Schemewise Annual Reports 2017 - 2018 · were invested in reverse repos/CBLO and (-0.37%) % in net...

Schemewise Annual Reports 2017 - 2018

► INDEX

HSBC Large Cap Equity FundHSBC Multi Cap Equity FundHSBC Dynamic asset Allocation FundHSBC Tax Saver Equity Fund HSBC Infrastructure Equity Fund HSBC Small Cap Equity FundHSBC Global Emerging Markets FundHSBC Brazil Fund HSBC Asia Pacific (Ex Japan) Dividend Yield Fund HSBC Global Consumer Opportunities Fund HSBC Managed Solutions HSBC Flexi Debt FundHSBC Short Duration FundHSBC Debt FundHSBC Cash Fund HSBC Low Duration Fund

HSBC Fixed Term Series 94 HSBC Fixed Term Series 96 HSBC Fixed Term Series 98

HSBC Fixed Term Series 105 HSBC Fixed Term Series 107 HSBC Fixed Term Series 109 HSBC Fixed Term Series 125 HSBC Fixed Term Series 126 HSBC Fixed Term Series 128HSBC Fixed Term Series 129HSBC Fixed Term Series 130HSBC Fixed Term Series 131HSBC Fixed Term Series 132HSBC Fixed Term Series 133

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

HSBC Regular Savings Fund

Summary of votes cast during the Financial year 2017-18 Details of votes cast during the Financial year 2017-18 Certificate on votes cast during the Financial year 2017-18 Annexure II

► INDEX

HSBC Large Cap Equity Fund

HSBC Multi Cap Equity Fund

HSBC Dynamic asset Allocation Fund

HSBC Tax Saver Equity Fund

4

The Trustees of HSBC Mutual Fund (“Fund”) present the Sixteenth Annual Report and the audited abridged fi nancial statements of the schemes of the Fund for the year ended March 31, 2018.

As at March 31, 2018, the Fund offered 30 schemes across asset classes to meet the varying investment needs of the investors. Notably, three Schemes of HSBC Mutual Fund viz. HSBC Large Cap Equity Fund, HSBC Short Duration Fund and HSBC Cash Fund have completed 15 years of operations during the year.

During the year, the Fund has launched Plan(s) under Fixed Term Series and carried out merger of the existing schemes viz HSBC Dividend Yield Equity Fund merged into HSBC Multi Cap Equity Fund (HMEF), erstwhile HSBC India Opportunities Fund, as offering sub-scale fund was not in the interest of the unitholders.

Further, in order to bring uniformity in the practice across Mutual Funds and to standardize the scheme categories and characteristics of schemes, SEBI vide its circular no. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017, issued guidelines for categorization and rationalization of Mutual Fund schemes.

Accordingly, HSBC Large Cap Equity Fund (erstwhile HSBC Equity Fund), HSBC Small Cap Equity Fund (erstwhile HSBC Mid Cap Equity Fund) , HSBC Infrastructure Equity Fund, HSBC Global Emerging Market Fund (erstwhile HSBC Emerging Market Fund), HSBC Debt Fund (erstwhile HSBC Income Fund – Investments Plan), HSBC Short Duration Fund (erstwhile HSBC Income Fund – Short Term Plan), HSBC Low Duration Fund (erstwhile HSBC Ultra Short Term Bond Fund), HSBC Regular Savings Fund (erstwhile HSBC Monthly Income Plan) and HSBC Managed Solutions have undergone fundamental attributes changes with effective from March 14, 2018.

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 Large Cap Equity Fund (HLEF), erstwhile HSBC Equity Fund (Large Cap Fund – An open ended equity Scheme predominantly investing in large cap stocks)

HLEF seeks to generate long-term capital growth from an actively managed portfolio of equity and equity related securities of predominantly large cap companies. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

The net assets of HLEF amounted to Rs. 648.24 crores as at March 31, 2018 as against Rs. 598.66 crores as at March 31, 2017. Around 98.35% of the net assets were invested in equities, 2.02% of the net assets were invested in reverse repos/CBLO and (-0.37%) % in net current assets as at March 31, 2018.

HLEF is a large cap fund and we remained invested in a diversifi ed portfolio across large capitalization stocks. The scheme has outperformed its benchmark over 3 year, 5 year period and since inception. It was possible due to superior stock selection, especially in sectors like Consumer Discretionary, Materials, and Energy. Going forward, we will continue with our approach of selecting sustainably profi table companies at reasonable valuations. In terms of allocation, being overweight in Financials, Industrials, and Consumer Discretionary sectors and underweight in Energy, Staples, Healthcare and Utilities sectors contributed to outperformance.

Scheme Name & Benchmarks Absolute Returns

(%)

Compounded Annualized Returns (%)

Date of Inception : 10 December 2002 1 Year 3 Years 5 Years Since Inception

HSBC Large Cap Equity Fund - Growth 10.24 9.19 14.04 21.35

Nifty 50 TRI (Scheme Benchmark) 12.68 7.99 13.63 17.47

S&P BSE Sensex TRI (Standard Benchmark) 13.51 7.76 13.48 17.43

Rs. 10,000, if invested in HLEF, would have become 11,024 13,024 19,295 193,368

Trustees’ ReportFor the year ended March 31, 2018

5


(%)


Date of Inception : 10 December 2002 1 Year 3 Years 5 Years Since Inception

Rs. 10,000, if invested in Nifty 50, would have become 11,268 12,599 18,950 117,588

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

11,351 12,518 18,826 116,976

Past performance may or may not be sustained in future. The returns for the respective periods are provided as on last business day of March 2018 for Growth Option. Different plans shall have a different expense structure. As TRI data is not available Since Inception of the scheme, benchmark performance is calculated using composite CAGR of S&P BSE Sensex PRI values from date 10-Dec- 2002 to date 31-May-2007 and TRI values since date 31-May-2007.

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

EQUITY OUTLOOKIndian equity markets continued to remain strong during fi scal year 2017-18 and posted gains of 11.76% by S&P CNX Nifty and 13.24% by BSE Midcap index respectively. Biggest drivers of the markets were, robust DII fl ow into equities, continued push of mega reforms – Goods and Services Tax (GST) implementation, Insolvency and Bankruptcy Code implementation, Real Estate (Regulation and Development) Act, second consecutive normal monsoon, and electoral victories of the ruling party in many state elections. On the other hand, the markets weather the storm of disruption in economy due to GST implementation, lingering impact of demonetization, muted FII fl ows, and rising yields in developed markets. Domestic Mutual Fund segment had their best ever year and they brought in ~USD 22 bn of net infl ows in equities during the year. Even after witnessing ~USD 4.3 bn of net outfl ows from the domestic insurers, the net DII tally was a very impressive ~USD 17.7 bn of net infl ows. There were mixed global cues well and the Foreign Institutional Investors (FIIs) net bought Indian equities worth USD 3.2 bn. The infl ows by both FIIs and domestic MFs acted as a factor in the strong market performance.

Indices Returns (April 1, 2017 to March 31, 2018) 1 Year (%)

S&P BSE Sensex 12.70%

NSE CNX Nifty 11.76%

S&P BSE 100 12.12%

S&P BSE 200 12.49%

S&P BSE 500 13.21%

S&P BSE Midcap 14.31%

S&P BSE 250 Small-cap 14.13%

Source: Bloomberg (All values are total return)

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

The impressive performance in equity markets during FY 2017-18 has come on the back of strong liquidity largely by domestic MFs but supported in party by FII fl ows, positive global growth, benign macro – both domestically and global, expectation of the continuation of favorable policy environment domestically and expectation of corporate earnings revival. Possibility of sound macro, economic reforms and implementation of existing reforms have increased, especially after continued success of the ruling party at the centre in state elections. However, after this strong performance in markets and rather long wait for earnings to be delivered has meant that the equity markets are currently trading above their historical averages.

Moving into FY 2018-19, we expect a continuation of the economic recovery process domestically, recovery in corporate earnings - led early by volume growth, and continued DII fl ows. Government led investment

Trustees’ ReportFor the year ended March 31, 2018 (Contd...)

6

spending and rural consumption are likely to lead with private sector investments contributing later (possibly after general elections 2019). 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, weaker than expected delivery in corporate earnings going forward, external news fl ows related to trade protectionism, developed market central banks raising rates prematurely, and 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.

DEBT OUTLOOKFixed Income in Financial Year 2017-18 has seen volatility further step up in this year. Markets went to perfect storm with higher crude prices, low liquidity and pressure on currency, apart from rate hike expectations.

Infl ation has followed the glide path to lower numbers towards 4% RBI target and even lower than the target number when infl ation printed a lowly 1.46% in June 2018 on back of lower food prices. RBI went for a cut despite of neutral stance. This positivity continued till until crude shock came in form of higher crude process. Global prices of Brent crude saw substantial increase in second half of the year, which jeopardized the infl ation path. Other worries that gathered around this time were related to GST collection and eventual impact on fi scal situation.

Government of India allowed the fi scal defi cit to slip to 3.5% (budget 3.2%) and kept next year target at 3.3% (in place of earlier path of 3%). This was on back of some excise relaxation for oil products and a month less collected for GST due to implementation in the current year. The fear of fi scal slippage alongwith the announcement of higher bond issuances spooked the bond markets into higher yields. Government fi nally borrowed only INR 90 bln extra (in place of INR 500 bln announced initially).

On the Monetary front the year was very volatile as well. RBI changed its stance to neutral causing some worry around rate hikes. Thereafter it cut rates and again went for OMO sales operations simultaneously. This created some confusion in the market participants regarding rates direction. Finally extra supply, higher oil prices and higher infl ation paved way for rates higher. RBI also held position on regulatory forbearance about spreading out losses by banks publicly. It eventually gave up the position in the end of March. However, the swift changes in stance caused lot of pressure and volatility in bonds.

Liquidity situation continuously deteriorated due to OMO sales initially and withdrawal of deposits due to remonetisation. Further liquidity was absorbed out due to portfolio outfl ows and reduction in reserves. Despite of defense from RBI utilizing the reserves, the currency depreciated meaningfully, which caused further jitters in foreign investor sentiments. Lack of liquidity also affected 1-3 year rates which were elevated in second half of the year.

Going forward following are key variables to watch out for:• 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 remain at 4.7% level in the ease in second half of FY 2018-19 in linewith RBI’s expectations.

• 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 andcrowding out in interest rate curve. We expect prudence in government spending and prospect ofspending 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.


7

2. BRIEF BACKGROUND OF SPONSORS, BOARD OF TRUSTEES AND ASSET MANAGEMENTCOMPANY

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 derivativemarket 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/046/02/5dated 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 suchinvestments 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 theTrust 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 RegisteredOffi ce at 16, V. N. Road, Fort, Mumbai 400 001. HSBC Asset Management (India) Private Limited hasbeen 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 theAMC. 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 videregistration no. INP000001322. The AMC also offers non-binding Advisory services to offshore fundsunder the mutual fund license.

HSBC Securities and Capital Markets (India) Private Limited holds 100% of the paid up equity sharecapital of the AMC.

3. INVESTMENT OBJECTIVE OF THE SCHEMESThe 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 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 SecuritiesExchange Board of India (Mutual Funds) Regulations 1996.


8

5. UNCLAIMED DIVIDENDS & REDEMPTIONSSummary of number of investors & corresponding amount Scheme-wise as on March 31, 2018.

SchemeUnclaimed Dividend Unclaimed Redemption

Amount (Rs.) No. of Investors


HSBC Large Cap Equity Fund 11,192,868.38 1284 7,687,209.04 165

6. INVESTOR SERVICESThe number of offi cial points of acceptance of transactions is 205 locations. In addition to the offi ces of the Registrar & Transfer agents, the AMC has Investor Service Centres in 9 locations at its own offi ces - namely Mumbai, New Delhi, Kolkata, Bangaluru, Pune, Ahmedabad, Hyderabad, Chandigarh 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.

On the distribution front, the number of empanelled distributors was 460 as on March 31, 2018. 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 42.

7. DETAILS OF INVESTOR GRIEVANCE REDRESSALThe details of the redressal of investor complaints received against HSBC Mutual Fund during April 2017 - March 2018 are as follows:

2017-2018

Com-plaintCode

Type of complaint (a) No. of complaints

pending at the

beginning of the year

(b) No. of complaintsreceivedduring

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 5 4 1 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 ofRedemption Proceeds

1 12 12 1 0 0 0 1 0 0 0

I D Interest on delayedp a y m e n t o fRedemption

0 1 1 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 D i s c r e p a n c y i n Statement of Account

0 0 0 0 0 0 0 0 0 0 0

II C Data corrections in Investor details **

0 34 34 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


9

2017-2018

Com-plaintCode


pending at the



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

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 updat ion of changes viz. address, PAN, bank details, nomination, etc

0 6 6 0 0 0 0 0 0 0 0

IV Others 1 41 42 0 0 0 0 0 0 0 0

Total 2 99 99 2 0 0 0 0 0 0 0

Summary of Complaints for FY 2017-18

Particulars Count

Total complaints received 99

Total number of folios 140099

% of complaints against the folio 0.071%

# 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 INITIATIVES The 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 16 roadshows at various locations in India to promote various Investor Awareness related topics including Asset Allocation, SIPs, Equity Mutual Funds and Financial Planning. The Fund has a Year-long tie-up with Mutual Fund Insights Magazine that includes 3 pages of content and advertorial publication in their monthly issue. Each issue contains a story promoting SIPs to achieve one’s various investment goals. In the month of December 2017 and January 2018 investor awareness promotion was done through Outlook and Outlook Money magazines through advertorials on various Mutual Fund topics.

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 2017-18 is provided below:


10

Quarter Total no. of resolutions

Break-up of vote decision

For Against Abstained

June 2017 184 116 5 63

September 2017 920 827 12 81

December 2017 49 45 1 3

March 2018 36 29 1 6

Total 1,189 1,017 19 153

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 2017-18. The certifi cate dated May 3, 2018 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 2017-18 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 withfl 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 shallbe 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/-

Dilip Thakkar

Trustee

Mumbai

July 17, 2018.


Independent Auditor’s Report

To the Board of Trustees

HSBC Mutual Fund – HSBC Large Cap Equity Fund

(Formerly known as HSBC Equity Fund)

Report on the financial statements

We have audited the accompanying financial statements of HSBC Large Cap Equity Fund

(formerly known as HSBC Equity Fund) (the ‘Scheme’), which comprise the balance sheet as at 31

March 2018, the related revenue account and the cash flow statement for the year then ended, and a

summary of significant accounting policies and other explanatory information, annexed thereto.

Management’s responsibility for the financial statements

The 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 financial statements that give a true and fair view of the financial position and financial

performance of the Scheme in accordance with the accounting policies and standards specified in

the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations,

1996, as amended (the ‘Regulations’) and the accounting principles generally accepted in India.

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 financial controls,

that were operating effectively for ensuring the accuracy and completeness of the accounting

records, relevant to the preparation and presentation of the financial statements that give a true and

fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Scheme’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless management either intends to liquidate the

Fund or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with the Standards on Auditing issued by the Institute of

Chartered Accountants of India (the ‘ICAI’). Those Standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free from material misstatement.

Independent Auditor’s Report (Continued)



Auditor’s responsibility (Continued)

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial 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 financial 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

financial statements.

We are also responsible to conclude on the appropriateness of management’s use of the going

concern basis of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the

Scheme’s ability to continue as a going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in the auditor’s report to the related disclosures in the

financial statements or, if such disclosures are inadequate, to modify the opinion. Our

conclusions are based on the audit evidence obtained up to the date of the auditor’s report.

However, future events or conditions may cause the Scheme to cease to continue as a going

concern.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Opinion

In our opinion, and to the best of our information and according to the explanations given to us, the

aforesaid financial 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 2018;

(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 flow statement, of the cash flows of the Scheme for the year ended on

that date.

Report on other legal and regulatory requirements

1 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 specified in the Ninth Schedule of the Regulations.




Report on other legal and regulatory requirements (Continued)

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.

3 In our opinion and on the basis of information and explanations given to us, the methods used

to value non - traded securities, as at 31 March 2018, as determined by the Board of Directors

of AMC, are in accordance with the Regulations and other guidelines issued by the Securities

and Exchange Board of India as applicable and approved by the Board of Trustees are fair and

reasonable.

For B S R & Co. LLP

Chartered Accountants

Firm’s Registration No: 101248W/W-100022

Milind Ranade Mumbai Partner

17 July 2018 Membership No: 100564

4









HSBC Multi Cap Equity Fund (HMEF), erstwhile HSBC India Opportunities Fund (Multi Cap Fund – An open ended equity Scheme investing across large cap, mid cap, small cap stocks)

HMEF seeks long term capital growth through investments across all market capitalisations, including small, mid and large cap stocks. The fund 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. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

The net assets of HMEF amounted to Rs. 597.77 crores as at March 31, 2018 as compared to Rs 454.14 crores as at March 31, 2017. 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%) in net current assets as at March 31, 2018.

HMEF is a multi-cap fund and we remained invested in a diversifi ed portfolio across all capitalization stocks. HMEF has outperformed its benchmark over 3 year, 5 year period and since inception. It has been possible due to superior stock selection, especially in sectors like Financials, Materials, and Energy. Going forward, we will continue with our approach of selecting sustainably profi table companies at reasonable valuations. In terms of allocation, being overweight in Materials, Industrials, Financials, and Consumer Discretionary sectors and underweight in Staples, Energy, Technology, Utilities, and Health care sectors contributed to outperformance.


(%)


Date of Inception : 24 February 2004 1 Year 3 Years 5 Years Since Inception

HSBC Multi Cap Equity Fund - Growth 10.67 9.63 19.60 16.37

S&P BSE 200 TRI (Scheme Benchmark) 13.51 9.91 15.77 14.79

Nifty 50 TRI (Standard Benchmark) 12.68 7.99 13.63 14.42


5


(%)


Date of Inception : 24 February 2004 1 Year 3 Years 5 Years Since Inception

Rs. 10,000, if invested in HMEF, would have become 11,067 13,183 24,483 84,775

Rs. 10,000, if invested in S&P BSE 500, would have become 11,351 13,284 20,804 69,914


Past performance may or may not be sustained in future. The returns for the respective periods are provided as on last business day of March 2018 for Growth Option. Different plans shall have a different expense structure. As TRI data is not available since Inception of the scheme, benchmark performance is calculated using composite CAGR of S&P BSE 200 PRI values from date 24-Feb-2004 to date 29-Jun-2007 and TRI values since date 29-Jun-2007.






S&P BSE 100 12.12%

S&P BSE 200 12.49%

S&P BSE 500 13.21%







6

Moving into FY 2018-19, we expect a continuation of the economic recovery process domestically, recovery in corporate earnings - led early by volume growth, and continued DII fl ows. Government led investment spending and rural consumption are likely to lead with private sector investments contributing later (possibly after general elections 2019). 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.














7



a. Sponsor



b. HSBC Mutual Fund










8






HSBC Multi Cap Equity Fund 4,305,796.93 476 3,072,391.28 65




2017-2018

Com-plaintCode


pending at the



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 5 4 1 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


1 12 12 1 0 0 0 1 0 0 0


0 1 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


9

2017-2018

Com-plaintCode


pending at the



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 34 34 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 1 41 42 0 0 0 0 0 0 0 0

Total 2 99 99 2 0 0 0 0 0 0 0


Particulars Count









10






June 2017 184 116 5 63

September 2017 920 827 12 81

December 2017 49 45 1 3

March 2018 36 29 1 6

Total 1,189 1,017 19 153

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 2017-18. The certifi cate dated May 3, 2018 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 2017-18 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 withfl 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 shallbe 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/-

Dilip Thakkar

Trustee

Mumbai

July 17, 2018.


Independent Auditor’s Report

To the Board of Trustees

HSBC Mutual Fund – HSBC Multi Cap Equity Fund

(Formerly known as HSBC India Opportunities Fund)

Report on the financial statements

We have audited the accompanying financial statements of HSBC Multi Cap Equity Fund

(formerly known as HSBC India Opportunities Fund) (the ‘Scheme’), which comprise the balance

sheet as at 31 March 2018, the related revenue account and the cash flow statement for the year

then ended, and a summary of significant accounting policies and other explanatory information,

annexed thereto.

Management’s responsibility for the financial statements

The 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 financial statements that give a true and fair view of the financial position and financial

performance of the Scheme in accordance with the accounting policies and standards specified in

the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations,

1996, as amended (the ‘Regulations’) and the accounting principles generally accepted in India.

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 financial controls,

that were operating effectively for ensuring the accuracy and completeness of the accounting

records, relevant to the preparation and presentation of the financial statements that give a true and

fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Scheme’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless management either intends to liquidate the

Fund or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with the Standards on Auditing issued by the Institute of

Chartered Accountants of India (the ‘ICAI’). Those Standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free from material misstatement.




Auditor’s responsibility (Continued)

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial 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 financial 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

financial statements.

We are also responsible to conclude on the appropriateness of management’s use of the going

concern basis of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the

Scheme’s ability to continue as a going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in the auditor’s report to the related disclosures in the

financial statements or, if such disclosures are inadequate, to modify the opinion. Our

conclusions are based on the audit evidence obtained up to the date of the auditor’s report.

However, future events or conditions may cause the Scheme to cease to continue as a going

concern.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Opinion

In our opinion, and to the best of our information and according to the explanations given to us, the

aforesaid financial 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 2018;

(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 flow statement, of the cash flows of the Scheme for the year ended on

that date.

Report on other legal and regulatory requirements

1 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 specified in the Ninth Schedule of the Regulations.




Report on other legal and regulatory requirements (Continued)

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.

3 In our opinion and on the basis of information and explanations given to us, the methods used

to value non - traded securities, as at 31 March 2018, as determined by the Board of Directors

of AMC, are in accordance with the Regulations and other guidelines issued by the Securities

and Exchange Board of India as applicable and approved by the Board of Trustees are fair and

reasonable.

For B S R & Co. LLP

Chartered Accountants

Firm’s Registration No: 101248W/W-100022

Milind Ranade Mumbai Partner

17 July 2018 Membership No: 100564

4









HSBC Dynamic Asset Allocation Fund (HDAAF), erstwhile HSBC Dynamic Fund(An open ended Dynamic Asset Allocation Fund)

HDAAF 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. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

The net assets of HDAAF amounted to Rs. 42.20 crores as at March 31, 2018 compared to Rs. 46.22 crores as at March 31, 2017. Around 95.09% of the net assets were invested in equities, 5.53% of the net assets were invested in reverse repos/CBLO and (-0.41%) % in net current assets as at March 31, 2018.

HDAAF is an asset allocation fund where assets are allocated to equity and debt depending upon attractiveness of the asset classes. The debt portion is invested in CBLO products, which under performs pure equity benchmark. Over 1 year, 3 year, 5 year periods, equities has performed very well and CBLO portion has underperformed equities. It is the primary reason of under performance of the fund over these periods. Superior stock selection, especially in Materials, Financials, and Energy helped in reducing extent of underperformance.


(%)


Date of Inception : 24 September 2007 1 Year 3 Years 5 Years Since Inception

HSBC Dynamic Asset Allocation Fund - Growth 9.89 7.55 11.62 5.16

S&P BSE 200 TRI (Scheme Benchmark) 13.51 9.91 15.77 8.98

Nifty 50 TRI (Standard Benchmark) 12.68 7.99 13.63 8.32

Rs. 10,000, if invested in HDAF, would have become 10,989 12,445 17,332 16,973


5


(%)


Date of Inception : 24 September 2007 1 Year 3 Years 5 Years Since Inception

Rs. 10,000, if invested in S&P BSE 200, would have become 11,351 13,284 20,804 24,700


Past performance may or may not be sustained in future. The returns for the respective periods are provided as on last business day of March 2018 for Growth Option. Different plans shall have a different expense structure. Performance of the respective benchmark is calculated as per the Total Return Index (TRI).






S&P BSE 100 12.12%

S&P BSE 200 12.49%

S&P BSE 500 13.21%






Moving into FY 2018-19, we expect a continuation of the economic recovery process domestically, recovery in corporate earnings - led early by volume growth, and continued DII fl ows. Government led investment spending and rural consumption are likely to lead with private sector investments contributing later (possibly


6

after general elections 2019). 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.















7


a. Sponsor



b. HSBC Mutual Fund











8





HSBC Dynamic Asset Allocation Fund - - 2,659,233.10 78




2017-2018

Com-plaintCode


pending at the



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 5 4 1 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


1 12 12 1 0 0 0 1 0 0 0


0 1 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 34 34 0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0 0 0 0


9

2017-2018

Com-plaintCode


pending at the



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 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 1 41 42 0 0 0 0 0 0 0 0

Total 2 99 99 2 0 0 0 0 0 0 0


Particulars Count











10




June 2017 184 116 5 63

September 2017 920 827 12 81

December 2017 49 45 1 3

March 2018 36 29 1 6

Total 1,189 1,017 19 153

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

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