HSBC Capital Protection Oriented Fund – Series II (HCPOF II)

New Fund Offer: 17 March – 23 March 2015

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Equity: Look ahead

Fastest growing economy: India is one of the fastest growing economy in the world and

the growth expected accelerate in the coming quarters

Improved macro stability: India’s macro outlook has improved over the recent months

with a fall in inflation and lower current account deficit

Union Budget 2015-16: The Union Budget announced measures to revive manufacturing

& infrastructure sector and laid down a road map towards fiscal consolidation

Investments: Announcements made in the budget is likely to kick-start the capex

investments (to be led by government and the Public Sector Undertakings (PSU’s)). This

could unleash a multi-year cycle

Revival in earnings: Strong corporate earnings growth is expected to drive P/E ratings

Valuations: Indian equities valuation are currently above historical averages, but an

economic recovery is expected to drive earnings and structural reforms could trigger a

further re-rating of Indian equities

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Considerations of the Indian investor…

By tradition, the Indian investors are risk averse and inclined towards relatively safe investment options

Post the Global Financial Crisis (GFC) and its impact on world equity markets, Indian investors, seem

to have settled for lower risk investments and capital surety over higher market linked returns

Indian investors remain in sweet spot as equity markets are doing well and interest rates are starting to

come off providing opportunities in both equities and fixed income

Expected interest rate cuts and falling inflation can support a rally in the bond markets

A gradual return of capital and an enabling environment can unleash a multi-year equity cycle

However near term risks in the form of uncertain global markets, entrenched infrastructural problems

and high interest rates can delay the progress for an indefinite time

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… reflected in the investment trend

Investors prefer fixed returns instrument over market linked returns

Over the long term equity as an asset class tends to outperform other asset classes and provide

real (inflation adjusted) returns

However, equities command a very small mindshare of investors

Source : Reserve Bank of India, Currency - INR

Expected average savings for 12th Five Year Plan (2012-17)

Asset Class Performance* Asset Class Distribution : Individual

Wealth

Period : FY90 – FY14, Source : CLSA, Currency – INR

*Real Estate data not available

0 5 10 15 20

Inflation

Gold

Bank FD

G Sec

Equity

6.5

9.4

9.6

9.3

15.9

%

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However, equities are reasonably attractive

Valuations are marginally higher than historical averages, but possibility of an earnings upgrade

makes the equity markets an attractive proposition

Source:Motilal Oswal Securities Ltd data as of February 2015

Can we generate real returns while aiming at

capital protection?

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Capital Protection Oriented Fund (CPOF) – key points

Long term investment horizon

− Investors should have a long term perspective since CPOF are close ended schemes with

maturity period of 3 years

Who should invest in CPOF?

− Investors who wish to participate in the equity markets but at the same time wish to safeguard

their principal – a win-win proposition for the investor

− Investors who would stay invested for the entire tenure of the fund, since the fund is close-ended

in nature

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HSBC Capital Protection Oriented Fund – Series II – Plan I is a 1195 days close ended fund that

aims to offer capital protection and capital growth by participating into high quality debt and

exchange traded index call options.

The scheme is oriented towards capital protection & seeks to protect capital by investing a portion

of the portfolio in good quality debt securities and money market instruments

It seeks to provide capital appreciation by participating in the equity market through call options

The invested securities would mature on or before the maturity of the tranche under the scheme

The scheme is “oriented towards protection of capital” and not with “guaranteed returns”. The orientation towards

protection of the capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance

cover, etc.

Presenting HSBC Capital Protection Oriented Fund – Series II – Plan I

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Product Features

The product is oriented towards capital protection and seeks to provide an upside return through equity

participation

Major portion of the portfolio (>80%) will be invested into AAA rated bonds or equivalent which aims

towards achieving capital protection and pays for expenses

The remaining assets are invested into “over the term”* Nifty call options which creates resultant

equity participation

Expense Ratio: Upto 2% p.a.

Rated CRISIL AAA** (so), by CRISIL. Instruments with this rating are considered to have the highest

degree of safety regarding timely servicing of financial obligations and carry lowest credit risk

For further details on investment strategy, asset allocation and investment pattern please refer to the Scheme

Information Document.

*“Over the term” means, largely over the duration of the existence of the scheme.

** Refer to rating disclaimer at the end of the presentation

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Key risks associated with HCOF

The fund is oriented towards Capital Protection and not with “guaranteed returns”, however following

risks are to be considered:

Credit risk - There is a risk of default by issuers in the portfolio

Interest Rate risk - As with all debt securities, changes in interest rates may affect the NAV of the

Scheme

Liquidity risk – While the scheme will be listed , this does not necessarily guarantee liquidity and

there can be no assurance that an active secondary market for the Units will develop or be

maintained

Restructuring/rescheduling risk – Risk on account of the issuer restructuring/re-scheduling a

particular debt/money market instrument held in the portfolio which could result in the maturity of the

instrument going beyond the Maturity Date of the scheme

Derivative Exposure Risk - The Fund will have derivative exposure limited to buying call options as

per the construct of the scheme. Pricing of the option may depend on implied volatility at the time of

maturity.

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Key Features

Investment Objective To seek protection of capital by investing a portion of the portfolio in high quality debt

securities and money market instruments and also to provide capital appreciation by

investing in equities through NIFTY (Index) Call Options.

However, there is no assurance that the investment objective of the Plans under the

Scheme will be achieved. It neither assures/ guarantees any returns nor does it provide

protection of capital.

The Plans under the Scheme are “oriented towards protection of capital” and not with

“guaranteed returns”. The orientation towards protection of capital originates from the

portfolio structure of the Plans under the Scheme and not from any bank guarantee,

insurance cover etc.

Rating The proposed portfolio structure has been rated ‘CRISIL AAA (so)’ by CRISIL, a SEBI

registered credit rating agency, from the view point of assessing the degree of certainty

for achieving the objective of capital protection. The rating would be reviewed on a

quarterly basis.

Minimum Investment INR 5,000 and multiples of INR 10 thereafter during NFO period only

Fund Manager Sanjay Shah (Fixed Income) and

Amaresh Mishra (Equity)

Benchmark CRISIL MIP Blended Index

Maturity 1195 days from date of allotment

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Product Labeling

HSBC Capital Protection Oriented Fund – Series II [HCPOF] – Plan

This product is suitable for investors who are seeking*:

Capital protection and capital appreciation linked to equity market at the end of long term

Investing in high quality rated debt securities and money market instruments and

equities through NIFTY (Index) Call Options

Low risk (Blue)

* Investors should consult their financial advisers if in doubt about whether the product is

suitable for them.

Note: Risk may be represented as:

(BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk

(BROWN) investors understand that their principal will be at high risk

Thank You

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Important Information

The Units of Plan II will be listed on the National Stock Exchange of India Ltd. (NSE) / any other Stock Exchange. Investors can

purchase / sell Units on a continuous basis on the Stock Exchange(s) on which the Units are listed. As the Units are listed on the

Stock Exchange, the Plan will not provide redemption facility until the date of Maturity / Final Redemption date.

NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed

that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness

of any of the contents of the Scheme Information Document. The investors are advised to refer to the Scheme Information

Document for the full text of the ‘Disclaimer Clause of NSE’.

“The rating of ‘CRISIL AAA(so)’ is pronounced as ‘CRISIL Triple A (Structured Obligation)’. The assigned rating is valid only for

HSBC Capital Protection Oriented Fund - Series II (Plan I to Plan IV). Instruments with this rating are considered to have the

highest degree of safety regarding timely servicing of financial obligations. The rating is not an opinion on the stability of Scheme’s

net asset value (NAV) before its maturity date. CRISIL’s capital protection oriented scheme ratings are not recommendations to

buy, sell or hold a fund or scheme.

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Disclaimer

This document has been prepared by HSBC Asset Management (India) Private Limited (AMIN) for information purposes only and

should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information

contained in this document (including that sourced from third parties), is obtained from sources, which AMIN/ third party, believes to

be reliable but which it has not been independently verified by AMIN/ the third party. Further, AMIN/ the third party makes no

guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such

information. The information and opinions contained within the document are based upon publicly available information and rates of

taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of

AMIN only and are subject to change without any prior intimation or notice. It does not have regard to specific investment

objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek

financial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed

or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither

this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in

certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are

required to inform themselves about, and to observe, any such restrictions.

© Copyright. HSBC Asset Management (India) Private Limited 2014, ALL RIGHTS RESERVED.

HSBC Asset Management (India) Private Limited, 16, V.N. Road, Fort, Mumbai-400001 Email: hsbcmf@hsbc.co.in

Mutual fund investments are subject to market risks, read all scheme related documents

carefully.