Schemewise Annual Reports 2016 - 2017 · OROP provided tailwinds to consumption and the passage of...

Filename: Annual Report Cover_2016-17.ai Size (cm): 13 (W) x 20.5 (H) Job No.: 17-0972

Schemewise Annual Reports2016 - 2017

► INDEX HSBC Equity Fund HSBC India Opportunities Fund HSBC Dividend Yield Equity Fund HSBC Dynamic Fund HSBC Tax Saver Equity Fund HSBC Infrastructure Equity Fund HSBC Midcap Equity Fund HSBC Emerging Markets Fund HSBC Brazil Fund HSBC Asia Pacific (Ex Japan) Dividend Yield Fund HSBC Global Consumer Opportunities Fund HSBC Managed Solutions HSBC Flexi Debt Fund HSBC Income Fund HSBC Floating Rate Fund HSBC Ultra Short Term Bond Fund HSBC Cash Fund HSBC MIP HSBC Fixed Term Series 94 HSBC Fixed Term Series 96 HSBC Fixed Term Series 98 HSBC Fixed Term Series 126 HSBC Fixed Term Series 105 HSBC Fixed Term Series 107 HSBC Fixed Term Series 109 HSBC Fixed Term Series 125 HSBC Capital Protection Oriented Fund Series II Plan I HSBC Capital Protection Oriented Fund Series II Plan II HSBC Fixed Term Series 91 HSBC Fixed Term Series 95 Summary of votes cast during the Financial year 2015-16 Details of votes cast during the Financial year 2015-16 Certificate on votes cast during the Financial year 2015-16 Annexure II

► INDEX HSBC Equity Fund HSBC India Opportunities Fund HSBC Dividend Yield Equity Fund HSBC Dynamic Fund HSBC Tax Saver Equity Fund

4

1 HSBC Equity Fund

Trustees’ ReportFor the year ended March 31, 2017

The Trustees of HSBC Mutual Fund (“Fund”) present the Fifteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2017.

As at March 31, 2017, the Fund offered 25 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Equity Fund, HSBC Income Fund and HSBC Cash Fund have completed 14 years of operations during the year.

During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out mergers of the existing schemes viz. HSBC Floating Rate Fund – Long Term Plan merged into HSBC Ultra Short Term Bond Fund and HSBC MIP – Regular Plan merged into HSBC MIP – Savings Plan and renamed as HSBC Monthly Income Plan. The objective of these mergers were to avoid offering of similar schemes and to ensure that the name of the scheme is refl ective of its strategy and asset allocation.

The Fund continues its focus on delivering consistent long term returns. The comments on the performance of the Scheme(s) is provided hereinafter. Dividends were declared under various schemes as per the provisions contained in the respective Scheme Information Documents after considering the distributable surplus available under the respective Schemes. Details of dividends declared can be viewed on our website at www.assetmanagement.hsbc.com/in.

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

a. Operations and Performance of the Schemes

HSBC Equity Fund (HEF) – an open-ended diversifi ed Equity Scheme HEF seeks 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. 598.66 crores as at March 31, 2017 as against Rs. 567.22 crores as at March 31, 2016. Around 98.32% of the net assets were invested in equities, 1.46% of the net assets were invested in reverse repos / CBLO and 0.22% in net current assets as at March 31, 2017.

HEF is a true large cap fund and we remained invested in a diversifi ed portfolio across large capitalization stocks. It has outperformed its benchmark Nifty 50 over the FY 2016-17 by 670bps primarily due to superior stock selection. Selections in sectors like Financials, Materials, Energy, and Consumer Discretionary contributed to the outperformance during this period. In terms of allocation, being overweight in Financials and underweight in Telecom have been positive contributors to outperformance.

Date of Inception : 10 December 2002 Absolute Returns

(%)

Compounded Annualized Returns (%)

Scheme Name & Benchmarks 1 Year 3 Years 5 Years Since Inception

HSBC Equity Fund – Growth 25.25 14.58 13.04 22.23

Nifty 50 (Scheme Benchmark) 18.55 11.01 11.60 16.24

S&P BSE 200 (Standard Benchmark) 22.47 14.17 13.08 17.75

Rs. 10,000, if invested in HEF, would have become 12,525 15,043 18,453 177,911

Rs. 10,000, if invested in Nifty 50, would have become 11,855 13,680 17,313 86,601

Rs. 10,000, if invested in S&P BSE 200, would have become

12,247 14,882 18,487 104,155

Past performance may or may not be sustained in future. Returns data as on March 31, 2017 for Growth Option has been provided. Different plans shall have a different expense structure.

5

HSBC Equity Fund 1

Trustees’ ReportFor the year ended March 31, 2017 (Contd...)

b. Market Overview & Outlook (as furnished by HSBC Asset Management (India) Private Limited)

EQUITY OUTLOOKAfter a weak performance in the preceding year, Indian equity markets rebounded strongly during fi scal year 2016-17 and posted gains of 18.5% by S&P CNX Nifty and 32.7% by BSE Midcap index. The markets weathered the storm of several path breaking events such as Demonetization domestically and external ones such as a noisy US presidential election, Brexit and the start of US rate hike cycle and delivered a strong performance.

Normal Monsoon season after two below normal years, implementation of seventh pay commission and OROP provided tailwinds to consumption and the passage of the landmark tax legislation of GST provided further impetus to the reforms roadmap. The domestic Mutual Fund segment brought in ~USD 8.4 bn of net infl ows in equities during the year. Even after witnessing ~USD 3.9 bn of net outfl ows from the domestic insurers, the net DII tally was an impressive ~USD 4.5 bn of net infl ows. There were positive global cues as well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 8.3 bn. Strong fl ows by both FIIs / FPIs and domestic MFs acted as a factor in the strong market performance.

Indices Returns (April 1, 2016 to March 31, 2017) 1 Year (%)

S&P BSE Sensex 16.9%

NSE CNX Nifty 18.5%

S&P BSE 100 21.2%

S&P BSE 200 22.5%

S&P BSE 500 24.0%

S&P BSE Midcap 32.7%

Source: Bloomberg

Our view on the key aspects related to equity markets are presented below -

The impressive performance in equity markets during FY 2016-17 has come on the back of strong liquidity driven by both FIIs & domestic MFs, positive global cues and expectation of the continuation of favorable policy environment domestically especially after the state electoral wins for the ruling party at the centre. However, after this strong performance, the equity markets are currently trading above their historical averages.

Moving into FY 2017-18, we expect a continuation of the economic recovery process domestically, led early by better margins – due to lower input and interest costs and followed by a volume recovery. Government led investment spending and urban consumption are likely to lead with private sector investments contributing later. On the policy front, Government has done its fair bit to improve the investment environment and the GST, a mega tax reform is now closer to reality. The ruling party at the centre has done well in the recent state assembly elections, especially in the key state of Uttar Pradesh and this is likely to provide them with political capital to pursue and implement economic reforms more aggressively.

The budget document that was presented in early February provides a good medium term policy direction for the economy. Occasionally the policy actions can serve up a few bumps and jolts but over the medium term, across different governments, there is a thread of continuity connecting many key economic policies such as in the case of this year’s union budget. We, in our investment process, prefer to take comfort in these threads of continuity and remain constructive on the India growth story. This makes us positive on the Indian equity markets over the medium to long term.

Risks are in the form of market valuations trending above historical averages and weaker than expected delivery in corporate earnings going forward. External news fl ows related to geopolitical tensions and other eco-political events would also infl uence market performance going forward, as the recent rally in the markets was supported by strong FII infl ows.

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1 HSBC Equity Fund


DEBT OUTLOOKFixed Income in Financial Year 2016-17 has seen volatility on various counts starting from Brexit effect, US election, effects of demonetization, change of governor and Change in monetary policy stance by new monetary policy committee in February, 2017.

Infl ation has followed the glide path to lower numbers towards 5% RBI target. RBI saw a change of guard and change in decision making process through implementation of monetary policy committee. The repo rate was cut twice with gap of 6 months. The rate cuts were not fully passed through in lending rates by similar quantum. Banks passed on the rate cuts after the deposit deluge after demonetization.

Deposit growth shot up during the period due to demonetization. However, credit growth nosedived and remained single digit number towards the close of the year. RBI changed its stance on liquidity at the start of the year and created liquidity surplus. Further, there were pressure to handle surplus liquidity created by demonetization. CRR was adopted as a measure initially and later short duration T bills were issued to manage the liquidity. Still the system liquidity remained surplus to the extent of 3% of deposits for the last quarter. Credit growth remained subdued due to lower commodity prices, lower trade activity and slower economic growth and demonetization. Currency (INR) appreciated during the year especially given the strong political outlook that came out in March 2017 and the after effect of demonetization and hawkish monetary stance.

UDAY bond issuances continued in FY 2016-17 as well and in the second half along with the hawkish monetary policy it put huge pressure on the bond yields and spreads. Global factors like Brexit and US elections which had potential for large volatility passed on smoothly without large ramifi cations for Indian market.

In the coming year apart from the global factors, following domestic factors will play a key role in fi xed income markets:

• Liquidity: Liquidity will drive short end rates and eventually drive decisions leading to market interventions and CRR cuts. RBI has focused now on neutral liquidity stance and providing liquidity to system, which will bode well short end rates.

• Infl ation: Infl ation numbers will determine future course of action for RBI and remains a critical variable for policy. We expect infl ation to pick up to 4.5% level in the ease in second half of FY 2017-18.

• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.

• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.

• Current Account Defi cit: Current Account Defi cit determines how the pressure on currency works and effective management of forex reserves.

• Currency levels: Level of INR will determine how the central bank reacts to the situation on the global crisis etc.

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

7

HSBC Equity Fund 1


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 for the purpose of providing facilities for participation by persons as benefi ciaries in such 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 there under 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 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited has been appointed as the Asset Management Company of 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. The paid-up equity share capital of the AMC is Rs. 61.59 crores. The AMC is registered as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 vide registration no. INP000001322. The AMC also offers non-binding Advisory services to offshore funds under the mutual fund license.

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 SCHEMES The investment objective of the respective schemes has been provided above under the heading “Scheme

Performance, Future Outlook and Operation of the Scheme” (Refer Section 1).

4. SIGNIFICANT ACCOUNTING POLICIES The Signifi cant Accounting Policies form part of the Notes to the Accounts annexed to the Balance Sheet

of the Schemes in the Full Annual Report. The accounting policies are in accordance with Securities Exchange Board of India (Mutual Funds) Regulations 1996.

5. UNCLAIMED DIVIDENDS & REDEMPTIONS Summary of number of investors & corresponding amount Scheme-wise as on March 31, 2017:

Scheme

Unclaimed Dividend Unclaimed Redemption

Amount (Rs.) No. of Investors


HSBC Equity Fund 12801781.29 1,077 7672580.56 198

6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance

8

1 HSBC Equity Fund


customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.

On the distribution front, the number of empanelled distributors was 370 as on March 31, 2017. During the year, the AMC 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 40.

7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2016 - March 2017 are as follows:

2016-2017

Com-plaintCode

Type of complaint (a) No. of complaints pending at the

beginning of the year

(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

0 6 4 2 0 0 0 0 0 0 0

I B Interest on delayed payment of Dividend

0 0 0 0 0 0 0 0 0 0 0

I C Non receipt of Redemption Proceeds

0 6 5 0 0 0 0 1 0 0 0

I D Interest on delayed payment of Redemption

0 0 0 0 0 0 0 0 0 0 0

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

0 0 0 0 0 0 0 0 0 0 0

II B Discrepancy in Statement of Account

0 0 0 0 0 0 0 0 0 0 0

II C Data corrections in Investor details**

1 34 35 0 0 0 0 0 0 0 0

II D Non receipt of Annual Report / Abridged Summary

0 0 0 0 0 0 0 0 0 0 0

III A Wrong switch between Schemes

0 0 0 0 0 0 0 0 0 0 0

III B Unauthorized switch between Schemes

0 0 0 0 0 0 0 0 0 0 0

III C Deviation from Scheme attributes

0 0 0 0 0 0 0 0 0 0 0

III D Wrong or excess charges / load

0 0 0 0 0 0 0 0 0 0 0

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

0 6 6 0 0 0 0 0 0 0 0

IV Others 0 21 20 0 0 0 0 1 0 0 0

Total 1 73 70 2 0 0 0 2 0 0 0

9

HSBC Equity Fund 1


Summary of Complaints for FY 2016-17

Particulars Count

Total complaints received 73

Total number of folios 156459

% of complaints against the folio 0.046%

# active folios** As per AMFI Best Practice Guidelines Circular No.25/2011-12 for Revisions in the Guidelines on

Standardization of Complaints / Grievances Reporting Procedure. If “Others” include a type of complaint which is more than 10% of overall complaints, then such a reason should be provided separately. Hence data corrections in Investor Details is included as a separate category

* Non actionable means the complaint is incomplete / outside the scope of the mutual fund

8. INVESTOR EDUCATION INITIATIVESThe Fund undertook various investor education and awareness initiatives related to investments in mutual funds throughout India in English / Hindi and Regional languages via mass media. The Fund conducted roadshows in various cities i.e. Jaipur, Chennai, Bangaluru, Hyderabad, Ludhiana and Mumbai to help investors understand Asset Allocation and benefi ts of investing in equity, published investor awareness advertorial in magazines like Outlook Money, Outlook, Mutual Funds Insights, India Today, Open magazine and Caravan magazine.

9. PROXY VOTING POLICYIn terms of SEBI Circular no. SEBI/IMD/CIR No. 18/198647/2010 dated March 15, 2010, the Fund has adopted Proxy Voting Policy and Procedures for exercising voting rights in respect of securities held by the Schemes.

The summary of the votes casted in the general meetings of the Investee companies,by the AMC for and on behalf of the Schemes of the Fund, for the fi nancial year 2016-17 is provided below:

Quarter Total no. of resolutions

Break-up of vote decision

For Against Abstained

June 2016 124 101 0 23

September 2016 1,005 880 27 98

December 2016 58 42 9 7

March 2017 39 33 3 3

Total 1,226 1,056 39 131

In terms of the requirement of SEBI Circular no. CIR/IMD/DF/05/2014 dated March 24, 2014 and SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016; the AMC has obtained certifi cate from M/s. M. P. Chitale & Co., Chartered Accountants, who is acting as a Scrutinizer, on the voting report for the FY 2016-17. The certifi cate dated April 20, 2017 issued by M/s. M. P. Chitale & Co., is available on the website of the AMC as part of the full Annual Report.

Unit holders can refer to the full Annual Report for complete details of actual exercise of votes in the general meetings of the investee companies for the fi nancial year 2016-17 or log on to our website at www.assetmanagement.hsbc.com/in.

10. 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.

10

1 HSBC Equity Fund

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 holders 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.

11. 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 services 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/-

N. P. Gidwani

Chairman

MumbaiJuly 18, 2017.


11

HSBC Equity Fund 1

To the Board of Trustees of

HSBC Mutual Fund - HSBC Equity Fund

Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017, the related revenue account and the cash fl ow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.

Management’s responsibility for the Financial StatementsThe Board of Trustees to the HSBC Mutual Fund (the ‘Board of Trustees’) and HSBC Asset Management (India) Private Limited (the ‘AMC’), being the investment manager to HSBC Mutual Fund (the ‘Fund’) (collectively referred as ‘Management’), are responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position and fi nancial performance of the Scheme 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, as amended (the ‘Regulations’) and the accounting standards issued by the Institute of Chartered Accountants of India (the ‘ICAI’), to the extent applicable. This responsibility includes maintenance of adequate accounting records for safeguarding of the assets of the Scheme and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal fi nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to preparation and fair presentation of the fi nancial statements, of the Scheme, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Scheme’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017;

(ii) in the case of the revenue account, of the net surplus for the year ended on that date; and

(iii) in the case of the cash fl ow statement, of the cash fl ows of the Scheme for the year ended on that date.

Independent Auditors’ Report

12

1 HSBC Equity Fund

Independent Auditors’ Report (Contd...)

Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:

(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;

(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.

2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet, revenue account and cash fl ow statement are in agreement with the books of account of the Scheme.

For B S R & Co. LLPChartered AccountantsFirm’s Registration No: 101248W/W-100022

Sd/-

Milind RanadePartnerMembership No: 100564

Place : MumbaiDate : July 18, 2017.

4

3 HSBC INDIA OPPORTUNITIES FUND







HSBC India Opportunities Fund (HIOF) – an open-ended Flexi-cap Equity Scheme HIOF seeks to generate long term capital growth through investments across all market capitalizations, including small, mid and large cap stocks. It aims to be predominantly invested in equity and equity related securities. However, it could move a 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. 454.14 crores as at March 31, 2017 as compared to Rs. 464.85 crores as at March 31, 2016. Around 97.51% of the net assets were invested in equities, 3.50% of the net assets were invested in reverse repos / CBLO and (-1.01%) in net current assets as at March 31, 2017.

HIOF is a multi-cap fund with a large-cap bias and we remained invested in a diversifi ed portfolio across capitalization stocks. HIOF outperformed its benchmark S&P BSE200 over the FY 2016-17 by 404bps primarily due to superior stock selection. Selections in sectors like Financials, Materials and Industrials contributed to the outperformance during this period. In terms of allocation, being overweight in Financials and underweight in Telecom have been positive contributors to outperformance.

Date of Inception : 24 February 2004 Absolute Returns

(%)



HSBC India Opportunities Fund - Growth 26.51 19.99 17.56 16.88

S&P BSE 200 (Scheme Benchmark) 22.47 14.17 13.08 13.79

Nifty 50 (Standard Benchmark) 18.55 11.01 11.60 13.13

Rs. 10,000, if invested in HIOF, would have become 12,651 17,276 22,452 77,263


12,247 14,882 18,487 54,407




5

HSBC INDIA OPPORTUNITIES FUND 3






NSE CNX Nifty 18.5%

S&P BSE 100 21.2%

S&P BSE 200 22.5%

S&P BSE 500 24.0%


Source: Bloomberg







6









• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy.

• Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.




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.


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


7


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.












Scheme




HSBC India Opportunities Fund 3679066.84 349 3213967.36 71

6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance


8


customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.



2016-2017

Com-plaintCode

Type of complaint (a) No. of complaints pending at the


(b) No. of com-plaints

receivedduring

theyear



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


0 6 4 2 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 6 5 0 0 0 0 1 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


1 34 35 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 6 6 0 0 0 0 0 0 0 0

IV Others 0 21 20 0 0 0 0 1 0 0 0

Total 1 73 70 2 0 0 0 2 0 0 0


9



Particulars Count











Break-up of vote decision

For Against Abstained

June 2016 124 101 0 23

September 2016 1,005 880 27 98

December 2016 58 42 9 7

March 2017 39 33 3 3

Total 1,226 1,056 39 131




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.


10


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 holders 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.




Sd/-

N. P. Gidwani

Chairman



11


To the Board of Trustees ofHSBC Mutual Fund - HSBC India Opportunities Fund

Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC India Opportunities Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other expl anatory information, annexed thereto.





OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and(ii) in the case of the revenue account, of the net surplus for the year ended on that date.

Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that: (a) We have obtained all information and explanations which, to the best of our knowledge and belief, were

necessary for the purposes of the audit; (b) The balance sheet and revenue account have been prepared in accordance with the accounting policies

and standards specifi ed in the Ninth Schedule of the Regulations.2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet

and revenue account are in agreement with the books of account of the Scheme.


Sd/-




4

5 HSBC DIVIDEND YIELD EQUITY FUND







HSBC Dividend Yield Equity Fund (HDYEF) - an open ended equity SchemeHDYEF aims to generate dividend yield and capital appreciation by primarily investing into equities and equity related securities of domestic Indian companies.

The net assets of HDYEF amounted to Rs. 42.49 crores as at March 31, 2017 compared to Rs. 38.52 crores as at March 31, 2016. Around 99.49 % of the net assets were invested in equities, 0.63% of the net assets were invested in reverse repos / CBLO and (-0.12%) in net current assets as at March 31, 2017.

The scheme out-performed its benchmark during FY 2016-17 due to overweight position in Industrial and Consumer discretionary. We will maintain the current positing and will continue to be invested in companies offering attractive dividend yields along with profi tability and valuation framework.

Date of Inception : 21 March 2007 Absolute Returns

(%)



HSBC Dividend Yield Equity Fund - Growth 25.93 15.53 13.80 6.82



Rs. 10,000, if invested in HDYEF, would have become 12,593 15,422 19,088 19,398


12,247 14,882 18,487 25,938




5

HSBC DIVIDEND YIELD EQUITY FUND 5






NSE CNX Nifty 18.5%

S&P BSE 100 21.2%

S&P BSE 200 22.5%

S&P BSE 500 24.0%


Source: Bloomberg








6








• Growth: GDP growth numbers as well as industrial activity will also determine the decision on policy. • Fiscal defi cit: Fiscal defi cit and government spending will determine the government borrowing and

crowding out in interest rate curve. We expect prudence in government spending and prospect of spending on infrastructure to pick up which will crowd in private investment as well.




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.


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.



7












Scheme




HSBC Dividend Yield Equity Fund – – 2846464.52 79

6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 197 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 8 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad and Chennai. With a view to enhance customer convenience, the AMC has the facility of priority based servicing to key distributors through the enhancement of the Interactive Voice Reponses. The AMC has a single Toll Free number which can be dialed from anywhere in India. The call centre service is being managed by the Registrar and Transfer Agents.




8


2016-2017

Com-plaintCode

Type of complaint (a) No. of complaints

pending at the


(b) No. of complaintsreceivedduring

theyear



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


0 6 4 2 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 6 5 0 0 0 0 1 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


1 34 35 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


0 6 6 0 0 0 0 0 0 0 0

IV Others 0 21 20 0 0 0 0 1 0 0 0

Total 1 73 70 2 0 0 0 2 0 0 0


Particulars Count








9






Break-up of vote decisionFor Against Abstained

June 2016 124 101 0 23

September 2016 1,005 880 27 98

December 2016 58 42 9 7

March 2017 39 33 3 3

Total 1,226 1,056 39 131




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 holders 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.




Sd/-

N. P. GidwaniChairman



10



To the Board of Trustees of

HSBC Mutual Fund - HSBC Dividend Yield Equity Fund

Report on the Financial StatementsWe have audited the accompanying fi nancial statements of HSBC Dividend Yield Equity Fund (the ‘Scheme’), which comprise the balance sheet as at 31 March 2017 and the related revenue account for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, annexed thereto.





OpinionIn our opinion, and to the best of our information and according to the explanations given to us, the aforesaid fi nancial statements give the information required by the Regulations in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Scheme as at 31 March 2017; and

(ii) in the case of the revenue account, of the net surplus for the year ended on that date.

11


Independent Auditors’ Report (Contd...)

Report on other Legal and Regulatory Requirements1) As required by Regulation 55(4) to the Regulations, we report that:

(a) We have obtained all information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit;

(b) The balance sheet and revenue account have been prepared in accordance with the accounting policies and standards specifi ed in the Ninth Schedule of the Regulations.

2) As required by Clause 5(ii)(2) of the Eleventh Schedule of the Regulations, we report that the balance sheet and revenue account are in agreement with the books of account of the Scheme.


Sd/-



4

2 HSBC DYNAMIC FUND








HSBC Dynamic Fund (HDF) - an open-ended SchemeHDF 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. 46.22 crores as at March 31, 2017 compared to Rs. 53.41 crores as at March 31, 2016. Around 81.59% of the net assets were invested in equities, 18.31% of the net assets were invested in reverse repos / CBLO and 0.10% in net current assets as at March 31, 2017.

HDF has underperformed its benchmark S&P BSE200 over the FY 2016-17 by 569 bps primarily due to high cash balance. The scheme allocates capital across equity and debt securities dynamically. In a year when equity market was up by 22.5%, approximately 18% allocation to cash (full year average) had a negative impact on attribution. Selections in sectors like Financials, Consumer Discretionary, and Industrials contributed to reducing the underperformance during FY 2016-17.

Date of Inception : 24 September 2007 Absolute Returns

(%)



HSBC Dynamic Fund - Growth 16.78 11.75 10.14 4.76



Rs. 10,000, if invested in HDF, would have become 11,678 13,954 16,209 15,578


12,247 14,882 18,487 19,280



5

HSBC DYNAMIC FUND 2







NSE CNX Nifty 18.5%

S&P BSE 100 21.2%

S&P BSE 200 22.5%

S&P BSE 500 24.0%


Source: Bloomberg



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