HSBC Global Asset Management · 3 HSBC Equity Fund SPONSOR HSBC Securities and Capital Markets (India) Private Limited Regd. Ofﬁ ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400

HSBC Global Asset Management

Issued by HSBC Asset Management (India) Private Limited

Schemewise Annual Reports :

2010-2011

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 ...............................................................................104

HSBC Gilt Fund ....................................................................................121

HSBC Floating Rate Fund ......................................................................130

HSBC Ultra Short Term Bond Fund ........................................................147

HSBC Flexi Debt Fund ...........................................................................157

HSBC Cash Fund ...................................................................................168

HSBC Fixed Term Series 79 ....................................................................178

1

HSBC Equity Fund

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 2011.

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 443.50 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, 2010.

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 scientifi cally 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 effi cient 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 benefi cial in the current environment, particularly in the aftermath of the global fi nancial 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 fi nancial 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 refl ection 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 profi le) 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 benefi ts vis-à-vis staying invested in a well managed fund which follows a disciplined investments approach.

2

HSBC Equity Fund

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 benefi t 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 benefi t 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 ChaddhaChief Executive Offi cerHSBC Asset Management (India) Private Limited

* Date source: MutualFundsIndia Explorer software** Source: Employee Provident Fund Organisation (EPFO)

3

HSBC Equity Fund

SPONSORHSBC Securities and Capital Markets (India) Private LimitedRegd. Offi ce: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.

TRUSTEEBoard of TrusteesOffi ce: 314, D. N. Road, Fort, Mumbai 400 001.

ASSET MANAGEMENT COMPANYHSBC Asset Management (India) Private LimitedCorp. & Regd. Offi ce: 314, D. N. Road, Fort, Mumbai 400 001.

CUSTODIANJP Morgan Chase Bank N. A.Corp. & Regd. Offi ce: J. P. Morgan Tower, C.T.S. No. 5435, Kalina, Santacruz (East), Mumbai 400 098.

AUDITORS TO THE SCHEMEPrice WaterhouseChartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.

LEGAL ADVISORSBharucha & PartnersCecil Court, 4th Floor, M. K. Bhushan Marg, Colaba, Mumbai 400 039.

REGISTRAR & TRANSFER AGENTSComputer Age Management Services (P) Ltd. (CAMS)Rayala Towers, Tower I, III Floor, 158 Anna Salai, Chennai - 600 002.

BOARD OF TRUSTEES*Mr. N. P. Gidwani - Chairman

Mr. Nasser MunjeeMr. Manu TandonMr. Mehli MistriMr. Dilip J. ThakkarMs. Joanna Munro

* Dr. Rudolf Apenbrink has resigned as a Trustee with effect from October 11, 2010. Further, Ms. Joanna Munro has been appointed as the Trustee of HSBC Mutual Fund with effect from June 16, 2011.

BOARD OF DIRECTORS**

Ms. Naina Lal Kidwai - Chairperson

Mr. S. P. MustafaMr. Ashok JhaMs. Kishori J. UdeshiMr. Puneet Chaddha - Chief Executive Offi cer

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.

4

The Trustees present the ninth report and the audited abridged fi nancial statements of the Scheme(s) of HSBC Mutual Fund (the “Fund”), for the year ended March 31, 2011.

1. SCHEME PERFORMANCE, FUTURE OUTLOOK AND OPERATIONS OF THE SCHEMES

a) Operations and Performance of the Scheme

HSBC Equity Fund (HEF) – an open-ended diversifi ed 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. 966.68 crores as at March 31, 2011 as against Rs. 1,382.78 crores as at March 31, 2010. 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, 2011.

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 10.43 6.00 11.56 32.75

BSE 200 8.15 7.17 10.98 24.50

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 India Opportunities Fund (HIOF) – an open-ended fl exi-cap Equity Scheme

HIOF seeks long term capital growth through investments across all market capitalisations, including small, mid and large cap stocks. It aims to be predominantly invested in equity and equity related securities. However, it could move a signifi cant portion of its assets towards fi xed income securities if the fund manager becomes negative on equity markets.

The net assets of HIOF amounted to Rs. 189.90 crores as at March 31, 2011 as compared to Rs. 283.80 crores as at March 31, 2010. 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, 2011.

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 (%)


HSBC India Opportunities Fund – Growth 11.75 4.75 9.14 19.63

BSE 500 7.48 6.50 10.48 18.30


HSBC Midcap Equity Fund (HMEF) – an open-ended diversifi ed 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 fi xed income securities if the fund manager becomes negative on the Indian equity markets.

The net assets of HMEF amounted to Rs. 138.69 crores as at March 31, 2011 as compared to Rs. 177.24 crores as at March 31, 2010. 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, 2011.

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.

Trustees’ ReportFor the year ended March 31, 2011

5

Date of Inception : 19 May, 2005 Compounded Annualized Returns (%)


HSBC Midcap Equity Fund – Growth -9.93 -1.59 1.08 12.22

BSE MID CAP 0.99 2.26 5.14 13.63


HSBC Progressive Themes Fund (HPTF) – an open-ended fl exi-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 benefi t from, India’s progress, reform process and economic development.

The net assets of HPTF amounted to Rs. 224.12 crores as at March 31, 2011 as compared to Rs. 391.28 crores as at March 31, 2010. 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, 2011.

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.



HSBC Progressive Themes Fund – Growth -10.05 -7.08 0.65 3.07

BSE 200 8.15 7.17 10.98 12.93

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 Tax Saver Equity Fund (HTSF) - an open-ended Equity Linked Savings Scheme

HTSF seeks to provide long term capital appreciation by investing in a diversifi ed portfolio of equity & equity related instruments of companies across various sectors and industries, with no capitalisation bias. The Fund may also invest in fi xed income securities.

The net assets of HTSF amounted to Rs. 248.29 crores as at March 31, 2011 compared to Rs. 301.54 crores as at March 31, 2010. 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, 2011.

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 5.80 11.44 9.33

BSE 200 8.15 7.17 8.81


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 fl exibility to move, entirely if required, into debt instruments in times that the view on equity markets seems negative.

The net assets of HDF amounted to Rs. 114.78 crores as at March 31, 2011 compared to Rs. 238.73 crores as at March 31, 2010. 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, 2011.

Trustees’ ReportFor the year ended March 31, 2011 (Contd...)

6

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 9.27 2.72 1.33

BSE 200 8.15 7.17 4.02


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. 59.69 crores as at March 31, 2011 compared to Rs. 87.09 crores as at March 31, 2010. 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, 2011.

HEMF outperformed its benchmark over past 1 year beating its benchmark, MSCI Emerging Market Index.

Date of Inception : 17 March, 2008 Compounded Annualized Returns (%)


HSBC Emerging Markets Fund – Growth 13.48 1.75 1.83

MSCI Emerging Markets Index 10.81 1.88 3.55


HSBC Unique Opportunities Fund (HUOF) - an open-ended Equity Scheme

HUOF seeks to provide long-term capital growth from a diversifi ed portfolio of equity and equity related instruments. The focus would be to invest in stocks of companies facing “out-of-ordinary” conditions.

The net assets of HUOF amounted to Rs. 96.50 crores as at March 31, 2011 compared to Rs. 214.98 crores as at March 31, 2010. 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, 2011.

HUOF outperformed its benchmark over past 1 year beating its benchmark BSE 200.



HSBC Unique Opportunities Fund – Growth 9.98 1.36 2.89

BSE 200 8.15 7.17 11.40


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 diversifi ed portfolio of equity and equity related instruments of small cap companies.


7

The net assets of HSCF amounted to Rs. 34.60 crores as at March 31, 2011 compared to Rs. 60.91 crores as at March 31, 2010. 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, 2011.

Correction in the markets in the second half FY11 led to underperformance in the small cap fund after posting good performance in the fi rst half. Small caps corrected much more than the large caps in the second half. Overall, the performance was better than benchmark for the year.



HSBC Small Cap Fund – Growth 0.04 2.27 2.70

BSE Small Cap -3.78 1.40 5.53


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. 222.57 crores as at March 31, 2011 as compared to Rs. 219.32 crores as at March 31, 2010. 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, 2011. The net assets of HMIP – Savings Plan (HMIP – S) amounted to Rs. 676.10 crores as at March 31, 2011 as compared to Rs. 358.31 crores as at March 31, 2010. 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, 2011.

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



HSBC MIP – Regular Plan – Growth 4.02 7.23 8.16 7.76

CRISIL MIP Blended Index 6.17 6.82 7.41 7.21


HMIP – Savings Plan



HSBC MIP – Savings Plan – Growth 4.37 8.41 9.49 9.63

CRISIL MIP Blended Index 6.17 6.82 7.41 7.21



8

HSBC Income Fund (HIF) – an open-ended Income Scheme

HIF seeks to generate reasonable income through a diversifi ed portfolio of fi xed income securities. The AMC’s view of interest rate trends and the nature of the Plans will be refl ected in the type and maturities of securities in which the Short Term and Investment Plans are invested.

The 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. 21.11 crores as at March 31, 2011 as compared to Rs. 32.66 crores as at March 31, 2010. 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, 2011. The net assets of HSBC Income Fund – Short Term Plan (HIF – STP) amounted to Rs. 164.21 crores as at March 31, 2011 as compared to Rs. 165.26 crores as at March 31, 2010. 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, 2011.

HIF - IP outperformed its benchmark through relatively active management of duration.

HIF – IP



HSBC Income Fund – IP – Regular - Growth 5.57 7.33 7.35 6.46

CRISIL Composite Bond Fund Index 5.06 5.94 5.94 5.24


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



HSBC Income Fund – STP – Regular - Growth 5.85 6.78 6.99 6.24

CRISIL Short-Term Bond Fund Index 5.12 6.91 7.04 5.89


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 refl ected in the maturities of securities in which the Scheme is invested.

The net assets of HGF amounted to Rs. 0.70 crores as at March 31, 2011 as compared to Rs. 0.42 crores as at March 31, 2010. 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, 2011.

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.



HSBC Gilt Fund – Growth 7.81 2.30 3.19 3.09

I Sec Composite Index 6.41 7.83 7.65 6.12



9

HSBC Floating Rate Fund (HFRF) – an open-ended Income SchemeHFRF seeks to generate reasonable return with commensurate risk from a portfolio comprised of fl oating rate debt instruments and fi xed rate debt instruments swapped for fl oating rate returns. The Scheme may also invest in fi xed rate money market and debt instruments.

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. 279.80 crores as at March 31, 2011 as compared to Rs. 597.50 crores as at March 31, 2010. 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, 2011. The net assets of HSBC Floating Rate Fund – Short Term Plan (HFRF – STP) amounted to Rs. 21.23 crores as at March 31, 2011 as compared to Rs. 72.22 crores as at March 31, 2010. Around 89.56% of the net assets were invested in reverse repos / CBLO and 10.44% in net current assets as at March 31, 2011.

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 November, 2004

Compounded Annualized Returns (%)


HSBC FRF – LTP – Regular Plan – Growth 5.74 6.30 6.90 6.55

CRISIL Liquid Fund Index 6.21 6.22 6.51 6.15


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 (%)


Scheme & Benchmark 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception

HSBC FRF - STP - Regular Plan - Growth

5.84 5.71 4.97 4.91 5.94 5.83

CRISIL Liquid Fund Index 7.96 7.43 6.21 6.22 6.51 6.15


HSBC Cash Fund (HCF) – an open-ended Liquid SchemeHCF aims to provide reasonable returns, commensurate with low risk while providing a high level of liquidity, through a portfolio of money market and debt securities.The net assets of HCF amounted to Rs. 270.82 crores as at March 31, 2011 as compared to Rs. 470.59 crores as at March 31, 2010. 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, 2011.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 (%)


Scheme & Benchmark 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception

HSBC Cash Fund – Regular – Growth

7.04 6.47 5.42 4.92 5.87 5.56

CRISIL Liquid Fund Index 7.96 7.43 6.21 6.22 6.51 5.70


10



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. 139.76 crores as at March 31, 2011 as compared to Rs. 512.32 crores as at March 31, 2010. 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, 2011.

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 (%)


HSBC Ultra Short Term Bond Fund – Regular – Growth 5.03 5.56 6.44

CRISIL Liquid Fund Index 6.21 6.22 6.55

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. 54.23 crores as at March 31, 2011 as compared to Rs. 102.42 crores as at March 31, 2010. 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, 2011.

HFDF has outperformed its benchmark index through relatively active management of duration.

Date of Inception : 5 October, 2007 Compounded Annualized Returns (%)


HSBC Flexi Debt Fund – Growth 5.77 8.14 8.24

CRISIL Composite Bond Fund Index 5.06 5.94 6.09

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 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 fi xed income instruments normally maturing in line with the time profi le 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, 2011. The performance of the plans is benchmarked against CRISIL Short Term Bond Fund Index. Being closed ended fi xed maturity plans, the performance of the schemes are not provided.

11

b) Market Overview & Outlook

EquityFinancial year 2010-2011 was a year of two halves. The fi rst half saw a euphoric period culminating with the highly successful Coal India IPO. Banks led the way through fi rst half on buoyant credit growth, soft interest rates, listing of parallel loan origination agencies like microfi nance / gold lending fi rms 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 offi cials 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 100 8.6

BSE 200 8.2

BSE 500 7.5

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 minefi eld with fi scal defi cits and refi nancing needs far in excess of what would be desirable. These have the potential to hurt global growth / commodity prices. As emerging economies battle infl ation (refer for details in the fi xed 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 fi rst fi nancial 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.

DebtFixed income markets remained pressured under various concern for the year FY2010-11. Starting with rate hikes from the early 2010, liquidity concerns on back of 3G outfl ows / large IPOs, government’s borrowing requirements and infl ation 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.

Infl ation has remained a major concern for the entire year. Annual Wholesale Price Index eased from double digit level to 9%. However, the easing in infl ation was not in line with expectation. This was due to higher


12

non food manufacturing infl ation. Earlier part of infl ation was regarded as supply side infl ation. However, it turned to demand push infl ation in later part of year. This movement in infl ation 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 fi red up infl ation. The market is expected to wait for a pause / end in rate hike cycle as and when infl ation 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. Infl ation may remain stubborn till September since the recent fuel price hikes will refl ect its impact on the market. Infl ation 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 fi nance & 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, 2002.

The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities / any other property for the purpose of providing facilities for participation by persons as benefi ciaries in such properties / investments and in the profi ts / income arising therefrom.

c) Board of Trustees (the Trustees) The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefi t

of the 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 fl oated thereunder are managed by the AMC in accordance with the Trust Deed, the said Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies.

d) Asset Management Company (the AMC) HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited

company incorporated under the Companies Act, 1956 on December 12, 2001 having its Registered Offi ce at 314, D. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of the HSBC Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. SEBI approved the AMC to act as the Investment Manager of the Fund vide. Its letter No. MFD/BC/163/2002 dated May 27, 2002.


13

The paid-up equity share capital of the AMC is Rs. 9 crores. HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid-up equity share capital of the AMC.

3. INVESTMENT OBJECTIVE OF THE SCHEMEThe investment objective of the respective Schemes has been provided above under the heading “Scheme Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).

4. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies are in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of Investors & corresponding amount Scheme-wise as on March 31, 2011:

SchemeUnclaimed Dividends Unclaimed Redemptions

Amount (Rs.)

No. of Investors

Amount (Rs.)

No. of Investors

HSBC Equity Fund 4,077,204.66 1109 2,379,836.99 87

HSBC India Opportunities Fund 1,209,792.27 335 694,180.42 20

HSBC Midcap Equity Fund 458,823.62 341 527,863.88 25

HSBC Progressive Themes Fund 718,704.65 364 2,675,137.34 155

HSBC Tax Saver Equity Fund 596,855.65 428 571,340.80 39

HSBC Dynamic Fund – – 1,348,548.28 35

HSBC Emerging Markets Fund – – 91,845.27 8

HSBC Unique Opportunities Fund – – 1,026,389.98 35

HSBC Small Cap Fund – – 77,708.40 3

HSBC MIP - Regular Plan 303,674.27 312 58,400.28 3

HSBC MIP – Savings Plan 476,626.47 387 12,754.56 4

HSBC Income Fund - Investment Plan 235,932.78 533 325,454.92 17

HSBC Income Fund - Short Term Plan 56,523.18 20 – –

HSBC Gilt Fund 7,395.57 2 – –

HSBC Floating Rate Fund– Long Term Plan

41,563.67 56 14,800.14 4

HSBC Ultra Short Term Bond Fund – – 66,064.60 2

HSBC Flexi Debt Fund 16.59 1 – –

6. INVESTOR SERVICESDuring the year, the number of offi cial points of acceptance of transactions increased signifi cantly to about 229 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 14 locations at its own offi ces - 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.


14

On the distribution front, the number of empanelled distributors increased from 8859 as on 31 March, 2010 to 8985 as of 31 March, 2011. 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 offi ce services including call centre services to HSBC Operations and Processing Enterprise (India) Private Limited.

7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund duringApril 2010- March 2011 are as follows:

Total Number of Folios: 3,75,572

Com-plaintCode

Type of complaint#

(a) No. ofcomplaints

pendingat the

beginningof theyear

(b) No. of com-plaints

receivedduring

theyear

Action on (a) and (b)

Resolved Non Actiona-

ble*

Pending

Within 30 days

30 - 60 days

60 - 180 days

Beyond 180 days

0 - 3 months

3 - 6 months

6 - 9 months

9 - 12 months

I A Non receipt of Dividend on Units

– 7 6 1 – – – – – – –

I B Interest on delayed payment of Dividend

– – – – – – – – – – –

I C Non receipt of Redemption Proceeds

– 13 12 – – – – 1 – – –

I D Interest on delayed payment of Redemption

– 5 5 – – – – – – – –

II A Non receipt of Statement of Account / Unit Certifi cate

– 1 1 – – – – – – – –

II B Discrepancy in Statement of Account

– 5 5 – – – – – – – –

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 charges / load

– 1 1 – – – – – – – –

III E Non updation of changes viz. address, PAN, bank details, nomination, etc.

– 15 15 – – – – – – – –

IV Others ** – 1,114 1,108 3 – – 1 2 – – –Total – 1,161 1,153 4 – – 1 3 – – –

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


15

8. STATUTORY DETAILSa) The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of

the Fund beyond initial contribution of Rs. 1 lakh for setting up the Fund.

b) The price and redemption value of the units, and income from them, can go up as well as down with fl uctuations in the market value of its underlying investments.

c) Full Annual Report shall be disclosed on the website at www.assetmanagement.hsbc.com/in and shall be available for inspection at the Head Offi ce of the mutual fund. Present and prospective unit holder can obtain copy of the trust deed, the full Annual Report of the Scheme(s), the Annual Report of HSBC Asset Management (India) Private Limited and the text of the relevant Scheme(s) at a price.

9. ACKNOWLEDGEMENTSThe Trustees wish to thank the Unit holders of the Schemes for their support throughout the year and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustees also appreciate the service provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers. The guidance and services provided by the Auditors and advocates and the ebullience, sincerity and dedication of the employees of HSBC Asset Management (India) Private Limited is also appreciated.

The Trustees look forward to the continued support of everyone.

For and on behalf of the Board of Trustees of HSBC Mutual Fund

Sd/-

Dilip J. Thakkar

Trustee

MUMBAIJuly 15, 2011


HSBC Equity Fund



HSBC Equity FundAn open-ended Diversifi ed Equity Scheme

Abridged Annual Report 2010 - 2011

17

HSBC Equity Fund

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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agent respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet, 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 fl ows 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 specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable.

iii. The methods used to value non-traded 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 WATERHOUSEFirm Registration Number: 301112EChartered Accountants

Sd/-

Alpa KediaPartnerMembership No. F/100681

Place : MumbaiDate : July 15, 2011

Auditors’ Report

18

HSBC Equity Fund

Rs. in Lakhs

HSBC EQUITY FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 22,950.76 33,754.332 Reserves & Surplus2.1 Unit Premium Reserves (18,873.82) (4,983.57)2.2 Unrealised Appreciation Reserve 25,988.25 33,567.402.3 Other Reserves 66,605.00 75,939.393 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 1,557.51 2,810.45

TOTAL 98,227.70 141,088.00

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 87,495.53 131,631.741.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds 29.13 –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 87,524.66 131,631.742 Deposits 5,071.29 4,506.033 Other Current Assets3.1 Cash & Bank Balance 87.02 55.263.2 CBLO / Reverse Repo Lending 3,639.35 3,384.733.3 Others 1,905.38 1,510.244 Deferred Revenue Expenditure – –

(to the extent not written off)

TOTAL 98,227.70 141,088.00Notes to Accounts - Annexure I

Abridged Balance Sheet as at March 31, 2011

19

HSBC Equity Fund

Abridged Revenue Account for the year ended March 31, 2011

Rs. in Lakhs

HSBC EQUITY FUNDCurrent

Year ended March 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend 1,565.88 1,581.761.2 Interest 456.15 470.711.3 Realised Gain / (Loss) on Foreign Exchange Transactions – (10.65)1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of

investments19,504.28 25,786.64

1.6 Realised Gains / (Losses) on Derivative Transactions 1,241.88 56.531.7 Other Income 7.26 29.70

(A) 22,775.45 27,914.69

2 EXPENSES2.1 Management fees 1,170.64 1,509.092.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 244.68 244.622.4 Custodian fees 59.73 62.632.5 Trusteeship fees 1.12 1.352.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 687.32 828.042.8 Audit fees 12.35 7.002.9 Other operating expenses 201.96 248.602.10 Less: Expenses to be Reimbursed by the

Investment Manager(72.93) –

(B) 2,304.87 2,901.33

3 NET REALISED GAINS / (LOSSES) FORTHE YEAR (A - B = C) 20,470.58 25,013.36

4 Change in Unrealised Depreciation in value of investments (D) (123.31) (4,894.10)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 20,593.89 29,907.46

6 Change in unrealised appreciation in the value of investments (F) (7,579.15) 33,545.37

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 13,014.74 63,452.837.1 Add: Balance transfer from Unrealised

Appreciation Reserve– –

7.2 Less: Balance transfer to Unrealised Appreciation Reserve (7,579.15) 33,545.377.3 Add / (Less): Equalisation (22,275.63) (13,771.15)

7.4 Transfer from Reserve Fund 7,652.65 –

8 TOTAL 5,970.91 16,136.31

9 Dividend appropriation9.1 Income Distributed during the year 7,652.65 7,418.579.2 Tax on income distributed during the year – –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet (1,681.74) 8,717.74

Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.** Service Tax on Management Fees is included in Other Operating Expenses.

20

HSBC Equity Fund

Key Statistics for the year ended March 31, 2011

HSBC EQUITY FUND Current


Previous Year ended

March 31, 2010

1. NAV per unit (Rs.): Open Growth Option 95.3300 60.1737 Dividend Option 27.2661 18.8099 High Growth Option 116.1716 96.0978 Dividend Option 31.3598 29.4924 Low Growth Option 89.1659 60.6698 Dividend Option 24.2236 18.9650 End Growth Option 105.2711 95.3300 Dividend Option 26.4794 27.26612. Closing Assets Under Management (Rs. in Lakhs) End 96,670 138,278 Average (AAuM)1 114,564 148,7273. Gross income as % of AAuM2 19.88% 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 AAuM3 17.87% 16.82%6. Portfolio turnover ratio4 0.96 1.287. Total Dividend per unit distributed during the year (planwise) Retail Dividend Option 3.50 2.50 Corporate Dividend Option 3.50 2.508. Returns (%): a. Last One Year Scheme Growth Option 10.4300 58.4247 Dividend Option 10.4300 58.4242 Benchmark BSE200 8.1469 92.8700 b. Since Inception Scheme Growth Option 32.7500 36.1335 Dividend Option 32.8000 36.1895 Benchmark BSE 200 24.5028 26.92001 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.

21

HSBC Equity Fund

Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011

HSBC EQUITY FUND1 Investments:

1.1 It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s unitholders.

1.2 Open Positions of derivatives amount to Rs. 473,661,900 and is 4.90% to Net Assets as of year ended March 31, 2011. Open Positions of derivatives amount to Rs. 417,045,564 and is 3.02% to Net Assets as of year ended March 31, 2010.

1.3 Investments in Associates and Group Companies:(Rupees)

Issuer Instrument Type

Amount Aggregate Investments

by all schemes


by all schemes

2011 2010

The Hongkong & Shanghai Banking Corporation Limited

Fixed deposits

430,000,000 970,000,000 430,000,000 1,018,000,000

1.4 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

2011 2010

Equity Shares

– Appreciation 2,662,127,636 27.5382% 3,511,447,614 25.3942%

– Depreciation 85,078,394 0.8801% 154,707,444 1.1188%

Non Convertible Debentures and Bonds

– Appreciation 2,912,501 0.0301% – –

– Depreciation – – – –

Equity Futures

– Appreciation 18,863,299 0.1951% 4,260,464 0.0308%

– Depreciation – – 16,591,918 0.1200%

1.7. The aggregate value of investments securities purchased (excluding accretion of discount of Rs. 279,250) and sold during the fi nancial year 2010-2011 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 2009-2010 is Rs. 12,919,307,271 and Rs. 14,698,914,601 respectively being 86.87% and 98.83% of the average daily net assets.

22

HSBC Equity Fund

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.)


2011 2010

Debt Instruments 2,912,501 3.0128% – –

Total 2,912,501 3.0128% – –

2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended:

During the year 2010-11, 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 2009-10, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 118,354 and clearing member charges on derivative transactions amounting to Rs. 1,745,886.

Commission paid to Sponsor / AMC and its associates / related parties / group companies

Name of Sponsor / AMC and its associates / related parties / group companies

Nature of Association / Nature of

Relation

Period Covered

Business Given [Rs. In Crores]

% of Total Business

received by the Fund

Commission paid[Rs.]

% of Total commission paid by the

Fund

The Hongkong and Shanghai Banking Corporation Limited

Associate 2010-2011 50.29 22.22 19,868,678 25.79

HSBC InvestDirect Securities (India) Limited

Associate 2010-2011 0.77 0.34 348,019 0.45



Relation

Period Covered


% of Total Business




Fund


Associate 2009-2010

154.25 28.82 55,132,417 32.27


Associate 2009-2010

1.01 0.19 526,980 0.31

Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the year ended March 31, 2011

23

HSBC Equity Fund

Brokerage paid to Sponsor / AMC and its associates / related parties / group companies



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

HSBC Securities and Capital Market (India) Private Limited

Sponsor 2010-2011 121.99 3.79 811,777 2.50



Relation

Period Covered


[Rs. in Crores]

% of total value of

transactions of the Fund



Fund


Associate 2009-2010 123.77 2.70 922,708 1.63

The brokerage paid was at rates similar to those offered to other brokers / distributors

Further, The Hongkong and Shanghai Banking Corporation Limited, an associate of the Sponsor, is on the panel of bankers with whom HSBC Mutual Fund places money on fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.

3 None of the Investors held more than 25% of the total net assets of the scheme at the years ended March 31, 2011 and March 31, 2010.

4 Unit Capital movement during the years ended March 31, 2011 and March 31, 2010.

Description2010 - 2011

Opening Units Subscription Redemption Closing Units Face Value

Growth Option

67,940,001.958 11,108,207.872 33,487,581.496 45,560,628.334 455,606,284

Dividend Option

269,603,291.565 35,686,211.094 121,342,547.098 183,946,955.561 1,839,469,555



Growth Option

82,822,603.543 31,106,227.231 45,988,828.816 67,940,001.958 679,400,020

Dividend Option

315,640,026.026 105,492,570.593 151,529,305.054 269,603,291.565 2,696,032,916

5 Previous year’s fi gures have been re-grouped / re-arranged where necessary.

6 No contingent liabilities for the years ended March 31, 2011 and March 31, 2010.

7 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.


24

HSBC Equity Fund

9 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 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, 2008.


HSBC India Opportunities Fund




HSBC India Opportunities FundAn open-ended Flexi-cap Equity Scheme

26



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. Our procedures included confi rmation of securities owned and unit capital balances as at March 31, 2011 by correspondence with the custodian / others and registrar and transfer agents respectively. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



(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 fl ows 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 specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable.


Sd/-



Auditors’ Report

27


Rs. in Lakhs

HSBC INDIA OPPORTUNITIES FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 8,957.63 14,295.842 Reserves & Surplus2.1 Unit Premium Reserves (11,139.11) (8,297.85)2.2 Unrealised Appreciation Reserve 4,849.87 6,029.112.3 Other Reserves 16,322.33 16,377.133 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 380.10 520.82

TOTAL 19,370.82 28,925.05

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 16,773.39 25,599.081.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – 16.441.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 16,773.39 25,615.52

2 Deposits 1,300.00 1,349.023 Other Current Assets3.1 Cash & Bank Balance 9.78 9.363.2 CBLO / Reverse Repo Lending 99.06 570.083.3 Others 1,188.59 1,381.074 Deferred Revenue Expenditure – –


TOTAL 19,370.82 28,925.05

Notes to Accounts - Annexure I


28



Rs. in Lakhs

HSBC INDIA OPPORTUNITIES FUNDCurrent


Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend 304.11 319.361.2 Interest 97.50 90.811.3 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

investments3,998.89 8,690.11

1.6 Realised Gains / (Losses) on Derivative Transactions 178.26 (295.25)1.7 Other Income 0.15 0.52

(A) 4,578.91 8,805.55

2 EXPENSES2.1 Management fees 256.26 355.312.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 49.27 54.022.4 Custodian fees 13.24 15.472.5 Trusteeship fees 0.24 0.302.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 181.02 256.822.8 Audit fees 2.43 5.002.9 Other operating expenses 42.88 57.10

(B) 545.34 744.02

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 4,033.57 8,061.53

4 Change in Unrealised Depreciation in value of investments (D) – (1,967.69)



7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 2,854.33 16,046.21

7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (1,179.24) 6,016.997.3 Add / (Less): Equalisation (3,354.55) (3,301.93)7.4 Transfer from Reserve Fund 733.83 3,806.227.5 Transfer from Unit Premium Reserve – –

8 TOTAL 1,412.85 10,533.51

9 Dividend Appropriation9.1 Income Distributed during the year 733.83 1,222.519.2 Tax on income distributed during the year – –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet 679.02 9,311.00


* Commission to Agents is included in Marketing & Distribution expenses.

** Service Tax on Management Fees is included in Other Operating Expenses.

29



HSBC INDIA OPPORTUNITIES FUNDCurrent


Previous Year ended

March 31, 2010

1. NAV per unit (Rs.):Open Growth Option 31.9869 19.6995 Dividend Option 15.9436 10.4365High Growth Option 39.1289 32.7859 Dividend Option 19.5031 17.0045Low Growth Option 29.9530 19.8927 Dividend Option 14.9298 10.5389End Growth Option 35.7149 31.9869 Dividend Option 16.8252 15.9436

2. Closing Assets Under Management (Rs. in Lakhs) End 18,991 28,404 Average (AAuM)1 23,126 33,032

3. Gross income as % of AAuM2 19.80% 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 AAuM3 17.44% 24.42%

6. Portfolio turnover ratio4 1.21 1.34

7. Total Dividend per unit distributed during the year (planwise)Retail Dividend Option 1.0000 1.0000Corporate Dividend Option 1.0000 1.0000

8. Returns (%):a. Last One Year Scheme Growth Option 11.7500 62.2361 Dividend Option 11.7500 62.2364 Benchmark BSE 500 7.4818 96.3800b. Since Inception Scheme Growth Option 19.6300 20.9771 Dividend Option 19.6400 20.9854 Benchmark BSE 500 18.3016 20.1800

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Lossed) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

30



HSBC INDIA OPPORTUNITIES FUND1 Investments:


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(Rupees)



by all schemes


by all schemes

2011 2010

The Hongkong & Shanghai Banking Corporation Ltd.

Fixed deposits

130,000,000 970,000,000 130,000,000 1,018,000,000

1.4 Open position of Securities Borrowed and / or Lent by the scheme as of fi nancial 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.)


Amount(Rs.)


2011 2010

Equity Shares

– Appreciation 495,568,376 26.0953% 619,460,514 21.8061%

– Depreciation 13,803,840 0.7269% 20,612,129 0.7256%

Equity Futures

- Appreciation 3,222,582 0.1697% 4,487,301 0.1580%

- Depreciation – – 424,303 0.0149%

1.7 The aggregate value of investments purchased and sold during the fi nancial year 2010 - 2011 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 fi nancial year 2009 - 2010 is Rs. 2,446,418,500 and Rs. 3,886,879,848 respectively being 74.06% and 117.67% of the average daily net assets.

1.8 Non-Traded securities in the portfolio:

Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets are as under :



Amount(Rs.)


2011 2010

Equities – – 1,643,930 0.06%

Money Market Instruments – – – –

31


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 2010-2011, 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 2009-2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges Rs. 25,830 and Clearing member charges on derivative transactions amounting to Rs. 561,071.

Details of amounts paid to associates in terms of Regulation 25 (8) are as follows :




Relation

Period Covered


% of Total Business




Fund


Associate 2010-2011 2.23 12.70 3,711,315 29.66


Associate 2010-2011 0.01 0.05 37,188 0.30



Relation

Period Covered


% of Total Business




Fund


Associate 2009-2010 7.37 22.78 8,081,423 37.27


Associate 2009-2010 0.03 0.09 55,346 0.26




Relation

Period Covered


(Rs. in crores)

% of Total Transaction

of the Fund

Brokerage paid(Rs.)

% of Total Brokerage paid by the

Fund


Sponsor 2010-2011 55.04 7.05 353,065 5.48


32




Relation

Period Covered


(Rs. in crores)

% of Total Transaction

of the Fund

Brokerage paid(Rs.)

% of Total Brokerage paid by the

Fund


Sponsor 2009-2010 67.32 5.30 367,945 2.78

The brokerage paid was at rates similar to those offered to other brokers / distributors.





Growth Option 34,977,620.244 1,674,315.413 15,903,230.816 20,748,704.841 207,487,049

Dividend Option 107,980,739.996 5,187,135.400 44,340,250.196 68,827,625.200 688,276,253



Growth Option 53,478,209.207 5,215,347.572 23,715,936.535 34,977,620.244 349,776,202

Dividend Option 167,277,543.980 11,264,297.076 70,561,101.060 107,980,739.996 1,079,807,401

5 Previous year’s fi gures have been re-grouped / re-arranged where appropriate.





HSBC Midcap Equity Fund




HSBC Midcap Equity FundAn open-ended Diversifi ed Equity Scheme

34



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




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 defi cit and its cash fl ows for the year ended on that date.


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.


Sd/-



Auditors’ Report

35


Rs. in Lakhs

HSBC MIDCAP EQUITY FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 9,780.82 10,725.812 Reserves & Surplus2.1 Unit Premium Reserves (4,465.91) (4,337.15)2.2 Unrealised Appreciation Reserve – 686.202.3 Other Reserves 8,553.76 10,649.363 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 149.97 228.76

TOTAL 14,018.64 17,952.98

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 12,224.62 16,174.341.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – 16.471.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares 35.31 65.141.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 320.00 432.133 Other Current Assets3.1 Cash & Bank Balance 23.09 29.743.2 CBLO / Reverse Repo Lending 738.29 585.363.3 Others 677.33 644.314 Deferred Revenue Expenditure – 5.49


TOTAL 14,018.64 17,952.98



36



Rs. in Lakhs

HSBC MIDCAP EQUITY FUNDCurrent


Previous Year ended

March 31, 2010


investments2,749.51 5,742.53

1.6 Realised Gains / (Losses) on Derivative Transactions (166.92) 1,446.461.7 Other Income 0.04 0.09

(A) 2,824.94 7,422.912 EXPENSES2.1 Management fees 196.81 177.232.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 36.89 25.362.4 Custodian fees 8.81 9.762.5 Trusteeship fees 0.18 0.132.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 132.85 87.622.8 Audit fees 1.77 1.002.9 Other operating expenses 39.23 66.502.10 Less:Expenses to be Reimbursed by the Investment Manager (4.75) –

(B) 411.79 367.60

3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 2,413.15 7,055.31

4 Change in Unrealised Depreciation invalue of investments (D) 3,271.19 (2,556.51)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = ( C - D)] (858.04) 9,611.82

6 Change in unrealised appreciation in the value of investments (F) (686.20) 686.20

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (1,544.24) 10,298.02

7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (686.20) 686.207.3 Add / (Less): Equalisation (75.57) 129.197.4 Transfer from Reserve Fund 1,161.99 860.367.5 Transfer from Unit Premium Reserve – –

8 TOTAL 228.38 10,601.379 Dividend Appropriation9.1 Income Distributed during the year 1,161.99 657.409.2 Tax on income distributed during the year – –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet (933.61) 9,943.97


37



HSBC MIDCAP EQUITY FUND Current


Previous Year ended

March 31, 2010

1. NAV per unit (Rs.): Open Growth Option 21.8352 10.1084 Dividend Option 13.4004 6.6851 High Growth Option 28.3993 22.5346 Dividend Option 17.4288 14.0594 Low Growth Option 17.8851 10.2556 Dividend Option 9.5589 6.7825 End Growth Option 19.6665 21.8352 Dividend Option 10.5110 13.4004



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%



7. Total Dividend per unit distributed during the year (planwise) Retail Dividend 2.00 1.00 Corporate Dividend 2.00 1.00

8. Returns(%): a. Last One Year Scheme Growth Option (9.9300) 116.0144 Dividend Option (9.9300) 116.0027 Benchmark BSE MID CAP 0.9876 130.2300 b. Since Inception Scheme Growth Option 12.2200 17.3992 Dividend Option 12.1600 17.3338 Benchmark BSE MID CAP 13.6306 16.42001 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Lossed) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year

38



HSBC MIDCAP EQUITY FUND1 Investments:

1.1 It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the Scheme’s Unitholders.

1.2 Open Positions of derivatives amount to Rs. 147,187,500 and is 10.61% to Net Assets as at 31 March, 2011. Open Positions of derivatives amount to Rs. 77,544,688 and is 4.38% to Net Assets as at 31 March, 2010.




by all schemes


by all schemes

2011 2010


Fixed deposits

32,000,000 970,000,000 42,000,000 1,018,000,000

1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of fi nancial years ended 2011 and 2010 are NIL.



Security Category Amount (Rs.) Percentage to Net Assets


2011 2010

Equity Shares

- Appreciation 65,529,846 4.7250% 152,588,178 8.6090%

- Depreciation 391,068,845 28.1980% 86,632,744 4.8878%

Equity Futures

- Appreciation 101,128 0.0073% 3,298,026 0.1861%

- Depreciation 1,681,504 0.1212% 633,589 0.0357%

1.7 The aggregate value of investments purchased and sold (including matured) during the year 2010 - 2011 is Rs. 1,784,678,836 and Rs. 2,067,737,077 respectively being 103.87% and 120.35% of the average daily net assets.

The aggregate value of investments purchased and sold (including matured) during the year 2009 - 2010 is Rs. 3,222,984,582 and Rs. 3,250,544,036 respectively being 210.97% and 212.77% of the average daily net assets.

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.)


Fair Value (Rs.) Percentage to Net Assets

2011 2010

Equities 3,530,713 0.2546% 8,160,759 0.4604%

Total 3,530,713 0.2546% 8,160,759 0.4604%

39



During the year 2010-11, 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 2009-10, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges amounting to Rs. 30,945 and clearing member charges on derivative transactions amounting to Rs. 552,472.





Relation

Period Covered

Business Given [Rs. in Crores]

% of Total Business received by the Fund



Fund


Associate 2010-2011 26.52 29.98 4,038,443 26.91


Associate 2010-2011 0.09 0.10 23,392 0.16



Relation

Period Covered





Fund


Associate 2009-2010 17.45 35.98 3,962,653 32.02


Associate 2009-2010 0.02 0.04 20,184 0.16




Relation

Period Covered


[Rs. in Crores]

% of Total Value of

Transactions of the Fund

Brokerage paid[Rs.]


Fund


Sponsor 2010-2011 32.7 4.79 359,886 4.38


40




Relation

Period Covered


[Rs. in Crores]

% of Total Value of

Transactions of the Fund


(on accrual basis)


Fund


Associate 2009-2010 0.73 0.06 14,526 0.11


Sponsor 2009-2010 63.01 4.90 351,893 2.65



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, 2010.

4 Unit Capital movement during the year ended March 31, 2011 and March 31, 2010:

Description 2010-2011


Growth 39,730,638.063 22,070,171.208 22,610,670.278 39,190,138.993 391,901,390

Dividend 67,527,457.193 22,732,722.431 31,642,119.882 58,618,059.742 586,180,597

Description 2009-2010


Growth 42,452,067.060 13,794,502.150 16,515,931.147 39,730,638.063 397,306,381

Dividend 75,926,965.375 17,092,673.068 25,492,181.250 67,527,457.193 675,274,572

5 Previous year’s fi gures have been re–grouped / re-arranged where appropriate.

6 No contingent liabilities for the year ended March 31, 2011 and March 31, 2010.

7 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.



HSBC Progressive Themes Fund




HSBC Progressive Themes FundAn open-ended Flexi-theme Equity Scheme

42



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




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 fl ows for the year ended on that date.


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.


Sd/-



Auditors’ Report

43


Rs. in Lakhs

HSBC PROGRESSIVE THEMES FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 20,699.57 32,633.732 Reserves & Surplus2.1 Unit Premium Reserves (27,126.28) (24,803.48)2.2 Unrealised Appreciation Reserve – 6,517.152.3 Other Reserves 28,872.19 24,812.553 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 396.90 719.06

TOTAL 22,842.38 39,879.01

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 18,999.65 35,899.961.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 18,999.65 35,899.962 Deposits 1,600.00 1,650.003 Other Current Assets3.1 Cash & Bank Balance 28.94 38.163.2 CBLO / Reverse Repo Lending 1,250.28 680.083.3 Others 963.51 1,526.694 Deferred Revenue Expenditure – 84.12


TOTAL 22,842.38 39,879.01



44



Rs. in Lakhs

HSBC PROGRESSIVE THEMES FUNDCurrent


Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend 381.59 429.591.2 Interest 174.92 131.861.3 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

8,221.47 8,963.10

1.6 Realised Gains / (Losses) on Derivative Transactions (612.60) 49.711.7 Other Income 0.17 0.46

(A) 8,165.55 9,574.722 EXPENSES2.1 Management fees 342.56 458.912.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 66.95 72.222.4 Custodian fees 21.61 16.452.5 Trusteeship fees 0.29 0.382.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 216.75 338.762.8 Audit fees 2.87 6.602.9 Amortisation of Deferred Revenue Expenditure 84.12 132.782.10 Other operating expenses 139.68 209.10

(B) 790.71 1,102.423 NET REALISED GAINS / (LOSSES)

FOR THE YEAR (A - B = C) 7,374.84 8,472.304 Change in Unrealised Depreciation in

value of investments (D) 2,379.33 (4,115.64)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 4,995.51 12,587.946 Change in unrealised appreciation in the value

of investments (F) (6,517.15) 6,511.09

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) (1,521.64) 19,099.03

7.1 Add: Balance transfer from UnrealisedAppreciation Reserve

6,517.15 –

7.2 Less: Balance transfer to UnrealisedAppreciation Reserve

– 6,511.09

7.3 Add / (Less): Equalisation (935.86) 1,259.337.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 4,059.65 13,847.27

9 Dividend Appropriation9.1 Income Distributed during the year 0.01 –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried

forward to Balance Sheet 4,059.64 13,847.27


45



HSBC PROGRESSIVE THEMES FUNDCurrent


Previous Year ended

March 31, 2010







7. Total Dividend per unit distributed during the year (planwise)Retail Dividend Option – –Corporate Dividend Option – –

8. Returns (%):a. Last One Year Scheme Growth Option (10.0500) 55.8478 Dividend Option (10.0500) 55.8467 Benchmark BSE 200 8.1469 92.8700b. Since Inception Scheme Growth Option 3.0700 6.5478 Dividend Option 3.0500 6.5243 Benchmark BSE 200 12.9251 14.1200

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

46



HSBC PROGRESSIVE THEMES FUND1 Investments:

1.1 It is confi rmed that investments of the schemes are registered in the name of the Trustees for the benefi t of the scheme’s unitholders.

1.2 Open Positions of derivatives amount to Rs. 314,697,425 and 14.02% to Net Assets as of year ended 31 March 2011. Open Positions of derivatives amount to Rs. 292,171,950 and 7.46% to Net Assets as of year ended 31 March, 2010.




by all schemes


by all schemes

2011 2010


Fixed deposits

160,000,000 970,000,000 160,000,000 1,018,000,000

1.4 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.


1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year 2010 -2011 and percentage to net assets are as under :

Company Name Amount(Rs.)


Amount(Rs.)


2011 2010

Equity Shares

– Appreciation 152,103,732 6.7766% 698,236,771 17.8304%

– Depreciation 388,521,356 17.3096% 50,277,699 1.2839%

Equity Futures

– Appreciation 1,573,985 0.0701% 7,092,309 0.1811%

– Depreciation 3,089,773 0.1377% 3,336,168 0.0852%

1.7 The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2010 - 2011 is 2,800,932,603 and 4,428,734,789 respectively being 88.11% and 139.31% of the average daily net assets.

The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2009 - 2010 is 4,484,625,154 and 5,700,864,079 respectively being 101.81% and 129.42% of the average daily net assets.


Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as follows:

Security Category Fair Value (Rs.)


Fair Value (Rs.)


2011 2010

Equities 3,391,414 0.15% – –

47


2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 As Amended:

During the year 2010 -11, 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 2009 -10, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs.15,434 and clearing member charges on derivative transactions amounting to Rs. 328,519.



Name of Sponsor / AMC and its associate / related parties / group companies


Relation

Period Covered


% of Total Business


Commission paid [Rs.]


Fund


Associate 2010-2011 1.91 10.74 2,440,311 14.01


Associate 2010-2011 0.06 0.32 52,103 0.30



Relation

Period Covered


% of Total Business




Fund


Associate 2009-2010 7.27 17.92 5,828,905 19.66


Associate 2009-2010 – – 69,317 0.23




relation

Period Covered


[Rs. In Crores]

% of total value of

transaction of the Fund


% of total brokerage paid by the

Fund


Sponsor 2010-2011 85.85 4.98 510,467 2.95



relation

Period Covered


[Rs. In Crores]

% of total value of




Fund


Sponsor 2009-2010 50.35 3.62 642,935 3.07



HSBC Tax Saver Equity Fund




HSBC Tax Saver Equity FundAn open-ended Equity Linked Savings Scheme

49



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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 fl ows for the year ended on that date.


(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.


Sd/-



Auditors’ Report

50


Rs. in Lakhs

HSBC TAX SAVER EQUITY FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 17,535.86 22,546.23 2 Reserves & Surplus2.1 Unit Premium Reserves (1,720.38) (127.95)2.2 Unrealised Appreciation Reserve 4,130.54 5,394.072.3 Other Reserves 4,883.69 2,341.643 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 225.60 461.36

TOTAL 25,055.31 30,615.35

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 24,421.67 29,138.001.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares 22.11 28.671.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds 8.83 -1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 28.56 111.683.2 CBLO / Reverse Repo Lending 385.50 1,044.203.3 Others 188.64 292.804 Deferred Revenue Expenditure – –


TOTAL 25,055.31 30,615.35



51



Rs. in Lakhs

HSBC TAX SAVER EQUITY FUNDCurrent


Previous Year ended

March 31, 2010


investments3,453.80 9,283.80

1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –

(A) 3,802.01 9,617.482 EXPENSES2.1 Management fees 300.02 295.012.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 59.32 47.502.4 Custodian fees 10.99 9.292.5 Trusteeship fees 0.26 0.282.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 227.92 282.932.8 Audit fees 3.17 1.752.9 Other operating expenses 50.47 52.542.10 Expenses to be Reimbursed by the Investment Manager (8.35) (19.24)

(B) 643.80 670.063 NET REALISED GAINS / (LOSSES)

FOR THE YEAR (A - B = C) 3,158.21 8,947.424 Change in Unrealised Depreciation in

value of investments (D) – (1,533.86)


of investments (F) (1,263.53) 5,394.07


Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (1,263.53) 5,394.077.3 Add / (Less): Equalisation (616.17) (294.10)7.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 2,542.04 10,187.18

9 Dividend Appropriation9.1 Income Distributed during the year – 902.799.2 Tax on income distributed during the year – –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet 2,542.04 9,284.39


52



HSBC TAX SAVER EQUITY FUNDCurrent


Previous Year ended

March 31, 2010







7. Total Dividend per unit distributed during the year (planwise)Retail Dividend Option – 1.00Corporate Dividend Option – 1.00

8. Returns (%):a. Last One Year Scheme Growth Option 5.8000 87.1384 Dividend Option 5.8000 87.1357 Benchmark BSE 200 8.1469 92.8700b. Since Inception Scheme Growth Option 9.3300 10.4434 Dividend Option 9.3300 10.4429 Benchmark BSE 200 8.8109 9.0200

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

53



HSBC TAX SAVER EQUITY FUND1 Investments:


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 :(Rupees)


Amount Aggregate Investments by

all schemes


all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 Open position of Securities Borrowed and / or Lent by the Scheme as of the year ended 31 March, 2011 is 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.)


Amount(Rs.)


2011 2010

Equity Shares

– Appreciation 469,428,451 18.9054% 563,326,418 18.6817%

– Depreciation 57,257,195 2.3059% 23,919,419 0.7932%

Non Convertible Debentures and Bonds Listed / Awaiting Listing

– Appreciation 882,576 0.0355% – –


1.7 The aggregate value of investments purchased and sold (including matured) during the fi nancial year 2010 - 2011 is Rs.2,937,507,052 and Rs. 3,624,594,914 respectively being 106.81% and 131.79% of the average daily net assets.

The aggregate value of investments purchased and sold (including matured) during the fi nancial year 2009 - 2010 is Rs. 5,435,615,688 and Rs. 5,578,682,825 respectively being 189.38% and 194.36% of the average daily net assets.

1.8 Non -Traded securities in the portfolio:

Aggregate Value of Equity, Debt & Money Market Instruments and percentages to net assets are as under :



Fair Value (Rs.)


2011 2010

Equities 2,210,941 0.089% 2,866,880 0.10%

Debt Instruments – – – –

Money market Instrument – – – –

Total 2,210,941 0.089% 2,866,880 0.10%

54



During the year 2010 - 2011, 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.






Relation

Period Covered


% of Total Business




Fund


Associate 2010-2011 0.32 1.60 599,532 3.29


Associate 2010-2011 0.03 0.16 56,558 0.31



Relation

Period Covered


% of Total Business




Fund


Associate 2009-2010 0.65 2.39 849,881 3.33


Associate 2009-2010 0.11 0.41 65,360 0.26



Nature of Association /Nature of

relation

Period Covered


[Rs. In Crores]

% of total value of




Fund


Sponsor 2010-2011 20.40 3.23 408,432 3.26


55


Name of Sponsor/AMC and its associates/related parties/group companies


relation

Period Covered


[Rs. In Crores]

% of total value of




Fund


Associate 2009-2010 1.82 0.17 36,558 0.17


Sponsor 2009-2010 27.60 2.55 552,086 2.60




4 Unit Capital movement during the years ended March 31, 2011 and March 31, 2010:

Description 2010 - 2011


Growth Option 137,876,158.949 8,745,396.032 38,023,617.881 108,597,937.100 1,085,979,369

Dividend Option 87,586,118.639 3,447,298.637 24,272,755.368 66,760,661.908 667,606,618



Growth Option 150,646,655.461 12,786,096.898 25,556,593.410 137,876,158.949 1,378,761,588

Dividend Option 94,404,698.350 9,216,234.324 16,034,814.035 87,586,118.639 875,861,185

5 Previous year’s fi gures have 0been re-grouped / re-arranged where appropriate.





HSBC Dynamic Fund




HSBC Dynamic FundAn open-ended Scheme

57

HSBC Dynamic Fund


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




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 fl ows for the year ended on that date.


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.


Sd/-



Auditors’ Report

58

HSBC Dynamic Fund

Rs. in Lakhs

HSBC DYNAMIC FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 10,956.31 24,899.692 Reserves & Surplus2.1 Unit Premium Reserves (7,067.46) (2,687.00)2.2 Unrealised Appreciation Reserve 3,293.16 5,548.392.3 Other Reserves 4,297.15 (3,888.14)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 299.87 517.96

TOTAL 11,779.03 24,390.90

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 9,570.60 21,260.011.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 3.18 –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 960.00 1,460.003 Other Current Assets3.1 Cash & Bank Balance 6.10 20.133.2 CBLO / Reverse Repo Lending 254.54 435.373.3 Others 984.61 1,215.394 Deferred Revenue Expenditure – –


TOTAL 11,779.03 24,390.90



59

HSBC Dynamic Fund


Rs. in Lakhs

HSBC DYNAMIC FUNDCurrent


Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend 224.85 283.901.2 Interest 83.05 121.181.3 Realised Gain / (Loss) on Foreign Exchange

Transactions– (3.74)

1.4 Realised Gains / (Losses) on Interscheme saleof investments

– –

1.5 Realised Gains / (Losses) on External sale /redemption of investments

4,249.29 5,255.18

1.6 Realised Gains / (Losses) on Derivative Transactions 43.02 (363.83)1.7 Other Income 0.03 0.01

(A) 4,600.24 5,292.702 EXPENSES2.1 Management fees 190.88 294.132.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 34.55 44.102.4 Custodian fees 9.94 13.492.5 Trusteeship fees 0.15 0.242.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 130.67 227.712.8 Audit fees 1.47 2.502.9 Other operating expenses 30.57 48.37


FOR THE YEAR (A - B = C) 4,202.01 4,662.16

4 Change in Unrealised Depreciation in value of investments (D) – (968.84)




Appreciation Reserve 2,255.23 –7.2 Less: Balance transfer to Unrealised

Appreciation Reserve– 5,548.39

7.3 Add / (Less): Equalisation 3,983.28 3,741.947.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 8,185.29 9,372.94

9 Dividend Appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried

forward to Balance Sheet 8,185.29 9,372.94


60

HSBC Dynamic Fund


HSBC DYNAMIC FUNDCurrent


Previous Year ended

March 31, 2010



3. Gross income as % of AAuM2 27.73% 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 AAuM3 25.33% 17.32%6. Portfolio turnover ratio4 1.20 1.577. Total Dividend per unit distributed during the year (planwise)

Retail Dividend Option – –Corporate Dividend Option – –

8. Returns (%):a. Last One Year Scheme Growth Option 9.2700 51.9718 Dividend Option 9.2700 51.9718 Benchmark BSE 200 8.1469 92.8658b. Since Inception Scheme Growth Option 1.3300 (1.6588) Dividend Option 1.3300 (1.6588) Benchmark BSE 200 4.0188 2.4233

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

61

HSBC Dynamic Fund


HSBC DYNAMIC FUND1 Investments:


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, 2011. Open Positions of derivatives amount to Rs. 144,098,597 and is 6.04% to Net Assets for the year end March 31, 2010.

1.3 Investments in Associates and Group Companies :(Rupees)



by all schemes


by all schemes

2011 2010


Fixed deposits

96,000,000 970,000,000 146,000,000 1,018,000,000

1.4 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.


1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year and percentage to net assets.



Amount(Rs.)


2011 2010

Equity Shares

– Appreciation 330,488,482 28.7903% 582,644,211 24.4061%

– Depreciation 7,037,733 0.6131% 30,122,536 1.2618%


– Appreciation 317,727 0.0277% – –


Equity Futures

– Appreciation 5,547,624 0.4833% 2,622,855 0.1099%

– Depreciation – – 305,068 0.0128%

1.7 The aggregate value of investments securities purchased and sold during the fi nancial year 2010 - 2011 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 fi nancial year 2009-2010 is Rs. 2,745,924,605 and Rs. 3,607,759,880 respectively being 102.03% and 134.05% of the average daily net assets.

62

HSBC Dynamic Fund





Fair Value (Rs.)


2011 2010

Debt Instruments 317,727 0.0277% – –

Total 317,727 0.0277% – –

2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 As Amended

During the year 2010 - 11, 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 2009 - 10, 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.





Relation

Period Covered


% of Total Business




Fund


Associate 2010-2011 2.67 32.78 1,830,420 16.18


Associate 2010-2011 0.05 0.63 21,300 0.19



Relation

Period Covered


% of Total Business



(on accrual basis)


Fund


Associate 2009-2010 3.77 22.30 4,906,397 23.50


Associate 2009-2010 0.02 0.12 29,382 0.14


63

HSBC Dynamic Fund




relation

Period Covered


[Rs. In Crores]

% of total value of



% of total brokerage

paid by the Fund


Sponsor 2010-2011 43.21 6.70 209,314 3.97

Name of Sponsor/AMC and its associate/related parties/group companies


relation

Period Covered


[Rs. In Crores]

% of total value of



(on accrual basis)


paid by the Fund


Sponsor 2009-2010 42.48 3.52 341,708 2.51







Growth Option 139,004,646.491 3,058,833.813 71,707,847.937 70,355,632.367 703,556,324

Dividend Option 109,992,230.656 3,425,608.781 74,210,402.448 39,207,436.989 392,074,369



Growth Option 190,248,100.865 7,916,961.708 59,160,416.082 139,004,646.491 1,390,046,465

Dividend Option 180,871,982.404 11,722,378.320 82,602,130.068 109,992,230.656 1,099,922,305


6. No contingent liabilities for the years ended March 31, 2011 and March 31, 2010

7. 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 specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 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, 2008.


HSBC Emerging Markets Fund




HSBC Emerging Markets FundAn open-ended Scheme

65



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.


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.


(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.



Sd/-



Auditors’ Report

66


Rs. in Lakhs

HSBC EMERGING MARKETS FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 5,648.85 9,354.142 Reserves & Surplus2.1 Unit Premium Reserves (117.31) 135.712.2 Unrealised Appreciation Reserve 484.75 –2.3 Other Reserves (47.53) (780.52)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 126.48 208.59

TOTAL 6,095.24 8,917.92

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities 5,907.55 8,595.69


2 Deposits – –3 Other Current Assets3.1 Cash & Bank Balance 9.35 6.463.2 CBLO / Reverse Repo Lending 163.16 310.553.3 Others 15.18 5.224 Deferred Revenue Expenditure

(to the extent not written off)– –

TOTAL 6,095.24 8,917.92



67



Rs. in Lakhs

HSBC EMERGING MARKETS FUNDCurrent Year

endedMarch 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – 58.111.2 Interest 11.09 10.901.3 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 EXPENSES2.1 Management fees 21.87 5.132.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 12.01 12.382.4 Custodian fees 3.17 3.942.5 Trusteeship fees 0.06 0.092.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 44.50 53.522.8 Audit fees 0.76 0.502.9 Other operating expenses 7.12 6.452.10 Expenses to be Reimbursed by the Investment Manager (14.67) (5.03)


FOR THE YEAR (A - B = C) (150.45) (559.00)

4 Change in Unrealised Depreciation invalue of investments *** (D) (455.18) (4,555.39)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 304.73 3,996.39

6 Change in unrealised appreciation inthe value of investments (F) – –

7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 304.73 3,996.39

7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 428.26 546.057.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 732.99 4,542.439 Dividend Appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit)

carried forward to Balance Sheet 732.99 4,542.43

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.

68



HSBC EMERGING MARKETS FUND

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Growth Option 9.3106 6.2554 Dividend Option 9.3107 6.2554

High Growth Option 10.8410 9.8071 Dividend Option 10.8410 9.8071

Low Growth Option 8.1775 6.5362 Dividend Option 8.1775 6.5362

End Growth Option 10.5663 9.3106 Dividend Option 10.5663 9.3107


3. Gross income as % of AAuM2 -1.11% -4.70%


5. Net Income as a percentage of AAuM3 -2.21% -5.45%

6. Portfolio turnover ratio4 – 0.05

7. Total Dividend per unit distributed during the year (planwise)

Retail Dividend Option – –

Corporate Dividend Option – –

8. Returns (%):a. Last One Year Scheme Growth Option 13.4800 48.8450 Dividend Option 13.4800 48.8450

Benchmark MSCI Emerging Markets Index 10.8141 54.6700

69



CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

b. Since Inception Scheme Growth Option 1.8300 (3.4432) Dividend Option 1.8300 (3.4432)

Benchnmark MSCI Emerging Markets Index 3.5506 0.1600

1 AAuM = Average daily net assets.

2 Gross income = amount against (A) in the Revenue Account i.e. Income.

3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.

4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

Key Statistics for the year ended March 31, 2011 (Contd...)

70




1 Investments:


1.2 Open Positions of derivatives as a % to Net Assets as of 2010 - 2011 and 2009 - 2010 are NIL.

1.3 Investments in Associates and Group Companies

(Rupees)



all schemes


all schemes2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 Open positions of Securities Borrowed and / or Lent by the scheme as of fi nancial year ended 2011 and 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:



2011 2010

Units in Mutual Fund

- Appreciation 48,474,532 0.08% – –

- Depreciation – – 45,518,394 5.2264%

1.7 The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2010 - 2011 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 fi nancial year 2009 - 2010 is Rs. 48,569,303 and Rs. 402,515,128 respectively being 4.73% and 39.21% of the average daily net assets.

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 :




Relation

Period Covered


% of Total Business




Fund


Associate 2010-2011 1.11 12.88 2,179,150 53.03


Associate 2010-2011 0.00~ 0.01 1,859 0.05

71



Nature of Association/

Nature of Relation

Period Covered





Fund


Associate 2009-2010 9.08 62.94 4,910,499 62.12


Associate 2009-2010 0.10 0.72 19,007 0.24

~ Indicates less than 0.01

During the year 2010 - 2011, 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 2009-10, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 300.


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 31,2010.




Growth Option 62,416,351.976 1,525,684.486 26,052,892.929 37,889,143.533 378,891,436

Dividend Option 31,125,080.331 6,405,159.777 18,930,886.353 18,599,353.755 185,993,537



Growth Option 84,302,484.733 13,367,388.355 35,253,521.112 62,416,351.976 624,163,520

Dividend Option 50,922,901.492 3,579,638.005 23,377,459.166 31,125,080.331 311,250,802




8 Other income represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.



HSBC Unique Opportunities Fund




HSBC Unique Opportunities FundAn open-ended Equity Scheme

73



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




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 fl ows for the year ended on that date.




Sd/-



Auditors’ Report

74


Rs. in Lakhs

HSBC UNIQUE OPPORTUNITIES FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 8,603.93 21,084.452 Reserves & Surplus2.1 Unit Premium Reserves (4,544.95) (1,509.48)2.2 Unrealised Appreciation Reserve 1,441.83 4,421.232.3 Other Reserves 4,149.75 (2,485.72)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 111.27 783.99

TOTAL 9,761.83 22,294.47

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 8,259.21 20,077.601.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares 9.28 –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities:1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 8,268.49 20,077.602 Deposits 900.00 900.003 Other Current Assets3.1 Cash & Bank Balance 8.91 24.123.2 CBLO / Reverse Repo Lending 252.93 456.203.3 Others 331.50 836.554 Deferred Revenue Expenditure


TOTAL 9,761.83 22,294.47



75



Rs. in Lakhs

HSBC UNIQUE OPPORTUNITIES FUND

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010


investments5,031.47 8,968.35

1.6 Realised Gains / (Losses) on Derivative Transactions (168.84) –1.7 Other Income – –

(A) 5,129.21 9,336.892 EXPENSES2.1 Management fees 165.22 299.352.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 29.20 45.292.4 Custodian fees 8.45 15.802.5 Trusteeship fees 0.13 0.242.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 115.76 215.272.8 Audit fees 1.23 6.002.9 Other operating expenses 24.99 462.552.10 Expenses to be Reimbursed by the Investment Manager (4.48) –

(B) 340.48 1,044.50


4 Change in Unrealised Depreciation in valueof investments (D) (14.70) (3,084.05)



7 NET SURPLUS / (DEFICIT) FORTHE YEAR (E + F = G) 1,824.03 15,793.57

7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (2,979.40) 4,417.137.3 Add / (Less): Equalisation 1,832.04 581.917.4 Transfer from Reserve Fund – –

7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 6,635.47 11,958.35

9 Dividend Appropriation9.1 Income Distributed during the year – –9.2 Tax on income distributed during the year – –

10 Retained Surplus / (Defi cit) carried forwardto Balance Sheet 6,635.47 11,958.35




76



HSBC UNIQUE OPPORTUNITIES FUNDCurrent

Year endedMarch 31, 2011

PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.): Open Growth Option 10.2021 5.6683 Dividend Option 10.2021 5.6683 High Growth Option 13.1459 10.4458 Dividend Option 13.1459 10.4458 Low Growth Option 9.4990 5.7112 Dividend Option 9.4990 5.7112 End Growth Option 11.2165 10.2021 Dividend Option 11.2165 10.2021



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%



7. Total Dividend per unit distributed during the year (planwise) Retail Dividend Option – – Corporate Dividend Option – –

8. Returns (%): a. Last One Year Scheme Growth Option 9.9800 79.9181 Dividend Option 9.9800 79.9181 Benchmark BSE 200 8.1469 92.8700 b. Since Inception Scheme Growth Option 2.8900 0.6501 Dividend Option 2.8900 0.6501 Benchmark BSE 200 11.4017 12.50001 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

77



HSBC UNIQUE OPPORTUNITIES FUND1 Investments:

1.1 It is confi rmed that Investments of the Schemes are registered in the name of the Trustees for the benefi ts 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, 2011. Open Positions of derivatives amount to Rs. 175,617,653 and is 8.16% to Net Assets as at March 31, 2010.

1.3 Investments in Associates and Group Companies :(Rupees)



by all schemes


by all schemes2011 2010


Fixed deposits

90,000,000 970,000,000 90,000,000 1,018,000,000

1.4 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:



2011 2010Equity Shares

– Appreciation 174,104,630 18.0419% 476,973,223 22.1740%

– Depreciation 31,422,641 3.2560% 34,850,114 1.6201%

Equity Futures

– Appreciation 2,432,851 0.2521% 636,898 0.0296%

– Depreciation 932,009 0.0966% 2,106,828 0.0979%

1.7 The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2010-2011 is Rs.1,098,866,929 and Rs. 2,449,716,820 respectively being 78.19% and 174.31% of the average daily net assets.

The aggregate value of investments securities purchased and sold (including matured) during the fi nancial year 2009 - 2010 (excluding accretion of discount of Rs. 4,156,301) is Rs. 3,386,000,287 and Rs. 4,667,516,230 respectively being 122.21% and 168.47% of the average daily net assets.

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.)


Fair Value (Rs.)


2011 2010

Equities 928,135 0.10% – –

Total 928,135 0.10% – –

78


2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 As Amended:

During the year 2010 - 11, 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 2009 - 10, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 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


Name of Sponsor / AMC and its associates/related parties / group companies


Nature of Relation

Period Covered





Fund


Associate 2010 - 2011 1.41 21.59 1,453,607 15.19


Associate 2010 - 2011 – – 9,721 0.10



Nature of Relation

Period Covered


% of Total

Business received by the Fund


(on accrual basis)


Fund


Associate 2009-2010 2.12 18.54 4,502,804 21.67


Associate 2009-2010 0.01 0.09 13,668 0.07




relation

Period Covered


[Rs. In Crores]

% of total value of




paid by the Fund


Sponsor 2010 - 2011 38.65 5.02 363,455 4.35



relation

Period Covered


[Rs. In Crores]

% of total value of


Brokerage paid

[Rs.] (on accrual basis)


paid by the Fund


Sponsor 2009-2010 68.98 4.1 472,954 2.55


79




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, 2010.

4 Unit Capital movement during the year ended March 31, 2011 and March 31, 2010.



Growth Option 99,531,254.387 1,460,998.153 55,301,958.928 45,690,293.612 456,902,935

Dividend Option 111,313,252.213 2,149,156.298 73,113,373.333 40,349,035.178 403,490,351



Growth Option

146,326,985.344 2,469,971.529 49,265,702.486 99,531,254.387 995,312,543

Dividend Option

240,917,869.036 9,473,289.843 139,077,906.666 111,313,252.213 1,113,132,522






HSBC Small Cap Fund


* An open-ended fund. Monthly income is not assured and is subject to the availability of distributable surplus.


HSBC Small Cap FundAn open-ended Equity Scheme*


With effect from March 25, 2011 the Scheme got converted from a close-ended Scheme to an open-ended Scheme.With effect from March 25, 2011 the Scheme got converted from a close-ended Scheme to an open-ended Scheme.

81

HSBC Small Cap Fund


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




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.




Sd/-



Auditors’ Report

82

HSBC Small Cap Fund

Rs. in Lakhs

HSBC SMALL CAP FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 3,271.41 5,621.172 Reserves & Surplus2.1 Unit Premium Reserves (59.97) 479.072.2 Unrealised Appreciation Reserve – 901.382.3 Other Reserves 248.49 (910.97)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 104.07 365.52

TOTAL 3,564.00 6,456.17

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 3,451.52 6,048.19 1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – 3.131.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares 7.87 –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –



(to the extent not written off)– 118.42

TOTAL 3,564.00 6,456.17



83

HSBC Small Cap Fund


Rs. in Lakhs

HSBC SMALL CAP FUNDCurrent Year

endedMarch 31, 2011

Previous Year ended

March 31, 2010


investments 2,158.57 2,032.091.6 Realised Gains / (Losses) on Derivative Transactions – 88.971.7 Other Income (1.52) 7.00

(A) 2,258.98 2,236.86

2 EXPENSES2.1 Management fees 69.99 70.052.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 11.75 9.772.4 Custodian fees 2.23 2.232.5 Trusteeship fees 0.07 0.052.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 44.01 45.732.8 Audit fees 0.44 1.002.9 Other operating expenses 101.63 151.29

(B) 230.12 280.12


4 Change in Unrealised Depreciation in value of investments (D) 710.22 (1,316.27)


6 Change in unrealised appreciation in the value of investments (F) (901.38) 901.38


7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (901.38) 901.387.3 Add / (Less): Equalisation (39.87) –7.4 Transfer from Reserve Fund – –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 1,278.77 3,273.01

9 Dividend Appropriation9.1 Income Distributed during the year 119.31 –9.2 Tax on income distributed during the year – –10 Retained Surplus / (Defi cit) carried forward to

Balance Sheet 1,159.46 3,273.01




84

HSBC Small Cap Fund


HSBC SMALL CAP FUNDCurrent


PreviousYear ended

March 31, 2010




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 AAuM3 35.93% 33.61%6. Portfolio turnover ratio4 0.79 2.067. Total Dividend per unit distributed during the year (planwise)

Retail Dividend Option 1.00 –Corporate Dividend Option 1.00 –

8. Returns (%):a. Last One Year Scheme Growth Option 0.0400 123.8286 Dividend Option 0.0400 123.8286 Benchmark BSE Small Cap (3.7840) 161.7300b. Since Inception Scheme Growth Option 2.7000 4.0479 Dividend Option 2.7000 4.0479 Benchmark BSE Small Cap 5.5273 10.4700

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

85

HSBC Small Cap Fund


HSBC SMALL CAP FUND

1 Investments:


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)



by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4. 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.





2011 2010

Equity Shares

- Appreciation 24,489,795 7.0781% 116,064,144 19.0561%

- Depreciation 95,511,987 27.6052% 25,926,611 4.2568%

1.7 The aggregate value of investments purchased and sold during the fi nancial year 2010 - 2011 is Rs. 448,031,735 and Rs. 761,923,988 respectively being 79.34% and 134.92% of the average daily net assets.

The aggregate value of investments purchased and sold during the fi nancial year 2009 - 2010 is Rs. 816,768,026 and Rs. 917,819,629 respectively being 140.31% and 157.66% of the average daily net assets.



Security Category Fair Value(Rs.)


Fair Value(Rs.)


2011 2010

Equities 787,200 0.23% 312,790 0.05%

Total 787,200 0.23% 312,790 0.05%

86

HSBC Small Cap Fund


During the year 2010 - 2011, 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 2009 - 2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 42,037 and clearing member charges on derivative transactions amounting to Rs. 63,638.





Relation

Period Covered





Fund


Associate 2010-2011 0.05 3.55 252,414 7.56


Associate 2010-2011 0.00~ 0.00~ 1,195 0.04


Nature of Association

/ Nature of Relation

Period Covered





Fund


Associate 2009-2010 0.13 0.74 288,400 7.41


Associate 2009-2010 0.00~ 0.00~ 1,462 0.04




relation

Period Covered


[Rs. in Crores]

% of total value of




Fund


Associate 2010-2011 – – – –


Sponsor 2010-2011 3.88 3.22 77,768 3.42


87

HSBC Small Cap Fund


Name of Sponsor/AMC and its associate / related parties / group companies


relation

Period Covered


[Rs. in Crores]

% of total value of



(on accrual basis)


Fund


Associate 2009-2010 0.88 0.36 17,000 0.48


Sponsor 2009-2010 2.36 0.97 25,679 0.73

~ Indicates less than 0.01



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, 2010.

4. Unit Capital movement during the years ended March 31, 2011 and March 31, 2010 :



Growth Option 38,513,485.047 353,447.144 17,435,503.861 21,431,428.330 214,314,282

Dividend Option 17,698,244.274 163,554.953 6,579,124.813 11,282,674.414 112,826,744



Growth Option 44,079,840.395 12,466,410.552 18,032,765.900 38,513,485.047 385,134,850

Dividend Option 29,259,696.530 1,509,540.509 13,070,992.765 17,698,244.274 176,982,442


6. No contingent liabilities for the years ended March 31, 2011 and March 31, 2010.

7. Expenses other than Management Fees are Inclusive of Service Tax where applicable.

8. The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 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, 2008.

HSBC MIP




HSBC MIPAn open-ended Fund with Regular & Savings Plans.Monthly income is not assured and is subject to the availability of distributable surplus.

89

HSBC MIP


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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.


(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.


Sd/-



Auditors’ Report

90

HSBC MIP

Rs. in Lakhs

HSBC MIP - REGULAR PLANAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 18,313.41 17,072.932 Reserves & Surplus2.1 Unit Premium Reserves 758.86 685.382.2 Unrealised Appreciation Reserve 50.67 319.492.3 Other Reserves 3,134.39 3,854.253 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 404.24 435.34

TOTAL 22,661.57 22,367.39

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 2,996.04 2,750.491.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 4,541.13 3,600.641.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares 10.91 20.181.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – 303.581.3.5 Securitised Debt securities – 660.561.4 Government Securities 219.88 286.721.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits 13,685.94 9,697.101.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 21,453.90 17,319.272 Deposits 477.06 352.043 Other Current Assets3.1 Cash & Bank Balance 5.46 83.143.2 CBLO / Reverse Repo Lending 111.49 4,111.463.3 Others 613.66 501.484 Deferred Revenue Expenditure


TOTAL 22,661.57 22,367.39



91

HSBC MIP

Rs. in Lakhs

HSBC MIP - SAVINGS PLANAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 50,576.34 26,134.052 Reserves & Surplus2.1 Unit Premium Reserves 5,372.94 2,084.922.2 Unrealised Appreciation Reserve 63.40 839.912.3 Other Reserves 11,597.48 6,771.993 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 948.68 425.27

TOTAL 68,558.84 36,256.14

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares 15,514.58 7,333.441.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 12,948.68 5,478.571.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares 60.40 32.061.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – 746.211.3.5 Securitised Debt securities – 911.561.4 Government Securities 639.66 122.881.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits 37,351.94 14,528.401.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 371.96 477.04

3 Other Current Assets3.1 Cash & Bank Balance 39.43 331.613.2 CBLO / Reverse Repo Lending 74.11 5,574.803.3 Others 1,558.08 719.574 Deferred Revenue Expenditure


TOTAL 68,558.84 36,256.14


Abridged Balance Sheet as at March 31, 2011 (Contd...)

92

HSBC MIP


Rs. in Lakhs

HSBC MIP - REGULAR PLANCurrent


PreviousYear ended

March 31, 2010

1 INCOME1.1 Dividend 39.05 12.061.2 Interest 1,452.75 556.781.3 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 350.97 753.811.6 Realised Gains / (Losses) on Derivative Transactions (42.17) (8.15)1.7 Other Income – –

(A) 1,800.60 1,314.50

2 EXPENSES2.1 Management fees 267.18 106.522.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 20.56 10.302.4 Custodian fees 4.63 1.892.5 Trusteeship fees 0.35 0.192.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 214.70 152.322.8 Audit fees 0.25 0.752.9 Other operating expenses 1.69 2.05

(B) 509.37 274.02

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A – B = C) 1,291.23 1,040.48

4 Change in Unrealised Depreciation in valueof investments (D) 88.69 (52.60)

5 NET GAINS / (LOSSES)FOR THE YEAR [E = (C - D)] 1,202.54 1,093.08

6 Change in unrealised appreciation in the valueof investments (F) (268.82) 208.77


7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (268.82) 208.777.3 Add / (Less): Equalisation (299.42) 2,427.367.4 Transfer from Reserve Fund 765.46 11.047.5 Transfer from Unit Premium Reserve – –

8 TOTAL 1,668.58 3,531.48

9 Dividend appropriation9.1 Income Distributed during the year 1,413.83 558.079.2 Tax on income distributed during the year 209.16 86.17

10 Retained Surplus / (Defi cit) carried forwardto Balance Sheet 45.59 2,887.24



93

HSBC MIP

Abridged Revenue Account for the year endedMarch 31, 2011 (Contd...)

Rs. in Lakhs

HSBC MIP - SAVINGS PLANCurrent


PreviousYear ended

March 31, 2010

1 INCOME1.1 Dividend 125.64 34.671.2 Interest 3,189.11 816.301.3 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 565.43 1,943.511.6 Realised Gains / (Losses) on Derivative Transactions (46.29) 19.741.7 Other Income 0.83 2.90

(A) 3,834.72 2,817.12

2 EXPENSES2.1 Management fees 595.34 169.852.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 49.11 16.362.4 Custodian fees 13.15 3.702.5 Trusteeship fees 0.57 0.272.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 481.89 232.832.8 Audit fees 0.76 0.752.9 Other operating expenses (21.14) 2.08

(B) 1,119.68 425.84


4 Change in Unrealised Depreciation in value ofinvestments (D) 374.95 (124.93)

5 NET GAINS / (LOSSES)FOR THE YEAR [E = (C - D)] 2,340.09 2,516.21

6 Change in unrealised appreciation in the valueof investments (F) (776.52) 583.39

7 NET SURPLUS / (DEFICIT)FOR THE YEAR (E + F = G) 1,563.57 3,099.60

7.1 Add: Balance transfer from Unrealised Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve (776.52) 583.397.3 Add / (Less): Equalisation 6,016.17 4,104.597.4 Transfer from Reserve Fund 986.63 –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL 9,342.89 6,620.80

9 Dividend appropriation9.1 Income Distributed during the year 3,071.36 1,037.239.2 Tax on income distributed during the year 459.40 154.90

10 Retained Surplus / (Defi cit) carried forwardto Balance Sheet 5,812.13 5,428.67

Notes to Accounts - Annexure I* Commission to Agents is included in Marketing & Distribution expenses.

94

HSBC MIP




PreviousYear ended

March 31, 2010

1 NAV per unit (Rs.):Open

Growth Option 16.3418 14.1825

Monthly Dividend Option 11.4773 10.7325

Quarterly Dividend Option 11.6340 10.8919

High




Low




End




2. Closing Assets Under Management (Rs. in Lakhs)

End 22,257 21,932

Average (AAuM)1 24,219 12,657


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)






7. Total Dividend per unit distributed during the year (planwise)Retail



Corporate Monthly Dividend Option 0.9493 0.7011 Quarterly Dividend Option 0.7123 0.7256

95

HSBC MIP




PreviousYear ended

March 31, 2010

8. Returns (%):a. Last One Year Scheme Growth Option 4.0200 15.2251 Monthly Dividend Option 2.7200 14.1546 Quarterly Dividend Option 3.0800 14.1551 Benchmark CRISIL MIP Blended Index 6.1663 14.2700

b. Since Inception Scheme Growth Option 7.7600 8.3825 Monthly Dividend Option 6.9100 7.6149 Quarterly Dividend Option 7.0000 7.6516 Benchmark CRISIL MIP Blended Index 7.2107 7.3900

1 AAuM = Average daily net assets.2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year.4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

96

HSBC MIP




PreviousYear ended

March 31, 2010

1 NAV per unit (Rs.):Open




High




Low




End




2. Closing Assets Under Management (Rs. in Lakhs)

End 67,610 35,831

Average (AAuM)1 57,121 20,112


4. Expense Ratio:

a. Total Expense as % of AAuM (planwise)




b. Management Fee as % of AAuM (planwise)






7. Total Dividend per unit distributed during the year (planwise)Retail



Corporate Monthly Dividend Option 1.0025 0.7990 Quarterly Dividend Option 0.7614 0.7827

97

HSBC MIP



PreviousYear ended

March 31, 2010

8. Returns (%):a. Last One Year Scheme Growth Option 4.3700 22.3802 Monthly Dividend Option 3.0700 21.1355 Quarterly Dividend Option 3.4000 21.1925 Benchmark CRISIL MIP Blended Index 6.1663 14.2700

b. Since Inception Scheme Growth Option 9.6200 10.5110 Monthly Dividend Option 8.6400 9.5802 Quarterly Dividend Option 8.7000 9.5923 Benchmark CRISIL MIP Blended Index 7.2107 7.3900



98

HSBC MIP


HSBC MIP - REGULAR / SAVINGS PLAN

1 Investments:

1.1. It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the scheme’s unitholders.

1.2. Open Positions of derivatives in MIP - Regular Plan as at March 31, 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.

1.3. Investments in Associates and Group Companies are as under :(Rupees)

Issuer 2011

Instrument Type

Regular Plan

Savings Plan

Aggregate Investments by all schemes


Fixed deposits 10,000,000 22,000,000 970,000,000

Issuer 2010

Instrument Type

Regular Plan

Savings Plan

Aggregate Investments by all schemes


Fixed deposits 10,000,000 10,000,000 1,018,000,000

1.4. Open positions of Securities Borrowed and / or Lent by the MIP - Regular Plan as of fi nancial year ended 2011 and 2010 are NIL.

Open positions of Securities Borrowed and / or Lent by the MIP - Savings Plan as of fi nancial year ended 2011 and 2010 are NIL.

1.5. 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.

1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial years 2011 and 2010 and their percentage to net assets are as under :

SecurityCategory

March 31, 2011

Regular Plan Savings Plan

Amount (Rs.)


Amount (Rs.)


Equity Shares

– Appreciation 22,867,095 1.0274% 101,566,533 1.5022%

– Depreciation 18,930,655 0.8505% 117,550,379 1.7386%


– Appreciation 510,002 0.0229% 1,854,290 0.0274%

– Depreciation 9,361,311 0.4206% 23,312,827 0.3448%

Privately Placed Non Convertible Debentures / Bonds

– Appreciation – – – –


99

HSBC MIP

SecurityCategory

March 31, 2011


Amount (Rs.)


Amount (Rs.)


Asset Backed Securities



Government of India Securities


– Depreciation 18,094 0.0008% 52,800 0.0781%

Equity Futures



Commercial Paper / Certifi cate of Deposit

– Appreciation 3,094,306 0.1390% 9,114,954 0.1348%

– Depreciation 1,963,734 0.0882% 2,775,200 0.0410%

SecurityCategory

March 31, 2010


Amount (Rs.)


Amount (Rs.)


Equity Shares

– Appreciation 35,159,577 1.6031% 243,422,390 6.7937%

– Depreciation 8,227,405 0.3751% 167,450,117 4.6733%


– Appreciation 3,093,155 0.1410% 4,437,820 0.1239%

– Depreciation 219,238 0.0100% 325,981 0.0091%

Privately Placed Non Convertible Debentures / Bonds

– Appreciation – – 576,049 1.6077%



– Appreciation 1,739,064 0.0793% 2,604,039 0.0727%



– Appreciation 32,116 0.0015% 13,687 0.0004%


Equity Futures

– Appreciation 485,963 0.0222% 983,230 0.0274%

– Depreciation 114,450 0.0052% 269,600 0.0075%

Commercial Paper / Certifi cate of Deposit




100

HSBC MIP

1.7. 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 2009-10 (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

RupeesPercentage of Average Daily

Net AssetsRupees

Percentage of Average Daily

Net Assets

Regular Plan 18,102,936,980 747.47% 17,758,495,701 733.25%

Savings Plan 40,066,934,889 701.44% 36,428,116,067 637.74%

Plan

March 31, 2010


RupeesPercentage of Average Daily

Net AssetsRupees


Net Assets

Regular Plan 8,666,663,810 684.74% 7,579,938,462 598.88%

Savings Plan 13,374,285,652 664.99% 11,634,947,422 578.51%

1.8. Non-Traded securities in the portfolio:

Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under :

Security Category

Amount (Rs.)


Amount (Rs.)


Regular Plan

2011 2010

Equities 1,091,187 0.0490% 2,018,410 0.0920%

Debt Instruments 454,113,258 20.4029% 381,375,038 17.3889%

Money Market Instruments

1,368,593,494 61.4896% 969,709,005 44.2142%

Total 1,823,797,939 81.9415% 1,353,102,453 61.6952%

Security Category

Amount (Rs.)


Amount (Rs.)


Savings Plan

2011 2010

Equities 6,039,864 0.0893% 3,205,710 0.0895%

Debt Instruments 1,294,867,566 19.1520% 638,530,506 17.8207%

Money Market Instruments

3,735,193,722 55.2460% 1,452,839,619 40.5472%

Total 5,036,101,152 74.4873% 2,094,575,835 58.4573%


During the year 2010-11, 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


101

HSBC MIP

on derivative transactions amounting to Rs. 33,223 and Rs. 149,601 for the Regular Plan and Savings Plan respectively.

During the year 2009-10, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid Collection / Bank charges amounting to Rs. 1,202 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.





Relation

Period Covered


% of Total Business




Fund

Regular Plan


Associate 2010-2011 45.66 21.60 5,662,279 22.48


Associate 2010-2011 0.31 0.15 51,315 0.20

Savings Plan


Associate 2010-2011 131.03 20.15 14,244,334 17.93


Associate 2010-2011 1.26 0.19 149,906 0.19

Name of Sponsor/AMC and its associates / related parties / group companies


Relation

Period Covered


% of Total Business



(on accrual basis)


Fund

Regular Plan


Associate 2009-2010 75.06 38.04 7,582,562 31.68


Associate 2009-2010 0.72 0.36 84,829 0.35

Savings Plan


Associate 2009-2010 93.16 31.40 10,037,894 27.67


Associate 2009-2010 0.26 0.09 49,702 0.14


102

HSBC MIP





relation

Period Covered


[Rs. In Crores]

% of total value of




Fund

Regular Plan


Sponsor 2010-2011 6.10 0.66 87,784 3.22

Savings Plan


Sponsor 2010-2011 27.92 1.34 420,296 4.45



relation

Period Covered


[Rs. In Crores]

% of total value of



(on accrual basis)


Fund

Regular Plan


Associate 2009-2010 0.24 0.05 4,760 0.22


Sponsor 2009-2010 1.75 0.35 30,556 1.40

Savings Plan


Associate 2009-2010 0.71 0.07 14,280 0.26


Sponsor 2009-2010 4.16 0.44 70,290 1.29

The brokerage paid was at rates similar to those offered to other distributors.


3 None of the Investors held more than 25% of the total net assets of the schemes at the years ended March 31, 2011 and March 31, 2010.

103

HSBC MIP


Description

Regular Plan


2010 - 2011

Growth Option 46,865,391.998 31,353,805.237 41,000,619.023 37,218,578.212 372,185,782

Monthly Dividend Option

87,365,066.104 96,344,927.811 87,540,254.245 96,169,739.670 961,697,397

Quarterly Dividend Option

36,498,869.190 36,551,359.322 23,304,487.219 49,745,741.293 497,457,413



Growth Option 20,343,046.918 36,509,108.348 9,986,763.268 46,865,391.998 468,653,919


11,179,392.387 92,918,786.004 16,733,112.287 87,365,066.104 873,650,662


15,065,276.417 27,233,449.862 5,799,857.089 36,498,869.190 364,988,692

Description

Savings Plan


2010 - 2011

Growth Option 66,682,194.233 110,504,442.735 54,525,552.688 122,661,084.280 1,226,610,843


117,679,029.512 254,267,713.904 125,281,128.913 246,665,614.503 2,466,656,145


76,979,245.665 107,884,751.165 48,427,260.251 136,436,736.579 1,364,367,366


Opening Units Subscription Redemption Closing Units FaceValue

Growth Option 27,263,343.045 55,702,716.349 16,283,865.161 66,682,194.233 666,821,943


22,335,867.542 113,309,617.474 17,966,455.504 117,679,029.512 1,176,790,295


35,851,537.631 50,500,233.466 9,372,525.432 76,979,245.665 769,792,456

5 Prior year amounts have been re-grouped and reclassifi ed, wherever applicable, to confi rm to current year’s presentation.

6 No contingent liabilities for MIP - Regular and MIP - Savings funds for the years ended March 31, 2011 and March 31, 2010.


8 Other income in Savings Plan represents exit load collected in excess of 1% of redemption proceeds and credited to the Scheme.



HSBC Income Fund




HSBC Income FundAn open-ended Income Scheme


105

HSBC Income Fund


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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.


(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.


Sd/-



Auditors’ Report

106

HSBC Income Fund

Rs. in Lakhs

HSBC INCOME FUND - INVESTMENT PLANAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 1,410.60 2,418.142 Reserves & Surplus2.1 Unit Premium Reserves (672.29) (602.92)2.2 Unrealised Appreciation Reserve 4.85 –2.3 Other Reserves 1,368.05 1,451.25

3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 122.48 212.25

TOTAL 2,233.69 3,478.72

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 913.57 813.041.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities 50.44 63.921.4 Government Securities 25.35 627.681.5 Treasury Bills – –1.6 Commercial Paper 197.32 497.341.7 Certifi cate of Deposits 734.54 –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 1,921.22 2,001.982 Deposits – 189.553 Other Current Assets3.1 Cash & Bank Balance 14.64 14.243.2 CBLO / Reverse Repo Lending 236.31 1,224.533.3 Others 61.52 48.424 Deferred Revenue Expenditure


TOTAL 2,233.69 3,478.72



107

HSBC Income Fund

Rs. in Lakhs

HSBC INCOME FUND - SHORT TERM PLANAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 14,796.72 14,887.542 Reserves & Surplus2.1 Unit Premium Reserves 518.40 372.472.2 Unrealised Appreciation Reserve 44.88 3.452.3 Other Reserves 1,060.80 1,266.303 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 580.12 84.33

TOTAL 17,000.92 16,614.09

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 517.72 500.661.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 1,276.44 2,394.531.7 Certifi cate of Deposits 14,098.57 12,616.231.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 15,892.73 15,511.422 Deposits – 4.043 Other Current Assets3.1 Cash & Bank Balance 440.36 53.893.2 CBLO / Reverse Repo Lending 643.18 977.313.3 Others 24.65 67.434 Deferred Revenue Expenditure


TOTAL 17,000.92 16,614.09



108

HSBC Income Fund


Rs. in Lakhs

HSBC INCOME FUND - INVESTMENT PLAN

Current Year ended

March 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 206.01 446.431.3 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 – 238.821.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.38

(A) 190.76 685.63

2 EXPENSES2.1 Management fees 35.14 95.712.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 2.24 6.332.4 Custodian fees 0.24 0.462.5 Trusteeship fees 0.12 0.112.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 11.87 33.752.8 Audit fees 0.20 1.502.9 Other operating expenses 0.75 1.002.10 Expenses to be Reimbursed by the Investment Manager – –

(B) 50.56 138.86

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 140.20 546.77

4 Change in Unrealised Depreciation in value of investments (D) (4.40) (157.02)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 144.60 703.79

6 Change in unrealised appreciation in the value of investments (F) 4.85 (29.07)

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 149.45 674.727.1 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 54.08 428.377.5 Transfer from Unit Premium Reserve – –

8 TOTAL 24.96 53.669 Dividend Appropriation9.1 Income Distributed during the year 47.41 213.839.2 Tax on income distributed during the year 6.67 31.7010 Retained Surplus / (Defi cit) carried forward to

Balance Sheet (29.12) (191.87)


109

HSBC Income Fund

Abridged Revenue Account for the year ended March 31, 2011 (Contd...)

Rs. in Lakhs

HSBC INCOME FUND - SHORT TERM PLAN

Current Year ended

March 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 939.38 1,868.401.3 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 (44.67) 274.991.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 5.82

(A) 894.71 2,149.21

2 EXPENSES2.1 Management fees 65.91 241.792.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 8.66 17.552.4 Custodian fees 2.79 4.192.5 Trusteeship fees 0.14 0.512.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 69.17 128.882.8 Audit fees 0.20 1.002.9 Other operating expenses 0.10 1.452.10 Expenses to be Reimbursed by the Investment Manager (23.92) –

(B) 123.05 395.37

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 771.66 1,753.84

4 Change in Unrealised Depreciation in value of investments (D) 0.01 –



7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 813.08 1,707.907.1 Add: Balance transfer from Unrealised

Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve 41.43 (45.94)7.3 Add / (Less): Equalisation (374.26) (14.78)7.4 Transfer from Reserve Fund 113.76 10.197.5 Transfer from Unit Premium Reserve – –

8 TOTAL 511.15 1,749.259 Dividend Appropriation9.1 Income Distributed during the year 508.97 1,208.449.2 Tax on income distributed during the year 93.92 218.1310 Retained Surplus / (Defi cit) carried forward to

Balance Sheet (91.74) 322.68


110

HSBC Income Fund


HSBC INCOME FUND -INVESTMENT PLAN

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 15.9381 14.8409 Regular Dividend Option 11.1692 11.1795 Regular Weekly Dividend Option Institutional Growth Option – 9.5776 Institutional Dividend Option – 10.6682 Institutional Weekly Dividend Option – – Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –High Regular Growth Option 16.8254 15.9383 Regular Dividend Option 11.3368 11.7989 Regular Weekly Dividend Option – – Institutional Growth Option 10.3921 10.2803 Institutional Dividend Option – 11.2616 Institutional Weekly Dividend Option – – Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –Low Regular Growth Option 15.9587 14.9264 Regular Dividend Option 10.8719 11.1456 Regular Weekly Dividend Option – – Institutional Growth Option 10.0106 9.6330 Institutional Dividend Option – 10.7298 Institutional Weekly Dividend Option – – Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –End Regular Growth Option 16.8253 15.9381 Regular Dividend Option 10.9288 11.1692 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

HSBC Income Fund


CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010


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 – –


6. Portfolio turnover ratio4 – –

7. Total Dividend per unit distributed during the year (planwise)Retail Regular Dividend Option 0.7379 0.7183 Regular Weekly Dividend Option – – Institutional Growth Option – – Institutional Dividend Option – 0.3416 Institutional Weekly Dividend Option – – Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –Corporate Regular Dividend Option 0.6877 0.6685 Regular Weekly Dividend Option – – Institutional Growth Option – – Institutional Dividend Option – 0.3179 Institutional Weekly Dividend Option – – Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –


112

HSBC Income Fund


CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

8. Returns (%):a. Last One Year Scheme Regular Growth Option 5.5700 7.3944 Regular Dividend Option 4.6000 6.4429 Regular Weekly Dividend Option N/A N/A Institutional Growth Option N/A 7.9191 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) 5.0617 5.3800b. Since Inception Scheme Regular Growth Option 6.4600 6.5848 Regular Dividend Option 5.8000 5.9678 Regular Weekly Dividend Option N/A N/A Institutional Growth Option N/A 0.3824 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) 5.2354 5.2600

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income3 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


113

HSBC Income Fund

HSBC INCOME FUND -SHORT TERM PLAN

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 15.6284 14.8706 Regular Dividend Option 10.9030 10.8304 Regular Weekly Dividend Option 10.1393 10.0712 Institutional Growth Option 12.3381 11.6871 Institutional Dividend Option 10.5488 10.4456 Institutional Weekly Dividend Option 10.4336 10.2542 Institutional Plus Growth Option – 10.1070 Institutional Plus Weekly Dividend Option 10.0558 – Institutional Plus Monthly Dividend Option 10.1482 10.0362High Regular Growth Option 16.5419 15.6284 Regular Dividend Option 10.9879 11.0379 Regular Weekly Dividend Option 10.1741 10.2224 Institutional Growth Option 13.0988 12.3381 Institutional Dividend Option 10.6000 10.6486 Institutional Weekly Dividend Option 10.4701 10.4622 Institutional Plus Growth Option 10.0700 10.6740 Institutional Plus Weekly Dividend Option 10.0878 10.1031 Institutional Plus Monthly Dividend Option 10.2040 10.2315Low Regular Growth Option 15.6474 14.9072 Regular Dividend Option 10.8452 10.8570 Regular Weekly Dividend Option 10.1202 10.0844 Institutional Growth Option 12.3538 11.7162 Institutional Dividend Option 10.0031 10.4715 Institutional Weekly Dividend Option 10.3844 10.2648 Institutional Plus Growth Option 10.0014 10.1322 Institutional Plus Weekly Dividend Option 10.0407 10.0188 Institutional Plus Monthly Dividend Option 10.0023 10.0611End Regular Growth Option 16.5419 15.6284 Regular Dividend Option 10.9778 10.9030 Regular Weekly Dividend Option 10.1741 10.1393 Institutional Growth Option 13.0988 12.3381 Institutional Dividend Option 10.2283 10.5488 Institutional Weekly Dividend Option 10.4701 10.4336 Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option 10.0553 10.0558 Institutional Plus Monthly Dividend Option 10.0540 10.1482



114

HSBC Income Fund


CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010


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%



7. Total Dividend per unit distributed during the year (planwise)Retail Regular Dividend Option 0.4788 0.4122 Regular Weekly Dividend Option 0.4757 0.3823 Institutional Growth Option – – Institutional Dividend Option 0.2265 0.4109 Institutional Weekly Dividend Option 0.5149 0.3344 Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option 0.5379 0.3679 Institutional Plus Monthly Dividend Option 0.3318 0.3884Corporate Regular Dividend Option 0.4461 0.3837 Regular Weekly Dividend Option 0.4433 0.3558 Institutional Growth Option – – Institutional Dividend Option 0.2111 0.3825 Institutional Weekly Dividend Option 0.4798 0.3112 Institutional Plus Growth Option – – Institutional Plus Weekly Dividend Option 0.5013 0.3424 Institutional Plus Monthly Dividend Option 0.3092 0.3615


115

HSBC Income Fund


CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

8. Returns (%):a. Last One Year Scheme Regular Growth Option 5.8500 5.0960 Regular Dividend Option 5.2100 4.5371 Regular Weekly Dividend Option 5.1600 4.5385 Institutional Growth Option 6.1700 5.5702 Institutional Dividend Option (0.8300) N/A Institutional Weekly Dividend Option 5.4400 5.0891 Institutional Plus Growth Option N/A 5.6258 Institutional Plus Weekly Dividend Option 5.4900 N/A Institutional Plus Monthly Dividend Option 2.3700 4.5414 Benchmark CRISIL Short–Term Bond Fund Index (Short Term Plan) 5.1199 5.8500b. Since Inception Scheme Regular Growth Option 6.2400 6.2989 Regular Dividend Option 5.6200 5.6818 Regular Weekly Dividend Option 5.5600 5.6759 Institutional Growth Option 2.9400 2.4616 Institutional Dividend Option 3.3800 – Institutional Weekly Dividend Option 5.3600 5.3322 Institutional Plus Growth Option N/A 6.0546 Institutional Plus Weekly Dividend Option 4.2700 3.6402 Institutional Plus Monthly Dividend Option 3.6100 4.8518 Benchmark CRISIL Short–Term Bond Fund Index (Short Term Plan) 5.8938 6.0000

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income3 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


116

HSBC Income Fund


HSBC INCOME FUND

1 Investments:


1.2 Open Positions of derivatives for HSBC Income Fund - Investment Plan is Nil as at March 31, 2011 and as at March 31, 2010.

Open Positions of derivatives for HSBC Income Fund - Short Term Plan is Nil as at March 31, 2011 and as at March 31, 2010.




by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 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.)


Amount(Rs.)



– Appreciation 215,076 0.1019% – –

– Depreciation 139,868 0.0662% 1,500 0.0001%

Certifi cate of Deposits

– Appreciation 409,315 0.1939% 4,487,556 0.2733%




– Depreciation 477,225 0.2260% – –



– Depreciation 6,528 0.0031% – –

117

HSBC Income Fund

Security Category March 31, 2010

INVESTMENT PLAN SHORT TERM PLAN

Amount(Rs.)


Amount(Rs.)



– Appreciation 250,564 0.0767% 344,566 0.0208%

– Depreciation 306,366 0.0938% – –



– Depreciation 441,583 0.1352% – –


– Appreciation 10,873 0.0033% – –

– Depreciation 437,566 0.1340% – –

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 2010 - 2011 are:

Plan Aggregate Purchases Aggregate Sales

Amount (Rs.) Percentage of Average Daily

Net Assets


Net Assets

Investment Plan 5,342,626,089 1900.42% 5,353,400,443 1900.25%

Short Term Plan 4,513,345,293 301.88% 4,564,642,895 305.32%

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 2009 - 2010 are :

Plan Aggregate Purchases Aggregate Sales


Net Assets


Net Assets

Investment Plan 9,142,476,843 1185.04% 10,057,164,104 1303.60%

Short Term Plan 23,963,152,456 616.42% 23,982,294,982 616.91%


Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets are as under:

INVESTMENT PLAN

Security Category Fair Value(Rs.)


Fair Value(Rs.)


2011 2010

Debt Instruments 70,421,034 33.3557% 87,696,285 26.8474%

Money market Instruments 93,186,340 44.1387% 49,732,940 15.2253%

Total 163,607,374 77.4944% 137,429,225 42.0726%


118

HSBC Income Fund


SHORT TERM PLANSecurity Category Fair Value

(Rs.)Percentage to

Net AssetsFair Value

(Rs.)Percentage to

Net Assets2011 2010

Debt Instruments – – 50,065,916 3.0288%

Money market Instruments 1,537,500,635 93.6313% 1,501,075,589 90.8105%

Total 1,537,500,635 93.6313% 1,551,141,505 93.8393%

2 Disclosure Under Regulation 25(8) of the Securities And Exchange Board of India (Mutual Funds) Regulations, 1996 as amended:

During the year 2010 - 2011, 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 2009 - 2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 22,806 for the Investment Plan and Rs. 7,865 for the Short Term Plan.

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



Relation

Period Covered

Business Given[Rs. In Crores]




Fund

INVESTMENT PLAN


Associate 2010-2011 1.14 14.75 556,576 39.27

HSBC InvestDirect Securities (India) Limited Associate 2010-2011 0.04 0.52 5,709 0.40

SHORT TERM PLAN


Associate 2010-2011 230.78 68.88 4,767,298 73.43

HSBC InvestDirect Securities (India) Limited Associate 2010-2011 0.00~ 0.00~ 3,382 0.05

Name of Sponsor / AMC and itsassociates / related parties / group companies


Relation

Period Covered

Business Given[Rs. In Crores]



(on accrual basis)


Fund

INVESTMENT PLAN


Associate 2009-2010 16.97 44.20 2,750,823 55.53

HSBC InvestDirect Securities (India) Limited Associate 2009-2010 0.00~ 0.00~ 5,415 0.11

SHORT TERM PLAN


Associate 2009-2010 253.25 29.71 11,527,114 58.98

HSBC InvestDirect Securities (India) Limited Associate 2009-2010 6.76 0.79 130,877 0.67

119

HSBC Income Fund

~ 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 fi xed deposits and enters into reverse repo transactions from time to time at competitive rates.

3 None of the Investors held more than 25% of the total net assets of HSBC Income Fund - Investment Plan and Short Term Plan as at the years ended on March 31, 2011 and March 31, 2010.


INVESTMENT PLANDescription Opening Units Subscription Redemption Closing Units Face Value

2010 - 2011Regular Dividend Option

12,321,384.234 1,333,071.168 9,208,184.044 4,446,271.358 44,462,715

Regular Growth Option

11,860,052.788 745,260.856 2,945,536.937 9,659,776.707 96,597,767

Regular Weekly Dividend Option

– – – – –

Institutional Dividend Option

– – – – –

Institutional Growth Option

– 5,000,000.000 5,000,000.000 – –

2009 - 2010Description Opening Units Subscription Redemption Closing Units Face ValueRegular Dividend Option

58,649,984.489 14,455,550.272 60,784,150.527 12,321,384.234 123,213,843


25,707,313.077 6,885,022.408 20,732,282.697 11,860,052.788 118,600,528


– – – – –


10,013,416.171 18,672.866 10,032,089.037 – –


519,254.435 11,032,977.203 11,552,231.638 – –

SHORT TERM PLANDescription Opening Units Subscription Redemption Closing Units Face Value

2010 - 2011Regular Dividend Option

39,938,792.341 103,276,086.586 89,454,461.862 53,760,417.065 537,604,172


14,747,400.770 25,132,723.022 25,886,782.650 13,993,341.142 139,933,410


20,379,450.229 76,793,939.250 38,370,050.308 58,803,339.171 588,033,393


486,140.282 13,238,681.916 10,712,489.848 3,012,332.350 30,123,325


11,638,971.961 2,014,163.598 11,638,971.961 2,014,163.598 20,141,635

Institutional Weekly Dividend Option

29,906,364.288 2,590,672.001 31,932,504.118 564,532.171 5,645,320

Institutional Plus Growth Option

– 50,264,958.110 50,264,958.110 – –


120

HSBC Income Fund

SHORT TERM PLANDescription Opening Units Subscription Redemption Closing Units Face Value

2010 - 2011Institutional Plus Weekly Dividend Option

30,759,481.865 18,399,294.635 38,388,259.734 10,770,516.766 107,705,166

Institutional Plus Monthly Dividend Option

1,018,803.528 15,108,424.310 11,078,696.915 5,048,530.923 50,485,309

2009 - 2010Description Opening Units Subscription Redemption Closing Units Face ValueRegular Dividend Option

53,157,406.512 163,384,188.969 176,602,803.140 39,938,792.341 399,387,924


15,450,409.839 24,352,826.602 25,055,835.671 14,747,400.770 147,474,007


14,467,296.399 73,014,114.879 67,101,961.049 20,379,450.229 203,794,503


4,837,013.350 53,253,516.264 57,604,389.332 486,140.282 4,861,404


8,845,986.502 37,282,068.211 34,489,082.752 11,638,971.961 116,389,719

Institutional Weekly Dividend Option

24,995,115.818 81,693,798.828 76,782,550.358 29,906,364.288 299,063,642

Institutional Plus - Growth Option

14,250,000.000 65,758,134.542 80,008,134.542 – –

Institutional Plus - Weekly Dividend Option

– 219,694,038.845 188,934,556.980 30,759,481.865 307,594,818

Institutional Plus - Monthly Dividend Option

1,000,000.000 84,875,537.437 84,856,733.909 1,018,803.528 10,188,035


6 No contingent liabilities for Investment Plan and Short Term Plan for the years ended March 31, 2011 and March 31, 2010.


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, fl oating rate securities and money market securities with effect from August 01, 2010. 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, fl oating 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 refl ect the valuations fairly as per the new regulatory norms by July 31, 2010. 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, 2010.



HSBC Gilt Fund




HSBC Gilt FundAn open-ended Gilt Scheme


122

HSBC Gilt Fund


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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 fl ows for the year ended on that date.



Sd/-



Auditors’ Report

123

HSBC Gilt Fund

Rs. in Lakhs

HSBC GILT FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 58.33 38.032 Reserves & Surplus2.1 Unit Premium Reserves (6.12) (26.34)2.2 Unrealised Appreciation Reserve 0.00~ –2.3 Other Reserves 17.59 30.563 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 0.74 0.98

TOTAL 70.54 43.23

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities –1.4 Government Securities 5.00 –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments 5.00 –



TOTAL 70.54 43.23

Notes to Accounts - Annexure I ~ Indicates less than 0.01


124

HSBC Gilt Fund


Rs. in Lakhs

HSBC GILT FUNDCurrent Year

endedMarch 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 5.15 25.781.3 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 1.48 (3.42)1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – –

(A) 6.63 22.36

2 EXPENSES2.1 Management fees 0.21 1.772.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 0.06 0.412.4 Custodian fees – –2.5 Trusteeship fees 0.00 ~ 0.012.6 Commission to Agents * – –2.7 Marketing & Distribution expenses – 1.622.8 Audit fees 0.20 0.122.9 Other operating expenses 0.16 0.022.10 Expenses to be Reimbursed by the Investment Manager (0.02) –

(B) 0.61 3.95

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 6.02 18.41

4 Change in Unrealised Depreciation in value of investments (D) – (48.48)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C - D)] 6.02 66.89

6 Change in unrealised appreciation in the value of investments (F) 0.00 ~ –

7 NET SURPLUS / (DEFICIT)OR THE YEAR (E + F = G) 6.02 66.89

7.1 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) 142.957.4 Transfer from Reserve Fund 0.20 –7.5 Transfer from Unit Premium Reserve – –

8 TOTAL (12.57) 209.84

9 Dividend Appropriation9.1 Income Distributed during the year 0.18 –9.2 Tax on income distributed during the year 0.02 –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet (12.76) 209.84

Notes to Accounts - Annexure I ~ Indicates less than 0.01

125

HSBC Gilt Fund


HSBC GILT FUND

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Growth Option 11.5879 10.7725 Dividend Option 10.2186 9.4995 Weekly Dividend Option 9.5097 8.8405High Growth Option 12.4932 11.5879 Dividend Option 11.0170 10.2186 Weekly Dividend Option 10.0727 9.5097Low Growth Option 11.5901 10.8152 Dividend Option 10.2206 9.5372 Weekly Dividend Option 9.5115 8.9398End Growth Option 12.4926 11.5879 Dividend Option 11.0165 10.2186 Weekly Dividend Option 10.0429 9.5097

2. Closing Assets Under Management (Rs. in Lakhs) End 69.80 42.24 Average (AAuM)1 81.02 522.75


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%



7. Total Dividend per unit distributed during the year (planwise)Retail Dividend Option – – Weekly Dividend Option 0.1821 –Corporate Dividend Option – – Weekly Dividend Option 0.1697 –

126

HSBC Gilt Fund


HSBC GILT FUND

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

8. Returns (%):a. Last One Year Scheme Growth Option 7.8100 7.5699 Dividend Option 7.8100 7.5693 Weekly Dividend Option 7.5400 7.5697 Benchmark I-Sec Composite Index 6.4067 4.4200

b. Since Inception Scheme Growth Option 3.0900 2.1060 Dividend Option 2.8700 2.3581 Weekly Dividend Option 1.3400 (2.6716)

Benchmark I-Sec Composite Index 6.1165 6.0700


127

HSBC Gilt Fund


HSBC GILT FUND

1 Investments:


1.2 Open Positions of derivatives as of March 31, 2011 is NIL. Open Positions of derivatives as of March 31, 2010 is NIL.




by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000



1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year end and their percentages to net assets are as under:



2011 2010


- Appreciation 214 0.0031% – –

- Depreciation – – – –

1.7 The aggregate value of investments purchased and sold during the fi nancial year 2010 - 2011 (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 fi nancial year 2009 - 2010 is Rs. 829,684,134 and Rs. 961,307,513 respectively being 1587.15% and 1838.94% of the average daily net assets.

1.8 Non-Traded securities in the portfolios as at March 31, 2011 and March 31, 2010 are NIL.


During the year 2010 - 2011, 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 2009 - 2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. NIL.

128

HSBC Gilt Fund



Name of Sponsor / AMC and its associates / related parties/group companies


Nature of Relation

Period Covered


% of Total Business




Fund


Associate 2010-2011 0.18 21.27 2,076 9.90

HSBC InvestDirect Secur i t i e s ( Ind ia ) Limited

Associate 2010-2011 0.02 2.36 25 0.12



Nature of Relation

Period Covered


% of Total Business




Fund


Associate 2009-2010 0.43 6.64 11,295 7.50


Associate 2009-2010 – – 564 0.37







Growth Option 276,151.441 338,302.775 173,962.423 440,491.793 4,404,917

Dividend Option 48,627.589 380,112.209 384,337.214 44,402.584 444,025

Weekly Dividend Option

55,473.174 48,358.958 5,430.683 98,401.449 984,014



Growth Option 2,554,537.361 93,544.839 2,371,930.759 276,151.441 2,761,513

Dividend Option 3,037,397.103 448,522.876 3,437,292.390 48,627.589 486,275

Weekly Dividend Option

13,934,870.718 6,553,849.420 20,433,246.964 55,473.174 554,731


129

HSBC Gilt Fund




7 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, 2009. 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, 2009. 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 fi led 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, fi led 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.



HSBC Floating Rate Fund




HSBC Floating Rate Fund An open-ended Income Scheme


131

HSBC FLOATING RATE FUND


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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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 fl ows for the year ended on that date.




Sd/-



Auditors’ Report

132


Rs. in Lakhs

HSBC FLOATING RATE FUND– LONG TERM PLAN

As atMarch 31, 2011

As atMarch 31, 2010

LIABILITIES1 Unit Capital 24,973.08 51,992.652 Reserves & Surplus2.1 Unit Premium Reserves 2,378.57 4,917.522.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 627.98 2,866.223 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 113.05 2,576.98

TOTAL 28,092.68 62,353.37

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 5,890.48 9,745.171.7 Certifi cate of Deposits 21,917.48 49,212.781.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits – 56.10

3 Other Current Assets3.1 Cash & Bank Balance 147.28 4.143.2 CBLO / Reverse Repo Lending 127.41 835.523.3 Others 10.03 2,499.664 Deferred Revenue Expenditure


TOTAL 28,092.68 62,353.37Notes to Accounts - Annexure I


133

SBC FLOATING RATE FUND

Rs. in Lakhs

HSBC FLOATING RATE FUND– SHORT TERM PLAN

As atMarch 31, 2011

As atMarch 31, 2010

LIABILITIES1 Unit Capital 2,026.22 6,706.372 Reserves & Surplus2.1 Unit Premium Reserves (27.86) 4,186.982.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 125.70 (3,670.33)3 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 6.24 10.53

TOTAL 2,130.30 7,233.55

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – –1.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits – –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –

Total Investments – –

2 Deposits 202.99 50.17

3 Other Current Assets3.1 Cash & Bank Balance 20.80 25.513.2 CBLO / Reverse Repo Lending 1,901.57 7,153.523.3 Others 4.94 4.354 Deferred Revenue Expenditure


TOTAL 2,130.30 7,233.55



134



Rs. in Lakhs

HSBC FLOATING RATE FUND– LONG TERM PLAN

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 3,611.84 5,815.311.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments – –1.5 Realised Gains / (Losses) on External sale / redemption of

investments 10.71 1,198.531.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income 0.08 0.05

(A) 3,622.63 7,013.88

2 EXPENSES2.1 Management fees 84.03 496.322.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 30.45 64.362.4 Custodian fees 9.73 14.892.5 Trusteeship fees 0.40 1.192.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 73.61 253.182.8 Audit fees 0.31 0.252.9 Other operating expenses 3.15 4.172.10 Expenses to be Reimbursed by the Investment Manager – –

(B) 201.68 834.36

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A – B = C) 3,420.95 6,179.52

4 Change in Unrealised Depreciation invalue of investments (D) – (6.64)

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C – D)] 3,420.95 6,186.16

6 Change in unrealised appreciation in thevalue of investments (F) – (29.05)


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 24.96 71.627.5 Transfer from Unit Premium Reserve – –

8 TOTAL 223.44 3,388.519 Dividend Appropriation9.1 Income Distributed during the year 2,026.37 3,300.219.2 Tax on income distributed during the year 410.34 682.67

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet (2,213.27) (594.37)


135


Abridged Revenue Account for the year endedMarch 31, 2011 (Contd...)

Rs. in Lakhs

HSBC FLOATING RATE FUND– SHORT TERM PLAN

CurrentYear ended

March 31, 2011

PreviousYear ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 196.85 212.631.3 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 (1.76) (2.72)1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.01

(A) 195.09 209.92

2 EXPENSES2.1 Management fees 10.11 20.292.2 Service tax on Management fees ** – –2.3 Transfer agents fees and expenses 1.94 3.632.4 Custodian fees – 0.112.5 Trusteeship fees 0.03 0.072.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 5.71 13.072.8 Audit fees 0.20 0.122.9 Other operating expenses 0.38 0.572.10 Expenses to be Reimbursed by the Investment Manager – –

(B) 18.37 37.86

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A – B = C) 176.72 172.06

4 Change in Unrealised Depreciation invalue of investments (D) – –

5 NET GAINS / (LOSSES) FOR THE YEAR [E = (C – D)] 176.72 172.06

6 Change in unrealised appreciation in thevalue of investments (F) – –

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 176.72 172.067.1 Add: Balance transfer from Unrealised

Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised Appreciation Reserve – –7.3 Add / (Less): Equalisation 3,742.92 (4,141.00)7.4 Transfer from Reserve Fund 19.26 42.367.5 Transfer from Unit Premium Reserve – –

8 TOTAL 3,938.90 (3,926.58)9 Dividend Appropriation9.1 Income Distributed during the year 96.76 103.759.2 Tax on income distributed during the year 26.84 29.39

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet 3,815.30 (4,059.72)


136



HSBC FLOATING RATE FUND– LONG TERM PLANCurrent Year ended

March 31, 2011Previous Year ended

March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 14.1925 13.5781 Regular Daily Dividend Option 10.0126 10.0114 Regular Weekly Dividend Option 10.0047 10.0066 Regular Monthly Dividend Option 10.0063 10.0064 Institutional Growth Option 14.4137 13.7348 Institutional Daily Dividend Option 10.1799 10.0980 Institutional Weekly Dividend Option 11.2299 11.2348 Institutional Fortnightly Dividend Option 10.1971 10.2245 Institutional Monthly Dividend Option 10.1891 10.0614 Institutional Plus Growth Option – – Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –High Regular Growth Option 15.0072 14.1925 Regular Daily Dividend Option 10.0621 10.0136 Regular Weekly Dividend Option 10.0199 10.0240 Regular Monthly Dividend Option – 10.0688 Institutional Growth Option 15.3477 14.4137 Institutional Daily Dividend Option 10.2198 10.1799 Institutional Weekly Dividend Option 11.2487 11.2550 Institutional Fortnightly Dividend Option – 10.2468 Institutional Monthly Dividend Option 10.3713 10.1891 Institutional Plus Growth Option 10.5135 – Institutional Plus Daily Dividend Option 10.0417 – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –Low Regular Growth Option 14.1925 13.5915 Regular Daily Dividend Option 10.0031 10.0114 Regular Weekly Dividend Option 10.0044 10.0009 Regular Monthly Dividend Option – 10.0027 Institutional Growth Option 14.4137 13.7486 Institutional Daily Dividend Option 10.0000 10.1000 Institutional Weekly Dividend Option 11.2297 10.0990 Institutional Fortnightly Dividend Option – 10.1606 Institutional Monthly Dividend Option 10.1558 10.0645 Institutional Plus Growth Option 10.1799 – Institutional Plus Daily Dividend Option 10.0126 – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –End Regular Growth Option 15.0055 14.1925 Regular Daily Dividend Option 10.0547 10.0126 Regular Weekly Dividend Option 10.0049 10.0047 Regular Monthly Dividend Option 10.0130 10.0063 Institutional Growth Option 15.3589 14.4137 Institutional Daily Dividend Option – 10.1799 Institutional Weekly Dividend Option 11.2296 11.2299 Institutional Fortnightly Dividend Option 9.9998 10.1971 Institutional Monthly Dividend Option 10.3028 10.1891

137




March 31, 2010 Institutional Plus Growth Option – – Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –



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 AAuM3 5.97% 4.71%6. Portfolio turnover ratio4 – –7. Total Dividend per unit distributed during the year

(planwise)Retail Regular Daily Dividend Option 0.4657 0.3871 Regular Weekly Dividend Option 0.4909 0.3897 Regular Monthly Dividend Option 0.4851 0.3886 Institutional Daily Dividend Option 0.0409 0.3578 Institutional Weekly Dividend Option 0.6198 0.4792 Institutional Fortnightly Dividend Option 0.2672 0.4551 Institutional Monthly Dividend Option 0.4566 0.3157 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –


138





March 31, 2010Corporate Regular Daily Dividend Option 0.4340 0.3603 Regular Weekly Dividend Option 0.4575 0.3627 Regular Monthly Dividend Option 0.4521 0.3617 Institutional Daily Dividend Option 0.0380 0.3330 Institutional Weekly Dividend Option 0.5775 0.4460 Institutional Fortnightly Dividend Option 0.2491 0.4236 Institutional Monthly Dividend Option 0.4255 0.2938 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 5.7400 4.5249 Regular Daily Dividend Option 5.0600 3.9436 Regular Weekly Dividend Option 5.0300 3.9506 Regular Monthly Dividend Option 5.0400 3.9532 Institutional Growth Option 6.4800 4.9429 Institutional Daily Dividend Option – 4.4107 Institutional Weekly Dividend Option 5.6700 4.3116 Institutional Fortnightly Dividend Option 0.9300 4.2832 Institutional Monthly Dividend Option 5.8200 4.4802 Institutional Plus Growth Option – – Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – – Benchmark CRISIL Liquid Fund Index 6.2075 3.6700

b. Since Inception Scheme Regular Growth Option 6.5500 6.7022 Regular Daily Dividend Option 5.0500 5.0434 Regular Weekly Dividend Option 4.5000 4.0210 Regular Monthly Dividend Option 5.7200 5.8500 Institutional Growth Option 6.9300 7.0090 Institutional Daily Dividend Option – 5.6624 Institutional Weekly Dividend Option 6.3100 6.4241 Institutional Fortnightly Dividend Option 4.9000 6.5441 Institutional Monthly Dividend Option 6.1100 6.1640 Institutional Plus Growth Option – – Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – – Benchmark CRISIL Liquid Fund Index 6.1475 6.1400


139


HSBC FLOATING RATE FUND – SHORT TERM PLANCurrent Year ended


March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 13.6668 13.3675 Regular Daily Dividend Option 10.0000 10.0000 Regular Weekly Dividend Option 10.0155 10.0205 Regular Monthly Dividend Option – – Institutional Growth Option 13.8138 13.5003 Institutional Daily Dividend Option 10.1363 10.0623 Institutional Weekly Dividend Option – 10.4999 Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option 10.1346 10.1350 Institutional Plus Growth Option 11.7344 11.4592 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – 10.0373 Institutional Plus Monthly Dividend Option – –High Regular Growth Option 14.3458 13.6668 Regular Daily Dividend Option 10.0000 10.0000 Regular Weekly Dividend Option 10.0279 10.0222 Regular Monthly Dividend Option – – Institutional Growth Option 14.5096 13.8138 Institutional Daily Dividend Option 10.5801 10.1360 Institutional Weekly Dividend Option – 10.5018 Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option 10.5322 10.1548 Institutional Plus Growth Option 12.0334 11.7344 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – 10.0392 Institutional Plus Monthly Dividend Option – –Low Regular Growth Option 13.6668 13.3689 Regular Daily Dividend Option 10.0000 10.0000 Regular Weekly Dividend Option 10.0155 10.0156 Regular Monthly Dividend Option – – Institutional Growth Option 13.8138 13.5018 Institutional Daily Dividend Option 10.1360 10.0623 Institutional Weekly Dividend Option – 10.4943 Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option 10.1314 10.1296 Institutional Plus Growth Option 11.7344 11.4605 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – 10.0319 Institutional Plus Monthly Dividend Option – –End Regular Growth Option 14.3458 13.6668 Regular Daily Dividend Option 10.0000 10.0000 Regular Weekly Dividend Option 10.0155 10.0155 Regular Monthly Dividend Option – – Institutional Growth Option 14.5099 13.8138 Institutional Daily Dividend Option – 10.1363 Institutional Weekly Dividend Option – – Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option – 10.1346


140




March 31, 2010 Institutional Plus Growth Option – 11.7344 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – –



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 AAuM3 2.29% 2.23%6. Portfolio turnover ratio4 – –7. Total Dividend per unit distributed during the year

(planwise)Retail Regular Daily Dividend Option 0.3796 0.1726 Regular Weekly Dividend Option 0.3804 0.1768 Regular Monthly Dividend Option – – Institutional Daily Dividend Option – 0.1230 Institutional Weekly Dividend Option – 0.0733 Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option 0.0410 0.1817 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – 0.0161 Institutional Plus Monthly Dividend Option – –


141




March 31, 2010Corporate Regular Daily Dividend Option 0.3796 0.1726 Regular Weekly Dividend Option 0.3804 0.1768 Regular Monthly Dividend Option – – Institutional Daily Dividend Option – 0.1230 Institutional Weekly Dividend Option – 0.0733 Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option 0.0410 0.1817 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – 0.0161 Institutional Plus Monthly Dividend Option – –

8. Returns (%):a. Last One Year Scheme Regular Growth Option 4.9700 2.2390 Regular Daily Dividend Option 3.8700 1.7359 Regular Weekly Dividend Option 3.8700 1.7298 Regular Monthly Dividend Option – – Institutional Growth Option 5.0400 2.3222 Institutional Daily Dividend Option – 1.9645 Institutional Weekly Dividend Option – – Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option – 1.8045 Institutional Plus Growth Option – 2.4016 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – – Benchmark CRISIL Liquid Fund Index 6.2075 3.6800b. Since Inception Scheme Regular Growth Option 5.8300 5.9868 Regular Daily Dividend Option 4.7000 4.8521 Regular Weekly Dividend Option 4.7400 4.9173 Regular Monthly Dividend Option – – Institutional Growth Option 5.9900 6.1719 Institutional Daily Dividend Option – 5.0985 Institutional Weekly Dividend Option – – Institutional Fortnightly Dividend Option – – Institutional Monthly Dividend Option – 5.1270 Institutional Plus Growth Option – 3.7350 Institutional Plus Daily Dividend Option – – Institutional Plus Weekly Dividend Option – – Institutional Plus Monthly Dividend Option – – Benchmark CRISIL Liquid Fund Index 6.1475 6.1400



142



HSBC FLOATING RATE FUND (COMBINED)

1 Investments:


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:(Rupees)



by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 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.


1.6 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

2010 - 2011


AmountRupees


Net Assets

AmountRupees


Net Assets

Long Term Plan 26,359,357,319 460.14% 29,809,561,449 520.37%

Short Term Plan 175,630 0.02% – –

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

2009 - 2010


AmountRupees


Net Assets

AmountRupees


Net Assets

Long Term Plan 72,453,262,526 552.03% 71,918,677,941 547.95%

Short Term Plan 797,541,975 103.30% 800,000,000 103.62%

143


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 :

2010 - 2011

Security CategoryFair Value

(Rs.)Percentage to


(Rs.)Percentage to

Net Assets

LONG TERM PLAN SHORT TERM PLAN

Money market Instruments

2,780,796,406 99.39% – –

Total 2,780,796,406 99.39% – –

2009 - 2010

Security CategoryFair Value

(Rs.)Percentage to


(Rs.)Percentage to

Net Assets

LONG TERM PLAN SHORT TERM PLAN


5,895,795,487 98.63% – –

Total 5,895,795,487 98.63% – –

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 2010 - 2011, 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 2009 - 2010, The Hongkong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 3,831 and Rs. 6,386 in Long Term Plan and Short Term Plan respectively.




Relation

Period Covered


% of Total Business




Fund

LONG TERM PLAN


Associate 2010-2011 146.52 6.47 1,105,014 13.97


Associate 2010-2011 0.00 0.00 431 0.01

SHORT TERM PLAN


Associate 2010-2011 2.97 14.42 311,663 62.69


Associate 2010-2011 1.17 5.70 582 0.12


144




Relation

Period Covered


% of Total Business



(on accrual basis)


Fund

LONG TERM PLAN


Associate 2009-2010 271.44 4.44 3,987,136 13.90

HSBC InvestDirect Secur i t ies ( India) Limited

Associate 2009-2010 83.70 1.37 342,379 1.19

SHORT TERM PLAN


Associate 2009-2010 27.75 30.58 810,250 64.35

HSBC InvestDirect Secur i t ies ( India) Limited

Associate 2009-2010 2.51 2.76 1,542 0.12

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


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

2011 2010

HSBC Floating Rate Fund– Long Term Plan

1 35.39% – –


Description LONG TERM PLAN2010 - 2011


Regular Growth 9,329,103.605 23,128,796.559 25,555,177.869 6,902,722.295 69,027,221Regular Daily Dividend

2,756,744.322 41,097.983 2,686,038.936 111,803.369 1,118,035

Regular Weekly Dividend

19,522,344.489 77,697,585.540 70,823,236.827 26,396,693.202 263,966,933

Regular Monthly Dividend

24,483,247.290 12,598,651.715 27,209,391.800 9,872,507.205 98,725,073

Institutional Growth

56,101,800.927 719,577,020.650 771,927,777.748 3,751,043.829 37,510,438

Institutional Daily Dividend

7,197,487.341 914,225.760 8,111,713.101 – –

Institutional Fortnightly Dividend

568,462.756 1,701,128.066 579,250.174 1,690,340.648 16,903,405

Institutional Weekly Dividend

398,091,374.663 935,257,782.344 1,133,875,989.938 199,473,167.069 1,994,731,672

Institutional Monthly Dividend

1,875,973.986 25,342,811.494 25,686,211.806 1,532,573.674 15,325,736


145


Description

SHORT TERM PLAN

2010 - 2011


Regular Growth 4,927,595.930 1,746,500.354 4,471,805.494 2,202,290.790 22,022,907

Regular Daily Dividend

20,343,588.524 15,947,837.886 27,435,302.049 8,856,124.361 88,561,246


23,335,871.766 2,151,659.614 16,299,452.631 9,188,078.749 91,880,786

Institutional Growth 2,512,271.146 – 2,496,593.295 15,677.851 156,778


99,780.341 – 99,780.341 – –


– – – – –


2,401,290.952 9,740.143 2,411,031.095 – –

Institutional Plus Growth

13,443,253.681 – 13,443,253.681 – –

Institutional Plus Daily Dividend

– – – – –

Institutional Plus Weekly Dividend

– – – – –

Description

LONG TERM PLAN2009 - 2010


Regular Growth

7,361,353.037 29,072,069.318 27,104,318.750 9,329,103.605 93,291,035


4,719,009.792 157,887.379 2,120,152.849 2,756,744.322 27,567,444


5,869,893.642 69,964,899.678 56,312,448.831 19,522,344.489 195,223,446


43,136,652.841 33,002,015.276 51,655,420.827 24,483,247.290 244,832,474


88,532,331.128 2,513,293,697.351 2,545,724,227.552 56,101,800.927 561,018,008


12,461,806.332 979,230.716 6,243,549.707 7,197,487.341 71,974,873


545,333.900 2,652,232.224 2,629,103.368 568,462.756 5,684,626


217,865,967.972 2,158,763,676.331 1,978,538,269.640 398,091,374.663 3,980,913,748


11,109,646.396 4,073,334.085 13,307,006.495 1,875,973.986 18,759,739


146



Description

SHORT TERM PLAN

2009 - 2010


Regular Growth 7,967,470.081 5,212,911.625 8,252,785.776 4,927,595.930 49,275,958


25,849,979.215 37,428,733.365 42,935,124.056 20,343,588.524 203,435,886


26,900,500.774 25,526,798.856 29,091,427.864 23,335,871.766 233,358,716


97,055.445 4,049,696.111 1,634,480.410 2,512,271.146 25,122,711


6,894,975.853 4,840,621.594 11,635,817.106 99,780.341 997,806


3,440,995.435 9,778.962 3,450,774.397 – –


4,339,496.053 50,934.139 1,989,139.240 2,401,290.952 24,012,908


4,987,332.184 8,737,217.855 281,296.358 13,443,253.681 134,432,538


– – – – –


3,580,547.191 4,157.938 3,584,705.129 – –

5 Prior year’s amounts have been re-grouped and reclassifi ed, wherever applicable, to confi rm 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, 2010.


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, fl oating rate securities and money market securities with effect from August 01, 2010. 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, fl oating 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 refl ect the valuations fairly as per the new regulatory norms by July 31, 2010. 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, 2010.


HSBC Ultra Short Term Bond Fund




HSBC Ultra Short Term Bond FundAn open-ended Debt Scheme


148



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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 fl ows for the year ended on that date.




Sd/-



Auditors’ Report

149


Rs. in Lakhs

HSBC ULTRA SHORT TERM BOND FUND

As atMarch 31, 2011

As atMarch 31, 2010

LIABILITIES1 Unit Capital 13,577.67 49,298.932 Reserves & Surplus2.1 Unit Premium Reserves (2.22) 16.002.2 Unrealised Appreciation Reserve – 1.212.3 Other Reserves 400.87 1,923.003 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 74.36 355.22

TOTAL 14,050.68 51,594.36

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 4,441.98 22,513.751.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities:1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – 8,495.751.3.5 Securitised Debt securities – 1,711.121.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper – –1.7 Certifi cate of Deposits 5,842.67 –1.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 958.51 2,031.003 Other Current Assets3.1 Cash & Bank Balance 26.90 90.903.2 CBLO / Reverse Repo Lending 2,670.79 14,862.543.3 Others 109.83 1,889.304 Deferred Revenue Expenditure


TOTAL 14,050.68 51,594.36



150



Rs. in Lakhs


Current Year ended

March 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 2,104.39 4,070.881.3 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 (41.68) (54.71)1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 1.88

(A) 2,062.71 4,018.05

2 EXPENSES2.1 Management fees 239.99 701.072.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 16.98 37.332.4 Custodian fees 3.32 5.342.5 Trusteeship fees 0.26 0.722.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 48.86 108.532.8 Audit fees 0.20 0.502.9 Other operating expenses 2.59 2.72

(B) 312.18 856.21

3 NET REALISED GAINS / (LOSSES) FOR THE YEAR (A - B = C) 1,750.53 3,161.84

4 Change in Unrealised Depreciation in value of investments (D) 57.61 –


6 Change in unrealised appreciation in the value of investments (F) (1.21) (48.74)

7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 1,691.71 3,113.10

7.1 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 187.75 258.837.5 Transfer from Unit Premium Reserve – –

8 TOTAL 70.79 960.92

9 Dividend Appropriation9.1 Income Distributed during the year 1,196.21 2,075.169.2 Tax on income distributed during the year 208.96 344.0410 Retained Surplus / (Defi cit) carried forward to

Balance Sheet (1,334.38) (1,458.28)



151



HSBC ULTRA SHORT TERM BOND FUNDCurrent


PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 12.5727 12.1193 Regular Daily Dividend Option 10.0122 10.0122 Regular Weekly Dividend Option 10.0331 10.0418 Institutional Growth Option 12.6572 12.1702 Institutional Daily Dividend Option 10.0125 10.0125 Institutional Weekly Dividend Option 10.0342 10.0432 Institutional Monthly Dividend Option 10.1446 10.1476 Institutional Plus Growth Option 12.7669 12.2294 Institutional Plus Daily Dividend Option 10.1094 10.0506 Institutional Plus Weekly Dividend Option 10.1637 10.0447 Institutional Plus Monthly Dividend Option 10.3343 10.3369High Regular Growth Option 13.2048 12.5727 Regular Daily Dividend Option 10.0155 10.0122 Regular Weekly Dividend Option 10.0516 10.0461 Institutional Growth Option 13.3268 12.6572 Institutional Daily Dividend Option 10.0158 10.0125 Institutional Weekly Dividend Option 10.0532 10.0477 Institutional Monthly Dividend Option 10.1917 10.1780 Institutional Plus Growth Option 13.4962 12.7630 Institutional Plus Daily Dividend Option 10.1289 10.1078 Institutional Plus Weekly Dividend Option 10.1844 10.1661 Institutional Plus Monthly Dividend Option 10.3865 10.3556Low Regular Growth Option 12.5727 12.1235 Regular Daily Dividend Option 9.9963 10.0122 Regular Weekly Dividend Option 10.0315 10.0345 Institutional Growth Option 12.6572 12.1852 Institutional Daily Dividend Option 9.9953 10.0125 Institutional Weekly Dividend Option 10.0330 10.0358 Institutional Monthly Dividend Option 10.1399 10.1415 Institutional Plus Growth Option 12.7669 12.2416 Institutional Plus Daily Dividend Option 10.1062 10.0506 Institutional Plus Weekly Dividend Option 10.1634 10.0385 Institutional Plus Monthly Dividend Option 10.3296 10.3330End Regular Growth Option 13.2048 12.5727 Regular Daily Dividend Option 10.0021 10.0122 Regular Weekly Dividend Option 10.0331 10.0331 Institutional Growth Option 13.3268 12.6572 Institutional Daily Dividend Option 10.0009 10.0125 Institutional Weekly Dividend Option 10.0342 10.0342 Institutional Monthly Dividend Option 10.1546 10.1446 Institutional Plus Growth Option N.A.! 12.7669 Institutional Plus Daily Dividend Option 10.1107 10.1094 Institutional Plus Weekly Dividend Option 10.1637 10.1637 Institutional Plus Monthly Dividend Option 10.3446 10.3343

152





PreviousYear ended

March 31, 2010



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%



7. Total Dividend per unit distributed during the year (planwise) Retail Regular Daily Dividend Option 0.4400 0.3222 Regular Weekly Dividend Option 0.4324 0.3306 Institutional Daily Dividend Option 0.4632 0.3441 Institutional Weekly Dividend Option 0.4545 0.3529 Institutional Monthly Dividend Option 0.4512 0.3516 Institutional Plus Daily Dividend Option 0.5148 0.3286 Institutional Plus Weekly Dividend Option 0.5184 0.2764 Institutional Plus Monthly Dividend Option 0.5187 0.3922 Corporate Regular Daily Dividend Option 0.4100 0.2998 Regular Weekly Dividend Option 0.4030 0.3077 Institutional Daily Dividend Option 0.4317 0.3203

153




PreviousYear ended

March 31, 2010

Institutional Weekly Dividend Option 0.4236 0.3284 Institutional Monthly Dividend Option 0.4205 0.3273 Institutional Plus Daily Dividend Option 0.4797 0.3059 Institutional Plus Weekly Dividend Option 0.4831 0.2573 Institutional Plus Monthly Dividend Option 0.4834 0.3650

8. Returns (%):a. Last One Year Scheme Regular Growth Option 5.0300 3.7411 Regular Daily Dividend Option 4.3900 3.2617 Regular Weekly Dividend Option 4.4000 3.2590 Institutional Growth Option 5.2900 4.0016 Institutional Daily Dividend Option 4.6200 3.4874 Institutional Weekly Dividend Option 4.6300 3.4853 Institutional Monthly Dividend Option 4.6500 3.4918 Institutional Plus Growth Option 5.2900 4.3951 Institutional Plus Daily Dividend Option 5.2300 3.9109 Institutional Plus Weekly Dividend Option 5.2300 3.9919 Institutional Plus Monthly Dividend Option – 3.8363

Benchmark CRISIL Composite Index ^^ 6.0942 3.9300b. Since Inception Scheme Regular Growth Option 6.4400 6.8513 Regular Daily Dividend Option 5.6200 5.9760 Regular Weekly Dividend Option 5.6000 5.9528 Institutional Growth Option 6.6600 7.0587 Institutional Daily Dividend Option 5.8100 6.1557 Institutional Weekly Dividend Option 5.8000 6.1458 Institutional Monthly Dividend Option 5.7600 6.0791 Institutional Plus Growth Option 6.6600 7.3264 Institutional Plus Daily Dividend Option 6.1500 6.4129 Institutional Plus Weekly Dividend Option 6.1500 6.4134 Institutional Plus Monthly Dividend Option – 6.5143 Benchmark CRISIL Composite Index ^^ 6.5962 6.7400


! No Units Outstnding as at March 31, 2011

^^ Composite Index of CRISIL Liquid Find Index (90%) and CRISIL Short Term Bond Fund Index (10%)


154




1 Investments: 1.1 It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the

benefi t of the scheme’s unitholders.

1.2 Open Positions of derivatives as of March 31, 2011 is NIL. Open Positions of derivatives as of March 31, 2010 is NIL.




by all schemes


by all schemes

2011 2010


Fixed deposits – 970,000,000 – 1,018,000,000



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


2011 2010


– Appreciation – – 118,650 0.0023%

– Depreciation 5,761,295 0.4122% 10 0.0000%


– Appreciation – – 2,182 0.0000%


1.7 The aggregate value of investment securities purchased and sold (including matured) during the fi nancial year 2010 - 2011 (excluding accretion of discount of Rs. 72,103,737) are Rs. 9,336,124,545 and Rs. 11,641,776,343 respectively being 274.89% and 342.78% 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 fi nancial year 2009 - 2010 are Rs. Nil and Rs. 3,945,886,455 respectively being 0.00% and 49.52% of the average daily net assets.

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.)


Fair Value (Rs.)


2011 2010

Debt Instruments 444,197,669 31.7822 3,272,062,567 63.8586


584,267,127 41.8041 – –

Total 1,028,464,796 73.5863 3,272,062,567 63.8586

155


2 Disclosure Under Regulation 25(8) of the Securities And Exchange Board of India (Mutual Funds) Regulations, 1996 as amended:

During the year 2010 - 2011, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 600.

During the year 2009 - 2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection / bank charges amounting to Rs. 62,633.

Details of amounts paid to associates in terms of Regulation 25 (8) are as follows : Commission paid to Sponsor / AMC and its associates / related parties / group companies

Name of Sponsor / AMC and its associates / related parties/group companies


Nature of Relation

Period Covered





Fund


Associate 2010-2011 126.18 8.66 1,900,431 41.66


Associate 2010-2011 0.00~ 0.00~ 3,488 0.08



Nature of Relation

Period Covered





Fund


Associate 2009-2010 632.82 23.69 6,055,879 49.19


Associate 2009-2010 26.40 0.99 26,101 0.21

~ 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




Description 2010 - 2011Opening Units Subscription Redemption Closing Units Face Value

Regular Growth 24,419,950.558 27,655,465.709 44,091,110.779 7,984,305.488 79,843,056


184,467,080.286 93,531,334.910 225,986,714.882 52,011,700.314 520,117,003


65,312,487.368 25,367,003.139 71,580,534.960 19,098,955.547 190,989,556


9,306,702.799 9,620,847.685 16,438,897.614 2,488,652.870 24,886,530


46,209,439.948 105,429,568.629 140,893,421.118 10,745,587.459 107,455,875


17,829,567.652 5,845,458.880 20,520,572.316 3,154,454.216 31,544,541


5,315,781.230 2,020,415.996 6,423,830.599 912,366.627 9,123,666


156





30,370,722.487 361,589,812.464 391,960,534.951 – –


54,569,000.612 558,170,808.662 582,371,478.835 30,368,330.439 303,683,305


48,977,965.510 140,790,603.624 181,653,641.169 8,114,927.965 81,149,280

Institutional Plus Monthly Dividend

6,210,629.419 0.000 5,313,240.871 897,388.548 8,973,884


Regular Growth 30,701,774.121 64,545,530.369 70,827,353.932 24,419,950.558 244,199,507


325,722,386.273 407,087,307.877 548,342,613.864 184,467,080.286 1,844,670,802


84,576,307.762 121,748,732.303 141,012,552.697 65,312,487.368 653,124,874


19,011,827.930 29,588,213.966 39,293,339.097 9,306,702.799 93,067,029


149,222,257.022 310,840,531.571 413,853,348.645 46,209,439.948 462,094,400


39,216,714.706 55,193,822.795 76,580,969.857 17,829,567.652 178,295,675


12,394,879.767 4,722,154.825 11,801,253.362 5,315,781.230 53,157,812


101,445,807.318 510,642,756.113 581,717,840.944 30,370,722.487 303,707,225


137,853,200.124 773,255,945.564 856,540,145.076 54,569,000.612 545,690,006


39,471,878.513 231,504,498.928 221,998,411.931 48,977,965.510 489,779,655

Institutional Plus Monthly Dividend

8,865,584.027 1,936,573.988 4,591,528.596 6,210,629.419 62,106,293

5 Prior year amounts have been re-grouped and reclassifi ed, wherever applicable, to confi rm to current year’s presentation.

6 No contingent liabilities for the years ended March 31, 2011 and March 31, 2010.7 Expenses other than Management Fees are Inclusive of Service Tax where applicable.8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards

specifi ed in the Ninth Schedule of The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 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, 2008.

HSBC Flexi Debt Fund




HSBC Flexi Debt FundAn open-ended Debt Scheme


158



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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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.




Sd/-



Auditors’ Report

159


Rs. in Lakhs

HSBC FLEXI DEBT FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 4,579.35 9,307.332 Reserves & Surplus2.1 Unit Premium Reserves (168.25) (58.18)2.2 Unrealised Appreciation Reserve 8.32 6.002.3 Other Reserves 1,003.28 992.293 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 90.30 53.62

TOTAL 5,513.00 10,301.06

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds 1,462.02 1,597.551.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – 9.891.3.5 Securitised Debt securities – –1.4 Government Securities 109.94 –1.5 Treasury Bills – –1.6 Commercial Paper 492.16 –1.7 Certifi cate of Deposits 2,841.51 8,257.151.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 89.01 –3 Other Current Assets3.1 Cash & Bank Balance 4.23 6.463.2 CBLO / Reverse Repo Lending 453.04 419.913.3 Others 61.09 10.104 Deferred Revenue Expenditure


TOTAL 5,513.00 10,301.06



160



Rs. in Lakhs

HSBC FLEXI DEBT FUNDCurrent Year

endedMarch 31, 2011

Previous Year ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 578.99 859.561.3 Realised Gain / (Loss) on Foreign Exchange Transactions – –1.4 Realised Gains / (Losses) on Interscheme sale of investments1.5 Realised Gains / (Losses) on External sale / redemption of

investments 30.22 848.631.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.31

(A) 609.21 1,708.50

2 EXPENSES2.1 Management fees 84.50 117.662.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 4.63 8.562.4 Custodian fees 1.01 4.272.5 Trusteeship fees 0.16 0.252.6 Commission to Agents* – –2.7 Marketing & Distribution expenses 53.39 122.762.8 Audit fees 0.20 0.502.9 Other operating expenses 0.51 0.592.10 Less: Expenses to be Reimbursed by the

Investment Manager(14.23)

(B) 130.17 254.59

3 NET REALISED GAINS / (LOSSES)FOR THE YEAR (A - B = C) 479.04 1,453.91

4 Change in Unrealised Depreciation invalue of investments (D) 0.10 (391.46)



7 NET SURPLUS / (DEFICIT) FOR THE YEAR (E + F = G) 481.26 1,709.87

7.1 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 168.92 13.657.5 Transfer from Unit Premium Reserve – –

8 TOTAL 449.48 982.419 Dividend Appropriation9.1 Income Distributed during the year 234.44 546.209.2 Tax on income distributed during the year 35.15 89.41

10 Retained Surplus / (Defi cit) carried forward toBalance Sheet 179.89 346.80



161



HSBC FLEXI DEBT FUNDCurrent


PreviousYear ended

March 31, 2010

1. NAV per unit (Rs.):Open Regular Growth Option 12.4521 11.6483 Regular Fortnightly Dividend Option 10.7340 10.3662 Regular Monthly Dividend Option 10.3129 10.2553 Regular Quarterly Dividend Option 11.1163 10.7885 Regular Half Yearly Dividend Option 10.2541 9.8005 Institutional Growth Option 12.5608 11.7088 Institutional Fortnightly Dividend Option 10.0592 9.7535 Institutional Monthly Dividend Option 10.5441 10.5214 Institutional Quarterly Dividend Option 10.9411 10.6734 Institutional Half Yearly Dividend Option – –High Regular Growth Option 13.1704 12.4521 Regular Fortnightly Dividend Option 10.8123 10.9247 Regular Monthly Dividend Option 10.4201 10.8078 Regular Quarterly Dividend Option 11.3030 11.3698 Regular Half Yearly Dividend Option 10.6654 10.3551 Institutional Growth Option 13.3320 12.5608 Institutional Fortnightly Dividend Option 10.1339 10.2659 Institutional Monthly Dividend Option 10.6567 11.0906 Institutional Quarterly Dividend Option 11.1322 11.2508 Institutional Half Yearly Dividend Option 10.2862 –Low Regular Growth Option 12.4693 11.7127 Regular Fortnightly Dividend Option 10.6910 10.4236 Regular Monthly Dividend Option 10.2617 10.3033 Regular Quarterly Dividend Option 11.0575 10.8482 Regular Half Yearly Dividend Option 10.2683 9.8548 Institutional Growth Option 12.5787 11.7739 Institutional Fortnightly Dividend Option 10.0199 9.8076 Institutional Monthly Dividend Option 10.4924 10.5177 Institutional Quarterly Dividend Option 10.9039 10.7327 Institutional Half Yearly Dividend Option 10.0071 –End Regular Growth Option 13.1704 12.4521 Regular Fortnightly Dividend Option 10.7327 10.7340 Regular Monthly Dividend Option 10.3414 10.3129 Regular Quarterly Dividend Option 11.1421 11.1163 Regular Half Yearly Dividend Option 10.6003 10.2541 Institutional Growth Option 13.3320 12.5608 Institutional Fortnightly Dividend Option 10.0579 10.0592 Institutional Monthly Dividend Option 10.5730 10.5441 Institutional Quarterly Dividend Option 10.9965 10.9411 Institutional Half Yearly Dividend Option 10.2816 –

162





PreviousYear ended

March 31, 2010



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%



7. Total Dividend per unit distributed during theyear / period (planwise)Retail Regular Fortnightly Dividend Option 0.5306 0.3027 Regular Monthly Dividend Option 0.4840 0.5592 Regular Quarterly Dividend Option 0.5270 0.3591 Regular Half Yearly Dividend Option 0.2108 0.1927 Institutional Fortnightly Dividend Option 0.5283 0.3482 Institutional Monthly Dividend Option 0.5275 0.6357 Institutional Quarterly Dividend Option 0.5270 0.4380 Institutional Half Yearly Dividend Option 0.0527 –Corporate Regular Fortnightly Dividend Option 0.4944 0.2817 Regular Monthly Dividend Option 0.4509 0.5205 Regular Quarterly Dividend Option 0.4912 0.3343

163




PreviousYear ended

March 31, 2010

Regular Half Yearly Dividend Option 0.1965 0.1794 Institutional Fortnightly Dividend Option 0.4922 0.3241 Institutional Monthly Dividend Option 0.4915 0.5917 Institutional Quarterly Dividend Option 0.4912 0.4076 Institutional Half Yearly Dividend Option 0.0491 –

8. Returns (%):a. Last One Year Scheme Regular Growth Option 5.7700 6.9006 Regular Fortnightly Dividend Option 5.0500 6.4777 Regular Monthly Dividend Option 5.0900 6.0895 Regular Quarterly Dividend Option 5.0800 6.4166 Regular Half Yearly Dividend Option 5.4800 6.6180 Institutional Growth Option 6.1400 7.2766 Institutional Fortnightly Dividend Option 5.2500 6.7516 Institutional Monthly Dividend Option 5.4100 6.3702 Institutional Quarterly Dividend Option 5.4400 6.6757 Institutional Half Yearly Dividend Option – – Benchmark CRISIL Composite Bond Fund Index 5.0617 5.3800

b. Since Inception Scheme Regular Growth Option 8.2400 9.2478 Regular Fortnightly Dividend Option 7.3400 8.2764 Regular Monthly Dividend Option 7.3100 8.2167 Regular Quarterly Dividend Option 7.6000 8.9021 Regular Half Yearly Dividend Option 4.3400 3.4705 Institutional growth Option 8.6200 9.6314 Institutional Fortnightly Dividend Option 7.4400 8.3344 Institutional Monthly Dividend Option 7.7300 8.6806 Institutional Quarterly Dividend Option 8.4400 10.4923 Institutional Half Yearly Dividend Option – Benchmark CRISIL Composite Bond Fund Index 6.0873 6.5000



164



HSBC FLEXI DEBT FUND

1 Investments:


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.




by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000



1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial years and percentages to net assets is as under :



2011 2010


– Appreciation 483,692 0.0892% 592,346 0.0578%

– Depreciation 128,059 0.0236% – –

Non Convertible Debentures and Bonds Privately Placed

– Appreciation – – 7,612 0.0007%


Certifi cate of Deposit

– Appreciation 826,721 0.1525% – –

– Depreciation 350,546 0.0646% – –



– Depreciation 9,881 0.0018% – –

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 2010 - 2011 is Rs.16,110,602,047 and Rs. 16,632,334,773 respectively being 1906.56% and 1968.30% 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 fi nancial year 2009-2010 is Rs. 19,227,187,601 and Rs. 21,287,109,534 respectively being 1185.45% and 1312.46% of the average daily net assets.

165



Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under:

Security Category

Fair Value (Rs.)


Fair Value (Rs.)


2011 2010

Debt Instruments 146,202,108 26.9612% 160,743,327 15.6862%Money market Instruments

333,366,577 61.4763% 825,716,153 80.5778%

Total 479,568,685 88.4375% 986,459,480 96.2639%

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 2010 - 2011, 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.






Nature of Relation

Period Covered





Fund


Associate 2010-2011 10.09 36.51 3,767,457 65.16



Nature of Relation

Period Covered





Fund


Associate 2009-2010 20.83 43.85 7,355,753 54.76


Associate 2009-2010 0.30 0.63 293,137 2.18



3 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets):


2011 2010

HSBC Flexi Debt Fund – – 2 57.03%


166



4 Unit Capital movement during the year ended March 31, 2011 and March 31, 2010:



Regular Growth 4,826,443.715 1,393,607.578 5,198,847.663 1,021,203.630 10,212,036


3,124,675.360 231,101.295 1,796,712.658 1,559,063.997 15,590,639

Regular Fortnightly Dividend

716,902.735 485,500.659 1,096,972.841 105,430.553 1,054,308

Regular Quarterly Dividend

3,198,586.047 239,860.492 2,386,409.348 1,052,037.191 10,520,373

Regular Half Yearly Dividend

1,341,015.203 – 1,340,048.851 966.352 9,663


22,483,472.275 12,178,125.003 13,963,305.045 20,698,292.233 206,982,924


11,761,922.583 2,247,598.485 12,859,025.404 1,150,495.664 11,504,957


34,181,810.440 1,082,194.357 28,312,554.791 6,951,450.006 69,514,500

Institutional Quarterly Dividend

11,438,436.190 635.302 3,710,976.583 7,728,094.909 77,280,949

Institutional Half Yearly Dividend

– 5,526,418.415 – 5,526,418.415 55,264,184



Regular Growth 11,320,074.613 5,141,823.875 11,635,454.773 4,826,443.715 48,264,437


22,377,892.041 2,013,779.622 21,266,996.303 3,124,675.360 31,246,753

Regular Fortnightly Dividend

2,851,879.905 503,018.935 2,637,996.105 716,902.735 7,169,028

Regular Quarterly Dividend

6,647,539.396 1,500,941.400 4,949,894.749 3,198,586.047 31,985,860

Regular Half Yearly Dividend

197,382.137 1,341,015.203 197,382.137 1,341,015.203 13,410,152


77,479,560.708 9,205,154.887 64,201,243.320 22,483,472.275 224,834,723


61,694,176.890 15,784,931.042 65,717,185.349 11,761,922.583 117,619,226


99,822,416.031 2,048,808.411 67,689,414.002 34,181,810.440 341,818,104

Institutional Quarterly Dividend

16,293,401.195 4,653,040.877 9,508,005.882 11,438,436.190 114,384,362

Institutional Half Yearly Dividend

– – – – –

167





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, fl oating rate securities and money market securities with effect from August 01, 2010. 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, fl oating 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 refl ect the valuations fairly as per the new regulatory norms by July 31, 2010. 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, 2010.



HSBC Cash Fund




HSBC Cash FundAn open-ended Liquid Scheme


169

HSBC Cash Fund


HSBC MUTUAL FUND

1. We have audited the Balance Sheet of HSBC Mutual Fund - HSBC Cash 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 fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.




(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 Cash Fund as at March 31, 2011, its net surplus and its cash fl ows for the year ended on that date.




Sd/-



Auditors’ Report

170

HSBC Cash Fund

Rs. in Lakhs

HSBC CASH FUNDAs at

March 31, 2011As at

March 31, 2010

LIABILITIES1 Unit Capital 25,988.55 45,365.602 Reserves & Surplus2.1 Unit Premium Reserves 727.20 50.732.2 Unrealised Appreciation Reserve – –2.3 Other Reserves 366.49 1,643.953 Loans & Borrowings – –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits – –4.2 Other Current Liabilities & Provisions 660.99 1,324.55

TOTAL 27,743.23 48,384.83

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares – –1.1.2 Preference Shares – –1.1.3 Equity Linked Debentures – –1.1.4 Other Debentures & Bonds – –1.1.5 Securitised Debt securities – –1.2 Securities Awaited Listing:1.2.1 Equity Shares – –1.2.2 Preference Shares – –1.2.3 Equity Linked Debentures – –1.2.4 Other Debentures & Bonds – –1.2.5 Securitised Debt securities – –1.3 Unlisted Securities1.3.1 Equity Shares – –1.3.2 Preference Shares – –1.3.3 Equity Linked Debentures – –1.3.4 Other Debentures & Bonds – 320.261.3.5 Securitised Debt securities – –1.4 Government Securities – –1.5 Treasury Bills – –1.6 Commercial Paper 4,422.51 4,995.271.7 Certifi cate of Deposits 14,718.57 22,656.561.8 Bill Rediscounting – –1.9 Units of Domestic Mutual Fund – –1.10 Foreign Securities – –


2 Deposits 2,350.17 2,061.883 Other Current Assets3.1 Cash & Bank Balance 144.99 127.103.2 CBLO / Reverse Repo Lending 6,073.67 18,203.023.3 Others 33.32 20.744 Deferred Revenue Expenditure


TOTAL 27,743.23 48,384.83



171

HSBC Cash Fund


Rs. in Lakhs

HSBC CASH FUNDCurrent


PreviousYear ended

March 31, 2010

1 INCOME1.1 Dividend – –1.2 Interest 2,381.79 1,715.401.3 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 0.67 (5.07)1.6 Realised Gains / (Losses) on Derivative Transactions – –1.7 Other Income – 0.03

(A) 2,382.46 1,710.36

2 EXPENSES2.1 Management fees 136.07 216.062.2 Service tax on Management fees – –2.3 Transfer agents fees and expenses 18.96 25.742.4 Custodian fees 3.14 2.392.5 Trusteeship fees 0.26 0.472.6 Commission to Agents * – –2.7 Marketing & Distribution expenses 40.22 53.492.8 Audit fees 0.39 1.002.9 Other operating expenses 3.83 3.162.10 Expenses to be Reimbursed by the Investment Manager – –

(B) 202.87 302.313 NET REALISED GAINS / (LOSSES) FOR

THE YEAR (A - B = C) 2,179.59 1,408.054 Change in Unrealised Depreciation in value of

investments (D) – –


of investments (F) – –7 NET SURPLUS / (DEFICIT)

FOR THE YEAR (E + F = G) 2,179.59 1,408.057.1 Add: Balance transfer from Unrealised

Appreciation Reserve – –7.2 Less: Balance transfer to Unrealised

Appreciation Reserve – –7.3 Add / (Less): Equalisation (1,628.92) (1,720.49)7.4 Transfer from Reserve Fund 93.75 349.197.5 Transfer from Unit Premium Reserve – –

8 TOTAL 644.42 36.759 Dividend appropriation9.1 Income Distributed during the year 1,431.20 943.359.2 Tax on income distributed during the year 396.93 267.20

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet (1,183.71) (1,173.80)



172

HSBC Cash Fund




PreviousYear ended

March 31, 2010

1 NAV per unit (Rs.):Open Regular Growth Option 14.8892 14.5744 Regular Daily Dividend Option 10.1930 10.1930 Regular Weekly Dividend Option 10.0169 10.0227 Institutional Growth Option 15.0262 14.6717 Institutional Daily Dividend Option 10.4401 10.4401 Institutional Weekly Dividend Option 10.4635 10.4699 Institutional Monthly Dividend Option 10.5267 10.5277 Institutional Plus Growth Option 14.1546 13.7655 Institutional Plus Daily Dividend Option 10.0056 10.0056 Institutional Plus Weekly Dividend Option 10.2343 10.2411 Institutional Plus Monthly Dividend Option 10.0819 10.0829High Regular Growth Option 15.6956 14.8892 Regular Daily Dividend Option 10.1930 10.1930 Regular Weekly Dividend Option 10.0315 10.0246 Institutional Growth Option 15.8794 15.0262 Institutional Daily Dividend Option 10.4401 10.4401 Institutional Weekly Dividend Option 10.4793 10.4720 Institutional Monthly Dividend Option 10.5832 10.5516 Institutional Plus Growth Option 15.0184 14.1546 Institutional Plus Daily Dividend Option 10.0056 10.0056 Institutional Plus Weekly Dividend Option 10.2505 10.2434 Institutional Plus Monthly Dividend Option 10.1394 10.1092Low Regular Growth Option 14.8892 14.5761 Regular Daily Dividend Option 10.1930 10.1930 Regular Weekly Dividend Option 10.0169 10.0173 Institutional Growth Option 15.0262 14.6736 Institutional Daily Dividend Option 10.4401 10.4401 Institutional Weekly Dividend Option 10.4635 10.4640 Institutional Monthly Dividend Option 10.5213 10.5219 Institutional Plus Growth Option 14.1546 13.7674 Institutional Plus Daily Dividend Option 10.0056 10.0056 Institutional Plus Weekly Dividend Option 10.2343 10.2350 Institutional Plus Monthly Dividend Option 10.0762 10.0770End Regular Growth Option 15.6956 14.8892 Regular Daily Dividend Option 10.1930 10.1930 Regular Weekly Dividend Option 10.0169 10.0169 Institutional Growth Option 15.8794 15.0262 Institutional Daily Dividend Option 10.4401 10.4401 Institutional Weekly Dividend Option 10.4777 10.4635 Institutional Monthly Dividend Option 10.5355 10.5267 Institutional Plus Growth Option 15.0184 14.1546

173

HSBC Cash Fund




PreviousYear ended

March 31, 2010

Institutional Plus Daily Dividend Option 10.0056 10.0056 Institutional Plus Weekly Dividend Option 10.2489 10.2343 Institutional Plus Monthly Dividend Option 10.0905 10.0819



4. Expense Ratio:a. Total Expense as % of AAuM (planwise) Regular Growth Option 1.00% 1.00% Regular Daily Dividend Option 1.00% 1.00% Regular Weekly Dividend Option 1.00% 1.00% Institutional Growth Option 0.75% 0.75% Institutional Daily Dividend Option 0.75% 0.75% Institutional Weekly Dividend Option 0.75% 0.75% Institutional Monthly Dividend Option 0.75% 0.75% Institutional Plus Growth Option 0.35% 0.35% Institutional Plus Daily Dividend Option 0.35% 0.35% Institutional Plus Weekly Dividend Option 0.35% 0.35% Institutional Plus Monthly Dividend Option 0.35% 0.35%

b. Management Fee as % of AAuM (planwise) Regular Growth Option 0.36% 0.40% Regular Daily Dividend Option 0.36% 0.40% Regular Weekly Dividend Option 0.36% 0.40% Institutional Growth Option 0.36% 0.40% Institutional Daily Dividend Option 0.36% 0.40% Institutional Weekly Dividend Option 0.36% 0.40% Institutional Monthly Dividend Option 0.36% 0.40% Institutional Plus Growth Option 0.36% 0.40% Institutional Plus Daily Dividend Option 0.36% 0.40% Institutional Plus Weekly Dividend Option 0.36% 0.40% Institutional Plus Monthly Dividend Option 0.36% 0.40%



7. Total Dividend per unit distributed during the year (planwise)Retail Regular Daily Dividend Option 0.4209 0.1698 Regular Weekly Dividend Option 0.4138 0.1714 Institutional Daily Dividend Option 0.4516 0.1942 Institutional Weekly Dividend Option 0.4417 0.1997 Institutional Monthly Dividend Option 0.4492 0.1967 Institutional Plus Daily Dividend Option 0.4641 0.2173 Institutional Plus Weekly Dividend Option 0.4635 0.2277 Institutional Plus Monthly Dividend Option 0.4618 0.2199

174

HSBC Cash Fund




PreviousYear ended

March 31, 2010

Corporate Regular Daily Dividend Option 0.4209 0.1698 Regular Weekly Dividend Option 0.4138 0.1714 Institutional Daily Dividend Option 0.4516 0.1942 Institutional Weekly Dividend Option 0.4417 0.1997 Institutional Monthly Dividend Option 0.4492 0.1967 Institutional Plus Daily Dividend Option 0.4641 0.2173 Institutional Plus Weekly Dividend Option 0.4635 0.2277 Institutional Plus Monthly Dividend Option 0.4618 0.2199

8. Returns (%):a. Last One Year Scheme Regular Growth Option 5.4200 2.1600 Regular Daily Dividend Option 4.2200 1.6748 Regular Weekly Dividend Option 4.2200 1.6666 Institutional Growth Option 5.6800 2.4162 Institutional Daily Dividend Option 4.4200 1.8726 Institutional Weekly Dividend Option 4.4500 1.8639 Institutional Monthly Dividend Option 4.4400 1.8763 Institutional Plus Growth Option 6.1000 2.8266 Institutional Plus Daily Dividend Option 4.7500 2.1897 Institutional Plus Weekly Dividend Option 4.7800 2.1811 Institutional Plus Monthly Dividend Option 4.7700 2.1941 Benchmark CRISIL Liquid Fund Index 6.2075 3.6800

b. Since Inception Scheme Regular Growth Option 5.5600 5.5837 Regular Daily Dividend Option 4.5800 4.6354 Regular Weekly Dividend Option 4.6900 4.7894 Institutional Growth Option 5.7200 5.7269 Institutional Daily Dividend Option 4.7000 4.7439 Institutional Weekly Dividend Option 4.7200 4.7669 Institutional Monthly Dividend Option 4.6900 4.7226 Institutional Plus Growth Option 6.1300 6.1378 Institutional Plus Daily Dividend Option 5.0100 5.0510 Institutional Plus Weekly Dividend Option 5.0900 5.1406 Institutional Plus Monthly Dividend Option 4.9200 4.9489 Benchnmark CRISIL Liquid Fund Index 5.7001 5.6300

1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net realised Gains / (Losses) for the year4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

175

HSBC Cash Fund


HSBC CASH FUND

1 Investments:

1.1 It is confi rmed that investments of the Schemes are registered in the name of the Trustees for the benefi t of the scheme’s unitholders.

1.2 Open Positions of derivatives as of March 31, 2011 is NIL. Open Positions of derivatives as of March 31, 2010 end is NIL.




by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 Open position of Securities Borrowed and / or Lent by the scheme as of fi nancial 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 NIL.

1.7 The aggregate value of investment securities purchased (excluding accretion of discount of Rs.153,913,398) and sold (including matured) during the fi nancial year 2010 - 2011 are Rs. 10,749,615,862 and Rs. 11,786,697,520 respectively being 285.82% and 313.39% of the average daily net assets.

The aggregate value of investment securities purchased (excluding accretion of discount of Rs. 60,417,423) and sold (including matured) during the fi nancial year 2009 - 2010 are Rs. 15,263,572,550 and Rs. 13,026,048,200 respectively being 279.08% and 238.17% of the average daily net assets.


Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets is as under:

Security Category

Amount(Rs.)


Amount(Rs.)


2011 2010

Debt Instruments – – 32,026,000.00 0.68%


1,914,107,953.84 70.68% 2,765,182,927.91 58.76%

Total 1,914,107,953.84 70.68% 2,797,208,927.91 59.44%

2. Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended:

During the year 2010 - 2011, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges amounting to Rs. 92,768.

During the year 2009 - 2010, The Hongkong & Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid collection/bank charges amounting to Rs. 99,605.

176

HSBC Cash Fund




Nature of Association

/ Nature of Relation

Period Covered

Business Given[Rs. in Crores]

% of Total Business




Fund


Associate 2010-2011 112.59 0.44 1,539,396 52.13


Associate 2010-2011 925.37 3.61 238,141 8.07

Name of Sponsor /AMC and its associates / related parties / group companies


Relation

Period Covered

Business Given[Rs. in Crores]

% of Total Business




Fund


Associate 2009-2010 176.35 0.32 2,933,023 60.11


Associate 2009-2010 549.21 0.99 157,182 3.22


3 Large Holdings in the Scheme (i.e. in excess of 25% of the net assets):


2011 2010

HSBC Cash Fund – – 1 43.56%




Regular Growth Option 12,653,458.458 25,600,473.066 27,992,932.283 10,260,999.241 102,609,994

Regular Daily Dividend Option 77,098,956.869 75,043,541.112 94,317,347.657 57,825,150.324 578,251,503

Regular Weekly Dividend Option 14,572,031.930 10,324,539.649 17,724,843.629 7,171,727.950 71,717,278

Institutional Growth Option 936,912.686 5,028,564.869 5,648,705.266 316,772.289 3,167,723

Institutional Daily Dividend Option 4,778,989.200 169,290,243.216 130,739,668.458 43,329,563.958 433,295,638

Institutional Weekly Dividend Option 2,928,890.719 2,952,142.838 5,879,649.924 1,383.633 13,836

Institutional Monthly Dividend Option 554,781.271 – – 554,781.271 5,547,812


177

HSBC Cash Fund



Institutional Plus Growth Option 18,546,884.116 1,784,190,092.699 1,799,400,707.566 3,336,269.249 33,362,692

Institutional Plus Daily Dividend Option

296,248,741.771 22,565,881,717.451 22,735,603,884.190 126,526,575.032 1,265,265,750

Institutional Plus Weekly Dividend Option

21,167,792.999 130,628,640.430 151,740,802.928 55,630.501 556,309


4,168,600.927 12,975,009.924 6,636,940.225 10,506,670.626 105,066,707



Regular Growth Option 19,452,526.536 40,702,731.451 47,501,799.529 12,653,458.458 126,534,586

Regular Daily Dividend Option 117,952,996.359 111,772,395.587 152,626,435.077 77,098,956.869 770,989,569

Regular Weekly Dividend Option 17,184,208.603 32,470,981.303 35,083,157.976 14,572,031.930 145,720,318

Institutional Growth Option 1,626,747.666 13,927,700.773 14,617,535.753 936,912.686 9,369,127

Institutional Daily Dividend Option 52,779,357.682 210,724,456.279 258,724,824.761 4,778,989.200 47,789,891

Institutional Weekly Dividend Option 10,930,233.795 4,593,062.717 12,594,405.793 2,928,890.719 29,288,907

Institutional Monthly Dividend Option 554,781.289 545,778.993 545,779.011 554,781.271 5,547,812

Institutional Plus Growth Option 44,991,905.273 2,543,491,205.051 2,569,936,226.208 18,546,884.116 185,468,841

Institutional Plus Daily Dividend Option

162,235,389.474 50,830,039,645.693 50,696,026,293.396 296,248,741.771 2,962,487,418

Institutional Plus Weekly Dividend Option

26,337,844.437 365,491,499.821 370,661,551.259 21,167,792.999 211,677,932


6,043,642.284 9,782,490.220 11,657,531.577 4,168,600.927 41,686,009






HSBC FTS




HSBC Fixed Term Series 79A Close-ended Income Scheme / Plan


179

HSBC FTS


HSBC MUTUAL FUND

1. We have audited the Balance Sheet of HSBC Mutual Fund - Fixed Term Series 79 (The “Scheme”) as at March 31, 2011, the related Revenue Account for the period March 22, 2011 to March 31, 2011 and the Cash Flow Statement for the period March 22, 2011 to March 31, 2011, which we have signed under reference to this report. These fi nancial statements are the responsibility of the Board of Trustees of HSBC Mutual Fund and the Management of HSBC Asset Management (India) Private Limited (the “Management”). Our responsibility is to express an opinion on these fi nancial statements based on our audit.



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 the amendments thereto, as applicable, and also give respectively a true and fair view of the state of affairs of HSBC Mutual Fund - Fixed Term Series 79 as at March 31, 2011, its net surplus and its cash fl ows for the period March 22, 2011 to March 31, 2011.

(ii) The Balance Sheet as at March 31, 2011, and the Revenue Account for the period March 22, 2011 to March 31, 2011, together with the notes thereon have been prepared in all material respects in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto as applicable.

(iii) The method used to value 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.


Sd/-



Auditors’ Report

180

HSBC FTS

Rs. in Lakhs

HSBC FIXED TERM SERIES 79#As at

March 31, 2011

LIABILITIES1 Unit Capital 51,984.722 Reserves & Surplus2.1 Unit Premium Reserves –2.2 Unrealised Appreciation Reserve 335.062.3 Other Reserves 83.993 Loans & Borrowings –4 Current Liabilities & Provisions4.1 Provision for doubtful Income / Deposits –4.2 Other Current Liabilities & Provisions 3.77

TOTAL 52,407.54

ASSETS1 Investments1.1. Listed Securities:1.1.1 Equity Shares –1.1.2 Preference Shares –1.1.3 Equity Linked Debentures –1.1.4 Other Debentures & Bonds –1.1.5 Securitised Debt securities –1.2 Securities Awaited Listing:1.2.1 Equity Shares –1.2.2 Preference Shares –1.2.3 Equity Linked Debentures –1.2.4 Other Debentures & Bonds –1.2.5 Securitised Debt securities –1.3 Unlisted Securities1.3.1 Equity Shares –1.3.2 Preference Shares –1.3.3 Equity Linked Debentures –1.3.4 Other Debentures & Bonds –1.3.5 Securitised Debt securities –1.4 Government Securities –1.5 Treasury Bills –1.6 Commercial Paper –1.7 Certifi cate of Deposits 52,302.191.8 Bill Rediscounting –1.9 Units of Domestic Mutual Fund –1.10 Foreign Securities –

Total Investments 52,302.19

2 Deposits –3 Other Current Assets3.1 Cash & Bank Balance 7.393.2 CBLO / Reverse Repo Lending 97.753.3 Others 0.214 Deferred Revenue Expenditure

(to the extent not written off)–

TOTAL 52,407.54

Notes to Accounts - Annexure I # Scheme / Plan launched during the current fi nancial year


181

HSBC FTS

Abridged Revenue Account for the period Ended March 31, 2011

Rs. in Lakhs

HSBC FIXED TERM SERIES 79#

Current Period endedMarch 31, 2011

1 INCOME1.1 Dividend –

1.2 Interest 85.64

1.3 Realised Gain / (Loss) on Foreign Exchange Transactions –

1.4 Realised Gains / (Losses) on Interscheme sale of investments –

1.5 Realised Gains / (Losses) on External sale / redemption of investments (0.16)

1.6 Realised Gains / (Losses) on Derivative Transactions –

1.7 Other Income –

(A) 85.48

2 EXPENSES2.1 Management fees 1.10

2.2 Service tax on Management fees –

2.3 Transfer agents fees and expenses 0.22

2.4 Custodian fees 0.06

2.5 Trusteeship fees –

2.6 Commission to Agents –

2.7 Marketing & Distribution expenses –

2.8 Audit fees 0.20

2.9 Other operating expenses 0.10

2.10 Expenses to be Reimbursed by the Investment Manager (0.19)

(B) 1.49

3 NET REALISED GAINS / (LOSSES) FOR THE PERIOD (A - B = C) 83.99

4 Change in Unrealised Depreciation in value of investments (D) –

5 NET GAINS / (LOSSES) FOR THE PERIOD [E = (C - D)] 83.99

6 Change in unrealised appreciation in the value of investments (F) 335.06

7 NET SURPLUS / (DEFICIT) FOR THE PERIOD (E + F = G) 419.05

7.1 Add: Balance transfer from Unrealised Appreciation Reserve –

7.2 Less: Balance transfer to Unrealised Appreciation Reserve 335.06

7.3 Add / (Less): Equalisation –

7.4 Transfer from Reserve Fund –

7.5 Transfer from Unit Premium Reserve –

8 TOTAL 83.99

9 Dividend Appropriation

9.1 Income Distributed during the year / period –

9.2 Tax on income distributed during the year / period –

10 Retained Surplus / (Defi cit) carried forward to Balance Sheet 83.99


# Scheme / Plan launched during the current fi nancial year

182

HSBC FTS

Key Statistics for the period ended March 31, 2011


Current Period ended March 31, 2011

1. NAV per unit (Rs.):Open Regular Growth Option – Regular Dividend Option –High Regular Growth Option 10.0806 Regular Dividend Option 10.0806Low Regular Growth Option 10.0000 Regular Dividend Option 10.0000End Regular Growth Option 10.0806 Regular Dividend Option 10.0806

2. Closing Assets Under Management (Rs. in Lakhs) End 52,404 Average (AAuM)1 52,114

3. Gross income as % of AAuM2 * 8.55%4. Expense Ratio:

a. Total Expense as % of AAuM (planwise) * Regular Growth Option 0.15% Regular Dividend Option 0.15%b. Management Fee as % of AAuM (planwise) * Regular Growth Option 0.11% Regular Dividend Option 0.11%

5. Net Income as a percentage of AAuM3 * 8.40%6. Portfolio turnover ratio4 –7. Total Dividend per unit distributed during the year (planwise)

Retail Regular Dividend Option – Corporate Regular Dividend Option –

8. Returns (%):a. Last One Year Scheme Regular Growth Option N.A Regular Dividend Option N.A Benchmark CRISIL Short-Term Bond Fund Index N.Ab. Since Inception Scheme Regular Growth Option 0.81% Regular Dividend Option 0.81% Benchnmark CRISIL Short-Term Bond Fund Index 0.23%

# Scheme / Plan launched during the current fi nancial year* Indicates annualized value1 AAuM = Average daily net assets2 Gross income = amount against (A) in the Revenue Account i.e. Income.3 Net income = amount against (C) in the Revenue Account i.e. Net Realised Gains / (Losses) for the year4 Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year.

183

HSBC FTS

Notes to Accounts - Annexure I To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2011


1 Investments:


1.2 Open Positions of derivatives as of the year ended March 31, 2011 is NIL.

1.3 There are no investments in Associates and Group Companies for the year ended March 31, 2011.

(Rupees)



by all schemes


by all schemes

2011 2010


Fixed deposits

– 970,000,000 – 1,018,000,000

1.4 Open positions of Securities Borrowed and / or Lent by the scheme as of the year ended March 31, 2011 is NIL.

1.5 NPAs for the year ended March 31, 2011 is NIL.

1.6 Aggregate Unrealised Gain / Loss as at the end of the Financial year ended 2010-2011 and their percentages to net assets are as under:


2011

Certifi cate of Deposits

– Appreciation 33,506,196.00 0.64%

– Depreciation – –

1.7 The aggregate value of investments securities purchased and sold (excluding accretion of discount of Rs. 5,554,108) during the fi nancial year 2010-2011 is Rs. 5,691,174,820 and 500,000,000 respectively being 109.21% and 9.59% of the average daily net assets.

1.8 Non-Traded securities in the portfolio of the scheme as at the year ended March 31, 2011 is NIL.

2 Disclosure Under Regulation 25(8) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended for the year ended March 31, 2011 is as under :

Commission paid to Sponsor / AMC and its associates / related parties / group companies:



Relation

Period Covered



Commission paid

[Rs.] *


Fund


Associate 2010-2011 185.95 35.77 – –

* Borne by HSBC Asset Management (India) Private Limited.

During the year 2010-11, The Hong Kong and Shanghai Banking Corporation Limited, an associate entity of HSBC Asset Management (India) Private Limited was paid Rs. Nil collection / bank charges is Nil.

184

HSBC FTS


3 None of the Investors held more than 25% of the total net assets of the scheme at the year ended March 31, 2011:

4 Unit Capital movement during the years ended March 31, 2011:


Opening Units

Subscription Redemption Closing Units Face Value


– 508,376,134.932 – 508,376,134.932 5,083,761,349

Regular Dividend Option

– 11,471,069.991 – 11,471,069.991 114,710,699.91

5 As these are the fi rst fi nancial statements of the scheme since the date of launch, there are no prior period comparatives.

6 No contingent liabilities for the year ended March 31, 2011.


8 The Annual Accounts of the Schemes prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has been approved by the Board of Directors of HSBC Asset Management (India) Private Limited and The Board of Trustees of HSBC Mutual Fund at their meeting held on July 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, 2008.

# Scheme /Plan launched during the current fi nancial year

Notes to Accounts - Annexure I (Contd...)To the Abridged Balance Sheet and Revenue Account for the period ended March 31, 2011

185

INTRODUCTIONThe purpose of this document is to state the voting policy and procedures of HSBC Asset Management (India) Private Limited (“AMIN”), in connection with various company proposals on behalf of all the schemes of HSBC Mutual Fund (“the Fund”).

The power to vote on proposals presented to shareholders through the proxy solicitation process is considered by AMIN to be important, recognizing that certain material proposals, if implemented, may have a substantial impact on the market valuation of portfolio stocks. Further, we believe that high standards of corporate governance help companies to deliver sustainable returns to the shareholders.

PROXY VOTING POLICIESA. Corporate governance matters including changes in the state of incorporation, merger and

other corporate restructuring and anti takeover provisions For all such material proposals, a careful review is undertaken by AMIN’s Investment team wherein the

fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Based on the review, AMIN exercises a vote either in favour or against the management’s recommendation.

B. Changes to the capital structure, including preferred stock issuances Such proposals relate to the approval of change in the capital structure of the company i.e. approval of

increase or decrease in the authorized share capital of the company. Shareholders are the principal providers of the capital which companies need to grow and fl ourish. Companies should focus on the interests of existing shareholders as they contemplate changes to their capital structure. Existing shareholders should have a pre-emptive right to participate in signifi cant capital increases. AMIN will generally support the proposals where it believes that such proposal will enhance the rights of the common shareholders or will oppose such proposals where it believes that such proposal will adversely affect the rights of the common shareholders.

C. Stock option plans and other management compensation plans Proposals relating to the stock option plans, performance share plans or other compensation plans are

evaluated on case by case basis but AMIN generally votes against such proposals if the plan provides unreasonable or excessive compensation or the management of the company can materially alter the plan without shareholders’ approval.

D. Social and corporate responsibility issues In case of proposals addressing social and corporate responsibility issues or other similar issues, AMIN

will generally vote in a manner which is most likely to protect and promote the economic value of the underlying securities held under the schemes of the fund. Such issues are evaluated on case by case basis.

E. Board of Directors AMIN generally supports the management’s recommendation with respect to appointment of directors

of the company that strengthens the independence of the board of directors. The Board should provide clear leadership and oversight of companies. AMIN favours the separation of the roles of Chairman and Chief Executive and believes that the company complies with the requirements of Clause 49 of the Listing Agreement on corporate governance with respect to composition of Board. Discharge of directors is considered as a routine matter unless there are signifi cant concerns about the conduct of an individual director or the protection of shareholder interests. Boards should establish committees to consider remuneration and audit issues.

F. Other matters i) Confl ict of interest including investments in Group companies In the event, a proposal giving rise to a material confl ict of interest such as investments in group

companies of AMIN or matters pertaining to the investments in the companies that have subscribed to the schemes of HSBC Mutual Fund or any other similar matters, the fund manager will consult AMIN Chief Executive Offi cer (“CEO”) and Local Compliance Offi cer (“LCO”) and, if deemed necessary by the AMIN CEO or LCO, an advise of the Chairman of the Board of Trustees will be obtained with respect to voting.

Voting Policy and Procedures

186

ii) Board remuneration Executive remuneration should be determined by a remuneration committee comprising a majority

of non-executive directors, the Chairman of committee being an independent director. Remuneration should be set at the level required to reward and motivate company management. Companies should avoid excessive payments to departing directors.

iii) Shareholders Rights Shareholders need suffi cient information to exercise their votes. This should be provided in a timely

manner. AMIN may vote against resolutions where insuffi cient information has been provided to allow an informed vote. Resolutions for shareholder approval should not ‘bundle’ together separate matters.

iv) Audit and accounts AMIN will generally support the re-election of external or statutory auditors unless there are concerns

about their independence or commitment to protecting shareholder interests. Approval of the annual accounts is normally a routine matter, unless concerns have been raised about the accounts presented. It is sometimes an opportunity to express broader concerns about the company’s governance or information available to shareholders.

v) Voting in banking stocks AMIN will not exercise voting rights in the stocks of the banking companies in India in accordance

with the RBI approval letter dated May 23, 2008. However, in case of any changes / amendments to the RBI regulations applicable for foreign banks, the voting policy shall be reviewed and notifi ed to the Board of Directors and Board of Trustees.

vi) Non-contentious matters AMIN generally supports the management’s recommendation for general non-contentious matters

such as resolutions relating to the administrative arrangements of a company unless these would be detrimental to the rights of minority shareholders.

DECISION MAKING PROCESSAMIN will generally exercise a vote in accordance with the fund manager’s or sector analyst’s recommendations. The recommendation will be based on the principles set out in the voting policy as above. However, based on the evaluation of certain proposals and on the relevant circumstances, a member of the AMIN’s Investment department i.e. a fund manager or the sector analyst, may attend the meeting in person to cast the votes.

Subject to these guidelines, AMIN may generally vote in favour of the company proposals although this does not preclude AMIN from voting against management on specifi c occasions wherein the fund manager may be of the opinion that the proposal is not likely to enhance the economic value or cause indeterminate and unnecessary expense to shareholders. Further, AMIN may abstain from voting in case of certain proposals where suffi cient information is not provided by the management or other similar reasons.

AUTHORISATIONAny decision of the Fund Manager to vote on any proposal shall require approval from the Head of Equities and any decision of the Head of Equities to vote on any proposal shall require approval from the Chief Investment Offi cer. In the absence of the Chief Investment Offi cer, the approval shall be accorded by the Chief Executive Offi cer.

ADMINISTRATION AND RECORD KEEPINGSubject to the above policy, voting with respect to all the proposals will be evaluated by AMIN’s Investment department who will electronically cast the vote on the custody web interface (currently proxyedge) or cast the vote in person on AMIN’s behalf i.e. For / Against / Abstain, based on their review along with a rationale for casting the votes and the same would be intimated to the AMIN’s Operations department in writing.

Record of actual exercise of votes in the meeting i.e. For / Against / Abstain on the management’s proposals along with the fund manager’s recommendation, whether attended or not, will be maintained by the AMIN’s Operations department. The details of the votes in the prescribed format will be disclosed periodically in accordance with the requirements of SEBI (Mutual Fund) Regulations and guidelines issued from time to time.

187

Details of the Proxy Votes exercised in General Meetings of the Listed Companies for the fi nancial year ended 2010-11Management Proposals

Date Name of the Company

Type of Meeting (AGM / EGM)

Proposal Management Recommen-

dation

Vote (For /

Against /Abstain)

29 July 2010

Hitachi Home and Life Solutions India Limited

AGM To Accept Financial Statements and Statutory Reports Accept For

To Approve Dividend on Shares Accept For

To Approve Reappointment of Director - Mr. Anil Shah Accept For

To Approve Reappointment of Director - Mr. Vinay Chauhan Accept For

To Approve Reappointment of Director - Mr. Mukesh Patel Accept For

To Approve Reappointment of Director - Mr. Tarun Sheth Accept For

To Approve Appointment of Auditors and fix their Remuneration

Accept For

To Approve Appointment of Director - Mr. Shinichi Lizuka Accept For

To Approve Appointment of Director - Mr. Motoo Morimoto Accept For

To Approve Reappointment and Remuneration of Director - Mr. Amit Doshi

Accept For

To Approve Reappointment and Remuneration of Director - Mr. Anil Shah

Accept For

To Approve Reappointment and Remuneration of Director - Mr. Vinay Chauhan

Accept For

To Approve to Kep the Register and all Shares Related Documents at Sharepro

Accept For

25 Sep. 2010

Force Motors Limited

AGM To Accept Financial Statements and Statutory Reports Accept For

To Approve Reappointment of Mrs. Anita Ramchandran as Director

Accept For

To Approve Reappointment of Mr. R. B. Bhandari as Director Accept For

To Approve Reappointment of Mr. Sudhir Mehta as Director Accept For

To Approve Reappointment of Mr. S. A. Gundecha as Director Accept For

To Approve Appointment of Auditors and fix their Remuneration

Accept For

To Approve Appointment of Mr. Abhay Firodia as Director Accept For

To Approve Appointment of Mr. Atul Chordia as Director Accept For

13 Oct. 2010

Triveni Engineering and Industries Limited

Court Meeting

To Approve the Scheme of Arrangement Between Triveni Engineering & Industries Ltd. & Triveni Turbine Limited

Accept For

23 Oct. 2010

Vardhman Textiles Limited

Court Meeting

To Approve the Scheme of arrangement & Demerger Amongst Vardhman Textiles & Vardhman Special Steels Limited

Accept For

Shareholder Proposals

Date Name of the Company

Type of Meeting (AGM / EGM)

Proposal Management Recommen-

dation

Vote (For /

Against /Abstain)

NIL

188

DISCLAIMERS

The content of this report has been prepared by HSBC Asset Management (India) Private Limited (HSBC) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. The information is for general information only and does not have regard to specifi c investment objectives, fi nancial situation and the particular needs of any specifi c person who may receive this information. Investments in mutual funds inherently involve risks and investors should read the relevant documents / information for details and risk factors and consult their legal, tax and fi nancial advisors before investing. Investors should understand that statements made herein regarding future prospects may not be realised. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions. Investors may obtain Statement of Additional Information, Combined Scheme Information Document and Common Key Information Memorandums along with application forms from the offi ce of HSBC Mutual Fund, 314, D. N. Road, Fort, Mumbai 400 001. Tel: 022-6666 8819.

Statutory Details:HSBC Mutual Fund has been set up as a trust by HSBC Securities and Capital Markets (India) Private Limited (liability restricted to the corpus of 1 lakh). The Sponsor/associates of the Sponsor/Asset Management Company (AMC) are not responsible or liable for any loss or shortfall resulting from the operation of the Schemes. The Trustees of HSBC Mutual Fund have appointed HSBC Asset Management (India) Private Limited as the Investment Manager.

Risk Factors:All investments in mutual funds and securities are subject to market risks and the Net Asset Value (NAV) of the Scheme(s) may go up or down depending on the factors and forces affecting the securities markets. There can be no assurance that the objectives of the Scheme(s) will be achieved. Past performance of the Sponsor, AMC, Mutual Fund or any associates of the Sponsor / AMC does not indicate the future performance of the Scheme(s) of the Mutual Fund. HSBC Equity Fund (HEF), HSBC India Opportunities Fund (HIOF), HSBC Midcap Equity Fund (HMEF), HSBC Progressive Themes Fund (HPTF), HSBC Tax Saver Equity Fund (HTSF), HSBC Dynamic Fund (HDF), HSBC Emerging Markets Fund (HEMF), HSBC Unique Opportunities Fund (HUOF), HSBC Small Cap Fund (HSCF), HSBC MIP - Regular Plan (HMIP-RP), HSBC MIP – Savings Plan (HMIP-SP), HSBC Income Fund (HIF), HSBC Gilt Fund (HGF), HSBC Floating Rate Fund (HGRF), HSBC Cash Fund (HCF), HSBC Ultra Short Term Bond Fund (HUSBF), HSBC Flexi Debt Fund (HFDF) and HSBC Fixed Term Series 79 (HFTS 79) are only the name of the Schemes and does not in any manner indicate the quality of the Schemes or their future prospects or returns. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

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 SID has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the draft SID. The investors are advised to refer to the SID for the full text of the ‘Disclaimer Clause of NSE’.

HSBC Equity Fund

If undelivered please return to:

Computer Age Management Services Private Limited (CAMS)Unit: HSBC Mutual Fund514A, Sathy Main Road, Lakshmipuram, Coimbatore - 641 006

HSBC MUTUAL FUND INVESTOR SERVICE CENTRES

City Telephone No.Andhra Pradesh 9849677319Bengaluru 080-41186519Bihar 9931397319Chandigarh 017-25008119Chennai 044-42008719Coimbatore 9894477319Delhi 011-41490719Gujarat 9898377319Hyderabad 040-66674719Karnataka 9980927319Kerala 9895477319Madhya Pradesh & Chhattisgarh 9893477319Maharashtra & Goa 9960077321Mumbai 022-66668819Nagpur 9860827319NCR 9910797319Pune 020-26134283, 26001119Punjab 9876937319Rajasthan 9928037319Uttar Pradesh 9936797319West Bengal 033-22139919

HSBC Asset Management (India) Private LimitedRegistered Offi ce : 314, D. N. Road, Fort, Mumbai 400 001 Tel. : 022-6614 5000Fax : 022-4002 9600 E-mail : [email protected] : www.assetmanagement.hsbc.com/in.

sms INVEST to 56767