This Statement of Additional Information (SAI) contains details of HSBC Mutual

Fund, its constitution, and certain tax, legal and general information. It is incorporated by reference (is legally a part of the Combined Scheme Information Document).

This SAI is dated 20 May, 2009.

Sponsor: HSBC Securities and Capital Markets (India) Private Limited Regd. Office: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001.

Trustee: Board of Trustees Office: 314, D. N. Road, Fort, Mumbai 400 001.

Asset Management Company: HSBC Asset Management (India) Private Limited Corp. & Regd. Office: 314, D. N. Road, Fort, Mumbai 400 001.

Blank STATEMENT OF ADDITIONAL INFORMATION (SAI) Blank Statement of Additional Information

TABLE OF CONTENTS

Page No. Page No.

I. INFORMATION ABOUT SPONSOR, ASSET 5. Joint Applicants ...... 35 MANAGEMENT COMPANY AND TRUSTEES ...... 2 6. Duration of the Scheme / Plan ...... 35 A. Constitution of the Mutual Fund ...... 2 7. Procedure and Manner of Winding up ...... 35

B. Sponsor ...... 2 8. Unclaimed Redemption / Dividend Amount ...... 35 9. Suspension of Sale / Repurchase / Switch of Units ...... 36 C. Board of Trustees (the Trustees) ...... 2 10. Requirements of Know Your Customer (KYC) under D. Asset Management Company ...... 5 Prevention of Money Laundering Act (PMLA) ...... 36

E. Key Employees of the AMC and relevant experience ...... 8 11. Freezing / Seizure of Accounts ...... 36

F. Service providers ...... 14 C. General Information ...... 36 1. Custodian ...... 14 1. Inter-Scheme Transfer of Investments ...... 36 2. Registrar & Transfer Agent ...... 14 2. Associate Transactions ...... 37 3. Statutory auditor ...... 14 3. Underwriting ...... 43 4. Securities / Stock Lending by the Mutual Fund ...... 43 4. Legal Counsel ...... 14 5. Borrowing by the Mutual Fund ...... 44 5. Fund Accountant ...... 14 6. Master Account / Folio ...... 44 6. Collecting Bankers ...... 14 7. Fractional Units ...... 44

II. CONDENSED FINANCIAL INFORMATION (CFI) ...... 15 8. Personal Identification Number (PIN) ...... 44 9. Policy on Offshore Investments by the III. HOW TO APPLY? ...... 21 Scheme and the Plans thereunder ...... 44 10. Power to make Rules ...... 45 IV. RIGHTS OF UNITHOLDERS OF THE SCHEME ...... 23 11. Power to remove Difficulties ...... 45 12. Scheme to be binding on the Unitholders ...... 45 V. INVESTMENT VALUATION NORMS FOR 13. Unambiguous and Unconditional requests ...... 45 SECURITIES AND OTHER ASSETS ...... 24 14. Acts done in good faith ...... 45

VI. ACCOUNTING POLICIES AND STANDARDS ...... 29 15. Lien ...... 45 16. Units with Depository ...... 45 VII. TAX & LEGAL & GENERAL INFORMATION ...... 32 17. Electronic Clearing Service (ECS) ...... 45

A. Taxation on investing in Mutual Funds ...... 32 18. Client Information ...... 46 19. Website ...... 46 B. Legal Information ...... 34 20. Web transactions Facility ...... 46 1. Nomination Facility ...... 34 21. Transaction by Distributor ...... 46 2. Transfer & Transmission of Units ...... 34 22. Brokers ...... 47 3. Pledge ...... 34 23. Documents Available for Inspection ...... 47 4. Applications under Power of Attorney / 24. Investor Grievances Redressal Mechanism ...... 4p7 Body Corporate / Registered Society / Trust / Partnership ...... 35

HSBC Mututal Fund 1 Statement of Additional Information

I. INFORMATION ABOUT SPONSOR, 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 ASSET MANAGEMENT COMPANY contribution towards the corpus of the Mutual Fund. HSCI is not AND TRUSTEES responsible nor liable for any loss or shortfall resulting from the operation of the Scheme beyond this contribution. THE HSBC GROUP HSCI is a member of the HSBC Group, one of the largest banking The Sponsor of HSBC Mutual Fund is HSBC Securities and Capital and financial services organisations, in the world. Headquartered in Markets (India) Private Limited, a member of the HSBC Group, one London, HSBC operates through long-established businesses in of the largest banking and financial services organisations in the five regions: Europe, Asia-Pacific region, Middle East, America and world. As at December 2008, HSBC had total assets of US$ 2527 Africa. Through its global network of some 9,500 offices in 86 billion. Headquartered in London, HSBC operates through long- countries and territories, HSBC provides a comprehensive range of established businesses in five regions: Europe, The Asia Pacific financial services to personal, commercial, corporate, institutional Region, the Americas, The Middle East and Africa. Through its and investment and private banking clients. global network of about 9500 offices in 86 countries and territories, HSBC provides a comprehensive range of financial services to more HSCI offers integrated investment banking services, securities and than 128 million customers: personal, commercial, corporate, corporate finance & advisory. HSCI is a member of The Bombay institutional and investment and private banking clients. Stock Exchange Limited and National Stock Exchange (capital and derivative market segments) and is also a category I merchant HSBC Global Asset Management is the core global investment banker and underwriter registered with Securities and Exchange management business of the HSBC Group. With dedicated investment Board of India. professionals across Europe, Africa, Asia Pacific and the Americas, HSBC Global Asset Management has strong global investment Equities: HSCI is primarily an institutional stockbroker, with a capabilities that are delivered to clients locally. For institutions, client base spanning foreign institutional investors, Indian financial corporates and financial intermediaries, a comprehensive range of institutions, mutual funds and select retail clients. The business is investment management solutions are offered. For high net worth backed by comprehensive research covering around 62 of India's individuals, HSBC Global Asset Management works with the largest, actively traded securities across 13 industry groups. relationship managers of the individuals to provide bespoke portfolio Global Investment Banking: HSCI provides public and private sector management services. HSBC Global Asset Management has funds corporates and government clients with strategic and financial advice under management & distribution of US$ 354.6 billion (as at in the areas of mergers and acquisitions, primary and secondary March 31, 2009). market funding, privatisations, structured financial solutions and HSBC Asset Management (India) Private Limited, the Asset project export finance. Management Company (AMC) of HSBC Mutual Fund is a subsidiary HSCI holds 100% of the paid-up equity share capital of the AMC. of HSBC Securities and Capital Markets (India) Private Limited. Financial Performance of HSCI (past three years): A. Constitution of the Mutual Fund (Rs. in '000) HSBC Mutual Fund ("the Mutual Fund" or "the Fund") has been Particulars 2007 - 2008 2006 - 2007 2005 - 2006 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, Net Worth 2,170,656 1,809,712 1,460,327 2002 with HSBC Securities and Capital Markets (India) Private Limited, as the Sponsor and the Board of Individual Trustees. The Total Income 1,499,127 1,313,881 1,040,186 office of the Sub-Registrar of Assurances at Mumbai has registered the Trust Deed establishing the Fund under the Registration Act, Profit after tax 496,925 441,837 387,713 1908. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002. Assets Under N.A. N.A. N.A. The office of the Mutual Fund is at 314, D. N. Road, Fort, Management Mumbai - 400 001. (if applicable) The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities / any other property C. Board of Trustees (the Trustees) for the purpose of providing facilities for participation by persons The Sponsor has appointed a Board of Individual Trustees (the as beneficiaries in such properties / investments and in the profits / Trustees) for managing the HSBC Mutual Fund. The Board of income arising therefrom. Individual Trustees (the "Trustee"), shall discharge its obligations as trustee of the HSBC Mutual Fund. The Trustee ensures that the B. Sponsor transactions entered into by the AMC are in accordance with the HSBC Mutual Fund is sponsored by HSBC Securities and Capital SEBI Regulations and will also review the activities carried on by Markets (India) Private Limited (HSCI). The Sponsor is the Settler the AMC.

2 HSBC Mututal Fund Statement of Additional Information

Details of Trustee Directors: Name Age Qualification Brief Experience N. P. Gidwani 68 B.Sc. (Bombay) Maths Hons., He is a fellow member of the Institute of Chartered Accountant. C.A. (Scotland), F.C.A (India) He is an Independent Financial / Management Consultant in India from 1993. He is the Chairman of the Board of Trustees. He is also a director on the Board of various companies and trustee of various charitable institutions. Dr. Rudolf Apenbrink 45 Master of Arts in Business He is the Chief Executive Officer of HSBC Investments (Hongkong) Administration (Major in Limited. He is also a director on the Board of other Finance), University of Georgia, company. Athens, USA Nasser Munjee 56 B.Sc. (Economics), He is the Chairman of Development Credit Bank and Senior M.Sc. (Economics), London Advisor - Infrastructure with KPMG. He is also a director on the School of Economics Board of various companies and trustee of various charitable institutions. Manu Tandon 65 B.Com, ACA - Institute of He is the Managing Director of Elantas Beck India Limited from Chartered Accountants - 1994. He is also a director on the Board of various companies. England & Wales Mehli Mistri 69 B.A. (Hons), Mumbai, He was Ex-MD of Saudi American Bank (Citibank affiliate) and Advanced Management Ex-CEO of ANZ Grindlays Bank. Presently, he is not a Director Program (AMP) - on the Board of any other company. Harvard University Dilip J. Thakkar 72 B.Com., LL.B., F.C.A He is a fellow member of the Institute of Chartered Accountant and is in practice from 1961. He is a Partner with two firms of Chartered Accountants in India. He is also a director on the Board of various companies. Mr. N. P. Gidwani and Dr. Rudolf Apenbrink are associated with the Sponsor. Mr. Nasser Munjee, Mr. Manu Tandon, Mr. Mehli Mistri and Mr. Dilip J. Thakkar are independent Trustees. Thus, 4 out of the 6 Trustees are independent Trustees. Responsibilities and duties of the Trustees as well as the specific so appointed shall immediately and independently report and general due diligence: to the Board any non-compliance observed;

Pursuant to the Trust Deed dated February 7, 2002 constituting the l Appointed registrars and laid down parameters for their Mutual Fund and in terms of the SEBI (Mutual Funds) Regulations, supervision; 1996, the rights and obligations of the Trustees are as under: l Prepared a compliance manual and designed internal l Each of the Trustees in carrying out his responsibilities as a control mechanisms including internal audit systems and member of the Board of Trustees, shall maintain arm's length l Specified norms for empanelment of brokers and marketing relationship with other companies, or institutions or financial agents. intermediaries or any body corporate with which he may be associated. l The Trustees shall ensure that the AMC has been diligent in empanelling brokers, in monitoring securities transactions with l The Trustees shall have a right to obtain from the AMC such brokers and avoiding undue concentration of business with any information as is considered necessary by them. broker. l The Trustees shall ensure before the launch of any scheme that l The Trustees are required to ensure that the AMC has not given the AMC has : - any undue or unfair advantage to any associate or dealt with l Systems in place for its back office, dealing room and any of the associates of the AMC in any manner detrimental accounting; to the interests of the Unitholders.

l Appointed all key personnel including fund manager(s) l The Trustees are required to ensure that the transactions entered for the Scheme and submitted to the Trustees their bio- into by the AMC are in accordance with the SEBI (Mutual data which shall contain the educational qualifications, Funds) Regulations, 1996 and the provisions of the Scheme. past experience in the securities market within 15 days of l The Trustees are required to ensure that the AMC has been their appointment; managing the Scheme independently of other activities and has l Appointed auditors to audit the accounts of the Scheme; taken adequate steps to ensure that the interest of investors of one Scheme are not compromised with those of any other l Appointed compliance officer who shall be responsible Scheme or of other activities of the AMC. for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. l The Trustees are required to ensure that all the activities of the issued by the Board or the Central Government and for AMC are in accordance with the provisions of SEBI (Mutual redressal of investors' grievances. The compliance officer Funds) Regulations, 1996.

HSBC Mututal Fund 3 Statement of Additional Information

l Where the Trustees have reason to believe that the conduct of l The Trustees are required to periodically review all service the business of the Fund is not in accordance with the contracts such as custody arrangements, transfer agency of Regulations and the provisions of the Scheme, they are required securities and satisfy themselves that such contracts are executed to take such remedial steps as are necessary by them and to in the interest of the Unitholders. immediately inform SEBI of the violation and the action taken l The Trustees are required to ensure that there is no conflict of by them. interest between the manner of deployment of its net worth by l Each of the Trustees are required to file with the Fund the the AMC and the interest of the Unitholders. details of his securities' transactions on a quarterly basis, in l The Trustees are required to periodically review the investor accordance with guidelines issued by SEBI from time to time. complaints received and the redressal of the same by the AMC. l The Trustees are accountable for and are required to be the l The Trustees are required to abide by the Code of Conduct as custodian of the Fund's property of the respective Scheme and specified in the Fifth Schedule of the SEBI (Mutual Funds) to hold the same in trust for the benefit of the Unitholders in Regulations, 1996. accordance with the SEBI (Mutual Funds) Regulations, 1996 and the provisions of the Trust Deed. l The Trustees have to furnish to SEBI on a half yearly basis:- l The Trustees are required to take steps to ensure that the l a report on the activities of the Fund; transactions of the Fund are in accordance with the provisions l a certificate stating that the Trustees have satisfied of the Trust Deed. themselves that there have been no instances of self dealing l The Trustees are responsible for the calculation of any income or front running by any of the Trustees, directors and key due to be paid to the Fund and also of any income received in personnel of the AMC; the Mutual Fund for the holders of the Units of any Scheme l a certificate to the effect that the AMC has been managing in accordance with the SEBI (Mutual Funds) Regulations, the Scheme independently of any other activities and in 1996 and the Trust Deed. case any activities of the nature referred to in Regulation l The Trustees are required to obtain the consent of the Unitholders 24, sub-regulation (2) of the SEBI (Mutual Funds) of a Scheme: Regulations, 1996 have been undertaken, the AMC has taken adequate steps to ensure that the interest of the l When required to do so by SEBI in the interest of the Unitholders Unitholders is protected. of that Scheme; or l The independent Trustees are required to give their l Upon the request of three-fourths of the Unitholders of any comments on the report received from the AMC regarding Scheme under the Fund for that Scheme; or the investments by the Mutual Fund in the securities of l If a majority of the Trustees decide to wind up the Scheme or the group companies of the Sponsor. prematurely redeem the Units. l No amendment to the Trust Deed shall be carried out without l The Trustees shall ensure that no change in the fundamental prior approval of SEBI and Unitholders' approval / consent attributes of any Scheme or the Trust or fees and expenses will be obtained where it affects the interests of Unitholders as payable or any other change which would modify the Scheme per the procedure / provisions laid down in the Regulations. and affect the interests of Unitholders, shall be carried out l The Trustees shall exercise due diligence as under: unless: A. General Due Diligence: l a written communication about the proposed change is

sent to each Unitholder and an advertisement is given in l The Trustees shall be discerning in the appointment of the one English daily newspaper having nationwide circulation directors of the AMC. as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is l The Trustees shall review the desirability of the situated; and continuance of the AMC if substantial irregularities are observed in the Schemes and shall not allow the AMC to l the Unitholders are given an option to exit at the prevailing float any new Scheme. Net Asset Value without any exit load. l The Trustee shall ensure that the trust property is properly l The Trustees are required to call for the details of transactions protected, held and administered by proper persons and in securities by the key personnel of the AMC in their own by a proper number of such persons. names or on behalf of the AMC and report the same to SEBI as and when called for. l The Trustees shall ensure that all service providers hold appropriate registrations from SEBI or the concerned l The Trustees are required to review quarterly, all transactions regulatory authority. carried out between the Fund, the AMC and its associates. l The Trustees shall arrange for test checks of service l The Trustees are required to review quarterly the net worth of contracts. the AMC and in case of any shortfall ensure that the AMC makes up for the shortfall as per clause (f) of sub-regulation l The Trustees shall immediately report to SEBI any special (1) of Regulation 21 of SEBI (Mutual Funds) Regulations, developments in the Mutual Fund. 1996.

4 HSBC Mututal Fund Statement of Additional Information

B. Specific Due Diligence: The supervisory role of the Trustees will be discharged by reviewing the information and the operations of the Fund based on the reports The Trustees shall: submitted at the meetings of the Trustees, by reviewing the reports l Obtain internal / concurrent audit reports at regular intervals submitted by the Internal Auditor and the bi-monthly and half yearly from independent auditors appointed by the Trustees. compliance reports. Presently the Board of Trustees are required to hold a meeting at least once in 2 calendar months and at least 6 such l Obtain compliance certificates at regular intervals from meetings are required to be held every year. During the period from the AMC. February 2002 up to April 2009, the Board of Trustees met 44 times. l Hold meetings of Trustees frequently and ensure that at No amendment to the Trust Deed shall be carried out without prior least 6 such meetings shall be held in each year. approval of SEBI and Unitholders' approval / consent will be obtained l Consider the reports of the independent auditor and where it affects the interests of Unitholders as per the procedure / compliance reports of the AMC at the meeting of the provisions laid down in the Regulations Trustees for appropriate action. The Trustees may require or give verification of identity or other l Maintain records of the decisions of the Trustees at their details regarding any subscription or related information from / of meetings and of the minutes of the meetings. the Unitholders as may be required under any law, which may result in delay in dealing with the applications, Units, benefits, distribution, l Prescribe and adhere to the code of ethics by the Trustees, the AMC and its personnel. etc.

l Communicate in writing to the AMC of the deficiencies TRUSTEESHIP FEES and check on the rectification of deficiencies. Pursuant to the Trust Deed constituting the Fund, the Fund is l The Trustees shall maintain high standards of integrity and authorised to pay the Independent Trustees a fee for their services fairness in all their dealings and in the conduct of their business. for meetings of the Board of Trustees / Committee meetings attended by such Trustees, as may be mutually agreed between the Sponsor l The Trustees shall render at all times high standards of service, and the Board of Trustees from time to time, subject to the SEBI exercise due diligence, ensure proper care and exercise Regulations. independent professional judgement. l The independent Trustees shall pay specific attention to the D. Asset Management Company following as may be applicable, namely: HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC) is a private limited company incorporated l The Investment Management Agreement and the under the Companies Act, 1956 on December 12, 2001 having its compensation paid under the Agreement. Registered Office at 314, D. N. Road, Fort, Mumbai 400 001. HSBC l Service contracts with affiliates - whether the AMC has Asset Management (India) Private Limited has been appointed as charged higher fees than outside contractors for the same the Asset Management Company of the HSBC Mutual Fund by the services. Trustee vide Investment Management Agreement (IMA) dated February 7, 2002 and executed between the Trustees and the AMC. l Selection of the AMC's independent directors. SEBI approved the AMC to act as the Investment Manager of the l Securities transactions involving affiliates to the extent Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. such transactions are permitted. The paid-up equity share capital of the AMC is Rs. 9 crores. HSBC l Selecting and nominating individuals to fill independent Securities and Capital Markets (India) Private Limited holds 100% directors' vacancies. of the paid-up equity share capital of the AMC.

l Code of ethics must be designed to prevent fraudulent, The AMC will manage the schemes of the Fund as mentioned in the deceptive or manipulative practices by insiders in Combined Scheme Information Document / Scheme Information connection with personal securities transactions. Documents / Offer Documents, in accordance with the provisions of IMA, the Trust Deed, the SEBI Regulations and the objectives l The reasonableness of fees paid to Sponsors, AMC and any others for services provided. of the Scheme.

l Principal underwriting contracts and renewals. The AMC has renewed its Certificate of Registration as Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993 l Any service contracts with the associates of the AMC. vide registration no. INP000001322 with effect from 16 September,

l Notwithstanding anything contained in sub-regulations 2008 and is valid till 15 September, 2011. (1) to (25) of Regulation 18 of the SEBI (Mutual Funds) In accordance with the SEBI Regulations, an asset management Regulations, 1996, the Trustees shall not be held liable for company, subject to certain conditions, is also permitted to undertake acts done in good faith if they have exercised adequate activities in the nature of portfolio management services, management due diligence honestly. and advisory services to offshore funds, pension funds, provident

l The Regulations provide that the meetings of the Trustees funds, venture capital funds, management of insurance funds, shall be held at least once in every 2 calendar months and financial consultancy and exchange of research on commercial at least 6 such meetings shall be held every year. Further, basis and such other activities as may be permitted by SEBI from as per the Regulations, for the purposes of constituting the time to time. Subject to these activities being assessed as desirable quorum for the meetings of the Trustees, at least one and economically viable, the AMC may undertake any or all of these Independent Trustee or Director should be present during activities after satisfying itself that there is no potential conflict of such meetings. interest.

HSBC Mututal Fund 5 Statement of Additional Information

DETAILS OF AMC DIRECTORS: Name Age Qualification Brief Experience Naina Lal Kidwai 52 MBA - Harvard Business She is the Chairman of the Board of Directors and Group General School, BA, Delhi University Manager & Country Head - The Hongkong and Shanghai Banking Corporation Limited, India. She is also a director on the Board of various companies and trustee of various charitable institutions / trust. Ayaz Ebrahim 45 B.Sc. (Hons.) in Accountancy & He is the Chief Executive Officer, Asia Pacific, Halbis Capital Finance, University of East Management (HK) Limited, Hong Kong from 2005. He is also a Anglia, UK director on the Board of various companies. S. P. Mustafa 59 BA Honors - St. Stephens College, He is a fellow member of the Institute of Chartered Accountants Chartered Accountant, FCA, of England and Wales. He is an Executive with Hasham England and Wales Investment & Trading Company Private Limited in Bangalore. He is also a Director on the Board of other company. Vithal Palekar 73 Bachelor of Science, He is a fellow member of the Institute of Chartered Accountant Bachelor of Laws, and is in practice from 2000. He is a Partner with a firm of Chartered Accountant Chartered Accountants in India. He is also a director on the Board of various companies and trustee of charitable institutions / trust. Kishori J. Udeshi 65 M.A. (Economics) Ms. Udeshi is currently Chairman of The Banking Codes and Standards Board of India, set up by the RBI. She is a director on the Board of the Government of India's Security Printing & Minting Corporation of India Ltd. and Haldyn Glass Gujarat Limited. She moved on to a professional career in central banking and became the first woman to be appointed as Deputy Governor of the Reserve Bank of India. Vikramaaditya 38 PGDM, B. Tech. He is the Chief Executive Officer of HSBC Asset Management (India) Private Limited from July 2008. Ms. Naina Lal Kidwai, Mr. Ayaz Ebrahim and Mr. Vikramaaditya are associated with the Sponsor. Mr. Vithal Palekar, Ms. Kishori J. Udeshi and Mr. S. P. Mustafa are independent Directors. Thus, 3 out of the 6 Directors are independent Directors.

Powers, Duties, Obligations and Responsibilities l Opening and operating bank accounts in the name and on of the Asset Management Company: behalf of each scheme in relation to the investments made by The powers, duties and responsibilities of the AMC shall be governed the Mutual Fund. by the Regulations and the Investment Management Agreement. l Fixing record dates or book closure periods for the purpose of The AMC, in the course of managing the affairs of the Mutual Fund, effecting transfer of Units and determining eligibility for has the powers, inter alia for following duties and responsibilites: dividends, bonus, rights, privileges, preferences, reservations l Floating Scheme of the Mutual Fund after approval of the same or other entitlements or accretions. by the Trustees and investing and managing the funds mobilised l Providing information to SEBI and the Unitholders as required under various Schemes, in accordance with the provisions of under the Regulations or as otherwise required by SEBI. the Trust Deed and the Regulations. l Receiving, holding in trust, or as agent or nominee of the l Evaluating investment opportunities for further investments by Trustees, improving, developing, using, selling, transferring, the Mutual Fund. exchanging, assigning, dealing, trading in and managing all l Evaluating and issuing orders and instructions with respect to assets and all accretions thereto and endeavouring to earn the acquisition and disposition of investments and risk positions / adequate returns on them for and on behalf of the Trust. exposures. l Fixing sales and re-purchase prices, and calculating Net Asset l Issuing and ensuring due compliance of instructions to the Value for Units, consistent with the Regulations. custodian and the Mutual Fund's brokers, agents including registrars and transfer agents. l Setting up an effective establishment for servicing of Unitholders under the various Scheme and also to protect the interest of the l Issuing, selling, repurchasing and cancelling the Units as per Unitholders. the terms of the respective Scheme of the Mutual Fund. l Generally doing all acts, deeds, matters and things which are l Managing the Mutual Fund Scheme independently of other necessary for any object, purpose or in relation to the Mutual activities and taking adequate steps to ensure that the interests Fund in any manner or in relation to any scheme of the Mutual of Unitholders are not being compromised with those of any Fund. other Scheme or any of its other activities.

6 HSBC Mututal Fund Statement of Additional Information

Duties and Responsibilities by the AMC and be disclosed in the half yearly / annual l The AMC shall take all reasonable steps and exercise due accounts of the respective Scheme with justification for such diligence to ensure that the investment of funds pertaining to investment provided that the latter investment has been made any Scheme is not contrary to the provisions of the SEBI within 1 year of the date of the former investment calculated Regulations and the Trust Deed. on either side. l The AMC shall file with the Trustees and SEBI l The AMC shall exercise due diligence and care in all its investment decisions as would be exercised by other persons l Detailed bio-data of all its directors along with their interest engaged in the same business. in other companies within 15 days of their appointment; and any change in the interest of directors every 6 months. l The AMC shall be responsible for the acts of commissions or omissions by its employees or the persons whose services have l A quarterly report to the Trustees giving details and been procured by the AMC. adequate justification about the purchase and sale of securities of the group companies of the Sponsor or the l The AMC shall submit to the Trustees quarterly reports of each AMC as the case may be, by the Mutual Fund during the year on its activities and the compliance with the SEBI quarter. Regulations. l Each director of the AMC shall file the details of his l The Trustees at the request of the AMC may terminate the transactions of dealing in securities with the Trustees on assignment of the AMC at any time provided that such a quarterly basis in accordance with guidelines issued by termination shall become effective only after the Trustees have SEBI from time to time. accepted the termination of assignment and communicated their decision in writing to the AMC. l The AMC shall not appoint any person as key personnel who has been found guilty of any economic offence or involved in l Notwithstanding anything contained in any contract or violation of securities laws. agreement of termination, the AMC or its directors or other officers shall not be absolved of liability to the Mutual Fund l The AMC shall appoint registrars and share transfer agents for their acts of commissions or omissions, while holding such who are registered with SEBI. Provided if the work relating to position or office. the transfer of Units is processed in-house, the charges at competitive market rates may be debited to the Scheme and for l The AMC shall not through any broker associated with the rates higher than the competitive market rates, prior approval Sponsor, purchase or sell securities, which is average of 5% or of the Trustees shall be obtained and reasons for charging more of the aggregate purchases and sales of securities made higher rates shall be disclosed in the annual accounts. by the Mutual Fund in all its Scheme. Provided that for these purposes, aggregate purchase and sale of securities shall exclude l The AMC shall abide by the Code of Conduct as specified in sale and distribution of Units issued by the Mutual Fund. the Fifth Schedule of the SEBI Regulations. Provided further that the aforesaid limit of 5% shall apply for l The AMC shall a block of any 3 months. l Not act as a trustee of any mutual fund l The AMC shall not purchase and sell through any broker (other l Not undertake any other business activities except activities than a broker associated with the Sponsor) which is average in the nature of portfolio management services, of 5% or more of the aggregate purchases and sale of securities management and advisory services to offshore funds, made by the Mutual Fund in all its Scheme, unless the AMC pension funds, provident funds, venture capital funds, has recorded in writing the justification for exceeding the limit management of insurance funds, financial consultancy of 5% and reports of all such investments are sent to the and exchange of research on commercial basis if any of Trustees on a quarterly basis. Provided that the aforesaid limit such activities are not in conflict with the activities of the shall apply for a block of 3 months. Mutual Fund without the prior approval of the Trustees l The AMC shall not utilise the services of the Sponsor or any and SEBI. Provided that the AMC may itself or through of its associates, employees or their relatives, for the purpose its subsidiaries undertake such activities if it satisfies of any securities' transactions and distribution and sale of SEBI that the key personnel of the AMC, the systems, securities, provided that the AMC may utilise such services if back office, bank and securities accounts are segregated disclosure to that effect is made to the Unitholders and the activity-wise and there exists systems to prohibit access brokerage or commission paid is also disclosed in the half to inside information of various activities. Provided further yearly annual accounts of the Mutual Fund. that the AMC shall meet capital adequacy requirements, if any, separately for each such activity and obtain separate l The AMC shall file with the Trustees the details of transactions approval, if necessary under the relevant regulations. in securities by key personnel of the AMC in their own name or on behalf of the AMC and shall also report to SEBI, as and l Not invest in any of its Scheme unless full disclosure of when required by SEBI. its intention to invest has been made in the respective Offer Document / Combined Scheme Information l In case the AMC enters into any securities' transaction with any Document. of its associates a report to that effect shall be sent to the l Not be entitled to charge any fees on its investment in that Trustees at their next meeting. Scheme. l In case any company has invested more than 5% of the net asset l Not acquire any of the assets out of the Trust funds, which value of a Scheme, the investment made by that Scheme or by involves the assumption of any liability which is unlimited any other Scheme of the same Mutual Fund in that company or which may result in encumbrance of the Scheme or its subsidiaries shall be brought to the notice of the Trustees property in any way.

HSBC Mututal Fund 7 Statement of Additional Information

l The independent Directors of the AMC shall pay specific be) of the Asset Management Company shall ensure that the attention to the following as may be applicable, namely: Mutual Fund complies with all the provisions of these regulations and the guidelines or circulars issued in relation l The Investment Management Agreement and the compensation thereto from time to time and that the investments made by the paid under the Agreement. Fund Managers are in the interest of the unitholders and shall l Service contracts with affiliates - whether the AMC has charged also be responsible for the overall risk management function higher fees than outside contractors for the same services. of the Mutual Fund. l Securities transactions involving affiliates to the extent such Asset Management Fees transactions are permitted. In the terms of the Investment Management Agreement and the l Code of ethics must be designed to prevent fraudulent, deceptive Regulations, the AMC is entitled to an investment management and or manipulative practices by insiders in connection with personal advisory fee at the rate of 1.25% per annum of the weekly average securities transactions. net assets outstanding in each accounting year for the Scheme concerned, as long as the net assets do not exceed Rs. 100 crores l The reasonableness of fees paid to Sponsors, AMC and any (Rupees One Hundred Crores Only) and 1.00% of the excess amount others for services provided. over Rs. 100 crores (Rupees One Hundred Crores Only), where net l Principal underwriting contracts and renewals. assets so calculated exceed Rs. 100 crores (Rupees One Hundred Crores). For Scheme launched on a no load basis, the AMC is l Any service contracts with the associates of the AMC. entitled to collect an additional management fee not exceeding 1% l The Chief Executive Officer (whatever his designation may of the weekly average net assets outstanding in each financial year.

E. Key Employees of the AMC and relevant experience:

Name Designation Age Qualification Brief Experience Vikramaaditya Chief Executive Officer 38 PGDM, B. Tech. Over 15 years of experience in areas of business strategy, product development, sales and client services / delivery. l HSBC Asset Management (India) Private Limited Chief Executive Officer from July 2008 onwards l HSBC, India SVP and Head - India, HSBC Securities Services from April 2004 to July 2008 Manager, Product Development, Payments & Cash Management from January 2001 to April 2004 Product Manager, Payments & Cash Management from October 1998 - December 2000 l Citibank N.A. Various Roles within Global Transaction Services in Product Management, Sales and Operations from May 1994 to October 1998. S. Venkatesh Iyer Senior Vice President 43 Chartered Accountant Over 18 years experience in Operations, Finance, & Chief Operating Customer Service, etc. Officer l HSBC Asset Management (India) Private Limited Chief Operating Officer from August 2004 to date l Prudential ICICI Asset Management Company Associate Vice President - Operations from July 2004 to August 2004 l Sundaram Asset Management Co. Ltd. Vice President - Operations, from August 2003 to July 2004 l Quintant Services Limited Lead Consultant from May 2003 to July 2003 l Capital Group International Inc. Consultant, from December 1999 to May 2003 l Birla SunLife Asset Management Company Limited Controller Operations, June 1996 to November 1999 l Ernst & Young, Accounting Firm, Kuwait Audit Officer from December 1991 to September 1995

8 HSBC Mututal Fund Statement of Additional Information

Name Designation Age Qualification Brief Experience

O. V. Ravi Vice President & 41 B.L., ACS Over 16 years of experience in Legal, Secretarial and Head of Compliance Compliance l HSBC Asset Management (India) Private Limited Vice President & Head of Compliance from September 2007 to present

l NV Advisory Services Private Limited Chief Compliance Officer from September 2005 to September 2007

l Reliance Capital Asset Management Limited Head - Legal & Compliance from November 2003 to September 2005

l Mphasis BFL Limited Head - Legal & Company Secretary from June 2002 to October 2003

l Novell Software Development Limited Company Secretary from January 2001 to June 2002

l Kakatiya Textiles Limited Secretarial Officer from January 1998 to September 2000

l Lanco Industries Limited Secretarial Officer from January 1994 to December 1997 Suyash Vice President & Head 30 PGDM, BA (Hons.) Over 8 years experience in research and fund management. Choudhary of Fund Management - Economics l HSBC Asset Management (India) Private Limited Fixed Income Head of Fund Management - Fixed Income from December 2008 to present Fund Manager from February 2008 to December 2008

l Standard Chartered AMC Fund Manager from November 2002 to January 2008 Manager - Pension Funds from November 2001 to October 2002

l DB Consulting Group Asia Pacific Research Associate from May 2000 to October 2001 Jitendra Sriram Vice President & 37 B.E. (Elect.), Post Over 14 years experience in Equity Research. This Head of Fund Graduate Diploma in involved analysing various sectors and companies and Management - Equities Business Management presenting investment ideas to fund managers. l HSBC Asset Management (India) Private Limited Head of Fund Management - Equities from February 2009 to present Fund Manager from May 2006 to February 2009

l Deutsche Equities India Private Limited Vice President from August 2002 to April 2006

l HSBC Securities and Capital Markets (India) Private Limited Deputy Head of Research from March 1997 to August 2002

l ITC Classic Share & Stock Broking Analyst from June 1995 to March 1997 R. Srinivasan Vice President & 35 B.Com., AICWA Over 14 years experience in Operations and Finance Head of Operations l HSBC Asset Management (India) Private Limited Head of Operations from August 2006 to present

l Tata Consultancy Services Limited Associate Consultant - Asset Management and Securities Back Office - BPO from November 2004 to July 2006

HSBC Mututal Fund 9 Statement of Additional Information

Name Designation Age Qualification Brief Experience

l Principal PNB Asset Management Company Private Limited Assistant Vice President - Operations and Finance from January 2004 to November 2004 Assistant Vice President - Operations from February 2002 to January 2004 l DSP Merrill Lynch Fund Managers Limited Assistant Vice President - Operations from January 2002 to February 2002 Manager - Operations from April 1998 to December 2001 l SBI Capital Markets Limited Accounts Executive - Finance from April 1995 to April 1998 Vipul Gupta Senior Vice President 40 MBA (FMS Delhi); Over 16 years of experience in areas of sales and & Head of Sales & B.E. (Mech.) distribution Distribution l HSBC Asset Management (India) Private Limited Head of Sales & Distribution from August 2008 onwards l HSBC, Middle East Senior Vice President, NRI Services - Middle East from May 2004 - July 2008 l HSBC, India Manager Hyderabad, from May 2002 - April 2004 Kolkata: Manager Shakespeare Sarani from April 2000 - May 2002 Kolkata: Sales Manager, Personal Banking from April 1999 to March 2000 Chennai: Assistant Manager Sales - Personal Banking from June 1995 to March 1999 l Coats Viyella India Limited Assistant Branch Manager from June 1992 to May 1995 Kishore Vice President & 31 ACS, Inter CWA, Over 11 years of experience in areas of finance, accounting, Balachandran Head of Finance B.Com. secretarial and strategy. l HSBC Asset Management (India) Private Limited Head of Finance from August 2008 onwards l HSBC Bank, Personal Financial Services (India) VP - Strategic Business Analysis and Development from April 2006 - July 2008 l HSBC Operations and Processing Enterprise (India) Private Limited Manager - Finance & Company Secretary from November 2003 - March 2006 l HSBC Professional Services (India) Private Limited Compliance Officer from February 2003 to October 2003 l HSBC Bank, India Banking Executive from August 2000 - February 2003 l Balaji Distilleries Limited Assistant Company Secretary from April 1999 to August 2000 l Balaji Hotels & Enterprise Limited Assistant Company Secretary from October 1998 to March 1999 l Balaji Industrial Corporation Limited Secretarial Officer from June 1997 to September 1998 Deepali Naair Vice President & 37 B.A., Masters of Over 16 years experience in Sales & Marketing, Brand Head of Marketing Management Management and Strategic Planning Studies (Marketing) l HSBC Asset Management (India) Private Limited Head of Marketing from April 2008 to present Head of Marketing & Product Development from April 2006 to March 2008

10 HSBC Mututal Fund Statement of Additional Information

Name Designation Age Qualification Brief Experience

l Marico Limited Marketing Manager from October 2002 to March 2005 l FCB ULKA Advertising Private Limited Consultant - Strategic Planning from September 1998 to October 2002 l BPL Mobile Communications Limited Manager - Marketing from September 1995 to August 1998 l Tata Motors Limited Senior Officer - Sales & Marketing from May 1993 to September 1995 Shwaita Vaish Vice President & 32 Post Graduate Over 10 years experience in Product Development & Sales. Head - Product Diploma in l HSBC Asset Management (India) Private Limited Strategy & Business Head Product Strategy & Development from April 2008 Development Management to present VP - Product Development from Aug. 2005 till March 2008 l ICICI Prudential Asset Management Manager - Product Development from January 2004 - July 2005 Asst. Manager - Sales from June 2002 - December 2003 l GROZ Net Industrties Executive - Sales & Marketing from Oct. 1997 - May 2000 Tony Jose Vice President, 29 Post Graduate Over 6 years of experience in Human Resources Human Resources Diploma in l HSBC Asset Management (India) Private Limited Personnel Vice President & Head of Human Resources from July Management & 2008 onwards Industrial l Deloitte Consulting India Pvt. Ltd. Relations, B.A. Manager - Talent Development from May 2002 to July 2008 Dhimant Shah Vice President & 41 B.Com., CA Over 16 years experience in Equity Research. This involved Fund Manager analysing various sectors and companies and presenting investment ideas to fund managers. l HSBC Asset Management (India) Private Limited Fund Manager from March 2007 to present

l Reliance Asset Management Co. Limited Vice President / Portfolio Manager from October 2005 to February 2007

l ASK Raymond James Securities Pvt. Limited Portfolio Manager from September 2003 to September 2005

l IL&FS Asset Management Co. Limited Senior Analyst from April 1997 to August 2003 Palak Mehta Vice President, 36 Bachelor of Over 9 years of experience in Dealing in Equity Markets Dealing Commerce l HSBC Asset Management (India) Private Limited Dealer since September 2008 onwards

l DSP Merrill Lynch Limited - Strategic Investment Group Dept. AVP - Dealing from September 2006 - September 2008

l DSP Merrill Lynch Limited - Global Private Client Dept. Senior Specialist - Dealing from October 2004 - September 2006

l Kotak Securities Dealer from April 2003 - September 2004

l Stanford Trading Company Dealer from March 2001 - March 2003

l HDFC Securities Dealer from January 2000 - February 2001

HSBC Mututal Fund 11 Statement of Additional Information

Name Designation Age Qualification Brief Experience

Nilang Mehta, Vice President & 32 M.Com., Chartered Over 9 years experience in fund management and credit CFA Fund Manager Accountant research l HSBC Asset Management (India) Pvt. Ltd. Fund Manager from October 2007 to present Assistant Fund Manager from July 2004 to October 2007 l Alliance Capital Asset Management (India) Pvt. Ltd. Senior Manager - Fixed Income from April 2003 to July 2004 l IDBI Principal Asset Management (India) Pvt. Ltd. Investment Analyst from April 2001 to April 2003 l Bank of America - Global Capital Markets Industrial Trainee from August 1998 to August 1999 Gaurav Mehrotra Associate 28 Post Graduate Over 4 years experience in research. Vice President, Diploma in Business l HSBC Asset Management (India) Private Limited Investment Management, AVP, Investment Management from September 2007 to present Management Bachelor of l JPMorgan Services India Private Limited Engineering Equity Research from August 2005 to Sep. 2007 l Tata Consultancy Services Limited Business Analyst from June 2004 to July 2005 Niren Parekh Associate Vice 28 Post Graduate Over 4 years experience in research. President, Diploma in Business l HSBC Asset Management (India) Private Limited Investment Management Assistant Fund Manager from September 2007 to Management Chartered Accountant present l Motilal Oswal Securities Limited Analyst from October 2005 to September 2007 l SBI Capital Markets Management Trainee from May 2005 to September 2005 Amaresh Mishra Associate 29 Post Graduate Over 4 years experience in Equities & Sales. Vice President, Diploma in l HSBC Asset Management (India) Private Limited Investment Business Management, Associate Vice President, Investment Management Management Bachelor of from April 2008 to present Engineering Associate Vice President - Equities from October (Chemical) 2007 - March 2008 Associate Vice President - Sales and Distribution from March 2005 - September 2007 l Centre for Science and Environment Trainee Researcher from July 2001 - July 2002 Aditya Khemani Associate Vice 28 PGDBM, Over 4 years experience in Research. President & B.Com. (Hons.) l HSBC Asset Management (India) Private Limited Assistant Fund Assistant Fund Manager, Equities from February 2009 Manager, Equities to present Associate Vice President - Investment Management from October 2007 to February 2009 l SBI Funds Management India Private Limited Senior Manager - Equity Research from March 07 - Sep. 07 l Prudential ICICI Asset Management Company India Private Limited Assistant Manager - Equity Research from Dec. 05 - Feb. 07 l Morgan Stanley Advantage Services Private Limited Research Associate from May 05 - Nov. 05 Kedar Karnik Associate Vice 28 M.M.S. (Finance), Over 4 years experience in research and credit rating President & B.E. l HSBC Asset Management (India) Private Limited Assistant Fund Assistant Fund Manager, Fixed Income from December Manager, 2008 to present Fixed Income Associate Vice President & Credit Analyst from July 2008 to December 2008 l CRISIL Ltd. Manager - Financial Sector Ratings from September 2005 to July 2008

12 HSBC Mututal Fund Statement of Additional Information

Name Designation Age Qualification Brief Experience

l ICICI Bank Ltd. Management Trainee from May 2005 to September 2005 Siddharth Taterh Vice President, 29 B.E. (Comp), Over 5 years of experience in Risk Risk Management PGDM in Finance/ l HSBC Asset Management (India) Private Limited System, FRM Head of Risk Management since November 2008 onwards

l Morgan Stanley Advantage Services Private Limited Manager, Prime Brokerage Risk Management from November 2006 to November 2008

l American Express India Private Limited Assistant Manager, Risk Management from September 2004 to November 2006

l HCL Technologies Ltd. Assistant Manager from May 2003 to September 2004 Sanjay Shah Vice President, 34 B. Com, Over 9 years of experience in research and risk & Fund Manager, A. C. A., l HSBC Asset Management (India) Private Limited Fixed Income P. G. D. M. Vice President & Fund Manager, Fixed Income since December 2008 onwards

l FIL Fund Management Private Limited Credit Analyst from September 2008 to December 2008

l Lehman Brothers Structured Financial Services Private Limited Vice President, Convertible Products from September 2006 to September 2008

l Rabo India Finance Private Limited Senior Manager - Credit Risk from July 2004 to September 2006

l ICICI Bank Limited Manager, Credit Risk from January 2003 to June 2004

l SBI Funds Management Private Limited Chief Manager, Debt Funds from June 1999 to January 2003 Presently the AMC has one dedicated equity dealer and a total of eleven employees in the investment management department. Presently all the key personnel are based in the corporate office of the AMC.

PROCEDURE FOLLOWED FOR INVESTMENT It is the responsibility of the AMC to ensure that the investments DECISIONS are made as per the internal / Regulatory guidelines, Scheme investment objectives and in the best interest of the Unitholders of The Fund Managers of the Scheme are responsible for making buy / the Scheme. The Fund may follow internal guidelines as approved sell decisions in respect of the securities in the Scheme's portfolio by the Board of the AMC and the Trustees from time to time. and to develop a well diversified portfolio that minimizes liquidity Internal guidelines shall be subject to change and may be amended and credit risk. The investment decisions are made on a daily basis from time to time in the best interest of the Unitholders. The keeping in view the market conditions and all relevant aspects. amendments will be approved by the Board of the AMC and the Trustees of the Mutual Fund. The Board of the AMC has constituted an Investment Management Committee that meets at periodic intervals. The Investment The Heads of Fund Management - Equities & Fixed Income present Management Committee, at its meetings, reviews investments, to the Board of the AMC and the Trustees periodically, the including investments in unrated debt instruments. The approval of performance of the Schemes. The performance of the Scheme will unrated debt instruments is based on parameters laid down by the be reviewed by the Boards with reference to the appropriate Board of the AMC and the Trustees. The details of such investments benchmarks. are communicated by the AMC to the Trustees in their periodical The performance of the schemes shall be benchmarked against the reports along with a disclosure regarding how the parameters have respective Benchmark Index mentioned in the Combined Scheme been complied with. Such reportings shall be in the manner prescribed Information Document read with the addendums issued from time by SEBI from time to time. The Committee also reviews the to time. However, the Schemes performance may not be strictly performance of the Scheme and general market outlook and comparable with the performance of the Index due to the inherent formulates the broad investment strategy at their meetings. differences in the construction of the portfolios. The Boards may

HSBC Mututal Fund 13 Statement of Additional Information review the benchmark selection process from time to time, and 2. Registrar & Transfer Agents make suitable changes as to use of the benchmark, or related to Computer Age Management Services (P) Ltd. (CAMS), Spencer composition of the benchmark, whenever it deems necessary. Plaza, Phase II, S49A, 172, Anna Salai, Chennai 600 002 has been The Heads of Fund Management - Equities & Fixed Income will appointed as Registrar, Transfer Agents and dividend paying agent. bring to the notice of the AMC Board, specific factors if any, which The Registrar is registered with SEBI under the SEBI (Registrars are impacting the performance of the Scheme. The Board on to an Issue and Share Transfer Agents) Regulations, 1993 vide consideration of all relevant factors may, if necessary, give appropriate registration number INR000002813. As Registrars to the Scheme, directions to the AMC. Similarly, the performance of the Scheme CAMS will handle communications with investors, perform data will be submitted to the Trustees. The Heads of Fund Management entry services and despatch account statements. The Board of AMC - Equities & Fixed Income will explain to the Trustees, the details and Trustees have ensured that the Registrar has adequate capacity on the Schemes' performance vis-à-vis the benchmark returns. to discharge responsibilities with regard to processing of applications The AMC will keep a record of all investment decisions. and dispatching account statements / unit certificates to unitholders within the time limit prescribed in the Regulations and also have F. Service providers sufficient capacity to handle investor complaints. 1. Custodian 3. Statutory Auditor JP Morgan Chase Bank, Mafatlal Centre, 9th Floor, Nariman Point, Mumbai - 400 021 has been appointed as Custodian / Global Price Waterhouse, Chartered Accountants, 252, Veer Savarkar Marg, Custodian of the Scheme of HSBC Mutual Fund. The Custodian has Shivaji Park, Dadar (West), Mumbai - 400 028 shall be the Auditors been registered with SEBI under the SEBI (Custodians of Securities) for the Schemes of HSBC Mutual Fund. The Trustees have the right Regulations, 1996, and has been awarded registration number to change the Auditors. IN/CUS/014 dated November 10, 1998. The Mutual Fund has entered into a Custody Agreement dated July 4, 2002, with the Custodian, 4. Legal Counsel and the salient features of the said Agreement are to: Bharucha & Partners, 4th Floor, Cecil Court, Mahakavi Bhushan Marg, Colaba, Mumbai - 400 039 has been appointed as the Legal l Provide post-trading and custodial services to the Mutual Fund Advisor for the Schemes of HSBC Mutual Fund. l Ensure benefits due on the holdings are received 5. Fund Accountant l Provide detailed information and other reports as required by JP Morgan Chase Bank, Mafatlal Centre, 9th Floor, Nariman Point, the AMC Mumbai - 400 021 has been appointed as the Fund Accountant for l Maintain confidentiality of the transactions Scheme. The Fund Accountant provides fund accounting, NAV calculation and other related services. The Fund Accountant is l Be responsible for the loss or damage to the assets belonging entitled to remuneration for its services in accordance with the terms to the Scheme due to negligence on its part or on the part of its approved agents of the Fund Administration Agreement. The Trustees / AMC have the right to change the Fund Accountant, if necessary. l Segregate assets of each Scheme 6. Collecting Bankers The Custodian shall not assign, transfer, hypothecate, pledge, lend, use or otherwise dispose any assets or property, except pursuant to The collecting bankers for transactions on an on-going basis will be instruction from the Trustees / AMC or under the express provisions The Hongkong and Shanghai Banking Corporation Limited, 56/60, of the Custody Agreement. M.G. Road, Mumbai - 400 001 (SEBI registration no. INBI00000027) and such other banks registered with SEBI as collecting bankers as The Custodian will be entitled to remuneration for its services in may be decided by the AMC from time to time. Applications on an accordance with the terms of the Custody Agreement. The Trustees on-going basis will be accepted at the Collection Centres designated have the right to change the Custodian, if necessary. by the AMC.

14 HSBC Mututal Fund Statement of Additional Information

II. CONDENSED FINANCIAL INFORMATION Condensed Financial Information as of 31 March, 2009 HISTORICAL PER UNIT STATISTICS HSBC-Advantage India Fund+ HSBC-Midcap Equity Fund* HSBC-Ultra Short Term Bond Fund+ 01-Apr-08 01-Apr-07 01-Apr-06 23-Feb-06 01-Apr-08 01-Apr-07 01-Apr-06 19-May-05 01-Apr-08 01-Apr-07 17-Oct-06 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06 31-Mar-09 31-Mar-08 31-Mar-07 NAV at the beginning of the Year/Period (Rs.) Dividend Option 13.3555 11.7374 11.2925 10.0000 13.6463 13.8256 17.3721 10.0000 NA NA NA Growth Option 14.5446 11.7374 11.2935 10.0000 20.6339 18.1774 18.6362 10.0000 NA NA NA Regular Option - Dividend NA NA NA NA NA NA NA NA 10.0122 10.0122 10.0000 Regular Option - Growth NA NA NA NA NA NA NA NA 11.2274 10.3595 10.0000 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0340 10.0460 10.0000 Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Growth NA NA NA NA NA NA NA NA 11.2519 10.3666 10.0000 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA 10.0125 10.0125 10.0000 Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0348 10.0469 10.0000 Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA 10.0834 10.1046 NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA 11.2737 10.3713 10.0000 Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA 10.0126 10.0126 10.0000 Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0353 10.0474 10.0000 Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA 10.2678 10.1050 10.0000 Net Income Per unit (Rs.) (4.6598) 5.9353 1.6208 0.1336 (8.0859) 5.6183 6.0230 2.7270 2.6779 1.5446 0.5478 Dividends Paid out (Rs. per unit) # Regular Option - Dividend 1.11 1.81 - - - 2.29 3.69 0.93 1.10 0.69 0.30 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA 1.12 0.96 0.23 Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA 1.89 0.87 0.35 Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA 1.61 0.94 0.33 Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA 1.15 1.26 0.87 Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA 7.01 1.69 0.50 Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA 4.88 1.57 1.46 Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA 1.20 1.57 1.29 Transfer to Reserves (Rs. In crores) - - - 204.35 - - - 223.08 - - 10.57 NAV at the End of the Year/Period (Rs.) Dividend Option 7.0792 13.3555 11.7374 11.2925 6.6851 13.6463 13.8256 17.3721 NA NA NA Growth Option 8.3228 14.5446 11.7374 11.2935 10.1084 20.6339 18.1774 18.6362 NA NA NA Regular Option - Dividend NA NA NA NA NA NA NA NA 10.0122 10.0122 10.0122 Regular Option - Growth NA NA NA NA NA NA NA NA 12.1193 11.2274 10.3595 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0418 10.0340 10.0460 Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Growth NA NA NA NA NA NA NA NA 12.1702 11.2519 10.3666 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA 10.0125 10.0125 10.0125 Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0432 10.0348 10.0469 Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA 10.1476 10.0834 10.1046 Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA 12.2294 11.2737 10.3713 Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA 10.0506 10.0126 10.0126 Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA 10.0447 10.0353 10.0474 Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA 10.3369 10.2678 10.1050 Net Assets at End of Year/Period (Rs. In Crores) 357.55 712.31 1,157.77 1,741.27 93.67 235.60 293.14 502.40 984.19 2,742.77 1,251.18 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) 2.52% 2.59% 2.72% 1.75% 2.40% 2.32% 2.30% 2.26% 0.46% 0.40% 0.42% Date of Allotment 23 Feb 06 23 Feb 06 23 Feb 06 23 Feb 06 19 May 05 19 May 05 19 May 05 19 May 05 17 Oct 06 17 Oct 06 17 Oct 06 Annualised Returns (Since inception) (5.75)% 19.52% 15.74% 12.93% 0.28% 28.73% 37.82% 86.38% 8.14% 8.28% 3.60% Benchmark Returns (Since inception) (3.64)% 21.68% 19.60% 10.41% (2.40)% 26.88% 31.19% 64.72% 7.87% 7.24% 2.93% Benchmark Index BSE 200 BSE 200 BSE 200 BSE 200 BSE Midcap BSE Midcap BSE Midcap BSE Midcap CRISIL Liquid CRISIL Liquid CRISIL Liquid Fund Index Fund Index Fund Index

HSBC Mututal Fund 15 Statement of Additional Information

HISTORICAL PER UNIT STATISTICS HSBC-Tax Saver Equity Fund+ HSBC-Unique Opportunities Fund+ HSBC-Fixed Term HSBC-Dynamic HSBC-Flexi Debt Series-30+ Fund+ Fund +^^^^ 01-Apr-08 01-Apr-07 05-Jan-07 01-Apr-08 01-Apr-07 21-Mar-07 01-Apr-08 11-Jun-07 01-Apr-08 24-Sep-07 01-Apr-08 05-Oct-07 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 NAV at the beginning of the Year/Period (Rs.) Dividend Option 10.5427 9.4098 10.0000 10.7715 10.2051 10.0000 NA NA 9.6659 10.0000 NA NA Growth Option 10.5427 9.4098 10.0000 10.7715 10.2051 10.0000 NA NA 9.6659 10.0000 NA NA Regular Option - Dividend NA NA NA NA NA NA 10.4450 10.0000 NA NA 10.0065 10.0000 Regular Option - Growth NA NA NA NA NA NA 10.9311 10.0000 NA NA 10.4155 10.0000 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 10.0315 10.0000 Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA 10.0000 NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend NA NA NA NA NA NA 10.4346 10.0000 NA NA NA NA Institutional Option - Growth NA NA NA NA NA NA 10.9311 10.0000 NA NA 10.4333 10.0000 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA 10.0706 10.0000 Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 10.0302 10.0000 Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Net Income Per unit (Rs.) (2.4153) 0.4806 0.0711 (6.6034) 2.8173 0.0970 1.0487 0.8213 (4.3741) 0.7479 0.2845 0.3981 Dividends Paid out (Rs. per unit) # Regular Option - Dividend ------1.09 0.49 - - NA NA Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 0.24 0.24 Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA 0.39 0.19 Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA 0.12 NA Institutional Option - Dividend NA NA NA NA NA NA - ! 0.49 NA NA NA NA Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA 0.35 3.13 Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 0.70 0.32 Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA 0.19 NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Transfer to Reserves (Rs. In crores) ------NAV at the End of the Year/Period (Rs.) Dividend Option 7.3692 10.5427 9.4098 5.6683 10.7715 10.2051 NA NA 6.3088 9.6659 NA NA Growth Option 7.3692 10.5427 9.4098 5.6683 10.7715 10.2051 NA NA 6.3088 9.6659 NA NA Regular Option - Dividend NA NA NA NA NA NA 10.0762 10.4450 NA NA NA 10.0065 Regular Option - Growth NA NA NA NA NA NA 11.6034 10.9311 NA NA 11.6483 10.4155 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 10.3662 10.0315 Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA 9.8005 NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA 10.2553 NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA 10.7885 NA Institutional Option - Dividend NA NA NA NA NA NA - ! 10.4346 NA NA NA NA Institutional Option - Growth NA NA NA NA NA NA 11.6034 10.9311 NA NA 11.7088 10.4333 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA 10.5214 10.0706 Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA 9.7535 10.0302 Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA 10.6734 NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Net Assets at End of Year/Period (Rs. In Crores) 180.58 228.53 179.38 219.50 520.38 650.24 87.08 105.31 234.13 405.28 316.84 235.33 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) 2.38% 2.35% 2.17% 3.84% 3.17% 1.88% 1.18% 1.16% 2.33% 2.14% 1.53% 0.79% Date of Allotment 05 Jan 07 05 Jan 07 05 Jan 07 21 Mar 07 21 Mar 07 21 Mar 07 11 Jun 07 11 Jun 07 24 Sep 07 24 Sep 07 05 Oct 07 05 Oct 07 Annualised Returns (Since inception) (12.76)% 4.37% (5.90)% (24.39)% 7.48% 2.05% 8.59% 9.31% (26.18)% (3.34)% 10.86% 4.16% Benchmark Returns (Since inception) (15.54)% 12.90% (6.42)% (13.74)% 24.70% 1.12% 9.08% 6.55% (32.50)% (6.68)% 7.18% 3.30% Benchmark Index BSE 200 BSE 200 CRISIL Short-Term BSE 200 CRISIL Composite Bond Fund Index Bond Fund Index

16 HSBC Mututal Fund Statement of Additional Information

HISTORICAL PER UNIT STATISTICS HSBC-Fixed Term HSBC-Fixed Term HSBC-Small Cap HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term Series-41+ Series-42+ Fund+ Series-44+ Series-45+ Series-46+ 01-Apr-08 20-Dec-07 01-Apr-08 08-Feb-08 01-Apr-08 24-Mar-08 01-Apr-08 19-Mar-08 01-Apr-08 28-Mar-08 01-Apr-08 28-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 NAV at the beginning of the Year/Period (Rs.) Dividend Option NA NA NA NA 10.1334 10.0000 NA NA NA NA NA NA Growth Option NA NA NA NA 10.1334 10.0000 NA NA NA NA NA NA Regular Option - Dividend 10.2514 10.0000 - ! - ! NA NA 10.0444 10.0000 10.0287 10.0000 10.0100 10.0000 Regular Option - Growth 10.2514 10.0000 10.0927 10.0000 NA NA 10.0444 10.0000 10.0287 10.0000 10.0100 10.0000 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend 10.2620 10.0000 - ! - ! NA NA - ! - ! - ! - ! 10.0104 10.0000 Institutional Option - Growth 10.2620 10.0000 10.0927 10.0000 NA NA 10.0462 10.0000 10.0292 10.0000 10.0104 10.0000 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Net Income Per unit (Rs.) 1.3417 0.2600 0.9365 0.1392 (3.9649) 0.0405 1.1662 0.0459 1.1218 0.0291 0.9595 0.0100 Dividends Paid out (Rs. per unit) # Regular Option - Dividend 1.01 - - - - - 0.85 - 0.75 - 0.77 - Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend 1.05 - - - NA NA - - - - 0.81 - Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Transfer to Reserves (Rs. In crores) ------NAV at the End of the Year/Period (Rs.) Dividend Option NA NA NA NA 4.8404 10.1334 NA NA NA NA NA NA Growth Option NA NA NA NA 4.8404 10.1334 NA NA NA NA NA NA Regular Option - Dividend 10.0648 10.2514 - ! - ! NA NA 10.0282 10.0444 10.0294 10.0287 10.0385 10.0100 Regular Option - Growth 11.1842 10.2514 10.9618 10.0927 NA NA 10.9516 10.0444 10.8420 10.0287 10.8717 10.0100 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Dividend 10.0681 10.2620 - ! - ! NA NA - ! - ! - ! - ! 10.0399 10.0104 Institutional Option - Growth 11.2335 10.2620 10.9618 10.0927 NA NA 11.0085 10.0462 10.8859 10.0292 10.9151 10.0104 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA NA NA NA NA Net Assets at End of Year/Period (Rs. In Crores) 36.08 58.84 685.10 630.78 35.50 85.97 99.52 133.71 19.98 28.27 248.71 257.02 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) 0.23% 0.22% 0.22% 0.22% 5.19% 1.72% 0.20% 0.17% 0.30% 0.20% 0.44% 0.34% Date of Allotment 20 Dec 07 20 Dec 07 08 Feb 08 08 Feb 08 24 Mar 08 24 Mar 08 19 Mar 08 19 Mar 08 28 Mar 08 28 Mar 08 28 Mar 08 28 Mar 08 Annualised Returns (Since inception) 9.14% 2.51% 8.37% 0.93% (50.93)% 1.33% 9.20% 0.44% 8.35% 0.29% 8.64% 0.10% Benchmark Returns (Since inception) 8.46% 1.98% 8.63% 1.02% (52.61)% 12.83% 8.88% 0.35% 8.83% 0.09% 8.83% 0.09% Benchmark Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index BSE Smallcap CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index

HSBC Mututal Fund 17 Statement of Additional Information

HISTORICAL PER UNIT STATISTICS HSBC-Fixed Term Series-49+ HSBC-Emerging Markets Fund+ HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term Series-50+ Series-52+ Series-53+ Series-54+ 01-Apr-08 28-Mar-08 01-Apr-08 17-Mar-08 29-Apr-08 06-May-08 29-May-08 12-Jun-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-09 31-Mar-09 31-Mar-09 NAV at the beginning of the Year/Period (Rs.) Dividend Option NA NA 10.0301 10.0000 NA NA NA NA Growth Option NA NA 10.0301 10.0000 NA NA NA NA Regular Option - Dividend 10.0100 10.0000 NA NA - ! 10.0000 10.0000 10.0000 Regular Option - Growth 10.0100 10.0000 NA NA 10.0000 10.0000 10.0000 10.0000 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA Institutional Option - Dividend - ! - ! NA NA - ! 10.0000 - ! 10.0000 Institutional Option - Growth 10.0100 10.0000 NA NA 10.0000 10.0000 10.0000 10.0000 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA Net Income Per unit (Rs.) 0.9398 0.0096 (0.0913) 0.0640 0.8449 0.9167 0.9143 0.8498 Dividends Paid out (Rs. per unit) # Regular Option - Dividend -----0.74 0.59 0.65 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA Institutional Option - Dividend - - NA NA - 0.79 NA 0.66 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA Transfer to Reserves (Rs. In crores) ------NAV at the End of the Year/Period (Rs.) Dividend Option NA NA 6.2553 10.0301 NA NA NA NA Growth Option NA NA 6.2554 10.0301 NA NA NA NA Regular Option - Dividend 10.9494 10.0100 NA NA - ! 10.0677 10.1022 10.0525 Regular Option - Growth 10.9494 10.0100 NA NA 10.8332 10.7536 10.7199 10.7039 Regular Option - Weekly Dividend NA NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA NA Institutional Option - Dividend - ! - ! NA NA - ! 10.0697 - ! 10.0615 Institutional Option - Growth 10.9494 10.0100 NA NA 10.8332 10.7925 10.7560 10.7643 Institutional Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA NA Net Assets at End of Year/Period (Rs. In Crores) 361.50 330.51 84.59 102.57 478.01 221.15 138.62 174.72 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) 0.25% 0.20% 0.75% 0.28% 0.25% 0.46% 0.51% 0.66% Date of Allotment 28 Mar 08 28 Mar 08 17 Mar 08 17 Mar 08 29 Apr 08 06 May 08 29 May 08 12 Jun 08 Annualised Returns (Since inception) 9.41% 0.10% (36.35)% 0.30% 8.33% 7.54% 7.20% 7.04% Benchmark Returns (Since inception) 8.83% 0.09% (34.58)% 5.12%/5.15% 8.04% 7.80% 7.41% 7.16% Benchmark Index CRISIL Liquid Fund Index MSCI Emerging BSE200 / MSCI CRISIL Liquid CRISIL Liquid CRISIL Liquid CRISIL Liquid Markets Index Emerging Markets Index Fund Index Fund Index Fund Index Fund Index

18 HSBC Mututal Fund Statement of Additional Information

HISTORICAL PER UNIT STATISTICS HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term HSBC-Fixed Term Series-56+ Series-57+ Series-59+ Series-61+ Series-62+ Series-63+ Series-66+ 07-Aug-08 22-Aug-08 15 Jul 08 29-Jul-08 26 Aug 08 09-Sep-08 03 Oct 08 31-Mar-09 31-Mar-09 31-Mar-09 31-Mar-09 31-Mar-09 31-Mar-09 31-Mar-09 NAV at the beginning of the Year/Period (Rs.) Dividend Option NA NA NA NA NA NA NA Growth Option NA NA NA NA NA NA NA Regular Option - Dividend 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 Regular Option - Growth 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 Regular Option - Weekly Dividend NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA Institutional Option - Dividend 10.0000 - ! 10.0000 10.0000 - ! - ! - Institutional Option - Growth 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 10.0000 Institutional Option - Daily Dividend NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA Net Income Per unit (Rs.) 0.7363 0.6510 0.8255 0.7823 0.6573 0.5420 0.4921 Dividends Paid out (Rs. per unit) # Regular Option - Dividend 0.52 0.54 0.63 0.59 0.75 0.44 0.46 Regular Option - Weekly Dividend NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA Institutional Option - Dividend 0.52 NA 0.65 0.63 NA NA NA Institutional Option - Daily Dividend NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA Transfer to Reserves (Rs. In crores) ------NAV at the End of the Year/Period (Rs.) Dividend Option NA NA NA NA NA NA NA Growth Option NA NA NA NA NA NA NA Regular Option - Dividend 10.1279 10.0482 10.0644 10.0753 10.0554 10.0888 10.1051 Regular Option - Growth 10.6740 10.6105 10.7121 10.7000 10.6388 10.5440 10.5506 Regular Option - Weekly Dividend NA NA NA NA NA NA NA Regular Option - Fortnightly Dividend NA NA NA NA NA NA NA Regular Option - Half Yearly Dividend NA NA NA NA NA NA NA Monthly Option - Dividend NA NA NA NA NA NA NA Quarterly Option - Dividend NA NA NA NA NA NA NA Institutional Option - Dividend 10.1483 - ! 10.0681 10.0842 - ! - ! NA Institutional Option - Growth 10.7365 10.6590 10.7695 10.7506 10.6604 10.5824 10.5506 Institutional Option - Daily Dividend NA NA NA NA NA NA NA Institutional Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Option - Monthly Dividend NA NA NA NA NA NA NA Institutional Option - Fortnightly Dividend NA NA NA NA NA NA NA Institutional Option - Quarterly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Growth NA NA NA NA NA NA NA Institutional Plus Option - Daily Dividend NA NA NA NA NA NA NA Institutional Plus Option - Weekly Dividend NA NA NA NA NA NA NA Institutional Plus Option - Monthly Dividend NA NA NA NA NA NA NA Net Assets at End of Year/Period (Rs. In Crores) 121.40 59.01 339.37 91.53 442.16 95.03 65.80 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) 0.54% 0.45% 0.37% 0.44% 0.73% 0.39% 1.02% Date of Allotment 07 Aug 08 22 Aug 08 15 Jul 08 29 Jul 08 26 Aug 08 09 Sep 08 03 Oct 08 Annualised Returns (Since inception) 6.74% 6.11% 7.12% 7.00% 6.39% 5.44% 5.51% Benchmark Returns (Since inception) 5.94% 5.56% 6.55% 6.19% 5.53% 5.13% 6.79% Benchmark Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Short-Term Bond Fund Index

HSBC Mututal Fund 19 Statement of Additional Information

Notes : 1) # The dividend paid out is calculated based on the total amount of dividend declared during the period including distribution tax wherever applicable divided by the number of units as on the last day of the relevant period. 2) ^ HSBC Cash Fund - Institutional Plus Options were launched on 02 June, 2004 and the HSBC Cash Fund - Regular Option - Weekly Dividend was launched on 20 April, 2005 3) ^^^^ HSBC Flexi Debt Fund - Institutional - Fortnightly Dividend Option, Regular - Fortnightly Dividend Option and Regular - Quarterly Dividend were launched on October 10, 2007, October 17, 2007 and April 10, 2008 respectively. 4) HSBC Income Fund - Short Term Plan - Institutional, HSBC Income Fund - Investment Plan - Institutional and HSBC Gilt Fund - Long Term Plan were wound up with effect from 1 July 2004, 30 December 2004 and 31 January 2005 respectively hence historic per unit statistics have not been provided. 5) * The HSBC-MidCap Equity Fund was launched on May 19, 2005 and ratio of Recurring Expenses to Average Daily Net Assets (Annualized ) is calculated w.e.f May 3, 2005. 6) + HSBC- Advantage India Fund, HSBC Fixed Term Series 21, HSBC Ultra Short Term Bond Fund, HSBC Fixed Term Series 22, HSBC Fixed Term Series 23, HSBC Fixed Term Series 24, HSBC Fixed Term Series 25, HSBC Fixed Term Series 27, HSBC Tax Saver Equity Fund, HSBC Unique Opportunities Fund, HSBC Fixed Term Series 28, HSBC Fixed Term Series 30, HSBC Fixed Term Series 32, HSBC Fixed Term Series 33 , HSBC Fixed Term Series 34,HSBC Fixed Term Series 35, HSBC Fixed Term Series 36, HSBC Dynamic Fund, HSBC Flexi Debt Fund, HSBC Fixed Term Series 37, HSBC Interval Fund - Plan I, HSBC Interval Fund - Plan II , HSBC Fixed Term Series 41, HSBC Fixed Term Series 42, HSBC Interval Fund - Plan III, HSBC Small Cap Fund, HSBC Emerging Market Fund, HSBC Fixed Term Series 44, HSBC Fixed Term Series 45, HSBC Fixed Term Series 46, HSBC Fixed Term Series 47, HSBC Fixed Term Series 48, HSBC Fixed Term Series 49, HSBC Fixed Term Series 50, HSBC Fixed Term Series 51,HSBC Fixed Term Series 52, HSBC Fixed Term Series 53 and HSBC Fixed Term Series 54 were launched on February 23, 2006, January 02, 2007, October 17,2006, January 23, 2007, March 02 ,2007, March 16, 2007, March 23, 2007, March 29, 2007, January 05, 2007, March 21, 2007, May 22, 2007, June 11, 2007, July 06, 2007, September 04, 2007, September 27, 2007, September 14, 2007, October 04, 2007, September 24, 2007, October 08, 2007, October 18, 2007, November 22, 2007, December 11, 2007, December 20, 2007, February 08, 2008, March 19, 2008, March 24, 2008, March 17, 2008, March 19, 2008, March 28, 2008, March 28, 2008, March 26, 2008, April 07, 2008, March 28, 2008, April 29, 2008, April 24, 2008, May 06, 2008, May 29, 2008 and June 16, 2008 respectively. Ratio of Recurring Expenses to Average Daily Net Assets (Annualized ) is calculated w.e.f December 15, 2005, March 4,2006, January 10, 2006, February 17,2006, March 29,2006 , January 02, 2006, June 27,2006, August 28,2006, September 26,2006, October 13,2006, January 17,2007, February 22,2007, March 14,2007, March 13,2007, March 23,2007, March 26,2007, November 24,2006, February 08,2007, May 16,2007 and May 16,2007 respectively. 7) HSBC Fixed Term Series VII, Fixed Term Series VIII, Fixed Term Series III, Fixed Term Series IV, Fixed Term Series 13, Fixed Term Series I, Fixed Term Series IX, Fixed Term Series 14, Fixed Term Series V, Fixed Term Series II, Fixed Term Series VI, Fixed Term Series 26, Fixed Term Series 15, Fixed Term Series 31, Fixed Term Series 29, Fixed Term Plan Series 34, Fixed Term Plan Series 21, Fixed Term Plan Series 23, Fixed Term Plan Series 27, Fixed Term Plan Series 22, Fixed Term Plan Series 25 and Fixed Term Plan Series 28 was closed on May 23, 2006, June 22, 2006, September 07, 2006, April 02, 2007, April 04, 2007, June 04, 2007, July 02, 2007, August 30, 2007, September 05, 2007, September 09, 2007, September 19, 2007, September 26, 2007, October 03, 2007, October 04, 2007, November 21, 2007, March 27, 2008, April 02, 2008, April 02, 2008, April 02, 2008, April 22, 2008, April 23, 2008 and May 26, 2008 respectively. 8) ^^^^ HSBC Flexi Debt Fund Regular Quarterly Dividend Option was launched on April 10, 2008.

20 HSBC Mututal Fund Statement of Additional Information

III. HOW TO APPLY? responsible for any loss, damage caused to the Transmitter directly or indirectly, as a result of the Transmitter sending or purporting to l The Application Form for the sale of Units of the Scheme will send such fax / electronic transactions including where a fax / be available at the Investor Service Centres / Designated electronic transaction sent / purported to be sent is not processed on Collection Centres / Distributors and also on our website at account of the fact that it was not received by the Recipient. The www.assetmanagement.hsbc.com/in. Transmitter acknowledges that fax / electronic transaction is not a secure means of giving instructions / transaction requests and that l Payment should be made by cheque or bank draft drawn on any the Transmitter is aware of the risks involved including those arising bank which is situated at and is a member of the Banker’s out of such transmission being inaccurate, imperfect, ineffective, Clearing House located at the place where the application is illegible, having a lack of quality or clarity, garbled, altered, distorted, submitted or in a manner acceptable to the AMC, which is not timely etc. and that the Transmitter’s request to the Recipient evidenced by receipt of credit in Bank Account of the Fund. to act on any fax / electronic transaction is for the Transmitter’s l The cheque(s) for the amount of subscription should be MICR- convenience and the Recipient shall not be obliged or bound to act encoded in case of investments in HSBC Cash Fund, HSBC on the same. The Transmitter authorizes the Recipient to accept and Floating Rate Fund (Long Term Plan and Short Term Plan) and act on any fax / electronic transaction which the Recipient believes HSBC Ultra Short Term Bond Fund. in good faith to be given by the Transmitter and the Recipient shall be entitled to treat any such fax / electronic transaction as if the same l Outstation cheques will not be accepted and applications was given to the Recipient under the Transmitter’s original signature. accompanied by such cheques are liable to be rejected. However, The Transmitter agrees that security procedures adopted by the outstation cheques are acceptable in case of SIP applications. Recipient may include signature verification, telephone callbacks or The first instalment of SIP should however be payable at the a combination of the same. Callbacks may be recorded by tape location where the application is tendered. recording device and the Transmitter consents to such recording and agrees to co-operate with the Recipient to enable confirmation of l No cash, money orders and postal orders will be accepted. such fax / electronic transaction requests. The Transmitter further l Post-dated cheques will not be accepted. accepts that the fax / electronic transaction shall not be considered until time stamped appropriately as a valid transaction request in the l Bank charges for demand drafts will be borne by the AMC and Scheme in line with the SEBI Regulations. In consideration of the will be limited to the bank charges as per table below. The Recipient from time to time accepting and at its sole discretion AMC will not entertain any request for refund of demand draft (including but not limited to the AMC extending / discontinuing charges. such facilities from time to time) acting on any fax / electronic Amount DD Charges transaction request received / purporting to be received from the Transmitter, the Transmitter agrees to indemnify and keep Up to Rs. 10,000 At actuals, subject to a maximum indemnified the AMC, Directors, employees, agents, representatives of Rs. 65/- of the AMC, HSBC Mutual Fund and Trustees (indemnified parties) Above Rs. 10,000 At Rs. 3.5 per Rs. 1,000/- Minimum from and against all actions, claims, demands, liabilities, obligations, Rs. 65/- and Maximum Rs. 12,500/- losses, damages, costs (including without limitation, interest and legal fees) and expenses of whatever nature (whether actual or However, such Demand Draft charges would be reimbursed only contingent) directly or indirectly suffered or incurred sustained by when the investor is not residing in any of the locations where the or threatened against the indemnified parties whatsoever arising AMC or CAMS have official points of acceptance. from or in connection with or any way relating to the indemnified l Applications should be made in adherence to the minimum parties in good faith accepting and acting on fax / electronic amount requirements as mentioned in the Combined Scheme transaction requests including relying upon such fax / electronic Information Document. transaction requests purporting to come from the Transmitter even though it may not come from the Transmitter. The AMC reserves l All cheques and bank drafts must be drawn in the name of the the right to discontinue the above mentioned facilities at any point Scheme / Plan or their abbreviations e.g. “HSBC Equity Fund” in time. or “HEF” and crossed “Account Payee only”. A separate cheque or bank draft must accompany each Application. On-line investment facility may also be available to the investors in future. Please visit our website at l The Application Forms together with the cheque / demand www.assetmanagement.hsbc.com/in. Applications not complete in draft can be tendered at any of the Designated Collection any respect are liable to be rejected. Centres. In order to protect the interest of investors from fraudulent encashment l Any discrepancy in the application on account of address or of cheques, cheques specify the name of the Unitholder and the bank residence status, the application will be rejected and the money name and account number where payments are to be credited. SEBI will be refunded upon confirmation from CVL. Regulations make it mandatory for an investor to mention the details The AMC, Mutual Fund, Registrar or any other agent or representative of his / her / its bank account. It is important for applicants to of the AMC, Mutual Fund, Registrar (“Recipient”) may accept mention their bank name, bank account number, branch address, certain transactions via facsimile or through any electronic mode account type in their applications for subscription or repurchase of (“fax / electronic transactions”), subject to the investor fulfilling Units. Applications without this information shall be rejected. certain terms and conditions as stipulated by the AMC from time Necessary supporting documents required with the Forms are to be to time. Acceptance of fax / electronic transactions will be as permitted submitted by the investor. The investor is mandatorily required to by SEBI or other regulatory authorities from time to time and will provide a copy of the PAN Card. As per SEBI circular no. MRD/ be solely at the risk of the transmitter of the fax / electronic transaction DoP/MF Cir - 08/2008 dated April 3, 2008 and circular no. MRD/ (“Transmitter”) and the Recipient shall not in any way be liable or DoP/Cir-20/2008 dated June 30, 2008 investors residing in the state

HSBC Mututal Fund 21 Statement of Additional Information of Sikkim and Central Government, State Government and the The Mutual Fund needs to use intermediaries such as post office, officials appointed by the courts e.g. Official liquidator, Court receiver local and international couriers, banks and other intermediaries for etc. (under the category of Government) respectively are exempted correspondence with the investor and for making payments to the from the mandatory requirement of PAN for their investments in investor by cheques, drafts, warrants, through ECS etc. The investor Mutual Funds. However, this would be subject to verification of the expressly agrees and authorizes the Mutual Fund to correspond with veracity of the claim of the investors by collecting sufficient the investor or make payments to the investor through intermediaries documentary evidence. The AMC reserves the right to ask for the including but not limited to post office, local and international necessary documentation to the satisfaction of the Mutual Fund. couriers and banks. The investor clearly understands the mutual The PAN requirements will be applicable to all joint applicants as fund uses such intermediaries for the convenience of the investor well as the Guardian, in case of applications by a Minor. Applications and such intermediaries are agents of the investor and not the mutual without this information will be rejected as per the presently fund. The Fund is not responsible for delayed receipt or non-receipt applicable regulations. It is also to be noted that furnishing an of any correspondence or payment through such intermediaries. incorrect PAN or not furnishing these details could invite a penalty of Rs. 10,000, as per the provisions of the Income Tax Act, 1961. PREVENTION OF MONEY LAUNDERING AND Dividend reinvestment, if any, of Rs. 50,000 or more, qualifies as KNOW YOUR CUSTOMER (KYC) purchase of units. Further, no entry / exit load shall be charged for With effect from February 1, 2008, any investors (whether new or unit(s) allotted under bonus / dividend reinvestment option. In case additional purchase) investing Rs. 50,000/- or more in mutual funds of non-receipt of PAN details from the investors / Unit holders (in is required to comply with Know Your Client (KYC) norms under case the application / units are held in joint names, each of the the Prevention of Money Laundering Act, 2002. This will be investors / unitholders), the dividend will be compulsorily paid out applicable for investments from individual investors including joint to the Unit holders and not reinvested. holding / institutional customers / other non-institutional investors / investments through power of attorney holders / investments of An application made may be accepted or rejected in the sole and minor through guardian. absolute discretion of the Trustees. The Trustees may reject any application for purchase of Units, if in the opinion of the Trustees, The KYC requirements can be completed by filling up the prescribed increasing the size of any or all of the Scheme’s Unit capital is not form and submitting the same along with the other requisite details / in the general interest of the Unitholders, or the Trustees for any proof (attested true copies of supporting documents relating to proof other reason believe it would be in the best interest of the Scheme of identity and address or verification with the original) to a designated or its Unitholders to accept / reject such an application. Provided Point of Service (PoS) of CDSL Ventures Limited (CVL). Any always that the Trustees’ rights will be subject to applicable SEBI subsequent change to Address, Pin Code, Country, Nationality, Regulations, if any. Occupation, Income details, Date of Birth, Proof of Identity need to be communicated to CVL ONLY. For details of the The AMC shall have the right to set-off dividend amounts, redemption process and list of PoS, please visit our website amounts or any other amounts that may be payable to an investor www.assetmanagement.hsbc.com/in. In case investor has completed under the Scheme: the KYC Compliance process, without submitting a copy of PAN (i) against redemption proceeds already paid by the AMC in respect Card, he/she must forthwith provide a copy of PAN Card along with of units created without realizing the subscription amounts, the copy of KYC compliance acknowledgement to CVL. and/or In view of this, each investor (including joint unit holder) who (ii) against any excess payments made (and, in the case of payments wishes to invest an amount of Rs. 50,000/- or more need to submit by cheque, whether encashed or not) to such investor, under a copy of the acknowledgement of KYC / printout of KYC status the Scheme or under any other scheme of the Mutual Fund (status can be downloaded from CVL website (www.cvlindia.com) managed by the AMC in the same folio or any other folio of using the PAN number) along with the application form for investing such investor in the Mutual Fund. in the schemes of Mutual Fund.

22 HSBC Mututal Fund Statement of Additional Information

IV. RIGHTS OF UNITHOLDERS OF THE SCHEME

1. Unitholders of the Scheme have a proportionate right in the 9. The Trustees shall obtain the consent of the Unitholders: beneficial ownership of the assets of the Scheme and in case l Whenever required to do so by SEBI, in the interest of the of Dividend sub-option(s), wherever applicable, to the dividend Unitholders declared, if any, by the Fund under the Scheme.

l Whenever required to do so on a requisition made by 2. When the Mutual Fund declares a dividend under the Scheme, the dividend warrants shall be despatched within 30 days of the three-fourths of the Unitholders of the Scheme

declaration of the dividend. Account Statement reflecting the l When the Trustees decide to wind-up or prematurely new or additional subscription as well as Redemption / Switch redeem the Units. of Units shall be dispatched to the Unit holder, as soon as possible, but not later than 30 days from date of receipt of 10. The Trustees shall ensure that no change in the fundamental request from the unitholder. Provided if a Unit holder so desires attributes of any Scheme or the Trust or fees and expenses the Mutual Fund shall issue a Unit certificate (non-transferable) payable or any other change which would modify the Scheme within 30 days of the receipt of request for the certificate. and affect the interests of Unitholders is carried out unless: 3. The Fund shall despatch the redemption proceeds to the l A written communication about the proposed change is Unitholders within 10 Business Days from the date of acceptance sent to each Unitholder and of the request for the same. In the event of failure to despatch l An advertisement is given in one English daily newspaper the redemption proceeds within the above time, interest @ 15% having nationwide circulation as well as in newspaper per annum or such rate as may be specified by SEBI, would published in the language of the region where the Head be paid to the unitholders for the period of delay. Office of the Mutual Fund is situated and 4. The Trustees are bound to make such disclosures to the l Unitholders are given an option to exit at the prevailing Unitholders as are essential in order to keep them informed Net Asset Value without any exit load. about any information known to Trustees which may have an adverse bearing on their investments. 11. Subject to the Regulations and the guidelines issued by SEBI, the consent of the Unitholders of the Scheme will be obtained 5. The appointment of the AMC for the Fund can be terminated by a majority of the Trustees or by 75% of the Unitholders of through voting by mail or by way of a postal ballot or such other means as may be approved by SEBI. Detailed modalities any one or more of the Scheme of the Fund and any change in the appointment of the AMC shall be subject to the prior of the same, including the principles for entitlement of votes for each Unitholder will be finalised in consultation with and approval of SEBI and the Unitholders of the respective Schemes. after obtaining the approval of SEBI and the Trustees. In 6. The Trustees are obliged to convene a meeting on a requisition specific circumstances, where the approval of unitholders is of 75% of the Unitholders of a Scheme. sought on any matter, the same shall be obtained by way of a 7. 75% of the Unitholders of a Scheme can pass a resolution to postal ballot or such other means as may be approved by SEBI.. wind up the Scheme. 12. The Annual Report containing accounts of the AMC 8. Unitholders have the right to inspect all the documents listed would be displayed on the website of the AMC (i.e. under “Documents Available for Inspection” in the respective www.assetmanagement.hsbc.com/in). Unitholders, if they so Offer Document / Combined Scheme Information Document. desire, may request for the Annual Report of the AMC.

HSBC Mututal Fund 23 Statement of Additional Information

V. INVESTMENT VALUATION NORMS FOR SECURITIES AND OTHER ASSETS

The valuation of the investment in the units / securities issued by However, the AMC reserves the right to choose the price for overseas mutual funds or unit trusts will be based on the NAV of valuation of ADRs / GDRs which may be different from the the overseas mutual funds or unit trusts on the date of valuation procedure given above depending upon the prevailing converted into Indian rupees. The NAV of the overseas mutual circumstances, the intention being to provide fair valuation to funds / unit trusts available may be more than 24 hour old depending the investors of the Scheme. Such valuation procedure shall be upon the time zone differences and laws applicable to overseas ratified by the Trustees of the Fund. mutual fund. The AMC shall use the rates released by Reuters (rate as on The Fund shall value its investments according to the valuation the date of portfolio valuation) for the purpose of conversion norms, as specified in the Eighth Schedule of the Regulations, or of the last traded price for the purpose of portfolio valuation. such norms as may be prescribed by SEBI from time to time. The The AMC retains the right to use the average of TT buy and broad valuation norms are detailed below: sell USD / INR rates as released by banks / rates released by other sources as the AMC may deem reasonable in the absence Traded Securities of appropriate release from Reuters. In case such quotes are not l Traded securities shall be valued at the last quoted closing available on any day, the foreign exchange rates as available price on the Stock Exchange. for the immediately preceding day may be used. The AMC also reserves the right to choose appropriate rates for conversion of l When the securities are traded on more than one recognised the last traded price for the purpose of valuation, depending stock exchange, the securities shall be valued at the official upon the prevailing circumstances, the intention being to provide closing price on the stock exchange where the security is fair valuation to the investors of the Scheme. principally traded. It would be left to the AMC to select the appropriate stock exchange, and the AMC shall record the l When a security (other than debt securities) is not traded on any reasons for the selection and change if any in writing. There stock exchange on a particular valuation day, the value at should, however, be no objection for all scrips being valued at which it was traded on the selected stock exchange, as the case the prices quoted on the stock exchange where a majority of maybe, on the earliest previous day maybe used provided such the investments are principally traded. date is not more than 30 days prior to valuation date. l When on a particular valuation day, a security has not been l When a debt security (other than Government Securities) is not traded on the principal stock exchange; the value at which it traded on any stock exchange on a particular valuation day, the is traded on another stock exchange will be used. value at which it was traded on the principal stock exchange or any other stock exchange, as the case may be, on the earliest Trades in ADRs / GDRs shall be accounted for on the day previous day may be used, provided such date is not more than following the trade on the relevant stock exchanges where such 15 days prior to the valuation date. ADRs / GDRs are listed viz. New York Stock Exchange, NASDAQ, London Stock Exchange (LSE), Luxembourg Stock l When a debt security (other than Government Securities) is Exchange etc. The valuation of such investments shall be done purchased by way of private placement, the value at which it at the last traded price of the previous day on the relevant was bought may be used for a period of 15 days beginning from exchange where the ADR / GDR is listed and traded. For the date of purchase. instance, in case of GDR listed on LSE, the last traded price Thinly Traded Securities on LSE shall be used for the purpose of valuation. In case of GDRs listed on more than one foreign stock exchange, the Thinly Traded Equity / Equity Related Securities scheme shall use the last traded price on LSE, in the absence Thinly traded securities as defined in the Regulations shall be of which last traded price on Luxembourg stock exchange shall valued in the manner as specified in the guidelines issued by SEBI, be used. If the GDR was not traded on Luxembourg stock as follows: exchange too, the last traded price on such other stock exchange as the AMC may deem appropriate shall be used for portfolio When trading in an equity / equity related security (such as convertible valuation, the intention being to provide fair valuation to the debentures, equity warrants, etc.) in a month is both less than investors of the Scheme. In case of an ADR listed on more than Rs. 5 lacs (Rupees Five Lakhs Only) and the total volume is less than 50,000 (Fifty Thousand Only) shares, it shall be considered as one stock exchange the last traded price on NYSE shall be used a thinly traded security and valued accordingly. for valuation. If the ADR is not traded on NYSE, the last traded price on NASDAQ shall be used for valuation and if the ADR For example, if the volume of trade is 100,000 and value is is not traded on NASDAQ too, the last traded price on such Rs. 400,000, the share does not qualify as thinly traded. Also if the other stock exchange as the AMC may deem appropriate shall volume traded is 40,000, but the value of trades is Rs. 600,000, the be used for portfolio valuation, the intention being to provide share does not qualify as thinly traded. In order to determine whether fair valuation to the investors of the Scheme. a security is thinly traded or not, the volumes traded in all recognized stock exchanges in India may be taken into account. In the absence of prices on any exchange on the concerned valuation date, the price prevailing at the close of business on Where a stock exchange identifies the "thinly traded" securities by the previous date of trade in such ADR/GDR shall be used for applying the above parameters for the preceding calendar month valuation provided that such previous date is not more than 30 and publishes / provides the required information along with the days prior to the date of valuation. daily quotations, the same can be used by the Mutual Fund.

24 HSBC Mututal Fund Statement of Additional Information

If the share is not listed on the stock exchanges which provide such To determine if a security accounts for more than 5% of the total information, then it will be obligatory on the part of the mutual fund assets of the Scheme, it should be valued by the procedure above to make its own analysis in line with the above criteria to check and the proportion which it bears to the total net assets of the whether such securities are thinly traded which would then be Scheme to which it belongs would be compared on the date of valued accordingly. valuation. In case trading in an equity security is suspended upto 30 days, then Non-Traded / Thinly Traded Debt Securities of the last traded price would be considered for valuation of that Upto 182 Days to Maturity security. If an equity security is suspended for more than 30 days, As the money market securities are valued on the basis of amortisation then the AMC / Trustees will decide the valuation norms to be (cost plus accrued interest till the beginning of the day plus the followed and such norms would be documented and recorded. difference between the redemption value and the cost spread Thinly Traded Debt Securities uniformly over the remaining maturity period of the instruments) Thinly traded securities as defined in the Regulations shall be a similar process should be adopted for non-traded debt securities valued in the manner as specified in the guidelines issued by SEBI, with residual maturity of upto 182 days, in the absence of any other as follows: standard benchmarks in the market. Debt securities purchased with residual maturity of upto 182 days are to be valued at cost (including l A debt security (other than Government Securities) shall be accrued interest till the beginning of the day) plus the difference considered as a thinly traded security if on the valuation date, between the redemption value (inclusive of interest) and cost spread there are no individual trades in that security in marketable lots uniformly over the remaining maturity period of the instrument. In (currently Rs. 5 crores) on the principal stock exchange or any case of a debt security with maturity greater than 182 days at the other stock exchange. time of purchase, the last valuation price plus accrued interest should be used instead of purchase cost. All other non-traded Non- l A thinly traded debt security as defined above would be valued as per the norms set for non-traded debt security. Government debt instruments shall be valued using the method suggested below. Non-Traded Securities Non-Traded / Thinly Traded Debt Securities of When a security (other than Government Securities) is not traded Over 182 Days to Maturity on any stock exchange for a period of 30 days prior to the valuation date, the scrip must be treated as a ‘non-traded’ security. For the purpose of valuation, all non-traded debt securities would be classified into “investment grade” and “non-investment grade” Valuation of Non-Traded / Thinly Traded Securities securities based on their credit ratings. The non-investment grade Non-traded / thinly traded securities shall be valued “in good faith” securities would further be classified as “performing” and “non- by the AMC on the basis of the valuation principles laid down performing” assets. below: l All non-government investment grade debt securities, classified Non-traded / Thinly Traded Equity Securities as not traded, shall be valued on yield to maturity basis as described below. Based on the latest available Balance Sheet, net worth shall be calculated as follows: l All non-government non-investment grade performing debt securities would be valued at a discount of 25% to the face Net Worth per share = [share capital reserves (excluding revaluation value. reserves) - miscellaneous expenditure and debit balance in P&L A/c] divided by number of paid up shares. l All non-government non-investment grade non-performing debt securities would be valued based on the provisioning norms. l Average capitalisation rate (P/E ratio) for the industry based The approach in valuation of non-traded debt securities is based on upon either BSE or NSE data (which should be followed the concept of using spreads over the benchmark rate to arrive at consistently and changes, if any noted with proper justification the yields for pricing the non-traded security. thereof) shall be taken and discounted by 75% i.e. only 25% of the industry average P/E shall be taken as capitalisation rate The yields for pricing the non-traded debt security would be arrived (P/E ratio). Earnings per share of the latest audited annual at using the process as defined below: accounts will be considered for this purpose. Step A l The value as per the net worth value per share and the capital A risk free benchmark yield is built using the government securities earning value calculated as above shall be averaged and further (GoI Securities) as the base. GoI Securities are used as the benchmarks discounted by 10% for ill-liquidity so as to arrive at the fair as they are traded regularly, free of credit risk and traded across value per share. different maturity spectrums every week. l In case the EPS is negative, EPS value for that year shall be Step B taken as zero for arriving at capitalised earning. A matrix of spreads (based on the credit risk) are built for marking l In case where the latest balance sheet of the company is not up the benchmark yields. The matrix is built based on traded corporate available within 9 months from the close of the year, unless the paper on the wholesale debt segment of an appropriate stock exchange accounting year is changed, the shares of such companies shall and the primary market issuances. The matrix is restricted only to be valued at zero. investment grade corporate paper. l In case an individual security accounts for more than 5% of the Step C total assets of the Scheme, an independent valuer shall be The yields as calculated above are marked-up / marked-down for appointed for the valuation of the said security. illiquidity risk.

HSBC Mututal Fund 25 Statement of Additional Information

Step D to the benchmark date will be considered for computing the average YTM for such rating category; The yields so arrived are used to price the portfolio. l If the matrix cannot be populated using any or all of the above Methodology steps, then credit spreads from trades on appropriate stock exchange of the relevant rating category over the AAA trades Construction of Risk Free Benchmark will be used to populate the matrix;

Using Government of India dated securities, the benchmark shall be l In each rating category, all outliers will be removed for constructed as below: smoothening the YTM matrix;

Government of India dated securities will be grouped into the l Spreads will be obtained by deducting the YTM in each duration following duration buckets viz., 0.5-1 years, 1-2 years, 2-3 years, category from the respective YTM of the GoI securities;

3-4 years, 4-5 years, 5-6 years and 6 years and the volume weighted l In the event of lack of trades in the secondary market and the yield would be computed for each bucket. primary market the gaps in the matrix would be filled by These duration buckets may be changed to reflect the market value extrapolation. If the spreads cannot be extrapolated for the more closely by any agency suggested by AMFI giving benchmark reason of practicality, carrying the spreads from the last matrix yield / matrix of spreads over benchmark yield. Accordingly, there will fill the gaps in the matrix. will be a benchmark YTM for each duration bucket. Mark-up / Mark-down Yield The benchmark as calculated above will be set at least weekly, and The Yields calculated would be marked-up / marked-down to account in the event of any significant movement of prices of Government for the ill-liquidity risk, promoter background, finance company securities on account of any event impacting interest rates on any risk and the issuer class risk. As the level of ill-liquidity risk would day such as change in the RBI policies, the benchmark will be reset be higher for non-rated securities the marking process for rated and to reflect any change in the market conditions. non-rated securities would be differentiated as follows: Note: The concept of duration over tenor has been chosen in order Adjustments for Securities rated by External to capture the reinvestment risk. It is intended to gradually move Rating Agencies towards a methodology that incorporates the continuous curve The Yields so derived out of the above methodology could be approach for valuation of such securities. However, in view of the adjusted to account for risk mentioned above by an appropriate current lack of liquidity in the corporate bond markets, a continuous discount or premium as may be required. The range of the markups curve approach to valuation would be necessarily based on limited for both discount as well as premium is given below: data points, and this would result in out of line valuations. As an interim methodology therefore it is proposed that the Duration Premium Bucket approach be adopted and continuously tracked in order to A Discretionary premium of up to -50 Basis Points for securities fine-tune the duration buckets on a periodic basis. Over the next few having duration of up to 2 years and up to -25 Basis Points for years it is expected that with the deepening of the secondary market securities having duration higher than 2 years will be permitted to trading, it would be possible to make a gradual move from the be provided for the above mentioned types of risks. The rationale Duration Bucket approach towards a continuous curve approach. for the above discount structure is to take cognizance of the differential Building a Matrix of Spreads for Marking-up the Benchmark interest rate risk of the securities. This structure will be reviewed Yield periodically. Mark-up for credit risk over the risk free benchmark YTM as Discount calculated in step A, will be determined using the trades of corporate SEBI has revised the discretionary discount limits as below: debentures / bonds of different ratings. All trades on appropriate Category Discretionary discount over stock exchange during the fortnight prior to the benchmark date will benchmark yield in basis points be used in building the corporate YTM and spread matrices. Initially these matrices will be built only for corporate securities of investment Rated Instruments with Discretionary Discount of up to +500 grade. The matrices are dynamic and the spreads will be computed duration up to 2 years every week. The matrix will be built for all duration buckets for which the benchmark GoI matrix is built to effectively link the Rated Instruments with Discretionary Discount of up to +400 corporate matrix with the GoI securities matrix. Accordingly: duration over 2 years l All traded paper (with minimum traded value of Rs. 1 crore) Adjustments for Internally Rated Securities (Rupees One Crore Only) will be classified by their ratings and To value an unrated security, the fund manager has to assign an grouped into 7 duration buckets; for rated securities, the most internal credit rating, which will be used for valuation. Since unrated conservative publicly available rating will be used; instruments tend to be more illiquid than rated securities, the yields l For each rating category, average volume weighted yield will would be mandatorily marked up by adding +50 basis point for be obtained both from trades on the appropriate stock exchange securities having a duration of up to two years and +25 basis point and from the primary market issuances; for securities having duration of higher than two years to account l Where there are no secondary trades on the appropriate stock for the illiquidity risk. exchange in a particular rating category and no primary market The yields derived from the above methodology could be adjusted issuances during the fortnight under consideration, then trades to account for risk mentioned above. SEBI has revised the on appropriate stock exchange during the 30 days period prior discretionary discount limits as below:

26 HSBC Mututal Fund Statement of Additional Information

Category Discretionary discount over redemption value and the cost spread uniformly over the remaining benchmark yield in basis points maturity period of the instruments. Unrated Instruments Discretionary Discount of up to +450 Valuation of “Repo” with duration up to over and above the mandatory Where instruments have been bought on ‘repo’ basis, the instrument 2 years Discount of +50 must be valued at the resale price after deduction of applicable Unrated Instruments Discretionary Discount of up to +375 interest up to date of resale. Where an instrument has been sold on with duration over 2 over and above the mandatory Discount a ‘repo’ basis, adjustment must be made for the difference between years of +25 the repurchase price (after deduction of applicable interest up to date of repurchase) and the value of the instrument. If the repurchase The benchmark yield / matrix of spreads over benchmark yield price exceeds the value, the depreciation must be provided for and obtained from any agency suggested by AMFI as a provider of if the repurchase price is lower than the value, credit must be taken benchmark yield / matrix of spreads over benchmark yield to mutual for the appreciation. funds, must be applied for valuation of securities on the day on which the benchmark yield / matrix of spreads over benchmark Valuation of unlisted equity shares yield is released by the aforesaid agency. Unlisted equity shares of a company shall be valued "in good faith" on the basis of the valuation principles laid down below: Valuation of securities with Put / Call options l Based on the latest available audited balance sheet, net worth The option embedded securities would be valued as follows: shall be calculated as lower of the following: Securities with Call option l Net worth per share = [share capital plus free reserves (excluding The securities with call option shall be valued at the lower of the revaluation reserves) minus Miscellaneous expenditure not value as obtained by valuing the security to final maturity and written off or deferred revenue expenditure, intangible assets valuing the security to call option. and accumulated losses] divided by Number of Paid up Shares. In case there are multiple call options, the lowest value obtained by l After taking into account the outstanding warrants and options, valuing to the various call dates and valuing to the is to be taken Net worth per share shall again be calculated and shall be = as the value of the instrument. [share capital plus consideration on exercise of Option / Warrants Securities with Put option received / receivable by the Company plus free The securities with put option shall be valued at the higher of the reserves(excluding revaluation reserves) minus Miscellaneous value as obtained by valuing the security to final maturity and expenditure not written off or deferred revenue expenditure, valuing the security to put option. intangible assets and accumulated losses] divided by {Number In case there are multiple put options, the highest value obtained by of Paid up Shares plus Number of Shares that would be obtained valuing to the various put dates and valuing to the is to be taken as on conversion / exercise of Outstanding Warrants and Options} the value of the instruments. l The lower of the above shall be used for calculation of net Securities with both Put and Call option on the worth per share and for further calculation to arrive at the fair same day value per share as stated below.

The securities with both Put and Call option on the same day would l Average capitalisation rate (P/E ratio) for the industry based be deemed to mature on the Put / Call day and would be valued upon either BSE or NSE data (which shall be followed accordingly. consistently and changes, if any, noted with proper justification Government Securities thereof) shall be taken and discounted by 75% i.e. only 25% of the Industry average P/E shall be taken as capitalisation rate Government securities will be valued as per the prices for Government (P/E ratio). Earnings per share of the latest audited annual Securities released by an agency suggested by AMFI for the sake accounts will be considered for this purpose. of uniformity in calculation of NAVs. l The value as per the net worth value per share and the capital Illiquid Securities earning value calculated as above shall be averaged and further l All funds shall disclose as on March 31 and September 30 the discounted by 15% for illiquidity so as to arrive at the fair value scheme-wise total illiquid securities in value and percentage of per share. the net assets while making disclosures of half yearly portfolios to the Unitholders. In the list of investments, an asterisk mark The above methodology for valuation shall be subject to the following shall also be given against all such investments, which are conditions: recognised as illiquid securities. l All calculations as aforesaid shall be based on audited accounts. l The Mutual Fund is not allowed to transfer illiquid securities l In case where the latest balance sheet of the company is not among its Scheme. available within 9 months from the close of the year, unless the Fixed Income and Money Market Securities accounting year is changed, the shares of such companies shall Debt instruments shall generally be valued on a yield to maturity be valued at zero. basis on the basis of the capitalisation factor for comparable traded l If the net worth of the company is negative, the share would securities and with an appropriate discount for a lower liquidity. be marked down to zero. While investments in call money, bills purchased under rediscounting l In case the EPS is negative, EPS value for that year shall be scheme and short term deposits with banks shall be valued at cost taken as zero for arriving at capitalised earning. plus accrual; other money market instruments shall be valued at the yield at which they are currently traded. For this purpose, instruments l In case an individual security accounts for more than 5% of the not traded for a period of 7 days will be valued at cost plus interest total assets of the Scheme, an independent valuer shall be accrued till the beginning of the day plus the difference between the appointed for the valuation of the said security. To determine

HSBC Mututal Fund 27 Statement of Additional Information

if a security accounts for more than 5% of the total assets of Expenses and Incomes Accrued the Scheme, it should be valued in accordance with the procedure All expenses and incomes accrued up to the valuation date shall be as mentioned above on the date of valuation. considered for computation of NAV. For this purpose, major expenses At the discretion of the AMC and with the approval of the Trustees, like management fees and other periodic expenses would be accrued an unlisted equity share may be valued at a price lower than the on a day to day basis. The minor expenses and income will be value derived using the aforesaid methodology. accrued on a periodic basis, provided the non-daily accrual does not affect the NAV calculations by more than 1%. Valua Valuation of of convertible debentures and bonds Changes in securities and in number of Units In respect of convertible debentures and bonds, the non-convertible Any changes in securities and in the number of Units will be and convertible components shall be valued separately. The recorded in the books not later than the first valuation date following nonconvertible component shall be valued on the same basis as the date of transaction. If this is not possible, given the frequency would be applicable to a debt instrument. The convertible component of NAV disclosure, the recording may be delayed up to a period of shall be valued on the same basis as would be applicable to an equity 7 days following the date of the transaction, provided as a result of instrument. If, after conversion the resultant equity instrument would such non-recording, the NAV calculation shall not be affected by be traded pari passu with an existing instrument which is traded, the more than 1%. value of the latter instrument can be adopted after an appropriate In case the NAV of the Scheme differs by more than 1%, due to non- discount for the non-tradability of the instrument during the period recording of transactions, the investors or Scheme as the case may preceding the conversion. While valuing such instruments, the fact be, shall be paid the difference in amount as follows:- whether the conversion is optional will also be factored in. l If the investors are allotted units at a price higher than NAV Valuation of warrants or are given a price lower than NAV at the time of sale of their In respect of warrants to subscribe for shares attached to instruments, Units, they shall be paid the difference in amount by the the warrants shall be valued at the value of the share which would Scheme. be obtained on exercise of the warrant as reduced by the amount l If the investors are charged lower NAV at the time of purchase which would be payable on exercise of the warrant. A discount of their Units or are given higher NAV at the time of sale of similar to the discount to be determined in respect of convertible their Units, the AMC shall pay the difference in amount to the debentures (as referred in valuation of convertible debentures and Scheme. The AMC may recover the difference from the bonds above) shall be deducted to account for the period which must investors. elapse before the warrant can be exercised; The valuation guidelines as outlined above are as per prevailing Valuation of Derivative Products Regulations and are subject to change from time to time in conformity l The traded derivatives shall be valued at market price in with changes made by SEBI. conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the Regulations as amended from time to time.

28 HSBC Mututal Fund

Thlti f tddditi hllbd i Statement of Additional Information

VI. ACCOUNTING POLICIES AND STANDARDS

In accordance with the Regulations, the AMC will follow the repurchased, after considering the equalisation as above, the accounting policies and standards, as detailed below: difference between the purchase price and face value of the Unit, if positive, shall be debited to reserves and, if negative, l The AMC, for the Scheme and its Plan(s), shall keep and shall be credited to reserves, the face value being debited to the maintain proper books of account, records and documents, so Capital Account. as to explain its transactions and to disclose at any point of time the financial position of the Scheme and, in particular, give a l The cost of investments acquired or purchased shall include true and fair view of the state of affairs of the Fund. brokerage, stamp charges and any charge customarily included in the broker’s bought note. In respect of privately placed debt l For the purposes of the financial statements, the Scheme and instruments any front-end discount offered shall be reduced its Plan(s) shall mark all investments to market and carry from the cost of the investment. investments in the balance sheet at market value. However, since the unrealised gain arising out of appreciation on l Underwriting commission shall be recognised as revenue only investments cannot be distributed, provision shall be made for when there is no devolvement on the Scheme and its Plans. exclusion of this item when arriving at distributable income. Where there is devolvement on the Scheme and the Plans thereunder, the full underwriting commission received and not l In respect of all interest-bearing investments, income shall be merely the portion applicable to the devolvement shall be accrued on a day to day basis as it is earned. Therefore, when reduced from the cost of the investment. such investments are purchased, interest paid for the period from the last interest due date up to the date of purchase should l Bonus shares to which the Scheme and the Plans thereunder not be treated as a cost of purchase but shall be debited to becomes entitled shall be recognized only when the original Interest Recoverable Account. Similarly, interest received at shares on which the bonus entitlement accrues are traded on the time of sale for the period from the last interest due date the stock exchange on an ex-bonus basis. Similarly, rights up to the date of sale must not be treated as an addition to sale entitlements shall be recognized only when the original shares value but shall be credited to Interest Recoverable Account. on which the right entitlement accrues are traded on the stock exchange on an ex-right basis. l In determining the holding cost of investments and the gains or loss on sale of investments, the “average cost” method shall l Dividend income earned by the Scheme and its Plans shall be be followed for each security. recognized, not on the date the dividend is declared, but on the date the share is quoted on an ex-dividend basis. For investments, l Transactions for purchase or sale of investments shall be which are not quoted on the stock exchange, dividend income recognised as of the trade date and not as of the settlement date, would be recognized on the date of declaration of dividend / so that the effect of all investments traded during a financial information about dividend / receipt of dividend proceeds. year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the The accounting policies and standards outlined above are as per the stock market, for example, acquisition through private existing Regulations and are subject to change as per changes in the placement or purchases or sales through private treaty, the Regulations. transaction would be recorded, in the event of a purchase, as Guidelines for Identification and Provisioning for of the date on which the Scheme obtains an enforceable obligation to pay the price or, in the event of a sale, when the Non-Performing Assets (Debt Securities) Scheme obtains an enforceable right to collect the proceeds of Definition of a Non-Performing Asset (NPA) sale or an enforceable obligation to deliver the instruments An ‘asset’ shall be classified as non-performing, if the interest and / sold. or principal amount have not been received or remained outstanding l Where income receivable on investments has accrued but has for 1 quarter from the day such income / instalment has fallen due. not been received for a period specified in the guidelines issued Effective date for classification and provisioning of NPAs by SEBI, provision shall be made by debit to the revenue account the income so accrued in the manner specified by The definition of NPA may be applied after a quarter past due date guidelines issued by SEBI. of the interest. For e.g. if the due date for interest is 30.06.2001, it will be classified as NPA from 01.10.2001. l When Units are sold in the Scheme and its Plans, an appropriate part of the sale proceeds shall be credited to an Equalisation Treatment of income accrued on the NPA and further accruals Account and when Units are repurchased an appropriate amount After the expiry of the 1st quarter from the date the income has shall be debited to Equalisation Account. The net balance on fallen due, there will be no further interest accrual on the asset i.e. this account shall be credited or debited to the Revenue Account. if for example, the due date for interest falls on 30.06.2001 and if The balance on the Equalisation Account debited or credited the interest is not received, accrual will continue till 30.09.2001 to the Revenue Account shall not decrease or increase the net after which there will be no further accrual of income. In short, income of the Fund but is only an adjustment to the distributable taking the above example, from the beginning of the 2nd quarter surplus. It shall therefore be reflected in the Revenue Account there will be no further accrual on income. only after the net income of the Fund is determined. On classification of the asset as NPA from a quarter past due date l When Units are sold, after considering the equalisation as of interest, all interest accrued and recognised in the books of above, the difference between the sale price and the face value accounts of the Fund till the date, should be provided for. For e.g. of the Unit, if positive, shall be credited to reserves and if if interest income falls due on 30.06.2001, accrual will continue till negative, shall be debited to reserve, the face value being 30.09.2001 even if the income as on 30.06.2001 has not been credited to Capital Account. Similarly, when the Units are received. Further, no accrual will be done from 01.10.2001 onwards.

HSBC Mututal Fund 29 Statement of Additional Information

Full provision will also be made for interest accrued and outstanding l In case the company has fully cleared all the arrears of interest, as on 30.06.2001. the interest not credited on accrual basis would be credited at the time of receipt. Provision for NPAs - Debt Securities l The provision made for the principal amount can be written Both secured and unsecured investments once they are recognised back in the following manner: - as NPAs call for provisioning in the same manner. l 100% of the asset provided for in the books will be written The value of the asset must be provided in the following manner or back at the end of the 2nd calendar quarter where the earlier at the discretion of the Fund. The Fund will not have discretion provision of principal was made due to the interest defaults to extend the period of provisioning. The provisioning against the only. principal amount or instalments should be made at the following rates irrespective of whether the principal is due for repayment or l 50% of the asset provided for in the books will be written not. back at the end of the 2nd calendar quarter and 25% after every subsequent quarter where both instalments and 10% of the book value of the asset should be provided for after 6 interest were in default earlier. months past due date of interest i.e. 3 months from the date of classification of the asset as NPA. l An asset is reclassified, as ‘standard asset’ only when both overdue interest and overdue instalments are paid in full and 20% of the book value of the asset should be provided for after 9 there is satisfactory performance for a subsequent period of 6 months past due date of interest i.e. 6 months from the date of months. classification of the asset as NPA. Receipt of past dues Another 20% of the book value of the assets should be provided for after 12 months past due date of interest i.e. 9 months from the date When the Fund has received income / principal amount after their of classification of the asset as NPA. classifications as NPAs:

Another 25% of the book value of the assets should be provided for l For the next 2 quarters, income should be recognised on cash after 15 months past due date of interest i.e. 12 months from the date basis and thereafter on accrual basis. The asset will be continued of classification of the asset as NPA. to be classified as NPA for these two quarters.

The balance 25% of the book value of the asset should be provided l During this period of two quarters although the asset is classified for after 18 months past due date of the interest i.e. 15 months from as NPA no provision needs to be made for the principal if the the date of classification of the assets as NPA. same is not due and outstanding.

Book value for the purpose of provisioning for NPAs shall be taken l If part payment is received towards principal, the asset continues as a value determined as per the prescribed valuation method. to be classified as NPA and provisions are continued as per the norms set at ‘Provision for NPAs - Debt Securities’ above. Any This can be explained by an illustration: excess provision will be written back. Let us consider that interest income is due on a half yearly basis and Classification of Deep Discount Bonds as NPAs the due date falls on 30.06.2002 and the interest is not received till 1st quarter after due date i.e. 30.09.2002. This provisioning will be Investments in Deep Discount Bonds can be classified as NPAs, if done in following phased manner: any two of the following conditions are satisfied:

10% provision 01.01.2003 6 months past due date of l If the rating of the Bond comes down to grade ‘BB’ or below. interest i.e. 3 months from l If the company is defaulting in their commitments in respect the date of classification of of other assets, if available. asset as NPA (01.10.2002) l Full net worth erosion. 20% provision 01.04.2003 Provision should be made as per the norms set at ‘Provision for 20% provision 01.07.2003 NPAs - Debt Securities’ above as soon as the asset is classified as NPA. 25% provision 01.10.2003 Full provision can be made if the rating comes down to grade ‘D’. 25% provision 01.01.2004 Reschedulement of an asset Thus, 1 1/2 years past the due date of income or 1 1/4 year from the date of classification of the ‘asset’ as an NPA, the ‘asset’ will In case any company defaults either interest or principal amount and be fully provided for. If any instalment is fallen due, during the the Fund has accepted a Reschedulement of the schedule of payments, period of interest default, the amount of provision should be then the following practice may be adhered to: instalment amount or above provision amount, whichever is higher. l In case it is a first reschedulement and only interest is in Reclassification of assets default, the status of the asset namely, ‘NPA’ may be continued and existing provisions should not be written back. This practice Upon reclassification of assets as ‘performing assets’: should be continued for two quarters of regular servicing of the l In case a company has fully cleared all the arrears of interest, debt. Thereafter, this is classified as ‘performing asset’ and the the interest provisions can be written back in full. interest provided may be written back. l The asset will be reclassified as performing on clearance of all l If the reschedulement is done due to default in interest and interest arrears and if the debt is regularly serviced over the principal amount, the asset should be continued as non- next two quarters. performing for a period of 4 quarters, even though the asset is

30 HSBC Mututal Fund Statement of Additional Information

continued to be serviced during these 4 quarters regularly. The total amount of provisions made against the NPAs shall be Thereafter, this can be classified as ‘performing asset’ and all disclosed in addition to the total quantum of NPAs and their proportion the interest provided till such date should be written back. of the assets of the Mutual Fund Scheme. In the list of investments an asterisk mark shall be given against such investments which are l If the reschedulement is done for a second / third time or recognised as NPAs. Where the date of redemption of an investment thereafter, the characteristic of NPA should be continued for 8 has lapsed, the amount not redeemed shall be shown as ‘Sundry quarters of regular servicing of the debt. The provision should Debtors’ and not investment provided that where an investment is be written back only after it is reclassified as ‘performing redeemable by instalments that will be shown as an investment until asset’. all instalments have become overdue. Disclosure in the Half Yearly Portfolio Reports The Mutual Fund shall make scripwise disclosures of NPAs on half yearly basis along with the half yearly portfolio disclosure.

HSBC Mututal Fund 31 Statement of Additional Information

VII. TAX & LEGAL & GENERAL INFORMATION

A. TAXATION ON INVESTING IN MUTUAL For Partnership firms, Indian Companies and other residents: Long FUNDS term capital gains will be subjected to the income tax at the rate of 20% (plus surcharge) or 10% (plus surcharge) as the case may be. As per the taxation laws in force*, tax benefits that are available to the investors investing in the Units of the Schemes are stated For non-residents and foreign companies: Long-term capital gains herein below. The information so stated is based on the Mutual will be subjected to the income tax at the rate of 20% (plus surcharge). Fund's understanding of such tax laws in force as of the date of this However, no benefit of Cost Inflation Indexation is available. Document, which have been vetted by the tax consultants For Non-resident Indians : Under section 115E of the Act for non- * The vote on account presented in the Parliament in February 2009 resident Indians, income by way of long-term capital gains in respect does not have any changes since Finance Act, 2008 of Units is chargeable at the rate of 10% (plus surcharge). However, no benefit of Cost Inflation Indexation is available. The following information is provided for only general information purposes. In view of the individual nature of tax Non-resident Indians may opt for computation of long-term capital benefits, each investor is advised to consult with his or her own gains as per section 112, if it is more beneficial. tax consultant with respect to the specific tax implications arising For Overseas Financial Organizations, including Overseas Corporate out of their participation in the scheme. Bodies fulfilling conditions laid down under section 115AB (Offshore The following benefits may accrue to the Unitholders with effect Funds). from the financial year commencing from April 1, 2008 (unless Under section 115AB of the Act, long term capital gains in respect otherwise stated): of units held for a period of more than 12 months will be chargeable A. INCOME TAX at the rate of 10% (plus surcharge). Such gains would be calculated without indexation of cost of acquisition. 1. Exemption u/s. 10(35): Under the provisions of Section 10(35) of the Act income received For Foreign Institutional Investors (“FIIs”): Under section 115AD in respect of the units of a mutual fund specified u/s. 10(23D) will of the Act, long term capital gains in respect of units held for more be exempt from income tax in the hands of all unitholders. In view than 12 months would be taxed at the rate of 10% plus surcharge. of this position, no tax needs to be deducted at source from such Such gains would be calculated without indexation of cost of distribution by the fund. However, by virtue of the proviso to section acquisition. 10(35), this exemption does not apply to income arising on “transfer” Tax on long term capital gains in all the above cases will be further of units of a mutual fund. increased by the Education Cess (“EC”) calculated @ 2% on tax 2. Long Term Capital Gains plus surcharge and Secondary and Higher Secondary Cess calculated @ 1% on tax plus surcharge as per the FB. i. On units of equity oriented funds: 3. Short Term Capital Gains Section 10(38) exempts long term capital gains arising from the transfer of units of an equity oriented fund provided the transaction i. On units of equity oriented funds: of sale is entered into on or after the date on which the securities Section 111A provides that the short term capital gains arising from transaction tax is made applicable and such transaction is chargeable the transfer of units of an equity oriented fund will be taxed at 15% to the securities transaction tax. (plus applicable surcharge) provided the transaction of sale is entered However such long term capital gains arising to a company shall be into on or after the date on which the securities transaction tax is taken into account in computing the book profit and income tax made applicable and such transaction is chargeable to the securities payable under section 115JB. transaction tax. ii. On units of funds other than the equity oriented funds: ii. On units of funds other than equity oriented funds: For Individuals and Hindu Undivided Families (“HUF”s): Long- Short Term Capital Gains in respect of Units held for a period of term capital gains in respect of units held for a period of more than not more than 12 months is added to the total income. Total income 12 months will be chargeable u/s.112 at the rate of 20% (plus including short-term capital gains is chargeable to tax as per the surcharge), as applicable. Capital gains would be computed after relevant slab rates. The maximum tax rates applicable to different reducing the aggregate of cost of acquisition (as adjusted by cost categories of assesses are as follows: inflation index notified by the Central Government) and expenditure Resident Individuals and HUF 30% plus surcharge, as applicable. incurred wholly and exclusively in connection with transfer. Partnership Firms 30% plus surcharge An assessee will have an option to apply concessional rate of tax Indian companies 30% plus surcharge of 10% (plus surcharge) provided the long term capital gains are Non Resident Indians 30% plus surcharge computed without substituting indexed cost in place of cost of Foreign Companies 40% plus surcharge acquisition. Overseas Financial Organisations 30% plus surcharge Further, in the case of Individuals and HUFs, being resident, where FIIs 30% plus surcharge taxable income as reduced by long-term capital gains, is below the Tax on short term capital gains in all the above cases will be further basic exemption limit, the long-term capital gains will be reduced increased by the EC calculated @ 2% on tax plus surcharge and to the extent of the shortfall and only the balance long-term capital Secondary and Higher Secondary Cess calculated @ 1% on tax plus gains will be subjected to income tax at 20% (plus surcharge) or surcharge as per the FB. 10% (plus surcharge) as the case may be.

32 HSBC Mututal Fund Statement of Additional Information

4. Capital Loss As per circular no. 728 dated October 1995 by CBDT, in the Section 94(7) disallows any capital loss, arising to a unitholder if case of a remittance to a country with which a Double Taxation he acquires units of a mutual fund within a period of three months Avoidance Agreement (DTAA) is in force, tax should be prior to the record date fixed for declaration of dividend or distribution deducted at the rate provided in the Finance Act of the relevant of income and sells or transfers such units within a period of nine year or at the rate provided in DTAA whichever is more months from such record date, to the extent of dividend or income beneficial to the assessee. received or receivable on such units. In order for the unitholder to obtain the benefit of a lower rate Section 94(8) provides that if a person buys or acquires units (“the under the DTAA, the unitholder would be required to provide original units”) of a mutual fund within a period of three months the fund with a certificate obtained from his Assessing Officer prior to the record date fixed for allotment of bonus units and sells stating his eligibility for the lower rate. the original units within nine months from the date of allotment of 6. Investments By Charitable And Religious Trusts bonus units then the loss arising on such sale or transfer shall be Units of Mutual Fund Schemes referred to in clause 23D of section ignored. Further, such loss shall be deemed to be the cost of 10 of the Act constitute an eligible avenue for investment by charitable acquisition or purchase of the bonus units. or religious trusts per rule 17C of the Income Tax Rules, 1962, read 5. Tax Deduction At Source On Capital Gains with clause (xii) of sub-section (5) of section 11 of the Income Tax (i) No tax is required to be deducted at source on capital gains Act, 1961. arising to any resident unit holder. B. WEALTH TAX (ii) Under section 195 of Act, tax shall be deducted at source in Units held under the Schemes of Mutual Fund are not treated as respect of capital gains as under: assets within the meaning of section 2(ea) of the Wealth Tax Act, 1957 and are, therefore, not liable to Wealth-Tax. a. In case of a non-resident other than a company - C. GIFT TAX l Long term capital gains nil on units of equity If units of Mutual Fund Scheme are gifted, no gift tax shall be oriented funds payable either by the donor or the donee as the Gift Tax has been abolished. l Long term capital gains 20% plus surcharge on units of funds other Notes: than equity oriented funds (i) All tax benefits will be available to the Sole Unitholder or the l Short term capital gains 15% plus surcharge first named holder in case the Units are held in the names of on units of equity more than one person, as the case may be. oriented funds (ii) HSBC AMC also confirms that the Income Tax/Wealth Tax/ l Short term capital gains 30% plus surcharge Capital Gains Tax and investment by NRIs/FIIs/OCBs are on units of funds other subject to relevant requirements under the Income Tax, FEMA than equity oriented funds and RBI Directions. b. In case of a foreign company - (iii) As per Section 54ED capital gains arising before April 1, 2006 l Long term capital gains nil from a transfer of a long term capital asset being listed securities on units of equity or units of UTI/mutual funds, shall be exempt from tax, if such oriented funds capital gains are invested in equity shares by way of a public l Long term capital gains 20% plus surcharge issue. The section provides for a lock-in period of one year and on units of funds other if the newly acquired shares are sold or transferred during the than equity oriented funds period, the capital gains earlier claimed exempt, would become taxable in the year of sale of the newly acquired shares. l Short term capital gains 15% plus surcharge on units of equity (iv) With effect from June 1, 2006 an investor who sells units of oriented funds an equity oriented fund to the mutual fund will have to pay l Short term capital gains 40% plus surcharge 0.25% of the sale price of the units as securities transaction tax on units of funds other which tax would be collected by the prescribed person in case than equity oriented funds of every mutual fund. Tax Deducted At Source on short term and long term capital gains (v) The FA has introduced section 36(1)(xv) which will grant a in all the above cases will be further increased by the EC calculated deduction in respect of the securities transaction tax paid by @ 2% on tax plus surcharge and Secondary and Higher Secondary a person if the income arising from sale of units of equity Cess calculated @ 1% on tax plus surcharge as per the FB. oriented funds is chargeable under the head “Profits and gains of business or profession”. (iii) Under section 196B of the Act tax at 10% plus surcharge and EC calculated @ 2% on tax plus surcharge and Secondary and (vi) Section 80C provides that an individual or HUF shall get a Higher Secondary Cess calculated @ 1% on tax plus surcharge deduction, in respect of a contribution to any units of any as per the FB shall be deducted at source from long term capital Mutual Funds notified under clause 10(23D) of section 10 or gains on units other than the units of equity-oriented mutual from the Administrator or the specified company under any funds earned by Overseas Financial Organisation. plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify (iv) Under Section 196D of the Act, no deduction shall be made in this behalf and in respect of any contribution by an individual from any income by way of capital gains, in respect of transfer to any pension fund set up by the Mutual Fund notified under of securities referred to in Section 115AD of the Act.

HSBC Mututal Fund 33 Statement of Additional Information

clause (23D) of section 10 or by the Administrator or the single / joint / surviving Unitholders can subsequently write to the specified company, as the Central Government may, by ISC requesting for a Nomination Form in order to nominate any notification in the Official Gazette, specify in this behalf, out person to receive the Units upon his / her / their death, subject to of his income chargeable to tax provided the aggregate sum completion of necessary formalities. Further, if either the Mutual does not exceed one lakh rupees. Fund or the AMC incur any loss whatsoever arising out of any litigation or harm that it may suffer in relation to the nomination, (vii) In terms of Section 115R of the Act, as amended from time to they will be entitled to be indemnified absolutely from the deceased time, applicable dividend distribution tax (DDT) will be applied Unitholders’ estate. Upon the demise of the Unitholder, the Units at the time of dividend distribution in eligible schemes. Investors would be transmitted in favour of the Nominee subject to the may please note that distribution tax shall be paid by the Nominee executing suitable indemnities in favour of the Mutual scheme at the rates applicable to an income scheme (under the Fund and the AMC and necessary documentation to the satisfaction Income-tax Act), as this scheme is classified as an income of the Mutual Fund. scheme under the SEBI Regulations. In case the scheme has to bear higher distribution tax as applicable to liquid funds, the Investors / Unitholders are advised to read the instructions carefully additional distribution tax shall be paid by the scheme / before nominating. recovered from the investors. The Mutual Fund can call for such documents from the Nominee as deemed necessary. B. LEGAL INFORMATION 2. Transfer & Transmission of Units 1. Nomination Facility As the Scheme stands ready to redeem Units on a continuous basis The AMC will provide an option to the Unitholder to nominate the as laid down herein, the transfer facility is found redundant. Units persons in whom all the Units held by the Unitholder shall vest in of the Scheme shall therefore be non transferable. However, if a the event of his death. Where the Units are held by more than one transferee becomes a holder of Units by operation of law including person jointly, all the joint Unitholders may together nominate a upon enforcement of a pledge, then the Trustees shall, subject to person by signing the nomination form indicating the name of the production of such evidence, which in their opinion is sufficient, person in whom all the rights in the Units shall vest in the event of proceed to effect the transfer within 30 days from the date of death of all the joint Unitholders. lodgement if the intended transferee is otherwise eligible to hold the The investors/Unitholders are requested to note that a maximum of Units. A person becoming entitled to hold the Units in consequence three nominees can be registered for a Folio. In case of multiple of the death, insolvency, or winding up of the sole holder or the nominees, the ‘Share / Ratio’ of nomination has to be clearly specified survivors of joint holders, upon producing evidence and in the nomination form / request letter. If the ‘Share / Ratio’ of documentation to the satisfaction of the Fund and upon executing nomination is not explicitly stated, then the nomination shall be suitable indemnities in favour of the Fund and the AMC, shall be treated at ‘Equal Share/Ratio’. registered as a Unitholder. It may be noted that the nominee / legal heir is required to provide a copy of his / her PAN card as well as The nomination can be made only by individuals applying for / fulfil the Know Your Customer (KYC) requirements which is a pre- holding Units on their own behalf singly or jointly. Non-individuals requisite for the transmission process. including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot In case of HSBC Tax Saver Equity Fund (HTSF), unitholders should, nominate. however, note that in the event of death of the Unitholder, the legal heir, subject to production of requisite documentary evidence, will A minor can be nominated and in that event, the name and address be able to redeem the investment only after the completion of one of the Guardian of the minor Nominee shall be provided by the year or anytime thereafter, from the date of allotment of Units to the Unitholder. deceased Unitholder. Units issued under HTSF can be transferred, The Nominee shall not be a society, trust (other than a religious or assigned or pledged after a period of 3 years from the date of charitable trust), body corporate, partnership firm, Karta of Hindu allotment. Undivided Family, holder of Power of Attorney. A non-resident 3. Pledge Indian can be a Nominee subject to the exchange controls in force If in conformity with the guidelines and notifications issued by from time to time. Nomination can also be made in favour of the SEBI / Government of India / any other regulatory body from time Central Government, State Government, Local Authority, any person to time, Units under the Scheme may be offered as security by way designated by virtue of his office or a religious or charitable trust. of a pledge / charge in favour of scheduled banks, financial Nomination in respect of the Units stands rescinded upon the institutions, non-banking finance companies (NBFCs), or any other transmission of Units. body. In case of HSBC Tax Saver Equity Fund, unitholders should, however, note that the Units issued under the Scheme can be pledged Transmission of Units in favour of a Nominee, shall be a valid only after a period of 3 years from the date of allotment. discharge by the Mutual Fund / AMC / Trustees against the legal heirs of the Unitholder(s). The AMC and / or the ISC will note and record such pledged Units. A standard form for this purpose is available on request from any The cancellation of Nomination can be made only by those individuals ISC. Disbursement of such loans will be at the entire discretion of who hold Units on their own behalf singly or jointly and who made the bank / financial institution / NBFC or any other body concerned the original nomination. and the Mutual Fund assumes no responsibility thereof. The Pledgor On cancellation of the nomination, the nomination shall stand will not be able to redeem / switch Units that are pledged until the rescinded and the Mutual Fund / AMC / Trustees shall not be under entity to which the Units are pledged provides written authorisation any obligation to transmit the Units in favour of the Nominee. to the Mutual Fund that the pledge / lien charge may be removed. As long as Units are pledged, the pledgee will have complete The nomination facility extended under the Scheme is in accordance authority to redeem such Units. with SEBI regulations and subject to other applicable laws. The

34 HSBC Mututal Fund Statement of Additional Information

The distributions in the nature of dividends which are paid out on l On the happening of any event, which in the opinion of the pledged units shall be made in favour of the investor. Trustees, requires the Scheme to be wound up 4. Applications under Power of Attorney / Body l If seventy five per cent (75%) of the Unitholders of the Scheme Corporate / Registered Society / Trust / Partnership pass a resolution that the Scheme be wound up The original Power of Attorney or a duly notarised copy of the l If SEBI so directs in the interest of the Unitholders. Power of Attorney shall be required to be submitted where Where the Scheme is so wound up, the Trustees shall give notice applications are made under a Power of Attorney. of the circumstances leading to the winding up of the Scheme to:

A company, body corporate, eligible institutions, registered society, l SEBI and trusts, partnership or other eligible non-individuals who apply in the l In two daily newspapers having a circulation all over India and Scheme should furnish a certified copy of resolution or authority to in one vernacular newspaper with circulation in Mumbai. make the application as the case may be and a certified copy of the Memorandum and Articles of Association and / or bye-laws and / On and from the date of the publication of notice of winding up, the or Trust Deed and / or Partnership Deed and certificate of registration Trustees or the AMC, as the case may be, shall: or any other document as the case may be. In case of a Trust / Fund, l Cease to carry on any business activities in respect of the it shall submit a certified true copy of the resolution from the Scheme so wound up Trustee(s) authorising such purchases. The officials should sign the application under their official designation and furnish a list of l Cease to create or cancel Units in the Scheme authorised signatories. All communications and payments shall be l Cease to issue or redeem Units in the Scheme made to the First Applicant only. 7. Procedure and Manner of Winding up 5. Joint Applicants The Trustees shall call a meeting of the Unitholders of the relevant In the event an account has more than one registered owner, the first- Scheme to approve by simple majority of the Unitholders present named holder (as determined by reference to the original Application and voting at the meeting, resolution for authorising the Trustees or Form) shall receive all Account Statements, notices and any other person to take steps for the winding up of the Scheme. correspondence with respect to the account, as well as the proceeds of any redemption requests or dividends or other distributions. In The Trustees or the person authorised as above, shall dispose of the addition, such Unitholder shall have voting rights associated with assets of the Scheme concerned in the best interest of the Unitholders such Units, as per the applicable guidelines. Applicants can specify of the Scheme. the mode of holding in the Application Form as ‘Jointly’ or ‘Anyone The proceeds of sale realised in pursuance of the above, shall be first or Survivor’. In the case of holding specified as ‘Jointly’, all utilised towards discharge of such liabilities as are due and payable transactions / instructions would have to be signed by all joint under the Scheme, and after meeting the expenses connected with holders. However, in cases of holding specified as ‘Anyone or such winding up, the balance shall be paid to the Unitholders in Survivor’, any one of the Unitholders will have the power to make proportion to their respective interest in the assets of the Scheme, transaction requests / provide instructions, without it being necessary as on the date the decision for winding up was taken. for all the Unitholders to sign. However, in all cases, all distributions On completion of the winding up, the Trustees shall forward to will be made to the first-named holder only. SEBI and the Unitholders, a report on the winding up, detailing the In case of death / insolvency of any one or more of the persons circumstances leading to the winding up, the steps taken for disposal named in the register of Unitholders as the joint holders of any of the assets of the Scheme before winding up, expenses of the Units, the AMC shall not be bound to recognise any person(s) other Scheme for winding up, net assets available for distribution to the than the remaining holders. In all such cases, redemption proceeds Unitholders and a certificate from the auditors of the Fund. shall be paid to the first named of such remaining Unitholders. Notwithstanding anything contained herein above, the provisions of 6. Duration of the Scheme / Plan the Regulations in respect of disclosures of half-yearly reports and Annual Reports shall continue to be applicable, until winding up is In case of open-ended schemes, the duration of the schemes will be completed or the Scheme cease to exist. perpetual and in case of close-ended schemes the duration of the schemes will be for a fixed term as mentioned in the respective Offer After the receipt of the report referred to above, if SEBI is satisfied Document / Combined Scheme Information Document. However, that all measures for winding up of the Scheme have been complied in case of HSBC Unique Opportunities Fund (HUOF) and HSBC with, the Scheme shall cease to exist. Small Cap Fund (HSCF), the duration of the schemes is three years from the date of allotment of Units. The schemes will be automatically 8. Unclaimed Redemption / Dividend Amount converted into an open ended equity schemes at the end of three The unclaimed redemption amounts and dividend amounts may be years from the date of allotment of units under the respective deployed by the mutual fund in call money market or money market schemes. Upon conversion, the duration of the schemes shall be instruments and the investors who claim these amounts during a perpetual. period of 3 years from the due date shall be paid at the prevailing net asset value. After a period of 3 years, this amount may be The AMC, the Fund and the Trustees reserve the right to make such transferred to a pool account and the investors can claim the amount changes / alterations to all or any of the Scheme (including the at the NAV prevailing at the end of the third year. The income earned charging of fees and expenses) offered under the respective Offer on such funds will be used for the purpose of investor education. Document / Combined Scheme Information Document to the extent The AMC will make continuous efforts to remind the investors permitted by the applicable Regulations. However, in terms of the through letters to take their unclaimed amounts. Further, the Regulations a scheme may be wound up after repaying the amount investment management fee charged by the AMC for managing due to the Unitholders: unclaimed amounts shall not exceed 50 basis points.

HSBC Mututal Fund 35 Statement of Additional Information

9. Sus pension of Sale / Repurchase / Switch of to redemptions, market forces or for any other reason, whichever Units is later. The suspension will not however affect Dividend reinvestment The Mutual Fund at its sole discretion reserves the right to withdraw options, Systematic Investment Plans, SIP Plus, Systematic Transfer sale and / or repurchase and / or switch of the Units in the Scheme Plans or other standing instructions which have been entered into (including any one of the Plan of any of the Scheme) temporarily by the investors at any time prior to the date from which the or indefinitely, if in the opinion of the AMC, the general market suspension takes effect. The Trustees/ AMC also reserve the right conditions are not favourable and / or suitable investment to review the amount, frequency and methodology by which the opportunities are not available for deployment of funds. However, suspension of further sale of units will be enforced. All decisions the suspension of sale / repurchase / switch either temporarily or of the Trustees/ AMC will take effect prospectively and be indefinitely will be with the approval of the Trustees. communicated to the investors from time to time by arranging to display a notice in the Investor Service Centres and issuing The sale / repurchase / switch of the Units may be suspended under advertisements in 2 newspapers, at least 1 day prior to the decision the following conditions: taking effect. All decisions of the Trustees/ AMC will be made in l When one or more stock exchanges or markets, which provide the interest of the investors and will be subject to the SEBI basis for valuation for a substantial portion of the assets of the Regulations. Scheme is closed otherwise than for ordinary holidays. HEMF: The Trustees/ AMC reserve the right to temporarily suspend l When, as a result of political, economic or monetary events or any circumstances outside the control of the Trustees and the subscriptions, switches into the Scheme, if the asset under AMC, the disposal of the assets of the Scheme is not reasonable, management of the Scheme exceed the maximum permissible limit or would not reasonably be practicable without being detrimental as mentioned under the heading on "Policy on Offshore Investments to the interests of the Unitholders. by the Scheme(s) and the Plan(s) thereunder" of this Combined Scheme Information Document. l In the event of breakdown in the means of communication used for the valuation of investments of the Scheme, without which 10. Requirements of Know Your Customer (KYC) the value of the securities of the Scheme cannot be accurately under Prevention of Money Laundering Act (PMLA) calculated. The investors are requested to refer "Prevention of Money Laundering l During periods of extreme volatility of markets, which in the and Know Your Customer (KYC)" of the document, for details opinion of the AMC are prejudicial to the interests of the pertaining to requirements of KYC and PMLA. Unitholders of the Scheme. l In case of natural calamities, strikes, riots and bandhs. 11. Freezing / Seizure of Accounts l In the event of any force majeure or disaster that affects the Investors may note that under the following circumstances the normal functioning of the AMC, ISC or the Registrar. Trustee / AMC may at its sole discretion (and without being l If so directed by SEBI. responsible and/or liable in any manner whatsoever) freeze / seize a Unit holder's account (or deal with the same in the manner the In the above eventualities, the time limits indicated above, for Trustee / AMC is directed and/or ordered) under the Scheme(s): processing of requests for purchase, switch and redemption of Units will not be applicable. Further, an order to purchase Units is not l Under any requirement of any law or regulations for the time binding on and may be rejected by the Trustees, the AMC or their being in force. respective agents, until it has been confirmed in writing by the AMC or its agents and payment has been received. l Under the direction and/or order (including interim orders) of any regulatory/statutory authority or any judicial authority or Suspension or restriction of repurchase / redemption facility under any quasi-judicial authority or such other competent authority any Scheme / Plan of the Mutual Fund shall be made applicable only having the powers to give direction and/or order. after the approval from the Board of Directors of the AMC and the Trustees. The approval from the AMC Board and the Trustees C. GENERAL INFORMATION giving details of circumstances and justification for the proposed action shall also be informed to SEBI in advance. 1. Inter-Scheme Transfer of Investments l Transfer of investments from one Scheme to another Scheme HMEF: The Trustees/ AMC reserve the right to temporarily suspend in the Mutual Fund shall be permitted provided: subscriptions, switches into the Scheme, if the asset under management of the Scheme exceeds Rs. 700 crores. However, as it l Such transfers are done at the prevailing market price for may not be possible to ensure that the assets under management quoted instruments on spot basis; does not exceed Rs. 700 crores at the point of time of subscription, l The securities so transferred shall be in conformity with the any excess amounts collected in the Scheme would be retained until investment objective of the transferee Scheme and the suspension of subscriptions, switches into the Scheme takes effect. The suspension will be for a minimum period of 1 month or l Inter-Scheme transfers shall be done in accordance with the until the assets under management fall below Rs. 700 crores, due SEBI (Mutual Fund) Regulations.

36 HSBC Mututal Fund Statement of Additional Information

2. Associate Transactions INVESTMENT IN ASSOCIATE COMPANIES During the period 1st April 2005 to 30th April 2009, HSBC Mutual Fund had invested in the following associate companies of the Sponsor (Rs. in crores) Name of the Investing Scheme Name of the Associate Particulars Amount of Investment HSBC Equity Fund HSBC Fixed Deposit 28.00 HSBC Cash Fund HSBC Fixed Deposit 302.00 HSBC Ultra Short Term Bond Fund HSBC Fixed Deposit 163.00 HSBC Taxsaver Equity Fund HSBC Fixed Deposit 13.60 HSBC MIP Regular Plan HSBC Fixed Deposit 0.82 HSBC MIP Savings Plan HSBC Fixed Deposit 0.98 HSBC India Opportunities Fund HSBC Fixed Deposit 20.80 HSBC Floating Rate Fund Long Term Plan HSBC Fixed Deposit 35.00 HSBC Advantage India Fund HSBC Fixed Deposit 36.00 HSBC Midcap Equity Fund HSBC Fixed Deposit 12.00 HSBC Unique Opportunities Fund HSBC Fixed Deposit 31.60 HSBC Small Cap Equity Fund HSBC Fixed Deposit 1.10 HSBC Dynamic Fund HSBC Fixed Deposit 9.00 The above investments were considered sound. Before making the investments, the AMC evaluated the same on merits and on arm’s length basis and in accordance with the objectives of the Scheme.

Underwriting Obligations with respect to issues of Limited during the half-year ended September 30, 2006. The fund Associate Companies was allotted 12,34,275 shares @ Rs. 60 per share. HSBC Securities The AMC has till date, not entered into any underwriting contracts and Capital Markets (India) Pvt. Ltd., the Sponsor was the book in respect of any public issue made by any of its associate companies. running lead manager / co-book running lead manager in these issues. However these were subscribed through merchant bankers / Subscriptions in issues lead managed by the brokers other than the Sponsor. Sponsor or any of its Associates Dealing with Associate Companies The Mutual Fund subscribed to the public issue of Maruti Udyog Limited during the half year ended September 30, 2003. The Fund The AMC has utilised the services of its associate, The Hongkong was allotted 62300 shares @ Rs. 125.00 per share. The Schemes of and Shanghai Banking Corporation Limited as the Collecting Banker HSBC MF subscribed to public issues of Biocon Ltd. (allotted and for procuring Unit subscriptions for Scheme of the Fund. The 75000 shares @ Rs. 315 per share) and Gas Authority of India Collecting Banker’s fees and commissions payable are at similar Limited (allotted 849520 shares @ Rs. 195 per share) during the rates offered to other collecting bankers and distributors by the half year ended March 31, 2004. The Schemes of HSBC Mutual Scheme. Fund subscribed to the public issue of National Thermal Power The Hongkong and Shanghai Banking Corporation Limited and Corporation Limited (allotted 2627100 shares @ Rs. 62 per share) HSBC Primary Dealership (India) Private Ltd. are on the panel of and Jet Airways India Limited (allotted 63,623 shares @ Rs. 1100 selected counterparties with which the Mutual Fund places money per share) during the half year ended March 31, 2005. The Schemes in fixed deposits and / or enters into transactions for purchase / sale of HSBC Mutual Fund subscribed to the public issue of Gujarat of debt instruments. State Petronet Limited (allotted 5,89,025 shares @ Rs. 23 per share) These associates were counterparties to the Mutual Fund with respect and Bank of Baroda (allotted 2,05,848 shares @ Rs. 230 per share) to purchase / sale of the abovementioned instruments. The AMC has during the half-year ended March 31, 2006. The Schemes of HSBC utilised the services of the Sponsor for purchase / sale of securities Mutual Fund subscribed to the public issue of Reliance Petroleum on behalf of the Mutual Fund.

HSBC Mututal Fund 37 Statement of Additional Information

DEALING WITH ASSOCIATE COMPANIES (PERIOD 01/04/06 TO 30/04/2009) HSBC Mutual Fund has utilised the services of the following associates for the purpose of securities transactions (aggregate purchase and sale) & Deals with associates as counterparty: (Rs. in crores) Name of the Particulars HEF HIF HCF HIIF HGF HMIP HIOF Associate IP ST IP ST ST R S The Hongkong and Fixed Deposit 28.00 – – 302.00 – – – 0.82 0.98 20.80 Shanghai Banking Discounted Instruments 75.57 0.98 67.47 500.47 – – – – – – Corporation Limited Government Securities – 66.64 – – – – 12.26 21.64 26.66 – PSU/PFI Bonds/Corporate Debt – – 29.53 14.97 – – – 0.56 6.79 – Treasury Bills – – 4.75 9.49 – – – – – – Interest Rate Swaps – – – 225.00 – – – – – – HSBC Primary Dealership Government Securities – – – – – – – – 10.43 – (India) Private Limited HSBC Securities and Equity Shares 702.08 – – – – – – 10.95 26.87 241.14 Capital Markets (India) Private Limited (Sponsor) Investment in Shares of Equity Shares – – – – – – – – – 3.60 Voltas Limited (Associate) HSBC Asset Management (I) Pvt Ltd PSU/PFI Bonds/Corporate Debt – – – – – – – – – –

Name of the Associate Particulars HFRF HMEF HFTS HFTS HAIF HTSEF HUOF HUSBF HDF HFDF HSCF HFTS LT ST I II 50 The Hongkong and Shanghai Fixed Deposit 35.00 – 12.00 – – 36.00 13.60 31.60 163.00 9.00 – 1.10 – Banking Corporation Limited Discounted Instruments 87.93 – 9.68 – – – 1.82 0.98 845.30 – – – 65.87 Government Securities – – – – – – – – – – 18.00 – – PSU/PFI Bonds/ Corporate Debt – 14.97 – – – – – – 75.01 – 24.65 – – Treasury Bills – – – – – – – – Interest Rate Swaps – 25.00 – – – – – – 275 – – – – HSBC Primary Dealership Government Securities – – – – – – – – – – – – – (India) Private Limited HSBC Securities and Capital Equity Shares – – 110.14 – – 369.45 58.82 175.75 – 155.20 – 6.06 – Markets (India) Private Limited (sponsor) Investment in Shares of Equity Shares – – 52.40 – – 21.78 – 5.69 – – – – – Voltas Limited (Associate) HSBC Asset Management PSU/PFI Bonds/ (I) Pvt Ltd Corporate Debt –––––––––––––

38 HSBC Mututal Fund HFTS 46 HFTS 56 HFTS 59 HFTS 24 HFTS 30 HFTS 61 HFTS 41

Statement of Additional Information

Name of the Associate Particulars HINF HFTS HFTS HFTS HFTS HFTS HFTS HFTS HFTS HINF HTSEF HFTS HFTS II 52 37 44 51 58 63 66 68 I 53 54 The Hongkong and Shanghai Fixed Deposit – – – – – – – – – – – – – Banking Corporation Limited Discounted Instruments 78.99 22.76 111.03 47.11 20.31 63.69 18.38 1.96 1.48 3.46 1.48 – – Government Securities – – – – – – – – – – – – – PSU/PFI Bonds/ Corporate Debt – – – – – – – – – – – – – Treasury Bills – – – – – – – – – – – – – Interest Rate Swaps – – – – – – – – – – – – – HSBC Primary Dealership Government Securities – – – – – – – – – – – – – (India) Private Limited HSBC Securities and Capital Equity Shares – – – – – – – – – – – – – Markets (India) Private Limited (sponsor) Investment in Shares of Equity Shares – – – – – – – – – – – – – Voltas Limited (Associate) HSBC Asset Management PSU/PFI Bonds/ (I) Pvt Ltd Corporate Debt – –– ––– –– –– – ––

Name of the Associate Particulars HFTS HFTS HFTS HFTS HFTS HFTS HFTS HFTS HFTS 46 56 59 24 30 61 41 45 49 The Hongkong and Shanghai Fixed Deposit – – – – – – – – – Banking Corporation Limited Discounted Instruments – – – – – – – 2.97 – Government Securities – – – – – – – – – PSU/PFI Bonds/ Corporate Debt – – – – – – – – 45.08 Treasury Bills – – – – – – – – – Interest Rate Swaps – – – – – – – – HSBC Primary Dealership Government Securities – – – – – – – – – (India) Private Limited HSBC Securities and Capital Equity Shares – – – – – – – – – Markets (India) Private Limited (sponsor) Investment in Shares of Equity Shares – – – – – – – – – Voltas Limited (Associate) HSBC Asset Management PSU/PFI Bonds/ (I) Pvt Ltd Corporate Debt – – – – – – 2.72 – – HEF : HSBC Equity Fund, HIF-IP : HSBC Income Fund - Investment Plan, HIF-ST : HSBC Income Fund - Short Term Plan, HCF : HSBC Cash Fund, HIF-IP : HSBC Income Fund - Investment Plan - Institutional, HIF-ST : HSBC Income Fund - Short Term Plan - Institutional, HGF : HSBC Gilt Fund, HIOF : HSBC India Opportunities Fund, HMIP-R : HSBC MIP - Regular, HMIP-S : HSBC MIP - Savings, HFRF-LT : HSBC Floating Rate Fund - Long Term Plan, HFRF-ST : HSBC Floating Rate Fund - Short Term Plan, HMEF : HSBC Midcap Equity Fund, HAIF : HSBC Advantage India Fund, HTSEF : HSBC Tax Saver Equity Fund, HUSBF : HSBC Ultra Short Term Bond Fund, HUOF : HSBC Unique Opportunities Fund, HFTS : HSBC Fixed Term Series, HDF : HSBC Dynamic Fund, HFDF : HSBC Flexi Debt Fund, HSCF : HSBC Small Cap Equity Fund and HEMF : HSBC Emerging Markets Fund.

Note: Schemes of HSBC Mutual Fund had subscribed to the issue of Cholamandalam Investment & Finance Company Limited lead managed by HSBC Limited to the tune of Rs. 25.00 Crores

HSBC Mututal Fund 39 Statement of Additional Information

AMOUNT PAID BY HSBC MUTUAL FUND TO ASSOCIATE COMPANIES April 1, 2005 - April 30, 2009 (Rs. in lacs) Name of the Associate Particulars HEF HIF HCF HGF HMIP HIOF HFRF HMEF HIF IP HIF ST HMIP R HMIP S HFRF LT HFRF ST HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals 93.36 – – – – 1.63 3.59 43.08 – – 17.72 The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 1,818.62 75.39 33.21 349.57 1.33 46.67 49.76 1,119.47 51.78 163.04 800.26 The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges 5.48 3.10 0.19 2.51 0.01 14.48 14.85 2.75 0.25 0.21 3.22 The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals HSBC Asset Management (India) Investment Private Limited Management & Advisory Fee 4,563.48 102.80 127.46 2,172.48 19.24 290.23 405.53 2,336.08 439.67 564.11 1,410.45 The Hongkong and Shanghai Interest on Banking Corporation Limited ** borrowings for redemptions/ switch-outs – – – 3.80 1.23 – 0.37 – 8.27 – – The Hongkong and Shanghai Clearing Banking Corporation Limited Member Fees for F&O Trades 40.79 – – – – 0.40 1.12 27.29 – – 6.55 ** : Interest of Rs.516.44 lacs on borrowings has been borne by HSBC AMC # : Charges paid by all the schemes of HSBC Mutual Fund towards settlment of Government Securities transactions through the constituent SGL account.

Name of the Associate Particulars HAIF HTSEF HUOF HUSBF HDF HFDF HSCF HEMF HFTS I II III IV V VI HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals 65.24 11.58 29.23 – 15.06 – 0.75 – – – – – – – The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 2,151.76 44.34 623.96 263.85 434.06 40.90 26.04 305.65 – – 0.12 – 20.25 50.87 The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges 1.66 0.09 0.01 0.43 0.10 – 0.02 0.04 – – – – – – The Hongkong and Shanghai Settlement Banking Corporation Limited Charges HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – – – – – – – HSBC Asset Management (India) Investment Private Limited Management & Advisory Fee 3,443.11 501.82 1,235.51 2,076.35 679.82 102.60 94.73 5.89 72.61 43.54 6.58 95.89 87.10 74.02 The Hongkong and Shanghai Interest on Banking Corporation Limited ** borrowings for redemptions/ switch-outs 0.22 – – 433.06 – – – – – – – – – – The Hongkong and Shanghai Clearing Banking Corporation Limited Member Fees for F&O Trades 29.62 1.17 14.26 – 18.08 – 0.20 – – – – – – –

40 HSBC Mututal Fund Settlement

Statement of Additional Information

Name of the Associate Particulars HFTS VII VIII XIII IX 14 15 21 22 23 24 25 26 27 28 HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 0.62 0.06 – – – – – – – – – 0.92 – – The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges – – – – – – – – – – 0.00 – – – The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – – – – – – – HSBC Asset Management Investment (India) Private Limited Management & Advisory Fee 9.18 7.99 48.04 124.06 49.88 58.88 95.47 111.38 92.31 223.97 168.32 2.87 46.87 118.27 The Hongkong and Shanghai Interest on Banking Corporation Limited ** borrowings for redemptions/ switch-outs – – – – – – – – – 3.54 – – – – The Hongkong and Shanghai Clearing Banking Corporation Limited Member Fees for F&O Trades – – – – – – – – – – – – – –

Name of the Associate Particulars HFTS 29 30 31 32 33 34 35 36 37 41 42 44 45 46 47 48 49 HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals – – – – – – – – – – – – – – – – – The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 3.07 7.53 1.43 1.47 20.37 0.62 – 0.58 20.35 2.34 56.18 – – – 0.19 0.94 – The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – – – – – – – – – – HSBC Asset Management Investment (India) Private Limited Management & Advisory Fee 14.71 83.59 56.66 19.64 95.92 51.54 54.17 32.80 60.16 10.36 82.42 7.11 4.11 92.28 3.46 35.86 81.94 The Hongkong and Shanghai Interest on Banking Corporation Limited ** borrowings for redemptions/ switch-outs – 7.58 – – – – – – – 5.51 – 2.39 0.11 8.19 – – – The Hongkong and Shanghai Clearing Banking Corporation Limited Member Fees for F&O Trades – – – – – – – – – – – – – – – – –

HSBC Mututal Fund 41 Statement of Additional Information

AMOUNT PAID BY HSBC MUTUAL FUND TO ASSOCIATE COMPANIES April 1, 2005 - April 30, 2009 (Contd....)

Name of the Associate Particulars HFTS 50 51 52 53 54 55 56 57 58 59 HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals – – – – – – – – – – The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units – 0.19 – – – 0.55 – – 0.34 – The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges – – – – – – – – – – The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – – – HSBC Asset Management Investment (India) Private Limited Management & Advisory Fee 38.76 30.01 53.24 46.81 20.04 14.91 11.81 2.54 42.98 22.02 The Hongkong and Shanghai Interest on Banking Corporation Limited** borrowings for redemptions/ switch-outs 0.06 – 48.66 113.16 79.37 – 15.34 0.03 – 88.75 The Hongkong and Shanghai Clearing Banking Corporation Limited Member Fees for F&O Trades – – – – – – – – – –

Name of the Associate Particulars HFTS HINF 60 61 62 63 68 I II III HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 0.31 – 0.88 – 0.74 0.51 1.02 0.22 The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges – – – – – – – – The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – HSBC Asset Management Investment (India) Private Limited Management & Advisory Fee 12.67 46.07 11.16 4.32 0.85 14.23 32.05 0.62 The Hongkong and Shanghai Interest on borrowings for Banking Corporation Limited ** redemptions/switch-outs – 7.32 – – – 3.18 – – The Hongkong and Shanghai Clearing Member Fees for Banking Corporation Limited F&O Trades – – – – – – – –

42 HSBC Mututal Fund Statement of Additional Information

Name of the Associate Particulars HFTS HINF 60 61 62 63 68 I II III HSBC Securities and Capital Brokerage on Markets (India) Private Limited Equity Deals The Hongkong and Shanghai Commision on Banking Corporation Limited Distribution of units 0.31 – 0.88 – 0.74 0.51 1.02 0.22 The Hongkong and Shanghai Collection / Banking Corporation Limited Bank Charges – – – – – – – – The Hongkong and Shanghai Settlement Banking Corporation Limited Charges 44.35# HSBC Securities and Capital Brokerage on Markets (India) Private Limited Debt Deals – – – – – – – – HSBC Asset Management Investment (India) Private Limited Management & Advisory Fee 12.67 46.07 11.16 4.32 0.85 14.23 32.05 0.62 The Hongkong and Shanghai Interest on borrowings for Banking Corporation Limited ** redemptions/switch-outs – 7.32 – – – 3.18 – – The Hongkong and Shanghai Clearing Member Fees for Banking Corporation Limited F&O Trades – – – – – – – – ** : Interest of Rs.516.44 lacs on borrowings has been borne by HSBC AMC # : Charges paid by all the schemes of HSBC Mutual Fund towards settlment of Government Securities transactions through the constituent SGL account. HEF : HSBC Equity Fund, HIF-IP : HSBC Income Fund - Investment Plan, HIF-ST : HSBC Income Fund - Short Term Plan, HCF : HSBC Cash Fund, HIF-IP : HSBC Income Fund - Investment Plan - Institutional, HIF-ST : HSBC Income Fund - Short Term Plan - Institutional, HGF : HSBC Gilt Fund, HIOF : HSBC India Opportunities Fund, HMIP-R : HSBC MIP - Regular, HMIP-S : HSBC MIP - Savings, HFRF-LT : HSBC Floating Rate Fund - Long Term Plan, HFRF-ST : HSBC Floating Rate Fund - Short Term Plan, HMEF : HSBC Midcap Equity Fund, HAIF : HSBC Advantage India Fund, HUSBF : HSBC Ultra Short Term Bond Fund, HTSF : HSBC Tax Saver Equity Fund, HUOF : HSBC Unique Opportunities Fund, HFTS : HSBC Fixed Term Series, HDF : HSBC Dynamic Fund, HFDF : HSBC Flexi Debt Fund, HSCF : HSBC Small Cap Equity Fund, HEMF : HSBC Emerging Markets Fund, HINF-I : HSBC Interval Fund-Plan I and HINF-II : HSBC Interval Fund-Plan II

The AMC has used the designated branches of The Hongkong and l Any security issued by way of private placement by an associate Shanghai Banking Corporation Limited as Collecting Centres / or group company of the Sponsor Investor Service Centres and Collecting / Distributing Agents. The l The listed securities of group companies of the Sponsor which percentage of brokerage paid to associate broker was in line with is in excess of 25% of the net assets. the norms relating to brokerage payment for transactions of the Mutual Fund. The AMC may avail the services of the Sponsor and / or its associates for usage of premises as Investor Service Centres and / or to act as The AMC may from time to time, for the purpose of conducting its collection and distribution agents. The Sponsor / associates shall be normal business, use the services (including brokerage services and paid a fee based on the quality of services rendered. These fees shall securities transactions) of the Sponsor, its subsidiaries, associates of be debited to the Scheme, subject to SEBI Regulations. the Sponsor and employees or relatives. The subsidiaries of the Sponsor on the date of this Document are: 3. Underwriting l HSBC Asset Management (India) Private Limited Subject to SEBI Regulations, the Scheme may enter into underwriting agreements after the Mutual Fund obtains the necessary registration The AMC may utilise the services of the Sponsor, group companies in terms of the Securities and Exchange Board of India (Underwriters) and any other subsidiary or associate company of the Sponsor Regulations, 1993 and the Securities and Exchange Board of India established or to be established at a later date, in case such a (Underwriters) Rules, 1993 authorising it to carry on activities as company (including employees or relatives) is in a position to underwriters. The capital adequacy norms for the purpose of provide the requisite services to the AMC. The AMC will conduct underwriting shall be the net assets of the Scheme and the its business with the aforesaid companies (including employees or underwriting obligation of the Scheme shall not at any time exceed relatives) on commercial terms and on arm's length basis and at the total Net Asset Value of the Scheme. For the purposes of the mutually agreed terms and conditions to the extent permitted under Regulations, the underwriting obligation will be deemed as if the SEBI Regulations, after evaluation of the competitiveness of the investments are made in such securities. pricing offered by the Sponsor, associate companies (including employees or relatives) and the services to be provided by them. 4. Securities / Stock Lending by the Mutual Fund Subject to the Regulations and the applicable guidelines, the Associate transactions, if carried out, will be as per the SEBI Scheme(s) and the Plan(s) thereunder may, if the Trustees permit, Regulations and the limits prescribed thereunder. The Scheme shall engage in securities / stock lending. Securities / stock lending means not make any investment in: the lending of securities / stocks to another person or entity for a l Any unlisted security of an associate or group company of the fixed period of time, at a negotiated compensation. The borrower Sponsor

HSBC Mututal Fund 43 Statement of Additional Information

will return the securities / stock lent on expiry of the stipulated l purchase period. Please refer to risks attached with securities lending mentioned l redemption in Combined Scheme Information Document. The Scheme(s), under l switch normal circumstances, shall not have exposure of more than 50% of its net assets in securities / stock lending. The Scheme(s) may also l static data changes viz. address change, change of bank mandate not lend more than 50% of its net assets to any one intermediary to etc. whom securities / stocks will be lent. Securities / Stock Lending The Unitholder will be asked for the PIN before the request is could be considered for the purpose of generating additional income accepted. In the interest of the Unitholder, the ISC reserves the right to unit holders on the longer term holdings of the Scheme. The AMC to ask for a fax confirmation of the request and any other additional shall report to the Trustees on a quarterly basis as to the level of information about the account of the Unitholder. The PIN should lending in terms of value, volume and the names of the intermediaries never be disclosed to any person or written down where any other and the earnings / losses arising out of the transactions, the value person may discover it. All transactions conducted with use of this of collateral security offered etc. PIN will be the responsibility of the Unitholder and the Unitholder 5. Borrowing by the Mutual Fund will abide by the record of the transactions generated. The Mutual Fund and the ISC / Registrar shall not accept any responsibility for Under the Regulations, the Fund is allowed to borrow to meet its the unauthorised use of the PIN. temporary liquidity needs for the purpose of repurchase / redemption of Units or payment of interest or dividend to the Unitholders. 9. Policy on Offshore Investments by the Scheme Further, as per the Regulations, the Fund shall not borrow more than and the Plans thereunder 20% of the Net Assets of the Scheme and the duration of such borrowing shall not exceed a period of 6 months. The Fund may SEBI Regulations permit mutual funds to invest in certain securities / raise such borrowings after approval by the Trustees from its Sponsor / instruments viz. ADRs / GDRs issued by Indian or Foreign associates / group companies / commercial banks in India or any companies, Equity of overseas companies listed on recognized stock other entity at market related rates prevailing at the time and applicable exchanges overseas, Initial Public Offer (IPO) and Follow on public to similar borrowings. The security for such borrowings, if required, offerings (FPO) for listing at recognized stock exchanges overseas, will be as determined by the Trustees. Such borrowings, if raised, Foreign debt securities in the countries with fully convertible may result in a cost, which would be dealt with in consultation with currencies, with rating not below investment grade by accredited/ the Trustees. registered credit rating agencies, Money market instruments rated not below investment grade, Repos - only as pure investment avenues, 6. Master Account / Folio where the counterparty is rated not below investment grade; however As an investor friendly measure, unless otherwise requested by the repos should not involve any borrowing of funds by mutual funds, Unitholder, one Master / Folio Number may be assigned for one Government securities where the countries are rated not below investor investing in different Scheme(s) of the Mutual Fund. In investment grade, Derivatives traded on recognized stock exchanges such a case, one consolidated Account Statement will be provided. overseas only for hedging and portfolio balancing with underlying The number of Units allotted to a Unitholder or repurchased by a as securities, Short term deposits with banks overseas where the Unitholder will be reflected in his / her account and a Statement to issuer is rated not below investment grade, Units/securities issued this effect will be issued to the Unitholder. The AMC reserves the by overseas mutual funds registered with overseas regulators and right to assign the existing Master Account / Folio number against investing in approved securities or Real Estate Investment Units/ multiple applications and / or subsequent purchases under a new securities issued by overseas mutual funds registered with overseas application form by an existing Unitholder, with identical mode of regulators and investing in approved securities or Real Estate holding and address. Investment Trusts (REITs) listed in recognized stock exchanges 7. Fractional Units overseas or unlisted overseas securities (not exceeding 10% of their Since a request for redemption or purchase is generally made in net assets) subject to the terms and conditions prescribed, subject rupee amounts and not in terms of number of Units of the Scheme, to maximum of US$ 300 million. This would be revised in terms an investor may be left with fractional Units. Fractional Units will of SEBI approvals / guidelines from time to time. All the provisions be computed and accounted for up to three decimal places for the of SEBI/IMD/CIR No.7/104753/07 dated 26 September, 2007 will Scheme. However, fractional Units will in no way affect the investor's be adhered to including appointment of dedicated fund manager for ability to redeem the Units, either in part or in full, standing to the investment in foreign securities. Unitholder's credit. It is the Investment Manager's belief that foreign securities offer 8. Personal Identification Number (PIN) new investment and portfolio diversification opportunities into multi- market and multi-currency products. The Fund would look to invest The PIN facility may be made available to the Unitholders. in foreign securities in order to diversify the portfolio in terms of Unitholders will be required to indicate their desire to avail of this variety of instruments held and enhance returns by taking advantage facility and also indicate their bank account number, name of the of market movements in global markets, which may or may not be bank and branch in the application for purchasing Units at a future in sync with the Indian markets. Investment in foreign securities date. A Form together with detailed terms and conditions will be would only be looked at if they provide a return, liquidity, ease of mailed to such Unitholders subject to which usage of the PIN will settlement and valuation, transaction costs better than equivalent be permitted. On receipt of the Form duly signed, the PIN will be local investments. Further, if the Fund Manager becomes cautious mailed to each Unitholder. or negative on the Indian markets for a reasonably long period of Unitholders may use the PIN to carry out one or more of the time, would he consider investing in such securities. The Fund will following types of transactions (as may be enabled by the Mutual look to identify and capture profitable opportunities as and when Fund) by calling the ISCs / Call centre only: they arise. However, such investments also entail additional risks. Such investment opportunities may be pursued by the Investment

44 HSBC Mututal Fund Statement of Additional Information

Manager provided they are considered appropriate in terms of the by the investor, failing which the Fund / Trustee / AMC may at its overall investment objectives of the Scheme. The Scheme may then, sole discretion reject such transaction request. Further, any requests if necessary, seek permission from SEBI and RBI to invest abroad for purchase / redemption / switch or other transactions must be in accordance with the investment objectives of the Scheme and in unconditional. The Fund / Trustee / AMC shall not be bound to take accordance with any guidelines issued by SEBI / RBI from time to cognizance of any conditions placed on the transaction request and time. may at its sole discretion, reject such transaction request, or process Since the Scheme would invest only partially in foreign securities, the same as if the condition were not mentioned. there may not be readily available and widely accepted benchmarks 14. Acts done in good faith to measure performance of the Scheme. To manage risks associated Any act, thing or deed done in good faith in pursuance of or with with foreign currency, the Fund may use derivatives for efficient reference to the information provided in the application or other portfolio management including hedging and in accordance with communications received from the investor / unit holder will conditions as may be stipulated by SEBI / RBI from time to time. constitute good and full discharge of the obligation of the Fund, Offshore investments will be made subject to any / all approvals and Trustee and the AMC. conditions thereof as may be stipulated by SEBI / RBI being fulfilled In cases of copies of the documents / other details such as list of and provided such investments do not result in expenses to the Fund authorized signatories, that are submitted by a limited company, in excess of the ceiling, if any, on expenses prescribed by SEBI for body corporate, registered society, trust or partnership, if the same offshore investment, and if no such ceiling is prescribed by SEBI, are not specifically authenticated to be certified true copies but are the expenses to the Scheme(s) shall be limited to the level which, attached to the application form and / or submitted to the Fund, the in the opinion of the Trustees, is reasonable and consistent with onus for authentication of the documents so submitted shall be on costs and expenses attendant to international investing. The Fund such investors and the AMC / Fund will accept and act on these in may, where necessary, appoint other intermediaries of repute as good faith wherever the documents are not expressly authenticated. advisors, sub-custodians, etc. for managing and administering such Submission of these documents / details by such investors shall be investments. The appointment of such intermediaries shall be in full and final proof of the corporate investor's authority to invest and accordance with the applicable requirements of SEBI and within the the AMC/Fund shall not be liable under any circumstances for any permissible ceilings of expenses. The fees and expenses would defects in the documents so submitted. illustratively include, besides the investment management fees, In cases where there is a change in the name of such investor, such custody fees and costs, fees of appointed advisors and sub-managers, a change will be effected by the AMC / Fund only upon receiving transaction costs and overseas regulatory costs. the duly certified copy of the revised Certificate of Incorporation 10. Power to make Rules issued by the relevant Registrar of Companies / registering authority. In cases where the changed PAN Number reflecting the name change Subject to the Regulations and other applicable laws, the Trustees is not submitted, such transactions accompanied by duly certified may from time to time, prescribe such terms and make such rules copy of the revised Certificate of Incorporation with a copy of the for the purpose of giving effect to the Scheme and the Plans thereunder Old PAN Card and confirmation of application made for new PAN with power to the AMC to add to, alter or amend all or any of the Card will be required as a documentary proof. terms and rules that may be framed from time to time. 15. Lien 11. Power to remove Difficulties The fund will have a first and paramount right of lien/set-off with If any difficulty arises in giving effect to the provisions of respect to every unit / dividend under any scheme of the Fund for the Scheme and the Plans thereunder, the Trustees may, subject to any money that may be owed by the unit holder, to it. the Regulations and other applicable laws, take any action not inconsistent with such provisions, which appears to be necessary, 16. Units with Depository desirable or expedient, for the purpose of removing such difficulty. Units of the Plan may, if decided by the AMC, be held with a Depository. Under such circumstances, Units will be transferable in 12. Scheme to be binding on the Unitholders accordance with the provisions of Depositories Act, 1996 and the Subject to the Regulations, the Trustees may from time to time, add Securities and Exchange Board of India (Depositories and or otherwise vary or alter all or any of the features of plans and terms Participants) Regulations, 1996 as may be amended from time to of the Scheme after obtaining the prior permission of SEBI and the time. Unitholders (where necessary), and the same shall be binding on all the Unitholders of the Scheme and the Plans thereunder and any 17. Electronic Payouts person or persons claiming through or under them, shall do so as Electronic Clearing Service (ECS) / Electronic payout / EFT / NEFT if each Unitholder or such person expressly had agreed that such / SEFT / RTGS / Wired Transfer are facilities offered by RBI, for features and terms shall be so binding. facilitating better customer service by direct credit of dividend/ redemption to an investor's bank account through electronic credit. 13. Unambiguous and Unconditional requests This helps in avoiding loss of dividend/redemption warrant in transit Any application for redemption, purchase or exchange or any other or fraudulent encashment. To facilitate the above electronic credits instruction must be correct, complete, clear and unambiguous in all and minimise errors, HSBC AMC may validate the investors' Bank respects and should conform to the prescribed procedure/ Account numbers with the respective banks and/or populate necessary documentation requirements, failing which the Trustee / AMC reserve IFSC/MICR codes through publicly available sources or through its the right to reject the same and in such a case the Trustee / AMC banks. The Mutual Fund will endeavour to arrange such facility for will not be responsible for any consequence therefrom. The Investor payment of dividend/redemption proceeds to the Unit holders. shall ensure that any overwriting or correction shall be countersigned However, this facility is optional for the investors. It may be

HSBC Mututal Fund 45 Statement of Additional Information specifically noted that there is no commitment from the Mutual to this material must first satisfy themselves that they are not subject Fund that this facility will be made available to the Unit holders for to any local requirements, which restrict or prohibit them from payment of dividend/ redemption proceeds. While the Mutual Fund doing so. will endeavour to arrange the facility, provision of this facility will Information other than that relating specifically to HSBC Asset be dependent on various factors including sufficient demand for the Management (India) Private Limited, HSBC Mutual Fund and its facility from Unit holders at any centre, as required by the authorities. products, is for information purposes only and should not be relied In places where such a facility is not available or if the facility is discontinued by the Scheme for any reason, the AMC shall despatch upon as a basis for investment decisions. HSBC Asset Management to the Unit holders the dividend proceeds within 30 days of the (India) Private Limited shall not be responsible, nor be held liable, declaration of the dividend and the redemption proceeds within 10 for any information contained in any website linked from the said Business Days. Website. The AMC makes no representations whatsoever about any such 18. Client Information website which the user may access through the said Website. A link The Mutual Fund shall presume that the identity of the investor and to a non-HSBC website does not mean that the AMC endorses or the information disclosed by him is true and correct. It will also be accepts any responsibility for the content, or the use, of such website. presumed that the funds invested by the investor in the Schemes of It is the responsibility of the user to take precautions to ensure that the Mutual Fund come from legitimate sources / manner and the whatever is selected for use is free of such items as viruses and other investor is duly entitled to invest the said funds. items of a destructive nature. The Mutual Fund will not, in any way, be responsible for correctness The investors are requested to read the Terms and Conditions given of the information provided by the investor to the Mutual Fund, as on the said Website carefully before using the Website. By using the to his identity or any other information, and also his sources of said Website, the investor will be deemed to have agreed that the income. The Mutual Fund is not under any obligation to carry out Terms and Conditions specified apply to the use of the investor of any investigation / inquiry as to the identity of the investor and the the said Website, any information obtained from the site, and our sources of the moneys invested by the investor into the schemes of products and services. If the investor does not agree to the specified the Mutual Fund. The Fund shall not undertake any such investigation/ Terms, the investor may not use the said Website or download any inquiry since it does not possess adequate resources to undertake content from it. such activity. 20. Web transactions Facility Where the funds invested are for the benefit of a person (beneficiary) In the new era of liberalisation and modernisation, the Fund wishes other than the person in whose name the units are issued and to take optimum advantage of the modern techniques of registered, the Mutual Fund shall assume that the investor holding communication and transactions to serve its investors in a more the Units in his name is legally authorized / entitled to invest the efficient manner. said funds in the Units of the Mutual Fund, for the benefit of the beneficiaries. As a step towards the same, the Fund may introduce in future certain Units of the Schemes are not offered, nor is the Fund managed or online transactions, including subscription and redemption / intended to serve, as a vehicle for frequent trading that seeks to take repurchase of the Units of the Fund or any other transaction such as change in address, change in bank details, change in mode of advantage of short-term fluctuations in the securities market. This payment etc., as may be specified by the Mutual Fund from time type of trading activity, often referred to as "market timing", could to time. Online transactions will save cost & time of the investor result in actual or potential harm to the Unit Holders. Accordingly, and will also enable the Fund to serve its clients in a faster and the Mutual Fund (MF) at its sole discretion may reject any purchase efficient way. or exchange of Units that the MF reasonably believes may represent a pattern of market timing activity involving the Schemes of the MF. However investors intending to take benefit of the web-based The AMC may share investors' personal information with the transaction facility should note that the investor shall use this service following third parties: at his own risk. The Fund, the AMC, the Trustee, along with its directors, employees and representatives shall not be liable for any l Registrar, Banks and / or authorised external third parties who damages or injuries arising out of or in connection with the use of are involved in transaction processing, despatches, etc. of the website or its non-use including, without limitation, non- investors' investment in any scheme; availability or failure of performance, loss or corruption of data, loss l Distributors through whom applications of investors are received of or damage to property (including profit and goodwill), work for the Schemes; or stoppage, computer failure or malfunctioning, or interruption of l Any other organisations for compliance with any legal or business; error, omission, interruption, deletion, defect, delay in regulatory requirements or to verify the identity of investors for operation or transmission, computer virus, communication line complying with anti-money laundering requirements. failure, unauthorised access or use of information. 19. Website The Fund shall not be liable for any misuse of data placed on the Internet, by third parties "hacking" or unauthorized accessing of the The website of HSBC Mutual Fund (the said Website) is intended server. The Fund will not be liable for any failure to act upon solely for the use of Resident Indians, Non Resident Indians, Persons electronic instructions or to provide any facility for any cause that of Indian Origin and Foreign Institutional Investors registered with is beyond the control of the Fund. Securities and Exchange Board of India. It should not be regarded as a solicitation for business in any jurisdiction other than India. In 21. Transaction by Distributor particular the information is not for distribution and does not With a view to facilitate ease of transacting, the AMC has tied up constitute an offer to sell or the solicitation of an offer to buy with certain existing distributors to report transactions on the web securities in any jurisdiction where such activity is prohibited. Any on behalf of their clients on the terms and conditions to be mutually persons resident outside India who nevertheless intend to respond agreed between the client and the distributor.

46 HSBC Mututal Fund Statement of Additional Information

22. Brokers 23. Documents Available for Inspection The Fund intends to utilize the services of select financial The following documents will be available for inspection at the intermediaries for distribution and may pay brokerage depending office of the Mutual Fund at 314, D. N. Road, Fort, Mumbai 400 001 upon the efficiency and other factors as may be decided by the during business hours on any day (excluding Saturdays, Sundays AMC. The Investment manager is the sole authority to select such and public holidays): financial intermediary/intermediaries who would distribute the product. Further, the AMC may appoint one or more exclusive l Memorandum and Articles of Association of the AMC distributors, at its discretion, based on the parameters decided by the l Investment Management Agreement AMC. l Trust Deed and amendments thereto, if any l Mutual Fund Registration Certificate The Fund may use the services of associate brokers or take the sale of its units into account when allocating brokerage. However, the l Agreement between the Mutual Fund and the Custodian brokerage paid to Associate Brokers shall be at the same rate offered l Agreement with Registrar and Share Transfer Agents to any other broker who procures subscription. l Consent of Auditors to act in the said capacity The AMC may from time to time have various contests / loyalty l Consent of Legal Advisors to act in the said capacity programmes in order to motivate its distributors. This could be in l Securities and Exchange Board of India (Mutual Funds) the form of additional compensation to the distributors or could Regulations, 1996 and amendments from time to time thereto. entail gifts / vouchers or various other privileges. The level of l Indian Trusts Act, 1882. compensation in the above forms could vary from time to time and 24. Investor Grievances Redressal Mechanism a number of factors could determine the same viz. qualifying distributor sales, assets and redemption rates, quality of the Investor grievances are normally received at the Corporate Office distributors' relationship with HSBC Mutual Fund. The AMC may of the AMC or at the Investor Service Centres or directly by the also publicise its various loyalty programmes as may be launched Registrar. All grievances are generally forwarded to the Registrar from time to time. Further, the AMC could also provide training in for their necessary action. The complaints are closely followed up order to keep the distributors abreast about the new developments with the Registrar to ensure timely redressal and prompt investor in the securities market and facilitate educating distributors and service. unitholders about Schemes of HSBC Mutual Fund. Given below is the status of complaints received from April 1, 2006 to May 12, 2009:

HSBC Mutual Fund - Consolidated Report for all schemes Name of Complaint / Queries Opening Total Queries / Queries resolved within Pending Balance Complaints 24 Hrs. 48 Hrs. 72 Hrs. Above 72 Hrs. T+0 T+1 T+2 > T+2 Complaints Received from SEBI 0 57 21 3 2 31 0 Correction in Investor Details 0 4379 4064 83 95 137 0 Non Allotment of Units 0 0 00000 Non receipt of Account Statement 0 405 352 25 9 21 0 Non receipt of Dividend Warrant 0 76 46 5 5 20 0 Non receipt of Redemption Warrant 0 76 50 2 1 23 0 Total 0 5006 4512 115 110 251 0

Investor Services the Fund will endeavour to add further Investor Service Centres The Fund believes in providing the investor with superior services and / or sales offices in other cities. The AMC reserves the right to to make the investor's experience in dealing with the Fund an designate from time to time, internet sites as official points of efficient and satisfactory one. In order to achieve these goals, the acceptance of transactions. Fund endeavours to continuously establish and upgrade systems to Each ISC of the AMC provides investors with requisite information handle transactions efficiently and resolve any investor grievances and help in processing transactions in the Scheme of the Mutual promptly. Fund. Adequate training will be imparted to personnel managing the Ease of Transactions Investor Service Centres, with a view to early resolution of queries. The Fund intends to make every transaction for the investor a simple Process transactions in a timely manner and convenient one. The Fund provides the following services: Under the Regulations, the Fund / the Registrar / the AMC shall Investor Service Centres in major metros despatch to the Unitholders, the dividend proceeds within 30 days of the date of declaration of dividend and the redemption proceeds The Fund presently has Investor Service Centres in 14 cities. In within 10 Business Days from the date of acceptance of the request addition to this, the Fund presently has a tie up with the Registrar for redemption or repurchase proceeds, as the case may be. In the who has set up Investor Service Centres in various cities. The details event of failure to despatch the redemption proceeds within the of Investor Service Centres are given in the inside back cover of the above time, interest @ 15% per annum or such rate as may be Combined Scheme Information Document. Over a period of time,

HSBC Mututal Fund 47 Statement of Additional Information

specified by SEBI, would be paid to the unitholders for the period contacted at the Corporate Office of the AMC. The address and of delay. phone numbers are: Under normal circumstances, the Fund will endeavor to despatch 314, D. N. Road, Fort, Mumbai 400 001. the redemption proceeds within 3 business days (in case of equity Tel.: (91) (22) 66668819. Fax : (91) (22) 40029600 schemes except HEMF), 7 business days (in case of HEMF) & 1 E-mail: [email protected] Business Day (in case of debt schemes) from the date of receiving Notwithstanding anything contained in this Statement of a valid redemption request in respect of the Scheme at the Investor Additional Information, the provisions of the SEBI (Mutual Service Centres. Funds) Regulations, 1996 and the guidelines thereunder shall be Ordinarily, non-monetary transactions or requests will be processed applicable. (with the exception of issue of Unit certificates) within 7 Business Days under the Scheme. Investors should note that completion of monetary / non-monetary For and on behalf of the Board of Directors of transactions within the respective number of Business Day(s) as HSBC Asset Management (India) Private Limited indicated above, would be done on "best efforts" basis and completion of all such transactions are subject to the time limits as prescribed under the Regulations. Sd/- Problem Resolution Vikramaaditya The Fund will follow-up with the Investor Service Centres and the Chief Executive Officer Registrar on complaints and enquiries received from investors with an endeavour to resolve them promptly. For this purpose, Ms. Lata Krishnamohan / Mr. Vivek Kamat are Place: Mumbai currently designated as the Investor Relations Officer. They can be Date: 20 May 2009

48 HSBC Mututal Fund

STATEMENT OF ADDITIONAL INFORMATION (SAI) INVESTOR SERVICE CENTRES AND OFFICIAL POINTS OF ACCEPTANCE FOR TRANSACTIONS

HSBC MUTUAL FUND CENTRES

Ahmedabad : Mardia Plaza, C.G. Road, Ahmedabad 380 006. Tel : 98983 77319. Bengaluru : No. 7, HSBC Centre, M. G. Road, Bengaluru 560 001. Tel : 080 - 4118 6519. Chandigarh : SCO - 1, Sector-9D, Madhya Marg, Chandigarh 160 017. Tel : 0172 - 500 8119. Chennai : 96, Radhakrishnan Salai, 2nd Floor, Mylapore, Chennai 600 004. Tel : 044 - 4200 8719. Coimbatore : 108, "Srivari Gokul Towers", Race Course Road, Coimbatore 641 018. Tel : 98944 77319. Hyderabad : 6-3-1107 & 1108, Raj Bhavan Road, Somajiguda, Hyderabad 500 082. Tel : 040 - 6667 4719. Indore : Darshan Mall, 15 / 2, Race Course Road, Indore 452 001. Tel : 98934 77319. Kochi : II Floor, Pulikkal Estate, Pallimukku, M. G. Road, Kochi 682 016. Tel : 98954 77319. Kolkata : Jasmine Tower, 1st Floor, 31, Shakespeare Sarani, Kolkata 700 017. Tel : 033 - 2213 9919. Lucknow : C/o. Business Bridge, 2nd Floor, Saran Chambers - 2, 5, Park Road, Lucknow 226 001. Tel : 99367 97319. Mumbai : 314 D. N. Road, Fort, Mumbai 400 001. Tel : 022 - 6666 8819. New Delhi : 3rd Floor, East Tower, Birla Tower, 25, Barakhamba Road, New Delhi 110 001. Tel : 011 - 4149 0719. Pune : Amar Avinash Corporate City, Bund Garden Road, Pune 411 001. Tel : 020 - 26001119. Vadodara : Sheel Building, 1/2 Kalpana Society, Inox Multiplex Road, Race Course Circle, Vadodara 390 007. Tel : 98983 77319.

CAMS INVESTOR SERVICE CENTRES, CAMS TRANSACTION POINTS AND CAMS COLLECTION CENTRES TEL.: 1800-200-2267 CAMS (Investor Service Centres) : l Ahmedabad l Bangalore l Bhubaneswar l Coimbatore l Cochin l Chandigarh l Chennai l New Delhi l Durgapur l Goa l Hyderabad l Indore l Jaipur l Kanpur l Kolkata l Lucknow l Ludhiana l Mangalore l Mumbai l Madurai l Nagpur l Pune l Patna l Surat l Vadodara l Visakhapatnam l Vijayawada CAMS (Transaction Points) : l Ajmer l Akola l Aligarh l Allahabad l Alwar l Amaravati l Ambala l Amritsar l Anand l Ananthpur l Avngul l Ankleshwar l Asansol l Aurangabad l Bagalkot l Balasore l Bareilly l Belgaum l Berhampur l Bhagalpur l Bhatinda l Bhavnagar l Bhilai l Bhilwara l Bhopal l Bhuj l Bikaner l Bilaspur l Bokaro l Burdwan l Calicut l Chandrapur l Cuttack l Darbhanga l Davenegere l Dehradun l Deoghar l Dhanbad l Dhule l Erode l Faizabad l Faridhabad l Ghaziabad l Gorakhpur l Gulbarga l Guntur l Gurgoan l Guwahati l Gwalior l Haldwani l Hazaribagh l Himatnagar l Hissar l Hosur l Hubli l Itarsi l Jabalpur l Jalandhar l Jalgaon l Jammu l Jamnagar l Jamshedpur l Jhansi l Jodhpur l Junagadh l Kadapa l Kakinada l Kalyani l Kannur l Karimnagar l Karur l Kestopur l Kharagpur l Kolhapur l Kollam l Kota l Kottayam l Kurnool l Latur l Malda l Manipal l Margao l Mathura l Meerut l Mehsana l Moga l Moradabad l Morbi l Muzzafarpur l Mysore l Namakkal l Nanded l Nasik l Navsari l Nellore l Nizamabad l Palakkad l Palanpur l Panipat l Patiala l Pondicherry l Porbander l Rae Bareily l Raichur l Raipur l Rajahmundry l Rajapalayam l Rajkot l Ranchi l Ratlam l Ratnagiri l Rohtak l Roorkee l Ropar l Rourkela l Sagar l Saharanpur l Salem l Sambalpur l Satara l Satna l Shimla l Shimoga l Siliguri l Solapur l Sri Ganganagar l Srikakulam l Surendranagar l Thiruppur l Tirunelveli l Tirupathi l Trichur l Trichy l Trivandrum l Tuticorin l Udaipur l Valsad l Vapi l Varanasi l Vashi l Vellore l Veraval l Warangal l Wardha l Yamuna Nagar CAMS (Collection Centres) : l Bharuch l Bhusawal l Howrah l Jalna l Karnal l Kolkata l Mapusa l Mumbai l Nandiad l Sangli l Unjha

COVER 3 HSBC Asset Management (India) Private Limited Registered Office 314, D. N. Road, Fort, Mumbai 400 001. Tel.: (91) (22) 66668819. Fax : (91) (22) 40029600 E-mail : [email protected] Website : (www.assetmanagement.hsbc.com/in) alok graphics