations fairly as per the new regulatory norms by July 31, The aforesaid has been approved by the Board of Trustees of HSBC Mutual Fund. Further, the same has also been intimated to SEBI vide letter dated June 10, 2010 and June 23, The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

123 HSBC Global Asset Management HSBC Gilt Fund An open-ended Gilt Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

124 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 ), 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

125 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC GILT FUND As at As at March 31, 2011 March 31, 2010 LIABILITIES 1 Unit Capital Reserves & Surplus 2.1 Unit Premium Reserves (6.12) (26.34) 2.2 Unrealised Appreciation Reserve 0.00~ 2.3 Other Reserves Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments Deposits 3 Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL Notes to Accounts - Annexure I ~ Indicates less than

126 Abridged Revenue Account for the year ended March 31, HSBC GILT FUND Current Year ended March 31, 2011 Rs. in Lakhs Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest Realised Gain / (Loss) on Foreign Exchange Transactions 1.4 Realised Gains / (Losses) on Interscheme sale of investments 1.5 Realised Gains / (Losses) on External sale / redemption of investments 1.48 (3.42) 1.6 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income (A) EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees 2.5 Trusteeship fees 0.00 ~ Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (0.02) (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) Change in Unrealised Depreciation in value of investments (D) (48.48) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] Change in unrealised appreciation in the value of investments (F) 0.00 ~ 7 NET SURPLUS / (DEFICIT) OR THE YEAR (E + F = G) Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (0.00) ~ 7.3 Add / (Less): Equalisation (18.79) Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL (12.57) Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet (12.76) Notes to Accounts - Annexure I ~ Indicates less than 0.01

127 Key Statistics for the year ended March 31, 2011 HSBC GILT FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Growth Option Dividend Option Weekly Dividend Option High Growth Option Dividend Option Weekly Dividend Option Low Growth Option Dividend Option Weekly Dividend Option End Growth Option Dividend Option Weekly Dividend Option Closing Assets Under Management (Rs. in Lakhs) End Average (AAuM) Gross income as % of AAuM % 4.28% 4. Expense Ratio: a. Total Expense as % of AAuM (Planwise) Growth Option 0.75% 0.75% Dividend Option 0.75% 0.75% Weekly Dividend Option 0.75% 0.75% b. Management Fee as % of AAuM (Planwise) Growth Option 0.25% 0.34% Dividend Option 0.25% 0.34% Weekly Dividend Option 0.25% 0.34% 5. Net Income as a percentage of AAuM % 3.52% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Dividend Option Weekly Dividend Option Corporate Dividend Option Weekly Dividend Option

128 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC GILT FUND Current Year ended March 31, 2011 Previous Year ended March 31, Returns (%): a. Last One Year Scheme Growth Option Dividend Option Weekly Dividend Option Benchmark I-Sec Composite Index b. Since Inception Scheme Growth Option Dividend Option Weekly Dividend Option (2.6716) Benchmark I-Sec Composite Index 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. 126

129 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC GILT FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as of March 31, 2011 is NIL. Open Positions of derivatives as of March 31, 2010 is NIL. 1.3 Investments in Associates and Group Companies: Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes 970,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year end and their percentages to net assets are as under: Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Government of India Securities - Appreciation % - Depreciation 1.7 The aggregate value of investments purchased and sold during the financial year (excluding accretion of discount of Rs. 26,154) is Rs. 254,752,780 and Rs. 254,427,673 respectively being 3,147.15% and 3,143.13% of the average daily net assets. The aggregate value of investments securities purchased (excluding accretion of discount of Rs.187,184) and sold during the financial year is Rs. 829,684,134 and Rs. 961,307,513 respectively being % and % of the average daily net assets. 1.8 Non-Traded securities in the portfolios as at March 31, 2011 and March 31, 2010 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 , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. NIL. During the year , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. NIL. 127

130 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Nature of Association/ Nature of Relation Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate , Associate Nature of Association/ Nature of Relation Period Covered Business Given [Rs. In Crores] % of Total Commission Business paid [Rs.] received by the Fund % of Total commission paid by the Fund Associate , Associate 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 fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, 2010: Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 276, , , , ,404,917 Dividend Option 48, , , , ,025 Weekly Dividend Option 55, , , , ,014 Description Opening Units Subscription Redemption Closing Units Face Value Growth Option 2,554, , ,371, , ,761,513 Dividend Option 3,037, , ,437, , ,275 Weekly Dividend 13,934, ,553, ,433, , ,731 Option 128

131 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Previous year s figures have been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Litigations Pending: Pursuant to the Compliant Filed by certain investors (the appellants ), SEBI issued a Show Cause notice dated August 7, 2009 to the Board of Trustees of the Fund, the Fund, HSBC Asset Management (India) Private Limited and the CEO of the HSBC Asset Management (India) Private Limited, (together the respondents ) pertaining to changes made in the Scheme Information Document of HSBC Gilt Fund via the addendums dated January 05, 2009 and March 02, However, after considering the submissions made by the respondents, SEBI, vide its order dated April 23, 2010 disposed off the show cause notice dated August 7, The matter was then referred to the Securities Appellate Tribunal (SAT) by the appellants. The SAT issued an order dated May 03, 2011 directing the respondents to comply with Regulation 18(15A) of the SEBI Regulations and provide an exit option to the appellants of the case. HSBC Asset Management (India) Private Limited has reviewed the SAT order and has filed an appeal against the same in the Supreme Court. Any liability that may arise as a result of the Supreme Court order will be borne by HSBC Asset Management (India) Private Limited. Further, HSBC Asset Management (India) Private Limited has also received complaints from Consumer Disputes Redressal Forum in December 2010, filed by investors, pertaining to changes made in the Scheme Information Document of HSBC Gilt Fund via the addendums. The matters are under litigation and have been adjourned to later date(s) for further hearing. 8 Expenses other than Management Fees are Inclusive of Service Tax where applicable. 9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

132 HSBC Global Asset Management HSBC Floating Rate Fund An open-ended Income Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

133 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 ), 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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, 2011, its net surplus and its cash flows for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

134 Abridged Balance Sheet as at March 31, Rs. in Lakhs HSBC FLOATING RATE FUND LONG TERM PLAN As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 24, , Reserves & Surplus 2.1 Unit Premium Reserves 2, , Unrealised Appreciation Reserve 2.3 Other Reserves , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions , TOTAL 28, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 5, , Certificate of Deposits 21, , Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 27, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others , Deferred Revenue Expenditure (to the extent not written off) TOTAL 28, , Notes to Accounts - Annexure I

135 Abridged Balance Sheet as at March 31, 2011 (Contd...) Rs. in Lakhs HSBC FLOATING RATE FUND SHORT TERM PLAN As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 2, , Reserves & Surplus 2.1 Unit Premium Reserves (27.86) 4, Unrealised Appreciation Reserve 2.3 Other Reserves (3,670.33) 3 Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 2, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 1.8 Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 2 Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending 1, , Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 2, , Notes to Accounts - Annexure I 133

136 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC FLOATING RATE FUND LONG TERM PLAN Current Previous Year ended Year ended March 31, 2011 March 31, INCOME 1.1 Dividend 1.2 Interest 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 , Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income (A) 3, , EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A B = C) 3, , Change in Unrealised Depreciation in value of investments (D) (6.64) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C D)] 3, , Change in unrealised appreciation in the value of investments (F) (29.05) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 3, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (29.05) 7.3 Add / (Less): Equalisation (3,222.47) (2,869.27) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL , Dividend Appropriation 9.1 Income Distributed during the year 2, , Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet (2,213.27) (594.37) 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. 134

137 Abridged Revenue Account for the year ended March 31, 2011 (Contd...) Rs. in Lakhs HSBC FLOATING RATE FUND SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest Realised Gain / (Loss) on Foreign Exchange Transactions 1.4 Realised Gains / (Losses) on Interscheme sale of investments 1.5 Realised Gains / (Losses) on External sale / redemption of investments (1.76) (2.72) 1.6 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 0.01 (A) EXPENSES 2.1 Management fees Service tax on Management fees ** 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Expenses to be Reimbursed by the Investment Manager (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A B = C) Change in Unrealised Depreciation in value of investments (D) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C D)] Change in unrealised appreciation in the value of investments (F) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 7.3 Add / (Less): Equalisation 3, (4,141.00) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL 3, (3,926.58) 9 Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet 3, (4,059.72) 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. 135

138 Key Statistics for the year ended March 31, 2011 HSBC FLOATING RATE FUND LONG TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option High Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Low Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option End Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option

139 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLOATING RATE FUND LONG TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 2. Closing Assets Under Management (Rs. in Lakhs) End 27,980 59,776 Average (AAuM) 1 57, , Gross income as % of AAuM % 5.34% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 0.98% 1.00% Regular Daily Dividend Option 0.98% 1.00% Regular Weekly Dividend Option 0.98% 1.00% Regular Monthly Dividend Option 0.98% 1.00% Institutional Growth Option 0.28% 0.61% Institutional Daily Dividend Option 0.28% 0.61% Institutional Weekly Dividend Option 0.28% 0.61% Institutional Fortnightly Dividend Option 0.28% 0.61% Institutional Monthly Dividend Option 0.28% 0.61% Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option b. Management Fee as % of AAuM (planwise) Regular Growth Option 0.15% 0.38% Regular Daily Dividend Option 0.15% 0.38% Regular Weekly Dividend Option 0.15% 0.38% Regular Monthly Dividend Option 0.15% 0.38% Institutional Growth Option 0.15% 0.38% Institutional Daily Dividend Option 0.15% 0.38% Institutional Weekly Dividend Option 0.15% 0.38% Institutional Fortnightly Dividend Option 0.15% 0.38% Institutional Monthly Dividend Option 0.15% 0.38% Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 5. Net Income as a percentage of AAuM % 4.71% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 137

140 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLOATING RATE FUND LONG TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Corporate Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 8. Returns (%): a. Last One Year Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Liquid Fund Index b. Since Inception Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Liquid Fund Index 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. 138

141 Key Statistics for the year ended March 31, 2011 HSBC FLOATING RATE FUND SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option High Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Low Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option End Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option

142 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLOATING RATE FUND SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 2. Closing Assets Under Management (Rs. in Lakhs) End 2,124 7,223 Average (AAuM) 1 7,720 7, Gross income as % of AAuM % 2.72% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 0.50% 0.51% Regular Daily Dividend Option 0.50% 0.51% Regular Weekly Dividend Option 0.50% 0.51% Regular Monthly Dividend Option Institutional Growth Option 0.43% 0.44% Institutional Daily Dividend Option 0.44% Institutional Weekly Dividend Option 0.44% Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option 0.44% Institutional Plus Growth Option 0.37% Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option 0.37% Institutional Plus Monthly Dividend Option b. Management Fee as % of AAuM (planwise) Regular Growth Option 0.26% 0.26% Regular Daily Dividend Option 0.26% 0.26% Regular Weekly Dividend Option 0.26% 0.26% Regular Monthly Dividend Option Institutional Growth Option 0.26% 0.26% Institutional Daily Dividend Option 0.26% Institutional Weekly Dividend Option 0.26% Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option 0.26% Institutional Plus Growth Option 0.26% Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option 0.26% Institutional Plus Monthly Dividend Option 5. Net Income as a percentage of AAuM % 2.23% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 140

143 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLOATING RATE FUND SHORT TERM PLAN Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Corporate Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option 8. Returns (%): a. Last One Year Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Liquid Fund Index b. Since Inception Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Regular Monthly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Liquid Fund Index 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. 141

144 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC FLOATING RATE FUND (COMBINED) 1 Investments: 1.1 It is confirmed that investments of the schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders. 1.2 Open Positions of derivatives for HSBC Floating Rate Fund Long Term Plan and HSBC Floating Rate Fund Short Term Plan as of March 31, 2011 and March 31, 2010 are NIL. 1.3 Investments in Associates and Group Companies are as under: Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes ,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the schemes as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss at the end of the Financial year ended March 31, 2011 and March 31, 2010 for HSBC Floating Rate Fund Long Term Plan and HSBC 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. 334,133,769) and Rs. Nil for Long Term Plan and Short Term Plan respectively) are: Plan Aggregate Purchases Amount Rupees Percentage of Average Daily Net Assets Amount Rupees Aggregate Sales Percentage of Average Daily Net Assets Long Term Plan 26,359,357, % 29,809,561, % Short Term Plan 175, % 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 Plan and Short Term Plan respectively) Plan Aggregate Purchases Amount Rupees Percentage of Average Daily Net Assets Amount Rupees Aggregate Sales Percentage of Average Daily Net Assets Long Term Plan 72,453,262, % 71,918,677, % Short Term Plan 797,541, % 800,000, % 142

145 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Non -Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and their percentages to Net assets are as under : Security Category Fair Value Percentage to (Rs.) Net Assets LONG TERM PLAN Fair Value (Rs.) Percentage to Net Assets SHORT TERM PLAN Money market Instruments 2,780,796, % Total 2,780,796, % Security Category Fair Value Percentage to (Rs.) Net Assets LONG TERM PLAN Fair Value (Rs.) Percentage to Net Assets SHORT TERM PLAN Money market Instruments 5,895,795, % Total 5,895,795, % 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, 2011 is as under: During the year , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. Nil in Long Term Plan and Short Term Plan respectively. During the year , 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. Commission paid to Sponsor / AMC and its associates / related parties / group companies Name of Sponsor / AMC and its associate / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,105, Associate SHORT TERM PLAN Associate , Associate

146 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Name of Sponsor / AMC and its associate / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited 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 Associate ,987, HSBC InvestDirect Associate , Securities (India) Limited SHORT TERM PLAN The Hongkong and Shanghai Banking Corporation Limited Associate , HSBC InvestDirect Associate , Securities (India) Limited 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 fixed 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 HSBC Floating Rate Fund Long Term Plan % 4 Unit Capital movement during the years ended March 31, 2011 and March 31, 2010: Description LONG TERM PLAN Opening Units Subscription Redemption Closing Units Face Value Regular Growth 9,329, ,128, ,555, ,902, ,027,221 Regular Daily Dividend 2,756, , ,686, , ,118,035 Regular Weekly 19,522, ,697, ,823, ,396, ,966,933 Dividend Regular Monthly 24,483, ,598, ,209, ,872, ,725,073 Dividend Institutional Growth 56,101, ,577, ,927, ,751, ,510,438 Institutional 7,197, , ,111, Daily Dividend Institutional Fortnightly Dividend 568, ,701, , ,690, ,903,405 Institutional 398,091, ,257, ,133,875, ,473, ,994,731,672 Weekly Dividend Institutional Monthly Dividend 1,875, ,342, ,686, ,532, ,325,

147 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Description SHORT TERM PLAN Opening Units Subscription Redemption Closing Units Face Value Regular Growth 4,927, ,746, ,471, ,202, ,022,907 Regular Daily Dividend 20,343, ,947, ,435, ,856, ,561,246 Regular Weekly Dividend 23,335, ,151, ,299, ,188, ,880,786 Institutional Growth 2,512, ,496, , ,778 Institutional Daily Dividend 99, , Institutional Weekly Dividend Institutional Monthly Dividend 2,401, , ,411, Institutional Plus Growth 13,443, ,443, Institutional Plus Daily Dividend Institutional Plus Weekly Dividend LONG TERM PLAN Description Opening Units Subscription Redemption Closing Units Face Value Regular Growth 7,361, ,072, ,104, ,329, ,291,035 Regular Daily Dividend 4,719, , ,120, ,756, ,567,444 Regular Weekly 5,869, ,964, ,312, ,522, ,223,446 Dividend Regular Monthly 43,136, ,002, ,655, ,483, ,832,474 Dividend Institutional Growth 88,532, ,513,293, ,545,724, ,101, ,018,008 Institutional 12,461, Daily Dividend 979, ,243, ,197, ,974,873 Institutional Fortnightly 545, ,652, ,629, , ,684,626 Dividend Institutional Weekly 217,865, ,158,763, ,978,538, ,091, ,980,913,748 Dividend Institutional Monthly Dividend 11,109, ,073, ,307, ,875, ,759,

148 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Description SHORT TERM PLAN Opening Units Subscription Redemption Closing Units Face Value Regular Growth 7,967, ,212, ,252, ,927, ,275,958 Regular Daily Dividend 25,849, ,428, ,935, ,343, ,435,886 Regular Weekly Dividend 26,900, ,526, ,091, ,335, ,358,716 Institutional Growth 97, ,049, ,634, ,512, ,122,711 Institutional Daily Dividend 6,894, ,840, ,635, , ,806 Institutional Weekly 3,440, Dividend 9, ,450, Institutional Monthly Dividend 4,339, , ,989, ,401, ,012,908 Institutional Plus Growth 4,987, ,737, , ,443, ,432,538 Institutional Plus Daily Dividend Institutional Plus Weekly Dividend 3,580, , ,584, Prior year s amounts have been re-grouped and reclassified, wherever applicable, to confirm to current year s presentation. 6 No contingent liabilities for HSBC Floating Rate Fund Long Term Plan and Short Term Plan for the years ended March 31, 2011 and March 31, 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 Transition to New valuation norms : SEBI circular no. SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and SEBI Circular Cir /IMD/ DF/4/2010 dated June 21, 2010 required Mutual Funds to implement revised valuation norms for debt securities, floating rate securities and money market securities with effect from August 01, As a measure of best practice and in order to ensure a non disruptive transition from old valuation norms to the new valuation norms applicable with effect from August 01, 2010, non-traded debt securities, floating rate securities and money market securities were progressively so valued that the impact due to transition was spread out from June 11, 2010 to July 31, 2010 to reflect the valuations fairly as per the new regulatory norms by July 31, The aforesaid has been approved by the Board of Trustees of HSBC Mutual Fund. Further, the same has also been intimated to SEBI vide letter dated June 10, 2010 and June 23, The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

149 HSBC Global Asset Management HSBC Ultra Short Term Bond Fund An open-ended Debt Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

150 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 ), 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 financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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, the Revenue Account and the 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, the Revenue Account and the 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 Ultra Short Term Bond Fund as at March 31, 2011, its net surplus and its cash flows for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

151 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC ULTRA SHORT TERM BOND FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 13, , Reserves & Surplus 2.1 Unit Premium Reserves (2.22) Unrealised Appreciation Reserve Other Reserves , Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 14, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds 4, , Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds 8, Securitised Debt securities 1, Government Securities 1.5 Treasury Bills 1.6 Commercial Paper 1.7 Certificate of Deposits 5, Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 10, , Deposits , Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending 2, , Others , Deferred Revenue Expenditure (to the extent not written off) TOTAL 14, , Notes to Accounts - Annexure I 149

152 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC ULTRA SHORT TERM BOND FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest 2, , 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 (41.68) (54.71) 1.6 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 1.88 (A) 2, , EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents * 2.7 Marketing & Distribution expenses Audit fees Other operating expenses (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 1, , Change in Unrealised Depreciation in value of investments (D) NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 1, , Change in unrealised appreciation in the value of investments (F) (1.21) (48.74) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1, , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve (1.21) (48.74) 7.3 Add / (Less): Equalisation (1,809.88) (2,459.75) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL Dividend Appropriation 9.1 Income Distributed during the year 1, , Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet (1,334.38) (1,458.28) Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses. 150

153 Key Statistics for the year ended March 31, 2011 HSBC ULTRA SHORT TERM BOND FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option High Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Low Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option End Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option N.A.! Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option

154 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC ULTRA SHORT TERM BOND FUND Current Year ended March 31, 2011 Previous Year ended March 31, Closing Assets Under Management (Rs. in Lakhs) End 13,976 51,239 Average (AAuM) 1 33,963 79, Gross income as % of AAuM % 5.04% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.27% 1.30% Regular Daily Dividend Option 1.27% 1.30% Regular Weekly Dividend Option 1.27% 1.30% Institutional Growth Option 1.02% 1.05% Institutional Daily Dividend Option 1.02% 1.05% Institutional Weekly Dividend Option 1.02% 1.05% Institutional Monthly Dividend Option 1.02% 1.05% Institutional Plus Growth Option 1.02% 0.67% Institutional Plus Daily Dividend Option 0.37% 0.67% Institutional Plus Weekly Dividend Option 0.37% 0.67% Institutional Plus Monthly Dividend Option 0.37% 0.67% b. Management Fee as % of AAuM (planwise) Regular Growth Option 0.71% 0.88% Regular Daily Dividend Option 0.71% 0.88% Regular Weekly Dividend Option 0.71% 0.88% Institutional Growth Option 0.71% 0.88% Institutional Daily Dividend Option 0.71% 0.88% Institutional Weekly Dividend Option 0.71% 0.88% Institutional Monthly Dividend Option 0.71% 0.88% Institutional Plus Growth Option 0.71% 0.88% Institutional Plus Daily Dividend Option 0.71% 0.88% Institutional Plus Weekly Dividend Option 0.71% 0.88% Institutional Plus Monthly Dividend Option 0.71% 0.88% 5. Net Income as a percentage of AAuM % 3.97% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year (planwise) Retail Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Corporate Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Daily Dividend Option

155 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC ULTRA SHORT TERM BOND FUND Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Returns (%): a. Last One Year Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Composite Index ^^ b. Since Inception Scheme Regular Growth Option Regular Daily Dividend Option Regular Weekly Dividend Option Institutional Growth Option Institutional Daily Dividend Option Institutional Weekly Dividend Option Institutional Monthly Dividend Option Institutional Plus Growth Option Institutional Plus Daily Dividend Option Institutional Plus Weekly Dividend Option Institutional Plus Monthly Dividend Option Benchmark CRISIL Composite Index ^^ 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.! No Units Outstnding as at March 31, 2011 ^^ Composite Index of CRISIL Liquid Find Index (90%) and CRISIL Short Term Bond Fund Index (10%) 153

156 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC ULTRA SHORT TERM BOND FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the scheme s unitholders. 1.2 Open Positions of derivatives as of March 31, 2011 is NIL. Open Positions of derivatives as of March 31, 2010 is NIL. 1.3 Investments in Associates and Group Companies: (Rupees) Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Amount Aggregate Investments by all schemes Amount Aggregate Investments by all schemes Fixed deposits 970,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years and percentages to net assets is as under : Company Name Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 118, % Depreciation 5,761, % % Asset Backed Securities Appreciation 2, % Depreciation 1.7 The aggregate value of investment securities purchased and sold (including matured) during the financial year (excluding accretion of discount of Rs. 72,103,737) are Rs. 9,336,124,545 and Rs. 11,641,776,343 respectively being % and % of the average daily net assets. The aggregate value of investment securities purchased (excluding accretion of discount of Rs. 16,855,956) and sold (including matured) during the financial year are Rs. Nil and Rs. 3,945,886,455 respectively being 0.00% and 49.52% of the average daily net assets. 1.8 Non-Traded securities in the portfolio: Aggregate Value of Equity, Debt & Money Market Instruments and their percentages to Net assets are as under : Security Category Fair Value (Rs.) Percentage to Net Assets Fair Value (Rs.) Percentage to Net Assets Debt Instruments 444,197, ,272,062, Money market 584,267, Instruments Total 1,028,464, ,272,062,

157 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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 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. 62,633. 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 The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Name of Sponsor / AMC and its associates / related parties / group companies Nature of Association/ Nature of Relation Period Covered Business Given [Rs. In Crores] 155 % of Total Business received by the Fund Commission paid [Rs.] % of Total commission paid by the Fund Associate ,900, Associate ~ 0.00~ 3, 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 Associate ,055, Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited Associate , ~ Indicates less than 0.01 The brokerage paid was at rates similar to those offered to other distributors. Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fixed 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, 2011 and March 31, Unit Capital movement during the years ended March 31, 2011 and March 31, Description Opening Units Subscription Redemption Closing Units Face Value Regular Growth 24,419, ,655, ,091, ,984, ,843,056 Regular Daily Dividend 184,467, ,531, ,986, ,011, ,117,003 Regular Weekly 65,312, ,367, ,580, ,098, ,989,556 Dividend Institutional Growth 9,306, ,620, ,438, ,488, ,886,530 Institutional Daily Dividend 46,209, ,429, ,893, ,745, ,455,875 Institutional Weekly Dividend 17,829, ,845, ,520, ,154, ,544,541 Institutional Monthly Dividend 5,315, ,020, ,423, , ,123,666

158 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 Description Opening Units Subscription Redemption Closing Units Face Value Institutional Plus Growth Institutional Plus Daily Dividend Institutional Plus Weekly Dividend Institutional Plus Monthly Dividend 30,370, ,589, ,960, ,569, ,170, ,371, ,368, ,683,305 48,977, ,790, ,653, ,114, ,149,280 6,210, ,313, , ,973,884 Description Opening Units Subscription Redemption Closing Units Face Value Regular Growth 30,701, ,545, ,827, ,419, ,199,507 Regular Daily 325,722, ,087, ,342, ,467, ,844,670,802 Dividend Regular Weekly 84,576, ,748, ,012, ,312, ,124,874 Dividend Institutional Growth 19,011, ,588, ,293, ,306, ,067,029 Institutional 149,222, ,840, ,853, ,209, ,094,400 Daily Dividend Institutional 39,216, ,193, ,580, ,829, ,295,675 Weekly Dividend Institutional Monthly Dividend 12,394, ,722, ,801, ,315, ,157,812 Institutional 101,445, ,642, ,717, ,370, ,707,225 Plus Growth Institutional 137,853, ,255, ,540, ,569, ,690,006 Plus Daily Dividend Institutional 39,471, ,504, ,998, ,977, ,779,655 Plus Weekly Dividend Institutional Plus Monthly Dividend 8,865, ,936, ,591, ,210, ,106,293 5 Prior year amounts have been re-grouped and reclassified, wherever applicable, to confirm to current year s presentation. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, 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 specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

159 HSBC Global Asset Management HSBC Flexi Debt Fund An open-ended Debt Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited

160 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 ) and the related Revenue Account for the year ended on that date which we have signed under reference to this report. These financial 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 financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial 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 the 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 the 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 Flexi Debt Fund as at March 31, 2011 and its net surplus for the year ended on that date. (ii) The Balance Sheet as at March 31, 2011 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 specified 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 debt securities as at March 31, 2011, 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 and the amendments thereto, are fair and reasonable. For PRICE WATERHOUSE Firm Registration Number: E Chartered Accountants Sd/- Alpa Kedia Partner Membership No. F/ Place : Mumbai Date : July 15,

161 Abridged Balance Sheet as at March 31, 2011 Rs. in Lakhs HSBC FLEXI DEBT FUND As at March 31, 2011 As at March 31, 2010 LIABILITIES 1 Unit Capital 4, , Reserves & Surplus 2.1 Unit Premium Reserves (168.25) (58.18) 2.2 Unrealised Appreciation Reserve Other Reserves 1, Loans & Borrowings 4 Current Liabilities & Provisions 4.1 Provision for doubtful Income / Deposits 4.2 Other Current Liabilities & Provisions TOTAL 5, , ASSETS 1 Investments 1.1. Listed Securities: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds 1, , Securitised Debt securities 1.2 Securities Awaited Listing: Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.3 Unlisted Securities Equity Shares Preference Shares Equity Linked Debentures Other Debentures & Bonds Securitised Debt securities 1.4 Government Securities Treasury Bills 1.6 Commercial Paper Certificate of Deposits 2, , Bill Rediscounting 1.9 Units of Domestic Mutual Fund 1.10 Foreign Securities Total Investments 4, , Deposits Other Current Assets 3.1 Cash & Bank Balance CBLO / Reverse Repo Lending Others Deferred Revenue Expenditure (to the extent not written off) TOTAL 5, , Notes to Accounts - Annexure I 159

162 Abridged Revenue Account for the year ended March 31, 2011 Rs. in Lakhs HSBC FLEXI DEBT FUND Current Year ended March 31, 2011 Previous Year ended March 31, INCOME 1.1 Dividend 1.2 Interest 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 Realised Gains / (Losses) on Derivative Transactions 1.7 Other Income 0.31 (A) , EXPENSES 2.1 Management fees Service tax on Management fees 2.3 Transfer agents fees and expenses Custodian fees Trusteeship fees Commission to Agents* 2.7 Marketing & Distribution expenses Audit fees Other operating expenses Less: Expenses to be Reimbursed by the (14.23) Investment Manager (B) NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) , Change in Unrealised Depreciation in value of investments (D) 0.10 (391.46) 5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] , Change in unrealised appreciation in the value of investments (F) 2.32 (135.50) 7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) , Add: Balance transfer from Unrealised Appreciation Reserve 7.2 Less: Balance transfer to Unrealised Appreciation Reserve 2.32 (135.50) 7.3 Add / (Less): Equalisation (198.38) (876.61) 7.4 Transfer from Reserve Fund Transfer from Unit Premium Reserve 8 TOTAL Dividend Appropriation 9.1 Income Distributed during the year Tax on income distributed during the year Retained Surplus / (Deficit) carried forward to Balance Sheet Notes to Accounts - Annexure I * Commission to Agents is included in Marketing & Distribution expenses. 160

163 Key Statistics for the year ended March 31, 2011 HSBC FLEXI DEBT FUND Current Year ended March 31, 2011 Previous Year ended March 31, NAV per unit (Rs.): Open Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option High Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option Low Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option End Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option

164 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLEXI DEBT FUND Current Year ended March 31, 2011 Previous Year ended March 31, Closing Assets Under Management (Rs. in Lakhs) End 5,423 10,247 Average (AAuM) 1 8,437 16, Gross income as % of AAuM % 10.53% 4. Expense Ratio: a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.85% 1.86% Regular Fortnightly Dividend Option 1.85% 1.86% Regular Monthly Dividend Option 1.85% 1.86% Regular Quarterly Dividend Option 1.85% 1.86% Regular Half Yearly Dividend Option 1.85% 1.86% Institutional Growth Option 1.50% 1.51% Institutional Fortnightly Dividend Option 1.50% 1.51% Institutional Monthly Dividend Option 1.50% 1.51% Institutional Quarterly Dividend Option 1.50% 1.51% Institutional Half Yearly Dividend Option 1.50% 1.51% b. Management Fee as % of AAuM (planwise) Regular Growth Option 1.00% 0.73% Regular Fortnightly Dividend Option 1.00% 0.73% Regular Monthly Dividend Option 1.00% 0.73% Regular Quarterly Dividend Option 1.00% 0.73% Regular Half Yearly Dividend Option 1.00% 0.73% Institutional Growth Option 1.00% 0.73% Institutional Fortnightly Dividend Option 1.00% 0.73% Institutional Monthly Dividend Option 1.00% 0.73% Institutional Quarterly Dividend Option 1.00% 0.73% Institutional Half Yearly Dividend Option 1.00% 0.73% 5. Net Income as a percentage of AAuM % 8.96% 6. Portfolio turnover ratio 4 7. Total Dividend per unit distributed during the year / period (planwise) Retail Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option Corporate Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option

165 Key Statistics for the year ended March 31, 2011 (Contd...) HSBC FLEXI DEBT FUND Current Year ended March 31, 2011 Previous Year ended March 31, 2010 Regular Half Yearly Dividend Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option Returns (%): a. Last One Year Scheme Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional Growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option Benchmark CRISIL Composite Bond Fund Index b. Since Inception Scheme Regular Growth Option Regular Fortnightly Dividend Option Regular Monthly Dividend Option Regular Quarterly Dividend Option Regular Half Yearly Dividend Option Institutional growth Option Institutional Fortnightly Dividend Option Institutional Monthly Dividend Option Institutional Quarterly Dividend Option Institutional Half Yearly Dividend Option Benchmark CRISIL Composite Bond Fund Index 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. 163

166 Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011 HSBC FLEXI DEBT FUND 1 Investments: 1.1 It is confirmed that investments of the Schemes are registered in the name of the Trustees for the benefit of the Scheme s unitholders. 1.2 Open Positions of derivatives as a % to Net Assets as of years ended March 31, 2011 is Nil. Open Positions of derivatives as a % to Net Assets as of year ended March 31, 2010 is NIL. 1.3 Investments in Associates and Group Companies: Issuer The Hongkong & Shanghai Banking Corporation Limited Instrument Type Fixed deposits Amount Aggregate Investments by all schemes Amount (Rupees) Aggregate Investments by all schemes ,000,000 1,018,000, Open positions of Securities Borrowed and / or Lent by the scheme as of the years ended March 31, 2011 and March 31, 2010 are NIL. 1.5 NPAs as at years ended March 31, 2011 and March 31, 2010 are NIL. 1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years and percentages to net assets is as under : Security Category Amount (Rs.) Percentage to Net Assets Amount (Rs.) Percentage to Net Assets Non Convertible Debentures and Bonds Listed / Awaiting Listing Appreciation 483, % 592, % Depreciation 128, % Non Convertible Debentures and Bonds Privately Placed Appreciation 7, % Depreciation Certificate of Deposit Appreciation 826, % Depreciation 350, % Government of India Securities Appreciation Depreciation 9, % 1.7 The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 22,591,940) and sold (including matured) during the financial year is Rs.16,110,602,047 and Rs. 16,632,334,773 respectively being % and % of the average daily net assets. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 13,501,279) and sold (including matured) during the financial year is Rs. 19,227,187,601 and Rs. 21,287,109,534 respectively being % and % of the average daily net assets. 164

167 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 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 Debt Instruments 146,202, % 160,743, % Money market 333,366, % 825,716, % Instruments Total 479,568, % 986,459, % 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, 2011 is as under : During the year , The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. Nil. During the year , 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 The Hongkong and Shanghai Banking Corporation Limited Name of Sponsor / AMC and its associates / related parties / group companies The Hongkong and Shanghai Banking Corporation Limited HSBC InvestDirect Securities (India) Limited 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 Associate ,767, 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 Associate ,355, Associate , 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 fixed 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 HSBC Flexi Debt Fund % 165

168 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Unit Capital movement during the year ended March 31, 2011 and March 31, 2010: Description Opening Units Subscription Redemption Closing Units Face Value Regular Growth 4,826, ,393, ,198, ,021, ,212,036 Regular Monthly Dividend 3,124, , ,796, ,559, ,590,639 Regular Fortnightly Dividend 716, , ,096, , ,054,308 Regular Quarterly Dividend 3,198, , ,386, ,052, ,520,373 Regular Half Yearly Dividend 1,341, ,340, ,663 Institutional 22,483, ,178, ,963, ,698, ,982,924 Growth Institutional 11,761, ,247, ,859, ,150, ,504,957 Monthly Dividend Institutional Fortnightly Dividend 34,181, ,082, ,312, ,951, ,514,500 Institutional 11,438, ,710, ,728, ,280,949 Quarterly Dividend Institutional Half 5,526, ,526, ,264,184 Yearly Dividend Description Opening Units Subscription Redemption Closing Units Face Value Regular Growth 11,320, ,141, ,635, ,826, ,264,437 Regular Monthly Dividend Regular Fortnightly Dividend Regular Quarterly Dividend Regular Half Yearly Dividend Institutional Growth Institutional Monthly Dividend Institutional Fortnightly Dividend Institutional Quarterly Dividend Institutional Half Yearly Dividend 22,377, ,013, ,266, ,124, ,246,753 2,851, , ,637, , ,169,028 6,647, ,500, ,949, ,198, ,985, , ,341, , ,341, ,410,152 77,479, ,205, ,201, ,483, ,834,723 61,694, ,784, ,717, ,761, ,619,226 99,822, ,048, ,689, ,181, ,818,104 16,293, ,653, ,508, ,438, ,384,

169 Notes to Accounts - Annexure I (Contd...) To the Abridged Balance Sheet and Revenue Account for the year ended March 31, Previous year s figures have been re-grouped / re-arranged where appropriate. 6 No contingent liabilities for the years ended March 31, 2011 and March 31, Expenses other than Management Fees are Inclusive of Service Tax where applicable. 8 Transition to New valuation norms : SEBI circular no. SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and SEBI Circular Cir/IMD/ DF/4/2010 dated June 21, 2010 required Mutual Funds to implement revised valuation norms for debt securities, floating rate securities and money market securities with effect from August 01, As a measure of best practice and in order to ensure a non disruptive transition from old valuation norms to the new valuation norms applicable with effect from August 01, 2010, non-traded debt securities, floating rate securities and money market securities were progressively so valued that the impact due to transition was spread out from June 11, 2010 to July 31, 2010 to reflect the valuations fairly as per the new regulatory norms by July 31, The aforesaid has been approved by the Board of Trustees of HSBC Mutual Fund. Further, the same has also been intimated to SEBI vide letter dated June 10, 2010 and June 23, The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specified 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 14, 2011 & July 15, 2011 respectively. The audit report attached herewith refers to the said Annual Accounts. The aforesaid abridged accounts are an extract of the Annual Accounts and are prepared in accordance with SEBI Circular No. IMD/Cir 8/132968/2008 dated July 24,

170 HSBC Global Asset Management HSBC Cash Fund An open-ended Liquid Scheme Abridged Annual Report * An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus. Issued by HSBC Asset Management (India) Private Limited