Codmidcap HSBC 2005

HSBC Asset Management
HSBC Mutual Fund

Offer Document
Issue of Units of Rs.10/- per unit for cash at par plus applicable load during the Initial Public Offer and at NAV based prices thereafter.
HSBC Midcap Equity Fund (HMEF)

An open-ended Growth Scheme
Initial Offer Opens on : April 12, 2005 Earliest Closing of Initial Offer : April 13, 2005
Earliest closing may take effect any day between April 13, 2005 & May 03, 2005 if subscriptions aggregating Rs. 700 crores are received in the Scheme (Please refer 'Highlights and Scheme Summary sections inside for further details)
This Offer Document sets forth concisely the information about the Scheme that a prospective investor ought to know before investing. The particulars of the Scheme have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended till date, and filed with Securities and Exchange Board of India (SEBI). The Units being offered for public subscription have not been approved or disapproved by SEBI nor has SEBI certified the accuracy or adequacy of this Offer Document. This Offer Document will remain effective till a 'material change' (other than a change in Fundamental Attributes and within the purview of this Offer Document) occurs and thereafter the changes shall be filed with SEBI and circulated to the Unitholders. Investors may also like to obtain further changes after the date of this Offer Document from the Mutual Fund/its Investor Service Centers or distributors. This Offer Document should be retained for future references. This Offer Document is dated March 31, 2005.
Initial Offer Closes on : May 03, 2005
Scheme Re-opens for continuous sale and repurchase within 30 days from closing of the Initial Offer
(Please refer 'Highlights and Scheme Summary' sections inside for further details)
Sponsor: HSBC Securities and Capital Markets (India) Private Limited Regd. Office: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001 Trustee: Board of Trustees Office: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001 Asset Management Company: HSBC Asset Management (India) Private Limited Corp. & Regd. Office: 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001
E mail id: hsbcmf@hsbc.co.in Visit us at : www.assetmanagement.hsbc.co.in
Offer Document
SPONSOR
HSBC Securities and Capital Markets (India) Private Limited
Registered Office 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001
TRUSTEE
Board of Trustees
Office 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001
ASSET MANAGEMENT COMPANY

HSBC Asset Management (India) Private Limited
Registered & Corporate Office 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001
REGISTRAR AND TRANSFER AGENTS

Computer Age Management Services (P) Ltd. (CAMS)
Office A & B Lakshmi Bhawan, 609 Anna Salai, Chennai - 600 006
CUSTODIAN
JPMorgan Chase Bank
Office Mafatlal Centre, 9th Floor, Nariman Point, Mumbai - 400 021
AUDITORS
Price Waterhouse
Office 252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028
LEGAL ADVISORS
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Office Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013
HSBC Mutual Fund
local knowledge makes a world of difference 1
Offer Document
TABLE OF CONTENTS Page No. Highlights .................................................................................... 3 Definitions ................................................................................... 4 Risk Factors and Special Considerations ................................ 6 Standard Risk Factors ........................................................... 6 Scheme Specific Risk Factors .............................................. 7 Special Considerations .......................................................... 8 Due Diligence Certificate ........................................................... 9 Scheme Summary ..................................................................... 10 SECTION I Constitution of the Mutual Fund ........................................ 12 Sponsor ................................................................................ 12 Board of Trustees (the Trustees) ........................................ 12 Summary of Substantive Provisions of the Trust Deed .... 14 Trusteeship Fees .................................................................. 16 Investment Manager ............................................................ 16 Board of Directors of the AMC ......................................... 16 Powers, Duties and Responsibilities of the AMC ............. 17 Asset Management Fees ..................................................... 18 Key Employees of the AMC and Relevant Experience .... 19 Fund Manager ..................................................................... 21 Custodian ............................................................................. 21 Registrars & Transfer Agents ............................................. 21 Fund Accountant ................................................................. 21 Auditors ............................................................................... 21 Collecting Bankers .............................................................. 21 SECTION II Investment Objectives & Policies ...................................... 22 Change in Investment Pattern ............................................. 23 Listing .................................................................................. 23 Investment Approach and Risk Control ............................. 23 Portfolio Turnover ............................................................... 23 Procedure followed for Investment Decisions ................... 24 Investments by the AMC in the Scheme ........................... 24 Fundamental Attributes ....................................................... 24 Special Considerations ........................................................ 24 Trading in Derivatives ........................................................ 24 Exposure to Derivatives ...................................................... 24 Valuation of Derivative Products ........................................ 26 Position of Debt Markets in India ...................................... 26 Investment Restrictions for the Scheme ............................. 27 Valuation of Assets and Net Asset Value ........................... 28 Accounting Policies and Standards .................................... 32 Guidelines for Identification and Provisioning for Non-Performing Assets ........................... 33 SECTION III Units & the Initial Offer ..................................................... 35 Extension of the Initial Offer Period .................................. 35 Minimum Subscription Amount ......................................... 35 On-going Subscriptions ....................................................... 35 Minimum Amount for Application .................................... 36 Allotment and Refund ......................................................... 36 Page No. Options Offered Under the Scheme ................................... 36 Who Can Apply? ................................................................ 36 How to Apply? .................................................................... 37 Sales, Repurchase and Switches of Units on On-going basis ............................................................... 37 Switching Options ............................................................... 39 Account Statements ............................................................. 39 Product Add ons .................................................................. 39 Pledge .................................................................................. 40 Joint Applicants ................................................................... 40 Nomination Facility ............................................................ 41 Transfer & Transmission of Units ...................................... 41 Master Account/Folio .......................................................... 41 Fractional Units ................................................................... 41 Right to Limit Redemptions ............................................... 41 Suspension of Sale / Repurchase / Switch of Units .......... 42 NRIs / FIIs .......................................................................... 42 Redemption by NRIs / FIIs ................................................ 42 SECTION IV Load Structure & Recurring Expenses ............................... 43 Initial Issue Expenses .......................................................... 44 Recurring Expenses ............................................................. 44 Condensed Financial Information ....................................... 45 SECTION V Unitholders' Rights & Services .......................................... 51 Ease of Transactions ........................................................... 51 Problem Resolution ............................................................. 51 Information about the Scheme ............................................ 51 Account Statements / Transaction Confirmation ............... 51 Receiving Account Statement / Correspondence by e-mail ... 51 NAV Information ................................................................ 52 Personal Identification Number (PIN) ................................ 52 Rights of Unitholders of the Scheme ................................. 52 Duration of the Scheme / Winding Up .............................. 53 Procedure and Manner of Winding Up .............................. 53 Taxation on investing in Mutual Funds ............................. 53 SECTION VI Other Matters ...................................................................... 56 Unitholder Grievances Redressal Mechanism .................... 56 Associate Transactions ........................................................ 56 Dealing with Associate Companies .................................... 57 Dividends and Distributions ............................................... 62 Penalties and Pending Litigations ...................................... 62 Borrowing by the Mutual Fund .......................................... 63 Securities Lending by the Mutual Fund ............................. 63 Underwriting ....................................................................... 63 Inter-Scheme Transfers ....................................................... 63 Policy on Offshore Investments by the Scheme ................ 64 General Information ............................................................ 64 Documents available for Inspection ................................... 64
2 local knowledge makes a world of difference
HSBC Mutual Fund
Offer Document
HIGHLIGHTS
The HSBC Group

The Sponsor of HSBC Mutual Fund is HSBC Securities and Capital Markets (India) Private Limited, a member of the HSBC Group, one of the largest banking and financial services organisations in the world, with a market capitalisation of US$ 190 billion at December 31, 2004. At the end of 2004, HSBC had total assets of US$ 1277 billion and shareholders' funds of US$ 86.6 billion. 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 over 9800 offices in 77 countries and territories, HSBC provides a comprehensive range of financial services to more than 110 million customers:personal, commercial, corporate, institutional and investment and private banking clients. HSBC Asset Management is the core global investment management business of the HSBC Group. With 380 dedicated investment professionals across Europe, Africa, Asia Pacific and the Americas, HSBC Asset Management has strong global investment capabilities that are delivered to clients locally. For institutions, corporates and financial intermediaries, a comprehensive range of investment management solutions are offered. For high net worth individuals, HSBC Asset Management works with the relationship managers of the individuals to provide bespoke portfolio management services. HSBC Asset Management has funds under management of US$ 204 billion which are part of the total of US$ 476 billion managed by the HSBC Group as a whole (as at December 31, 2004). HSBC Asset Management (India) Private Limited, the Asset Management Company (AMC) of HSBC Mutual Fund is a subsidiary of HSBC Securities and Capital Markets (India) Private Limited. HSBC Midcap Equity Fund : The Initial Public Offer is for an open-ended Equity Scheme seeking to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being mid cap stocks. The Initial Offer is for issue of units at Face Value of Rs. 10 plus applicable load. On an ongoing basis, units of the Scheme will be available for subscriptions and redemptions at Net Asset Value (NAV) based prices. Initial Offer Period The Initial Offer Period for the Scheme will commence from April 12, 2005 and close on May 3, 2005. The earliest closing date will be April 13, 2005. It is the intent of the Trustees / AMC to collect subscriptions in the Scheme of Rs. 700 crores with a view to protect the interest of the unit holders from the liquidity risk inherent to a Midcap Fund. Towards this intent, the Trustees / AMC reserve the right to announce closure of the Initial Public Offer on any date commencing from the Earliest Closing Date and extending up to the Final Closing Date of the Offer. The announcement will be made by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to closing the Initial Public Offer. However, as it is not possible to ensure that the amount of subscriptions received in the Initial Public Offer would be exactly Rs. 700 crores, it is possible that the AMC collects subscriptions over Rs. 700 crores. Subject to the applications being in accordance with the terms of this Offer, full and firm allotment will be made to all applicants. The excess amount collected in the IPO would be retained in the Fund but further subscriptions into the Fund on an on-going basis would be temporarily suspended until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason. All decisions of the Trustees /
AMC will take effect prospectively and will be communicated by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations. Ongoing Subscriptions The Trustees / AMC reserve the right to temporarily suspend subscriptions, switches into the Scheme, if the assets under management of the Scheme exceeds Rs. 700 crores. However, as it may not be possible to ensure that the assets under management does not exceed Rs. 700 crores at the point of time of subscription, any excess amounts collected in the Scheme would be retained until the suspension of subscriptions, switches into the Scheme takes effect. The suspension will be for a minimum period of 1 month or until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason, whichever is later. The suspension will not however affect Dividend reinvestment options, Systematic Investment Plans, Systematic Transfer Plans or other standing instructions which have been entered into by the investors at any time prior to the date from which the suspension takes effect. The Trustees / AMC also reserve the right to review the amount, frequency and methodology by which the suspension of further sale of units will be enforced. All decisions of the Trustees / AMC will take effect prospectively and be communicated to the investors from time to time by arranging to display a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations. Transparency The AMC will calculate and disclose the first NAVs of the Scheme not later than 30 days from the closure of the Initial Offer Period. Subsequently, the NAVs will be calculated and disclosed at the close of every Business Day. In addition, the AMC will disclose details of the portfolio of the Scheme every 6 months. Liquidity Being an open ended Scheme, Units may be purchased or redeemed on every Business Day at NAV based prices, subject to provisions of entry / exit load, if any. The Fund will, under normal circumstances, endeavor to despatch redemption proceeds within 2 Business Days. Load Structure Investors subscribing to the Units in the Initial Public Offer will be charged an entry load of 2.25% on investments below Rs. 5 crores. No entry load will be charged on investments of Rs. 5 crores and above. No exit load shall be charged. The load structure is subject to change from time to time and such changes shall be implemented prospectively. Load in case of investments by Fund-of-Funds (FOF) scheme: No load (entry/exit) will be charged in case of investments made by Fund-of- Funds Schemes launched by mutual funds in HSBC Midcap Equity Fund. Taxation The following are certain taxation provisions updated as per the Finance Act, 2004 and are subject to changes from time to time. l Dividend distributed by the Fund shall be tax-free in the hands of the unitholders. l Investments in the Scheme will be exempt from Wealth Tax. Investors in the Scheme are not being offered any guaranteed / assured returns.
HSBC Mutual Fund
Offer Document
DEFINITIONS
In this Offer Document, the following words and expressions shall have the meaning specified herein, unless the context otherwise requires: ADRs and GDRs ADRs are negotiable certificates issued to represent a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars. GDRs are negotiable certificates held in the bank of one country representing a specific number of shares of a stock traded on an exchange of another country. Asset Management Company or AMC or Investment Manager Applicable NAV HSBC Asset Management (India) Private Limited, incorporated under the provisions of the Companies Act, 1956, and approved by SEBI to act as Investment Manager for the Schemes of HSBC Mutual Fund. The Net Asset Value applicable for purchases / redemptions / switches etc., based on the Business Day and relevant cut-off times on which the application is accepted at an Investor Service Centre. A day other than (1) Saturday and Sunday or (2) a day on which The Stock Exchange, Mumbai or National Stock Exchange of India Limited or Reserve Bank of India or banks in Mumbai are closed or (3) a day on which there is no RBI clearing / settlement of securities or (4) a day on which the sale and / or redemption and / or switches of Units is suspended by the Trustees / AMC or (5) a book closure period as may be announced by the Trustees / AMC. The AMC reserves the right to change the definition of Business Day(s). Provided that the days when the banks in any location where the AMC's Investor Service Centres are located, are closed due to a local holiday, such days will be treated as non Business Days at such centres for the purposes of accepting fresh subscriptions. However, if the Investor Service Centre in such locations is open on such local holidays, then redemption and switch requests will be accepted at those centres, provided it is a Business Day for the Scheme on an overall basis. Notwithstanding the above, the AMC may declare any day as a Business Day / Non Business Day. Benchmark CNX Midcap 200 Index The HSBC Midcap Equity Fund which is benchmarked to CNX Midcap 200 Index is not sponsored, endorsed, sold or promoted by India Index Services & Products Limited (IISL). IISL is not responsible for any errors or omissions or the results obtained from the use of such index and in no event shall IISL have any liability to any party for any damages of whatsoever nature (including lost profits) resulted to such party due to purchase or sale or otherwise of such product benchmarked to such index. Call money / Money at Call Custodian Refers to the money lent by Mutual Funds in the Interbank Call Money Market, subject to necessary regulatory approvals. JPMorgan Chase Bank, Mumbai, registered under the SEBI (Custodian of Securities) Regulations, 1996, currently acting as Custodian to the Scheme or any other custodian approved by the Trustees. Such centres as may be designated by the AMC for collection of subscriptions and / or redemptions and / or switches in the Scheme. Depository as defined in the Depositories Act, 1996. A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., "derived from") the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates) etc. is known as a derivative. Derivatives involve the trading of rights or obligations based on the underlying product, but do not directly transfer property. Such persons / firms / companies / corporates as may be appointed by the AMC to distribute / sell / market the Schemes of the Fund. Income distributed by Scheme on the Units, where applicable. Convertible Debentures, Equity Warrants, Convertible Preference Shares, FCCBs, Equity Mutual Funds etc. are considered equity related securities.
Business Day
Designated Collection Centre Depository Derivatives
Distributor Dividend Equity related securities
HSBC Mutual Fund
Offer Document
FII Floating Rate Debt Instruments
Foreign Institutional Investors, registered with SEBI under Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 as amended from time to time. Floating Rate Debt Instruments are instruments where interest rates are reset periodically and are generally linked to a benchmark rate. Say an instrument on which the interest provided by the issuer is some basis points above daily MIBOR. HSBC Mutual Fund, a trust set up under the provisions of the Indian Trusts Act, 1882 and registered with SEBI under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 vide Registration No. MF/046/02/5 dated May 27, 2002. HSBC Midcap Equity Fund HSBC Securities and Capital Markets (India) Private Limited, a company incorporated under the provisions of the Companies Act, 1956. Offer for purchase of Units of HSBC Midcap Equity Fund during the Initial Offer Period.
Fund or Mutual Fund
HMEF HSCI or Sponsor or Settlor Initial Public Offer or Initial Issue or IPO Initial Offer Period Investment Management Agreement
The Agreement dated February 7, 2002 entered into between the Trustees of HSBC Mutual Fund and HSBC Asset Management (India) Private Limited as amended from time to time. Such offices as are designated as Investor Service Centres by the AMC from time to time. In case of repurchase / switch out of a Unit, the sum of money deducted from the applicable NAV on the repurchase / switch out (Exit Load) and in the case of sale / switch in of a Unit, a sum of money to be paid by the prospective investor on the sale / switch in of a Unit in addition to the applicable NAV (Entry Load). Mid Cap companies are generally those companies that are either included in the CNX Midcap 200 Index or ones that fall within market capitalization requirement of CNX Midcap 200 Index. Net Asset Value of the Units of the Scheme, Plan(s) (including Option(s) if any, therein) calculated in the manner provided in this Offer Document or as may be prescribed by the Regulations from time to time. This document issued by HSBC Mutual Fund, Offering units of HSBC Midcap Equity Fund, a Scheme of HSBC Mutual Fund, for subscription. Reserve Bank of India, established under the Reserve Bank of India Act, 1934, as amended from time to time. Computer Age Management Services (P) Ltd. (CAMS), registered under the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993, currently acting as Registrar to the Scheme or any other registrar appointed by the AMC from time to time. Sale / purchase of Government Securities as may be allowed by RBI from time to time with simultaneous agreement to repurchase / resell them at a later date. Repurchase / redemption of Units of the Scheme. Sale / subscription of Units of the Scheme. HSBC Midcap Equity Fund (including, as the context permits, the Options / Sub-options). Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992, as amended from time to time. Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time, including by way of circulars or notifications issued by SEBI, the Government of India or RBI. Sale of a Unit in one Scheme / Plan / Option against purchase of a Unit in another Scheme / Plan / Option.
Investor Service Centres or ISC Load
Midcap Stocks
NAV
Offer Document RBI Registrar
Repo / Reverse repo Repurchase / Redemption Sale / Subscription Scheme SEBI SEBI Regulations or Regulations
Switch
HSBC Mutual Fund
Offer Document
Trustees
The Board of Trustees of HSBC Mutual Fund and approved by SEBI to act as the Trustees of the Schemes of the Fund or any other Trustee as may be appointed from time to time by the Sponsor and as approved by SEBI. The Trust Deed dated 7 February, 2002 made by and between the Sponsor and the Trustees establishing HSBC Mutual Fund, as amended from time to time. Amounts settled / contributed by the Sponsor towards the corpus of the HSBC Mutual Fund and additions / accretions thereto. The interest of an investor which consists of one undivided share in the net assets of the Scheme. A holder of Units in the Scheme of HSBC Mutual Fund offered under this Offer Document. significant in the event of an inordinately large number of redemption requests or of a restructuring of the Scheme's portfolio. In view of this, the Trustees have the right, in their sole discretion to limit redemptions (including suspending redemption) under certain circumstances, as described under the section titled "Right to Limit Redemptions".
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Trust Deed Trust Fund Unit Unitholder or Investor
RISK FACTORS AND SPECIAL CONSIDERATIONS

Standard Risk Factors
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Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital markets. Past performance of the Sponsor, Mutual Fund, AMC or any associates of the Sponsor / AMC does not indicate the future performance of the Scheme of the Mutual Fund. HSBC Midcap Equity Fund (HMEF) is the name of the Scheme and does not in any manner indicate either the quality of the Scheme or its future prospects and returns. The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Scheme beyond the initial contribution of Rs. 1,00,000 (Rupees One Lakh only) made by it towards setting up the Mutual Fund. The associates of the sponsor are not responsible or liable for any loss or shortfall resulting from the operation of the Scheme. Mutual funds being vehicles of securities investments are subject to market and other risks and there can be no guarantee against loss resulting from investing in the Scheme. The various factors which impact the value of the Scheme' investments include, but are not limited to, fluctuations in the 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. Investment decisions made by the AMC may not always be profitable. From time to time and subject to the Regulations, the Sponsor, their affiliates, associates, subsidiaries, the Mutual Fund and the AMC may invest directly or indirectly in the Scheme. These entities may acquire a substantial portion of the Scheme's Units and collectively constitute a major investor in the Scheme. Accordingly, redemption of Units held by such entities may have an adverse impact on the Scheme because the timing of such redemption may impact the ability of other Unitholders to redeem their Units. As the liquidity of the Scheme's investments could, at times, be restricted by trading volumes and settlement periods, the time taken by the Fund for redemption of Units may be
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Redemptions due to change in the fundamental attributes of the Scheme or due to any other reasons may entail tax consequences. The Trustees, the Mutual Fund, the AMC, their directors or their employees shall not be liable for any tax consequences that may arise. The tax benefits described in this Offer 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 AMC 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 Scheme will endure indefinitely. In view of the individual nature of tax consequences, each investor is advised to consult his/ her own professional tax advisor. Neither this Offer Document nor the Units have been registered in any jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this Offer Document are required to inform themselves about, and to observe, any such restrictions. Prospective investors should review / study this Offer 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, switch or redemption or conversion into money) of Units and to the treatment of income (if any), capitalisation, capital gains, any distribution, and other tax consequences relevant to their subscription, acquisition, holding, capitalisation, disposal (sale, transfer, switch or conversion into money) of Units 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 Units are subject, and also to determine possible legal, tax, financial or other consequences of subscribing / gifting, purchasing or holding Units before making an application for Units.
HSBC Mutual Fund
Offer Document
HSBC Mutual Fund / the AMC have not authorised any person to give any information or make any representations, either oral or written, not stated in this Offer Document in connection with issue of Units under the Scheme. Prospective investors are advised not to rely upon any information or representations not incorporated in this Offer Document as the same have not been authorised by the Fund or the AMC. Any subscription, purchase or sale made by any person on the basis of statements or representations which are not contained in this Offer Document or which are inconsistent with the information contained herein shall be solely at the risk of the investor. To the best of the knowledge and belief of the Trustees and the AMC, information contained in this Offer Document is in accordance with the SEBI regulations and the facts stated herein are correct and this Offer Document does not omit anything likely to have an impact on the importance of such information.
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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 be 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. Secondly in the case of fixed rate instruments that have been swapped for floating rates, any adverse movement in the fixed rate yields vis--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. Liquidity or Marketability Risk: This refers to the ease with which a security can be sold at or near to its valuation yieldto-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 characteristic of the Indian fixed income market. 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). Because of this risk, corporate debentures are sold at a yield above those offered on Government Securities, which are sovereign obligations. Normally, the value 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. Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received from the securities in the Scheme 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. Benchmark Risk: The floating rate segment of the domestic debt market is not very developed. Currently, majority of the issuance of floating rate papers is linked to NSE MIBOR. As the floating rate segment develops further, more benchmark rates for floating papers may be available in future. The fewer number of benchmark rates could result in limited diversification of the benchmark risk. Different types of securities in which the scheme would invest as given in the Offer Document carry different levels and types of risk. Accordingly the scheme's risk may increase or decrease depending upon its investment pattern. E.g. corporate bonds carry a higher amount of risk than Government Securities. Further even among corporate bonds, bonds which are AAA rated are comparatively less risky than bonds which are AA rated. Securitised debt: Securitised debt papers carry credit risk of the Obligors and are dependent on the servicing of the PTC / Contributions etc. However these are offset suitably by appropriate pool selection as well as credit enhancements specified by Rating Agencies. In cases where the underlying facilities are linked to benchmark rates, the securitized debt papers may be adversely impacted by adverse movements in benchmark rates. However this risk is mitigated to an extent
The Scheme and individual Plan(s), if any under the Scheme shall have a minimum of 20 investors and no single investor shall account for more than 25% of the corpus of the Scheme/ Plan(s). However if such a situation arises during the IPO of the Scheme, in accordance with the SEBI Regulations, the Fund will endeavour to ensure that within a three months time period or the end of the succeeding calendar quarter from the close of the Initial Public Offering (IPO) of the Scheme, whichever is earlier, the Scheme complies with these two conditions failing which the provisions of Regulation 39 (2) (c) of SEBI (Mutual Funds) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up and the units would be redeemed at applicable NAV. The two conditions mentioned above shall also be complied within each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. The Fund shall adhere to the requirements prescribed by SEBI from time to time in this regard.
Scheme Specific Risk Factors

Equity or Equity related Securities: l Subject to the stated investment objective, the Scheme proposes to invest in equity and equity related securities. Equity instruments by nature are volatile and prone to price fluctuations on a daily basis due to both macro and micro factors. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of these investments. Different segments of financial markets have different settlement periods and such periods may be extended significantly by unforeseen circumstances. The inability of the Scheme to make intended securities' purchases due to settlement problems could cause the Scheme to miss certain investment opportunities. In the view of the Fund Manager, investing in Mid and Small Cap stocks are riskier than investing in Large Cap stocks.
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The Scheme may also use various derivative and hedging products from time to time, as would be available and permitted by SEBI, in an attempt to protect the value of the portfolio and enhance Unitholders' interest.
Debt Instruments : Subject to the stated investment objective, the Scheme proposes to invest in debt and related instruments.
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Price-Risk or Interest Rate Risk: As with all debt securities, changes in interest rates may affect the NAV of the Scheme as the prices of securities increase as interest rates decline and decrease as interest rates rise. Prices of long-term securities
HSBC Mutual Fund
Offer Document
by appropriate credit enhancement specified by rating agencies. Securitised debt papers also carry the risks of prepayment by the obligors. In case of prepayments of securities debt papers, it may result in reduced actual duration as compared to the expected duration of the paper at the time of purchase, which may adversely impact the portfolio yield. These papers also carry risk associated with the collection agent who is responsible for collection of receivables and depositing them. The Investment teams evaluates the risks associated with such investments before making an investment decision. The underlying assets in the case of investment in securitized debt could be mortgages or other assets like credit card receivables, automobile / vehicle / personal / commercial / corporate loans and any other receivables / loans / debt. The risks associated with the underlying assets can be described as under : Credit card receivables are unsecured. Automobile / vehicle loan receivables are usually secured by the underlying automobile / vehicle and sometimes by a guarantor. Mortgages are secured by the underlying property. Personal loans are usually unsecured. Corporate loans could be unsecured or secured by a charge on fixed assets / receivables of the company or a letter of comfort from the parent company or a guarantee from a bank / financial institution. As a rule of thumb, underlying assets which are secured by a physical asset / guarantor are perceived to be less risky than those which are unsecured. By virtue of this, the risk and therefore the yield in descending order of magnitude would be credit card receivables, personal loans, vehicle /automobile loans, mortgages and corporate loans assuming the same rating.
currencies relative to the Indian Rupee. The repatriation of capital to India may also be hampered by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.
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Derivatives: The Fund may use derivative instruments like stock index futures, interest rate swaps, forward rate agreements or other derivative instruments for the purpose of hedging and portfolio balancing, as permitted under the Regulations and guidelines. As and when the Schemes trade in the derivatives market there are risk factors and issues concerning the use of derivatives that investors should understand. Derivative products are specialised instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movements correctly. There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the "counter party") to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have a large impact on their value. Also, the market for derivative instruments is nascent in India.
Special Considerations
ADRs / GDRs : It is the AMC's belief that investment in ADRs / GDRs offers new investment and portfolio diversification opportunities into multi-market and multi-currency products. However, such investments also entail additional risks. Such investment opportunities may be pursued by the AMC provided they are considered appropriate in terms of the overall investment objectives of the Scheme. Since the Scheme would invest only partially in ADRs / GDRs, there may not be readily available and widely accepted benchmarks to measure performance of the Scheme. To manage risks associated with foreign currency and interest rate exposure, the Fund may use derivatives for efficient portfolio management including hedging and in accordance with conditions as may be stipulated by SEBI / RBI from time to time. Offshore investments will be made subject to any / all approvals, conditions thereof as may be stipulated by SEBI/RBI and provided such investments do not result in expenses to the Fund in excess of the ceiling on expenses prescribed by and consistent with costs and expenses attendant to international investing. The Fund may, where necessary, appoint other intermediaries of repute as advisors, custodian/sub-custodians etc. for managing and administering such investments. The appointment of such intermediaries shall be in accordance with the applicable requirements of SEBI and within the permissible ceiling of expenses. The fees and expenses would illustratively include, besides the investment management fees, custody fees and costs, fees of appointed advisors and sub-managers, transaction costs and overseas regulatory costs. To the extent that the assets of the Scheme will be invested in ADRs/ GDRs denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes in the value of certain foreign
Stock Lending: The risks in lending portfolio securities, as with other extensions of credit, consist of the failure of another party, in this case the approved intermediary, to comply with the terms of agreement entered into between the lender of securities i.e. the Scheme and the approved intermediary. Such failure to comply can result in the possible loss of rights in the collateral put up by the borrower of the securities, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of any corporate benefits accruing to the lender from the securities deposited with the approved intermediary. The Mutual Fund may not be able to sell such lent securities and this can lead to temporary illiquidity.
Interpretation
For all purposes of this Offer Document, except as otherwise expressly provided or unless the context otherwise requires: l The terms defined in this Offer Document include the plural as well as the singular. l Pronouns having a masculine or feminine gender shall be deemed to include the other. l All references to "US$" refer to United States Dollars and "Rs." refer to Indian Rupees. A "crore" means "ten million" and a "lakh" means a "hundred thousand". Note (Abbreviations used) : HEF - HSBC Equity Fund, HIOF HSBC India Opportunities Fund, HCF - HSBC Cash Fund, HIF-ST - HSBC Income Fund - Short Term Plan, HIF-IP - HSBC Income Fund Investment Plan, HIIF-ST- HSBC Institutional Income Fund Short Term Plan, HIIF-IP - HSBC Institutional Income Fund Investment Plan, HGF-LT - HSBC Gilt Fund - Long Term Plan, HGF-ST - HSBC Gilt Fund - Short Term Plan, HMIP-R - HSBC MIP Regular Plan, HMIP-S - HSBC MIP Savings Plan, HFRF-LT HSBC Floating Rate Fund - Long Term Plan, HFRF-ST - HSBC Floating Rate Fund - Short Term Plan.
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Offer Document
DUE DILIGENCE CERTIFICATE

It is confirmed that: i) ii) The draft Offer Document forwarded to SEBI is in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time. All legal requirements connected with the launching of the Scheme as also the guidelines, instructions, etc. issued by the Government of India and any other competent authority in this behalf, have been duly complied with.
iii) The disclosures made in the Offer Document are true, fair and adequate to enable the investors to make a well-informed decision regarding investment in the proposed Scheme. iv) The intermediaries named in the Offer Document, are registered with SEBI and till date such registration is valid.
For HSBC Asset Management (India) Private Limited (Investment Manager to HSBC Mutual Fund) Sd/Kashmira Mathew Head of Compliance & Company Secretary Place : Mumbai Date : January 18, 2005
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SCHEME SUMMARY
Name of the Scheme Investment Objective
HSBC Midcap Equity Fund

The Fund is an open ended Equity Scheme seeking to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However, it could move a portion of its assets towards fixed income securities if the fund manager becomes cautious or negative on the Indian equity markets. Dividend (Payout / Reinvestment) and Growth Declaration of dividend and its frequency will inter alia depend upon the distributable surplus. Dividend may be declared from time to time at the discretion of the Trustees. Rs. 5,000/Re. 1/The Initial Offer Period for the Scheme will commence from April 12, 2005 and close on May 3, 2005. The earliest closing date will be April 13, 2005. The initial offer price of Units of the Scheme will be Rs. 10/- per unit, for cash at face value plus applicable load. The Trustees reserve the right to extend the closing date of the Initial Offer Period, subject to the condition that the subscription to the Initial Offer shall not be kept open for more than 30 days. It is the intent of the Trustees / AMC to collect subscriptions in the Scheme of Rs. 700 crores with a view to protect the interest of the unit holders from the liquidity risk inherent to a Midcap Fund. Towards this intent, the Trustees / AMC reserve the right to announce closure of the Initial Public Offer on any date commencing from the Earliest Closing Date and extending up to the Final Closing Date of the Offer. The announcement will be made by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to closing the Initial Public Offer. However, as it is not possible to ensure that the amount of subscriptions received in the Initial Public Offer would be exactly Rs. 700 crores, it is possible that the AMC collects subscriptions over Rs. 700 crores. Subject to the applications being in accordance with the terms of this Offer, full and firm allotment will be made to all applicants. The excess amount collected in the IPO would be retained in the Fund but further subscriptions into the Fund on an on-going basis would be temporarily suspended until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason. All decisions of the Trustees / AMC will take effect prospectively and will be communicated by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations.
Plan(s) Option(s) / Sub-option(s) Dividend Minimum Application Amount Minimum additional investment Initial Offer
On-going Subscriptions
The Units of the Scheme shall be available for subscription at Applicable NAV based prices, subject to prevalent load provisions, if any on every business day not later than 30 days after the close of the Initial Offer Period. The Trustees / AMC reserve the right to temporarily suspend subscriptions, switches into the Scheme, if the assets under management of the Scheme exceeds Rs. 700 crores. However, as it may not be possible to ensure that the assets under management does not exceed Rs. 700 crores at the point of time of subscription, any excess amounts collected in the Scheme would be retained until the suspension of subscriptions, switches into the Scheme takes effect. The suspension will be for a minimum period of 1 month or until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason, whichever is later. The suspension will not however affect Dividend reinvestment options, Systematic Investment Plans, Systematic Transfer Plans or other standing instructions which have been entered into by the investors at any time prior to the date from which the suspension takes effect. The Trustees / AMC also reserve the right to review the amount, frequency and methodology by which the suspension of further sale of units will be enforced. All decisions of the Trustees / AMC will take effect prospectively and be communicated to the investors from time to time by arranging to display a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations.
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Offer Document
The AMC will calculate and disclose the first NAVs not later than 30 days from the closure of the Initial Offer Period. On an ongoing basis, NAVs will be calculated and published for every Business Day. NAV of the Scheme / Option(s) shall be made available at all Investor Service Centres of the AMC. The AMC shall have the NAV published in two daily newspapers and updated on AMC's website (www.assetmanagement.hsbc.co.in). As presently required by the SEBI Regulations, a complete statement of the Scheme portfolio would be published by the Mutual Fund as an advertisement in one English daily circulating in the whole of India and in a newspaper published in the language of the region where the head office of the mutual fund is situated, within 1 month from the close of each half year (i.e. 31 March and 30 September ) or mailed to the Unitholders. The AMC and the Trustees reserve the right to introduce such other
plans as they deem necessary from time to time, in accordance with the SEBI Regulations. The AMC and the Trustees reserve the right to increase / decrease the Initial Offer Period. The AMC shall update the NAVs on the website of Association of Mutual Funds in India - AMFI (www.amfiindia.com) by 8.00 p.m. on every Business Day. In case of any delay, the reasons for such delay would be explained to AMFI and SEBI by the next day. If the NAVs are not available before commencement of business hours on the following day due to any reason, the Fund shall issue a press release providing reasons and explaining when the Fund would be able to publish the NAVs. NAV will be determined on every Business Day, except under special circumstances specified in this Offer Document.
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SECTION I
CONSTITUTION OF THE MUTUAL FUND
HSBC Mutual Fund ("the Mutual Fund" or "the Fund") has been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated February 7, 2002. The office of the Sub-Registrar of Assurances at Mumbai has registered the Trust Deed establishing the Fund under the Registration Act, 1908. The Fund was registered with SEBI vide registration number MF/046/02/5 dated May 27, 2002. The office of the Mutual Fund is at 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001. The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities / any other property for the purpose of providing facilities for participation by persons as beneficiaries in such properties / investments and in the profits / income arising therefrom. Investment Banking Advisory: HSCI provides public and private sector corporates and government clients with strategic and financial advice in the areas of mergers and acquisitions, primary and secondary market funding, privatisations, structured financial solutions and project export finance. HSCI has contributed an amount of Rs. 100,000 (Rupees One Lakh Only) to the corpus of the Fund. HSCI is not responsible nor liable for any loss or shortfall resulting from the operation of the Scheme beyond this contribution. HSCI holds 75% of the paid-up equity share capital of the AMC. The balance is held by resident Indian individuals. Given below is a brief summary of HSCI's financials: Year ended December 31 (Rs. '000) Description Total Income Profit Before Tax Profit After Tax Free Reserves / (Accumulated Losses) Net Worth Earnings per Share (Rs.) Book Value per Share (Rs.) / (Net Worth / No. of Shares) Dividend % Paid-Up Capital (Equity) (Preference) Share Capital on amalgamation pending allotment 2004* 698,271 171,523 100,799 47,217 1,078,289 7.72 138.05 2002 519,689 126,675 50,265 (97,783) 940,525 3.55 120.41 2001 468,469 56,112 33,412 (142,254) 878,237 3.24 85.18
Sponsor
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 over 9800 offices in 77 countries and territories, HSBC provides a comprehensive range of financial services to more than 110 million customers: personal, commercial, corporate, institutional and investment and private banking clients. HSCI offers integrated investment banking services, Equities and Investment Banking Advisory. HSCI is a member of The Stock Exchange, Mumbai and National Stock Exchange and is also a category I merchant banker 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.
781,072 250,000
781,072 250,000
781,072 250,000
* 15 months period from January 1, 2003 to March 31, 2004
Board of Trustees (The Trustees)

The Sponsor has appointed a Board of Individual Trustees (the Trustees) for managing the HSBC Mutual Fund. The Board presently comprises the following: N. P. Gidwani 92B, Embassy Apartments, 46 Napean Sea Road, Mumbai - 400 036 Chairman of the Board of Trustees Chartered Accountant Independent financial / management consultant Director Rampart Finance Private Limited AFL Private Limited Tolani Shipping Company Limited Technova Imaging Systems Private Limited Technova Graphics Private Limited Marsh (India) Private Limited Lastra Niraj Private Limited ADRC Limited ADRC (Cayman) Limited, British West Indies
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Blair Chilton Pickerell La Hacienda, Lower House 1, 29 Mt. Kellett Road, The Peak, Hong Kong Business Executive Chief Executive, Asia-Pacific, HSBC Asset Management (Hong Kong) Limited
Director HSBC Asset Management (Singapore) Limited HSBC Life (International) Limited HSBC Asset Management (Taiwan) Limited HSBC Asset Management (Bahamas) Limited HSBC Asset Management (Hong Kong) Limited HSBC Asset Management Securities (Hong Kong) Limited HSBC Investment Funds (Hong Kong) Limited SINOPIA Greater China Limited HSBC Asset Management Limited The Taiwan Fund, Inc. Director Asea Brown Boveri Limited HDFC Limited Repro India Limited Cummins India Limited Gujarat Ambuja Cements Limited KPIT Cummins Infosystems Limited Voltas Limited The Jammu & Kashmir Bank Limited Mahindra & Mahindra Financial Services Limited Skanska Cementation India Limited Sowil Limited Unichem Laboratories Limited Securities Trading Corporation of India Limited Tata Infotech Limited Director Nil
Nasser Munjee Champagne House, 69, Worli Seaface, Mumbai - 400 018 Economist/ Consultant Senior Advisor - Infrastructure, KPMG
Manu Tandon 16, Solitaire, 4 Samadhi Road, Off Pune - Nagar Road, Pune - 411 006 Managing Director Beck India Limited Mehli Mistri 302, Belmont, 3rd Floor 37-D, Napean Sea Road, Mumbai - 400 036 Executive Ex-MD Saudi American Bank (Citibank affiliate), Ex-CEO ANZ Grindlays Bank Dilip J. Thakkar 12-B Accropolis, Little Gibbs Road, Malabar Hill, Mumbai - 400 006 Chartered Accountant Partner - Jayantilal Thakkar & Co., Partner - Jayantilal Thakkar Associates
Director Tracmail (Bermuda) Ltd.
Director Blueberry Trading Company Private Limited Chrysanthemum Investments Private Limited Deccan Florabase Limited Essar Oil Limited Hamlet Constructions (India) Private Limited Himatsingka Seide India Limited India Consultancy Group Private Limited Indo Count Industries Ltd. Matsushita Lakhanpal Battery India Limited Monotona Exports Limited Nandan Investments Private Limited Omega Management Services Limited PAE Ltd. Rajasvi Properties Holdings Private Limited Starrock Investments & Trading Private Limited Thirumalai Chemicals Limited The Ruby Mills Limited Township Real Estate Developers Private Limited Walchandnagar Industries Limited, Mumbai Windmere Hospitality (India) Pvt. Ltd.
Mr. N. P. Gidwani and Mr. Blair Chilton Pickerell are associated with the Sponsor. Mr. Nasser Munjee, Mr. Manu Tandon, Mr. Mehli Mistri and Mr. Dilip J. Thakkar are independent Trustees. Thus, 4 out of the 6 Trustees are independent Trustees.
HSBC Mutual Fund
Offer Document Summary of Substantive Provisions of the Trust Deed

Pursuant to the Trust Deed dated February 7, 2002 constituting the Mutual Fund and in terms of the SEBI (Mutual Funds) Regulations, 1996, the rights and obligations of the Trustees are as under:
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Each of the Trustees are required to file with the Fund the details of his securities' transactions on a quarterly basis, in accordance with guidelines issued by SEBI from time to time. The Trustees are accountable for and are required to be the custodian of the Fund's property of the respective Scheme and to hold the same in trust for the benefit of the Unitholders in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the provisions of the Trust Deed. The Trustees are required to take steps to ensure that the transactions of the Fund are in accordance with the provisions of the Trust Deed. The Trustees are responsible for the calculation of any income due to be paid to the Fund and also of any income received in the Mutual Fund for the holders of the Units of any Scheme in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustees are required to obtain the consent of the Unitholders of a Scheme:
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The Trustees shall have a right to obtain from the AMC such information as is considered necessary by them. The Trustees shall ensure before the launch of any scheme that the AMC has: l l
Systems in place for its back office, dealing room and accounting;
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Appointed all key personnel including fund manager(s) for the Scheme and submitted to the Trustees their bio-data which shall contain the educational qualifications, past experience in the securities market within 15 days of their appointment;
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Appointed auditors to audit the accounts of the Scheme; Appointed compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by the Board or the Central Government and for redressal of investors' grievances. The compliance officer so appointed shall immediately and independently report to the Board any non-compliance observed; Appointed registrars and laid down parameters for their supervision; Prepared a compliance manual and designed internal control mechanisms including internal audit systems and Specified norms for empanelment of brokers and marketing agents.
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When required to do so by SEBI in the interest of the Unitholders of that Scheme; or Upon the request of three-fourths of the Unitholders of any Scheme under the Fund for that Scheme; or If a majority of the Trustees decide to wind up the Scheme or prematurely redeem the Units.
The Trustees shall ensure that no change in the fundamental attributes of any Scheme or the Trust or fees and expenses payable or any other change which would modify the Scheme and affect the interests of Unitholders, shall be carried out unless:
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The Trustees shall ensure that the AMC has been diligent in empanelling brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker. The Trustees are required to ensure that the AMC has not given any undue or unfair advantage to any associate or dealt with any of the associates of the AMC in any manner detrimental to the interests of the Unitholders. The Trustees are required to ensure that the transactions entered into by the AMC are in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the provisions of the Scheme. The Trustees are required to ensure that the AMC has been managing the Scheme independently of other activities and has taken adequate steps to ensure that the interest of investors of one Scheme are not compromised with those of any other Scheme or of other activities of the AMC. The Trustees are required to ensure that all the activities of the AMC are in accordance with the provisions of SEBI (Mutual Funds) Regulations, 1996. Where the Trustees have reason to believe that the conduct of the business of the Fund is not in accordance with the Regulations and the provisions of the Scheme, they are required to take such remedial steps as are necessary by them and to immediately inform SEBI of the violation and the action taken by them.
l l
a written communication about the proposed change is sent to each Unitholder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated; and the Unitholders are given an option to exit at the prevailing Net Asset Value without any exit load.
The Trustees are required to call for the details of transactions in securities by the key personnel of the AMC in their own names or on behalf of the AMC and report the same to SEBI as and when called for. The Trustees are required to review quarterly, all transactions carried out between the Fund, the AMC and its associates. The Trustees are required to review quarterly the net worth of the AMC and in case of any shortfall ensure that the AMC makes up for the shortfall as per clause (f) of sub regulation (1) of Regulation 21 of SEBI (Mutual Funds) Regulations, 1996. The Trustees are required to periodically review all service contracts such as custody arrangements, transfer agency of securities and satisfy themselves that such contracts are executed in the interest of the Unitholders. The Trustees are required to ensure that there is no conflict of interest between the manner of deployment of its net worth by the AMC and the interest of the Unitholders.
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The Trustees are required to periodically review the investor complaints received and the redressal of the same by the AMC. The Trustees are required to abide by the Code of Conduct as specified in the Fifth Schedule of the SEBI (Mutual Funds) Regulations, 1996. The Trustees have to furnish to SEBI on a half yearly basis:l
Maintain records of the decisions of the Trustees at their meetings and of the minutes of the meetings. Prescribe and adhere to the code of ethics by the Trustees, the AMC and its personnel. Communicate in writing to the AMC of the deficiencies and check on the rectification of deficiencies.
a report on the activities of the Fund; a certificate stating that the Trustees have satisfied themselves that there have been no instances of self dealing or front running by any of the Trustees, directors and key personnel of the AMC; a certificate to the effect that the AMC has been managing the Scheme independently of any other activities and in case any activities of the nature referred to in Regulation 24, sub regulation (2) of the SEBI (Mutual Funds) Regulations, 1996 have been undertaken, the AMC has taken adequate steps to ensure that the interest of the Unitholders is protected.
The Trustees shall maintain high standards of integrity and fairness in all their dealings and in the conduct of their business. The Trustees shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement. The independent Trustees shall pay specific attention to the following as may be applicable, namely:
l
The Investment Management Agreement and the compensation paid under the Agreement. Service contracts with affiliates - whether the AMC has charged higher fees than outside contractors for the same services. Selection of the AMC's independent directors. Securities transactions involving affiliates to the extent such transactions are permitted. Selecting and nominating individuals to fill independent directors' vacancies. Code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions. The reasonableness of fees paid to sponsors, AMC and any others for services provided. Principal underwriting contracts and renewals. Any service contracts with the associates of the AMC. Notwithstanding anything contained in sub-regulations (1) to (25) of Regulation 18 of the SEBI (Mutual Funds) Regulations, 1996, the Trustees shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly. The Regulations provide that the meetings of the Trustees shall be held at least once in every 2 calendar months and at least 6 such meetings shall be held every year. Further, as per the Regulations, for the purposes of constituting the quorum for the meetings of the Trustees, at least one Independent Trustee or Director should be present during such meetings.
The independent Trustees are required to give their comments on the report received from the AMC regarding the investments by the Mutual Fund in the securities of the group companies of the Sponsor. No amendment to the Trust Deed shall be carried out without prior approval of SEBI and Unitholders' approval / consent will be obtained where it affects the interests of Unitholders as per the procedure / provisions laid down in the Regulations. The Trustees shall exercise due diligence as under: A.
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General Due Diligence: The Trustees shall be discerning in the appointment of the directors of the AMC. The Trustees shall review the desirability of the continuance of the AMC if substantial irregularities are observed in the Schemes and shall not allow the AMC to float any new Scheme. The Trustees shall ensure that all service providers hold appropriate registrations from SEBI or the concerned regulatory authority. The Trustees shall arrange for test checks of service contracts. The Trustees shall immediately report to SEBI any special developments in the Mutual Fund. Specific Due Diligence:
B.
The Trustees shall:

l
Obtain internal / concurrent audit reports at regular intervals from independent auditors appointed by the Trustees. Obtain compliance certificates at regular intervals from the AMC. Hold meetings of Trustees frequently and ensure that at least 6 such meetings shall be held in each year. Consider the reports of the independent auditor and compliance reports of the AMC at the meeting of the Trustees for appropriate action.
The supervisory role of the Trustees will be discharged by reviewing the information and the operations of the Fund based on the reports submitted at the meetings of the Trustees, by reviewing the reports submitted by the Internal Auditor and the bi-monthly and half yearly compliance reports. Presently the Board of Trustees are required to hold a meeting at least once in 2 calendar months and at least 6 such meetings are required to be held every year. During the period from February 2002 up to March 2005, the Board of Trustees met 19 times. No amendment to the Trust Deed shall be carried out without prior approval of SEBI and Unitholders' approval / consent will be obtained where it affects the interests of Unitholders as per the procedure / provisions laid down in the Regulations.
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The Trustees may require or give verification of identity or other details regarding any subscription or related information from / of the Unitholders as may be required under any law, which may result in delay in dealing with the applications, Units, benefits, distribution, etc.
SEBI approved the AMC to act as the Investment Manager of the Fund vide its letter No. MFD/BC/163/2002 dated May 27, 2002. The AMC will manage the Scheme of the Fund as mentioned in this Offer Document, in accordance with the provisions of IMA, the Trust Deed, the SEBI Regulations and the objectives of the Scheme. The AMC renders non-binding investment advisory services as a sub-advisor in respect of HSBC Global Investment Funds - Indian Equity Fund (HGIF), the HSBC Group's India dedicated offshore fund registered in Luxembourg and other offshore funds managed / advised by the HSBC Group which invest in Indian securities. HGIF is a growth oriented fund investing in Indian equities listed on local exchanges or those available as international depository receipts. This Fund is registered with SEBI vide registration number IN-LUFD-0330-95 dated December 6, 1995 and the registration has been duly renewed. In accordance with the SEBI Regulations, an asset management company, subject to certain conditions, is also permitted to undertake activities in the nature of portfolio management services, management and advisory services to offshore funds, pension funds, provident funds, venture capital funds, management of insurance funds, financial consultancy and exchange of research on commercial basis and such other activities as may be permitted by SEBI from time to time. Subject to these activities being assessed as desirable and economically viable, the AMC may undertake any or all of these activities after satisfying itself that there is no potential conflict of interest.
Trusteeship Fees
Pursuant to the Trust Deed constituting the Fund, the Fund is authorised to pay the Independent Trustees a fee for their services for meetings of the Board of Trustees / Committee meetings attended by such Trustees, as may be mutually agreed between the Sponsor and the Board of Trustees from time to time, subject to the SEBI Regulations.
Investment Manager
HSBC Asset Management (India) Private Limited (the Investment Manager or the AMC), is a company incorporated under the Companies Act, 1956, having its registered office at 52/60, Mahatma Gandhi Road, Fort, Mumbai 400 001. The paid-up equity share capital of the AMC is Rs. 12 crores. Out of the total equity paid-up capital, HSBC Securities and Capital Markets (India) Private Limited holds 75%, with the balance 25% being held by Indian resident individuals. The AMC is appointed as the Investment Manager of HSBC Mutual Fund vide Investment Management Agreement (IMA) dated February 7, 2002, executed between the Trustees and the AMC.
Board of Directors of the AMC

Niall S K Booker 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001 Chairman of the Board of Directors Bank Executive Group General Manager & Chief Executive Officer, India The Hongkong and Shanghai Banking Corporation Limited Sanjiv Duggal 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001 Fund Manager Director & Chief Investment Officer HSBC Asset Management (India) Private Limited Nawshir Khurody 12 A Darbhanga Mansion, Carmicheal Road, Mumbai - 400 026 Executive Ex-Chairman - Tata Infomedia Limited Ex-CEO & MD - Voltas Limited Ex-CEO & MD - Merind Limited Vithal Palekar 415, Samudra Mahal, Worli, Mumbai - 400 018 Chartered Accountant Ex-Chairman and Managing Director Johnson & Johnson Limited Partner - Borkar & Muzumdar, Chartered Accountants Director HSBC Securities and Capital Markets (India) Private Limited Bombay Chamber of Commerce & Industry HSBC Software Development (India) Private Limited
Director Nil
Director Eureka Forbes Limited Samrat Holdings Limited Voltas Limited Khurody Technical Services Private Limited Vantech Investments Limited NextGen Publishing Limited Forbes Gokak Ltd. Forbes Infotainment Limited Director Dextrous Solutions Limited Royen Investments Limited
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Jagjit Lal Pasricha 4B Sunny Side, Bride Street, Bangalore - 560 025 Social work President, Multiple Sclerosis Society of India Ex-Joint Managing Director Motor Industries Company Limited, MICO Bosch Group Sanjay Prakash 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001 Chief Executive Officer HSBC Asset Management (India) Private Limited
Director Nil
Director Nil
Mr. Niall S K Booker, Mr. Sanjiv Duggal and Mr. Sanjay Prakash are associated with the Sponsor. Mr. Nawshir Khurody, Mr. Vithal Palekar and Mr. Jagjit Lal Pasricha are independent Directors. Thus, 3 out of the 6 Directors are independent Directors.
Powers, Duties and Responsibilities of the AMC

The powers, duties and responsibilities of the AMC shall be governed by the Regulations and the Investment Management Agreement. The AMC, in the course of managing the affairs of the Mutual Fund, has the powers, inter alia for :
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Setting up an effective establishment for servicing of Unitholders under the various Scheme and also to protect the interest of the Unitholders. Generally doing all acts, deeds, matters and things which are necessary for any object, purpose or in relation to the Mutual Fund in any manner or in relation to any scheme of the Mutual Fund.
Floating Scheme of the Mutual Fund after approval of the same by the Trustees and investing and managing the funds mobilised under various Scheme, in accordance with the provisions of the Trust Deed and the Regulations. Evaluating investment opportunities for further investments by the Mutual Fund. Evaluating and issuing orders and instructions with respect to the acquisition and disposition of investments and risk positions / exposures. Issuing and ensuring due compliance of instructions to the custodian and the Mutual Fund's brokers, agents including registrars and transfer agents. Issuing, selling, repurchasing and cancelling the Units as per the terms of the respective Scheme of the Mutual Fund. Managing the Mutual Fund Scheme independently of other activities and taking adequate steps to ensure that the interests of Unitholders are not being compromised with those of any other Scheme or any of its other activities. Opening and operating bank accounts in the name and on behalf of each scheme in relation to the investments made by the Mutual Fund. Fixing record dates or book closure periods for the purpose of effecting transfer of Units and determining eligibility for dividends, bonus, rights, privileges, preferences, reservations or other entitlements or accretions. Providing information to SEBI and the Unitholders as required under the Regulations or as otherwise required by SEBI. Receiving, holding in trust, or as agent or nominee of the Trustees, improving, developing, using, selling, transferring, exchanging, assigning, dealing, trading in and managing all assets and all accretions thereto and endeavouring to earn adequate returns on them for and on behalf of the Trust. Fixing sales and re-purchase prices, and calculating Net Asset Value for Units, consistent with the Regulations.
Duties and responsibilities l The AMC shall take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any Scheme is not contrary to the provisions of the SEBI Regulations and the Trust Deed.
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The AMC shall exercise due diligence and care in all its investment decisions as would be exercised by other persons engaged in the same business. The AMC shall be responsible for the acts of commissions or omissions by its employees or the persons whose services have been procured by the AMC. The AMC shall submit to the Trustees quarterly reports of each year on its activities and the compliance with the SEBI Regulations. The Trustees at the request of the AMC may terminate the assignment of the AMC at any time provided that such termination shall become effective only after the Trustees have accepted the termination of assignment and communicated their decision in writing to the AMC. Notwithstanding anything contained in any contract or agreement of termination, the AMC or its directors or other officers shall not be absolved of liability to the Mutual Fund for their acts of commissions or omissions, while holding such position or office. The AMC shall not through any broker associated with the Sponsor, purchase or sell securities, which is average of 5% or more of the aggregate purchases and sales of securities made by the Mutual Fund in all its Scheme. Provided that for these purposes, aggregate purchase and sale of securities shall exclude sale and distribution of Units issued by the Mutual Fund. Provided further that the aforesaid limit of 5% shall apply for a block of any 3 months. The AMC shall not purchase and sell through any broker (other than a broker associated with the Sponsor) which is average
HSBC Mutual Fund
Offer Document
of 5% or more of the aggregate purchases and sale of securities made by the Mutual Fund in all its Scheme, unless the AMC has recorded in writing the justification for exceeding the limit of 5% and reports of all such investments are sent to the Trustees on a quarterly basis. Provided that the aforesaid limit shall apply for a block of 3 months.
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The AMC shall

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Not act as a trustee of any mutual fund Not undertake any other business activities except activities in the nature of portfolio management services, management and advisory services to offshore funds, pension funds, provident funds, venture capital funds, management of insurance funds, financial consultancy and exchange of research on commercial basis if any of such activities are not in conflict with the activities of the Mutual Fund without the prior approval of the Trustees and SEBI. Provided that the AMC may itself or through its subsidiaries undertake such activities if it satisfies SEBI that the key personnel of the AMC, the systems, back office, bank and securities accounts are segregated activity wise and there exists systems to prohibit access to inside information of various activities. Provided further that the AMC shall meet capital adequacy requirements, if any, separately for each such activity and obtain separate approval, if necessary under the relevant regulations; Not invest in any of its Scheme unless full disclosure of its intention to invest has been made in the Offer Document. Not be entitled to charge any fees on its investment in that Scheme. Not acquire any of the assets out of the Trust funds, which involves the assumption of any liability which is unlimited or which may result in encumbrance of the Scheme property in any way.
The AMC shall not utilise the services of the Sponsor or any of its associates, employees or their relatives, for the purpose of any securities' transactions and distribution and sale of securities, provided that the AMC may utilise such services if disclosure to that effect is made to the Unitholders and the brokerage or commission paid is also disclosed in the half yearly annual accounts of the Mutual Fund. The AMC shall file with the Trustees the details of transactions in securities by key personnel of the AMC in their own name or on behalf of the AMC and shall also report to SEBI, as and when required by SEBI. In case the AMC enters into any securities' transaction with any of its associates a report to that effect shall be sent to the Trustees at their next meeting. In case any company has invested more than 5% of the net asset value of a Scheme, the investment made by that Scheme or by any other Scheme of the same Mutual Fund in that company or its subsidiaries shall be brought to the notice of the Trustees by the AMC and be disclosed in the half yearly / annual accounts of the respective Scheme with justification for such investment provided that the latter investment has been made within 1 year of the date of the former investment calculated on either side. The AMC shall file with the Trustees and SEBI
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The independent Directors of the AMC shall pay specific attention to the following as may be applicable, namely: The Investment Management Agreement and the compensation paid under the Agreement. Service contracts with affiliates - whether the AMC has charged higher fees than outside contractors for the same services. Securities transactions involving affiliates to the extent such transactions are permitted. Code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions. The reasonableness of fees paid to Sponsors, AMC and any others for services provided. Principal underwriting contracts and renewals. Any service contracts with the associates of the AMC.
Detailed bio-data of all its directors along with their interest in other companies within 15 days of their appointment; and any change in the interest of directors every 6 months. A quarterly report to the Trustees giving details and adequate justification about the purchase and sale of securities of the group companies of the Sponsor or the AMC as the case may be, by the Mutual Fund during the quarter. Each director of the AMC shall file the details of his transactions of dealing in securities with the Trustees on a quarterly basis in accordance with guidelines issued by SEBI from time to time.
The AMC shall not appoint any person as key personnel who has been found guilty of any economic offence or involved in violation of securities laws. The AMC shall appoint registrars and share transfer agents who are registered with SEBI. Provided if the work relating to the transfer of Units is processed in-house, the charges at competitive market rates may be debited to the Scheme and for rates higher than the competitive market rates, prior approval of the Trustees shall be obtained and reasons for charging higher rates shall be disclosed in the annual accounts. The AMC shall abide by the Code of Conduct as specified in the Fifth Schedule of the SEBI Regulations.
Asset Management Fees

In the terms of the Investment Management Agreement and the Regulations, the AMC is entitled to an investment management and advisory fee at the rate of 1.25% per annum of the weekly average net assets outstanding in each accounting year for the Scheme concerned, as long as the net assets do not exceed Rs. 100 crores (Rupees One Hundred Crores Only) and 1.00% of the excess amount over Rs. 100 crores (Rupees One Hundred Crores Only), where net assets so calculated exceed Rs. 100 crores (Rupees One Hundred Crores). For Scheme launched on a no load basis, the AMC is entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year.
HSBC Mutual Fund
Offer Document Key Employees of the AMC and relevant experience

Sanjay Prakash, Chief Executive Officer 40 years B.A. (Hons) Economics Experience : Over 18 years experience in areas of banking, asset management, sales, operations, finance and technology.
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Was Senior Fund Manager of HSBC Global Investment Funds Indian Equity Fund, the HSBC Group's India dedicated offshore fund with a track record of over 7 years. Built up this fund from $ 10m to $ 300m at peak through active marketing and strong consistent performance. Has experience of managing a range of emerging and Asian markets equity funds. Achievements (HSBC Global Investment Funds - Indian Equity Fund):
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HSBC Asset Management (India) Private Limited Chief Executive Officer from April 2003 to present HSBC Asset Management (India) Private Limited Chief Operating Officer from December 2001 to March 2003 HSBC Securities and Capital Markets (India) Private Limited Chief Operating Officer (Designate) - HSBC Asset Management (India) Private Limited from April 2001 to December 2001. ANZ Grindlays Asset Management Company Private Limited (now Standard Chartered Asset Management) Head - Operations, India from September 1999 to March 2001 ANZ Grindlays Bank (now Standard Chartered Bank) Area Manager - Operations, Western India from October 1996 to August 1999 Area BPR Team Leader, Western India from July 1997 to January 1998 Area Manager - Operations, Eastern India from January 1996 to September 1996 Branch Manager, Shakespeare Sarani, Calcutta from July 1994 to December 1996 Audit Manager Retail Services, Group Audit, South Asia from January 1993 to June 1994 Computer Auditor / Auditor Systems & Research, Group Audit, South Asia from June 1991 to December 1992 Internal Auditor, ANZ Bank, Melbourne, Australia from April 1990 to May 1991
Winner of the South China Morning Post Fund Manager of the Year Awards 2002 - 3 year award 2001 - 3 year award 2000 - 1 and 3 year awards
Winner of the Lipper Funds Award for the category of Fund of the Year 2002 - Equity India Winner of Standard Chartered Investment Fund Awards for 2000 Winner of the Banco Swiss Fund Guide Award in 2000 for 4th best Asian fund over 3 years Winner of Benchmark Investment Fund Award for best India fund in 1998 Second in 1998 in Indian Equity category for S&P Micropal awards 5 star rated by S&P Micropal 5 star rated by Morning Star
Sanjiv Duggal, Director & Chief Investment Officer 41 years CA, England and Wales Associate of the Institute of Investment Management and Research Foundation course in Accountancy Various A and O levels Experience: Over 10 years experience in fund management
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S. Venkatesh Iyer, Chief Operating Officer 39 years Chartered Accountant Experience: Over 15 years experience in Operations, Finance, Customer Service etc.
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HSBC Asset Management (India) Private Limited Chief Operating Officer from August 2004 to date Prudential ICICI Asset Management Company Associate Vice President - Operations from July 2004 to August 2004 Sundaram Asset Management Co. Ltd. Vice President - Operations, from August 2003 to July 2004 Quintant Services Limited Lead Consultant from May 2003 to July 2003 Capital Group International Inc. Consultant, from December 1999 to May 2003 Birla Sun Life Asset Management Company Limited Controller Operations, June 1996 to November 1999 Ernst & Young, Accounting Firm, Kuwait Senior Accountant from December 1991 to September 1995
HSBC Asset Management (India) Private Limited Director & Chief Investment Officer from June 2002 to present HSBC Asset Management (Europe) Limited Head of Equities, Indian Subcontinent from 1996 to May 2002 Hill Samuel Group Fund Manager, Emerging and Asian Equities from 1991 to 1996 Heron Group Senior internal auditor from 1990 to 1991 Touche Ross Audit Supervisor from 1988 to 1990 Bright Grahame Murray Audit Supervisor from 1984 to 1988
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Offer Document
Anthony Heredia, Head of Sales & Distribution 32 years B. Com., CA Experience: Over 9 years experience in sales and distribution
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Trader - Credit Products, September 1998 - October 2000 Manager, Treasury Marketing, Western India, April 1997 August 1998 Assistant Manager, Treasury Marketing, Western India, July 1994 - March 1997
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HSBC Asset Management (India) Private Limited Head of Sales and Distribution from December 2001 to present Birla SunLife Asset Management Company Assistant Vice President - Business Development from October 1995 to November 2001
Merwanjee Securities, Mumbai Dealer (Broking), July 1993 - July 1994 Raychem RPG Ltd., Mumbai Assistant Manager (on deputation from RPG Enterprises Ltd.), June 1992 - June 1993 Wipro Infotech Ltd., Mumbai Senior Systems Executive, July 1988 - June 1990
Kashmira Mathew, Head of Compliance & Company Secretary 34 years B. Com. (Hons), ACS Experience: Over 9 years experience in legal, secretarial and compliance
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HSBC Asset Management (India) Private Limited Head of Compliance & Company Secretary from December 2001 to present HSBC Securities and Capital Markets (India) Private Limited Assistant Company Secretary, Deputy Company Secretary from June 1996 to December 2001 Reliance Industries Limited Management Trainee from June 1994 to October 1995
Shailendra Jhingan, Fund Manager 33 years Masters in Management Studies (Finance) B.A. (Hons) Economics Experience: Over 9 years experience in research and fund management
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HSBC Asset Management (India) Private Limited Fund Manager from December 2002 to present Birla Sun Life Mutual Fund Fund Manager from February 2000 to November 2002 JM Morgan Stanley Economist & Fixed Income Analyst from July 1997 to February 2000 Fortress Financial Research Analyst from 1995 to June 1997
K. Sriram, Head of Finance & Customer Service 32 years B. Com., AICWA, ACA Experience: Over 8 years experience in financial & management accounting.
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HSBC Asset Management (India) Private Limited Head of Finance from December 2001 to June 2004. Head of Finance & Customer Service from July 2004 to present. HSBC Securities and Capital Markets (India) Private Limited Head of Finance (Designate) - HSBC Asset Management (India) Private Limited from September 2001 to December 2001. Templeton Asset Management (India) Private Limited Manager, Senior Manager - Corporate Accounting from June 2000 to September 2001 Stock Holding Corporation of India Limited Executive, Asst. Manager from May 1996 to June 2000
K. R. Shanbhag, Senior Analyst 35 years Masters of Management Studies (Finance) Bachelor of Engineering (Mechanical) Profile: Over 11 years experience in equity research and fund management. This involved equity research on various sectors and companies and marketing investment ideas to fund managers. In the previous role as a fund manager with ING Investment Management (India) Pvt. Ltd., was responsible for managing day to day investment activities of the equity fund and the equity portion of the balanced fund.
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Gordon Rodrigues, Fund Manager - Fixed Income 38 years Masters in Management Studies (Finance) Bachelor of Engineering (Electronics) Experience: Over 11 years experience in debt and fixed income trading
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HSBC Asset Management (India) Private Limited Senior Analyst from May 2002 till date ING Investment Management (India) Pvt. Ltd. Fund Manager - Equity Markets from July 1998 till May 2002 Indosuez W I Carr Securities (India) Pvt. Ltd. Research Analyst from March 1998 till July 1998 ING Barings Securities India Pvt. Ltd. Research Analyst from November 1994 till March 1998 Synthesis, Sundar Iyer Equity Equity Analyst from June 1993 till October 1994
HSBC Asset Management (India) Private Limited Fund Manager - Fixed Income from March 2002 to present HSBC Treasury Senior Trader - Credit Products, November 2000 - March 2002
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Offer Document
Viresh Mehta, Senior Analyst 36 years Masters in Management Studies (Finance) Bachelor of Engineering (Mechanical) Experience: Over 12 years experience in equity markets.
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IN/CUS/014 dated November 10, 1998. The Mutual Fund has entered into a Custody Agreement dated July 4, 2002, with the Custodian, and the salient features of the said Agreement are to:
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Provide post-trading and custodial services to the Mutual Fund Ensure benefits due on the holdings are received Provide detailed information and other reports as required by the AMC Maintain confidentiality of the transactions Be responsible for the loss or damage to the assets belonging to the Scheme due to negligence on its part or on the part of its approved agents Segregate assets of each Scheme
UBS Warburg India Pvt. Ltd. Head of Dealing and Sales Trading from August 1995 to March 2002. Prabhudas Lilladher Pvt. Ltd. Institutional Sales from October 1993 to July 1995. DSP Financial Consultant Limited Analyst from June 1992 to October 1993.
Anand Narayan, Senior Dealer 33 years Masters in Financial Management Experience: Over 13 years experience in dealing
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The Custodian shall not assign, transfer, hypothecate, pledge, lend, use or otherwise dispose any assets or property, except pursuant to instruction from the Trustees / AMC or under the express provisions of the Custody Agreement. The Custodian will be entitled to remuneration for its services in accordance with the terms of the Custody Agreement. The Trustees have the right to change the Custodian, if necessary.
HSBC Asset Management (India) Private Limited Senior Dealer from August 2004 to date Kotak Securities AVP from December 2001 to July 2004 Cazenove India Holdings Dealer from June 1999 to November 2001 Indsec Sec. & Fin. AVP from May 1997 to June 1999 Paterson & Co. Dealer from May 1991 to May 1997
Registrar & Transfer Agents

Computer Age Management Services (P) Ltd. (CAMS), A & B Lakshmi Bhawan, 609 Anna Salai, Chennai 600 006 have been appointed as Registrar and Transfer Agents. The Registrar is registered with SEBI under the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 vide registration number INR000002813. As Registrars to the Scheme, CAMS will handle communications with investors, perform data entry services and despatch account statements. The AMC and the Trustees have satisfied themselves that the Registrar have adequate capacity to discharge responsibilities with regard to processing of applications and despatching account statements to Unitholders within the time limit prescribed in the Regulations and also sufficient capacity to handle investor complaints.
Presently the AMC has two dedicated equity research analyst, one dedicated equity dealer and a total of eight employees in the investment management department. Presently all the key personnel are based in the corporate office of the AMC.
Fund Accountant
JPMorgan Chase Bank, Mumbai has been appointed as the Fund Accountant for Scheme. The Fund Accountant provides fund accounting, NAV calculation and other related services. The Fund Accountant is entitled to remuneration for its services in accordance with the terms of the Fund Administration Agreement. The Trustees / AMC have the right to change the Fund Accountant, if necessary.
Fund Manager
K. R. Shanbhag
Compliance Officer
Kashmira Mathew Head of Compliance & Company Secretary HSBC Asset Management (India) Private Limited 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001
Auditors
Price Waterhouse, Chartered Accountants, 252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028 shall be the Auditors for the Scheme offered under this Offer Document. The Trustees have the right to change the Auditors.
Investor Relations Officer

K. Sriram Head of Finance & Customer Service HSBC Asset Management (India) Private Limited 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001
Collecting Bankers
The collecting bankers for transactions in the IPO and on an ongoing basis will be The Hongkong and Shanghai Banking Corporation Limited (SEBI registration no. INBI00000027) and HDFC Bank Limited (SEBI registration no. INBI00000063) and such other banks registered with SEBI as collecting bankers as may be decided by the AMC from time to time. Applications for the Initial Public Offer will be accepted at the Collection Centres designated by the AMC.
Custodian
JPMorgan Chase Bank, Mumbai has been appointed as Custodian of the Scheme of HSBC Mutual Fund. The Custodian has been registered with SEBI under the SEBI (Custodians of Securities) Regulations, 1996, and has been awarded registration number
HSBC Mutual Fund
Offer Document
SECTION II
INVESTMENT OBJECTIVES & POLICIES
HSBC Midcap Equity Fund (HMEF) Type of Scheme An open-ended diversified equity Scheme seeking long-term capital growth from a diversified portfolio of equity and equity related securities, primarily being midcap stocks. The Scheme can also invest in small cap equity and equity related securities and various fixed income securities. Investment Objective The Fund is an open ended Equity Scheme seeking to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However, it could move a portion of its assets towards fixed income securities if the fund manager becomes cautious or negative on the Indian equity markets. There can be no assurance that the Scheme objective can be realised. Investment Pattern The corpus of the Scheme will be primarily invested in midcap equity and equity related securities. The Scheme can also invest in small cap equity and equity related securities and various fixed income securities. The Scheme can actively move its assets between equity and fixed income securities depending on its view on these markets. Subject to the Regulations and other prevailing laws as applicable, the corpus of the Scheme can be invested in any (but not exclusively) of the following securities:
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Repurchase and reverse repurchase obligations in securities. The non-convertible part of convertible securities. Any other domestic fixed income securities. Pass through, Pay through or other Participation Certificates representing interest in a pool of assets including receivables. Any other instruments as may be permitted by SEBI from time to time.
The securities mentioned above could be listed, unlisted, privately placed, secured, unsecured, rated or unrated and of any maturity. The securities may be acquired through Initial Public Offerings (IPOs), secondary market operations and private placement, rights offers or negotiated deals. The Scheme may participate in securities lending as permitted under the Regulations. The asset allocation under the Scheme will be as follows: S. Type of Security No. Normal Allocation (% of Corpus) Risk Profile
Equity and equity related securities including convertible bonds and debentures and warrants carrying the right to obtain equity shares. ADRs / GDRs issued by the Indian companies, subject to the guidelines issued by the Reserve Bank of India and Securities and Exchange Board of India. Stock index futures and such other derivative instruments permitted by SEBI / RBI. Securities issued / guaranteed by the Central, State and local governments (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills). Debt obligations of domestic government agencies and statutory bodies, which may or may not carry a Central / State Government guarantee. Corporate debt (of both public and private sector undertakings). Debt obligations of banks (both public and private sector) and financial institutions. Money market instruments permitted by SEBI and / or RBI, having residual maturities of up to 1 year. Certificate of Deposits (CDs). Commercial Papers (CPs). Bills of Exchange / Promissory Notes. Securitised Debt. Call Money / Money at Call. Floating rate debt instruments.
1. Equities & equity related securities 65 - 100% of companies that are generally either included in the CNX Midcap 200 Index or ones that fall within market capitalization requirement of CNX Midcap 200 Index, at the point of investment. 2. Equities & equity related securities 0 - 35% of companies whose market capitalization does not exceed the market capitalization of the largest constituent of the CNX Midcap 200 Index at the point of investment and which are not part of the CNX Midcap 200 Index. 3. Debt instruments & Money Market instruments (including money at call) 0 - 35%
High
High
Low to medium
Under normal circumstances, the Scheme shall invest at least 65% of the net assets under the Scheme in Equity and Equity related Securities which fall within the definition of midcap companies. The Scheme may review the above pattern of investments based on views on the equity and debt markets and asset liability management needs and the portfolio shall be reviewed and rebalanced on a regular basis. However, at all times the portfolio will adhere to the overall investment objective of the Scheme. Mid Cap stocks will comprise equity stocks of companies which are generally those that are either included in the CNX Midcap 200 Index or ones that fall within the market capitalization requirement of CNX Midcap 200 Index, at the point of investment. Investors may note that securities which provide higher returns, typically display higher volatility. Accordingly, the investment portfolio of the Scheme would reflect moderate to high volatility in its equity and equity related investments and low to moderate volatility in its debt and money market investments.
HSBC Mutual Fund
Offer Document
If the Scheme decides to invest in securitised debt, it is the intention of the Investment Manager that such investments will not normally exceed 30% of the corpus of the Scheme and if the Scheme decides to invest in ADRs/GDRs issued by Indian Companies, it is the intention of the Investment Manager that such investments will not, normally exceed 30% of the assets of the Scheme. For investments in ADRs / GDRs, the Fund Manager would consider the premium / discount to the underlying stock and the possibility of the discount narrowing or the premium expanding, liquidity management of the portfolio, secondary and primary offerings of ADRs / GDRs. Securitized debt, while relatively illiquid compared to other debt investments provides a higher yield pickup. Hence only if the Fund Manager becomes cautious or negative on the Indian equity markets for a reasonably long period of time would he consider investing in such instruments to improve the yield to the fund and investors as opposed to putting the monies in reverse repo and short term money market instruments. No investments shall be made in foreign securitized debt. HMEF shall not have exposure of more than 50% of the net assets in derivative instruments. These limits will be reviewed by the AMC, from time to time. Investments in derivatives would be in accordance with the SEBI Regulations, viz. for hedging and rebalancing the portfolio.
A top down and bottom up approach will be used to invest in equity and equity related instruments. Investments will be pursued in select sectors based on the Investment Team's analysis of business cycles, regulatory reforms, competitive advantage etc. Selective stock picking will be done from these sectors. The fund manager in selecting scrips will focus on the fundamentals of the business, the industry structure, the quality of management, corporate governance trends, sensitivity to economic factors, the financial strength of the company and the key earnings drivers. Since investing requires disciplined risk management, the AMC would incorporate adequate safeguards for controlling risks in the portfolio construction process. Risk will also be reduced through adequate diversification of the portfolio. Diversification will be achieved by spreading the investments over a range of industries / sectors. The Scheme may however, invest in unlisted and / or privately placed and / or unrated debt securities subject to the limits indicated under "Investment Restrictions for the Scheme prescribed in this Offer Document, from issuers of repute and sound financial standing. If investment is made in unrated debt securities, the approval of the Board of the AMC and the Trustees or the Investment Management Committee (within the broad parameters approved by the Board of the AMC and the Trustees) shall be obtained, as per the Regulations. As per the asset allocation pattern indicated above, for investment in debt securities and money market instruments, the Fund may invest a part of the portfolio in various debt securities issued by corporates and/or state and central government. Such government securities may include securities which are supported by the ability to borrow from the treasury or supported only by the sovereign guarantee or of the state government or supported by GOI / state government in some other way. With the aim of controlling risks, rigorous in depth credit evaluation of the instruments proposed to be invested in will be carried out by the Investment Team of the AMC. The credit evaluation includes a study of the operating environment of the company, the past track record as well as the future prospects of the issuer, the short as well as long-term financial health of the issuer. The AMC will also be guided by the ratings of rating agencies such as CRISIL, CARE and ICRA or any other rating agency as approved by the regulators. In addition, the Investment Team of the AMC will study the macro economic conditions, including the political, economic environment and factors affecting liquidity and interest rates. The AMC would use this analysis to attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same. The Scheme may invest in other Scheme(s) managed by the AMC or in the schemes of any other mutual fund, provided it is in conformity with the investment objectives of the Scheme and in terms of the prevailing Regulations. As per the Regulations, no investment management fees will be charged for such investments.
Change in Investment Pattern

Subject to the Regulations, the asset allocation pattern indicated above for the Scheme may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It must be clearly understood that the percentages stated above are only indicative and not absolute and that they can vary substantially depending upon the perception of the Investment Manager, the intention being at all times to seek to protect the interests of the Unitholders, and meet the objective of the Scheme. Such changes in the investment pattern will be for short term and defensive considerations. Provided further and subject to the above, any change in the asset allocation affecting the investment profile of the Scheme shall be effected only in accordance with the provisions of sub regulation (15A) of Regulation 18 of the Regulations, as detailed in this Offer Document.
Listing
Being open ended Scheme under which sale and repurchase of Units will be made on continuous basis by the Mutual Fund, the Units of the Scheme are generally not proposed to be listed on any stock exchange. However, the Mutual Fund may at its sole discretion, list the Units under the Scheme on one or more stock exchanges at a later date.
Investment Approach and Risk Control

HSBC Midcap Equity Fund (HMEF) The aim of the HSBC Midcap Equity Fund is to deliver abovebenchmark returns by providing long-term capital growth from an actively managed portfolio, primarily comprising of midcap stocks. Income is not a primary consideration in the investment policies of the HSBC Midcap Equity Fund. The Scheme aims to be predominantly invested in midcap equity and equity related securities and also invest in small cap equity and equity related securities. However, it could move a portion of its assets towards fixed income securities if the fund becomes cautious or negative on equity markets.
Portfolio Turnover
Portfolio turnover is defined as lesser of purchases and sales as a percentage of the average corpus of the Scheme during a specified period of time. The Scheme being an open-ended Scheme, it is expected that there would be a number of subscriptions and redemptions on a daily basis. Consequently, it is difficult to estimate with any reasonable measure of accuracy, the likely turnover in the portfolio(s). Active asset allocation would impact portfolio turnover.
HSBC Mutual Fund
Offer Document Procedure followed for Investment Decisions

The Fund Manager of the Scheme is responsible for making buy / sell decisions in respect of the securities in the Scheme's portfolio. The investment decisions are made on a daily basis keeping in view the market conditions and all relevant aspects. The Board of the AMC has constituted an Investment Management Committee that meets at periodic intervals. The Investment Management Committee, at its meetings, reviews investments , including investments in unrated debt instruments. The approval of unrated debt instruments is based on parameters laid down by the Board of the AMC and the Trustees. The details of such investments are communicated by the AMC to the Trustees in their periodical reports along with a disclosure regarding how the parameters have been complied with. Such reportings shall be in the manner prescribed by SEBI from time to time. The Committee also reviews the performance of the Scheme and general market outlook and formulate the broad investment strategy at their meetings. It is the responsibility of the AMC to ensure that the investments are made as per the internal / Regulatory guidelines, Scheme investment objectives and in the best interest of the Unitholders of the respective Scheme. The Fund may follow internal guidelines as approved by the Board of the AMC and the Trustees from time to time. All individual equity holdings in securities above 5% of the portfolio will not exceed 40% of the portfolio. In case of HMEF performance will be benchmarked against CNX Mid Cap 200 Index. The Boards may review the benchmark selection process from time to time, and make suitable changes as to use of the benchmark, or related to composition of the benchmark, whenever it deems necessary. The Chief Investment Officer will bring to the notice of the AMC Board, specific factors if any, which are impacting the performance of the Scheme. The Board on consideration of all relevant factors may, if necessary, give appropriate directions to the AMC. Similarly, the performance of the Scheme will be submitted to the Trustees. The Chief Investment Officer will explain to the Trustees, the details on the Schemes' performance vis--vis the benchmark returns. The AMC will keep a record of all investment decisions.
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A written communication about the proposed change is sent to each Unitholder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated; and The Unitholders are given an option to exit at the prevailing Net Asset Value without any exit load.
Special Considerations
The Scheme may also use various derivative and hedging products from time to time, as would be available and permitted by SEBI, in an attempt to protect the value of the portfolio and enhance Unitholders' interest.
Trading in Derivatives
SEBI has permitted all mutual funds to participate in derivatives trading subject to observance of guidelines issued by it in this behalf. Pursuant to this, mutual funds may use various derivative and hedging products from time to time, as would be available and permitted by SEBI, in an attempt to protect the value of the portfolio and enhance Unitholders' interest. Accordingly, the Fund may use derivative instruments like stock index futures, options on stocks and stock indices, interest rate swaps, forward rate agreements or such other derivative instruments as may be introduced from time to time for the purpose of hedging, portfolio balancing or any other purpose, as permitted under the Regulations and guidelines.
Exposure to Derivatives
HMEF shall not have exposure of more than 50% of the net assets in derivative instruments. These limits will be reviewed by the AMC, from time to time. The following information provides a basic idea as to the nature of the derivative instruments proposed to be used by the Fund and the benefits and risks attached therewith. Please note that the examples have been given for illustration purposes only. Interest Rate Swaps (IRS) and Forward Rate Agreements (FRA) Benefits Bond markets in India are not very liquid. Investors run the risk of illiquidity in such markets. Investing for short-term periods for liquidity purposes has its own risks. Investors can benefit if the Fund remains in call market for the liquidity and at the same time take advantage of fixed rate by entering into a swap. It adds certainty to the returns without sacrificing liquidity. IRS An IRS is an agreement between two parties (counter parties) to exchange, on particular dates in the future, one series of cash flows (fixed interest) for another series of cashflows (variable or floating interest) in the same currency and on the same principal for an agreed period of time. The exchange of cashflows need not occur on the same date. As floating rate instruments tend to be relatively less liquid, swapping a fixed rate instrument into floating returns can help in improving the liquidity of the fund. FRA A FRA is an agreement between two counter parties to pay or to receive the difference between an agreed fixed rate (the FRA rate) and the interest rate prevailing on a stipulated future date, based on a notional amount, for an agreed period. In short, in a FRA, interest rate is fixed now for a future period. The special feature of FRAs is that the only payment is the difference between the FRA rate and
Investments by the AMC in the Scheme

The AMC may invest in the Scheme at any time during the IPO or during the continuous offer period subject to the SEBI Regulations & circulars issued by SEBI and to the extent permitted by its Board of Directors from time to time. As per the existing SEBI Regulations, the AMC will not charge investment management and advisory fee on the investment made by it in the Scheme.
Fundamental Attributes
The investment objective together with the investment approach and the investment pattern will comprise the principal fundamental attributes of the Scheme. The other fundamental attributes of the Scheme shall be the following:
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Type of Scheme i.e. open ended scheme Terms of issue relating to listing, repurchase / redemption, fees, expenses.
In accordance with Regulation 18(15A) of the SEBI Regulations, the Trustees shall ensure that no change in the fundamental attributes of the Scheme and the Plan(s) / Option(s) thereunder or the trust or fee and expenses payable or any other change which would modify the Scheme and the Plan(s) / Option(s) thereunder and affect the interests of Unitholders is carried out unless:
HSBC Mutual Fund
Offer Document
the reference rate and hence are single settlement contracts. As in the case of IRS, notional amounts are not exchanged. The Scheme will use derivative instrument for the purpose of hedging and portfolio balancing. Hedging does not mean maximisation of returns but only reduction of systematic or market risk inherent in the investment. Basic Structure of a Swap Assume that the Scheme has a Rs. 20 crore floating rate investment linked to MIBOR (Mumbai Inter Bank Offered Rate). Hence, the Scheme is currently running an interest rate risk and stands to lose if the interest rate moves down. To hedge this interest rate risk, the Scheme can enter into a 6 month MIBOR swap. Through this swap, the Scheme will receive a fixed predetermined rate (assume 12%) and pays the "benchmark rate" (MIBOR), which is fixed by the National Stock Exchange (NSE) or any other agency such as Reuters. This swap would effectively lock-in the rate of 12% for the next 6 months, eliminating the daily interest rate risk. This is usually routed through an intermediary who runs a book and matches deals between various counterparties. The steps will be as follows : l Assuming the swap is for Rs. 20 crore June 1, 2001 to December 1, 2001. The Scheme is a fixed rate receiver at 12% and the counterparty is a floating rate receiver at the overnight rate on a compounded basis (say NSE MIBOR).
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The Fund can sell futures to hedge against market movements effectively without actually selling the stocks it holds.
The stock index futures are instruments designed to give exposure to the equity market indices. The Stock Exchange, Mumbai and the National Stock Exchange have started trading in index futures of 1, 2 and 3 month maturities. The pricing of an index future is the function of the underlying index and interest rates. Illustration Spot Index: 1070 1 month Nifty Future Price on day 1: 1075 Fund buys 100 lots Each lot has a nominal value equivalent to 200 Units of the underlying index Situation 1 Let us say that on the date of settlement, the future price = closing spot price = 1085 Profits for the Fund = (1085-1075)* 100 lots * 200 = Rs. 200,000 Situation 2 Let us say that on the date of settlement, the future price = Closing spot price = 1070 Loss for the Fund = (1070-1075)* 100 lots * 200 = (Rs. 100,000) The net impact for the Fund will be in terms of the difference between the closing price of the index and cost price (ignoring margins for the sake of simplicity). Thus, it is clear from the example that the profit or loss for the Fund will be the difference of the closing price (which can be higher or lower than the purchase price) and the purchase price. The risks associated with index futures are similar to the one with equity investments. Additional risks could be on account of illiquidity and hence mispricing of the future at the time of purchase. Buying Options Benefits of buying a call option Buying a call option on a stock or index gives the owner the right, but not the obligation, to buy the underlying stock / index at the designated strike price. Here the downside risks are limited to the premium paid to purchase the option. Illustration If the Fund buys a 1 month call option on Hindustan Lever at a strike of Rs. 190, the current market price being say Rs.191. The Fund will have to pay a premium of say Rs. 15 to buy this call. If the stock price goes below Rs. 190 during the tenure of the call, the Fund avoids the loss it would have incurred had it straightaway bought the stock instead of the call option. The Fund gives up the premium of Rs. 15 that has to be paid in order to protect the Fund from this probable downside. If the stock goes above Rs. 190, it can exercise its right and own Hindustan Lever at a cost price of Rs. 190, thereby participating in the upside of the stock. Benefits of buying a put option Buying a put option on a stock originally held by the buyer gives him / her the right, but not the obligation, to sell the underlying stock at the designated strike price. Here the downside risks are limited to the premium paid to purchase the option. Illustration If the Fund owns Hindustan Lever and also buys a three-month put option on Hindustan Lever at a strike of Rs. 190, the current market price being say Rs.191. The Fund will have to pay a premium of say Rs. 12 to buy this put.
On 1 June, 2001 the Scheme and the counterparty will exchange only a contract of having entered this swap. This documentation would be as per International Securities Dealers Association (ISDA). On a daily basis, the benchmark rate fixed by NSE will be tracked . On December 1, 2001 the following will be calculated : The Scheme is entitled to receive interest on Rs. 20 crore at 12% for 184 days i.e. Rs. 1.21 crore, (this amount is known at the time the swap was concluded) and will pay the compounded benchmark rate. The counterparty is entitled to receive daily compounded call rate for 184 days & pay 12% fixed. On December 1, 2001, if the total interest on the daily overnight compounded benchmark rate is higher than Rs. 1.21 crore, the Scheme will pay the difference to the counter party. If the daily compounded benchmark rate is lower, then the counterparty will pay the Scheme the difference. Effectively the Scheme earns interest at the rate of 12% p.a. for 6 months without lending money for 6 months fixed, while the counterparty pays interest @ 12% p.a. for 6 months on Rs. 20 crore, without borrowing for 6 months fixed.
Swaps have its own drawbacks like credit risk, settlement risk. However, these risks are substantially reduced as the amount involved is interest streams and not principal. Index Futures Benefits l Investment in stock index futures can give exposure to the index without directly buying the individual stocks. Appreciation in index stocks can be effectively captured through investment in Stock Index Futures.
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If the stock price goes below Rs. 190 during the tenure of the put, the Fund can still exercise the put and sell the stock at Rs. 190, avoiding therefore any downside on the stock below Rs. 190. The Fund gives up the fixed premium of Rs. 12 that has to be paid in order to protect the Fund from this probable downside. If the stock goes above Rs. 190, say to Rs. 220, it will not exercise its option. The Fund will participate in the upside of the stock, since it can now sell the stock at the prevailing market price of Rs. 220. Writing Options Benefits of writing an option with underlying stock holding (Covered call writing) Covered call writing is a strategy where a writer (say the Fund) will hold a particular stock, and sell in the market a call option on the stock. Here the buyer of the call option now has the right to buy this stock from the writer (the Fund) at a particular price which is fixed by the contract (the strike price). The writer receives a premium for selling a call, but if the call option is exercised, he has to sell the underlying stock at the strike price. This is advantageous if the strike price is the level at which the writer wants to exit his holding / book profits. The writer effectively gains a fixed premium in exchange for the probable opportunity loss that comes from giving up any upside if the stock goes up beyond the strike price. Illustration Let us take for example Infosys Technologies, where the Fund holds stock, the current market price being Rs. 3600. The Fund Manager holds the view that the stock should be sold when it reaches Rs. 3700. Currently the 1 month 3700 calls can be sold at say Rs.150. Selling this call gives the call owner the right to buy from the Fund, Infosys at Rs. 3700. Now the Fund by buying / holding the stock and selling the call is effectively agreeing to sell Infosys at Rs. 3700 when it crosses this price. So the Fund is giving up any possible upside beyond Rs. 3700. However, the returns for the Fund are higher than what it would have got if it just held the stock and decided to sell it at Rs. 3700. This is because the Fund by writing the covered call gets an additional Rs. 150 per share of Infosys. In case the price is below Rs. 3700 during the tenure of the call, then it will not be exercised and the Fund will continue to hold the shares. Even in this case the returns are higher than if the Fund had just held the stock waiting to sell it at Rs. 3700. Benefits of writing put options with adequate cash holding Writing put options with adequate cash holdings is a strategy where the writer (say, the Fund) will have an amount of cash and will sell put options on a stock. This will give the buyer of this put option the right to sell stock to the writer (the Fund) at a pre-designated price (the strike price). This strategy gives the put writer a premium, but if the put is exercised, he has to buy the underlying stock at the designated strike price. In this case the writer will have to accept any downside if the stock goes below the exercise price. The writer effectively gains a fixed premium in exchange for giving up the opportunity to buy the stock at levels below the strike price. This is advantageous if the strike price is the level at which the writer wants to buy the stock. Illustration Let us take for example, that the Fund wants to buy Infosys Technologies at Rs. 3500, the current price being Rs. 3600. Currently the three-month puts can be sold at say Rs. 100. Writing this put gives the put owner the right to sell to the Fund, Infosys at Rs. 3500. Now the Fund by holding cash and selling the put is agreeing to buy
Infosys at Rs. 3500 when it goes below this price. The Fund will take on itself any downside if the price goes below Rs. 3500. But the returns for the Fund are higher than what it would have got if it just waited till the price reached this level and bought the stock at Rs. 3500, as per its original view. This is because the Fund by writing the put gets an additional Rs. 100 per share of Infosys. In case the price stays above Rs. 3500 during the tenure of the put, then it will not be exercised and the Fund will continue to hold cash. Even in this case the returns are higher than if the Fund had just held cash waiting to buy Infosys at Rs. 3500.
Valuation of Derivative Products

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The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended from time to time. The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time.
Position of Debt Markets in India

The major players in the Indian debt markets today are banks, financial institutions, insurance companies and mutual funds. The instruments in the market can be broadly categorised as those issued by corporates, banks, financial institutions and those issued by state / central governments. The risks associated with any investment are - credit risk, interest rate risk and liquidity risk. While corporate papers carry credit risk due to changing business conditions, government securities are perceived to have zero credit risk. Interest rate risk is present in all debt securities and depends on a variety of macroeconomic factors. The liquidity risk in the corporate securities market is higher as compared to that in case of government securities. Liquidity in the corporate debt market has been improving due to the entry of more players and due to various measures taken by the regulators in this direction over a period of time. SEBI's directive of a compulsory rating by a rating agency for any public issuance over 18 months, dematerialisation, entry of private insurance companies and growth of fixed income mutual funds have enhanced liquidity in the corporate debt market. The setting up of clearing corporations, real time gross settlement and electronic clearing system for government securities will considerably enhance the depth and width of the Indian debt markets and bring it at par with developed markets. The following table attempts to give a broad overview of the available instruments in the financial markets and their risk - return profile. The data is based on the market conditions as on the date of the Offer Document and may vary substantially depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The indicative yields and liquidity on various securities, currently, are as under : Issuer GOI GOI GOI Instrument Treasury Bill Treasury Bill Short Dated Maturity 91 days 364 days 1-3 Yrs Yields 5.25-5.35% 5.55-5.75% 5.50-6.50% Liquidity Medium Medium Medium to High
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Issuer GOI GOI GOI GOI GOI Corporate Debt Corporate Debt Corporate Debt Corporate Debt Corporate Debt Corporate Debt Corporate Debt Corporate Debt Corporate Debt
Instrument Medium Dated Medium Dated Long Dated Long Dated Reverse Repo Taxable Bonds (AAA) Taxable Bonds (AAA) Taxable Bonds (AAA) Taxable Bonds (AAA) Floating Rate Bond (AAA) Floating Rate Bond (AAA) Floating Rate Bond (AAA) CPs(P1+) CPs(P1+)
Maturity 3-5 Yrs 5-10 Yrs 10-15Yrs >15Yrs 1 day to 14 days 364 days
Yields 6.25-7.25% 6.50-7.50% 6.75-7.75% 7.25-8.25% 4.50-5.50% 5.90-6.25%
Liquidity Medium to High High High High High Low to Medium Low to Medium Medium
The Scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the Scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of the AMC or a Committee constituted in this behalf. The Fund under all its Scheme shall not own more than 10% of any company's paid up capital carrying voting rights Transfer of investments from one Scheme to another Scheme in the Mutual Fund is permitted provided: Such transfers are done at the prevailing market price for quoted instruments on spot basis (spot basis shall have the same meaning as specified by a Stock Exchange for spot transactions); and The securities so transferred shall be in conformity with the investment objective of the Scheme to which such transfer has been made.
1-3 Yrs
5.90-6.75%
3-5 Yrs
6.50-7.25%
5-10 Yrs
6.90-7.50%
Medium
The aggregate inter-scheme investment in line with the investment objectives, made by all the Schemes under the same management or in schemes under management of any other asset management company shall not exceed 5% of the Net Asset Value of the Fund. No investment management fees shall be charged for investing in other Schemes of the Fund or in the Schemes of any other Mutual Fund. The initial issue expenses in respect of any Scheme may not exceed 6% of the funds raised under that Scheme. The Fund shall get the securities purchased or transferred in the name of the Fund on account of the concerned Scheme, wherever investments are intended to be of a long-term nature. The Fund may buy and sell securities on the basis of deliveries and shall in all cases of purchases take delivery of relative securities and in all cases of sale, deliver the securities and will not make any short sales or engage in carry forward transaction or badla finance. Provided that the Mutual Fund shall enter into derivative transactions on a recognised stock exchange for the purpose of hedging and portfolio balancing, in accordance with the guidelines issued by SEBI. Pending deployment of funds of a Scheme in securities in terms of the investment objectives of the Scheme, the AMC can invest the funds of the Scheme in short term deposits of scheduled commercial banks . The Scheme shall not make any investment in: Any unlisted security of an associate or group company of the Sponsor; or Any security issued by way of private placement by an associate or group company of the Sponsor; or the listed securities of group companies of the Sponsor which is in excess of 25% of the net assets of the Scheme of the Mutual Fund.
364 days
NSE MIBOR + (0. 40-0.75%) NSE MIBOR + (0.40-1.00%) NSE MIBOR + (0.75-1.50%) 5.65-6.85% 5.95-6.25%
Low to Medium Low to Medium
1-3 Yrs
3-5 Yrs
Medium Medium Medium
3 months 1 Year
Investment Restrictions for the Scheme

All investments by the Scheme and the Mutual Fund, will always be within the investment restrictions as specified in the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. Pursuant to the Regulations, the following investment and other restrictions are presently applicable to the Scheme:
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The Scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorised to carry out such activity under the SEBI Act, 1992. Such investment limit may be extended to 20% of the NAV of the Scheme with the prior approval of the Board of Trustees and the Board of the AMC. Provided that, such limit shall not be applicable for investments in government securities and money market instruments. Provided further that investment within such limit can be made in mortgage backed securitised debt which are rated not below investment grade by a credit rating agency registered with SEBI.
The Scheme shall not invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any Company. The Scheme shall not invest more than 10% of its NAV in the unlisted equity shares or equity related instruments in case of the Scheme.
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The Fund shall not borrow except to meet temporary liquidity needs of the Fund for the purpose of repurchase / redemption of Units or payment of interest and dividend to the Unitholders. Provided that the Fund shall not borrow more than 20% of the net assets of any individual Scheme and the duration of the borrowing shall not exceed a period of 6 months. The entire Scheme's investments will be in transferable securities (whether in capital markets or money markets) or in privately placed debentures or securitised debt, or bank deposits or in money at call. Debentures, irrespective of any residual maturity period (above or below 1 year), shall attract the investment restrictions as applicable for debt instruments as specified under Clause 1 and 1A of the Seventh Schedule to the Regulations or as may be specified by SEBI from time to time. No loans for any purpose shall be advanced by the Scheme. The Fund may lend securities in accordance with the stock lending scheme of SEBI. The Scheme shall not invest in a fund of funds scheme. The Scheme will comply with any other regulations applicable to the investments of mutual funds from time to time.
price on Luxembourg stock exchange shall be used. If the GDR was not traded on Luxembourg stock exchange too, the last traded price on such other stock exchange as the AMC may deem appropriate shall be used for portfolio valuation, the intention being to provide fair valuation to the investors of the Scheme. In case of an ADR listed on more than one stock exchange the last traded price on NYSE shall be used for valuation. If the ADR is not traded on NYSE, the last traded price on NASDAQ shall be used for valuation and if the ADR is not traded on NASDAQ too, the last traded price on such other stock exchange as the AMC may deem appropriate shall be used for portfolio valuation, the intention being to provide fair valuation to the investors of the Scheme. In the absence of prices on any exchange on the concerned valuation date, the price prevailing at the close of business on the previous date of trade in such ADR/GDR shall be used for valuation provided that such previous date is not more than 30 days prior to the date of valuation. However, the AMC reserves the right to choose the price for valuation of ADRs/GDRs which may be different from the procedure given above depending upon the prevailing circumstances, the intention being to provide fair valuation to the investors of the Scheme. Such valuation procedure shall be ratified by the Trustees of the Fund. The AMC shall use the rates released by Reuters (rate as on the date of portfolio valuation) for the purpose of conversion of the last traded price for the purpose of portfolio valuation. The AMC retains the right to use the average of TT buy and sell USD / INR rates as released by banks / rates released by other sources as the AMC may deem reasonable in the absence of appropriate release from Reuters. In case such quotes are not available on any day, the foreign exchange rates as available for the immediately preceding day may be used. The AMC also reserves the right to choose appropriate rates for conversion of the last traded price for the purpose of valuation, depending upon the prevailing circumstances, the intention being to provide fair valuation to the investors of the Scheme. When a debt security (other than Government Securities) is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the principal stock exchange or any other stock exchange, as the case may be, on the earliest previous day may be used, provided such date is not more than 15 days prior to the valuation date.
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The Trustees may alter the above restrictions from time to time to the extent that changes in the Regulations may allow and as deemed fit in the general interest of the Unitholders.
Valuation of Assets and Net Asset Value

The NAV of the Units of the Scheme will be computed by dividing the net assets of the Scheme by the number of Units outstanding on the valuation date. The Fund shall value its investments according to the valuation norms, as specified in the Eighth Schedule of the Regulations, or such norms as may be prescribed by SEBI from time to time. The broad valuation norms are detailed below: Traded Securities l Traded securities shall be valued at the last quoted closing price on the Stock Exchange.
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When the securities are traded on more than one recognised stock exchange, the securities shall be valued at the official closing price on the stock exchange where the security is principally traded. It would be left to the AMC to select the appropriate stock exchange, and the AMC shall record the reasons for the selection and change if any in writing. There should, however, be no objection for all scrips being valued at the prices quoted on the stock exchange where a majority of the investments are principally traded. When on a particular valuation day, a security has not been traded on the principal stock exchange; the value at which it is traded on another stock exchange will be used. Trades in ADRs/GDRs shall be accounted for on the day following the trade on the relevant stock exchanges where such ADRs/GDRs are listed viz. New York Stock Exchange, NASDAQ, London Stock Exchange (LSE), Luxembourg Stock Exchange etc. The valuation of such investments shall be done at the last traded price of the previous day on the relevant exchange where the ADR/GDR is listed and traded. For instance, in case of GDR listed on LSE, the last traded price on LSE shall be used for the purpose of valuation. In case of GDRs listed on more than one foreign stock exchange, the scheme shall use the last traded price on LSE, in the absence of which last traded
When a debt security (other than Government Securities) is purchased by way of private placement, the value at which it was bought may be used for a period of 15 days beginning from the date of purchase.
Thinly Traded Securities Thinly Traded Equity / Equity Related Securities Thinly traded securities as defined in the Regulations shall be valued in the manner as specified in the guidelines issued by SEBI, as follows: When trading in an equity / equity related security (such as convertible debentures, equity warrants, etc.) in a month is both less than Rs. 5 lacs (Rupees Five Lakhs Only) and the total volume is less than 50,000 (Fifty Thousand Only) shares, it shall be considered as a thinly traded security and valued accordingly. For example, if the volume of trade is 100,000 and value is Rs. 400,000, the share does not qualify as thinly traded. Also if the
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volume traded is 40,000, but the value of trades is Rs. 600,000, the share does not qualify as thinly traded. In order to determine whether a security is thinly traded or not, the volumes traded in all recognised stock exchanges in India may be taken into account. Where a stock exchange identifies the "thinly traded" securities by applying the above parameters for the preceding calendar month and publishes / provides the required information along with the daily quotations, the same can be used by the Mutual Fund. If the share is not listed on the stock exchanges which provide such information, then it will be obligatory on the part of the mutual fund to make its own analysis in line with the above criteria to check whether such securities are thinly traded which would then be valued accordingly. In case trading in an equity security is suspended up to 30 days, then the last traded price would be considered for valuation of that security. If an equity security is suspended for more than 30 days, then the AMC / Trustees will decide the valuation norms to be followed and such norms would be documented and recorded. Thinly Traded Debt Securities Thinly traded securities as defined in the Regulations shall be valued in the manner as specified in the guidelines issued by SEBI, as follows: A debt security (other than Government Securities) shall be considered as a thinly traded security if on the valuation date, there are no individual trades in that security in marketable lots (currently Rs. 5 crore) on the principal stock exchange or any other stock exchange. A thinly traded debt security as defined above would be valued as per the norms set for non-traded debt security. Non-Traded Securities When a security (other than Government Securities) is not traded on any stock exchange for a period of 30 days prior to the valuation date, the scrip must be treated as a 'non traded' security. Valuation Of Non-Traded / Thinly Traded Securities Non-traded / thinly traded securities shall be valued "in good faith" by the AMC on the basis of the valuation principles laid down below: Non-traded / Thinly Traded Equity Securities Based on the latest available Balance Sheet, net worth shall be calculated as follows: Net Worth per share = [share capital reserves (excluding revaluation reserves) - miscellaneous expenditure and debit balance in P&L A/c] divided by number of paid up shares.
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In case where the latest balance sheet of the company is not available within 9 months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero. In case an individual security accounts for more than 5% of the total assets of the Scheme, an independent valuer shall be appointed for the valuation of the said security.
To determine if a security accounts for more than 5% of the total assets of the Scheme, it should be valued by the procedure above and the proportion which it bears to the total net assets of the Scheme to which it belongs would be compared on the date of valuation. Non-Traded / Thinly Traded Debt Securities of Upto 182 Days to Maturity As the money market securities are valued on the basis of amortisation (cost plus accrued interest 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 instruments) a similar process should be adopted for non-traded debt securities with residual maturity of upto 182 days, in the absence of any other standard benchmarks in the market. Debt securities purchased with residual maturity of upto 182 days are to be valued at cost (including accrued interest till the beginning of the day) plus the difference between the redemption value (inclusive of interest) and cost spread uniformly over the remaining maturity period of the instrument. In case of a debt security with maturity greater than 182 days at the time of purchase, the last valuation price plus accrued interest should be used instead of purchase cost. All other non-traded Non-Government debt instruments shall be valued using the method suggested below. Non-Traded / Thinly Traded Debt Securities of Over 182 Days to Maturity For the purpose of valuation, all non traded debt securities would be classified into "investment grade" and "non investment grade" securities based on their credit ratings. The non-investment grade securities would further be classified as "performing" and "non performing" assets.
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All non-government investment grade debt securities, classified as not traded, shall be valued on yield to maturity basis as described below. All non-government non-investment grade performing debt securities would be valued at a discount of 25% to the face value. All non-government non-investment grade non-performing debt securities would be valued based on the provisioning norms.
Average capitalisation rate (P/E ratio) for the industry based upon either BSE or NSE data (which should be followed consistently and changes, if any noted with proper justification thereof) shall be taken and discounted by 75% i.e. only 25% of the industry average P/E shall be taken as capitalisation rate (P/E ratio). Earnings per share of the latest audited annual accounts will be considered for this purpose. The value as per the net worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 10% for ill-liquidity so as to arrive at the fair value per share. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning.
The approach in valuation of non traded debt securities is based on the concept of using spreads over the benchmark rate to arrive at the yields for pricing the non traded security. The yields for pricing the non traded debt security would be arrived at using the process as defined below. Step A A risk free benchmark yield is built using the government securities (GOI Securities) as the base. GOI Securities are used as the benchmarks as they are traded regularly, free of credit risk and traded across different maturity spectrums every week.
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Step B A matrix of spreads (based on the credit risk) are built for marking up the benchmark yields. The matrix is built based on traded corporate paper on the wholesale debt segment of an appropriate stock exchange and the primary market issuances. The matrix is restricted only to investment grade corporate paper. Step C The yields as calculated above are marked-up / marked-down for illiquidity risk. Step D The yields so arrived are used to price the portfolio. Methodology Construction of Risk Free Benchmark Using Government of India dated securities, the benchmark shall be constructed as below: Government of India dated securities will be grouped into the following duration buckets viz., 0.5-1 years, 1-2 years, 2-3 years, 3-4 years, 4-5 years, 5-6 years and 6 years and the volume weighted yield would be computed for each bucket. These duration buckets may be changed to reflect the market value more closely by any agency suggested by AMFI giving benchmark yield / matrix of spreads over benchmark yield. Accordingly, there will be a benchmark YTM for each duration bucket. The benchmark as calculated above will be set at least weekly, and in the event of any significant movement of prices of Government securities on account of any event impacting interest rates on any day such as change in the RBI policies, the benchmark will be reset to reflect any change in the market conditions. Note: The concept of duration over tenor has been chosen in order to capture the reinvestment risk. It is intended to gradually move towards a methodology that incorporates the continuous curve approach for valuation of such securities. However, in view of the current lack of liquidity in the corporate bond markets, a continuous curve approach to valuation would be necessarily based on limited data points, and this would result in out of line valuations. As an interim methodology therefore it is proposed that the Duration Bucket approach be adopted and continuously tracked in order to fine-tune the duration buckets on a periodic basis. Over the next few years it is expected that with the deepening of the secondary market trading, it would be possible to make a gradual move from the Duration Bucket approach towards a continuous curve approach. Building a Matrix of Spreads for Marking-up the Benchmark Yield Mark up for credit risk over the risk free benchmark YTM as calculated in step A, will be determined using the trades of corporate debentures / bonds of different ratings. All trades on appropriate stock exchange during the fortnight prior to the benchmark date will be used in building the corporate YTM and spread matrices. Initially these matrices will be built only for corporate securities of investment grade. The matrices are dynamic and the spreads will be computed every week. The matrix will be built for all duration buckets for which the benchmark GOI matrix is built to effectively link the corporate matrix with the GOI securities matrix. Accordingly:
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Where there are no secondary trades on the appropriate stock exchange in a particular rating category and no primary market issuances during the fortnight under consideration, then trades on appropriate stock exchange during the 30 days period prior to the benchmark date will be considered for computing the average YTM for such rating category; If the matrix cannot be populated using any or all of the above steps, then credit spreads from trades on appropriate stock exchange of the relevant rating category over the AAA trades will be used to populate the matrix; In each rating category, all outliers will be removed for smoothening the YTM matrix; Spreads will be obtained by deducting the YTM in each duration category from the respective YTM of the GOI securities; In the event of lack of trades in the secondary market and the primary market the gaps in the matrix would be filled by extrapolation. If the spreads cannot be extrapolated for the reason of practicality, carrying the spreads from the last matrix will fill the gaps in the matrix.
Mark-up / Mark-down Yield The Yields calculated would be marked-up / marked-down to account for the ill-liquidity risk, promoter background, finance company risk and the issuer class risk. As the level of ill-liquidity risk would be higher for non rated securities the marking process for rated and non rated securities would be differentiated as follows: Adjustments for Securities rated by External Rating Agencies The Yields so derived out of the above methodology could be adjusted to account for risk mentioned above by an appropriate discount or premium as may be required. The range of the markups for both discount as well as premium is given below: Premium A Discretionary premium of up to -50 Basis Points for securities having a duration of up to 2 years and up to - 25 Basis Points for securities having duration higher than 2 years will be permitted to be provided for the above mentioned types of risks. The rationale for the above discount structure is to take cognizance of the differential interest rate risk of the securities. This structure will be reviewed periodically. Discount SEBI has revised the discretionary discount limits as below: Category Rated Instruments with duration up to 2 years Rated Instruments with duration over 2 years Discretionary discount over benchmark yield in basis points Discretionary Discount of up to +100 Discretionary Discount of up to +75
All traded paper (with minimum traded value of Rs. 1 crore) (Rupees One Crore Only) will be classified by their ratings and grouped into 7 duration buckets; for rated securities, the most conservative publicly available rating will be used; For each rating category, average volume weighted yield will be obtained both from trades on the appropriate stock exchange and from the primary market issuances;
Adjustments for Internally Rated Securities To value an unrated security, the fund manager has to assign an internal credit rating, which will be used for valuation. Since unrated instruments tend to be more illiquid than rated securities, the yields would be mandatorily marked up by adding +50 basis point for securities having a duration of up to two years and +25 basis point for securities having duration of higher than two years to account for the illiquidity risk.
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The yields derived from the above methodology could be adjusted to account for risk mentioned above. SEBI has revised the discretionary discount limits as below :
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traded securities and with an appropriate discount for a lower liquidity. While investments in call money, bills purchased under rediscounting scheme and short term deposits with banks shall be valued at cost plus accrual; other money market instruments shall be valued at the yield at which they are currently traded. For this purpose, instruments not traded for a period of 7 days will be valued at cost plus interest accrued 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 instruments.
Category Unrated Instruments with duration up to 2 years Unrated Instruments with duration over 2 years
Discretionary discount over benchmark yield in basis points Discretionary Discount of up to +50 over and above the mandatory Discount of +50 Discretionary Discount of up to +50 over and above the mandatory Discount of +25
The benchmark yield / matrix of spreads over benchmark yield obtained from any agency suggested by AMFI as a provider of benchmark yield / matrix of spreads over benchmark yield to mutual funds, must be applied for valuation of securities on the day on which the bench mark yield / matrix of spreads over benchmark yield is released by the aforesaid agency. Valuation of securities with Put / Call options The option embedded securities would be valued as follows: Securities with Call option The securities with call option shall be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option. In case there are multiple call options, the lowest value obtained by valuing to the various call dates and valuing to the maturity date is to be taken as the value of the instrument. Securities with Put option The securities with put option shall be valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to put option. In case there are multiple put options, the highest value obtained by valuing to the various put dates and valuing to the maturity date is to be taken as the value of the instruments. Securities with both Put and Call option on the same day The securities with both Put and Call option on the same day would be deemed to mature on the Put / Call day and would be valued accordingly. Government securities Government securities will be valued as per the prices for Government Securities released by an agency suggested by AMFI for the sake of uniformity in calculation of NAVs. Illiquid Securities l All funds shall disclose as on March 31 and September 30 the scheme-wise total illiquid securities in value and percentage of the net assets while making disclosures of half yearly portfolios to the Unitholders. In the list of investments, an asterisk mark shall also be given against all such investments, which are recognised as illiquid securities.
l
Valuation of "Repo" Where instruments have been bought on `repo' basis, the instrument must be valued at the resale price after deduction of applicable interest up to date of resale. Where an instrument has been sold on a `repo' basis, adjustment must be made for the difference between the repurchase price (after deduction of applicable interest up to date of repurchase) and the value of the instrument. If the repurchase price exceeds the value, the depreciation must be provided for and if the repurchase price is lower than the value, credit must be taken for the appreciation. Valuation of unlisted equity shares Unlisted equity shares of a company shall be valued "in good faith" on the basis of the valuation principles laid down below:
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Based on the latest available audited balance sheet, net worth shall be calculated as lower of the following: Net worth per share = [share capital plus free reserves (excluding revaluation reserves) minus Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] divided by Number of Paid up Shares. After taking into account the outstanding warrants and options, Net worth per share shall again be calculated and shall be = [share capital plus consideration on exercise of Option / Warrants received / receivable by the Company plus free reserves (excluding revaluation reserves) minus Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] divided by {Number of Paid up Shares plus Number of Shares that would be obtained on conversion / exercise of Outstanding Warrants and Options}. The lower of the above shall be used for calculation of net worth per share and for further calculation to arrive at the fair value per share as stated below.
Average capitalisation rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted with proper justification thereof) shall be taken and discounted by 75% i.e. only 25% of the Industry average P/E shall be taken as capitalisation rate (P/E ratio). Earnings per share of the latest audited annual accounts will be considered for this purpose. The value as per the net worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 15% for illiquidity so as to arrive at the fair value per share.
The Mutual Fund is not allowed to transfer illiquid securities among its Scheme.
Fixed Income and Money Market Securities l Debt instruments shall generally be valued on a yield to maturity basis on the basis of the capitalisation factor for comparable
The above methodology for valuation shall be subject to the following conditions:
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All calculations as aforesaid shall be based on audited accounts.
HSBC Mutual Fund
Offer Document
In case where the latest balance sheet of the company is not available within 9 months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero. If the net worth of the company is negative, the share would be marked down to zero. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. In case an individual security accounts for more than 5% of the total assets of the Scheme, an independent valuer shall be appointed for the valuation of the said security. To determine if a security accounts for more than 5% of the total assets of the Scheme, it should be valued in accordance with the procedure as mentioned above on the date of valuation.
recorded in the books not later than the first valuation date following the date of transaction. If this is not possible, given the frequency of NAV disclosure, the recording may be delayed up to a period of 7 days following the date of the transaction, provided as a result of such non recording, the NAV calculation shall not be affected by more than 1%. In case the NAV of the Scheme differs by more than 1%, due to non - recording of transactions, the investors or Scheme as the case may be, shall be paid the difference in amount as follows:l
If the investors are allotted units at a price higher than NAV or are given a price lower than NAV at the time of sale of their Units, they shall be paid the difference in amount by the Scheme. If the investors are charged lower NAV at the time of purchase of their Units or are given higher NAV at the time of sale of their Units, the AMC shall pay the difference in amount to the Scheme. The AMC may recover the difference from the investors.
At the discretion of the AMC and with the approval of the Trustees, an unlisted equity share may be valued at a price lower than the value derived using the aforesaid methodology. Valuation of convertible debentures and bonds In respect of convertible debentures and bonds, the non-convertible and convertible components shall be valued separately. The nonconvertible component shall be valued on the same basis as would be applicable to a debt instrument. The convertible component shall be valued on the same basis as would be applicable to an equity instrument. If, after conversion the resultant equity instrument would be traded pari passu with an existing instrument which is traded, the value of the latter instrument can be adopted after an appropriate discount for the non-tradability of the instrument during the period preceding the conversion. While valuing such instruments, the fact whether the conversion is optional will also be factored in. Valuation of warrants In respect of warrants to subscribe for shares attached to instruments, the warrants shall be valued at the value of the share which would be obtained on exercise of the warrant as reduced by the amount which would be payable on exercise of the warrant. A discount similar to the discount to be determined in respect of convertible debentures (as referred in valuation of convertible debentures and bonds above) shall be deducted to account for the period which must elapse before the warrant can be exercised; Valuation of Derivative Products l The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the Regulations.
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The valuation guidelines as outlined above are as per prevailing Regulations and are subject to change from time to time in conformity with changes made by SEBI. NAV of Units under the Scheme shall be calculated as shown below: Market or Fair Value of Schemes investments (+) Current Assets (-) Current Liabilities and Provisions ______________________________________ No. of Units outstanding under Scheme The first NAV will be calculated and announced not later than 30 days from the close of the IPO. Subsequently, the NAV of the Scheme will be calculated as of the close of every Business Day. NAVs of the Scheme shall be disclosed up to 4 decimal places. The valuation of the Scheme' assets and calculation of the Scheme' NAV shall be subject to audit on an annual basis and such regulations as may be prescribed by SEBI from time to time.
NAV (Rs.) =
Accounting Policies and Standards

In accordance with the Regulations, the AMC will follow the accounting policies and standards, as detailed below:
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The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the Regulations.
The AMC, for the Scheme and its Plan(s), shall keep and maintain proper books of account, records and documents, so as to explain its transactions and to disclose at any point of time the financial position of the Scheme and, in particular, give a true and fair view of the state of affairs of the Fund. For the purposes of the financial statements, the Scheme and its Plan(s) shall mark all investments to market and carry investments in the balance sheet at market value. However, since the unrealised gain arising out of appreciation on investments cannot be distributed, provision shall be made for exclusion of this item when arriving at distributable income. In respect of all interest-bearing investments, income shall be accrued on a day to day basis as it is earned. Therefore, when such investments are purchased, interest paid for the period from the last interest due date up to the date of purchase should not be treated as a cost of purchase but shall be debited to Interest Recoverable Account. Similarly, interest received at the time of sale for the period from the last interest due date
Expenses and Incomes Accrued All expenses and incomes accrued up to the valuation date shall be considered for computation of NAV. For this purpose, major expenses like management fees and other periodic expenses would be accrued on a day to day basis. The minor expenses and income will be accrued on a periodic basis, provided the non-daily accrual does not affect the NAV calculations by more than 1%. Changes in securities and in number of Units Any changes in securities and in the number of Units will be
HSBC Mutual Fund
Offer Document Guidelines for Identification and Provisioning for Non-Performing Assets (Debt Securities)
Definition of a Non-Performing Asset (NPA) An 'asset' shall be classified as non-performing, if the interest and / or principal amount have not been received or remained outstanding for 1 quarter from the day such income / installment has fallen due. Effective date for classification and provisioning of NPAs The definition of NPA may be applied after a quarter past due date of the interest. For e.g. if the due date for interest is 30.06.2001, it will be classified as NPA from 01.10.2001. Treatment of income accrued on the NPA and further accruals After the expiry of the 1st quarter from the date the income has fallen due, there will be no further interest accrual on the asset i.e. if for example, the due date for interest falls on 30.06.2001 and if the interest is not received, accrual will continue till 30.09.2001 after which there will be no further accrual of income. In short, taking the above example, from the beginning of the 2nd quarter there will be no further accrual on income. On classification of the asset as NPA from a quarter past due date of interest, all interest accrued and recognised in the books of accounts of the Fund till the date, should be provided for. For e.g. if interest income falls due on 30.06.2001, accrual will continue till 30.09.2001 even if the income as on 30.06.2001 has not been received. Further, no accrual will be done from 01.10.2001 onwards. Full provision will also be made for interest accrued and outstanding as on 30.06.2001. Provision for NPAs - Debt Securities Both secured and unsecured investments once they are recognised as NPAs call for provisioning in the same manner. The value of the asset must be provided in the following manner or earlier at the discretion of the Fund. The Fund will not have discretion to extend the period of provisioning. The provisioning against the principal amount or installments should be made at the following rates irrespective of whether the principal is due for repayment or not. 10% of the book value of the asset should be provided for after 6 months past due date of interest i.e. 3 months from the date of classification of the asset as NPA. 20% of the book value of the asset should be provided for after 9 months past due date of interest i.e. 6 months from the date of classification of the asset as NPA. Another 20% of the book value of the assets should be provided for after 12 months past due date of interest i.e. 9 months from the date of classification of the asset as NPA. Another 25% of the book value of the assets should be provided for after 15 months past due date of interest i.e. 12 months from the date of classification of the asset as NPA. The balance 25% of the book value of the asset should be provided for after 18 months past due date of the interest i.e. 15 months from the date of classification of the assets as NPA. Book value for the purpose of provisioning for NPAs shall be taken as a value determined as per the prescribed valuation method.
up to the date of sale must not be treated as an addition to sale value but shall be credited to Interest Recoverable Account.
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In determining the holding cost of investments and the gains or loss on sale of investments, the "average cost" method shall be followed for each security. Transactions for purchase or sale of investments shall be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisition through private placement or purchases or sales through private treaty, the transaction would be recorded, in the event of a purchase, as of the date on which the Scheme obtains an enforceable obligation to pay the price or, in the event of a sale, when the Scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold. Where income receivable on investments has accrued but has not been received for a period specified in the guidelines issued by SEBI, provision shall be made by debit to the revenue account the income so accrued in the manner specified by guidelines issued by SEBI. When Units are sold in the Scheme and its Plans, an appropriate part of the sale proceeds shall be credited to an Equalisation Account and when Units are repurchased an appropriate amount shall be debited to Equalisation Account. The net balance on this account shall be credited or debited to the Revenue Account. The balance on the Equalisation Account debited or credited to the Revenue Account shall not decrease or increase the net income of the Fund but is only an adjustment to the distributable surplus. It shall therefore be reflected in the Revenue Account only after the net income of the Fund is determined. When Units are sold, after considering the equalisation as above, the difference between the sale price and the face value of the Unit, if positive, shall be credited to reserves and if negative, shall be debited to reserve, the face value being credited to Capital Account. Similarly, when the Units are repurchased, after considering the equalisation as above, the difference between the purchase price and face value of the Unit, if positive, shall be debited to reserves and, if negative, shall be credited to reserves, the face value being debited to the Capital Account. The cost of investments acquired or purchased shall include brokerage, stamp charges and any charge customarily included in the broker's bought note. In respect of privately placed debt instruments any front-end discount offered shall be reduced from the cost of the investment. Underwriting commission shall be recognised as revenue only when there is no devolvement on the Scheme and its Plans. Where there is devolvement on the Scheme and the Plans thereunder, the full underwriting commission received and not merely the portion applicable to the devolvement shall be reduced from the cost of the investment.
The accounting policies and standards outlined above are as per the existing Regulations and are subject to change as per changes in the Regulations.
HSBC Mutual Fund
Offer Document
This can be explained by an illustration: Let us consider that interest income is due on a half yearly basis and the due date falls on 30.06.2002 and the interest is not received till 1st quarter after due date i.e. 30.09.2002. This provisioning will be done in following phased manner: 10% provision 01.01.2003 6 months past due date of interest i.e. 3 months from the date of classification of asset as NPA (01.10.2002)
During this period of two quarters although the asset is classified as NPA no provision needs to be made for the principal if the same is not due and outstanding. If part payment is received towards principal, the asset continues to be classified as NPA and provisions are continued as per the norms set at 'Provision for NPAs - Debt Securities' above. Any excess provision will be written back.
20% provision 01.04.2003 20% provision 01.07.2003 25% provision 01.10.2003 25% provision 01.01.2004 Thus, 1 1/2 years past the due date of income or 1 1/4 year from the date of classification of the 'asset' as an NPA, the 'asset' will be fully provided for. If any installment is fallen due, during the period of interest default, the amount of provision should be installment amount or above provision amount, whichever is higher. Reclassification of assets Upon reclassification of assets as 'performing assets':
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Classification of Deep Discount Bonds as NPAs Investments in Deep Discount Bonds can be classified as NPAs, if any two of the following conditions are satisfied:
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If the rating of the Bond comes down to grade 'BB' or below. If the company is defaulting in their commitments in respect of other assets, if available. Full net worth erosion.
Provision should be made as per the norms set at 'Provision for NPAs - Debt Securities' above as soon as the asset is classified as NPA. Full provision can be made if the rating comes down to grade 'D'. Reschedulement of an asset In case any company defaults either interest or principal amount and the Fund has accepted a Reschedulement of the schedule of payments, then the following practice may be adhered to:
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In case a company has fully cleared all the arrears of interest, the interest provisions can be written back in full. The asset will be reclassified as performing on clearance of all interest arrears and if the debt is regularly serviced over the next two quarters. In case the company has fully cleared all the arrears of interest, the interest not credited on accrual basis would be credited at the time of receipt. The provision made for the principal amount can be written back in the following manner: l
In case it is a first reschedulement and only interest is in default, the status of the asset namely, 'NPA' may be continued and existing provisions should not be written back. This practice should be continued for two quarters of regular servicing of the debt. Thereafter, this is classified as 'performing asset' and the interest provided may be written back. If the reschedulement is done due to default in interest and principal amount, the asset should be continued as nonperforming for a period of 4 quarters, even though the asset is continued to be serviced during these 4 quarters regularly. Thereafter, this can be classified as 'performing asset' and all the interest provided till such date should be written back. If the reschedulement is done for a second / third time or thereafter, the characteristic of NPA should be continued for 8 quarters of regular servicing of the debt. The provision should be written back only after it is reclassified as 'performing asset'.
100% of the asset provided for in the books will be written back at the end of the 2nd calendar quarter where the provision of principal was made due to the interest defaults only. 50% of the asset provided for in the books will be written back at the end of the 2nd calendar quarter and 25% after every subsequent quarter where both installments and interest were in default earlier.
An asset is reclassified, as 'standard asset' only when both overdue interest and overdue installments are paid in full and there is satisfactory performance for a subsequent period of 6 months.
Disclosure in the Half Yearly Portfolio Reports The Mutual Fund shall make scripwise disclosures of NPAs on half yearly basis along with the half yearly portfolio disclosure. The total amount of provisions made against the NPAs shall be disclosed in addition to the total quantum of NPAs and their proportion of the assets of the Mutual Fund Scheme. In the list of investments an asterisk mark shall be given against such investments which are recognised as NPAs. Where the date of redemption of an investment has lapsed, the amount not redeemed shall be shown as 'Sundry Debtors' and not investment provided that where an investment is redeemable by installments that will be shown as an investment until all installments have become overdue.
Receipt of past dues When the Fund has received income / principal amount after their classifications as NPAs:
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For the next 2 quarters, income should be recognised on cash basis and thereafter on accrual basis. The asset will be continued to be classified as NPA for these two quarters.
HSBC Mutual Fund
Offer Document
SECTION III
UNITS & THE INITIAL OFFER
Initial Offer
The offer is being made for subscription of Units of HSBC Midcap Equity Fund which is an open-ended Growth Scheme. the suspension of subscriptions, switches into the Scheme takes effect. The suspension will be for a minimum period of 1 month or until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason, whichever is later. The suspension will not however affect Dividend reinvestment options, Systematic Investment Plans, Systematic Transfer Plans or other standing instructions which have been entered into by the investors at any time prior to the date from which the suspension takes effect. The Trustees / AMC also reserve the right to review the amount, frequency and methodology by which the suspension of further sale of units will be enforced. All decisions of the Trustees / AMC will take effect prospectively and be communicated to the investors from time to time by arranging to display a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations. The above can be explained by the following illustration : Assets under management cross Rs. 700 crores - March 14, 2005. AMC learns of the excess : at end of day - March 14, 2005 / opening March 15, 2005. AMC takes steps to issue notices at ISCs and to issue advertisement - March 15, 2005. Advertisement suspending subscriptions, switches until further notice, appears in the newspapers - March 17, 2005. Further subscriptions, switches into the Scheme will cease to be accepted from - March 18, 2005. Suspension will be for a minimum period of 1 month ie, up to April 17, 2005. If on April 17, 2005, the assets under management do not fall below Rs. 700 crores, the suspension continues. Assets under management fall below Rs. 700 crores - April 17, 2005 AMC learns of the fall : end of day - April 17, 2005 / opening April 18, 2005. AMC takes steps to issue notices at ISCs and to issue advertisement - April 18, 2005. Advertisement allowing subscriptions, switches appears in the newspapers - April 20, 2005. Further subscriptions, switches into the Scheme will be accepted from - April 21, 2005. Assets under management fall below Rs. 700 crores - anytime after April 17, 2005 (T day). AMC learns of the fall : end of day - T day / opening T+1 day. AMC takes steps to issue notices at ISCs and to issue advertisement - T+1 day. Advertisement allowing subscriptions, switches appears in the newspapers - T+3 day. Further subscriptions, switches into the Scheme will be accepted from - T+4 day. Note : all dates mentioned in the illustration are assumed to be Business Days
Initial Offer Period

The Initial Offer Period for the Scheme will commence from April 12, 2005 and close on May 3, 2005. The earliest closing date will be April 13, 2005. It is the intent of the Trustees / AMC to collect subscriptions in the Scheme of Rs. 700 crores with a view to protect the interest of the unit holders from the liquidity risk inherent to a Midcap Fund. Towards this intent, the Trustees / AMC reserve the right to announce closure of the Initial Public Offer on any date commencing from the Earliest Closing Date and extending up to the Final Closing Date of the Offer. The announcement will be made by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to closing the Initial Public Offer. However, as it is not possible to ensure that the amount of subscriptions received in the Initial Public Offer would be exactly Rs. 700 crores, it is possible that the AMC collects subscriptions over Rs. 700 crores. Subject to the applications being in accordance with the terms of this Offer, full and firm allotment will be made to all applicants. The excess amount collected in the IPO would be retained in the Fund but further subscriptions into the Fund on an on-going basis would be temporarily suspended until the assets under management fall below Rs. 700 crores, due to redemptions, market forces or for any other reason. All decisions of the Trustees / AMC will take effect prospectively and will be communicated by displaying a notice in the Investor Service Centres and issuing advertisements in 2 newspapers, at least 1 day prior to the decision taking effect. All decisions of the Trustees / AMC will be made in the interest of the investors and will be subject to the SEBI Regulations.
Initial Offer Price

The initial offer price of Units of the Scheme will be Rs. 10/- per unit, for cash at face value plus applicable load.
Extension of the Initial Offer Period

The Trustees reserve the right to extend the closing date of the Initial Offer Period, subject to the condition that the subscription to the Initial Offer shall not be kept open for more than 30 days.
Minimum Subscription Amount

The minimum subscription (target) amount for the HSBC Midcap Equity Fund shall be Rs. 1 Crore. In accordance with the SEBI Regulations, if the Mutual Fund fails to collect the minimum subscription amount of Rs. 1 crore (Rupees One Crore Only) in the HSBC Midcap Equity Fund, the Mutual Fund and the AMC shall be liable to refund the subscription amount within a period of 6 weeks from the date of closure of subscription list to the applicants of the Scheme.
Ongoing Subscriptions
The Trustees / AMC reserve the right to temporarily suspend subscriptions, switches into the Scheme, if the assets under management of the Scheme exceeds Rs. 700 crores. However, as it may not be possible to ensure that the assets under management does not exceed Rs. 700 crores at the point of time of subscription, any excess amounts collected in the Scheme would be retained until
HSBC Mutual Fund
Offer Document Offer Price for On-going Subscriptions

The Scheme will offer for sale and repurchase, Units on every Business Day not later than 30 days after the close of the Initial Offer Period. The Units of the Scheme shall be available for subscription at Applicable NAV based prices, subject to prevalent load provisions, if any on every business day not later than 30 days after the close of the Initial Offer Period.
Indication not made Scheme Name Dividend / Growth Option / Sub-options Dividend Payout / Reinvestment Mode of holding (in cases where there are more than one applicant)
Default Application Rejected Growth Option / Sub-option Dividend Reinvestment Joint
Minimum Amount for Application

Minimum Application amounts under the Scheme / Option(s) shall be as under : Scheme Minimum Application Amount (Rs.) 5000 Additional investment (Re.) 1
Who can apply?

The following persons are eligible and may apply for subscription to the Units of the Scheme (subject, wherever relevant, to purchase of units of mutual funds being permitted and duly authorised under their respective constitutions, charter documents, corporate / other authorisations and relevant statutory provisions etc):
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HSBC Midcap Equity Fund
The AMC reserves the right to change the minimum application amount from time to time.
Indian resident adult individuals either singly or jointly. Minor through parent / lawful guardian. Companies, bodies corporate, public sector undertakings, association of persons, bodies of individuals, societies registered under the Societies Registration Act, 1860, mutual fund schemes (so long as the purchase of units is permitted under the respective constitutions). Religious and Charitable Trusts, Wakfs or endowments of private trusts (subject to receipt of necessary approvals as required) and Private Trusts authorised to invest in mutual fund schemes under their trust deeds. Partnership Firms. Karta of Hindu Undivided Family (HUF). Banks (including Co-operative Banks and Regional Rural Banks) & Financial Institutions. Non-resident Indians (NRIs) / Persons of Indian Origin on full repatriation basis (subject to RBI approval, if required) or on non-repatriation basis. Foreign Institutional Investors (FIIs) registered with SEBI on full repatriation basis (subject to RBI approval, if required). Army, Air Force, Navy and other para-military funds and eligible institutions. Scientific and Industrial Research Organisations. Provident / Pension / Gratuity and such other Funds as and when permitted to invest. International Multilateral Agencies approved by the Government of India / RBI. Other Schemes of HSBC Mutual Fund subject to the conditions and limits prescribed in SEBI Regulations. Trustees, AMC or Sponsor or their associates (if eligible and permitted under prevailing laws), may subscribe to the Units under the Scheme.
Allotment and Refund

All applicants will receive full and firm allotment of Units, provided the applications are complete in all respects and are found to be in order. The Trustees retain the sole and absolute discretion to reject any application. The process of allotment of Units and mailing of account statements reflecting the allotments will be completed within 30 days from the date of closure of the Initial Offer Period. In addition to the above, refund of subscription money to applicants whose applications are invalid for any reason whatsoever will commence immediately after the allotment process is completed. No interest will be payable on any subscription money refunded within 6 weeks from the closure of the Initial Offer Period. Interest on subscription amount will be payable for amounts refunded later than 6 weeks from the closure of the Initial Offer Period at the rate of 15% per annum for the period in excess of 6 weeks and will be charged to the AMC. Refund orders will be marked "A/c. payee only" and will be in favour of and be despatched to the Sole / First Applicant, by registered post
Options offered under the Scheme

Under HMEF investors will have a choice of two Options viz. Dividend Option and Growth Option. Dividend Option Under the Dividend Option, dividend shall be distributed subject to availability of distributable profits, as computed in accordance with SEBI Regulations. Investors in HSBC Midcap Equity Fund have the choice of opting for either payout or reinvestment of the dividends. The Trustees reserve the right of dividend declaration. Growth Option Under this Option, income earned on the Scheme's corpus will remain invested in the Scheme and will be reflected in the Net Asset Value (NAV). Unitholders who opt for this Option will not receive any dividend in normal circumstances. Investors should indicate the Scheme and / or Option etc., wherever applicable, for which the subscription is made by indicating the choice in the appropriate box provided for this purpose in the Application Form. In case of valid applications received, without indicating the Scheme and / or Option etc. the following defaults will be flagged off :
Note :
Subscriptions from residents in the United States of America and Canada shall not be accepted by the Schemes of HSBC Mutual Fund. The Fund reserves the right to include / exclude new / existing
HSBC Mutual Fund
Offer Document
categories of investors to invest in the Scheme from time to time, subject to SEBI Regulations and other prevailing statutory regulations, if any.
mention their bank name, bank account number, branch address, account type in their applications for subscription or repurchase of Units. PAN of Sole / First Applicant, Second Applicant and Third Applicant must be mentioned if the amount invested is Rs. 50,000/- or more irrespective of mode of holding. In case a person does not have a PAN while entering such a transaction, he shall make a declaration in Form No. 60 /61 (as may be applicable). Applications without this information will be rejected as per the presently applicable regulations. It is also to be noted that furnishing an incorrect PAN or not furnishing these details could invite a penalty of Rs. 10,000, as per the provisions of the Income Tax Act, 1961. PAN must be mentioned in the transaction request by an investor if there is a payment of an amount of Rs. 50000 or more to a Mutual Fund for purchase of its units. In case such transaction is entered into by a minor who does not have a PAN, he shall quote the PAN of his father or mother or guardian, as the case may be. The investor is compulsorily required to provide a copy of the PAN Card / PAN Letter / Copy of assessment order/ refund order from the Income Tax department mentioning the PAN. In case a person does not have a PAN while entering such a transaction, he shall make a declaration in Form No. 60 /61 (as may be applicable). Necessary supporting documents required with the Forms are to be submitted by the investor. SEBI has issued the Securities and Exchange Board of India (Central Database of Market Participants) Regulations, 2003 which interalia require that specified intermediaries, other entities, specified listed companies and specified investors shall make application for allotment of Unique Identification Numbers (UIN) for itself and for its related persons in accordance with these regulations. Vide circular MRD/DOP/MAPIN/Cir -26/2004 dated August 16, 2004, SEBI has inter-alia prescribed that no specified investor being a body corporate shall buy, sell or deal in units of mutual fund unless such specified investor, its promoter and directors have been allotted UIN by 31st December 2004. Further vide circular MAPIN/Cir-37/2004 dated October 27, 2004 SEBI has interalia specified that all resident investors not being body corporate who enter into any transaction in units of mutual funds of values Rs. 100000 or more are required to obtain a UIN before March 31, 2005. SEBI vide Press Release PR-48/2005 dated February 24, 2005 has extended the date to December 31, 2005. Foreign institutional investor, sub-accounts and foreign venture capital investors are also required to obtain a UIN before March 31, 2005. HSBC Mutual Fund shall be acting in accordance with the rules and regulations as may be prescribed by SEBI in this regard. An application made may be accepted or rejected in the sole and absolute discretion of the Trustees. The Trustees may reject any application for purchase of Units, if in the opinion of the Trustees, increasing the size of any or all of the Scheme's Unit capital is not in the general interest of the Unitholders, or the Trustees for any other reason believe it would be in the best interest of the Scheme or its Unitholders to accept / reject such an application. Provided always that the Trustees' rights will be subject to applicable SEBI Regulations, if any.
How to apply?
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The Application Form for the sale of Units of the Scheme will be available at the Investor Service Centres / Designated Collection Centres / Distributors. Payment should be made by cheque or bank draft drawn on any bank which is situated at and is a member of the Banker's Clearing House located at the place where the application is submitted or in a manner acceptable to the AMC, which is evidenced by receipt of credit in Bank Account of the Fund. Outstation cheques will not be accepted and applications accompanied by such cheques are liable to be rejected. No cash, money orders and postal orders will be accepted. Post dated cheques will not be accepted other than in the case of Systematic Investment Plans or as may be decided by the AMC from time to time.
Bank charges for outstation demand drafts will be borne by the AMC and will be limited to the bank charges as per table below. The AMC will not entertain any request for refund of demand draft charges. Amount Upto Rs. 500 Rs. 501- Rs. 1000/Rs. 1001 - Rs. 5000/Rs. 5001 - Rs. 10000/Rs. 10001 - Rs. 1 lakh Rs. 100001 - Rs. 10 lakh Above Rs. 10 lakh DD charges Rs. 10/- per instrument Rs. 15/- per instrument Rs. 20/- per instrument Rs. 25/- per instrument Rs. 2.50 per Rs. 1000/or part thereof Rs. 2.00 per Rs. 1000/or part thereof Rs. 1.50 per Rs. 1000/- or part thereof subject to a maximum of Rs. 5000/-
Applications should be made in adherence to the minimum amount requirements as mentioned in the Offer Document. All cheques and bank drafts must be drawn in the name of the Scheme or their abbreviations e.g. "HSBC Midcap Equity Fund" or "HMEF" and crossed "Account Payee only". A separate cheque or bank draft must accompany each Application. The Application Forms together with the cheque / demand draft can be tendered at any of the Designated Collection Centres.
On-line investment facility may also be available. Please visit our website at www.assetmanagement.hsbc.co.in Applications not complete in any respect are liable to be rejected. In order to protect the interest of investors from fraudulent encashment of cheques, cheques specify the name of the Unitholder and the bank name and account number where payments are to be credited. SEBI Regulations make it mandatory for an investor to mention the details of his / her /its bank account. It is important for applicants to
Sales, Repurchase and Switches of Units on On-going Basis

The Scheme will offer Units for sale, repurchase and switch on every Business Day based on the Applicable NAV. The cut off times for determining Applicable NAVs for subscriptions,
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redemptions and switches to be made at the Investor Service Centres / Designated Collection Centres (designated as Official Points of Acceptance from time to time) are as per the following table : Scheme / Plan HMEF Subscription 3.00 p.m. Redemption 3.00 p.m. Switch-in 3.00 p.m. Switch-out 3.00 p.m.
and number of Units, the amount requested for repurchase will be considered as the definitive request. If the balance in the Unitholder's account does not cover the amount of repurchase request, then the Mutual Fund is authorised to close the account of the Unitholder and send the entire such (lesser) balance to the Unitholder. In case an investor has purchased Units on more than 1 Business Day (either under the Initial Offer Period or through subsequent purchases), the Units purchased prior in time (i.e. those Units which have been held for the longest period of time), will be deemed to have been redeemed first i.e. on a First-in-First-Out basis. Unitholders may also request for redemption of their entire holding and close the account by indicating the same to the Fund / AMC. Where however, the Unitholder wishes to redeem Units for a specified amount, then the amount to be paid on redemption will be divided by the redemption price, and the resultant number of Units will be redeemed. In case the Units are standing in the names of more than one Unitholder, where mode of holding is specified as 'Jointly', redemption requests will have to be signed by ALL joint holders. However, in cases of holding specified as 'Anyone or Survivor', any one of the Unitholders will have the power to make redemption requests, without it being necessary for all the Unitholders to sign. However, in all cases, the proceeds of the redemption will be paid to the first-named holder only. Repurchase Price The repurchase price of the Units, on an ongoing basis, is based on the Applicable NAV. As per SEBI Regulations, an exit load upto a maximum of 7% may be charged for all redemptions under the Plans / Options available under the Scheme, provided that the difference between the repurchase price and the sale price of the Units shall not exceed the permissible limit of 7% calculated on the sale price. The AMC reserves the right to impose different exit loads under the various Plans / Options available under the Scheme. Repurchase Price = Applicable NAV * (1 - Exit Load, if any) Example If the Applicable NAV is Rs.15 and the exit load applicable is 0.5%, the repurchase price is calculated as follows: Repurchase Price = 15 * (1 - 0.005) = 15 * 0.995 = 14.925 Applicable NAV for Repurchase of Units Applicable NAV for HMEF would be the Net Asset Value per Unit at the close of the Business Day on which a valid request for redemption is accepted. Please see 'Right to Limit Redemptions' and 'Suspension of Sale / Repurchase / Switch of Units'. As per the Regulations, the Fund shall despatch the redemption proceeds within 10 Business Days from the date of acceptance of redemption request at any of the Investor Service Centres. Under normal circumstances, the Fund will endeavor to despatch the redemption proceeds within 2 Business Days from the date of receiving a valid redemption request.
Where a request for redemption / switch is received after the cut-off time as mentioned above, the request will be deemed to have been received on the next Business Day. Sale of Units The Units of the Scheme will be available at the sale price, which is based on the Applicable NAV, subject to sales load and subject to the minimum application amount specifications. Subscriptions on an ongoing basis will be made only by specifying the amount to be invested and not the number of Units to be subscribed. The total number of Units allotted will be determined with reference to the applicable sale price and fractional Units may be created. Fractional Units will be computed and accounted for up to three decimal places for all Scheme. Fractional Units will in no way affect the investor's ability to redeem Units. The AMC reserves the right to review the terms of acceptance of subscription requests and reserves the right to change the basis for subscription from amount basis to any other basis, subject to the SEBI Regulations. Sales Price The sale price of the Units, on an ongoing basis, is based on the Applicable NAV. As per SEBI Regulations, an entry load upto a maximum of 7% may be charged for all subscriptions made under the Plans / Options available under the Scheme, provided that the difference between the repurchase price and the sale price of the Units shall not exceed the permissible limit of 7% calculated on the sale price. The AMC reserves the right to impose different entry loads under the various Plans / Options available under the Scheme. Sale Price Example : If the Applicable NAV is Rs.15 and the sales load applicable is 2%, the sales price is calculated as follows: Sales Price = = = 15 * (1+ 0.02) 15 * 1.02 15.30 = Applicable NAV * (1 + Entry Load, if any)
Applicable NAV for sale of Units Applicable NAV for HMEF shall be the NAV as at the close of Business day Repurchase of Units The repurchase request can be made on a pre-printed form or by such other method(s) as may be acceptable to the Fund / AMC from time to time. Such request should be submitted at any of the Investor Service Centres / Designated Collection Centres. The repurchase would be permitted to the extent of credit balance in the Unitholder's account. The repurchase request can be made by specifying the rupee amount or the number of Units to be repurchased. Repurchase requests can be made for a minimum amount of Rs.1000/- (Rupees One Thousand Only) and multiples of Re. 1/(Rupee One Only) thereof in case of all the Schemes of HSBC Mutual Fund. Where a request for a repurchase is for both amount
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The redemption cheque will be issued in favour of the Sole / First Unitholder's registered name and bank account number, and will be mailed to the registered address of the Sole / First holder as indicated in the original Application Form. The Fund may also directly credit the investor's bank account with the redemption proceeds, in lieu of issue of redemption cheque. The redemption cheque will be payable at par at all the places where the Investor Service Centres are located. The bank charges for collection of cheques at all other places will be borne by the AMC. A fresh Account Statement / Transaction Confirmation will be sent to the redeeming investors, indicating the new balance to the credit in the Account. The Fund may close a Unitholder's account if as a consequence of a redemption, the balance falls below Rs. 1000/-. Further, as Units may not be held by any person in breach of the Regulations, law or requirements of any governmental, statutory authority including, without limitation, Exchange Control Regulations, the Mutual Fund may mandatorily redeem all the Units of any Unitholder where the Units are held by a Unitholder in breach of the same. The Trustees may mandatorily redeem Units of any Unitholder in the event it is found that the Unitholder has submitted information either in the application or otherwise that is false, misleading or incomplete. If a Unitholder makes a redemption request immediately after purchase of Units, the Fund shall have a right to withhold the redemption request till sufficient time has elapsed to ensure that the amount remitted by him (for purchase of Units) is realised and the proceeds have been credited to the concerned Scheme's Account. However, this is only applicable if the value of redemption is such that some or all of the freshly purchased Units may have to be redeemed to effect the full redemption.
of procedures and / or final approval of the Reserve Bank of India and / or and any other agency, as may be required. The AMC reserves the right to charge different (including zero) loads on Applicable NAV on switchover as compared to the sale/ repurchase as the case may be.
Account Statements
An account statement will be sent by ordinary post / courier / e-mail to each Unitholder, stating the number of units allotted, not later than 30 Business Days from the close of the Initial Offer Period. As units of the Scheme will be non-transferable, the Account Statements shall be non-transferable. If the Unitholder so desires, nontransferable unit certificates will be issued within 6 weeks of the receipt of request for the certificate. Also, an Account Statement reflecting the net balance of the Unitholder will be mailed to the Unitholder by ordinary post / courier after every financial transaction (other than dividend declaration) is effected, except in exceptional circumstances. The Account Statement shall not be construed as a proof of title and is only a computer-printed statement indicating the details of transactions under the Scheme. Under normal circumstances on an on-going basis, Account Statements will be mailed to the investor within 3 Business Days of acceptance of the purchase, redemption, switch request for the Scheme, provided that the Fund reserves the right to reverse the transaction of crediting units in the Unitholder's account, in the event of non-realisation of any cheque or other instrument remitted by the investor . The Unit balance shown on the account statement is subject to realisation of cheque, fulfilment of regulatory requirements, fulfilment of requirements of the Offer Document(s) / Addendum(s) and furnishing necessary information to the satisfaction of the Mutual Fund. All Units will rank pari passu among Units within the same Option / Sub-Option, i.e. either the Dividend Sub-Option or the Growth SubOption, as to assets, earnings and the receipt of dividend distributions, if any, as may be declared by the Trustees. Allotment of Units and despatch of Account Statements to NRIs / FIIs will be subject to RBI's general permission dated 30 March, 1999 to mutual funds, in terms of Notification no. FERA.195/99-RB or such other notifications, guidelines issued by RBI from time to time.
Switching Options
On an on-going basis, the Unitholders have the option to switch all or part of their investment from one scheme to any of the other Scheme(s) offered by the Fund, which is available for investment at that time, subject to prevailing load structure. Investors also have the option of switching between various Plans / Options of the same Scheme. To effect a switch, a Unitholder must provide clear instructions. A request for a switch may be specified either in terms of amount or in terms of the number of Units of the Scheme from which the switch is sought. Where a request for switch is for both amount and number of Units, the amount requested will be considered as the definitive request. Such instructions may be provided in writing and lodged on any Business Day at any of the Investor Service Centres / Designated Collection Centres. An Account Statement / Transaction Confirmation reflecting the new holding will be despatched to the Unitholders normally within 3 Business Days of completion of the switch transaction. The switch will be effected by redeeming units from the scheme in which the units are held and investing the net proceeds in the other Scheme / Plans / Options, subject to the minimum balance, minimum application amount and subscription / redemption criteria applicable for the respective Scheme. Valid requests for 'switch out' shall be treated as redemptions and for 'switch in' shall be treated as purchases, after considering any prevalent exit and entry loads or a combination thereof for switches. A switch by NRI / FII Unitholders will be subject to the compliance
Product Add Ons

Systematic Investment Plan (SIP) Unitholders of the Scheme can benefit by investing specific rupee amounts periodically, for a continuous period. SIP allows the investors to invest a fixed amount every month or quarter for purchasing additional Units of the Scheme at NAV based prices. The requirement of 'Minimum Amount for Application' will not be applicable in case of SIPs, . An investor can start an SIP by providing at least 6 postdated cheques of Rs. 1000 (Rs. One Thousand) each, for a block of 6 months in advance, in case he wishes to invest monthly. Unitholders wishing to invest on a quarterly basis must provide at least 2 post-dated cheques, for a minimum of Rs. 3,000 (Rupees Three Thousand Only) per cheque for a block of 6 months. Post-dated cheques for SIP should be dated on either the 3rd, 10th, 17th or 26th of every month in case of monthly SIPs and should be dated 10th of the relevant month in case of quarterly SIPs. If these dates fall on a holiday, the transaction will be taken as of the next Business Day. The cheques should be drawn in the name of the Scheme / Plan or its abbreviation i.e., "HSBC Midcap Equity Fund" or "HMEF" and crossed "Account Payee only" and must
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be payable at the locations where the applications are submitted at the Investor Service Centres. Outstation cheques will not be accepted and applications accompanied by such cheques are liable to be rejected. The Mutual Fund may have arrangements with organisations to accept group SIPs whereby the employees of such organisations can opt for a direct deduction from their salary and invest in the Scheme in which the SIP facility is available. The Mutual Fund will decide the terms and conditions on which such group SIPs would be made available. The AMC reserves the right to introduce / discontinue SIP from time to time. The AMC reserves the right to have differential load structures for investors who opt for the SIP. Systematic Encashment Plan (SEP) Unitholders have the benefit of enrolling themselves under the Systematic Encashment Plan. The SEP allows the Unitholder to withdraw sums of money each month / quarter from his investments in the Scheme. SEP is ideal for Unitholders seeking a regular inflow of funds for their needs in a tax efficient manner. It is also suited to retired persons or individuals who wish to invest a lumpsum and withdraw from the investment over a period of time. Investors can opt for either monthly or quarterly withdrawals. The Unitholder may avail of this Plan by sending a written request to the Registrar. The amount thus withdrawn by redemption will be converted into Units at the Applicable NAV based prices and the number of Units so arrived at will be subtracted from the Units balance to the credit of that Unitholder. The SEP transaction will be on the first Business Day of every month / quarter. The Fund may close a Unitholder's account if the balance falls below Rs 1,000/- in the respective Options/sub-options within 30 days from the date on which a written intimation in this regard is sent to the Unitholder. The SEP may be terminated or modified on a written notice to the Registrar of at least 14 days by a Unitholder of the Scheme and it will terminate automatically if all Units are liquidated or withdrawn from the account by the Unitholder. Under SEP investors can opt for withdrawal of a Fixed Amount or the Capital Appreciation on their investment. Under the Fixed Amount Option, the investor specifies the fixed amount that he would like to receive on a regular basis irrespective of the gain / loss on the Fund in the specified period. The minimum amount which the Unitholder can withdraw is Rs. 1000/- (Rupees One Thousand Only) and in multiples of Re.1 (Rupee One Only) thereafter. The Capital Appreciation Option allows the automatic redemption of the incremental amount i.e. appreciation on the original investment. For example, if the appreciation on the initial investment in a period is Rs. 5000/- and Rs. 4500/- in the next period, then the investor would receive only the appreciation i.e. Rs. 5000/- and Rs. 4500/in the respective periods. Unitholders should note that in the event of there being no capital appreciation, no withdrawal / payment would be effected. The AMC reserves the right to introduce / discontinue SEP from time to time. The AMC reserves the right to have differential load structures for investors who opt for the SEP. Systematic Transfer Plan (STP) Investors can opt for the Systematic Transfer Plan by investing a lumpsum amount in the HSBC Income Fund, HSBC Cash Fund, HSBC MIP, HSBC Floating Rate Fund and HSBC Gilt Fund and
providing a standing instruction to transfer sums at monthly intervals (for a minimum period of 3 months) into HSBC Midcap Equity Fund. Investors could also opt for STP from an existing account by quoting their account / folio number. Investors could choose to specify the fixed sum to be transferred every month. Alternatively, in the Growth Sub-Options under the Regular, Institutional and Institutional Plus Options of HSBC Cash Fund and in the Growth Sub-Options under the Regular and Institutional Option of HSBC Floating Rate Fund Short Term Plan, investors could opt to automatically transfer the capital appreciation (between the immediately preceding STP date and the present STP date) in the value of their investments to HSBC Midcap Equity Fund. Transfers would be effected as of the first Business Day of every month in case of transfer from HSBC Income Fund, HSBC Gilt Fund, HSBC Floating Rate Fund Long Term Plan and HSBC MIP and would be effected on the first, tenth and the twentieth day of the month in case of transfer from HSBC Cash Fund and HSBC Floating Rate Fund Short Term Plan. If these dates fall on a holiday, the transaction will be effected as of the next Business Day. Transfers must be for a minimum amount of Rs.1,000/- in case of STPs where a fixed sum is specified to be transferred every month. The AMC reserves the right to introduce / discontinue STP from time to time. The AMC reserves the right to have differential load structures for investors who opt for the STP.
Pledge
If in conformity with the guidelines and notifications issued by SEBI / Government of India / any other regulatory body from time to time, Units under the Scheme may be offered as security by way of a pledge / charge in favour of scheduled banks, financial institutions, non-banking finance companies (NBFCs), or any other body. The AMC and / or the ISC will note and record such pledged Units. A standard form for this purpose is available on request from any ISC. Disbursement of such loans will be at the entire discretion of the bank / financial institution / NBFC or any other body concerned and the Mutual Fund assumes no responsibility thereof. The Pledgor will not be able to redeem / switch Units that are pledged until the entity to which the Units are pledged provides written authorisation to the Mutual Fund that the pledge / lien charge may be removed. As long as Units are pledged, the pledgee will have complete authority to redeem such Units.
Applications under Power of Attorney / Body Corporate / Registered Society / Trust / Partnership
The original Power of Attorney or a duly notarised copy of the Power of Attorney shall be required to be submitted where applications are made under a Power of Attorney. A company, body corporate, eligible institutions, registered society, trusts, partnership or other eligible non-individuals who apply in the Scheme should furnish a certified copy of resolution or authority to make the application as the case may be and a certified copy of the Memorandum and Articles of Association and / or bye-laws and / or Trust Deed and / or Partnership Deed and certificate of registration or any other document as the case may be. In case of a Trust / Fund, it shall submit a certified true copy of the resolution from the Trustee(s) authorising such purchases. The officials should sign the application under their official designation and furnish a list of authorised signatories. All communications and payments shall be made to the First Applicant only.
Joint Applicants
In the event an account has more than one registered owner, the firstnamed holder (as determined by reference to the original Application
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Form) shall receive all Account Statements, notices and correspondence with respect to the account, as well as the proceeds of any redemption requests or dividends or other distributions. In addition, such Unitholder shall have voting rights associated with such Units, as per the applicable guidelines. Applicants can specify the mode of holding in the Application Form as 'Jointly' or 'Anyone or Survivor'. In the case of holding specified as 'Jointly', all transactions / instructions would have to be signed by all joint holders. However, in cases of holding specified as 'Anyone or Survivor', any one of the Unitholders will have the power to make transaction requests / provide instructions, without it being necessary for all the Unitholders to sign. However, in all cases, all distributions will be made to the first-named holder only. In case of death / insolvency of any one or more of the persons named in the register of Unitholders as the joint holders of any Units, the AMC shall not be bound to recognise any person(s) other than the remaining holders. In all such cases, redemption proceeds shall be paid to the first named of such remaining Unitholders.
Fund or the AMC incur any loss whatsoever arising out of any litigation or harm that it may suffer in relation to the nomination, they will be entitled to be indemnified absolutely from the deceased Unitholders' estate. Upon the demise of the Unitholder, the Units would be transmitted in favour of the Nominee subject to the Nominee executing suitable indemnities in favour of the Mutual Fund and the AMC and necessary documentation to the satisfaction of the Mutual Fund. Investors / Unitholders are advised to read the instructions carefully before nominating. The Mutual Fund can call for such documents from the Nominee as deemed necessary.
Transfer & Transmission of Units

As the Scheme stands ready to redeem Units on a continuous basis as laid down herein, the transfer facility is found redundant. Units of the Scheme shall therefore be non transferable. However, if a transferee becomes a holder of Units by operation of law including upon enforcement of a pledge, then the Trustees shall, subject to production of such evidence, which in their opinion is sufficient, proceed to effect the transfer within 30 days from the date of lodgement if the intended transferee is otherwise eligible to hold the Units. A person becoming entitled to hold the Units in consequence of the death, insolvency, or winding up of the sole holder or the survivors of joint holders, upon producing evidence and documentation to the satisfaction of the Fund and upon executing suitable indemnities in favour of the Fund and the AMC, shall be registered as a Unitholder.
Nomination Facility
The AMC will provide an option to the Unitholder to nominate a person in whom all the Units held by the Unitholder shall vest in the event of his death. Where the Units are held by more than one person jointly, all the joint Unitholders may together nominate a person by signing the nomination form indicating the name of the person in whom all the rights in the Units shall vest in the event of death of all the joint Unitholders. The nomination can be made only by individuals applying for / holding Units on their own behalf singly or jointly. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate. A minor can be nominated and in that event, the name and address of the Guardian of the minor Nominee shall be provided by the Unitholder. The Nominee shall not be a society, trust (other than a religious or charitable trust), body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney. A non-resident Indian can be a Nominee subject to the exchange controls in force from time to time. Nomination can also be made in favour of the Central Government, State Government, Local Authority, any person designated by virtue of his office or a religious or charitable trust. Nomination in respect of the Units stands rescinded upon the transmission of Units. Transmission of Units in favour of a Nominee, shall be a valid discharge by the Mutual Fund / AMC / Trustees against the legal heirs of the Unitholder(s). The cancellation of Nomination can be made only by those individuals who hold Units on their own behalf singly or jointly and who made the original nomination. On cancellation of the nomination, the nomination shall stand rescinded and the Mutual Fund / AMC / Trustees shall not be under any obligation to transmit the Units in favour of the Nominee. The nomination facility extended under the Scheme is in accordance with SEBI regulations and subject to other applicable laws. The single / joint / surviving Unitholders can subsequently write to the ISC requesting for a Nomination Form in order to nominate any person to receive the Units upon his / her / their death, subject to completion of necessary formalities. Further, if either the Mutual
Master Account / Folio

As an investor friendly measure, unless otherwise requested by the Unitholder, one Master / Folio Number may be assigned for one investor investing in different Scheme(s) of the Mutual Fund. In such a case, one consolidated Account Statement will be provided. The number of Units allotted to a Unitholder or repurchased by a Unitholder will be reflected in his / her account and a Statement to this effect will be issued to the Unitholder. The AMC reserves the right to assign the existing Master Account / Folio number against multiple applications and / or subsequent purchases under a new application form by an existing Unitholder, with identical mode of holding and address.
Fractional Units
Since a request for redemption or purchase is generally made in rupee amounts and not in terms of number of Units of the Scheme, an investor may be left with fractional Units. Fractional Units will be computed and accounted for up to three decimal places for the Scheme. However, fractional Units will in no way affect the investor's ability to redeem the Units, either in part or in full, standing to the Unitholder's credit.
Right to Limit Redemptions

The Trustees may, in the general interest of the Unitholders of the Scheme offered under this Offer Document, and keeping in view the unforeseen circumstances / unusual market conditions, limit the total number of Units which may be redeemed on any Business Day to 5% of the total number of Units then in issue, under the Scheme and Plan(s) thereof, or such other percentage as the Trustees may determine. Any Units, which by virtue of these limitations are not redeemed on a particular Business Day, will be carried forward for redemption to the next Business Day, in order of receipt. Redemptions so carried forward will be priced on the basis of the Applicable NAV (subject to the prevailing load) of the Business Day on which redemption is made. Under such circumstances, to the extent multiple
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redemption requests are received at the same time on a single Business Day, redemptions will be made on pro-rata basis, based on the size of each redemption request, the balance amount being carried forward for redemption to the next Business Day. In addition, the Trustees reserve the right in their sole discretion, to limit redemptions with respect to any single account to an amount of Rs. 1 crore (Rupees One Crore Only) in a single day.
processing of requests for purchase, switch and redemption of Units will not be applicable. Further, an order to purchase Units is not binding on and may be rejected by the Trustees, the AMC or their respective agents, until it has been confirmed in writing by the AMC or its agents and payment has been received. Suspension or restriction of repurchase / redemption facility under any Scheme / Plan of the Mutual Fund shall be made applicable only after the approval from the Board of Directors of the AMC and the Trustees. The approval from the AMC Board and the Trustees giving details of circumstances and justification for the proposed action shall also be informed to SEBI in advance.
Suspension of Sale / Repurchase / Switch of Units

The Mutual Fund at its sole discretion reserves the right to withdraw sale and / or repurchase and / or switch of the Units in the Scheme (including any one of the Plan of any of the Scheme) temporarily or indefinitely, if in the opinion of the AMC, the general market conditions are not favourable and / or suitable investment opportunities are not available for deployment of funds. However, the suspension of sale / repurchase / switch either temporarily or indefinitely will be with the approval of the Trustees. The sale / repurchase / switch of the Units may be suspended under the following conditions:
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NRIs / FIIs
The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (the "FEMA Regulations") permit a NRI to purchase on repatriation or nonrepatriation basis, without limit, units of domestic mutual funds. Payment for such units must be made either by: (i) inward remittance through normal banking channels; or (ii) out of funds held in the NRE / FCNR account, in the case of purchases on a repatriation basis or out of funds held in the NRE / FCNR / NRO account, in the case of purchases on a non-repatriation basis. The FEMA Regulations also permit a registered FII to purchase, on repatriation basis, units of domestic mutual funds provided the FII restricts allocation of its total investment between equity and debt instruments in the ratio of 70:30. Payment by the FII must be made either by inward remittance through normal banking channels or out of funds held in foreign currency account or non resident rupee account maintained by the FII with a designated branch of an authorised dealer with the approval of the RBI in terms of paragraph 2 of Schedule 2 to the FEMA Regulations.
When one or more stock exchanges or markets, which provide basis for valuation for a substantial portion of the assets of the Scheme is closed otherwise than for ordinary holidays. When, as a result of political, economic or monetary events or any circumstances outside the control of the Trustees and the AMC, the disposal of the assets of the Scheme is not reasonable, or would not reasonably be practicable without being detrimental to the interests of the Unitholders. In the event of breakdown in the means of communication used for the valuation of investments of the Scheme, without which the value of the securities of the Scheme cannot be accurately calculated. During periods of extreme volatility of markets, which in the opinion of the AMC are prejudicial to the interests of the Unitholders of the Scheme. In case of natural calamities, strikes, riots and bandhs. In the event of any force majeure or disaster that affects the normal functioning of the AMC, ISC or the Registrar. If so directed by SEBI.
Redemption by NRIs / FIIs

Units held by an NRI investor and FIIs may be redeemed by such investor by tendering Units to the Mutual Fund or for payment of maturity proceeds, subject to any procedures laid down by RBI from time to time. The Fund will not be liable for any delays or for any loss on account of any exchange fluctuations, while converting the rupee amount in foreign exchange in the case of transactions with NRIs / FIIs. Provisions with respect to NRIs / FIIs stated above, is as per the AMC's understanding of the laws currently prevalent in India.
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In the above eventualities, the time limits indicated above, for
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SECTION IV
LOAD STRUCTURE & RECURRING EXPENSES
Sales of Units under the Scheme could attract an entry load (as a % of the invested amount). Repurchases could attract an exit load (as a % of the Applicable NAV for redemptions). Unitholders should note that the AMC retains the right to change / impose an entry / exit load as per the provisions below: and Institutional Plus Options of HSBC Cash Fund and in the Growth Sub-Option under the Regular and Institutional Options of HSBC Floating Rate Fund Short Term Plan on the first, tenth and the twentieth day of every month to HSBC Midcap Equity Fund. However an exit load of 2.25% shall be applicable on amount of capital appreciation of more than Rs. 25 lakh by way of SIP / STP, if such amount is redeemed / switched out of the Scheme within 2 years from the date of the relevant investment / transfer. No load shall be applicable in case of Switch in / Switch out, from / to HSBC Midcap Equity Fund to / from HSBC Equity Fund / HSBC India Opportunities Fund. Load in case of dividend reinvestments : Where investors opt for reinvestment of dividend earned from the Weekly Dividend SubOption under Institutional and Institutional Plus Options of HSBC Cash Fund and under the Weekly Dividend Sub-Option under the Institutional Option of HSBC Floating Rate Fund Short Term Plan, in to HSBC Midcap Equity Fund, an exit load of 2.25% shall be applicable on the amount of dividend reinvested, if such amount is redeemed / switched out of HSBC Midcap Equity Fund within 2 years from the date of the reinvestment. No entry load will be charged for the amount of dividend reinvestment transferred in to the HSBC Midcap Equity Fund. Load in case of investments by Fund-of-Funds (FOF) scheme: No load (entry/exit) will be charged by HSBC Midcap Equity Fund, on the investments made by Fund-of- Funds Schemes launched by mutual funds. The entry / exit load set forth above is subject to change at the discretion of the AMC and such changes shall be implemented prospectively. Subject to the Regulations, the Trustees reserve the right to modify / alter the load structure and may decide to introduce a differential load structure on the Units subscribed / redeemed on any Business Day. Such changes will be applicable for prospective investments. The Addendum detailing the changes in load structure will be attached to Offer Documents and Abridged Offer Documents. The Addendum will also be circulated to all the distributors / brokers so that the same can be attached to all the Offer Documents and Abridged Offer Documents in stock. This Addendum will also be sent along with the newsletter to the Unitholders immediately after the changes. The Trustees / AMC shall arrange to display a notice in the Investor Service Centers of the AMC before the change of the then prevalent load structure. Changes in the load structure may be stamped in the acknowledgement slip issued by the Fund after the changes in load structure. The changes may also be disclosed in the Statements of Account issued after the introduction of such load. The load collected from the Unitholders under each Plan will be credited to a separate account in the respective Plan accounts and will be offset against distribution and marketing expenses in accordance with SEBI Regulations. Surplus of load, if any, charged over planned marketing and distribution expenses to be defrayed will be credited to the respective Plans whenever felt appropriate by the AMC. The repurchase price however, will not be lower than 93% of the NAV and the sales price will not be higher than 107% of the NAV, provided that the difference between the repurchase price and the sales price at any point in time shall not exceed the permitted limit as prescribed by SEBI from time to time, which is presently 7% calculated on the sales price.
Load For the Initial Public Offer

Particulars Sales Load (Maximum sales load = 7%) HSBC Midcap Equity Fund (as a % of NAV) For investments below Rs. Five Crores - 2.25% For investments of Rs. Five crores and above - Nil
Sales load on issue of Units in lieu of Dividend (Dividend Reinvestment) Repurchase / redemption Load
Nil Nil
Entry load collected during the Initial Offer Period shall be used to meet initial issue expenses.
On an Ongoing Basis
Particulars Entry load imposed on purchases HSBC Midcap Equity Fund (as a % of NAV) For investments below Rs. Five Crores - 2.25% For investments of Rs. Five crores and above - Nil
Load on issue of units in lieu of dividend (dividend reinvestment) Exit Load imposed on sales Switchover Fee
Nil Nil As per the prevailing load structure of the Scheme
No entry load shall be applicable in case of investments into HSBC Midcap Equity Fund by way of Systematic Investment Plan (SIP) and / or Systematic Transfer Plan (STP) (specified by way of a fixed amount in case of HSBC Income Fund, HSBC Cash Fund, HSBC MIP, HSBC Gilt Fund and HSBC Floating Rate Fund or by way of capital appreciation in the Growth Sub-Options under the Regular, Institutional and Institutional Plus Options of HSBC Cash Fund and in the Growth Sub-Option under the Regular and Institutional Options of HSBC Floating Rate Fund Short Term Plan) where each such investment / amount of capital appreciation by way of SIP/STP is of Rs. 25 Lakh or below. However an exit load of 2.25% shall be applicable on the fixed amount or capital appreciation of Rs. 25 lakh or below by way of SIP / STP, if such amount is redeemed / switched out of the Scheme within 2 years from the date of the relevant investment / transfer. In case of investments of more than Rs. 25 Lakh by way of SIP/STP, an entry load of 2.25% will be charged on each such investment. However such load shall not be charged to investors opting to automatically shift the capital appreciation in the value of their investments in the Growth Sub-Option under the Regular, Institutional
HSBC Mutual Fund
Offer Document Initial Issue Expenses

SEBI Regulations prescribe that the total initial issue expenses shall not exceed 6% of the initial resources raised under the Scheme and any excess beyond 6% shall be borne by the AMC. The information provided above is based on estimates and Trustees / AMC reserve the right to review the load / expense structure. Initial issue expenses are estimated as under Expense Head Advertising Expenses Agent Commissions Registrar Expenses Marketing expenses Miscellaneous Expenses Bankers Fees Legal Fees Printing & Distribution Total HSBC Midcap Equity Fund (as % of amount mobilised) 1.00% 2.50% 0.10% 0.20% 0.25% 0.05% 0.05% 0.10% 4.25% Advertising Expenses Agent Commissions Registrar Expenses Marketing Expenses Miscellaneous Expenses Bankers Fees Legal Fees Printing & Distribution Total
Initial issue expenses of Past Scheme(s) HEF

Expense Head Estimated as per Offer Document Actuals
HIOF
Estimated as per Offer Document Actuals
(as a % of amount mobilised)
1.00 1.50 0.10 0.25 0.25 0.05 0.05 0.10 3.30
0.00 2.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00
1.00 1.50 0.10 0.25 0.25 0.05 0.05 0.10 3.30
0.13 1.87 0.00 0.00 0.00 0.00 0.00 0.00 2.00
The above estimates are subject to change as per actuals and are based on the minimum subscription (target) amount of Rs. 1 crore (Rupees One Crore Only). The estimates include the entry load of 2.25% collected during the Initial Offer Period. Out of Rs. 100 (Rupees one hundred only) contributed by the investor, Rs. 98 will be available for investment in cases where entry load is NIL and Rs. 95.75 will be available in cases where entry load is 2.25%, during the Initial Public Offer. Initial Issue Expenses to the extent borne by the Scheme would be amortised over a period of five years and would be included in the NAV. However the same would not be included in the NAV for determining the Investment Management Fee. Policies followed in this respect would be in accordance with the SEBI Regulations. An illustration is provided for further clarification : Particulars Face Value of Units (Rs. per Unit) Entry Load (2.25% of Face Value) Issue Price (A + B) Maximum IPO Expenses per SEBI Regulations (A x 6%) Estimated IPO Expenses Estimated IPO Expense to be borne out of Entry Load during the IPO (B) Balance Estimated IPO Expenses to be charged to the Scheme (E-F) Estimated Amount available for investment for every Rs. 10 plus entry load (wherever applicable), as contributed by investor (C-F-G) Amortisation of IPO expenses per day (Rs. per unit) - [0.20/(365x5)] Balance IPO expense to be carried forward (G-I) NAV on day 1 (A-I) A B C D E F G 10 0.2250 10.2250 0.60 0.425 0.225 0.20
The initial issue expenses to the extent of the entry load of 2% (amounting to Rs. 70,36,142/- in HEF and amounting to Rs. 52,11,807 in HIOF) were borne by the Mutual Fund. Expenses over and above 2% in HEF and HIOF and the entire initial issue expenses for HIF, HCF, HMIP, HIIF, HGF and HFRF were borne by the AMC, details of which are as under: Expense Head (Rs. in lacs) HEF / HIF / HCF / HIIF 21.81 24.19 23.14 27.99 5.47 HGF HMIP / HFRF HIOF
Printing Business Promotion Advertising Brokerage Registrar's Fees Professional Fees Total
2.30
22.22 31.40 80.13 71.17 8.01 2.38
4.38 9.34 3.62 1.35
3.20 21.89
102.60
2.30
215.31
Recurring Expenses
Description (% per annum of average net assets) 1.25% 0.05% 0.20% 0.30% 0.10% 0.01%
Investment Management & Advisory Fees H I J K 9.80 0.0001 0.1999 9.9999 Additional Fees (if any) Trustee Fees Custodian Fees Marketing & Selling Expenses Registrar & Transfer Agent Fees Audit Fees
Note : IPO expenses charged to the Scheme will be amortised over a period of five years.
HSBC Mutual Fund
Offer Document
Description
(% per annum of average net assets) 0.04% 0.05% 0.05% 0.05% 2.10% 0.40% 2.50%
Costs related to investor communications Cost of providing account statements, dividend, redemption warrants etc. Cost of statutory advertisements Other Expenses Total Annual Recurring Expenses Amortized portion of Initial Issue Expenses* TOTAL
to the AMC and the total expenses may be more than as specified in the table above. However, as per the Regulations, the total recurring expenses that can be charged to the Scheme in this Offer Document shall be subject to the applicable guidelines. Expenses over and above the permitted limits will be borne by the AMC. The recurring expenses of the Scheme, and the additional management fee shall be as per the limits prescribed under subregulation 6 of Regulation 52 of the SEBI Regulations and shall not exceed the limits prescribed thereunder. Currently, as per the Regulations, the maximum recurring expenses that can be charged to the Scheme shall be subject to a percentage limit of average weekly net assets as given below:
Equity Schemes
First Rs. 100 crore 2.50% Next Rs. 300 crore 2.25% Next Rs. 300 crore 2.00% Over Rs. 700 crore 1.75%
* The Initial Issue Expenses to the extent borne by the Scheme and amortised over a period of five years will be within the maximum limit of annual recurring expense that can be charged to the Scheme as per the SEBI Regulations. To the extent that the amortised portion of the initial issue expenses falls short of the above stated percentage (ie, 0.40%), such portion will be adjusted against the total Annual Recurring Expenses charged to the Scheme, subject overall to the maximum permissible limits as per the SEBI Regulations, at all points in time. The purpose of the above table is to assist the investor in understanding the various costs and expenses that an investor in the Scheme will bear directly or indirectly. The above expenses are subject to change and may increase / decrease as per actual and / or any change in the Regulations. These estimates have been made in good faith as per information available
Subject to Regulations and this Offer Document, expenses over and above the prescribed ceiling will be borne by the AMC, Trustees or the Sponsor. As per SEBI regulations, the AMC is entitled to an investment management and advisory fee at the rate of 1.25% per annum of the weekly average net assets outstanding in each accounting year for the scheme concerned, as long as the net assets do not exceed Rs. 100 crore (rupees one hundred crores only) and 1.00% of the excess amount over Rs. 100 crore (rupees one hundred crores only), where net assets so calculated exceed Rs. 100 crore (rupees one hundred crores only). For schemes launched on a no load basis, the AMC is entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year.
CONDENSED FINANCIAL INFORMATION

as of 28th February, 2005
HISTORICAL PER UNIT STATISTICS 1-Apr-04 28-Feb-05 NAV at the beginning of the period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend HSBC Equity Fund 1-Apr-03 31-Mar-04 14-Nov-02 31-Mar-03 HSBC India Opportunities Fund 1-Apr-04 28-Feb-05 22-Jan-04 31-Mar-04 1-Apr-04 28-Feb-05 HSBC Cash Fund^ 1-Apr-03 31-Mar-04 14-Nov-02 31-Mar-03
18.06 27.41 NA NA NA NA NA NA NA NA NA NA NA NA NA
NA NA 10.1883 10.6981 NA NA NA 10.6979 10.4372 10.4435 10.4415 NA NA NA NA
NA NA 10.1866 10.1866 NA NA NA NA NA NA NA NA NA NA NA
NA NA 10.0000 10.0000 NA NA NA NA NA NA NA NA NA NA NA
HSBC Mutual Fund
Offer Document
HISTORICAL PER UNIT STATISTICS 1-Apr-04 28-Feb-05 Net Income Per unit (Rs.) Dividends Paid out (Rs. per Unit) # Regular Dividend Option Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Transfer to Reserves (Rs. in crores) NAV at the End of the year / period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Net Assets at End of Year / period (Rs. Crores) Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) Date of Allotment Annualised Return (Since inception) Benchmark Returns (Since inception) Benchmark Index 22.9995 37.8048 NA NA NA NA NA NA NA NA NA NA NA NA NA 1,622.67 1.97% 1.53 NA NA NA NA NA NA NA NA NA 0.00 2.7719
HSBC Equity Fund 1-Apr-03 31-Mar-04 3.9459 14-Nov-02 31-Mar-03 0.0824
HSBC India Opportunities Fund 1-Apr-04 28-Feb-05 1.1991 22-Jan-04 31-Mar-04 (0.0990) 1-Apr-04 28-Feb-05 0.4620
HSBC Cash Fund^ 1-Apr-03 31-Mar-04 0.2717 14-Nov-02 31-Mar-03 0.1207
4.15 NA NA NA NA NA NA NA NA NA 213.88
NA NA NA NA NA NA NA NA NA 0.35
NA NA NA NA NA NA NA NA NA 0.00
NA NA NA NA NA NA NA NA NA -11.11
0.49 NA NA NA 1.82 0.58 2.06 0.33 0.36 0.42 0.00
0.34 NA NA NA 0.17 0.17 0.13 NA NA NA 68.62
0.00 NA NA NA NA NA NA NA NA NA 3.81
18.06 27.41 NA NA NA NA NA NA NA NA NA NA NA NA NA 982.81 2.28%
NA NA 10.1908 11.1511 NA NA NA 11.1609 10.4401 10.4473 10.4570 10.3650 10.0056 10.0073 10.0125 2,735.21 0.53% 4-Dec-02 4.99% 4.34% Crisil Liquid Fund Index
NA NA 10.1883 10.6981 NA NA NA 10.6979 10.4372 10.4435 10.4415 NA NA NA NA 1,701.30 0.65% 4-Dec-02 5.22% 4.48% Crisil Liquid Fund Index
NA NA 10.1866 10.1866 NA NA NA NA NA NA NA NA NA NA NA 207.48 0.52% 4-Dec-02 5.77% 4.82% Crisil Liquid Fund Index
10-Dec-02 10-Dec-02 10-Dec-02 24-Feb-04 24-Feb-04 81.94% 47.51% BSE 200 113.92% 64.38% BSE 200 0.90% -6.13% BSE 200 37.37% 24.94% BSE 500 -3.80% -0.08% BSE 500
HSBC Mutual Fund
Offer Document
HISTORICAL PER UNIT STATISTICS
HSBC Income Fund - Short Term Plan 1-Apr-04 28-Feb-05 1-Apr-03 31-Mar-04 14-Nov-02 31-Mar-03 1-Apr-04 28-Feb-05
HSBC Income Fund - Investment Plan 1-Apr-03 31-Mar-04 14-Nov-02 31-Mar-03
HSBC Gilt Fund - Short Term Plan 1-Apr-04 28-Feb-05 28-Nov-03 31-Mar-04
NAV at the beginning of the period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Net Income Per unit (Rs.) Dividends Paid out (Rs. per Unit) # Regular Dividend Option Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Transfer to Reserves (Rs. in crores) NAV at the End of the year / period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend NA NA 10.1442 11.1908 NA NA 10.6778 NA NA 10.0892 10.7945 NA NA 10.5270 NA NA 10.0956 10.1714 NA NA NA NA NA 10.3219 11.3224 NA NA ^^ NA NA 10.3623 11.2673 NA NA 11.1170 NA NA 10.2551 10.2551 NA NA NA 10.1299 10.2612 NA NA NA NA NA 10.0627 10.1027 NA NA NA NA NA 0.50 NA NA 1.46 NA NA NA NA NA NA 0.00 0.52 NA NA 0.36 NA NA NA NA NA NA 8.70 0.06 NA NA NA NA NA NA NA NA NA 1.35 0.27 NA NA ^^ NA NA NA NA NA NA 0.00 0.74 NA NA 0.32 NA NA NA NA NA NA 37.71 0.00 NA NA NA NA NA NA NA NA NA 6.06 1.85 NA NA NA NA NA NA NA NA NA 0.00 0.04 NA NA NA NA NA NA NA NA NA 0.02 NA NA 10.0892 10.7945 NA NA 10.5270 10.8193 NA NA NA NA NA NA NA 0.9854 NA NA 10.0956 10.1714 NA NA NA NA NA NA NA NA NA NA NA 0.5529 NA NA 10.0000 10.0000 NA NA NA NA NA NA NA NA NA NA NA 0.2741 NA NA 10.3623 11.2673 NA NA 11.1170 11.3207 NA NA NA NA NA NA NA (0.0450) NA NA 10.2551 10.2551 NA NA NA NA NA NA NA NA NA NA NA 0.7830 NA NA 10.0000 10.0000 NA NA NA NA NA NA NA NA NA NA NA 0.2405 10.0627 10.1027 NA NA NA NA NA NA NA NA NA NA NA NA NA 0.1863 10.0000 10.0000 NA NA NA NA NA NA NA NA NA NA NA NA NA 0.0867
HSBC Mutual Fund
Offer Document
HISTORICAL PER UNIT STATISTICS 1-Apr-04 28-Feb-05 Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Net Assets at End of Year / period (Rs. Crores) Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) Date of Allotment Annualised Return (Since inception) Benchmark Returns (Since inception) Benchmark Index 11.2574 NA NA NA NA NA NA NA 74.51 1.03%
HSBC Income Fund - Short Term Plan 1-Apr-03 31-Mar-04 10.8193 NA NA NA NA NA NA NA 254.18 1.06% 14-Nov-02 31-Mar-03 NA NA NA NA NA NA NA NA 83.36 1.37% 1-Apr-04 28-Feb-05 11.4550 NA NA NA NA NA NA NA 91.53 1.68%
HSBC Income Fund - Investment Plan 1-Apr-03 31-Mar-04 11.3207 NA NA NA NA NA NA NA 534.90 1.84% 14-Nov-02 31-Mar-03 NA NA NA NA NA NA NA NA 256.69 2.05%
HSBC Gilt Fund - Short Term Plan 1-Apr-04 28-Feb-05 NA NA NA NA NA NA NA NA 0.94 0.99% 28-Nov-03 31-Mar-04 NA NA NA NA NA NA NA NA 2.22 1.01% 5-Dec-03 1.03% 1.78% I-SecSI-Bex
10-Dec-02 10-Dec-02 10-Dec-02 10-Dec-02 10-Dec-02 10-Dec-02 5-Dec-03 5.19% 4.29% Crisil Short Term Bond Fund Index 5.93% 5.33% Crisil Short Term Bond Fund Index 1.71% 1.62% Crisil Short Term Bond Fund Index 5.75% 4.59% 9.42% 7.99% 2.55% 1.62% 2.02% 3.93% I-SecSI-Bex
Crisil Crisil Crisil Composite Composite Composite Bond Bond Bond Fund Fund Fund Index Index Index
HSBC MIP - Regular Plan HSBC MIP - Savings Plan
HSBC Floating Rate Fund Short Term Plan^^^^ 16-Nov-04 28-Feb-05
HSBC Floating Rate Fund Long Term Plan^^^^ 16-Nov-04 28-Feb-05
1-Apr-04 28-Feb-05 NAV at the beginning of the period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth NA NA NA 10.0854 10.0854 10.0854 NA NA NA NA NA NA
22-Jan-04 31-Mar-04
1-Apr-04 28-Feb-05
22-Jan-04 31-Mar-04
NA NA NA 10.0000 10.0000 10.0000 NA NA NA NA NA NA
NA NA 10.0000 10.0000 NA NA NA 10.0000 10.0000 10.0000 10.0000 NA
NA NA 10.0000 10.0000 NA NA NA 10.0000 NA 10.0000 10.0000 NA
HSBC Mutual Fund
Offer Document
HSBC Floating Rate Fund Short Term Plan^^^^ 16-Nov-04 28-Feb-05 NA NA NA 0.1228
HSBC Floating Rate Fund Long Term Plan^^^^ 16-Nov-04 28-Feb-05 NA NA NA 0.1071
1-Apr-04 28-Feb-05 Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Net Income Per unit (Rs.) Dividends Paid out (Rs. per unit) # Regular Dividend Option Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Transfer to Reserves (Rs. in crores) NAV at the End of the year / period (Rs.) Dividend Option Growth Option Regular Option - Dividend Regular Option - Growth Monthly - Dividend Quarterly - Dividend Institutional Option - Dividend Institutional Option - Growth Institutional Option - Daily Dividend Institutional Option - Weekly Dividend Institutional Option - Monthly Dividend Institutional Plus Option - Growth Institutional Plus Option - Daily Dividend Institutional Plus Option - Weekly Dividend Institutional Plus Option - Monthly Dividend Net Assets at End of Year / period (Rs. Crores) NA NA NA 10.5523 10.2353 10.2546 NA NA NA NA NA NA NA NA NA 203.14 NA 0.59 0.46 NA NA NA NA NA NA NA 0.00 NA NA NA 0.5682
22-Jan-04 31-Mar-04 NA NA NA 0.0428
1-Apr-04 28-Feb-05 NA NA NA 0.6760
22-Jan-04 31-Mar-04 NA NA NA 0.0400
NA 0.00 0.00 NA NA NA NA NA NA NA 2.63
0.10 NA NA NA 0.11 0.12 0.07 NA NA NA 0.00
0.11 NA NA NA NA 0.10 0.08 NA NA NA 0.00
NA NA NA 10.0854 10.0854 10.0854 NA NA NA NA NA NA NA NA NA 318.98
NA NA 10.0128 10.1590 NA NA NA 10.1648 10.0132 10.0174 10.0297 NA NA NA NA 1,190.67
NA NA 10.0270 10.1676 NA NA NA 10.1735 NA 10.0207 10.0202 NA NA NA NA 569.52
HSBC Mutual Fund
Offer Document
HSBC Floating Rate Fund - Short Term Plan^^^^ 16-Nov-04 28-Feb-05 0.59%
HSBC Floating Rate Fund - Long Term Plan^^^^ 16-Nov-04 28-Feb-05 0.67%
1-Apr-04 28-Feb-05 Ratio of Recurring Expenses to Average Daily Net Assets (%) (Annualised) Date of Allotment Annualised Return (Since inception) Benchmark Returns (Since inception) Benchmark Index 1.95%
22-Jan-04 31-Mar-04 1.94%
1-Apr-04 28-Feb-05 1.95%
22-Jan-04 31-Mar-04 1.94%
24-Feb-04 24-Feb-04 24-Feb-04 24-Feb-04 16-Nov-04 16-Nov-04 5.52% 3.28% Crisil MIP Blended Index 0.85% 0.87% Crisil MIP Blended Index 7.32% 3.28% Crisil MIP Blended Index 0.96% 0.87% Crisil MIP Blended Index 5.28% 4.91% Crisil Liquid Fund Index 1.68% 1.37% Crisil Liquid Fund Index
Notes : 1) 2) # ^^ The dividend paid out is calculated based on the total amount of dividend declared during the period including distribution tax wherever applicable divided by the number of units as on the last day of the relevant period. The Institutional Option - Dividend of HSBC Income fund - Investment plan was fully redeemed on September 09, 2004. Hence no NAVs were calculated for Institutional Option - Dividend as at February 28, 2005. Further Dividend Per Unit has also accordingly not been calculated. The Institutional Plus Option of HSBC Cash Fund were launched on June 02, 2004.
3) 4) 5) 6)
^^^^ The HSBC Floating Rate Fund was launched during the current year on November 16, 2004 Returns are annualized for periods over one year except in case of the returns of HSBC Cash Fund and HSBC Floating Rate Fund Short Term Plan which are annualized for periods over 30 days. HSBC Institutional Income Fund - Short Term Plan, HSBC Institutional Income Fund - Investment Plan and HSBC Gilt Fund - Long Term Plan were wound up with effect from July 1, 2004, December 30, 2004 and January 31, 2005 respectively hence historical per unit statistics have not been provided.
HSBC Mutual Fund
Offer Document
SECTION V
UNITHOLDERS' RIGHTS & SERVICES
Investor Services
The Fund believes in providing the investor with superior services to make the investor's experience in dealing with the Fund an efficient and satisfactory one. In order to achieve these goals, the Fund endeavours to continuously establish and upgrade systems to handle transactions efficiently and resolve any investor grievances promptly.
Information about the Scheme

A schemewise Annual Report of the Fund or an abridged summary thereof shall be mailed to all Unitholders as soon as may be but not later than 6 months from 31 March of each year. The abridged annual report shall contain such details as are required under the Regulations. A full copy of the annual report shall be made available for inspection at the Head Office of the Fund and a copy shall be made available to the Unitholders on request, on payment of nominal fees if any. The Fund shall before the expiry of 1 month from the close of each half year, that is as on 31 March and 30 September, publish its unaudited financial results in one English daily newspaper circulating in the whole of India and in a newspaper published in the language of the region where the Head Office of the Fund is situated and update the same on the AMC's website at www.assetmanagement.hsbc.co.in and on AMFI's website at www.amfiindia.com, within 1 month from the close of each half year, in the formats as prescribed by SEBI. The AMC will disclose the NAV of each Plan of every Scheme of the Fund on every Business Day. The Fund shall before the expiry of 1 month from the close of each half year (31 March and 30 September) send to the Unitholders a complete statement of the Scheme's portfolios or if such statement is not sent to the Unitholders, it will be published by way of an advertisement in one English daily newspaper circulating in the whole of India and in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated. The Scheme's portfolios shall also be displayed on the AMC's website at www.assetmanagement.hsbc.co.in, 1 month from the close of each half year. The statement shall be in the format as prescribed by SEBI. The Mutual Fund will produce and mail to existing Unitholders, quarterly reports on the functioning of the Mutual Fund and the Scheme. These quarterly reports will also provide existing and potential investors with a summary of the current thinking of the AMC and outline the investment strategy with respect to the Scheme. The Mutual Fund shall disclose large unitholdings in the Scheme, which are over 25% of the NAV. The information on the number of such investors and total holdings by them in percentage terms, shall be disclosed in the allotment letters after the Initial Public Offer and in the annual and the half yearly results. The annual report containing accounts of the AMC shall be displayed on the website of the AMC. Unitholders, if they so desire, may request for the annual report of the AMC.
Ease of Transactions
The Fund intends to make every transaction for the investor a simple and convenient one. The Fund provides the following services: Investor Service Centres in major metros The Fund presently has Investor Service Centres in 8 cities. In addition to this, the Fund presently has a tie up with the Registrar who has set up Investor Service Centres in various cities. The details of Investor Service Centres are given in the inside back cover of the Offer Document. Over a period of time, the Fund will endeavour to add further Investor Service Centres and / or sales offices in other cities. Each ISC of the AMC provides investors with requisite information and help in processing transactions in the Scheme of the Mutual Fund. Adequate training will be imparted to personnel managing the Investor Service Centres, with a view to early resolution of queries. Process transactions in a timely manner Under the Regulations, the Fund / the Registrar / the AMC shall despatch to the Unitholders, the dividend warrants within 30 days of the date of declaration of dividend and the redemption proceeds within 10 Business Days from the date of acceptance of the request for redemption or repurchase proceeds, as the case may be. Under normal circumstances, the Fund will endeavour to complete all monetary transactions within 2 Business Days from the date of acceptance of a transaction request in respect of the Scheme at the Investor Service Centres. Ordinarily, non-monetary transactions or requests will be processed (with the exception of issue of Unit certificates) within 7 Business Days under the Scheme. Investors should note that completion of monetary / non-monetary transactions within the respective number of Business Day(s) as indicated above, would be done on "best efforts" basis and completion of all such transactions are subject to the time limits as prescribed under the Regulations.
Problem Resolution
The Fund will follow-up with the Investor Service Centres and the Registrar on complaints and enquiries received from investors with an endeavour to resolve them promptly. For this purpose, Mr. K. Sriram has been appointed the Investor Relations Officer. He can be contacted at the Corporate Office of the AMC. The address and phone numbers are: 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400 001 Phone: (91)(22) 22734343 Fax: (91)(22) 22734375 E-mail: hsbcmf@hsbc.co.in
Account Statements / Transaction Confirmation

The AMC shall endeavour to mail Account Statements / Transaction Confirmations within 3 Business Days for purchases, redemptions and switches.
Receiving Account Statement / Correspondence by e-mail

The Mutual Fund will encourage the investors to provide their e-mail addresses for all correspondence. The Mutual Fund's website may facilitate request for Account Statement by Unitholders. The Mutual Fund will endeavour to send Account Statements and any other correspondence including Annual Reports using e-mail as the mode for communication as may be decided from time to time.
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Offer Document
The Unitholder will be required to download and print the Account Statement after receiving the e-mail from the Mutual Fund. Should the Unitholder experience any difficulty in accessing the electronically delivered Account Statement, the Unitholder shall promptly advise the Mutual Fund to enable the Mutual Fund to make the delivery through alternate means. Failure to advise the Mutual Fund of such difficulty within 24 hours after receiving the e-mail will serve as an affirmation regarding the acceptance by the Unitholder of the Account Statement. It is deemed that the Unitholder is aware of all security risks including possible third party interception of the Account Statements and content of the Account Statements becoming known to third parties. Under no circumstances, including negligence, shall the Mutual Fund or anyone involved in creating, producing, delivering or managing the Account Statements of the Unitholders, be liable for any direct, indirect, incidental, special or consequential damages that may result from the use of or inability to use the service or out of the breach of any warranty. The use and storage of any information including, without limitation, the password, account information, transaction activity, account balances and any other information available on the Unitholder's personal computer is at the risk and sole responsibility of the Unitholder.
to ask for a fax confirmation of the request and any other additional information about the account of the Unitholder. The PIN should never be disclosed to any person or written down where any other person may discover it. All transactions conducted with use of this PIN will be the responsibility of the Unitholder and the Unitholder will abide by the record of the transactions generated. The Mutual Fund and the ISC / Registrar shall not accept any responsibility for the unauthorised use of the PIN.
Rights of Unitholders of the Scheme

l
Unitholders of the Scheme have a proportionate right in the beneficial ownership of the assets of the Scheme and in case of Dividend Option(s), wherever applicable, to the dividend declared, if any, by the Fund under the Scheme. When the Fund declares a dividend under the Scheme, the Fund shall despatch the dividend warrants to the Unitholders within 30 days from the date of declaration of dividend. The Fund shall despatch the redemption proceeds to the Unitholders within 10 Business Days from the date of acceptance of the request for the same. The Trustees are bound to make such disclosures to the Unitholders as are essential in order to keep them informed about any information known to Trustees which may have an adverse bearing on their investments. The appointment of the AMC for the Fund can be terminated by a majority of the Trustees or by 75% of the Unitholders of any one or more of the Scheme of the Fund and any change in the appointment of the AMC shall be subject to the prior approval of SEBI and the Unitholders of the respective Schemes. The Trustees are obliged to convene a meeting on a requisition of 75% of the Unitholders of a Scheme. 75% of the Unitholders of a Scheme can pass a resolution to wind up the Scheme. Unitholders have the right to inspect all the documents listed under "Documents Available for Inspection" in this Offer Document. The Trustees shall obtain the consent of the Unitholders: Whenever required to do so by SEBI, in the interest of the Unitholders Whenever required to do so on a requisition made by threefourths of the Unitholders of the Scheme When the Trustees decide to wind-up or prematurely redeem the Units. The Trustees shall ensure that no change in the fundamental attributes of any Scheme or the Trust or fees and expenses payable or any other change which would modify the Scheme and affect the interests of Unitholders is carried out unless: A written communication about the proposed change is sent to each Unitholder and An advertisement is given in one English daily newspaper having nationwide circulation as well as in newspaper published in the language of the region where the Head Office of the Mutual Fund is situated and Unitholders are given an option to exit at the prevailing Net Asset Value without any exit load.
NAV Information
The NAV of the Scheme will be calculated daily and announced by the Fund on each Business Day. The Unitholders may obtain the information on NAV on any day, by calling the office of the AMC or any of the Investor Service Centres or on the website of the AMC at www.assetmanagement.hsbc.co.in. The Fund will publish NAVs daily, in at least two daily newspapers. Further, the AMC shall publish the purchase and redemption prices of Units daily in a newspaper with all India circulation. The AMC shall update the NAVs on the website of Association of Mutual Funds in India - AMFI (www.amfiindia.com) by 8.00 p.m. on every Business Day. In case of any delay, the reasons for such delay would be explained to AMFI and SEBI by the next day. If the NAVs are not available before commencement of business hours on the following day due to any reason, the Fund shall issue a press release providing reasons and explaining when the Fund would be able to publish the NAVs.
l
Personal Identification Number (PIN)

The PIN facility may be made available to the Unitholders. Unitholders will be required to indicate their desire to avail of this facility and also indicate their bank account number, name of the bank and branch in the application for purchasing Units at a future date. A Form together with detailed terms and conditions will be mailed to such Unitholders subject to which usage of the PIN will be permitted. On receipt of the Form duly signed, the PIN will be mailed to each Unitholder. Unitholders may use the PIN to carry out one or more of the following types of transactions (as may be enabled by the Mutual Fund) by calling the ISCs / Call centre only:
l l l l
purchase redemption switch static data changes viz. address change, change of bank mandate etc.
The Unitholder will be asked for the PIN before the request is accepted. In the interest of the Unitholder, the ISC reserves the right
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Offer Document
Subject to the Regulations and the guidelines issued by SEBI, the consent of the Unitholders of the Scheme will be obtained through voting, by mail. Detailed modalities of the same, including the principles for entitlement of votes for each Unitholder will be finalised in consultation with and after obtaining the approval of SEBI and the Trustees. The annual report containing accounts of the AMC would be displayed on the website of the AMC (i.e. www.assetmanagement.hsbc.co.in). Unitholders, if they so desire, may request for the annual report of the AMC.
The Trustees or the person authorised as above, shall dispose of the assets of the Scheme concerned in the best interest of the Unitholders of the Scheme. The proceeds of sale realised in pursuance of the above, shall be first utilised towards discharge of such liabilities as are due and payable under the Scheme, and after meeting the expenses connected with such winding up, the balance shall be paid to the Unitholders in proportion to their respective interest in the assets of the Scheme, as on the date the decision for winding up was taken. On completion of the winding up, the Trustees shall forward to SEBI and the Unitholders, a report on the winding up, detailing the circumstances leading to the winding up, the steps taken for disposal of the assets of the Scheme before winding up, expenses of the Scheme for winding up, net assets available for distribution to the Unitholders and a certificate from the auditors of the Fund. Notwithstanding anything contained herein above, the provisions of the Regulations in respect of disclosures of half-yearly reports and annual reports shall continue to be applicable, until winding up is completed or the Scheme cease to exist. After the receipt of the report referred to above, if SEBI is satisfied that all measures for winding up of the Scheme have been complied with, the Scheme shall cease to exist.
Minimum Number of Investors in Schemes/Plans of Mutual Funds The Scheme and individual Plan(s) under the Scheme shall have a minimum of 20 investors and no single investor shall account for more than 25% of the corpus of the Scheme/Plan(s). However if such a situation arises during the IPO of the Scheme, in accordance with the SEBI Regulations, the Fund will endeavour to ensure that within a three months time period or the end of the succeeding calendar quarter from the close of the Initial Public Offering (IPO) of the Scheme, whichever is earlier, the Scheme complies with these two conditions failing which the provisions of Regulation 39 (2) (c) of SEBI (Mutual Funds) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up. The two conditions mentioned above shall also be complied with in each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. The Fund shall follow such regulations as may be set in place by the regulatory authorities from time to time.
Taxation on investing in Mutual Funds

As per the taxation laws in force and as per the amendments proposed therein by the Finance Bill, 2005 ("the FB") the tax benefits that are available to the investors investing in the Units of the Schemes are stated herein below. The information so stated is based on the Mutual Fund's understanding of such tax laws in force as of the date of this Offer Document, which have been vetted by the tax consultants. The following information is provided for only general information purposes. In view of the individual nature of tax benefits, each investor is advised to consult with his or her own tax consultant with respect to the specific tax implications arising out of their participation in the scheme. The following benefits may accrue to the Unitholders with effect from the financial year commencing from April 1, 2005 (unless otherwise stated) subject to the FB being enacted as the Finance Act, 2005. A. INCOME TAX 1. Exemption u/s. 10(35) Under the provisions of Section 10(35) of the Act income received in respect of the units of a mutual fund specified u/s. 10(23D) will be exempt from income tax in the hands of all unitholders. In view of this position, no tax needs to be deducted at source from such distribution by the fund. However, by virtue of the proviso to section 10(35), this exemption does not apply to income arising on "transfer" of units of a mutual fund. 2. Long Term Capital Gains i. On units of equity oriented funds : Section 10(38) exempts long term capital gains arising from the transfer of units of an equity oriented fund provided the transaction of sale is entered into on or after the date on which the securities transaction tax is made applicable and such transaction is chargeable to the securities transaction tax.
Duration of the Scheme / Winding up

Being open-ended, the duration of the Scheme is perpetual. The AMC, the Fund and the Trustees reserve the right to make such changes / alterations to all or any of the Scheme (including the charging of fees and expenses) offered under this Offer Document to the extent permitted by the applicable Regulations. However, in terms of the Regulations a scheme may be wound up after repaying the amount due to the Unitholders:
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On the happening of any event, which in the opinion of the Trustees, requires the Scheme to be wound up If seventy five per cent (75%) of the Unitholders of the Scheme pass a resolution that the Scheme be wound up If SEBI so directs in the interest of the Unitholders.
Where the Scheme is so wound up, the Trustees shall give notice of the circumstances leading to the winding up of the Scheme to:
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SEBI and In two daily newspapers having a circulation all over India and in one vernacular newspaper with circulation in Mumbai.
On and from the date of the publication of notice of winding up, the Trustees or the AMC, as the case may be, shall:
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Cease to carry on any business activities in respect of the Scheme so wound up Cease to create or cancel Units in the Scheme Cease to issue or redeem Units in the Scheme
Procedure and Manner of Winding up

The Trustees shall call a meeting of the Unitholders of the relevant Scheme to approve by simple majority of the Unitholders present and voting at the meeting, resolution for authorising the Trustees or any other person to take steps for the winding up of the Scheme.
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Offer Document
ii.
l
On units of funds other than the equity oriented funds: For Individuals and Hindu Undivided Families ("HUF"s) : Long-term capital gains in respect of units held for a period of more than 12 months will be chargeable u/s.112 at the rate of 20% (plus surcharge), as applicable. Capital gains would be computed after reducing the aggregate of cost of acquisition (as adjusted by cost inflation index notified by the Central Government) and expenditure incurred wholly and exclusively in connection with transfer. An assessee will have an option to apply for concessional rate of tax of 10% (plus surcharge) provided the long term capital gains are computed without substituting indexed cost in place of cost of acquisition. Further, in the case of Individuals and HUFs, being resident, where taxable income as reduced by long-term capital gains, is below the basic 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 subjected to income tax at 20% (plus surcharge) or 10% (plus surcharge) as the case may be.
Section 94(8) provides that if a person buys or acquires units ("the original units") of a mutual fund within a period of three months prior to the record date fixed for allotment of bonus units and sells the original units within nine months from the date of allotment of bonus units then the loss arising on such sale or transfer shall be ignored. Further, such loss shall be deemed to be the cost of acquisition or purchase of the bonus units.
4. Short Term Capital Gains i. On units of equity oriented funds : Section 111A provides that the short term capital gains arising from the transfer of units of an equity oriented fund will be taxed at 10% (plus applicable surcharge) provided the transaction of sale is entered into on or after the date on which the securities transaction tax is made applicable and such transaction is chargeable to the securities transaction tax. ii.
l
For Partnership firms, Indian Companies and other residents: Long term capital gains will be subjected to the income tax at the rate of 20% (plus surcharge) or 10% (plus surcharge) as the case may be. For non-residents and foreign companies: Long-term capital gains will be subjected to the income tax at of 20% (plus surcharge). However, no benefit of Cost Inflation Indexation is available. For Non-resident Indians : Under section 115E of the Act for non-resident Indians, income by way of long-term capital gains in respect of Units is chargeable at the rate of 10% (plus surcharge). However, no benefit of Cost Inflation Indexation is available. Non-resident Indians may opt for computation of long-term capital gains as per section 112, if it is more beneficial.
On units of funds other than equity oriented funds: Short term Capital Gains in respect of Units held for a period of not more than 12 months is added to the total income. Total income including short-term capital gains is chargeable to tax as per the relevant slab rates. The maximum tax rates applicable to different categories of assesses are as follows: Resident Individuals and HUF Partnership Firms Indian companies Non-Resident Indians Foreign Companies Overseas financial Organisations FIIs 30% plus surcharge, as applicable. 30% plus surcharge 30% plus surcharge 30% plus surcharge 40% plus surcharge 30% plus surcharge 30% plus surcharge
Tax on short term capital gains in all the above cases is proposed to be further increased by the EC calculated @ 2% on tax plus surcharge as per the FB. 5. (i) Tax Deduction at Source on Capital Gains No tax is required to be deducted at source on capital gains arising to any resident unit holder.
For Overseas Financial Organizations, including Overseas Corporate Bodies fulfilling conditions laid down under section 115AB (Offshore Funds) : Under section 115AB of the Act, long term capital gains in respect of units held for a period of more than 12 months will be chargeable at the rate of 10% (plus surcharge). Such gains would be calculated without indexation of cost of acquisition. For Foreign Institutional Investors ("FIIs"): Under section 115AD of the Act, long term capital gains in respect of units held for more than 12 months would be taxed at the rate of 10% plus surcharge. Such gains would be calculated without indexation of cost of acquisition. Tax on long term capital gains in all the above cases is proposed to be further increased by the Education Cess ("EC") calculated @ 2% on tax plus surcharge as per the FB.
(ii) Under section 195 of Act, tax shall be deducted at source in respect of capital gains as under: a.
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3.
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Capital Loss Section 94(7) disallows any capital loss, arising to a unitholder if he acquires units of a mutual fund within a period of three months prior to the record date fixed for declaration of dividend or distribution of income and sells or transfers such units within a period of nine months from such record date, to the extent of dividend or income received or receivable on such units.
b.
l
In case of a non-resident other than a company Long term capital gains on units of equity oriented funds Nil Long term capital gains on 20% plus units of funds other than surcharge equity oriented funds Short term capital gains on units 10% plus of equity oriented funds surcharge Short term capital gains on units 30% plus of funds other than surcharge equity oriented funds In case of a foreign company Long term capital gains on units Nil of equity oriented funds Long term capital gains on units 20% plus of funds other than equity oriented surcharge funds
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Offer Document
Short term capital gains on units of equity oriented funds Short term capital gains on units of funds other than equity oriented funds
10% plus surcharge 40% plus surcharge
subject to relevant requirements under the Income Tax, FEMA and RBI Directions. (ii) As per Section 54ED capital gains arising from transfer of a long term capital asset being listed securities or units of UTI/ mutual funds, shall be exempt from tax, if such capital gains are invested in equity shares by way of a public issue. The section provides for a lock-in period of one year and if the newly acquired shares are sold or transferred during the period, the capital gains earlier claimed exempt, would become taxable in the year of sale of the newly acquired shares. (iii) An investor who sells units of an equity oriented fund to the mutual fund will have to pay 0.2% of the sale price of the units as securities transaction tax which tax would be collected by the prescribed person in case of every mutual fund. (iv) Section 88E provides that where the total income of a person includes income chargeable under the head "Profits and gains of business or profession" arising from sale of units of equity oriented funds, he shall get rebate equal to the securities transaction tax paid by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax. (v) Section 80C provides that an individual or HUF shall get deduction, in respect of contribution to any units of any Mutual Funds notified under clause 23D of section 10 or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official gazette, specify in this behalf and in respect of contribution by an individual to any pension fund set up by the Mutual Fund notified under clause 23D of section 10 or by the Administrator or the specified company, as the Central Government may, by notification in the Official Gazette, specify in this behalf, out of his income chargeable to tax being the aggregate sum does not exceed one lakh rupees.
Tax Deducted At Source on short term and long term capital gains in all the above cases is proposed to be further increased by the EC calculated @ 2% on tax plus surcharge as per the FB. (iii) Under section 196B of the Act tax at 10% plus surcharge and EC calculated @ 2% on tax plus surcharge as per the FB shall be deducted at source from long term capital gains on units other than the units of equity-oriented mutual funds earned by Overseas Financial Organisations. (iv) Under Section 196D of the Act, no deduction shall be made from any income by way of capital gains, in respect of transfer of securities referred to in Section 115AD of the Act. As per circular no. 728 dated October 1995 by CBDT, in the case of a remittance to a country with which a Double Taxation Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in DTAA whichever is more beneficial to the assessee. In order for the unitholder to obtain the benefit of a lower rate under the DTAA, the unitholder would be required to provide the fund with a certificate obtained from his Assessing Officer stating his eligibility for the lower rate. 6. Investments by Charitable and Religious Trusts Units of Mutual Fund Schemes referred to in clause 23D of section 10 of the Act constitute an eligible avenue for investment by charitable or religious trusts per rule 17C of the Income Tax Rules, 1962, read with clause (xii) of sub-section (5) of section 11 of the Income Tax Act, 1961. B. WEALTH TAX Units held under the Schemes of Mutual Fund are not treated as assets within the meaning of section 2(ea) of the Wealth Tax Act, 1957 and are, therefore, not liable to Wealth-Tax C. GIFT TAX If units of Mutual Fund Scheme are gifted, no gift tax shall be payable either by the donor or the donee as the Gift Tax has been abolished. Notes: (i) HSBC AMC also confirms that the Income Tax/Wealth Tax/ Capital Gains Tax and investment by NRIs/FIIs/OCBs are
Unclaimed Redemption / Dividend Amount

The unclaimed redemption amounts and dividend amounts may be deployed by the mutual fund in call money market or money market instruments and the investors who claim these amounts during a period of 3 years from the due date shall be paid at the prevailing net asset value. After a period of 3 years, this amount will be transferred to a pool account and the investors can claim the amount at the NAV prevailing at the end of the third year. The income earned on such funds will be used for the purpose of investor education. The AMC will make continuous efforts to remind the investors through letters to take their unclaimed amounts. Further, the investment management fee charged by the AMC for managing unclaimed amounts shall not exceed 50 basis points.
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Offer Document
SECTION VI
OTHER MATTERS
Unitholder Grievances Redressal Mechanism
Investor grievances are normally be received at the Corporate Office of the AMC or at the Investor Service Centres or directly by the Registrar. All grievances are generally forwarded to the Registrar for their necessary action. The complaints are closely followed up with the Registrar to ensure timely redressal and prompt investor service. Given below is the status of complaints received up to March 18, 2005 Since Inception to March 18, 2005 HSBC Mutual Fund - Consolidated Report for all schemes
Name of Complaint Opening Balance Total Complaints March 2005 Queries resolved within 24 Hrs. T+0 48 Hrs. T+1 72 Hrs. T+2 Above 72 Hrs. > T+2 Pending
Complaints Received from SEBI Correction in Investor Details Non - Allotment of Units Non - receipt of Account Statement Non - receipt of Dividend Warrant Non - receipt of Redemption Warrant Total
0 0 0 0 0 0 0
0 1189 0 268 85 73 1615
0 1136 0 246 80 69 1531
0 10 0 9 1 0 20
0 25 0 5 2 1 33
0 18 0 8 2 3 31
0 0 0 0 0 0 0
ASSOCIATE TRANSACTIONS
INVESTMENT IN ASSOCIATE COMPANIES During the period November 14, 2002 to February 28, 2005, HSBC Mutual Fund had invested in the following associate companies of the Sponsor (Rs. in crores) Name of the Investing Scheme HSBC Cash Fund HSBC Income Fund Short Term Plan HSBC Institutional Income Fund Investment Plan HSBC Institutional Income Fund Short Term Plan HSBC MIP - Regular HSBC MIP - Savings HSBC Floating Rate Fund - Long Term Plan Name of the Associate HSBC HSBC HSBC HSBC HSBC HSBC HSBC Particulars Fixed Deposit Fixed Deposit Fixed Deposit Fixed Deposit Fixed Deposit Fixed Deposit Fixed Deposit Amount of Investment 344.29 57.65 1.00 29.03 6.00 3.00 60.00
The above investments were considered sound. Before making the investments, the AMC evaluated the same on merits and on arms' length basis and in accordance with the objectives of the Scheme.
Underwriting Obligations with respect to issues of Associate Companies

The AMC has till date, not entered into any underwriting contracts in respect of any public issue made by any of its associate companies.
Subscriptions in issues lead managed by the Sponsor or any of its Associates

The Mutual Fund subscribed to the public issue of Maruti Udyog Limited during the half year ended September 30, 2003. The Fund was allotted 62300 shares @ Rs. 125.00 per share. The Schemes of HSBC MF subscribed to public issues of Biocon Ltd. (allotted 75000 shares @ Rs 315 per share) and Gas Authority of India Limited (allotted 849520 shares @ Rs. 195 per share) during the half year ended March 31, 2004. The Schemes of HSBC Mutual Fund subscribed to the public issue of Jet Airways India Limited during the half year ended March 31, 2005. The Fund was allotted 63623 shares @ Rs 1100 per share. HSBC Securities and Capital Markets (India) Pvt. Ltd., the Sponsor was the book running lead manager / co-book running lead manager in these issues. However these were subscribed through merchant bankers / brokers other than the Sponsor.
HSBC Mutual Fund
Offer Document Dealing with Associate Companies

The AMC has utilised the services of its associate, The Hongkong and Shanghai Banking Corporation Limited as the Collecting Banker and for procuring Unit subscriptions for Scheme of the Fund. The Collecting Banker's fees and commissions payable are at similar rates offered to other collecting bankers and distributors by the Scheme. The Hongkong and Shanghai Banking Corporation Limited and HSBC Primary Dealership (India) Private Limited are on the panel of selected counterparties with which the Mutual Fund places money in fixed deposits and / or enters into transactions for purchase / sale of debt instruments. These associates were counterparties to the Mutual Fund with respect to purchase / sale of the abovementioned instruments. The AMC has utilised the services of the Sponsor for purchase / sale of securities on behalf of the Mutual Fund. DEALINGS WITH ASSOCIATE COMPANIES (PERIOD 14/11/02 TO 28/02/2005) HSBC Mutual Fund has utilised the services of the following associates for the purpose of securities transactions (aggregate purchase and sale) & Deals with associates as counterparty: (Rs. in crores) Name of the Associate Particulars HEF HCF IP The Hongkong and Shanghai Banking Corporation Limited Commercial Paper Fixed Deposit Discounted Instruments Government Securities PSU/PFI Bonds/ Corporate Debt Treasury Bills Government Securities Treasury Bills 18.86 67.60 207.56 344.29 3.21 36.33 25.01 221.21 468.65 73.86 40.74 4.99 159.66 30.85 1.29 65.84 121.19 69.90 5.05 14.99 7.22 43.14 12.54 18.57 0.37 1.34 11.67 26.84 57.62 46.13 1.79 23.34 26.30 5.18 HIF ST 4.95 57.65 IP 1.00 HIIF ST 19.79 29.03 LT HGF ST HIOF HMIP R 6.00 S 3.00 HFRF ST LT 60.00
HSBC Primary Dealership (India) Private Limited
135.34 153.76 21.01 571.63 261.93 46.58
24.61 21.30 132.21 78.18 10.34 8.83
1.05
2.06 14.11
HSBC Securities Equity Shares and Capital Markets (India) Private Limited (Sponsor)
BORROWINGS BY HSBC MUTUAL FUND FROM ASSOCIATE COMPANIES (Rs. in crores) Name of the Associate Particulars HEF HCF IP The Hongkong and Shanghai Banking Corporation Limited Borrowings for redemptions / switch-outs HIF ST IP HIIF ST LT HGF ST HIOF HMIP R S HFRF ST LT
12.00
81.75
HEF : HSBC Equity Fund, HIF-IP : HSBC Income Fund - Investment Plan, HIF-ST : HSBC Income Fund - Short Term Plan, HIIF-IP : HSBC Institutional Income Fund - Investment Plan, HIIF-ST : HSBC Institutional Income Fund - Short Term Plan, HGF-LT : HSBC Gilt Fund - Long Term Plan, HGF-ST : HSBC Gilt Fund - Short Term Plan, HIOF : HSBC India Opportunities Fund, HMIP-R : HSBC MIP - Regular, HMIP-S : HSBC MIP - Savings, HFRF-LT : HSBC Floating Rate Fund - Long Term Plan, HFRF-ST : HSBC Floating Rate Fund - Short Term Plan
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AMOUNT PAID BY HSBC MUTUAL FUND TO ASSOCIATE COMPANIES (14/11/02 to 28/02/05) (Rs. in lacs) Name of the Associate Particulars HEF IP HSBC Securities Brokerage on and Capital Equity Deals Markets (India) Private Limited The Hongkong and Shanghai Banking Corporation Limited The Hongkong and Shanghai Banking Corporation Limited The Hongkong and Shanghai Banking Corporation Limited Commision on Distribution of units 46.04 HIF ST HCF IP HIIF ST LT HGF ST R 2.58 HMIP S 2.20 14.38 HIOF HFRF LT ST
780.28
258.62
62.70 146.99
11.23
18.29
0.42
0.18
102.39
56.31
407.01
1.81
3.85
Collection / Bank Charges
3.96
0.54
0.17
1.38
0.01
0.11
0.42
0.58
0.03
0.10
Settlement Charges
35.89#
HSBC Securities Brokerage on and Capital Debt Deals Markets (India) Private Limited HSBC Asset Management (India) Private Limited The Hongkong and Shanghai Banking Corporation Limited Investment Management & Advisory Fee Interest on borrowings for redemptions/ switch-outs
0.05
1,650.54 638.63
286.39 943.60 145.48
114.33
13.92
0.82
227.72
171.56 400.69
20.15
56.27
0.40
**
** Interest of Rs. 1.35 lacs on borrowings has been borne by HSBC AMC # Charges paid by all the schemes of HSBC Mutual Fund towards settlment of Government Securities transactions through the constituent SGL account. HEF : HSBC Equity Fund, HIF-IP : HSBC Income Fund - Investment Plan, HIF-ST : HSBC Income Fund - Short Term Plan, HIIF-IP : HSBC Institutional Income Fund - Investment Plan, HIIF-ST : HSBC Institutional Income Fund - Short Term Plan, HGF-LT : HSBC Gilt Fund - Long Term Plan, HGF-ST : HSBC Gilt Fund - Short Term Plan, HIOF : HSBC India Opportunities Fund, HMIP-R : HSBC MIP - Regular, HMIP-S : HSBC MIP - Savings, HFRF-LT : HSBC Floating Rate Fund - Long Term Plan, HFRF-ST : HSBC Floating Rate Fund - Short Term Plan The AMC has used the designated branches of The Hongkong and Shanghai Banking Corporation Limited as Collecting Centres / Investor Service Centres and Collecting / Distributing Agents. The percentage of brokerage paid to associate broker was in line with the norms relating to brokerage payment for transactions of the Mutual Fund. The AMC may from time to time, for the purpose of conducting its normal business, use the services (including brokerage services and securities transactions) of the Sponsor, its subsidiaries, associates of the Sponsor and employees or relatives. The subsidiaries of the Sponsor on the date of this Offer Document are:
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HSBC Primary Dealership (India) Private Limited
The AMC may utilise the services of the Sponsor, group companies and any other subsidiary or associate company of the Sponsor established or to be established at a later date, in case such a company (including employees or relatives) is in a position to provide the requisite services to the AMC. The AMC will conduct its business with the aforesaid companies (including employees or relatives) on commercial terms and on arms' length basis and at mutually agreed terms and conditions to the extent permitted under the SEBI Regulations, after evaluation of the competitiveness of the pricing offered by the Sponsor, associate companies (including employees or relatives) and the services to be provided by them.
HSBC Mutual Fund
Offer Document
Associate transactions, if carried out, will be as per the SEBI Regulations and the limits prescribed thereunder. The Scheme shall not make any investment in:
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The listed securities of group companies of the Sponsor which is in excess of 25% of the net assets.
Any unlisted security of an associate or group company of the Sponsor Any security issued by way of private placement by an associate or group company of the Sponsor
The AMC may avail the services of the Sponsor and / or its associates for usage of premises as Investor Service Centres and / or to act as collection and distribution agents. The Sponsor / associates shall be paid a fee based on the quality of services rendered. These fees shall be debited to the Scheme, subject to SEBI Regulations.
HSBC MUTUAL FUND Disclosure under Regulation 25(11) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended Investments made by the schemes of HSBC Mutual Fund in Companies or their subsidiaries that have invested more than 5% of the net assets of any scheme
Company Name Schemes invested in by the Company Investment made by schemes of HSBC Mutual Fund in the company/subsidiary Aggregate cost of acquisition during the period ended February 28, 2005 (Rs. in Lakhs) Outstanding as at February 28, 2005 (At Market / Fair Value) (Rs. in Lakhs)
Bharti Televentures Ltd.
HIF-ST HFRF-ST
HMIP-R HMIP-S HEF HIOF HEF HIOF HMIP-R HMIP-S HCF HIF-IP HIIF-IP HMIP-R HMIP-S HEF HIOF HMIP-R HMIP-S HEF HIOF HIF-ST HCF HMIP-R HMIP-S HEF HIOF
960.90 735.92 6,502.20 2,405.83 5,092.60 822.39 1,154.83 669.67 8,000.67 505.27 505.27 270.81 395.50 7,069.37 1,092.59 509.32 716.73 7,864.36 2,262.96 994.14 1,976.35 9.04 5.52 4,792.94 3,048.07 100.00 11,463.76 2,000.00 4,500.00 3,500.00 2,500.00 323.21 530.80 2,952.54 1,102.16 1,056.34 886.81 334.84 3,807.05 1,228.50 527.98 528.14
1,966.95 1,060.76 530.38 1,500.00 52.58 75.90 8,298.29 1,182.40 175.60 200.54 4,757.04 1,002.64 8,286.76 3,173.88 522.50 235.44 277.10 2,298.70 1,058.79 522.50
Canara Bank
HCF
Electro Steel Castings Ltd. Grasim Industries
HIIF-IP HIIF-ST
HCL Technologies Ltd.
HIF-ST HIIF-ST HIF-IP
HCL Infosystems Limited (Subsidiary of HCL Technologies Limited)
HDFC Bank Ltd.
HIF-ST HIIF-ST
HIF-ST HCF HIIF-ST HMIP-R HMIP-S HFRF-ST HMIP-R HMIP-S HEF HIOF HIF-IP HMIP-R HMIP-S HEF HIOF HFRF-LT HIF-ST
Hero Honda Motors Limited
HIIF-IP HMIP-R HMIP-S HFRF-LT HFRF-ST HIF-IP HIIF-IP HFRF-LT HCF
Hindalco Industries Limited
HSBC Mutual Fund
Offer Document
Company Name
Schemes invested in by the Company
Investment made by schemes of HSBC Mutual Fund in the company/subsidiary
Aggregate cost of acquisition during the period ended February 28, 2005 (Rs. in Lakhs)
Outstanding as at February 28, 2005 (At Market / Fair Value) (Rs. in Lakhs)
Hindustan Lever Limited
HCF
HMIP-R HMIP-S HEF HIOF
113.52 152.44 279.22 206.64
Hindustan Lever Chemicals (Subsidiary of Hindustan Lever Limited) Indian Aluminium Company Ltd. HFRF-LT
HMIP-R HIF-IP HIF-ST HEF HIOF HIOF HIF-IP HIF-ST HCF HIIF-ST HIIF-IP HMIP-R HMIP-S HEF HIOF HFRF-LT HFRF-ST HCF
547.49 521.76 806.94 1,146.01 191.76 7,223.80 6,225.62 34,708.59 3,826.04 2,956.22 3,905.89 2,555.63 4,798.20 756.82 5,090.11 5,572.36 1,500.00
500.40 521.52 1,618.25 2,471.60 219.57 1,038.52 3,509.06 519.26 1,513.43 114.00 4,602.86 2,541.32
Indian Rayon & Industries Ltd. Indo Gulf Fertilisers Limited
HFRF-LT HGF-LT
Industrial Development Bank of India HIF-ST HCF HIF-IP HFRF-ST
IDBI Capital Markets (Subsidiary of Industrial Development Bank of India) Infrastructure Leasing & Financial Services Ltd. HCF
HIF-ST HCF HIIF-ST HIIF-IP HFRF-LT HIF-IP HIIF-IP HCF HFRF-ST HMIP-R HMIP-S HEF HIOF HMIP-R HMIP-S HCF HEF HIOF HIF-ST HCF HIIF-ST HMIP-R HMIP-S HFRF-ST HFRF-LT
5,835.11 83,893.77 3,500.00 494.32 3,357.75 503.47 1,046.05 2,443.96 1,499.53 444.02 533.34 11,315.57 438.40 949.25 1,201.33 433.42 13,729.25 4,799.99 2,503.02 44,441.12 3,501.75 505.60 505.60 4,504.50 2,500.00 304.28 50.55
3,500.00 3,365.17 64.71 64.71 2,737.86 204.14 257.86 9,741.58 3,223.20 13,502.96 3,004.42 2,500.00 45.76
Infrastucture Development Finance Co. Ltd.
HFRF-LT HIF-ST
ITC Limited
HCF HFRF-ST
Mahindra & Mahindra Limited
HIIF-ST
Mahindra & Mahindra Financial Services (Subsidiary of Mahindra & Mahindra Limited)
Polaris Software Ltd.
HIIF-ST
HEF HIOF
HSBC Mutual Fund
Offer Document
Company Name
Schemes invested in by the Company
Investment made by schemes of HSBC Mutual Fund in the company/subsidiary
Aggregate cost of acquisition during the period ended February 28, 2005 (Rs. in Lakhs)
Outstanding as at February 28, 2005 (At Market / Fair Value) (Rs. in Lakhs)
Raymonds Limited
HGF-LT HIIF-IP HFRF-ST
HCF HFRF-ST HFRF-LT HCF HEF HIOF HFRF-ST HFRF-LT HIOF
35,000.00 9,500.00 1,000.00 21,781.65 1,102.01 1,016.41 2,000.00 2,000.00 78.87 958.92 2,104.77 8,753.35 2,106.94 352.81 335.05 500.00 1,500.00 488.58 553.03 7,940.61 1,874.07 507.61 413.08 167.30 185.20 533.94 842.66 42,668.77 473.31 533.94 2,528.23 1,500.00 4,930.67 1,085.86 198.00 354.80 374.82 1,771.49 133.53
1,700.00 2,649.42 1,284.62 892.08 1,956.90 3,800.25 1,539.10 177.36 502.79 12,719.12 501.39 501.39 762.60 127.10
Sterlite Industries Ltd.
Hindustan Zinc Limited (Subsidiary of Sterlite Industries) The Great Eastern Shipping Co Ltd. Tata Iron and Steel Co. Ltd. HIIF-ST HIIF-IP HCF
HIOF HEF HEF HIOF HMIP-R HMIP-S HIF-ST HCF
Tata SSL (Subsidiary of Tata Iron and Steel Co. Ltd) Tata Motors Limited HMIP-R HCF HFRF-LT HCF HCF
HMIP-R HMIP-S HEF HIOF HMIP-R HEF HMIP-R HMIP-S HIF-IP HIF-ST HCF HIIF-ST HIIF-IP HMIP-R HMIP-S HFRF-ST HEF HIOF HMIP-R HMIP-S HEF HIOF
Tata Sons Limited The Tata Power Co. Ltd.
UTI Bank Limited
HIF-ST
Vijaya Bank Wipro Limited
HIIF-IP HCF
HEF : HSBC Equity Fund, HIF-IP : HSBC Income Fund - Investment Plan, HIF-ST : HSBC Income Fund - Short Term Plan, HIIF-IP : HSBC Institutional Income Fund - Investment Plan, HIIF-ST : HSBC Institutional Income Fund - Short Term Plan, HGF-LT : HSBC Gilt Fund - Long Term Plan, HGF-ST : HSBC Gilt Fund - Short Term Plan, HIOF : HSBC India Opportunities Fund, HMIP-R : HSBC MIP - Regular, HMIP-S : HSBC MIP - Savings, HFRF-LT : HSBC Floating Rate Fund - Long Term Plan, HFRF-ST : HSBC Floating Rate Fund - Short Term Plan The above investments comprise equity shares, debentrures / bonds, commercial paper, fixed deposits and other debt instruments. These investments have been made on account of their high credit quality and competitive yield for the investment in fixed income/ money market insturments and in case of equity shares because of attractive valuations of these companies. In case of equity shares the investments are made because of attractive valuations of these companies.
HSBC Mutual Fund
Offer Document Dividends and Distributions

Dividend may be declared from time to time. Such dividends if declared, will be paid under normal circumstances, only to those Unitholders who have opted for Dividend Option. However, it must be distinctly understood that the actual declaration of dividends under the Scheme and the frequency thereof will, interalia, depend upon the distributable surplus of the Scheme. The Trustees reserve the right of dividend declaration and to change the frequency, date of declaration and the decision of the Trustees in this regard shall be final. There is no assurance or guarantee to unit holders as to the rate of dividend distribution nor that dividend will be regularly paid. The dividend that may be paid out of the net surplus of the Scheme will be paid only to those Unitholders whose names appear in the register of Unitholders on the notified record date. The dividend will be at such rate as may be decided by the AMC in consultation with the Trustees. The AMC shall despatch to the Unitholders, the dividend warrants within 30 days of the date of declaration of dividend.
with the requirements of collecting margins from all noninstitutional clients. Exchanges/depository levy fines from time to time on matters inherent to the stock broking business. Penalty of Rs 210,000 has been levied by the Directorate of Enforcement on The Hongkong and Shanghai Banking Corporation Limited, New Delhi Branch under the provisions of the erstwhile Foreign Exchange Regulation Act, 1973 for accepting cash deposits aggregating to Rs 2.2 m into NRE account by persons other than the NRE account holders during May 1992 to April 1994. An appeal against the said order has been filed by the Bank before the Appellate Tribunal. Penalties (considered on the basis of the top 10 monetary penalties) imposed by a financial regulatory body or government authority against associates of the Sponsor carrying on business in the UK, for irregularities / violations in the financial services sector, during last five years: In September 1998, HSBC Futures was fined approximately US$18,000 by the London International Futures and Options Exchange (LIFFE) for failing to correctly settle a futures trade. In October 1999, HSBC Investment Bank plc was fined approximately US$15,000 by the London Stock Exchange for failure to have adequate procedures and controls in place when inputting orders to SETS (the automated price driven quotation system of the Exchange). In March 1999, HSBC Investment Bank plc was fined approximately US$7,500 by the London Stock Exchange for a breach of its rules in connection with a worked principal agreement ("WPA"). In April 1998, HSBC Investment Bank plc was fined approximately US$7,500 by the London Stock Exchange for failing to disclose a block trade in accordance with its rules. In August 1998, HSBC Insurance Brokers Limited (INUK) was fined approximately US$3,000 by Lloyd's of London for failing to obtain prior consent from the Council of Lloyd's for two of INUK's directors to hold common directorships with insurance companies.
Penalties and Pending Litigations

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Cases of penalties awarded by SEBI under the SEBI Act or any of its regulations against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the Asset Management Company, Trustee Company /Board of Trustees, or any of the directors or key personnel (specifically the fund managers) of the Asset Management Company and Trustee Company. For Sponsor and its associates, other than the penalties as mentioned above, the penalties awarded by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debentureholders and depositors.Additionally, penalties awarded for any economic offence and violation of any securities laws. No penalties have been awarded by SEBI under the SEBI Act or any of its regulations against the Sponsor or any company associated with the Sponsor in any capacity including the Asset Management Company, Board of Trustees, or any of the directors or key personnel (specifically the fund managers) of the Asset Management Company. No penalties have been awarded in the case of the Sponsor or its associates by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debentureholders and depositors. No penalties have been awarded against the Asset Management Company, Sponsor or Trustees for any economic offence. Penalties imposed by a financial regulatory body or government authority against the Sponsor and its associates carrying on business in India, for irregularities / violations in the financial services sector, during the last five years: On the Sponsor: Rs 5000 by National Stock Exchange in July 2001 for not indicating names of authorised signatories on contract notes and for furnishing trade data on cumulative basis on contract notes issued. Rs 5000 by National Securities Depository Limited in August 2001 for not taking database backup on 26 August 2001. Fines of Rs. 5000 each for 4 quarters during 2002 to 2003 and for 2 quarters in 2004 by The Stock Exchange, Mumbai, Rs. 10,000 each for 5 quarters during 2001 to 2002 and Rs 5000 for 4 quarters during 2003 and for 4 quarters in 2004 by National Stock Exchange for not fully complying
Suspensions / cancellation of certificate of registration (for violations in the financial services sector) of associates of the Sponsor carrying on business outside India, during the last ten years: The Capital Markets Supervisory Board in Indonesia penalised HSBC Securities Indonesia ("HCID") for transactions in September 2001 that were not in accordance with the trading rules following a stock split. HCID paid a fine of US$ 10,000 in January 2002. HCID was one of a number of firms suspended by the Jakarta Stock Exchange; however, the suspension was subsequently retracted. In June 2001, HSBC Fund Administration (Guernsey) Limited dealings in various third party funds were temporarily suspended by the regulator following an adverse auditors report. In May 2001, HSBC Securities Indonesia was suspended from trading for one day for late submission of a regulatory return, caused by an input error.
HSBC Mutual Fund
Offer Document
In 1998, the Japanese authorities imposed a limited trading ban and fines totalling approximately US$70,000 on HSBC Securities (Japan) Limited for certain discrepancies in the booking and reporting of transactions. In July 2001, The Hongkong and Shanghai Banking Corporation Limited in Bangkok was suspended from dealing in the REPO market for 10 days following a breach of Bank of Thailand's reporting requirements.
Other than as disclosed above, there are no other enquiries / adjudication proceedings under the SEBI Act and the Regulations made thereunder, that are in progress against the Sponsor of the Mutual Fund or any Company associated with the Sponsor in any capacity including the AMC, Board of Trustees / Trustee Company or any of the Directors or key personnel of the Asset Management Company. HSBC Asia Pacific Holdings (UK) Limited holds 14.62% of the equity share capital of UTI Bank Limited as a financial investment and the HSBC Group has no management control or Board representation on UTI Bank Limited. The above information has been disclosed in good faith as per the information available to the AMC.
Any pending material litigation proceedings incidental to the business of the Mutual Fund to which the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees / Trustee Company or any of the directors or key personnel is a party. Any pending criminal cases against the Sponsor or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees / Trustee Company or any of the directors or key personnel. There are no pending material litigation proceedings incidental to the business of the Mutual Fund or pending criminal cases to which the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees or any of the directors or key personnel is a party.
Borrowing by the Mutual Fund

Under the Regulations, the Fund is allowed to borrow to meet its temporary liquidity needs for the purpose of repurchase / redemption of Units or payment of interest or dividend to the Unitholders. Further, as per the Regulations, the Fund shall not borrow more than 20% of the Net Assets of the Scheme and the duration of such borrowing shall not exceed a period of 6 months. The Fund may raise such borrowings after approval by the Trustees from its Sponsor / associates / group companies / commercial banks in India or any other entity at market related rates prevailing at the time and applicable to similar borrowings. The security for such borrowings, if required, will be as determined by the Trustees. Such borrowings, if raised, may result in a cost, which would be dealt with in consultation with the Trustees.
Any deficiency in the systems and operations of the Sponsor of the Mutual Fund or any company associated with the sponsor in any capacity including the AMC or the Trustee Company which SEBI has specifically advised to be disclosed in the offer document, or which has been notified by any other regulatory agency. There are no deficiencies in the systems and operations of the Sponsor of the Mutual Fund or any company associated with the sponsor in any capacity including the AMC or the Board of Trustees which SEBI has specifically advised to be disclosed in the offer document or which has been notified by any other regulatory agency to be disclosed in an offer document.
Securities Lending by the Mutual Fund

Subject to the Regulations and the applicable guidelines, the Scheme and the Plan(s) thereunder may, if the Trustees permit, engage in stock lending. Stock lending means the lending of stock to another person or entity for a fixed period of time, at a negotiated compensation. The borrower will return the securities lent on expiry of the stipulated period. Please refer to risks attached with stock lending. Each Scheme, under normal circumstances, shall not have exposure of more than 50% of its net assets in stock lending. The Scheme may also not lend more than 50% of its net assets to any one intermediary to whom securities will be lent. Securities Lending could be considered for the purpose of generating additional income to unit holders on the longer term holdings of the Scheme. The AMC shall report to the Trustees on a quarterly basis as to the level of lending in terms of value, volume and the names of the intermediaries and the earnings / losses arising out of the transactions, the value of collateral security offered etc.
Any enquiry / adjudication proceedings under the SEBI Act and the Regulations made thereunder, that are in progress against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees / Trustee Company or any of the Directors or key personnel of the Asset Management Company. The Sponsor 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. The Sponsor has submitted that there has been no failure on the part of the Sponsor to comply with its obligations as a merchant banker. Subsequent to the enquiry officer's recommendation of a minor penalty ie the Sponsor be censured, a show cause notice has been issued by SEBI requiring the Sponsor to show cause as to why the said penalty should not be imposed. The Sponsor has reiterated its earlier stand and submitted that there has been no failure on the part of the Sponsor to comply with its obligations as a merchant banker.
Underwriting
Subject to SEBI Regulations, the Scheme may enter into underwriting agreements after the Mutual Fund obtains the necessary registration in terms of the Securities and Exchange Board of India (Underwriters) Regulations, 1993 and the Securities and Exchange Board of India (Underwriters) Rules, 1993 authorising it to carry on activities as underwriters. The capital adequacy norms for the purpose of underwriting shall be the net assets of the Scheme and the underwriting obligation of the Scheme shall not at any time exceed the total Net Asset Value of the Scheme. For the purposes of the Regulations, the underwriting obligation will be deemed as if investments are made in such securities.
Inter-Scheme Transfers
Transfer of investments from one Scheme to another Scheme in the Mutual Fund shall be permitted provided:
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Such transfers are done at the prevailing market price for quoted instruments on spot basis;
HSBC Mutual Fund
Offer Document General Information

Power to make Rules Subject to the Regulations, the Trustees may from time to time, prescribe such terms and make such rules for the purpose of giving effect to the Scheme and the Plans thereunder with power to the AMC to add to, alter or amend all or any of the terms and rules that may be framed from time to time. Power to remove Difficulties If any difficulty arises in giving effect to the provisions of the Scheme and the Plans thereunder, the Trustees may, subject to the Regulations, take any action not inconsistent with such provisions, which appears to be necessary, desirable or expedient, for the purpose of removing such difficulty. Scheme to be binding on the Unitholders Subject to the Regulations, the Trustees may from time to time, add or otherwise vary or alter all or any of the features of plans and terms of the Scheme after obtaining the prior permission of SEBI and the Unitholders (where necessary), and the same shall be binding on all the Unitholders of the Scheme and the Plans thereunder and any person or persons claiming through or under them, shall do so as if each Unitholder or such person expressly had agreed that such features and terms shall be so binding.
The securities so transferred shall be in conformity with the investment objective of the transferee Scheme and Inter-Scheme transfers shall be done in accordance with the SEBI (Mutual Fund) Regulations.
Policy on Offshore Investments by the Scheme and the Plans thereunder

SEBI regulations and circulars issued by it permit mutual funds to invest in ADRs / GDRs issued by Indian companies, foreign debt securities, government securities of foreign countries, units / securities issued by overseas mutual funds or unit trusts, subject to the terms and conditions prescribed, up to a specified percentage of net assets managed as on the date of last audited balance sheet subject to maximum of US$50 million. The minimum limit presently prescribed is US$ 5 million. It is the Investment Manager's belief that ADRs/GDRs issued by Indian Companies / foreign securities etc. offer new investment and portfolio diversification opportunities into multi-market and multicurrency products. The Fund would look to invest in ADRs/GDRs issued by Indian Companies / foreign securities in order to diversify the portfolio in terms of variety of instruments held and enhance returns by taking advantage of market movements in global markets, which may or may not be in sync with the Indian markets. Investment in foreign securities would only be looked at if they provide a return, liquidity, ease of settlement and valuation, transaction costs better than equivalent local investments. Hence only if the Fund Manager becomes cautious or negative on the Indian equity markets for a reasonably long period of time, would he consider investing in such securities. The Fund will look to identify and capture profitable opportunities as and when they arise. However, such investments also entail additional risks. Such investment opportunities may be pursued by the Investment Manager provided they are considered appropriate in terms of the overall investment objectives of the Scheme. The Scheme may then, if necessary, seek permission from SEBI and RBI to invest abroad in accordance with the investment objectives of the Scheme and in accordance with any guidelines issued by SEBI / RBI from time to time. Since the Scheme would invest only partially in ADRs/GDRs issued by Indian Companies / foreign securities etc., there may not be readily available and widely accepted benchmarks to measure performance of the Scheme. To manage risks associated with foreign currency , the Fund may use derivatives for efficient portfolio management including hedging and in accordance with conditions as may be stipulated by SEBI / RBI from time to time. Offshore investments will be made subject to any / all approvals and conditions thereof as may be stipulated by SEBI / RBI being fulfilled and provided such investments do not result in expenses to the Fund in excess of the ceiling, if any, on expenses prescribed by SEBI for offshore investment, and if no such ceiling is prescribed by SEBI, the expenses to the Scheme(s) shall be limited to the level which, in the opinion of the Trustees, is reasonable and consistent with costs and expenses attendant to international investing. The Fund may, where necessary, appoint other intermediaries of repute as advisors, sub-custodians, etc. for managing and administering such investments. The appointment of such intermediaries shall be in accordance with the applicable requirements of SEBI and within the permissible ceilings of expenses. The fees and expenses would illustratively include, besides the investment management fees, custody fees and costs, fees of appointed advisors and sub-managers, transaction costs and overseas regulatory costs.
Documents Available for Inspection

The following documents will be available for inspection at the office of the Mutual Fund at 52/60 Mahatma Gandhi Road, Fort, Mumbai 400 001 during business hours on any day (excluding Saturdays, Sundays and public holidays):
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Memorandum and Articles of Association of the AMC Investment Management Agreement Trust Deed and amendments thereto, if any Mutual Fund Registration Certificate Agreement between the Mutual Fund and the Custodian Agreement with Registrar and Share Transfer Agents Consent of Auditors to act in the said capacity Consent of Legal Advisors to act in the said capacity Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereof from time to time. Indian Trusts Act, 1882
Notwithstanding anything contained in this Offer Document, the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the guidelines thereunder shall be applicable. Note: The Trustees approved this Offer Document vide resolution passed on January 17, 2005 For and on behalf of the Board of Directors of HSBC Asset Management (India) Private Limited Sanjay Prakash Chief Executive Officer Place: Mumbai Date: January 18, 2005
HSBC Mutual Fund
HSBC MUTUAL FUND INVESTOR SERVICE CENTRES (Available Post IPO)*

Ahmedabad Bangalore Chennai Hyderabad Kolkata Mumbai New Delhi Pune Ahmedabad Bangalore Chandigarh Coimbatore Chennai Gurgaon Hyderabad Indore Jaipur Kochi Kolkata Ludhiana Mumbai New Delhi Noida Pune Trivandrum Vadodara Vizag Agra Ahmedabad Allahabad Amritsar Bangalore Belgaum Bhopal Bhubaneswar Calicut Chandigarh Chennai Cochin Coimbatore Dehradun Durgapur Guwahati Hubli Indore Jaipur Jalandhar Jamnagar Jamshedpur Jodhpur Kanpur Kolkata Lucknow Ludhiana Madurai Mangalore Moradabad Mumbai Mysore Nagpur Nasik : : : : : : : : : : : : : : : : : : : : : : : : : : : Mardia Plaza, C.G. Road, Ahmedabad - 380006 No. 7, HSBC Centre, M.G. Road, Bangalore - 560001 96, Radhakrishnan Salai, 1st Floor, Mylapore, Chennai - 600004 Uma Plaza, Road No. 1, Banjara Hills, Hyderabad - 500082 Jasmine Tower, 1st Floor, 31, Shakespeare Sarani, Kolkata - 700017 52/60, Mahatma Gandhi Road, Fort, Mumbai - 400001 25, Barakhamba Road, New Delhi - 110001 Amar Avinash Corporate City, Bund Garden Road, Pune - 411001 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 079 26468001 080 25574444 044 52008719 040 55739805 033 22139919 022 56668819 011 51490719 020 26134283 [91] 98982 72424 [91] (80) 2558 9595 [91] (172) 896 555 [91] 98943 72424 [91] (44) 2526 9595 [91] (11) 2373 8989 [91] (40) 2335 8686 [91] 98932 72424 [91] (141) 220 8989 [91] 98954 72424 [91] (33) 2243 8585 [91] (161) 502 8989 [91] (22) 2498 2424 [91] (22) 2498 2424 [91] (11) 2371 6000 [91] (11) 2373 8989 [91] (20) 402 8585 [91] 98954 72424 [91] 98982 72424 [91] 98490 12424
HSBC COLLECTION CENTRES (Available only during IPO)

Mardia Plaza, C G Road, Ahmedabad - 380 006 7 Mahatma Gandhi Road, Bangalore - 560 001 SCO 1, Sector 9-D, Chandigarh - 160 017 Srivari Gokul Towers, 108, Race Course Road, Coimbatore - 641 018 96, Dr. Radhakrishnan Salai, Mylapore, Chennai - 600 004 JMD Regent Square, DLF Phase II, Gurgaon-Mehrauli Road, Gurgaon - 122 002 P O Box 33, Uma Plaza, Road No.1, Nagarjuna Hills, Hyderabad - 500 082 Darshan Mall, Upper Ground Floor, 15/2, Race Course Road, Indore - 452 001 61-A, Vasanti, Sardar Patel Marg, C - Scheme, Jaipur 302 001 39/6765, Harbour View Residency, Opposite Shipyard, M. G. Road, Kochi - 682 015 31, BBD Bagh, Kolkata - 700 001 Ground Floor, Ludhiana Stock Exchange, Feroze Gandhi Market, Ludhiana - 141 001 52/60 Mahatma Gandhi Road, Mumbai - 400 001 Ish Krupa, Ram Maruti Road, Naupada, Thane (West) - 400 602 1st Floor, 25 Barakhamba Road, New Delhi - 110 011 K 14-18, Sector 18, Gautam Budh Nagar, Noida - 201 301 Amar Avinash Corporate City, Sector No.11, Bund Garden Road, Pune - 411 001 Kulathakal Towers, Diamond Hill, Vellayambalam, Trivandrum - 695 010 Sheel, 1/2 Kalpana Society, Inox Multiplex Road, Race Course Circle, Vadodara - 390 007 28-16-31, Suryabagh, Visakhapatnam - 530 020
CAMS COLLECTION CENTRES (Available Post IPO)*

: CAMS Transaction Point, F-39/203, Sky Tower, Sanjay Place, Agra 282 002. : 402-406, 4th Floor, Devpath Building, Off C G Road, Behind Lal Bungalow, Ellis Bridge, Ahmedabad 380 006. : CAMS Transaction Point, 1st Floor, Chandra Shekhar Azad Complex, (Near Indira Bhawan), 5, S.P. Marg, Civil Lines, Allahabad 211 001. : CAMS Transaction Point, 378, Majithia Complex, 1st Floor, M. M. Malviya Road, Amritsar 143 001. camsamt@camsonline.com : No. 8, Kempe Gowda Road, Second Floor, Mahaveer Shopping Complex, Above Kids Kemp, K. G. Road, Bangalore 560 009. : CAMS Transaction Point, No. 21, Ground Floor, Arvind Complex, 1552, Maruti Galli, Belgaum 590 002. : Mr. Ashish Ojha, CAMS Transaction Point, C-12, 1st Floor, Above Life Line Hospital, Zone-I, M.P. Nagar, Bhopal 462 011 (M.P.). camsbhp@camsonline.com : 101/ 7, Janpath, Unit - III Bhubaneswar 751 001. camsbhr@camsonline.com : CAMS Transaction Point, 17/28, H 1st Floor, Manama Towers, Marvoor Road, Calicut 673 001. : SCO No 39-40, Navroop Building, Basement, Sector 17-C, Chandigarh 160 017. : A&B Lakshmi Bhawan, 609 Anna Salai, Chennai 600 006. Gems Foundatation, Ground Floor, 383, Anna Salai, Saidapet, Chennai 600 015. Rayala Towers, Ground Floor, 158, Anna Salai, Chennai 600 002. : 41/1617, Rock Hill, First Floor, Banerji Road (North). : 462-A, Venkatasamy Road, New Sidhapudur Road, Coimbatore 641 004. : CAMS Transaction Point, 81, Chakrata Road, Dehradun 248 001. camsdun@camsonline.com : CAMS Transaction Point, SN- 10, Ambedkar Sarani, City Centre, Durgapur 713 216. camsdur@camsonline.com : CAMS Transaction Point, A.K. Azad Road, Rehabari, Guwahati 781008. camsgwt@camsonline.com : CAMS Transaction Point, B -1, Laxmi Complex, Club Road, Hubli 580029. camshub@camsonline.com CAMS Transaction Point, No. 208, ' A ' Block, 1st Floor, Kundagol Complex, Opp. Court, Club Road, Hubli 580 029. : Dalal Chambers, No. 101, Sagarmatha Apartments, 1st Floor, 18/7 M. G. Road, Indore 452 003. camsind@camsonline.com : A-6, Sardar Patel Marg, C Scheme, Opp Bank of Rajasthan H.O, Jaipur 302 001. : CAMS Transaction Point, 367/8, Central Town, Opp. Gurudwara Diwan Asthan, Jalandhar 144 001. camsjal@camsonline.com : CAMS Transaction Point, 207/209, K.P. Shah House I, K. V. Road, Jamnagar 361 001. camsjam@camsonline.com : CAMS Transaction Point, Panch Bhawan, R Road, Bistupur, Gr. Floor, (Near Rajasthan Bhawan), Jamshedpur 831 001. camsjpr@camsonline.com : CAMS Transacation Point, 1/5, Nirmal Tower, Ist Chopasani Road, Jodhpur 342 003. : G - 27,28 Citi Centre, 63/2 , The Mall, Kanpur 208 001. camskpr@camsonline.com : 53/A Rafi Ahmed Kidwai Road, 1st Floor, Kolkata 700 016. : No. 3, First Floor, Saran Chambers 1, 5 Park Road, Lucknow 226 001. : Shop No. 20-21(Ground Floor), Prince Market, Near Traffic Lights, Sarabha Nagar Pulli, Pakhowal Road, P.O: Model Town, Ludhiana 141 002. : CAMS Transaction Point, No. 56, Naicker New Street, Madurai 625 001. camsmdu@camsonline.com : 6. First Floor, West Gate TerminusFalnir Road, Opp. Unity Health Complex, Highlands Mangalore 575 002. camsman@camsonline.com : CAMS Transaction Point, B-612 Sudhakar, Lajpat Nagar, Moradabad ( U.P) 244 001. camsmbd@camsonline.com : Apollo House, 82/84, Apollo Street, Mumbai Samachar Marg, Fort, Mumbai 400 023. : CAMS Transaction Point, No. 3, 1st Floor, CH.26 7th Main, 5th Cross, (Above Trishakthi Medicals) Saraswati Puram, Mysore 570 009. camsmys@camsonline.com : 145 Lendra Park, Behind Shabari, New Ramdaspeth, Nagpur 440 010. camsnpr@camsonline.com : CAMS Transaction Point, Rahakar Chambers, 2nd floor, 431 Vakil Wadi, Ashok Stambh, Nasik 422 001. camsnsk@camsonline.com Tel: 0562 - 252 1812 Tel: 1600 - 44 - 2267 Tel: 0532 - 260 1602 Tel: 0183 - 221 1194 Tel: 1600 - 44 - 2267 Tel: 0831 - 242 5305 Tel: 0755 - 527 5591 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 0674 - 253 4909 0495 - 272 3173 1600 - 44 - 2267 1600 - 44 - 2267
1600 - 44 - 2267 1600 - 44 - 2267 0135 - 271 3233 0343 - 254 8190 / 098321 26799 Tel: 0361 - 260 7771 / 098640 - 11508 Tel: 0836 - 225 4568 Tel: 0836 - 225 1213
Tel: 1901 - 44 - 2267, Tel: 0731 - 2528 609 Tel: 1600 - 44 - 2267 Tel: 0181 - 245 6336 Tel: 0288 - 266 1942 Tel: Tel: Tel: Tel: Tel: 0657 - 3091 600 0291 - 309 2892 1901 - 44 - 2267 1600 - 44 - 2267 1600 - 44 - 2267
Tel: 1600 - 44 - 2267 Tel: 0452 - 2622 682 Tel: 0824 - 243 6567 Tel: 0591 - 3092844 Tel: 1600 - 44 - 2267 Tel: 0821 - 309 1244 Tel: 0712 - 253 2447
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Tel: 0253 - 257 7449
New Delhi Panaji Patna Patiala Pondicherry Pune Raipur Rajahmundry Rajkot Ranchi Salem Secunderabad
: 14 & 15, Arunachal (Upper Ground Floor), 19, Barakhamba Road, New Delhi. : No. 15, Diamond Chambers, I Floor, 18th June Road, Panaji 403 001, GOA. camsgoa@camsonline.com : Kamlalaye Shobha Plaza (1st Floor), Behind RBI Near Ashiana Tower, Exhibition Road, Patna - 800 001. camspat@camsonline.com : CAMS Transaction Point, 3, Ajit Nagar, Patiala 147001. camsptl@camsonline.com : CAMS Transaction Point, 25, First Floor, Jawaharlal Nehru Street, Pondicherry 605 001. campdy@camsonline.com : Kalpataru Plaza, Office No. B. 314, 3rd Floor, 224 Bhawani Peth, Pune 411 042. : CAMS Transaction Point, C-23, Sector 1, Devendra Nagar, Raipur 492 004. camsrai@camsonline.com : CAMS Transaction Point, D. No. 7-27-4, Krishna Complex, Baruvari Street, T Nagar, Rajahmundry 533 101. camsrmd@camsonline.com : CAMS Transaction Point, 111, Pooja Complex, Harihar Chowk, Near GPO, Rajkot 360 001. camsraj@camsonline.com : CAMS Transaction Point, 223,Tirath Mansion (Near Over Bridge), 1st Floor, Main Road, Ranchi 834 001. camsran@camsonline.com : CAMS Transaction Point, 28, I Floor, Advytha Ashram Road, Salem 636 004. camssal@camsonline.com
Tel: 1600 - 44 - 2267 Tel: 0832 - 242 4527 Tel: 0612 - 2322 206 Tel: 0175 - 221 1328 Tel: 0413 - 222 0575 Tel: Tel: Tel: Tel: Tel: 1600 - 44 - 2267 0771 - 309 0830 0883 - 5565531 / 94405 36185 0281 - 224 1399
Tel: 0651 - 3095122 Tel: 0427 - 244 6338 / 098427 - 11644 Tel: 1600 - 44 - 2267 Tel: 0353 - 221 6065 Tel: 1901 - 44-2267, 0261 - 7458520 Tel: 0487 2420646 Tel: 0431 - 274 1717 Tel: 0471 - 272 4687 Tel: 0294 - 3091722 Tel: 1901 - 44-2267, Tel: 02632 - 249 957 Tel: 0542 220 8546 Tel: 0866 - 559 5657 Tel: 1600 - 44 - 2267
: 1-7-293/2/A/1 to 5 A, Behind Bank of India Building, Near Paradise Bus Stop, M.G. Road, Secunderabad 500 003. Siliguri : CAMS Transaction Point, No 8, Swamiji Sarani, Ground Floor, Hakimpara, Siliguri 734 401. camssil@camsonline.com Surat : 111. Orion House , I Floor, (Behind Resham Bhawan), Lal Darwaja, Surat 395 003. camssur@camsonline.com Trichur : CAMS Transaction Point, VIII/350/15, O. K. John Memorial Building, Ekkanda Warrier Road, Trichur 686 001 Trichy : CAMS Transaction Point, No 8, I Floor, 8th Cross West Extn. Thillainagar, Trichy 620 018. camstri@camsonline.com Trivandrum : CAMS Transaction Point, 15/181 Chennakara Buildings, Althara Junction, Vellayambalam, Trivandrum 695 015. camstvm@camsonline.com Udaipur : CAMS Transaction Point, Ahinsapuri, Fatehpura Circle, Udaipur 313 004 Vadodara : G -10 Paradise Complex, Sayajigunj, Vadodara 390 005. camsvad@camsonline.com Valsad : CAMS Transaction Point, C/o CAD House, 1st Floor Opp. LIC Office, Halar Road, Valsad 396 001. camsval@camsonline.com Varanasi : CAMS Transacation Point, C 27/249 - 22A, Vivekanand Nagar Colony, Maldhaiya, Varanasi 221 002 Vijayawada : CAMS Transaction Point, 40-1-48/2, Bandar Road, Adj. to HDFC Bank, Vijayawada 520 010. camsvij@camsonline.com Visakhapatnam : 47/9/17, 1st Floor, 3rd Lane, Dwaraka Nagar, Visakhapatnam 530 016
HDFC COLLECTION CENTRES (Available only during the IPO)

Amritsar Bhopal Bhubaneswar Dehradun Durgapur Guwahati Hubli Jalandhar Jamnagar Jamshedpur Kanpur Lucknow Madurai Mangalore Moradabad Mysore Nagpur Nasik Panaji Patna Patiala Pondicherry Raipur Rajahmundry Rajkot Ranchi Salem Silliguri Surat Trichy Valsad Vijayawada : 39, The Mall, Amritsar : E-1/57, Arera Colony, Bhopal - 462016 (M.P). : Junction of Janpath & Gandhi Marg, Hotel Jajati Complex, Kharvelanagar, Unit-III, Master Canteen Square, Bhubaneswar - 751 001 : 56, Rajpur Road, Dehradun - 248 001 Uttaranchal : A102 & 103, City Centre, Bengal Shristi Complex, City Centre, Durgapur Branch, West Bengal - 713 216 : House No. 126, Opp. Times Of India, Bhangagarh, Guwahati - 781005 : T B Revankar Complex, Vivekanand Hospital Road, Hubli - 580 029 : 911, G.T. Road, Near Narinder Cinema, Jalandhar : Plot No 6, Park Colony, Opp. St. Ann's School, Bedi Bunder Road, Jamnagar - 361008 : C/o Mithila Motors Ltd., Near Rammandir, Bistupur, Jamshedpur - 831 001 : Krishna Tower Complex, 15/63 , Civil Lines, Kanpur 208001 : 31/31, M. G. Marg, Hazratganj, Lucknow - 226001 : 7-A, West Veli Street, Opp Railway Station, Madurai - 625 001. : M. N. Towers, Kadri, Mangalore - 575002 : Chaddha Shopping Complex, GMD Road, Moradabad, Uttar Pradesh - 244001 : Nageetha Complex, Vishwamanawa Double Road, Saraswathi Puram, Mysore - 570009 : 204, Bhagyashree, 1st Floor, Cement Road, Shankar Nagar, Dharampeth Extension, Nagpur - 440 010. : Vastushree No. 3, Thatte Nagar, Gangapur Road, Nasik - 422 005 : Minum Residency, 18th June Road, Panjim, Goa - 403 001 : Rajendra Ram Plaza, Exhibition Road,Patna - 800 001 : S.C.O. 70-73, Leela Bhawan Market, Patiala - 147 001 : TS No. 6100 F.T. Road, Ellaipillaichavady, Pondicherry - 600 005 : Chawla Complex, Near Vanijya Bhawan, Sai Nagar, Devendra Nagar Road, Raipur - 492 009 : H. No. 46-17-20, Main Road, Danavaipet, Rajahmundry - 533 103 : Venkatesh Plaza, Dr Radhakrishna Road, Nr Eagle Palace, Rajkot : Ranchi Club Shopping Complex, Apt No .11, Main Road, Ranchi - 834 001 : 5/241-F,Rathna Arcade, Omalur Main Road, Salem - 636 004. : 3 No. Ramkrishna Samity Building, Sevoke Road, Pani Tanki More, Siliguri - 734 401 : Chataniya Jyoti Building, Near Parle Point Circle, Surat - 395 007 : A-10, "Lakshmi Arcade", 11th Cross Main Road, Thillainagar, Trichy - 620 018 : Ekta Appt., Nr, Rjj High School, Thithal Road, Valsad - 1. : 40-1-48/2, M.G. Road, Labbipet, Vijayawada - 520 010 Tel: 0183 - 2564616 Tel: 0755 - 2461145 Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: Tel: 0674 - 2400986 0135 - 2745295 0343 - 2549962 0361 - 2461082 0836 - 2217084 0181 - 5071644 0288 - 2662035 0657 - 2420174 0512 - 2305160 0522 - 2230991 0452 - 2350707 0824 - 2225405 0591- 2310508 0821 - 2342917 0712 - 2551741 0253 2318165 0832 - 2421955 0612 - 2206161 0175 5002500 0413 2200741 0771 - 252 9110 0883 - 2442928 0281 - 2481779 0651 - 2308148 0427 - 2331604 0353 - 2640726 0261 - 2212194 0431 - 2742204 02632 - 241395 0866 - 2490400
* Please note that during the IPO, Switch Transactions (switch-out from an existing scheme of HSBC Mutual Fund to HSBC Midcap Equity Fund) should be submitted only at HSBC Mutual Fund Investor Service Centres or the CAMS Centres listed above
Contact us at : hsbcmf@hsbc.co.in
Visit us at : www.assetmanagement.hsbc.co.in

Registered Office 52/60 Mahatma Gandhi Road, Fort, Mumbai 400 001 Tel. : 022-2273 4343 Fax : 022-2273 4375 Email : hsbcmf@hsbc.co.in Website : www.assetmanagement.hsbc.co.in

Codmidcap HSBC 2005

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Codmidcap HSBC 2005

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HSBC Asset Management

HSBC Mutual Fund

HSBC Midcap Equity Fund (HMEF)

Initial Offer Closes on : May 03, 2005

E mail id: hsbcmf@hsbc.co.in Visit us at : www.assetmanagement.hsbc.co.in

ASSET MANAGEMENT COMPANY

REGISTRAR AND TRANSFER AGENTS

HSBC Mutual Fund

local knowledge makes a world of difference 1

2 local knowledge makes a world of difference

HSBC Mutual Fund

The HSBC Group

HSBC Mutual Fund

local knowledge makes a world of difference 3

Designated Collection Centre Depository Derivatives

Distributor Dividend Equity related securities

4 local knowledge makes a world of difference

HSBC Mutual Fund

FII Floating Rate Debt Instruments

Fund or Mutual Fund

Investor Service Centres or ISC Load

Offer Document RBI Registrar

HSBC Mutual Fund

local knowledge makes a world of difference 5

Trust Deed Trust Fund Unit Unitholder or Investor

RISK FACTORS AND SPECIAL CONSIDERATIONS

6 local knowledge makes a world of difference

HSBC Mutual Fund

Scheme Specific Risk Factors

HSBC Mutual Fund

local knowledge makes a world of difference 7

8 local knowledge makes a world of difference

HSBC Mutual Fund

DUE DILIGENCE CERTIFICATE

HSBC Mutual Fund

local knowledge makes a world of difference 9

HSBC Midcap Equity Fund

10 local knowledge makes a world of difference

HSBC Mutual Fund

HSBC Mutual Fund

local knowledge makes a world of difference 11

* 15 months period from January 1, 2003 to March 31, 2004

Board of Trustees (The Trustees)

12 local knowledge makes a world of difference

HSBC Mutual Fund

Director Tracmail (Bermuda) Ltd.

HSBC Mutual Fund

local knowledge makes a world of difference 13

Offer Document Summary of Substantive Provisions of the Trust Deed

14 local knowledge makes a world of difference

HSBC Mutual Fund

The Trustees shall:

HSBC Mutual Fund

local knowledge makes a world of difference 15

Board of Directors of the AMC

16 local knowledge makes a world of difference

HSBC Mutual Fund

Powers, Duties and Responsibilities of the AMC

HSBC Mutual Fund

local knowledge makes a world of difference 17

The AMC shall

Asset Management Fees

18 local knowledge makes a world of difference