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DISCLOSURE DOCUMENT
(As required under Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993)
(i) The Disclosure Document (hereinafter referred to as ‘the Document’) has been filed with the
Securities and Exchange Board of India (SEBI) along with the certificate in the prescribed format
in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993.
(ii) The purpose of the Document is to provide essential information about the Portfolio Management
Services (PMS) in a manner to assist and enable the investors in making informed decision for
engaging a Portfolio Manager.
(iii) The Document gives the necessary information about the Portfolio Manager required by an
investor before investing, and the investor may also be advised to retain the document for future
reference.
(iv) Details of the Principal Officer
Name : Mr Vikramaaditya
Address : HSBC Asset Management (India) Private Limited
314 D. N. Road, Fort, Mumbai 400 001
Phone : +91 22 6614 5000
E-mail : vikramaaditya@hsbc.co.in
(v) This Disclosure Document is dated November 16, 2010.
Portfolio Management Services
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1 HSBC Asset Management (India) Private Limited
SEBI Registration No. INP000001322
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TABLE OF CONTENTS
Sr. No. Contents Page No.
1 Disclaimer 3
2 Definitions 3-4
3 Description 5-8
4 Penalties, pending litigation or proceedings, findings of inspection or 9-10
investigations for which action may have been taken or initiated by any
regulatory authority
5 Services Offered 11-16
6 Risk Factors 17-28
7 Client Representation 29
8 The Financial Performance of the Portfolio Manager 30-31
9 Portfolio Management Performance 32-33
10 Nature of Expenses 34-35
11 Taxation 36-41
12 Accounting Policies 42-43
13 Investor Services 44
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1. Disclaimer
1.1. This Disclosure Document has been prepared in accordance with the SEBI (Portfolio Managers)
Regulations, 1993 as amended from time to time and filed with SEBI. This Document has neither
been approved or disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the
contents of the Document.
2. Definitions
2.1 Act The Securities and Exchange Board of India Act, 1992 (15 of
1992).
2.2 Cash Account the account in which the funds handed over by the client shall be
held by the Portfolio Manager on behalf of the Client.
2.3 Chartered a chartered accountant as defined in clause (b) of sub-section (1)
Accountant of section 2 of the Chartered Accountants Act, 1949 (38 of 1949)
and who has obtained a certificate of practice under sub-section
(1) of section 6 of that Act.
2.4 Client any body corporate, partnership firm, individual, HUF,
association of person, body of individuals, trust, statutory
authority, or any other person who enters into agreement with the
Portfolio Manager for the management of his portfolio.
2.5 Discretionary a Portfolio Manager who exercises or may, under a contract
Portfolio relating to portfolio management, exercises any degree of
Manager discretion as to the investments or management of the portfolio
of securities or the funds of the client, as the case may be.
2.6 Fund Manager the individual(s) appointed by the Portfolio Manager who
manages, advises or directs or undertakes on behalf of the client
(whether as a Discretionary Portfolio Manager or otherwise) the
management or administration of a portfolio of securities or the
funds of the client, as the case may be.
2.7 Funds the moneys placed by the Client with the Portfolio Manager and
any accretions thereto.
2.8 Large cap stock any stock whose market capitalisation does not fall within the
definition of a Mid and Small Cap stock as defined herein.
2.9 Mid and Small a stock whose marked capitalization is the lower of the
cap stock following:
the stock having the largest market capitalization on the
BSE Midcap Index
the 80th stock of the BSE 200 Index
2.10 Non a Portfolio Manager who manages the funds in accordance with
Discretionary the directions of the client.
Portfolio
Manager
2.11 Person directly any person being an associate, subsidiary, inter connected
or indirectly company or a company under the same management within the
connected meaning of section 370(1B) of the Companies Act, 1956 or in the
same group.
2.12 PMS Agreement includes contract entered between the Portfolio Manager and the
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client for the management of funds or securities of the client.
2.13 PMS Portfolios any of the investment Portfolios as mentioned herein or such
Portfolios that may be introduced at any time in future by the
Portfolio Manager.
2.14 Portfolio the total holdings of securities belonging to the client.
2.15 Portfolio HSBC Asset Management (India) Private Limited (AMIN), who
Manager has obtained certificate of registration from SEBI to act as a
Portfolio Manager under Securities and Exchange Board of India
(Portfolio Managers) Rules and Regulations, 1993, vide
Registration no. INP000001322.
2.16 Principal Officer a director of the Portfolio Manager who is responsible for the
activities of portfolio management and has been designated as
principal officer by the Portfolio Manager.
2.17 Rules The Securities and Exchange Board of India (Portfolio
Managers) Rules, 1993.
2.18 Regulations The Securities and Exchange Board of India (Portfolio
Managers) Regulations, 1993, and as may be amended by SEBI
from time to time.
2.19 SEBI / Board the Securities and Exchange Board of India.
2.20 Securities ‘Securities’ as per Securities Contracts (Regulation) Act, 1956
include:
shares, scrips, stocks, bonds, debentures, debenture stock or
other marketable securities of a like nature in or of any
incorporated company or other body corporate
derivatives (contracts which derive their value from the
prices, or index of prices, of underlying securities)
units or any other instrument issued by any collective
investment scheme to the investors in such schemes
security receipts as defined in clause (zg) of section 2 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
units or any other such instrument issued to the investors
under any mutual fund scheme
Government securities
such other instruments as may be declared by the Central
Government to be securities
rights or interests in securities.
2.21 Securities the securities lending as per the Securities Lending Scheme, 1997
Lending Scheme specified by the Board.
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3. Description
3.1. History, Present Business and Background of the Portfolio Manager:
HSBC Asset Management (India) Private Limited (AMIN) is a private limited company
incorporated under the provisions of the Companies Act, 1956 having its Registered Office at
314 D N Road, Fort, Mumbai 400 001.
The paid-up equity share capital of the Portfolio Manager is Rs. 9 crores. HSBC Securities and
Capital Markets (India) Private Limited holds 100% of the equity capital of the Portfolio
Manager.
AMIN has been appointed as the Investment Manager of HSBC Mutual Fund vide Investment
Management Agreement dated 7 February 2002, executed between the Trustees of HSBC
Mutual Fund and AMIN. SEBI approved AMIN to act as the Investment Manager for the
Schemes of HSBC Mutual Fund vide letter dated 27 May 2002. As at end of October 2010,
AMIN had assets of over Rs. 4716 crores under management under its Mutual Fund business
with offices in 14 cities viz., Mumbai, New Delhi, Chennai, Kolkata, Bangalore, Ahmedabad,
Hyderabad, Pune, Indore, Chandigarh, Coimbatore, Kochi, Lucknow and Baroda. As on October
29, 2010 AMIN had assets of approximately Rs 795 crores under management in its PMS
business and assets of approximately Rs. 39040 crores in its EPFO mandate.
AMIN has obtained Certificate of Registration as Portfolio Manager from SEBI effective 16
September 2008 with Registration No. INP000001322. The Registration is valid for a period of 3
years.
Promoters of the Portfolio Manager, directors and their background
3.1.1. 4 Promoter
“HSBC Securities and Capital Markets (India) Private Limited (HSCI)”
HSCI is a member of the HSBC Group, one of the largest banking and financial services
organisations, in the world. Headquartered in London, HSBC operates through long-
established businesses in five regions: Europe, the Asia-Pacific region, the Americas, the
Middle East and Africa. Through its global network of some 10,000 offices in 82
countries and territories, HSBC provides a comprehensive range of financial services to
more than 125 million customers: personal, commercial, corporate, institutional and
investment and private banking clients.
HSCI offers integrated investment banking services, securities and corporate finance &
advisory. HSCI is a member of The Bombay Stock Exchange Limited and National Stock
Exchange (capital and derivative market segments) and is also a category I Merchant
Banker and underwriter registered with Securities and Exchange Board of India.
Equities: HSCI is primarily an institutional stockbroker, with a client base spanning
foreign institutional investors, Indian financial institutions, mutual funds and select retail
clients. The business is backed by comprehensive research covering around 62 of India’s
largest, actively traded securities across 13 industry groups.
Global Investment Banking: HSCI provides public and private sector corporates and
government clients with strategic and financial advice in the areas of mergers and
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acquisitions, primary and secondary market funding, privatisations, structured financial
solutions and project export finance.
HSCI holds 100% of the paid up equity share capital of the AMIN.
3.1.2. Board of Directors
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(i) Naina Lal Kidwai
52/60 M G Road, Fort, Mumbai 400001
Group General Manger & Country Head,, India
The Hongkong & Shanghai Banking Corporation
Recipient of several awards for Business in India, Ms. Kidwai has been awarded
the Padma Shri by the Government of India for her contribution to trade and
industry. An MBA from Harvard Business School, Ms. Kidwai is the Group
General Manager and Country Head of the HSBC group of companies in India
which comprises Banking services, Insurance broking, Asset Management,
Securities broking, Software development and the Global service centres. Prior to
joining HSBC, she was the Vice Chairman and Head of the Investment Bank of
J M Morgan Stanley in India and the Morgan Stanley representative on the Board
of Directors. Before her stint with JM Morgan Stanley, she was the head of ANZ
Grindlays, Investment Bank.
(ii) Ayaz Ebrahim
Level 22, HSBC main Building
1 Queen’s Road Central
Hong Kong
Chief Investment Officer, Asia Pacific & Middle East
Halbis Capital Management (HK) Limited
Mr Ebrahim is overall responsible for Halbis’ investment teams and strategies in
Asia ex-Japan. Prior to rejoining Halbis in May 2007, Ayaz was Regional Chief
Investment Officer, Asia Pacific for Deutsche Asset Management. Ayaz, who has
around 18 years of experience in various areas of fund management, began his
financial career with Price Waterhouse in London as an auditor. After moving back
to Hong Kong, he worked for Barclays de Zoete Wedd as an investment analyst,
headed up the research team for Banks and Conglomerates in Hong Kong at Hoare
Govett, and then spent 11 years at Crédit Agricole Asset Management, where his
last position was Chief Investment Officer. Between 2003 and 2006, Ayaz was
Chief Investment Officer of HSBC’s asset management business in Asia. He has a
Bachelors degree in Accountancy and Finance from the University of East Anglia,
UK.
(iii) Sayed P Mustafa
Sobha Ivory Apartments, Flat 251, 5th floor
7/1, St. John’s Road, Bangalore 560 042
Executive
Ex Vice President Treasury, M&A and Investor Relations, Hindustan Unilever
Limited
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Mr Mustafa holds a bachelors degree from St Stephens College, University of
Delhi and is a Chartered Accountant and a Fellow of the Institute of Chartered
Accountants of England and Wales. He is an Executive with Hasham Investment &
Trading Company Private Limited in Bangalore. He has worked in the UK for a
number of years and was a Partner in a Chartered Accountants firm in London prior
to his joining Unilever. At Unilever, he had held several senior management and
leadership positions over a number of years and his responsibilities covered
strategic financial restructuring, mergers and acquisitions, development of external
communication strategy, management of the supply chain, business performance,
commercial controls and Financial & Management Accounting.
(iv) Ashok Kumar Jha
E 1/20, Ground Floor, Vasant Vihar
New Delhi- 110057
Mr. Jha was a member of the premier Civil Service in India, the Indian
Administrative Services (IAS) for 38 years. He has worked in all the major
Economic Ministries/Departments in the Government of India, i.e. Ministries of
Commerce, Department of Industrial Policy, Ministry of Finance, as well as in the
Foreign Office. He functioned as Secretary to the Government of India in the
Department of Economic Affairs, Ministry of Finance and Finance Secretary,
Ministry of Finance, Government of India. Prior to this, he was Secretary to the
Government of India in the Department of Industrial Policy & Promotion. Post his
retirement from Government in May 2007, he was with Hyundai Motor India
Limited as President till July 2009 where his role was to oversee all activities
including production, sales & marketing and finance. Mr Jha has a Masters degree
in Economics from Delhi School of Economics, Masters Degree in Development
Economics from Australian National University, Canberra and is a Visiting Fellow,
Oxford University, U.K.
(v) Kishori J Udeshi
15, Sumit Apartment, 31 Carmichael Road, Mumbai 400026
Executive
Ex-Deputy Governor, Reserve Bank of India
Ms Kishori Udeshi has an M.A. Degree in Economics from Bombay University.
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.
As Deputy Governor of RBI, she was on the Board of SEBI, NABARD, Exim
Bank and was the Chairman of Bharatiya Reserve Bank Note Mudran (Pvt) Ltd.,
Bangalore. She was also the Chairman of Deposit Insurance and Credit Guarantee
Corporation.
Ms Udeshi is currently Chairman of The Banking Codes and Standards Board of
India, set up by the RBI to evaluate, oversee and enforce the observance of the two
Banking Codes. She is a director on the Board of the Government of India’s
Security Printing & Minting Corporation of India Ltd and Haldyn Glass Gujarat
Ltd. She is also the nominee of the Government of Maharashtra on the Board of the
Indian Red Cross Society.
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(vi) Vikramaaditya
314 D N Road, Fort, Mumbai - 400 001
Chief Executive Officer
HSBC Asset Management (India) Private Limited
Vikramaaditya has around 15 years of experience in banking and financial services.
Prior to joining HSBC Asset Management (India) Private Limited as CEO, he was
heading the Fund Accounting & Custody function of HSBC Bank from 2004.
Vikramaaditya had joined HSBC from Citibank 10 years ago as Product Manager
for Payments & Cash Management. He is a B Tech from IIT Kanpur and holds a
PGDM from IIM (Calcutta). He also holds a Certificate in International Cash
Management from Association of Corporate Treasurers, UK.
3.2. Group companies/firms of the Portfolio Manager in India on turnover basis
a) The Hongkong and Shanghai Banking Corporation Limited, India
b) HSBC Securities and Capital Markets (India) Private Limited
c) HSBC Pragati Finance (India) Private Limited (formerly know as HSBC Primary
Dealership (India) Private Ltd)
d) HSBC Software Development (India) Private Limited
e) HSBC Professional Services (India) Private Limited
f) HSBC Electronic Data Processing India Private Limited
g) HSBC Operations and Processing Enterprise (India) Private Limited
h) HSBC Private Equity Advisors (India) Private Limited
i) HSBC Agency (India) Private Limited
j) HSBC Financial Holdings (India) Private Limited
k) HSBC Consumer Services (India) Private Limited
l) HSBC InvestDirect (India) Limited
m) HSBC InvestDirect Securities (India) Limited
n) Investsmart Financial Services Limited
o) HSBC InvestDirect Commodities (India) Limited
p) HSBC InvestDirect Academy for Insurance and Finance (India) Limited
q) HSBC Insurance Brokers (India) Private Limited
r) IL&FS Investsmart Insurance Brokers Limited
(The above are the Group companies in India based on turnover, however they are not listed as
per turnover)
3.3. Details of the services being offered: Discretionary/ Non discretionary/ Advisory.
The Portfolio Manager offers Discretionary, Non – discretionary and Advisory services as per
individual client agreement.
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4. Penalties, pending litigation or proceedings, findings of inspection or investigations for which
action may have been taken or initiated by any regulatory authority.
4.1. All cases of penalties imposed by the SEBI or directions issued by SEBI under the Act or Rules or
Regulations made thereunder. The nature of the penalty/direction. Penalties imposed for any
economic offence and/ or for violation of any securities laws.
12No penalties have been imposed on the Portfolio Manager by SEBI and no directions have been
issued by SEBI under the Act or Rules or Regulations made thereunder. There are no penalties
imposed on the Portfolio Manager for any economic offence and / or for violation of any
securities laws.
4.2. Any pending material litigation / legal proceedings against the Portfolio Manager / key personnel
with separate disclosure regarding pending criminal cases, if any.
There are no pending material litigation / legal proceedings or criminal cases against the
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Portfolio Manager / key personnel.
4.3. Any deficiency in the systems and operations of the Portfolio Manager observed by SEBI or any
regulatory agency.
There has been no deficiency in the systems and operations of the Portfolio Manager observed
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by SEBI or any regulatory agency.
4.4. Any enquiry/ adjudication proceedings initiated by SEBI against the Portfolio Manager or its
directors, principal officer or employee or any person directly or indirectly connected with the
Portfolio Manager or its directors, principal officer or employee, under the Act or Rules or
Regulations made thereunder.
a) SEBI issued a Show Cause notice dated 7 August 2009 to the Trustees of HSBC Mutual Fund,
HSBC Mutual Fund, HSBC Asset Management (India) Private Limited and the CEO of HSBC Asset
Management (India) Private Limited pertaining to the changes made in the Offer Document of HSBC
Gilt Fund via Addendum. SEBI stated in the said show cause notice that the change made to the
name, benchmark index and duration of the Scheme would be construed as a change in the
fundamental attribute of the Scheme and hence the applicable provisions of the SEBI (Mutual funds)
Regulations, 1996 with respect to the same should have been complied with. HSBC Asset
Management (India) Private Limited had on behalf of the Trustees of HSBC Mutual Fund, HSBC
Mutual Fund and the CEO filed its response with relevant supporting documents with SEBI.
Subsequently, the personal hearing took place before the Whole Time Member, SEBI. After
considering the submissions made by the AMC, Whole Time Member, SEBI vide its order dated 23
April 2010 disposed of the show cause notice dated 07 August 2009 and warned the Board of
Trustees of HSBC Mutual Fund, HSBC Mutual Fund, HSBC Asset Management (India) Private
Limited and its CEO that they should strictly comply with the law governing the conduct and
business of mutual fund in securities market.
b) HSBC Securities and Capital Markets (India) Private Limited (HSCI), the promoter of the Portfolio
Manager was acting as a merchant banker under the SEBI (Substantial Acquisitions of Shares and
Takeovers) Regulations, 1997 for an open offer made by Global Green Company Limited for the
shares of Saptarishi Agro Industries Limited in the year 2000. Some of the shares of the target
company were not listed at the time of the open offer but were stated as listed in the letter of offer. An
enquiry is in progress under SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing
Penalty) Regulations 2002 for alleged contravention of SEBI (Substantial Acquisitions of Shares and
Takeovers) Regulations, 1997 and SEBI (Merchant Bankers) Regulations, 1992. HSCI has submitted
that there has been no failure on the part of HSCI to comply with its obligations as a merchant banker.
Subsequent to the enquiry officer's recommendation of a minor penalty i.e. HSCI be censured, a show
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cause notice has been issued by SEBI requiring HSCI to show cause as to why the said penalty should
not be imposed. HSCI has reiterated its earlier stand and submitted that there has been no failure on
the part of HSCI to comply with its obligations as a merchant banker. HSCI had sought a personal
hearing before the Whole Time Member, SEBI; submissions were made by HSCI’s counsel at the
hearing held on 5 September 2006. Subsequent to the hearing, an order dated 7 March 2007 was
passed by SEBI imposing a minor penalty of censure on HSCI. Thereafter, HSCI appealed against the
said order before the Securities Appellate Tribunal, Mumbai on 23 April 2007 which was admitted by
the Securities Appellate Tribunal and the next date of hearing was scheduled for 11 December 2007.
The Securities Appellate Tribunal heard the arguments of both Parties on the 11 and 12 December
2007 respectively and has further sought written arguments from both parties, which have been
submitted to the Securities Appellate Tribunal on 14 December 2007. Subsequent to the hearing held
before SAT and submission of written arguments, an order dated 20 February 2008 was passed by
SAT upholding SEBI’s minor penalty of censure on HSCI.
c) HSCI was acting as a merchant banker under the SEBI (Substantial Acquisitions of Shares and
Takeovers) Regulations, 1997 for an open offer made by indiaSTAR (Mauritius) Limited for the
shares of Garware Offshore Services Limited in the year 2008. SEBI had initiated an enquiry against
HSCI and thereby issued a Show Cause Notice dated 30 July 2008 calling upon the Sponsor to show
cause as to why further action should not be taken against it for the violations alleged to have been
committed by the Sponsor under Regulations 25 and 38 of the SEBI (Intermediaries) Regulations,
2008. HSCI had filed a detailed response in this regard on 10 September 2008 and had sought a
personal hearing in the matter. Accordingly, submissions were made by HSCI at the hearing held on 6
October 2008. Pursuant to the said hearing, SEBI had vide its letter dated 4 March 2009, informed
HSCI of the enquiry officer’s recommendation i.e. the matter is not a fit case to levy any penalty.
Thereafter, vide a letter dated 08 September 2009, SEBI informed HSCI that the enquiry proceedings
initiated against HSCI pursuant to the show cause notice dated 30 July 2008 have been closed by
SEBI.
Other than as disclosed above, there are no enquiries/ adjudication proceedings initiated by SEBI
against the Portfolio Manager or its directors, principal officer or employee or any person directly or
indirectly connected with the Portfolio Manager or its directors, principal officer or employees, under
the Act or Rules or Regulations made thereunder.
The above information has been disclosed in good faith as per the information available to the
Portfolio Manager.
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5. Services Offered
The Portfolio Manager offers the following three types of services:
5.1. Discretionary – the portfolio account of the client is managed at the full discretion and liberty of the
Portfolio Manager.
5.2. Non - Discretionary – the portfolio, which the Portfolio Manager manages in accordance with the
directions and permission of the client.
5.3. Advisory – the client is advised on buy/ sell decision within the overall risk profile without any back-
office responsibility for trade execution, custody or accounting functions.
5.4. The present investment objectives and policies including the types of securities in which it generally
invests shall be clearly and concisely stated in the document for easy understanding of the potential
investor.
Investment Objective
The investment objective is to seek capital appreciation over the long term. The endeavour is
wealth creation through long term compounding.
PMS Portfolios:
1. HSBC Alpha Account Signature Portfolio – This portfolio focuses on companies that
offer sustainable long-term business growth and are available at a reasonable discount to
their intrinsic value. The portfolio attempts to invest in diversified stocks across
capitalisation, sectors and industries.
The Portfolio attempts to deliver reasonable returns by following investment approach to
generate absolute and consistent performance from a well-diversified portfolio.
The Portfolio Manager follows bottom-up, research-based investment style. The portfolio
attempts to optimise returns through power of compounding. The Portfolio Manager
exercises risk control through price-value mismatch i.e. investing in companies that are
traded at a significant discount to their intrinsic value and thereby offering margin of
safety. The portfolio focuses on companies with sustained growth prospects in business
and potential of higher RoEs (Return on equity) or superior cash flows.
Benchmark Indices : BSE 500
The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other Regulatory Authority from time to time including
Units of Schemes of Mutual Funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
2. HSBC Alpha Account Strategic Portfolio – The portfolio seeks to invest in equities and
equity related instruments with focus on companies that are misappraized or temporarily
impaired resulting in price-value mismatch. The Portfolio aims to deliver reasonable
returns over the long-term. The investment is essentially made in listed entities. Private
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equity investment proposals (unlisted companies) may be considered, considering their
attractive fundamentals and possibility of unlocking significant gains in future on listing.
Benchmark Index : BSE Midcap
The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other Regulatory Authority from time to time including
Units of Schemes of Mutual Funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
3. HSBC Large Cap Oriented Portfolio-This portfolio seeks to generate long term capital
growth from an actively managed portfolio primarily comprising companies registered in
and/or listed on a regulated market of India. The Portfolio will invest with a preference
for large cap companies with at least 70% of the assets to be invested in large cap stocks.
Exposure to Mid and Small cap stocks shall not exceed 30% of the total portfolio.
Benchmark Index : S & P CNX Nifty
The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other Regulatory Authority from time to time including
Units of Schemes of Mutual Funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
4. HSBC Capital Guard Portfolio- This portfolio seeks to protect 100% of the capital
invested by the client along with an endeavour to generate capital appreciation by
investing in equity / equity related securities while endeavouring to protect the downside
by investing in debt / money market instruments / liquid/ funds/ Bank Fixed
Deposits/Debt Schemes of Mutual Fund. The exposure to debt will be dynamically
rebalanced in an attempt to provide downside protection while at the same time
maximizing equity exposure within defined protection levels. The key features of this
portfolio are:
(i) Capital protection – guarantee to protect 100% of the capital; and
(ii) Profit lock-in – endeavour to protect 3 percent for every 10 percent rise in the
portfolio level.
The 100% capital guarantee is envisaged to be provided through, inter alia, the Dynamic
Portfolio Methodology employed by the Portfolio Manager on the basis of non binding
advice received from the HSBC Bank plc. Subject to the terms and conditions contained
in the client agreement, the Dynamic Portfolio Methodology combined with the
guarantee provided by HSBC Bank plc to cover for situations where the portfolio value
drops below the internally determined floor level, guarantees the return of at least the
Funds invested by the Client.
Sinopia Asset Management (Asia Pacific) Limited shall provide investment advisory
services for the purpose of administration of this portfolio and the same shall be non-
binding in nature.
The portfolio shall have a 4-year tenure with capital guarantee on maturity.
Benchmark Index: BSE Sensex
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The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other regulatory authority from time to time including
units of schemes of mutual funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
5. HSBC Equity Linked Portfolio Series- This portfolio seeks to generate long term
absolute returns, typically linked to an underlying equity index or basket of equities. To
achieve this, the portfolio will be investing in non-convertible debentures (NCD) issued
by entities that are reputable in the opinion of the Portfolio Manager. A Non Convertible
Debenture (NCD) is an instrument that endeavors to provide investors principal
protection and a coupon.
The portfolio will invest in NCDs, which have a fixed tenor. The NCDs will be listed but
could carry significant liquidity risk. Redemption of the principal or any part thereof by
the investors shall be at the maturity of the underlying NCD.
Under this Portfolio, the Portfolio Manager may seek to invest in various NCDs at
different points in time and investments may be solicited from clients at the time of each
NCD investment. Investments made in each NCD shall form part of the Equity Linked
Portfolio Series and will be serially numbered. The first investment in the Series shall be
termed as HSBC Equity Linked Portfolio Series 1.
Benchmark Indices: The S & P CNX Nifty and the CRISIL Liquid Fund index will be
the standard benchmark indices for this product. The Portfolio Manager may specify
other indices depending on the nature of the NCD and this will be specified in the Client
Agreement.
The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other Regulatory Authority from time to time including
Units of Schemes of Mutual Funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
6. HSBC Select Portfolio-Powering the Core Sector: Under this Portfolio, the Portfolio
Manager may launch different thematic portfolios from time to time. HSBC Select
Portfolio – Powering the Core Sector is the first such offering from the Portfolio
Manager.
The HSBC Select Portfolio– Powering the Core Sector is an actively managed equity
oriented offering from the Portfolio Manager. It is a 3 year close ended product.
HSBC Select Portfolio – Powering the Core Sector aims to capture the core of India’s
economic growth by investing in companies that, in the opinion of the Portfolio Manager,
are likely to benefit from the potentially large spends on India’s infrastructure. The
Portfolio Manager would seek to identify stocks within core sectors with a primary focus
on companies involved into ancillary activities surrounding core sectors. Though, the
portfolio’s primary focus would be that of the ancillary companies to the core sectors, the
portfolio would have the flexibility to take exposure to companies in the core sectors like
real estate or power generation.
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At the end of 3 years, investments extant at that point of time may be liquidated and
transferred to another thematic portfolio which may be launched by the Portfolio
Manager at its sole discretion.
Investors will have the option to redeem their investments at the end of the 3 year period,
if they chose to.
Benchmark Index: BSE 500
The Portfolio Manager may invest in derivatives or any other instrument as may be
permitted by SEBI / RBI / such other Regulatory Authority from time to time including
Units of Schemes of Mutual Funds and as may be decided by the Portfolio Manager. The
Portfolio Manager may also participate in the Securities Lending Scheme.
7. Management of Provident Fund (under Central Board of Trustees, EPFO)
This Portfolio shall invest in debt securities in accordance with the investment pattern
stipulated by the Ministry of Labour, Government of India and the guidelines issued by
the Central Board of Trustees, Employees’ Provident Fund Organisation (CBT, EPF).
The Portfolio Manager will not invest in derivatives. The Portfolio Manager will not
participate in securities lending.
The policies for investments in associates/ group companies of the Portfolio Manager and
the maximum percentage of such investments therein would be subject to the applicable
laws / regulations / guidelines and the guidelines issued by the CBT, EPF.
The investment pattern will be as set out below or as may be amended from time to time:
(Pattern of investment is as per as per notification No.G-27031/3/99-SS-II issued by the
Ministry of Labour, Government of India on July 9th, 2003 )
1. Investment Pattern:
S. Securities % to be
No. Invested
(i) Central Government securities as defined in Sec 2 of the Public 25%
Debt Act, 1944 (18 of 1944); and/or units of such mutual funds
which have been set up as dedicated funds for investment in
Government Securities and which have been approved by the
Securities and Exchange Board of India.
(ii) (a) Government securities as defined in Sec 2 of the Public Debt 15%
Act, 1944 (18 of 1944); created and issued by any State
Government; and/or units of such mutual funds which have been
set up as dedicated funds for investment in Government
Securities and which have been approved by the Securities and
Exchange Board of India; and/or
(b) Any other negotiable securities the principal whereof and
interest whereon is fully and unconditionally guaranteed by the
14
Central Government or any State Government except those
covered under (iii)(a) below.
(iii) (a) Bonds/securities of “Public Financial Institutions” as 30%
specified under Section 4(1) of the Companies Act; “public
sector companies” as defined in Section 2(36-A) of the Income
Tax Act, 1961 including public sector banks; and/or
(b) Short duration (less than a year) Term Deposit Receipt
(TDR) issued by public sector banks.
(iv) To be invested in any of the above three categories as decided 30%
by the Central Board of Trustees, Employees Provident Fund
Organisation (Trustees).
(v) The Trustees subject to their assessment of the risk-return
prospects may invest upto 1/3rd of (iv) above, in private sector
bonds / securities which have an investment grade rating from at
least two credit rating agencies.
a. Any money received on the maturity of earlier investments reduced by obligatory
outgoing shall be invested in accordance with the investment pattern mentioned above.
b. In case of any instruments mentioned above being rated and their rating falling below
investment grade and the same rating has been confirmed by two credit rating agencies
then the option of exit can be exercised.
c. The investment pattern as envisaged in the above paragraphs may be achieved by the end
of a financial year.
The existing investment pattern as above is subject to change based on the notifications issued by
the Government of India from time to time.
The investment shall be made by the Portfolio Manager through a Stock Exchange, or directly
with other counterparties in respect of Government Securities and other debt instruments at the
best possible rate available on the day of transactions.
Notes to Point 5.4 : The portfolio of each client may differ from that of the other client in the
given portfolios, at the Portfolio Manager’s discretion. The funds remaining to be invested in any
of the above portfolios at any given point of time may be deployed by the Portfolio Manager in
any other short-term investments.
The performance of the Portfolios may not be strictly comparable with the performance of the
Indices, due to the inherent differences in the construction of the portfolios. The Portfolio
Manager may from time to time, review the benchmark selection process and make suitable
changes as to use of the benchmark, or related to composition of the benchmark, whenever it
deems necessary.
5.5 The policies for investments in associates/ group companies of the Portfolio Manager and the
maximum percentage of such investments therein would be subject to the applicable laws /
regulations/ guidelines.
15
AMIN currently does not intend to invest in any of its associate or group companies.
5.6 Types of Securities in which the funds are generally invested:
(a) Equity and Equity related securities,
(b) Units, Magnums and other instruments of Mutual Funds;
(c) Bank Deposits;
However in addition to the above and subject to SEBI Regulations, the Funds can also be
invested in such securities, capital and money market instruments or in fixed income securities
or variable securities of any description, by whatever name called including:
(a) Convertible Stock and Preference Shares of Indian Companies;
(b) Debentures (Convertible and Non-convertible), Bonds and Secured Premium Notes,
Swaps, Futures and Options, Securitised Debt, Structured Products, Pass Through
Certificates and Instruments which are quasi-debt instruments, Tax-exempt Bonds of
Indian Companies and Corporations;
(c) Government and Trustee Securities;
(d) Treasury Bills;
(e) Commercial Papers, Certificates of Deposit and other similar Money Market instruments;
and Derivatives. The Portfolio Manager may use derivative instruments like Stock Index
Futures, Futures on Individual Stocks, Options on Stock Indices and Options on
individual stocks, Interest rate swaps, Forward Rate Agreements or such other derivative
instruments as may be introduced from time to time, as permitted by SEBI. However, in
respect of investments in derivatives, the Portfolio Manager shall not leverage the
Portfolio;
(f) Tradable or any other warrants;
(g) The Portfolio Manager may invest in private equity investment proposals (unlisted
companies) considering their attractive fundamentals and possibility of unlocking
significant gains in future on listing, subject to applicable regulations;
(h) Such other instrument(s) offered in private placements, arrangements, treaties, contracts
or agreements for facilitating acquisition and/or disposing of investments as the case may
be;
(i) Any other eligible mode of investment within the meaning of the Regulations issued by
SEBI and amended thereto from time to time.
16
6. Risk factors
General Risk Factors applicable to all Portfolios
6.1. Securities investments are subject to market risk and there is no assurance or guarantee that
the objectives of the Portfolio will be achieved.
6.2. Past performance of the Portfolio Manager does not indicate its future Performance.
6.3. The investments made by the Portfolio Manager are subject to risks arising from the
investment objective, investment strategy and asset allocation.
6.4. The investments made by the Portfolio Manager are subject to risks arising out of non-
diversification etc.
6.5. Securities investments are subject to market and other risks and there can be no guarantee in
any of the Portfolios mentioned in this Disclosure Document against loss resulting from
investing in the Portfolio(s) of the Portfolio Manager. The various factors which may impact
the value of the Portfolios' investments include, but are not limited to, fluctuations in the
equity and bond markets, fluctuations in interest rates, prevailing political and economic
environment, changes in government policy, factors specific to the issuer of the securities, tax
laws, liquidity of the underlying instruments, settlement periods, trading volumes etc.
6.6. Investment decisions made by the Portfolio Manager may not always be profitable.
6.7. The tax benefits described in this Disclosure Document are as available under the present
taxation laws and are available subject to conditions. The information given is included for
general purpose only and is based on advice received by the Portfolio Manager regarding the
law and practice in force in India and the investors should be aware that the relevant fiscal
rules or their interpretation may change. As is the case with any investment, there can be no
guarantee that the tax position or the proposed tax position prevailing at the time of an
investment in the Portfolio will endure indefinitely. In view of the individual nature of tax
consequences, each investor is advised to consult his/ her own professional tax advisor.
6.8. Prospective investors should review / study this Disclosure Document carefully and in its
entirety and shall not construe the contents hereof or regard the summaries contained herein
as advice relating to legal, taxation, or financial / investment matters and are advised to
consult their own professional advisor(s) as to the legal, tax, financial or any other
requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal
(sale or conversion into money) of Portfolio and to the treatment of income (if any),
capitalisation, capital gains, any distribution, and other tax consequences relevant to their
portfolio, acquisition, holding, capitalisation, disposal (sale, transfer or conversion into
money) of portfolio within their jurisdiction of nationality, residence, incorporation, domicile
etc. or under the laws of any jurisdiction to which they or any managed funds to be used to
purchase/gift portfolio of securities are subject, and also to determine possible legal, tax,
financial or other consequences of subscribing / gifting, purchasing or holding portfolio of
securities before making an investment.
6.9. Investments are subject to certain risks viz. limited liquidity in the market, settlement risk,
impeding readjustment of portfolio composition, highly volatile stock markets in India etc.
Such loss could arise due to factors which by way of illustration, include, default or non-
performance of a third party, company’s refusal to register a security due to legal stay or
otherwise, disputes raised by third parties. Mis-judgment by the Portfolio Manager or his
incapacitation due to any reason however remote is also a risk. Thus the investment in Indian
17
capital markets involves above average risk for investors compared with other types of
investment opportunities. Investments will be of a longer duration compared to trading in
securities. There is a possibility of the value of investment and the income there from falling
as well as rising depending upon the market situation. There is also risk of total loss of value
of an Asset, possibilities of recovery of loss in investments only through legal process.
6.10. The investments made are subject to external risks such as War, natural calamities, policy
changes of Local / International Markets which affects stock markets.
6.11. Any policy change / technology change / obsolescence of technology would affect the
investments made in a particular industry.
6.12. The Client has perused and understood the disclosures made by the Portfolio Manager in the
Disclosure Document before entering into this Agreement.
6.13. The Portfolio Manager is neither responsible nor liable for any losses resulting from the
operations of the Portfolios.
6.14. Clients are not being offered any guarantee / assured returns.
6.15. Performance of the Portfolios may be impacted as a result of specific investment restrictions
provided by the client.
6.16 Risk factors specific to the HSBC Capital Guard Portfolio
Unless otherwise defined, the capitalized terms used in this clause 6.17 shall bear the following meanings:
Bond Floor Level: Bond Floor Level means the value of the Portfolio, as determined from time to time
by Portfolio Manager at which, if the entire Portfolio is invested in debt / money market instruments /
liquid funds / bank fixed deposits / debt schemes of mutual funds for the balance of the Tenure, the
Portfolio Level shall be equal to the Protection Level at the Maturity Date.
Gap Risk: Gap Risk means the difference between the Bond Floor Level and the Portfolio Level, if the
Portfolio Level is below the Bond Floor.
Maturity Date: Maturity Date is the date on which the tenure of the Portfolio expires.
Participation Amount: Participation Amount means the Funds collected from the Client when invested
in the HSBC Capital Guard Portfolio at the Activation Date.
Portfolio: Portfolio in general means the securities managed on behalf of the Client, through the
investment of Funds and bonus and rights shares in respect of securities forming part of the Portfolio, and
also includes the Funds entrusted by the Client to the Portfolio Manager and specifically for the purpose
of these Risk Factors means HSBC Capital Guard Portfolio.
Portfolio Level: Portfolio Level means the average daily net asset value as determined by the Portfolio
Manager, at any date, of the Portfolio.
Protection Level: Protection Level means 100 percent of the participation amount (net of upfront fees if
any).
Profit Lock In: Profit Lock In means the sum of money representing a rise of 3 percent for every 10
percent rise in the value of the Portfolio Level.
18
Portfolio Manager: HSBC Asset Management (India) Private Limited
All the general risk factors applicable to the other Portfolios of the Portfolio Manager and more
specifically mentioned in this Disclosure Document are applicable to the Portfolio. The risk factors
specific to this Portfolio are listed below.
(a) The Client may receive an amount less than its initial investment if it exits prior to the Maturity
Date.
(b) Whilst the Portfolio Manager has guaranteed the return of at least the Protection Level at the
Maturity Date, neither the Portfolio Manager, HSBC Bank plc, Sinopia nor any other member of the
HSBC group assure or guarantee or offer to assure or guarantee the Client any returns, including the
Profit Lock In, in excess of the Protection Level.
(c)The Portfolio Level shall be affected by interest rates and the performance of the underlying
stocks.
(d) The Client shall be exposed to the credit risk of HSBC Bank plc - the guarantor of the Gap Risk.
The Client shall also be exposed to the credit risk of the fixed income securities and mutual funds that
the Portfolio may invest in.
(e)The guarantee on the Gap Risk shall also be subject to operational risk, including losses arising out
of deviations by the Portfolio Manager from the advice / strategy formulated by HSBC Bank plc. Any
profit / loss arising from such deviations shall accrue / be borne by the Client. The Portfolio Manager
has set up adequate operational controls to reduce the above risk, but the same does not eliminate the
risk altogether.
(f)After HSBC Bank plc pays the amount equal to the Gap Risk, the objective to protect initial capital
depends on the Portfolio Manager managing the remaining Portfolio in a manner which yields a
return at or higher than the yield of the notional bond used to determine the Bond Floor Level. In case
of an event that leads to a Gap Risk, the allocation to the equity component in the Portfolio shall
become zero and the Client shall no longer get equity returns. In case of such an event, the Portfolio
will be invested in fixed income securities, instruments including debt and liquid mutual funds,
certificate of deposit, fixed deposits and the Client has to hold the Portfolio till the Maturity Date to
get back the value of his initial investment.
(g)The Protection Level will be determined by the employment of the Dynamic Portfolio
Methodology. The Dynamic Portfolio Methodology works on the basis of certain volatility
assumptions and stress tests on the underlying equity component. In the event of dramatic changes in
market conditions leading to these assumptions / stress tests not being valid, there is a possibility that
the capital guarantee may be breached.
(h)Clients can invest their Funds in the HSBC Capital Guard Portfolio up till such date as may be
specified in writing by the Portfolio Manager. The active management of the Portfolio (to aim to
achieve its stated objectives) will only commence on such date as has been specified in writing by the
Portfolio Manager (the “Activation Date”). Such Funds will be invested in the liquid schemes of
HSBC Mutual Fund in the period commencing from the date of their collection up to the Activation
Date. Any capital appreciation/ loss in the value of the Funds during such interim period will be
booked to the account of the Client.
(i)The Client may suffer loss of opportunity for gain under the Portfolio, on account of or arising out
of such circumstance / change in market conditions or for any other reason which may specifically
19
affect a particular sector or security, including but not limited to disruption / prohibition /
discontinuation / suspension of trading in a particular security including any index or scrip specific
futures / options or due to an act of any company, market intermediary, SEBI or any other regulatory
authority, which may result in trading in such security(ies) being completely or partially affected.
(j)By their nature, certain market risk disclosures are only estimates and could be materially different
from what actually occurs in the future. As a result, actual future gains or losses could materially
differ from those that have been estimated.
(k)The recipient(s) of this material alone shall be fully responsible/are liable for any decision taken on
the basis of this material. All recipients of this material should before dealing and/or transacting in
any of the products referred to in this material make their own investigation, seek appropriate
professional advice. The investments discussed in this may not be suitable for all investors. Any
person subscribing to or investing in any product/financial instruments should do so on the basis of
and after verifying the terms attached to such product/financial instrument. Financial products and
instruments are subject to market risks and yields may fluctuate depending on various factors
affecting capital/debt markets. Please note that past performance of the financial products,
instruments and the Portfolio does not necessarily indicate the future prospects and performance
thereof. Such past performance may or may not be sustained in future. Portfolio Manager’s
investment decisions may not be always profitable, as actual market movements may be at variance
with anticipated trends.
(l)The Client shall not make, and agrees that it has no claim against HSBC Bank plc for any loss
(notional or real) or any loss of opportunity for gain or loss arising from computational error in the
investment advice / strategy or loss of capital.
(m)Investing in securities including equities and derivatives involves certain risks and considerations
associated generally with making investments in securities. The Portfolio Level may be affected
generally by factors affecting financial markets, such as price and volume, volatility in interest rates,
currency exchange rates, changes in regulatory and administrative policies of the Government or any
other appropriate authority (including tax laws) or other political and economic developments.
Consequently, there can be no assurance that the Portfolio would achieve the stated objective of Profit
Lock In. The Portfolio Level may fluctuate and can go up or down. The Client is advised to carefully
review this Disclosure Document, Client agreement and other related documents carefully and in
entirety and consult their legal, tax and financial advisors to determine possible legal, tax and
financial or any other consequences of investing under the Portfolio, before making an investment
decision. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of
these investments. Different segments of the Indian financial markets have different settlement
periods and such periods may be extended significantly by unforeseen circumstances. The inability of
the Portfolio Manager to make intended securities purchases due to settlement problems could cause
the Portfolio to miss certain investment opportunities. By the same rationale, the inability to sell
securities held in the Portfolio due to the absence of a well developed and liquid secondary market for
debt securities would result, at times may result in losses to the Portfolio Level.
(n)The Portfolio Manager has not authorized any person to give any information or make any
representations, either oral or written, which are not stated in the Client agreement or this Disclosure
Document. The Client is accordingly advised not to rely upon any information or representations not
incorporated in the Client agreement or this Disclosure Document. Participation in the Portfolio, by
any person, on the basis of statements or representations which are not contained in the Client
agreement, this Disclosure Document or which are inconsistent with the information contained
therein shall be solely at the risk of such person.
20
(o)The Client is urged not to rely upon or be misled by any oral promises or statements made by any
party associated with the Portfolio Manager and it is brought to the special attention of investors that
the Portfolio Manager will not be liable for any misstatement or communication by any such party
which are not previously expressly authorized / approved by the Portfolio Manager. The Portfolio
Manager shall not be responsible for any claims made by the Client based on such oral promises
made by any such party.
(p)The distribution of this product and document in certain jurisdictions may be restricted or totally
prohibited and accordingly, persons who come into possession of this document are required to
inform themselves about, and to observe, any such restrictions.
6.17 Risk factors specific to the HSBC Equity linked Portfolio
Unless otherwise mentioned in the relevant risk factors discussed below, it is not possible to quantify
the extent of the Risks specified herein. The following are the risks envisaged and potential Investors
should consider the following risk factors carefully along with the risks described in the Issuer
Documents for evaluating the Issuer and its business before making any investment decision relating
to the NCDs. If any one of the following stated risks actually occurs, the Issuer’s business, financial
conditions and results of operations could suffer and therefore, the value of the Issuer’s NCDs could
decline.
I. Credit and counterparty risk: Investment by the Portfolio Manager in instruments like non
convertible debentures (NCD) involves a fair measure of uncertainty of payoffs, as changes in the
value of underlying Index can cause asymmetric changes in the NCD value. The term “capital”, if
used, in relation to “Principal Protection” refers to the face value of the NCD. Any Principal
Protection is subject to the terms of the Issuer Documents, investments being held till maturity and
the Issuer’s credit risk. The Portfolio Manager does not provide the Principal Protection. The
Portfolio Manager may not get an independent market derived valuation price for the NCDs and
would rely on an estimate of the fair market value provided by the issuer/issuer’s Associate from
time to time. The issuer will institutionalise a systematic credit evaluation process monitoring the
performance of its asset portfolio on a regular and continual basis to detect any material
development and constantly evaluate the changes and developments in sectors in which it has
substantial exposure. The market value of the Portfolio may change as the result of changes in the
actual or perceived credit standing of the Issuer. The credit rating of the NCDs does not cover the
market risk associated with such instruments. The issuer cannot guarantee that the issuer’s rating
will not be downgraded.. The credit ratings of the Issuer may undergo a change due to any
significant negative development affecting the issuer/issuer’s Group Companies and Associates or
the industry. This could severely impact the issuer’s ability to access debt capital markets for its
funding requirements. In case there is a credit default by the Issuer, there is a risk of receiving
lower than expected or negligible returns or returns lower than the initial investment amount in
respect of such NCD over the life and/or part thereof or upon maturity of the NCDs. Even where
the NCDs are principal protected there is a risk that any failure by a counter party to perform
obligations when due may result in the loss of all or part of the investment. The Portfolio may
remain invested in a single security issued by a single Issuer, resulting in higher concentration risk.
The Portfolio Manager does not guarantee the returns and / or maturity proceeds thereon. Investors
are requested to read all the terms and conditions and the Issuer Documents and risk factors before
investing.
II. Liquidity Risk: The NCDs are proposed to be listed. Presently, secondary market for such
securitized papers is not very liquid. Listing of the NCD does not necessarily guarantee their
liquidity and there can be no assurance that an active secondary market for the NCDs will develop
21
or be maintained. Consequently, the NCDs may be illiquid and quote below its face value/valuation
price.
III. Market Risk: The value of the Portfolio, prior to the Redemption and Maturity Date, may be
affected by a number of factors, including but not limited to the level of the performance of the
stocks, option volatility of the stock(s) in the basket, interest rates and time remaining to maturity.
The return of the Portfolio is linked to performance of the underlying Equity Index or on single
stocks or basket of stocks or Mutual Funds, Futures & Options and the overall demand for the
Issuer’s products is linked to macro economic parameters like GDP growth, capital markets and
liquidity. The fluctuations in the equity market can be significant and any adverse movement will
have an adverse impact on the business of the Issuer. The returns on the NCDs may be lower than
prevalent market interest rates or even be nil depending entirely on the movement in the underlying
index and futures values as also that over the life of the NCDs (including the amount if any, payable
on maturity, redemption, sale or disposition of the NCD.) The NCD holder may receive no
income/return at all on the NCDs or less income/return than the NCD holder may have expected, or
obtained by investing elsewhere or in similar investments.
IV. Event Risk: The trading on each of the stocks in the basket is subject to certain event risks
including but not limited to certain events such as Market Disruption, Settlement Disruption,
Insolvency, Delisting, Merger and Nationalization. Issuer may in such case adjust the terms at its
sole discretion to reflect the new market conditions. This may even include redeeming the Portfolio
prior to the Redemption and Maturity Date. If there is a stock split, issue of bonus shares or any
other event which changes the number of issued shares of the underlying in the basket or the
composition of the basket, the issuer may adjust the contract terms, at its sole discretion, to reflect
the market conditions. There is also a possibility of the Reference Index getting dissolved or
withdrawn by the Index Provider and in such a case the Debenture-Trustees upon request by the
issuer of the NCDs may modify the terms of issue of NCDs, so as to track a different and suitable
index and appropriate intimation will be sent to the NCD holders. It is possible that the methods of
computation adopted in relation to the NCDs may have to be modified or even alternative methods
could be adopted due to any disruptions in any of the financial markets or on account of any other
reason. In such cases the issuer of the NCDs may include the use of estimates and approximations.
All such computations shall be valid and binding on the holders of NCDs and no liability therefore
will attach to the Issuer or the Portfolio Manager.
V. No guarantee and no cross default : The issuer or its Group companies have not provided any
guarantee in any manner with respect to the NCDs. No Investor shall have any recourse against the
issuer’s Group Companies, except the Issuer, with respect to the performance of the terms and
conditions of the issue of the series of the NCD. The NCDs shall share, on a pari passu basis, the
same security (the “Security”) created by the issuer for all NCDs issued under this Programme.
However, there will not be any cross default between different Series of NCDs or between NCDs
issued under the particular issue and other indebtedness of the issuers.
VI. Risk arising out of RBI Registration Renewal- The COR issued to the issuer by the Reserve
Bank of India (RBI) permits it to carry out the business of a non banking financial institution and
states that the registration will be regularised after evaluating the performance of the Issuer for a
minimum period of two years. Therefore, if the RBI in its discretion is of the view that the
performance of the issuer does not, for any reason, merit the renewal or regularisation of the COR,
then the operations and prospects of the issuer, including issue of this series of NCD would be
materially affected. The issuer cannot guarantee that such renewal or regularisation will be granted
in a timely manner or be granted at all.
VII. Operational and System Risk: The issuers that the portfolio manager may invest in typically
would have established operational and system controls to safeguard the risk of improper
22
authorizations, inappropriate documentation, failure in maintenance of proper security policies,
frauds and employee errors, inadequate training etc. Further, there can also be a security risk in
terms of handling information technology related products which involves certain risks like data
loss, confidentiality, business continuity and network security. Failure of any of the operational and
system (information security) controls may hamper the ability of the Issuer to run its business
operations, which in turn may have an adverse effect on the portfolio.
VIII. Replacement Security: The issuer will be entitled to modify and replace the Security created by
the issuer in relation to the NCDs from time to time in accordance with the terms of the Debenture
Trust Deed.
IX. Interest Rate Risk: The issuer’s business will to an extent depend on factors such as interest
income from its operations.The Iissuer is exposed to interest rate risk principally as a result of
lending to customers at interest rates and in amounts and for periods, which may differ from its
funding sources (bank borrowings and permitted debt offerings). The issuer seeks to match its
interest rate positions to minimize interest rate risk. Despite these efforts, there can be no assurance
that significant interest rate movements will not have an effect on its results of operations. Interest
rates are highly sensitive to many factors beyond the control of the issuer, including the monetary
policies of the RBI, deregulation of the financial sector in India, domestic and international
economic and political conditions, inflation and other factors. Due to these factors, interest rates in
India have historically experienced a relatively high degree of volatility.
X. Regulatory , Legal and Political Risk: The issuers and the Portfolio Manager are subject to
various regulatory supervision. Changes in Government policies may impact the economic
environment, which may in turn affect the Issuers/Portfolio Manager. Further, any changes in
Government policies can impact business by impacting margins (interest rates) or by impacting
distribution growth or through changes in accounting/ /other norms. Also, future government
policies and changes in laws and regulations in India and comments, statements or policy changes
by any regulator, including but not limited to SEBI or the RBI, may adversely affect the NCDs, and
restrict the issuer’s ability to do business in its target markets. The timing and content of any new
law or regulation is not within the issuer’s control and such new law, regulation, comment,
statement or policy change could have an adverse effect on its business, results of operations and
financial condition. Further, SEBI, the relevant Stock Exchange(s) or other regulatory authorities
may require clarifications on the Issuer Documents, which may cause a delay in launch of this
series of NCD or may result in this launch being materially affected or even rejected. In addition,
the RBI also requires the issuer to make provisions in respect of NPAs. Any changes in the
regulatory framework specifically affecting NBFCs including the provisioning for NPAs or capital
adequacy requirements could adversely affect the profitability of the issuer or its future financial
performance by requiring a restructuring of its activities, increasing costs or otherwise. The issuer
may, in the future be classified as a NBFC-ND-SI as defined in applicable RBI guidelines, which is
subject to certain statutory, regulatory, exposure and prudential norms and this may limit the
flexibility of the Issuer’s loans, investments and other products. Further, since 1991, successive
Indian governments have pursued policies of economic liberalization. The role of the Central and
State Governments in the Indian economy as producers, consumers and regulators has remained
significant. If there was to be any slowdown in the economic liberalization, or a reversal of steps
already taken, it could have an adverse effect on the issuer’s business. Financial difficulties and
other problems in certain financial institutions in India could cause the issuer’s business to suffer.
The issuer is exposed to the risks of the Indian financial system, which in turn may be affected by
financial difficulties, trends and other problems faced by certain Indian financial institutions. The
problems faced by such Indian financial institutions and any instability in or difficulties faced by
the Indian financial system generally could create an adverse market perception about Indian
financial institutions, banks and NBFCs. This in turn could adversely affect the issuer’s business, its
future financial performance and its shareholders’ funds. General elections for the Parliament and
23
other state legislatures will be held at the latest by May, 2009 and may result in a change in the
economic and other policies which may have a material adverse effect on the operations, results and
performance of the issuer. In general, a slowdown in the Indian economy may adversely affect the
Issuer’s business, including its ability to enhance its asset portfolio and the quality of its assets, and
its ability to implement certain measures could be adversely affected by a movement in interest
rates, or various other factors affecting the growth of industrial, manufacturing and services sector
or a general down trend in the economy.
XI. Market Risk Committee: RBI guidelines require NBFCs to set up a market risk committee
(“MRC”). Any delay on the part of the Issuer in setting up the MRC may impact its ability to make
prudent and controlled investments.
XII. Debenture Redemption Reserve: Section 117C of the Companies Act, 1956 states that any
company that intends to issue debentures must create a debenture redemption reserve to which
adequate amounts shall be credited out of the profits of the company until the redemption of the
debentures. However, the Ministry of Company Affairs has, through its circular no. 9/2002
No.6/3/20001-CL.V dated April 18, 2002, clarified that NBFCs are exempt from this requirement
in respect of privately placed debentures. Pursuant to this exemption, the issuer may not create any
reserve funds for the redemption of the NCDs issued under this Issue.
XIII. Typically the issuers may appoint an affiliate (including its parent) as its Calculation Agent or other
agent, for the purposes of calculating amounts payable or deliverable to holders under a series of
Debentures, or for any other purpose. Under certain circumstances, the agent as an affiliate and its
responsibilities as Calculation Agent or other agent for the Debentures could give rise to conflicts
of interest. The Calculation Agent or other agent is required to carry out its duties in good faith and
using its reasonable judgment. However, because the issuers could be controlled by the affiliate,
potential conflicts of interest could arise. The issuer also may enter into an arrangement with an
affiliate to hedge market risks associated with its obligations under the Debentures. Typically the
issuers will not seek competitive bids for this arrangement from unaffiliated parties.
XIV. Uncertain Trading Market: The issuer intends to list the NCDs on the WDM segment of the NSE
and/or BSE. The issuer cannot guarantee that the NCDs will be frequently traded on the Stock
Exchanges and that there would be any market for the NCDs .
XV. The issuers may be exposed to rising competition from banks and Non Banking Financial
Companies (NBFCs). Some of these players are very aggressive in underwriting credit risk and
pricing their products. The issuers could face a situation where it stands to lose a large amount of
business to its competitors due to such and other factors arising out of competition. Further, various
members of the Issuer’s Group in India, engaged in the securities business, compete for the same
business and may in certain cases provide similar financial services and products and target the
same clientele as the issuer. The issuer’s results may suffer due to the competition it faces from
other members of its Group.
XVI. The issuer’s growth will depend on its continued ability to access funds at competitive rates. With
the growth of its business, the issuer will increasingly rely on funding from the debt capital markets
and commercial borrowings. The market for such funds is competitive and its ability to obtain
funds at competitive rates will depend on various factors including its ability to maintain its credit
ratings. If the issuer is unable to access funds at an effective cost that is comparable to or lower than
its competitors, the Issuer may not be able to offer competitive interest rates for its loans or have
adequate funds for its investment activities. This may adversely impact its business results and its
future financial performance. The value of its collateral may decrease or the Issuer may experience
delays in enforcing its collateral when its customers default on their obligations, which may result
in failure to recover the expected value of collateral and adversely affect its financial performance.
24
XVII. Terrorist attacks, civil unrest and other acts of violence or war involving India and other countries
could adversely affect the financial markets and the Issuer’s business: Terrorist attacks and other
acts of violence or war may negatively affect the Indian markets and may also adversely affect the
worldwide financial markets. These acts may also result in a loss of business confidence. In
addition, adverse social, economic and political events in India could have a negative impact on the
Issuer. Such incidents could also create a greater perception that investment in Indian companies
involves a higher degree of risk and could have an adverse impact on the Issuer’s business. Further,
the performance of the Issuer may also be affected by natural disasters like earthquake, flood,
drought etc.
XVIII. In the interest of the investors, the Portfolio Manager may, at its sole discretion, invest up to 100%
of the Portfolio in Liquid and / or Debt Mutual Fund Schemes. Moreover, the Portfolio Manager
may at its sole discretion decide not to apply to the NCDs and return the funds to investors, in case
there is any change in the Participation Rate or if the Portfolio Manager feels that the total amount
received under this Series does not justify investment in the NCDs, or if the Issuer does not allot the
NCD for any reason, or for any other reason that the Portfolio Manager may deem appropriate.
XIX. The Portfolio Manager does not make any representation or warranty, express or implied to the
subscribers of the NCDs regarding the advisability of investing in such instruments or the ability of
the S&P CNX Nifty (or any other index used instead of, in replacement or in conjunction with the
S&P CNX Nifty) to track general stock market performance in India. The Portfolio Manager has
not guaranteed the accuracy and/or the completeness of the S&P CNX Nifty (or any other index) or
any data included therein.
XX. The issuers of the NCDs or any person acting on behalf of such issuers of NCDs may have an
interest/position as regards the Portfolio Manager and/or may have an existing banking relationship,
financial, advisory or other relationship with them and/or may be in negotiation/discussion with
them as to transactions of any kind.
XXI. At any time during the life of such NCDs, the value of the NCDs may be substantially less than its
investment value.
XXII. Since the Portfolio Manager may invest in NCDs to achieve portfolio objective, the issuers of the
NCDs may have long or short positions or make markets including in S&P CNX Nifty indices,
futures and options and other similar assets, they may act as an underwriter or distributor of similar
instruments, the returns on which or performance of which, may be at variance with or
asymmetrical to those on the NCDs, and they may engage in other public and private financial
transactions (including the purchase of privately placed investments or securities or other assets).
Such type of activities of the issuers of the NCDs or any of its Agents and related markets (such as
the foreign exchange market) may affect the value of the NCDs. In particular, the value of the
NCDs could be adversely impacted by a movement in the S&P CNX Nifty indices, futures and
options or activities in related markets.
XXIII. Equity Index-Linked NCDs may generate returns, which are not in line with the performance of the
Reference Index, depending on their calculation formulas and underlying investments.
XXIV. The returns of investments in securities would depend on the happening / non-happening of
specified events and the returns may or may not accrue to an investor accordingly.
XXV. Dates specified in the client Agreement are subject to change based on the allotment date.
25
XXVI. The commencement date of the issue and the Offer Period are indicative only and may be altered at
the sole discretion of the Portfolio Manager and the respective observation dates, scheduled
valuation dates, etc would change accordingly.
XXVII. The investment in NCDs involves certain considerations and significant risks. Accordingly, before
deciding to invest therein, prospective investors should carefully study the specific risks detailed in
the Disclosure Document, Client Agreement and the Sample of the Offer Documents and seek
independent investment, legal and tax advice. Additional risks and uncertainties not presently
known to the Portfolio Manager, or those it currently deems immaterial may also have an adverse
impact on the Product’s prospects and business. There can be no assurance that the Product’s
investment objective will be achieved.
XXVIII. Clients should be aware that the investment strategy of the Portfolio may lead to a dilution of
performance when compared to a direct investment into the equity market of the Index linked to the
NCD. The Participation Rate and the averaging mechanism of the NCD, if any, will also affect the
performance of the Portfolio.
XXIX. Clients should note that Portfolio Manager, Investment Advisor, Fund Accountant & Custodian are
all part of the HSBC Group and members of the HSBC Group may also act as the counterparty of
the NCD. However, each of such entities operates independently in assuming their respective duties
and obligations in relation to the Portfolio and is subject to the supervision of their relevant industry
regulators. All transactions and dealings between such entities in relation to the Portfolio will be
dealt with on arm’s length basis.
XXX. Investing in Securities including equities and derivatives involves certain risks and considerations
associated generally with making investments in Securities. The Portfolio Level may be affected
generally by factors affecting financial markets, such as price and volume, volatility in interest
rates, currency exchange rates, changes in regulatory and administrative policies of the Government
or any other appropriate authority (including tax laws) or other political and economic
developments. Consequently, the Portfolio Level may fluctuate and can go up or down. The Client
is advised to carefully review the Disclosure Document, Client Agreement, Issuer Documents and
other related documents carefully and in entirety and consult their legal, tax and financial advisors
to determine possible legal, tax and financial or any other consequences of investing under the
Portfolio, before making an investment decision. Trading volumes, settlement periods and transfer
procedures may restrict the liquidity of these investments. Different segments of the Indian
financial markets have different settlement periods and such periods may be extended significantly
by unforeseen circumstances. The inability of the Portfolio Manager to make intended Securities
purchases due to settlement problems could cause the Portfolio to miss certain investment
opportunities. By the same rationale, the inability to sell Securities held in the Portfolio due to the
absence of a well developed and liquid secondary market for debt Securities, at times may result in
losses to the Portfolio Level.
XXXI. The Portfolio Manager has not authorized any person to give any information or make any
representations, either oral or written, which are not stated in the Issuer Document, Client
Agreement or the Disclosure Document. The Client is accordingly advised not to rely upon any
information or representations not incorporated in the Client Agreement or the Disclosure
Document. Participation in the Portfolio, by any person, on the basis of statements or
representations which are not contained in the Client Agreement, Disclosure Document or which
are inconsistent with the information contained therein shall be solely at the risk of such person.
XXXII. The Client is urged not to rely upon or be misled by any oral promises or statements made by any
party associated with the Portfolio Manager and it is brought to the special attention of investors
that the Portfolio Manager will not be liable for any misstatement or communication by any such
26
party which are not previously expressly authorized / approved by the Portfolio Manager. The
Portfolio Manager shall not be responsible for any claims made by the Client based on such oral
promises made by any such party.
6.18 Risk Factors specific to HSBC Select Portfolio – Powering the Core Sector
(a) All the general risk factors applicable to the Portfolios of the Portfolio Manager are
applicable to the Portfolio.
(b) The Portfolio Level shall be affected by interest rates and the performance of the
underlying stocks.
(c) The Client may suffer loss of opportunity for gain under the Portfolio , on account of or
arising out of such circumstance / change in market conditions or for any other reason
which may specifically affect the particular core sector or security, including but not
limited to disruption / prohibition / discontinuation / suspension of trading in a particular
security including any index or scrip specific futures / options or due to an act of any
company, market intermediary, SEBI or any other regulatory authority, which may result
in trading in such security(ies) being completely or partially affected.
(d) By their nature, certain market risk disclosures are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains or losses
could materially differ from those that have been estimated.
(e) The recipient(s) of this material alone shall be fully responsible/are liable for any
decision taken on the basis of this material. All recipients of this material should before
dealing and/or transacting in any of the products referred to in this material make their
own investigation, seek appropriate professional advice. The investments discussed in
this may not be suitable for all investors. Any person subscribing to or investing in any
product/financial instruments should do so on the basis of and after verifying the terms
attached to such product/financial instrument. Financial products and instruments are
subject to market risks and yields may fluctuate depending on various factors affecting
capital/debt markets. Please note that past performance of the financial products,
instruments and the portfolio does not necessarily indicate the future prospects and
performance thereof. Such past performance may or may not be sustained in future.
Portfolio Manager’s investment decisions may not be always profitable, as actual market
movements may be at variance with anticipated trends.
(f) Investing in securities including equities and derivatives involves certain risks and
considerations associated generally with making investments in securities. The Portfolio
Level may be affected generally by factors affecting financial markets, such as price and
volume, volatility in interest rates, currency exchange rates, changes in regulatory and
administrative policies of the Government or any other appropriate authority (including
tax laws) or other political and economic developments. The Portfolio Level may
fluctuate and can go up or down. The Client is advised to carefully review the Disclosure
Document, Client Agreement and other related documents carefully and in entirety and
consult their legal, tax and financial advisors to determine possible legal, tax and
financial or any other consequences of investing under the Portfolio, before making an
investment decision. Trading volumes, settlement periods and transfer procedures may
restrict the liquidity of these investments. Different segments of the Indian financial
markets have different settlement periods and such periods may be extended significantly
by unforeseen circumstances. The inability of the Portfolio Manager to make intended
securities purchases due to settlement problems could cause the Portfolio to miss certain
investment opportunities. By the same rationale, the inability to sell securities held in the
27
Portfolio due to the absence of a well developed and liquid secondary market for debt
securities would result, at times may result in losses to the Portfolio Level.
(g) The Portfolio Manager has not authorized any person to give any information or make
any representations, either oral or written, which are not stated in the Client Agreement or
the Disclosure Document. The Client is accordingly advised not to rely upon any
information or representations not incorporated in the Client Agreement or the Disclosure
Document. Participation in the Portfolio, by any person, on the basis of statements or
representations which are not contained in the Client Agreement, the Disclosure
Document or which are inconsistent with the information contained therein shall be
solely at the risk of such person.
(h) The Client is urged not to rely upon or be misled by any oral promises or statements
made by any party associated with the Portfolio Manager and it is brought to the special
attention of investors that the Portfolio Manager will not be liable for any misstatement or
communication by any such party which are not previously expressly authorized /
approved by the Portfolio Manager. The Portfolio Manager shall not be responsible for
any claims made by the Client based on such oral promises made by any such party.
(i) The distribution of this product and document in certain jurisdictions may be restricted or
totally prohibited and accordingly, persons who come into possession of this document
are required to inform themselves about, and to observe, any such restrictions.
6.19 Risk factors specific to Management of Provident Fund (under Central Board of
Trustees, EPFO)
(a). Price-Risk or Interest Rate Risk: As with all debt securities, changes in interest rates may
affect the prices of securities. Generally, the prices of securities increase as interest rates
decline and generally decrease as interest rates rise. Prices of long-term securities
generally fluctuate more in response to interest rate changes than do short-term securities.
Indian debt markets can be volatile leading to the possibility of price movements up or
down in fixed income securities and thereby to possible movements in the NAV.
In the case of floating rate instruments, an additional risk could arise due to the change in
the spreads of floating rate instruments. If the spreads on floating rate papers rise, then
there could be a price loss on these instruments. Further, in the case of fixed rate
instruments that have been swapped for floating rates, any adverse movement in the fixed
rate yields vis-à-vis swap rates could result in losses. However, floating rate debt
instruments which have periodical interest rate reset, carry a lower interest rate risk as
compared to fixed rate debt instruments. In a falling interest rate scenario the returns on
floating rate debt instruments may not be better than those on fixed rate debt instruments.
(b). Liquidity or Marketability Risk: This refers to the ease with which a security can be sold
at or near to its valuation yield-to-maturity (YTM). The primary measure of liquidity risk
is the spread between the bid price and the offer price quoted by a dealer. Liquidity risk is
today, the characteristic of the Indian fixed income market. Although the Government
Securities market is considered to be more liquid compared to other debt, on ocassions
there could be difficulty in transacting due to extreme volatility or any other prevailing
adverse market conditions.
(c). Credit Risk: Credit risk or default risk refers to the risk that an issuer of a fixed income
security may default (i.e., will be unable to make timely principal and interest payments
on the security). Consequently, corporate debentures are sold at a yield above those
offered on Government Securities, which are sovereign obligations. Normally, the value
28
of a fixed income security will fluctuate depending upon the changes in the perceived
level of credit risk as well as any actual event of default. The greater the credit risk, the
greater the yield required for someone to be compensated for the increased risk. The least
risk perception is in case of government securities.
(d). Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received
from the securities in the portfolio are reinvested. The additional income from
reinvestment is the "interest on interest" component. The risk is that the rate at which
interim cash flows can be reinvested may be lower than that originally assumed.
29
7. Client Representation
7.1.
Category of clients No. of Funds managed Discretionary/ Non
clients (Rs. cr) Discretionary (if
available)
Associates / Group companies
As at 31 March 2008 Nil NA NA
As at 31 March 2009 NIL NA NA
As at 31 March 2010 NIL NA NA
Others
As at 31 March 2008 1481 * 716.5337 * Discretionary
As at 31 March 2009 2065 ** 15150.19 ** Discretionary
As at 31 March 2010 1974 ** 30429.49** Discretionary
* Includes advisory clients
** Includes EPFO and Advisory Clients
7.2. Complete disclosure in respect of transactions with related parties as per the standards specified by
the Institute of Chartered Accountants of India.
6 Please refer Annexure I
30
7 8. The Financial Performance of the Portfolio Manager (based on audited financial statements)
INR
As on 31 March As on 31 March As on 31 March
Balance Sheet 2010 2009 2008
SOURCES OF FUNDS
Shareholders' funds
Share capital 90,000,000 90,000,000 90,000,000
Reserves & Surplus 636,569,000 532,734,000 797,088,025
Loan Funds
Secured Loans
Lease liability 983,000 704,000 2,426,281
Unsecured Loans
Bank overdraft - -
TOTAL 727,552,000 623,438,000 889,514,306
APPLICATION OF FUNDS
Fixed assets
Gross block 93,283,000 104,628,000 95,526,301
Less: Accumulated Depreciation 78,609,000 88,005,000 78,429,750
Net block 14,674,000 16,623,000 17,096,551
Work In Progress -
Investments 471,749,000 303,458,000 680,491,355
Deferred tax asset 2,569,000 - 29,931,855
Long term incentive plan - - 66,313,963
Current assets, loans & advances
Cash and bank balances 5,752,000 9,482,000 5,175,629
Sundry debtors 154,652,000 121,177,000 98,345,657
Loans and advances 317,293,000 338,462,000 227,923,390
477,697,000 469,121,000 331,444,676
Current liabilities and provisions
Current liabilities 228,401,000 155,012,000 229,024,006
Provisions 10,736,000 10,752,000 6,740,088
239,137,000 165,764,000 235,764,094
Net current assets/(liabilities) 238,560,000 303,357,000 95,680,582
Miscellaneous expenditure
(to the extent not written off or adjusted) -
31
Debit balance in profit & loss account
TOTAL 727,552,000 623,438,000 889,514,306
INR
As on 31 March Year ended Year ended
Profit & Loss Statement
2010 31 March 2009 31 March 2008
Total Income 821,232,000 729,410,000 895,151,778
Total Expenses 686,674,000 847,126,000 740,531,009
Profit/(loss) before depreciation & tax 134,558,000 (117,716,000) 154,620,769
Depreciation 17,491,000 16,475,000 11,738,314
Profit/(loss) before tax 117,067,000 (134,191,000) 142,882,455
Provision for tax (net of deferred tax) 18,331,000 (29,932,000) (36,678,929)
Fringe benefit tax ( 39,000) (5,465,000) (7,406,590)
Net Profit/(loss) after tax 103,835,000 (169,588,000) 98,796,936
32
9. Portfolio Management performance of the Portfolio Manager for the last three years, and in case
of discretionary Portfolio Manager, disclosure of performance indicators calculated using
weighted average method in terms of Regulation 14 of the SEBI (Portfolio Managers)
Regulations, 1993.
Returns %
01/04/2010 - 01/04/2009 - 01/04/2008 - 01/04/2007 -
Period 31/10/2010 31/03/2010 31/03/2009 31/03/2008
HSBC Alpha Account Signature
Portfolios Portfolio 13.54% 95.78% -40.41% 20.36%
Benchmarks Sensex - - -37.62% 19.06%
BSE Midcap - - -53.79% 18.82%
Nifty - - -36.19% 23.89%
BSE500 16.15% 96.38% - -
HSBC Alpha Account Strategic
Portfolios Portfolio 14.26% 162.77% -53.21% 8.34%
Benchmarks Sensex - - -37.62% -
BSE Midcap 21.99% 130.23% -53.79% -
Nifty - - -36.19% 23.89%
BSE500 - - - -
HSBC Capital Protection
Oriented Portfolio (Maturity Date
Portfolios - 11-03-2010) - 10.40% -1.08% 11.52%
Benchmarks Sensex - - - 19.06%
BSE Midcap - - - 18.82%
Nifty - 73.76% -36.19% 23.89%
BSE500 - - - -
HSBC Large Cap Oriented
Portfolios Portfolio 13.18% 73.69% -35.73 7.89%
Benchmarks Sensex - - -37.62% 19.06%
BSE Midcap - - -53.79% 18.82%
Nifty 14.64% 73.76% -36.19% 23.89%
BSE500 - - - -
HSBC Capital Guard (Since
Portfolios Performance reporting date) 4.83% 8.98% -12.76% 1.39%
Benchmarks Sensex 14.29% 80.54% -37.62% 8.39%
BSE Midcap - - - -
Nifty - - -36.19% -
BSE500 - - - -
HSBC Select 1 Portfolio (Since
Portfolios Performance reporting date) 31.13% 182.92% -62.84% -
Benchmarks Sensex - - - -
BSE Midcap - - - -
Nifty - - - -
33
Returns %
01/04/2010 - 01/04/2009 - 01/04/2008 - 01/04/2007 -
Period 31/10/2010 31/03/2010 31/03/2009 31/03/2008
BSE500 16.15% 96.38% -48.91%
HSBC Equity Linked Portfolio
(ELN) Series - 1 (Date of
Portfolios Maturity - 06-11-2009) - - -8.81% -2.74%
Benchmarks Nifty - - -36.19% 7.56%
HSBC Equity Linked Portfolio
(ELN) Series - 2 (Date of
Portfolios Maturity - 01-04-2010) - 12.10% 2.61% -3.67%
Benchmarks Nifty - 73.76% -36.19% -5.71%
HSBC Equity Linked Portfolio
(ELN) Series - 3 (Date of
Portfolios Maturity - 28-06-2010) - 11.75% -5.30% -11.99%
Benchmarks Nifty - 73.76% -36.19% -22.15%
HSBC Equity Linked Portfolio
Portfolios (ELN) Series - 4 12.25% 16.57% -10.98% -9.68%
Benchmarks Nifty 14.64% 73.76% -36.19% -17.68%
HSBC Equity Linked Portfolio
Portfolios (ELN) Series - 5 11.43% 20.45% -14.06% -6.45%
Benchmarks Nifty 14.64% 73.76% -36.19% 4.45%
HSBC Equity Linked Portfolio
(ELN) Series - 6 (Date of
Portfolios Maturity - 25-10-2010) - 62.94% -23.25% -
Benchmarks Nifty - 73.76% -27.37% -
HSBC Equity Linked Portfolio
(ELN) Series - 7 (Date of
Portfolios Maturity - 23-10-2009) - - -1.44% -
Benchmarks Nifty - - -27.37% -
HSBC Equity Linked Portfolio
Portfolios (ELN) Series - 8 3.30% 36.55% -9.81% -
Benchmarks Nifty 14.64% 73.76% -31.55% -
8 Notes:
9 a) The returns shown above are post expenses.
34
b) There had been change in Benchmark Indices for HSBC Alpha Account Signature Portfolio,
10
effective 1 December 2009 and change in the benchmark of HSBC Alpha Account Strategic Portfolio
and HSBC Large Cap Oriented Portfolio effective 1 June 2009.
c) The performance of the Portfolio Manager is calculated using weighted average method taking
11
each individual category of investments
d) The returns for ELN (i.e. structured products) which are matured during the relevant period have
not been shown.
10. Nature of expenses
The following are the general costs and expenses to be borne by the client availing the services of the
Portfolio Manager. However, the exact quantum and nature of expenses relating to each of the following
services is annexed to the Portfolio Management Agreement in respect of each of the services provided.
10.1.1 Portfolio Management Fees :
The Portfolio Management Fees relate to the Portfolio Management Services offered to
the Clients. The fee may be a fixed fee or performance based fee or a combination of
both, as agreed by the client in the PMS Agreement.
10.1.2 Depository / Custodian fee :
Charges relating to custody and transfer of shares, bonds and units, opening and
operation of demat account, dematerialisation and rematerialisation, and / or any other
charges in respect of the investment etc.
10.1.3 Registration and transfer agents' fees :
Fees payable for the Registrars and Transfer Agents in connection with effecting transfer
of any or all of the securities and bonds including stamp duty, cost of affidavits, notary
charges, postage stamps and courier charges
10.1.4 Brokerage, transaction costs and other services:
The brokerage and other charges like stamp duty, transaction cost and statutory levies
such as service tax, securities transaction tax, turnover fees and such other levies as may
be imposed upon from time to time.
10.1.5 Fees and charges in respect of investment in mutual funds:
Mutual Funds including HSBC Mutual Fund shall be recovering expenses or
management fees and other incidental expenses and such fees and charges shall be paid to
the Asset Management Company of the Mutual Funds on behalf of the Client. Such fees
and charges are in addition to the portfolio Management fees described above.
10.1.6 Certification charges or professional charges:
The charges payable to outsourced professional services like accounting, taxation and any
legal services, etc.
10.1.7 Securities lending and borrowing charges:
The charges pertaining to the lending of securities, costs of borrowings and costs
associated with transfer of securities connected with the lending and borrowing transfer
operations.
35
10.1.8 Any other incidental and ancillary charges:
All incidental and ancillary expenses not recovered above but incurred by the Portfolio
Manager on behalf of the client shall be charged to the Client.
The Portfolio Manager shall deduct directly from the cash account of the client all the
fees/costs as specified above and shall send a statement to the client for the same.
The fees charged to the client for PMS come under the ambit of “fees for technical
services” under Section 194J of the Income Tax Act, 1961(“the Act”). As the section
calls for withholding tax, the client is required to withhold tax @ 10 % (plus applicable
surcharge and education cess) on the fees that the client pays to the Portfolio Manager, if
he / she fall under the following two categories:
a) Individual / HUFs -specified in section 194J i.e. having gross turnover from business
exceeding Rs. 60 lakhs or receipt from profession exceeding Rs 15 lakh;
b) Corporates- This implies, the client (as mentioned in point 1 and 2 above) while
making payment of the fees would deduct tax at source. However, as per the
Agreement with the client, the Portfolio Manager acts as ‘an agent as well as a
trustee’ of its clients and is entrusted by the client to fully operate its bank account.
Further, the clients of the Portfolio Manager have executed a power of attorney in its
favour. As the responsibility can vest with the Portfolio Manager on account of this
agreement, and as an extension to our services, the Portfolio Manager will carry out
the following on behalf of the client:
i) Deduct tax at source at the specified rate on the fees payable by the client to the
Portfolio Manager as per the provisions of section 194J; and
ii) Make payment to the Government within the due date specified under the Income Tax
Rules, 1962.
For this purpose, we take the Permanent Account Number (PAN), the Tax Deduction at
Source Account Number (TAN) and Assessing Officer details from the client towards the
Tax Deducted at Source on behalf of the client. However, the responsibility to issue the
Tax Deduction Certificate in Form 16A remains with the client who shall provide it to the
Portfolio Manager within the statutory time limit laid down under the income tax
provisions.
36
11. Taxation - Discloses the implications of investments in securities and the tax provisions on
Income/ Loss or Tax Deduction at Source on various investors.
11.1Taxation
Disclose the implications of investments in securities and the tax provisions on Income/ Loss or
Tax Deduction at Source on various investors. The following are the tax provisions applicable to
Clients investing in the Portfolio Management Services under the taxation laws as on the date
herewith, as advised by our Tax Consultants.
11.2Dividend
Dividends declared, distributed or paid on or after April 1, 2003 by domestic companies will be
exempt in the hands of the shareholder recipient but tax on distributed profits of 15 percent (as
increased by surcharge @7.5 per cent) will be payable by the domestic company.
Income distributed on or after April 1, 2003 by a mutual fund specified u/s 10(23D) of the Act
will be exempt in the hands of the unit holders but a tax on distributed income will be paid as
under:
In case of distribution by a money market mutual fund or a liquid fund:
25 per cent (plus surcharge @7.5 per cent) and
In case of distribution by a fund other than a money market mutual fund or a liquid fund:
12.5 per cent (plus surcharge @ 7.5 per cent) in case of distribution to an individual or
Hindu Undivided Family; and 20 per cent (plus surcharge @7.5 per cent) in any other
case.
However, no tax on such distributed income is payable by an equity oriented mutual
fund.
Further, the tax and surcharge on distribution as stated above will be increased by the Education
Cess of 2% and Secondary and Higher Education Cess of 1%.
11.3Capital Gains Tax
Profit on sale of investments, (being shares in a company or any other securities listed on a
recognised stock exchange in India or units of the Unit Trust of India established under the Unit
Trust of India Act, 1963 (52 of 1963) or units of a Mutual Fund specified under Section 10(23D))
held as a capital asset for a period of more than 12 months (36 months in case of any other
investments) immediately preceding the date of transfer, will be treated as long-term capital
gains; in all other cases, it would be treated as short-term capital gains. The taxability of long-
term and short-term capital gains is discussed below:
11.3.1 Transactions in securities on recognized stock exchange and in units of an equity
oriented fund:
Long term capital gains on sale of listed securities and on units of an equity
oriented fund are exempt from tax when the transactions for sale take place on
recognized stock exchanges and are subject to the Securities Transactions Tax
37
(“STT”). However, such long Term Capital Gains arising to a company shall be
taken into account in computing the book profit and income tax payable u/s 115JB.
Short term capital gains on sale of listed securities and units of an equity oriented
fund are taxable @15% (plus applicable surcharge, Education Cess and Secondary
and Higher Education Cess) when the transactions for sale take place on recognized
stock exchanges and are subject to the STT.
Additionally, STT is payable in respect of purchase of listed securities and units of
an equity oriented fund on recognized stock exchanges, as follows.
Sr. No. Taxable securities transaction Rate (per Payable by
cent)
1 Purchase of an equity share in a 0.125 3 Purchaser
company or a unit of an equity
oriented fund, where
(a) the transaction of such purchase is entered
into in a recognized stock exchange; and
(b) the contract for the purchase of such share or
unit is settled by the actual delivery or transfer
of such share or unit
2 Sale of an equity share in a company or a unit of an 0.125 Seller
equity oriented fund, where -
(a) the transaction of such sale is entered into in
a recognized stock exchange; and
(b) the contract for the sale of such share or unit
is settled by the actual delivery or transfer of
such share or unit
3 Sale of an equity share in a company or a unit of 0.025 Seller
an equity oriented fund, where –
(a) the transaction of such sale is entered into in
a recognized stock exchange; and
(b) the contract for the sale of such share or unit
is settled otherwise than by the actual
delivery or transfer of such share or unit
4 (a) Sale of an option in securities 0.017 Seller
(b) Sale of an option in securities, where option is 0.125 Purchaser
exercised
(c) Sale of a futures in securities 0.017 Seller
5 Sale of a unit of an equity oriented fund to the Mutual 0.25 Seller
Fund
The above-mentioned rates of STT are applicable on the transactions undertaken on or
after June 1, 2006. The investor would be liable to pay STT at the above rates on the
value of the securities purchased on a recognized stock exchange in India. The securities,
in respect of which such tax is leviable, include: -
Shares, bonds, debentures, etc or other marketable securities of a like nature in or
of any incorporated company or other body corporate;
Derivatives;
Units or any other instrument issued by any collective investment scheme to the
investors in such schemes;
Units or any other such instrument issued to the investors under any mutual fund
scheme;
38
Any certificate or instrument(by whatever name called), issued to an investor by
any issuer being a special purpose distinct entity which possesses any debt or
receivable , including mortgage debt, assigned to such entity , and
acknowledging beneficial interest of such investor in such debt or receivable,
including mortgage debt, as the case may be
Security receipts defined under the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002;
Government Securities; and
Other notified instruments.
The value of taxable securities transaction –
(a) In the case of a taxable securities transaction relating to an option in securities,
shall be –
(i) the option premium, in respect of transaction of sale of an option in
securities
(ii) the settlement price, in respect of transaction of sale of an option in
securities, where option is exercised.
(b) in case of a taxable securities transaction relating to a derivative, being “ futures”,
shall be the price at which such futures is traded; and
(c) in the case of any other taxable securities transaction, shall be the price at which
such securities are purchased or sold:
STT is not available as a deduction in computing capital gains. However, from the
assessment year 2009-10, where income from taxable securities transactions referred to
above is treated as business income, the person will be eligible for deduction u/s
36(1)(xv), for the amount of STT paid.
11.3.2 Transactions in other securities or transactions not on recognized stock exchanges
(a) Tax on Long Term Gain
For Indian Companies :
Long-term Capital Gains will be chargeable under Section 112 of the Income-tax
Act, 1961, at the rate of 20 percent (plus applicable surcharge, Education Cess
and Secondary and Higher Education Cess- see note) with indexation or 10
percent without indexation (plus applicable surcharge, Education Cess and
Secondary and Higher Education Cess - see note).
For Resident Individuals and HUFs
Long-term Capital Gains will be chargeable under Section 112 of the Income-tax
Act, 1961, at the rate of 20 percent (plus Education Cess and Secondary and
Higher Education Cess- see note) with indexation or 10 percent without
indexation (plus Education Cess and Secondary and Higher Education Cess - see
note).
Where the taxable income as reduced by long term capital gains is below the
exemption limit, the long term capital gains will be reduced to the extent of the
shortfall and only the balance long term capital gains will be charged at the flat
rate of 20 percent (plus Education Cess and Secondary and Higher Education
Cess see note).
39
For any other Resident:
Long-term Capital Gains will be chargeable under Section 112 of the Income-tax
Act, 1961, at the rate of 20 percent (plus Education Cess and Secondary and
Higher Education Cess- see note) with indexation or 10 percent without
indexation (plus Education Cess and Secondary and Higher Education Cess - see
note).
For Foreign Companies:
Long Term Capital Gains will be subjected to the income tax at the rate of 20%
(plus applicable surcharge, Education Cess and Secondary and Higher Education
Cess, see note). However, no benefit of Cost Inflation Index is available in case
of shares and debentures.
For non residents other than foreign companies:
Long Term Capital Gains will be subjected to the income tax at the rate of 20%
(plus Education Cess and Secondary and Higher Education Cess, see note).
However, no benefit of Cost Inflation Index is available in case of shares and
debentures.
Non Resident Indians (“NRI”s) can opt for taxation of Long Term Capital Gains
u/s 115E at the rate of 10% (plus Education Cess and Secondary and Higher
Education Cess see note) in case of foreign exchange assets. No benefit of Cost
Inflation Index is available in such a case. NRIs may opt for computation of
Long Term Capital Gains as per section 112 if it is more beneficial.
(b) Tax on Short Term Capital Gain:
Short-term capital gains are chargeable to tax as per the relevant rates applicable to
various assessees (discussed below).
11.3.3 Capital loss can be set off against capital gains as follows:
Long-term capital loss of a tax year, which is chargeable to tax, cannot be set off against
short-term capital gains arising in that year. On the other hand, short-term capital loss in a
year can be set off against both short-term and chargeable long-term capital gains of the
same year.
Unabsorbed short term and long-term capital loss of prior years shall be separately
carried forward. However, short-term capital loss shall be eligible for set off against the
chargeable long term capital gains.
11.4 Dividend stripping
Losses arising from the sale/transfer (including redemption) of securities including units
purchased up to 3 months prior to the record date (for entitlement of dividends) and sold within
9 months (in case of units) or 3 months (in case of any other securities) after such date, will be
disallowed to the extent of income distribution (excluding redemptions) on such units claimed
as tax exempt by the unit holder.
40
11.5 Bonus stripping
In case of units purchased within a period of 3 months prior to the record date (for entitlement
of bonus) and sold/ transferred (including redeemed) within 9 months after such date, the loss
arising on transfer of original units shall be ignored for the purpose of computing the income
chargeable to tax. The loss so ignored shall be treated as cost of acquisition of such bonus units.
11.6 The tax rates applicable to resident individuals and Hindu Undivided Families are as
follows:
Slab Tax Rate:
(A) In the case of women residents, below the age of sixty five years
Particulars
2 Rates of income tax
Where the total income does not exceed Nil
Rs.1,90,000
Where the total income exceeds 10% of the amount by which the
Rs.1,90,000 but does not exceed total income exceeds Rs.1,90,000
Rs.5,00,000
Where the total income exceeds Rs.,31,000 plus 20% of the
Rs.5,00,000 but does not exceed amount by which the total income
Rs.8,00,000 exceeds Rs.5,00,000
Where the total income exceeds Rs 91,000 plus 30% of the amount
Rs.8,00,000 by which the total income exceeds
Rs.8,00,000
(B) In the case of resident individuals of the age of sixty five years or more:
Particulars Rates of income tax
Where the total income does not exceed Nil
Rs.2,40,000
Where the total income exceeds 10% of the amount by which the
Rs.2,40000 but does not exceed total income exceeds Rs.2,40,000
Rs.5,00,000
Where the total income exceeds Rs.26,000 plus 20% of the amount
Rs.5,00,000 but does not exceed Rs. by which the total income exceeds
8,00,000 Rs.5,00,000
Where the total income exceeds Rs. Rs.86,000 plus 30% of the amount
8,00,000 by which the total income exceeds
Rs.8,00,000
(C) In the case of other individuals and Hindu Undivided Families or association of persons
or body of individuals, or every artificial juridical person other than those referred to in
(A) and (B) above
Particulars Rates of income tax
41
Where the total income does not exceed Nil
Rs.1,60,000
Where the total income exceeds 10% of the amount by which the
Rs.1,60,000 but does not exceed total income exceeds Rs.1,60,000
Rs.5,00,000
Where the total income exceeds Rs. 34,000 plus 20% of the amount
Rs.5,00,000 by which the total income exceeds
but does not exceed Rs.8,00,000 Rs.5,00,000
Where the total income exceeds Rs.94,000 plus 30% of the amount
Rs.800,000 by which the total income exceeds
Rs.800,000
11.7 Firms:
In case of Firms (comprising of Partnership Firms and Limited Liability
Partnerships) the tax rate applicable would be 30 percent.( plus Education Cess and
Secondary and Higher Education Cess on the amount of tax )
11.8Indian Companies:
In case of Indian Companies having total income of less than Rs. One Crore the tax
rate applicable would be 30 percent (plus Education Cess and Secondary and
Higher Education Cess on the amount of tax).
In case of Indian Companies having total income of more than Rs. One Crore the
tax rate applicable would be 30 percent (plus 7.5% surcharge and Education Cess
and Secondary and Higher Education Cess on the amount of tax and surcharge).
Note:
1. The total tax liability (including surcharge), shall be further increased by the Education cess of 2
percent and Secondary and Higher Education Cess of 1 percent
2. The above provisions are as specified in the Finance Act 2010.
3. However, the client would be best advised to consult his or her tax advisor/consultant for
appropriate counsel on tax treatment of the nature of income indicated herein.
42
43
12. Accounting policies- Disclose the accounting policy followed by the Portfolio Manager while
accounting for the portfolio investments of the clients.
12.1 Basis of Accounting
Books and Records would be separately maintained in the name of the client to
account for the assets and any additions, income, receipts and disbursements in
connection therewith, as provided by the SEBI (Portfolio Management)
Regulations, 1993, as amended from time to time. Accounting under the respective
portfolios will be done in accordance with Generally Accepted Accounting
Principles. As SEBI (Portfolio Management) Regulations, 1993, do not explicitly
lay down detailed accounting policies, such policies which are laid down under
SEBI (Mutual Fund) Regulations would be followed, in so for as accounting and
valuation for equities or equity related instruments are concerned.
12.2 Maintenance of Client Account
12.2.1 In case of investments by the Client in listed securities and in the event that the
Client is a Non-Resident Indian, as defined by SEBI from time to time and further
in instances where the Client opts for the Non-Pool Account, the Portfolio Manager
shall keep the funds of the Client in a separate designated account to be maintained
by it in a scheduled commercial bank and shall also maintain a separate Portfolio
record in the name of the Client in its books for accounting the assets and income of
the Client.
In line with SEBI circular No. IMD/DOF I/PMS/Cir- 4/2009 dated 23 June 2009,
the portfolio manager keeps the funds of all clients in a separate bank account
maintained by the portfolio manager and the following conditions are adhered to:
o There are clear segregation of each client’s fund through proper and clear
maintenance of back office records;
o Portfolio Managers does not use the funds of one client for another client;
o Portfolio Managers also maintains an accounting system containing separate
client-wise data for their funds and provide statement to clients for such
accounts at least on monthly basis; and
o Portfolio Managers reconciles the client-wise funds with the funds in the
aforesaid bank account on daily basis.
12.2.2 The Portfolio Manager also maintains a separate depository account of each client.
12.3 Portfolio Valuation
12.3.1 Investments in Equity or Equity Related instruments and Debt Securities
listed on a recognized stock exchange are valued at the last quoted closing
price on the National Stock Exchange of India Limited (NSE). If on a
particular valuation date, a security is not traded on NSE, the value at
which it is traded on The Stock Exchange, Mumbai (BSE) is used or any
recognized stock exchange. If a particular security is not listed on the
NSE, then it is valued at the last quoted closing price on the BSE on the
valuation date or on a recognized stock exchange as the case may be.
12.3.2 Non-traded and thinly traded equity securities, including those not traded
within thirty days prior to the valuation date are valued at fair value as
determined by HSBC Asset Management (India) Private Limited. Non-
traded and thinly traded Fixed Income Instruments, including those not
44
traded within seven days prior to the valuation date will be valued at cost
plus interest accrual till the beginning of the day plus the difference
between the redemption value and the cost spread uniformly over the
remaining maturity period of the instrument.
12.3.3 Equity securities awaiting listing are valued at fair value as determined in
good faith by HSBC Asset Management (India) Private Limited. Fixed
Income Instruments that are awaiting listing will be valued at cost plus
interest accrual till the beginning of the day plus the difference between the
redemption value and the cost spread uniformly over the remaining
maturity period of the instrument.
12.3.4 Equity share warrants listed on a recognised stock exchange are valued at
the last quoted closing price on NSE. If on a particular date the warrant is
not traded on NSE the value at which it is traded on BSE is used. If no sale
is reported at that time the last quoted closing price of the equity shares
receivable by the Portfolio when the option is exercised less price per share
payable upon exercise of the warrant and the last dividend if any paid by
the issuer of the warrants on the shares of the issuer is used.
12.3.5 Instruments bought on ‘repo’ basis are valued at the resale price after
deduction of applicable interest up to the date of resale.
12.3.6 Investments in Mutual funds will be valued at the repurchase NAV
declared for the relevant schemes on the date of the report or the most
recent NAV will be reckoned.
12.3.7 In the Derivatives segment, the unrealized gains/losses for Futures and
Options will be calculated by marking all the open positions to market.
12.4 Securities Transaction
Investment securities transactions are accounted for on a trade date basis. The cost of the
investments acquired or purchased would include brokerage, stamp charges and any
charges customarily included in the broker’s contract note or levied by any statue except
STT(Securities Transaction Tax). Similarly, in case of Sale Transaction, the above-
mentioned charges will be deducted from the sale price. STT will be treated as an
expense in case of clients treating it as capital Gains. However, in case the gains arising
are treated as Business Income it will be shown as Current Asset to claim deduction
under section 88E. Realised Gains/Losses will be calculated by applying the First in/ First
Out method.
12.5 Income/expenses
All investment income and Expenses will be accounted on accrual basis. Dividend will
be accrued on the Ex-date of the securities and the same will be reflected in the clients’
books on the ex-date. Similarly, bonus shares will be accrued on the ex-date of the
securities and the same will be reflected in the clients’ books on ex-date. In case of Fixed
Income instruments, purchased/sold at Cum-interest rates, the interest component upto
45
the date of purchase /sale will be taken to interest receivable/payable account and net of
interest will be the cost/sale for the purpose of calculating realized gains/losses.
46
13. Investors services
13. Name, address and telephone number of the investor relation officer who
shall attend to the investor queries and complaints.
Mr Kiran Rajput
Vice President - PMS Operations
HSBC Asset Management (India) Private Limited
314 D N Road,
Fort, Mumbai 400 001
Tel : + 91 22 6614 5000
email : hsbcpms@hsbc.co.in
13.1 Grievance redressal and dispute settlement mechanism.
The Portfolio Manager shall attend to and address any client query or concern as soon as
possible to mutual satisfaction.
All disputes, differences, claims and questions whatsoever which shall arise either during
the subsistence of the agreement with a client or afterwards with regard to the terms
thereof or any clause or thing contained therein or otherwise in any way relating to or
arising there from or the interpretation of any provision therein shall be, in the first place
settled by mutual discussions, failing which the same shall be referred to and settled by
arbitration in accordance with and subject to the provisions of the Arbitration and
Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time
being in force. The arbitration shall be held in Mumbai and be conducted in English
language.
The agreement with the client shall be governed by, construed and enforced in
accordance with the laws of India. Any action or suit involving the agreement with a
client or the performance of the agreement by the either party of its obligations will be
conducted exclusively in courts located within the city of Mumbai in the State of
Maharashtra.
For HSBC Asset Management (India) Private Limited
Naina Lal Kidwai Sayed P Mustafa
Ayaz Ebrahim Kishori J Udeshi
Ashok Kumar Jha Vikramaaditya
Date : November 16, 2010
Place : Mumbai
47
FORM C
Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993
(Regulation 14)
HSBC Asset Management (India) Private Limited
314 D N Road, Fort, Mumbai 400 001
Tel : +91 22 6614 5000
Fax : +91 22 4002 3830
Email : hsbcpms@hsbc.co.in
We confirm that:
i) the Disclosure Document forwarded to SEBI is in accordance with the SEBI (Portfolio
Managers) Regulations, 1993 and the guidelines and directives issued by SEBI from time
to time;
ii) the disclosures made in the document are true, fair and adequate to enable the investors to
make a well informed decision regarding entrusting the management of the portfolio to us
/ investment in the Portfolio Management Services;
iii) the Disclosure Document has been duly certified by an independent chartered accountant,
M/s N. M Raiji & Co, Universal Insurance Building, Pherozshah Mehta Road, Mumbai
400 001, Tel No. 2287 0068, bearing registration no. 39434 on November 24, 2010
(enclosed is a copy of the chartered accountants' certificate to the effect that the
disclosures made in the document are true, fair and adequate to enable the investors to
make a well informed decision).
Date : 24 November 2010
Vikramaaditya
Signature of the Principal Officer
Place: Mumbai
Name and address of the Principal Officer:
Name : Mr Vikramaaditya
Address : HSBC Asset Management (India) Private Limited
314 D N Road, Fort, Mumbai 400 001
0
Annexure I
Rupees in '000
Related party transactions
(1) Names of related parties by/on whom control is exercised
Holding Company
Direct Holding Indirect Holding
HSBC Securities and Capital Markets (India) Private Limited HSBC Investment Bank Holdings BV
Others HSBC Holdings PLC
HSBC Mutual Fund * HSBC Finance (Netherlands)
HSBC Holdings BV
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund.
(2) Fellow subsidiaries with whom transactions have taken place during the year
The Hongkong and Shanghai Banking Corporation Limited - India Branches
HSBC Global Asset Management (Hongkong) Limited (Formerly known as HSBC Investments (Hongkong) Limited)
HSBC Software Development (India) Private Limited
HSBC Insurance Brokers India Private Limited
HSBC Operations and Processing Enterprise (India) Private Limited
HSBC Global Asset Management, London (Formerly known as HSBC Group Investment Business Limited, London)
Sinopia Asset Management (Asia Pacific) Limited
The Hongkong and Shanghai Banking Corporation Limited,Hong Kong
HSBC Investment Funds (Luxembourg) S.A
(3) Key management personnel and their relatives with whom transactions have taken place
during the year
Key management personnel
Ms. Naina Lal Kidwai Mr. Ashok Jha
Mr Vikramaaditya Mr S P Mustafa
Mr Ayaz Ebrahim Ms K J Udeshi
(4) Revenue transactions with related parties
with Holding Companies with fellow Subsidiaries with Others* with Key Management
Particulars
Current year Previous year Current year Previous year Current year Previous year Current year Previous year
Income
Investment management fees - - - - 609,346 537,643 - -
Investment advisory fees - - 8,146 9,357 - - - -
Profit / (Loss) on sale of investments
- - - - 1,174 22,332
(net) (non trade)
Dividend - - - - 9,494 30,342
Interest on loans - - - - - - - -
Expenses
Remuneration - - - - - - 17,409 14,305
Commission/Brokerage - - 91,434 183,260 16,777 - - -
Bank and custody charges - - 3,626 295 - -
Business Promotions - 659 - -
Sitting fees - - - - - - 195 180
Compensation - - - - 210 139 - -
Scheme related expenses - - - - 7,781 180,647 - -
Training and Education - - 96 269 - - - -
Professional Fees and Expenses - - 1,525 24,346 - - - -
AMGB and Intra Regional Charges - - 62,362 - - - - -
Rent and Utilities - - 34,571 33,644 - - - -
Support and maintenance service
8,750 5,300 17,676 27,755 - - - -
charges
Note: For details of remuneration paid to directors, please refer to Note 15.6
#REF! #REF!
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund
2003-04 51,893,019 2002-03
(5) Capital transactions with related parties
with Holding Companies with fellow Subsidiaries with Others* with Key Management
Particulars
Current year Previous year Current year Previous year Current year Previous year Current year Previous year
Deposit for premises - - (893) 479 - - - -
Purchase of investments - - - - 690,040 1,394,521 - -
Purchase of fixed assets - - - 1,907 - - - -
Sale of Fixed Assets - - - - - - - -
Sale of investments - - - - 529,721 1,771,555 - -
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund
(6) Balances with related parties
with Holding Companies with fellow Subsidiaries with Others* with Key Management Maximum during
Particulars
31-Mar-10 31-Mar-09 31-Mar-10 31-Mar-09 31-Mar-10 31-Mar-09 31-Mar-10 31-Mar-09 the year ended 2009-10
Assets
Investment management fee
- - - - 82,591 86,976 - - 82,591
receivable
Investment advisory fees receivable - - 18,662 9,357 - - - - 18,662
Loans - - - - - - - - -
Deposit for premises - - 4,210 5,103 - - - - 4,210
Investments - - - - 471,749 303,458 - - 528,381
Other receivables - 2,295 1,716 1,814 7,893
Balances with banks in current
- - 606 4,056 - - 32,084
accounts
Liabilities
Equity share capital held by
90,000 90,000 - - - - - - 90,000
holding company
Support service charges - - 1,655 11,867 - - - - 1,655
AMGB and Intra Regional Charges - - 16,587 - - - - - 16,587
Professional fees - - 210 97 - - - - 210
Commission/Brokerage - - 72,363 10,296 - - - - 72,363
Scheme related expenses - - - - 5,636 33,292 - - 5,636
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund
Transactions carried out with providers of finance in the normal course of business have not been disclosed in the above table in accordance with Accounting Standard 18 - Related Party Transactions prescribed by the
Companies (Accounting Standards) Rules, 2006.
(7) Debts due from bodies corporate under the same management
31 March 2010 31 March 2009
Hongkong and Shanghai Banking Corporation Limited 4,210 7,398
HSBC Investment Funds (Luxembourg) S.A 18,662 9,357
22,872 16,755
