HSBC Asset Management (India) Private Limited Annual Report

Transcription

1 Annual Report

2 5DIRECTORS REPORT FOR THE YEAR ENDED MARCH 31, 2011 The Directors have pleasure in submitting their report along with the audited financials for the Financial Year April 01, 2010 up to March 31, FINANCIAL RESULTS 0Particulars Current financial year ended March 31, 2011 (Rs. 000s) Previous financial year ended March 31, 2010 Gross income 684, ,232 Profit / (loss) before finance charges and depreciation (55,978) 135,352 Finance charges 1, Depreciation 21,267 17,491 Profit / (loss) for the period (78,937) 117,067 Provision for Tax - (15,762) Deferred Tax & Fringe benefit tax Credit / (Charge) (3,084) 2,530 Net Profit / (loss) for the period after adjustment of deferred tax credit (82,021) 103,835 Dividend, Dividend Distribution tax & Other - - Appropriations Net Profit / (loss) after taxes carried forward to the Balance Sheet (82,021) 103,835 Previous period figures have been regrouped and reclassified wherever necessary to confirm the current period s presentation. 2 OPERATIONS a) Mutual Fund The stress on the financial markets had impacted the business of your Company during the year under review. The same had an adverse impact on the Assets under Management (AUM), revenue and the cost incurred. The following schemes were launched by HSBC Mutual Fund: Name of the Scheme Date of Launch HSBC Fixed Term Plan Series 79 March 22, 2011 HSBC Brazil Fund April 15, 2011 HSBC Fixed Term Plan Series 80 June 17, 2011 HSBC Fixed Term Plan Series 81 August 04, 2011 The Company earned Investment Management fees to the tune of Rs crores (net of Service Tax) for managing the assets of HSBC Mutual Fund. 1

3 The fund under management of the Schemes of HSBC Mutual Fund as at March 31, 2011 was Rs crores. The Fund had 3,75,572 folios as at March 31, 2011 in its various Schemes. b) Portfolio Management Services (PMS) The Company launched its Portfolio Management Services (PMS) offering on 27 March Portfolio Management Services is a customized proposition for high net worth clients. The service aims to provide personalized portfolio management services to select clientele depending on the investor's risk appetite, growth expectations and personal investment requirements. Currently the Company provides Discretionary and Advisory Portfolio Management Services to individual and institutional customers. As on March 31, 2011, the PMS business had Assets under Management (AUM) of INR 46, crores including the Employee Provident Fund Organization (EPFO) corpus. There were 1449 clients under Discretionary PMS and Nil clients under Advisory PMS. 3. PERFORMANCE 15The performance of the Schemes of HSBC Mutual Fund as on March 31, 2011 is presented below: i) 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 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 Dec 02 Compounded Annualized Returns (%) 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. 2

4 ii) HSBC India Opportunities Fund (HIOF) an open-ended flexi-cap Equity Scheme HIOF seeks long term capital growth through investments across all market capitalizations, including small, mid and large cap stocks. It aims to be predominantly invested in equity and equity related securities. However, it could move a 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 Feb 04 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. iii) 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. 3

5 Date Of Inception : 19 May 05 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. iv) 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 Feb 06 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. 6v) 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 % of the net assets were invested in equities, 1.59% of the 4

6 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 Jan 07 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. 7vi) 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 % 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, HDF outperformed its benchmark over the past 1 year beating its benchmark BSE 200. Date Of Inception : 24 Sep 07 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. 8vii) 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. 5

7 The net assets of HEMF amounted to Rs crores as at March 31, 2011 compared to Rs crores as at March 31, Around % 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 Mar 08 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. 9viii) 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 % 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 Mar 07 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. 6

8 10ix) 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. The net assets of HSCF amounted to Rs crores as at March 31, 2011 compared to Rs crores as at March 31, Around % 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 Mar 08 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. x) HSBC Brazil Fund (HBF) - an open ended Fund of Funds Scheme HBF seeks to provide long term capital appreciation by investing predominantly in units/shares of HSBC Global Investments Funds (HGIF) Brazil Equity Fund. The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund Schemes, which may constitute a significant part of its corpus. The Scheme may also invest a certain proportion of its corpus in money market instruments and /or units of liquid mutual fund Schemes, in order to meet liquidity requirements from time to time. HBF was launched on April 15, 2011 and the performance of the Scheme is benchmarked against MSCI Brazil 10/40 Index. As the Scheme was not in existence as on March 31, 2011, the performance data is not provided. xi) 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. 7

9 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 Feb 04 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 Feb 04 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. 8

10 xii) 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. 11HIF IP Date Of Inception : 10 Dec 02 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. 12HIF STP Date Of Inception : 10 Dec 02 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

11 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. 13xiii) 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 :05 Dec 03 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. 14xiv) 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,

12 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 : 16 Nov 04 Compounded Annualized Returns (%) 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 Nov 04 Simple Annualized Returns (%) Compounded Annualized Returns (%) Since Inception Scheme & Benchmark 3 Months 6 Months 1 Year 3 Years 5 Years 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. xv) 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,

13 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 : 04 Dec 02 Simple Annualized Returns (%) Compounded Annualized Returns (%) 3 5 Since Years Years Inception Scheme & Benchmark 3 Months 6 Months 1 Year HSBC Cash Fund Regular 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. xvi) 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 Oct 06 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, 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. xvii) 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. 12

14 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 : 05 Oct 07 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. xviii) 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 the schemes are not provided. 4. 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, Bangalore, 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. On the distribution front, the number of empanelled distributors increased from 8859 as on March 31, 2010 to 8985 as of March 31, 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 13

15 AMC has outsourced certain back office services including call centre services to HSBC Operations and Processing Enterprise (India) Private Limited (HOPE). 5. DIRECTORS 1Mr. Puneet Chaddha and Mr. Stuart Glenn Berry were appointed as Directors of HSBC Asset Management (India) Private Limited w.e.f. March 14, 2011 and July 14, 2011, respectively. Mr. Vikramaaditya resigned as Director w.e.f. March 11, As required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Board of Directors of the Company comprises 50% directors who are not associate of or associated in any manner with, the Sponsor of HSBC Mutual Fund (HSBC Securities and Capital Markets (India) Private Limited) or any of its subsidiaries or the Trustees of HSBC Mutual Fund. Directors Responsibility Statement The Directors confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) the accounting policies have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at March 31, 2011 and of the profit or loss of the Company for the Financial Year ended March 31, 2011; (iii) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts have been prepared on a going concern basis. 6. PERSONNEL Particulars of employees required under section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are given in the Annexure forming part of this Report. 37. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO As the Company is the asset management company to HSBC Mutual Fund and provides portfolio management services, no reporting in respect of conservation of energy and technology absorption is required. Information regarding foreign exchange earnings and outgo is contained in points 15.3 and 15.4 of the Notes to the financial statements. 14

16 8. AUDITORS M/s B S R & Associates retire as auditors at the ensuing annual general meeting and are eligible for reappointment. By authority of the Board Sd/- Naina Lal Kidwai 4Chairperson Sd/- Puneet Chaddha Director & Chief Executive Officer Place: Mumbai Date: August 30, 2011 Statutory Details: HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of Rs 1 lakh). The Sponsor/associates of the Sponsor/Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager. Risk Factors: All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor/AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. The names of the Schemes do not in any manner indicate the quality of the Schemes or their future prospects or returns. Read the Scheme Information Document and Scheme Additional Information carefully before investing. 15

17 Financial statements together with Auditors Report for the year ended 31 March 2011

18 Financial statements together with Auditors Report for the year ended 31 March 2011 Contents Pages Auditors Report 3 7 Balance sheet 8 Profit and loss account 9 Cash flow statement Schedules to the financial statements Balance sheet abstract 28 29

19 Auditors Report To the Members of HSBC Asset Management (India) Private Limited We have audited the attached balance sheet of HSBC Asset Management (India) Private Limited ( the Company ) as at 31 March 2011, the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1 As required by the Companies (Auditor's Report) Order, 2003 and amendments thereto (together referred to as the Order ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 2 Further to our comments in the Annexure referred to above, we report that: (i) (ii) (iii) (iv) (v) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in subsection (3C) of section 211 of the Companies Act, 1956; On the basis of written representations received from the Directors, as on 31 March 2011, and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31 March 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; 3

20 Auditors Report (Continued) HSBC Asset Management (India) Private Limited (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the balance sheet, of the state of affairs of the Company as at 31 March 2011; (b) in the case of the profit and loss account, of the loss of the Company for the year ended 31 March 2011; and (c) in the case of cash flow statement, of the cash flows of the Company for the year ended 31 March For B S R & Associates Chartered Accountants Firm s Registration No: W Sd/- Akeel Master Mumbai Partner 30 August 2011 Membership No:

21 Annexure to Auditors Report - 31 March 2011 (Referred to in our report of even date) We report the following: (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified on a yearly basis. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification. (ii) (iii) (iv) (v) (vi) (vii) (viii) (c) Fixed assets disposed off during the year were not substantial and therefore, do not affect the going concern assumption. The Company is a service company primarily rendering asset management services and portfolio management services. Accordingly, paragraph 4(ii) of the Order is not applicable. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, with regard to purchase of fixed assets and sale of services. We have not observed any major weaknesses in internal control system during the course of our audit. In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, The Company has not accepted deposits from public hence directives issued by the Reserve Bank of India and the provisions of section 58A and 58 AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under are not applicable for the year under audit. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business. The Central Government has not prescribed the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 for any of the services rendered by the Company. (ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Service tax, Cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Investor Education and Protection Fund, Sales-tax, Wealth tax, Customs duty and Excise duty. 5

22 Annexure to Auditors Report - 31 March 2011 (Continued) (b) (c) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other material statutory dues were in arrears as at 31 March 2011 for a period of more than six months from the date they became payable. According to the information and explanations given to us, the following dues of Income-tax have not been deposited by the Company on account of disputes: Name of the statute Income Tax Act, 1961 Income Tax Act, 1961 Nature of dues Income tax Income tax Amount (rupees in 000) Period to which the amount relates Forum where dispute is pending 1,341 A.Y CIT, Appeals 3,797 A.Y Appellate Tribunal (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) (d) There were no dues on account of cess under Section 441 A of the Companies Act, 1956 since the date from which the aforesaid section comes into force has not yet been notified by the Central Government. The Company does not have any accumulated losses at the end of the financial year. However the Company has incurred cash losses during the year. No cash losses were incurred in the immediately preceding financial year. The company did not have any due outstanding to any financial institutions, banks and debenture holders during the year. In our opinion, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures, and other securities. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. In our opinion and based on information and explanations given to us, in respect of dealing and trading in shares, securities, debentures and other investments, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The shares, securities, debentures and other investments have been held by the Company in its own name. According to information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks and financial institutions. The Company did not have any term loans outstanding during the current year except the assets taken on lease. According to the information and explanations given to us and based on overall examination of the balance sheet of the Company, we are of the opinion that no short term funds have been raised. 6

23 Annexure to Auditors Report - 31 March 2011 (Continued) (xviii) The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, (xix) (xx) (xxi) The Company has not issued any debentures during the year. Accordingly, paragraph 4(xix) of the Order is not applicable. The Company has not raised any money by public issues during the year. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For B S R & Associates Chartered Accountants Firm s Registration No: W Sd/- Akeel Master Mumbai Partner 30 August 2011 Membership No:

24 Balance sheet as at 31 March 2011 (Currency: Indian Rupees in '000) Schedules 31 March March 2010 SOURCES OF FUNDS Shareholders' funds Share capital 3 90,000 90,000 Reserves and surplus 4 554, ,569 Loan Funds Secured loans Lease liability 5 5, Unsecured loans Deferred tax liability , ,552 APPLICATION OF FUNDS Fixed assets 6 Gross block 119,727 93,283 Less: Accumulated depreciation 92,860 78,609 Net block 26,867 14,674 Investments 7 316, ,749 Deferred tax asset (net) ,569 Current assets, loans and advances Cash and bank balances 8 7,292 5,752 Sundry debtors 9 83, ,652 Loans and advances , , , ,697 Current liabilities and provisions Current liabilities , ,401 Provisions 12 12,663 10, , ,137 Net current assets 307, , , ,552 - (0.47) Significant accounting policies 2 - (0.47) Notes to the financial statements 15 The schedules referred to above form an integral part of the balance sheet. As per our report attached. For B S R & Associates Chartered Accountants Firm Registration No W For and on behalf of the Board of Directors of HSBC Asset Management (India) Private Limited # Sd/- Sd/- Sd/- Akeel Master Naina Lal Kidwai Puneet Chaddha Partner Chairperson Director & Membership No: Chief Executive Officer Mumbai 30 August 2011 Sd/- Denny Thomas Company Secretary 8 Mumbai 30 August 2011

25 Profit and loss account for the year ended 31 March 2011 (Currency: Indian Rupees in '000) INCOME Schedules 31 March March 2010 Investment management fees 409, ,346 (net of service tax and cess Rs 44,093 previous year Rs 60,170) (TDS Rs 45,322 previous year Rs 50,027) Investment advisory fees - 8,146 Income from PMS Business 241, ,016 (net of service tax and cess Rs 24,815 previous year Rs 19,946) (TDS Rs 1,206 previous year Rs 2,528) Profit on sale of investments (non trade) 11,889 1,174 Dividend (non trade) 20,738 9,494 Other income ,396 2,056 (0) TOTAL 684, ,232 EXPENDITURE Employee costs , ,073 Establishment and other expenses , ,303 Depreciation 6 21,267 17,491 Lease finance charges 1, Foreign exchange loss (net) 482 (1,496) 0.5 TOTAL 763, ,165 (Loss) / profit before tax (78,937) 117,067 Provision for tax (15,762) Deferred tax (charge)/credit (3,084) 2,569 Fringe benefit tax - (39) (Loss) / profit after tax (82,021) 103,835 Accumulated profit brought forward 546,569 (0) 442,734 Profit available for appropriations 464, ,569 Balance carried over to reserves and surplus 464, ,569 TOTAL 464, ,569 Basic and diluted earnings per share 15.9 (9.11) Significant accounting policies 2 Notes to the financial statements 15 The schedules referred to above form an integral part of the profit and loss account. As per our report attached. For B S R & Associates Chartered Accountants Firm Registration No W For and on behalf of the Board of Directors of HSBC Asset Management (India) Private Limited Sd/- Sd/- Sd/- Akeel Master Naina Lal Kidwai Puneet Chaddha Partner Chairperson Director & Membership No: Chief Executive Officer Mumbai 30 August 2011 Sd/- Denny Thomas Company Secretary Mumbai 30 August

26 Cash flow statement for the year ended 31 March 2011 (Currency: Indian Rupees in '000) Particulars 31 March March 2010 A B C Cash flow from operating activities (Loss) / profit before tax (78,937) 117,067 Adjustments for Depreciation 21,267 17,491 Lease finance charges 1, Loss on sale of assets Profit on sale of investments (11,889) (1,174) Dividend (20,738) (9,494) Other income (1,396) (2,056) (10,247) 5,967 Operating (loss) / profit before working capital changes (89,184) 123,034 Adjustments for : Decrease / (increase) in sundry debtors 71,501 (33,475) (Increase) / decrease in loans and advances (32,801) 34,657 (Decrease) / increase in current liabilities and provisions (59,838) 73,372 Cash (used in) / generated from operations (21,138) 74,554 Direct tax paid (46,629) 0 (29,288) 0 Net cash (used in) / generated from operating activities ( A ) (156,951) 168,300 Cash flow from investing activities Purchase of fixed assets (34,207) (17,410) (Cost incurred for sale) / Proceeds from sale of fixed assets (70) 1,461 Purchase of debentures (15,209) (27,209) Purchase of mutual fund units (722,499) (690,040) Proceeds from sale of mutual fund units 881, ,895 Proceeds from sale of debentures 23,182 19,236 Dividend income 20,738 9,494 Other income 1,396 2,056 Net cash generated from / (used in) investing activities ( B ) 155,296 (171,517) Cash flow from financing activities Repayment of secured loans (2,482) (628) Additional secured loans 7, Lease finance charges (1,692) (794) Net cash generated from / (used in) financing activities ( C ) 3,195 (513) 10

27 Cash flow statement for the year ended 31 March 2011 (Currency: Indian Rupees in '000) Particulars 31 March March 2010 Net increase / (decrease) in cash and cash equivalents (A) + (B) + ( C ) 1,540 (3,730) Cash and cash equivalents at the beginning of the year 5,752 9,482 Cash and cash equivalents at the end of the year (refer note) 7,292 5,752 Net increase / (decrease) in cash and cash equivalents 1,540 (3,730) Note Cash and cash equivalents comprise of cash in hand, balances with banks in current accounts and in fixed deposits. (Refer schedule 8 of the financial statements) As per our report attached. For B S R & Associates Chartered Accountants Firm Registration No W For and on behalf of the Board of Directors of HSBC Asset Management (India) Private Limited Sd/- Akeel Master Sd/- Sd/- Partner Naina Lal Kidwai Puneet Chaddha Membership No: Chairperson Director & Mumbai Chief Executive Officer 30 August 2011 Sd/- Denny Thomas Company Secretary Mumbai 30 August

28 Schedules to the financial statements for the year ended 31 March 2011 (Currency: Indian Rupees in '000) 1. Background HSBC Asset Management (India) Private Limited ("the Company") was incorporated on 12 December The Company is a fullyowned subsidiaryof HSBC Securities and Capital Markets (India) Private Limited. Its principalactivity is to act as an Investment Manager to HSBC Mutual Fund ("the Fund") which has seventeen live schemes/plansas on 31 March The Company manages the Mutual Scheme schemes launched by HSBC Mutual Fund and provides various administrative services to the Fund as laid down in the Investment Management Agreement dated 7 February The Company is also a SEBI registered Portfolio Manager. The Company has received a certificate from SEBI to act as Portfolio Manager. The said certificate is valid upto 15 September 2011 and to be renewed thereafter. It provides discretionary and advisory portfolio management services (PMS) to its clients. 2. Significant Accounting Policies 2.1 Basis of preparation of financial statements The accompanyingfinancialstatements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the CompaniesAct, 1956 to the extent applicable. The financialstatements are presented in Indian rupees. 2.2 Use of estimates The preparation of the financialstatements in conformity with the generallyaccepted accounting principles (GAAP) requires managementto make estimates and assumptions that affect the reported amount of assets and liabilitiesand disclosure of contingent liabilitieson the date of financialstatements. Actual results may differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. 2.3 Fixed assets and depreciation Fixed assets are stated at historical cost less accumulated depreciation. Cost includes inward freight, duties, octroi, taxes and other incidental expenses related to acquisition and corresponding installation expenses. Depreciation on fixed assets is provided on the written-down value method. The rates of Depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimumrates. If, the management'sestimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaininguseful life on the subsequent review is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on the management estimate of the useful life/ remaininguseful life. Pursuant to this policy, depreciation on assets has been provided at the following rates: Motor Cars As per the lease tenure or on the basis of technical evaluation of the useful life whichever is earlier Computers 40.00% Office Equipment 25.00% Furniture and Fittings 25.00% Depreciation on additions is provided on a pro rata basis from the date the asset is put to use or ready to use whicheveris earlier. In respect of assets sold, depreciation is provided upto the date of disposal. Intangible assets (computer software) have been amortised at 100% in the year of acquisition. Assets costing less than Rs. 10,000 are fully depreciated in the year of purchase. 2.4 Impairment of assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairmentloss and is recognized in the profit and loss account. If, at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. 2.5 Investments Long term investments are carried at cost less any other-than-temporary diminution in value, determined separately for each individual investment. Current investments are carried at lower of cost or fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Purchases and sales of investments are recorded on trade date basis. 12