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DISCLOSURE DOCUMENT
(As required under Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993)
(i) The Disclosure Document (hereinafter referred to as ‘the Document’) has been filed with the
Securities and Exchange Board of India (SEBI) along with the certificate in the prescribed
format in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993.
(ii) The purpose of the Document is to provide essential information about the Portfolio
Management Services (PMS) in a manner to assist and enable the investors in making
informed decision for engaging a Portfolio Manager.
(iii) The Document gives the necessary information about the Portfolio Manager required by an
investor before investing, and the investor may also be advised to retain the document for
future reference.
(iv) Details of the acting Principal Officer
Name : Ravi Menon
Address : HSBC Asset Management (India) Private Limited
3rd Floor, Mercantile Bank Chamber,
16, V. N. Road, Fort, Mumbai 400 001
Phone : +91 22 6614 5000
E-mail : [email protected]
(v) This Disclosure Document is dated November 16, 2016
Portfolio Management Services
HSBC Asset Management (India) Private Limited
SEBI Registration No. INP000001322
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TABLE OF CONTENTS
Sr. No. Contents Page No.
1 Disclaimer 3
2 Definitions 3-4
3 Description
3.1 History, Present Business and Background of the Portfolio
Manager
4 - 5
3.2 Promoters of the Portfolio Manager, directors and their
background
5 – 6
3.3 Group companies/firms of the Portfolio Manager in India on
turnover basis
6
3.4 Details of the services being offered: Discretionary/ Non-
discretionary/ Advisory.
7
4 Penalties, pending litigation or proceedings, findings of
inspection or investigations for which action may have been
taken or initiated by any regulatory authority
7 – 9
5 Services Offered 9 - 17
6 Risk Factors 17 – 18
7 Client Representation 19
8 The Financial Performance of the Portfolio Manager 19 – 20
9 Portfolio Management Performance 20 – 21
10 Nature of Expenses 21 – 23
11 Taxation 23 – 29
12 Accounting Policies 29 –31
13 Investor Services 31
14 Foreign Account Tax Compliance Act (FATCA) 32
15 SEBI Scores Platform 33
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1. Disclaimer
1.1. This Disclosure Document has been prepared in accordance with the SEBI (Portfolio
Managers) Regulations, 1993 as amended from time to time and filed with SEBI. This
Document has neither been approved nor disapproved by SEBI nor has SEBI certified the
accuracy or adequacy of the contents of the Document.
2. Definitions
2.1 Act The Securities and Exchange Board of India Act, 1992 (15 of 1992).
2.2 Cash Account the account in which the funds handed over by the client shall be held
by the Portfolio Manager on behalf of the Client.
2.3 Chartered
Accountant
a chartered accountant as defined in clause (b) of sub-section (1) of
section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and
who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act.
2.4 Client anybody corporate, partnership firm, individual, HUF, association of
person, body of individuals, trust, statutory authority, or any other
person who enters into agreement with the Portfolio Manager for the
management of his portfolio.
2.5 Discretionary
Portfolio
Manager
a Portfolio Manager who exercises or may, under a contract relating to
portfolio management, exercises any degree of discretion as to the
investments or management of the portfolio of securities or the funds
of the client, as the case may be.
2.6 Foreign Account
Tax Compliance
Act (FATCA)
Foreign Account Tax Compliance Act that seeks to identify U.S.
taxpayers having accounts at Foreign Financial Institutions (FFIs) and
attempts to enforce reporting of those accounts through withholding.
2.7 Fund Manager the individual(s) appointed by the Portfolio Manager who manages,
advises or directs or undertakes on behalf of the client (whether as a
Discretionary Portfolio Manager or otherwise) the management or
administration of a portfolio of securities or the funds of the client, as
the case may be.
2.8 Funds the moneys placed by the Client with the Portfolio Manager and any
accretions thereto.
2.9 Non-
Discretionary
Portfolio
Manager
a Portfolio Manager who manages the funds in accordance with the
directions of the client.
2.10 Person directly or
indirectly
connected
any person being an associate, subsidiary, inter connected company or
a company under the same management within the meaning of section
370(1B) of the Companies Act, 1956 or in the same group.
2.11 PMS Agreement includes contract entered between the Portfolio Manager and the client
for the management of funds or securities of the client.
2.12 PMS Portfolios any of the investment Portfolios as mentioned herein or such
Portfolios that may be introduced at any time in future by the Portfolio
Manager.
2.13 Portfolio the total holdings of securities belonging to the client.
2.14 Portfolio
Manager
HSBC Asset Management (India) Private Limited (AMIN), who has
obtained certificate of registration from SEBI to act as a Portfolio
Manager under Securities and Exchange Board of India (Portfolio
Managers) Rules and Regulations, 1993, vide Registration no.
INP000001322.
2.15 Principal Officer a director of the Portfolio Manager who is responsible for the activities
of portfolio management and has been designated as principal officer
by the Portfolio Manager.
2.16 Rules The Securities and Exchange Board of India (Portfolio Managers)
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Rules, 1993.
2.17 Regulations The Securities and Exchange Board of India (Portfolio Managers)
Regulations, 1993, and as may be amended by SEBI from time to
time.
2.18 SEBI / Board the Securities and Exchange Board of India.
2.19 Securities ‘Securities’ as per Securities Contracts (Regulation) Act, 1956 include:
shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated
company or other body corporate
derivatives (contracts which derive their value from the prices, or
index of prices, of underlying securities)
units or any other instrument issued by any collective investment
scheme to the investors in such schemes
security receipts as defined in clause (zg) of section 2 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
units or any other such instrument issued to the investors under
any mutual fund scheme
Government securities
such other instruments as may be declared by the Central
Government to be securities
rights or interests in securities.
2.20 Securities
Lending Scheme
the securities lending as per the Securities Lending Scheme, 1997
specified by the Board.
3. Description
3.1. History, Present Business and Background of the Portfolio Manager:
HSBC Asset Management (India) Private Limited (AMIN) is a private limited company
incorporated under the provisions of the Companies Act, 1956 having its Registered Office at
3rd Floor, Mercantile Bank Chamber, 16, V. N. Road, Fort, Mumbai 400 001.
The paid-up equity share capital of the Portfolio Manager is Rs. 61.59 crores. HSBC
Securities and Capital Markets (India) Private Limited holds 100% of the equity capital of
the Portfolio Manager.
AMIN is registered with SEBI as Portfolio Manager under Securities and Exchange Board of
India (Portfolio Managers) Regulations, 1993 and has obtained a license from SEBI for
offering Portfolio Management Services under Registration No. INP000001322. AMIN has
renewed its Certificate of Registration as Portfolio Manager from SEBI. The Registration is
valid for a period of 3 years i.e. from September 16, 2014 till September 15, 2017.
AMIN has also been appointed as the Investment Manager of HSBC Mutual Fund vide
Investment Management Agreement dated February 07, 2002, executed between the Trustees
of HSBC Mutual Fund and AMIN. SEBI approved AMIN to act as the Investment Manager
for the Schemes of HSBC Mutual Fund vide letter dated 27 May 2002.
There is no conflict between the two business lines, as AMIN has segregated its front and
back office personnel, systems, securities/bank accounts etc activity-wise ensuring that there
is no access to confidential information between its various activities and all customers are
treated fairly.
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As on October 31, 2016, AMIN had assets of over INR 9,140 crores under management in its
Mutual Fund business with offices in 8 cities viz., Mumbai, New Delhi, Ahmedabad,
Kolkata, Bangalore, Pune, Hyderabad and Chennai. As on October 31, 2016, AMIN had
assets of approximately INR 113,598 crores under management in its PMS business
including assets under the EPFO mandate.
3.2. Promoters of the Portfolio Manager, directors and their background
3.2.1. Promoter
“HSBC Securities and Capital Markets (India) Private Limited (HSCI)”
HSCI is a member of the HSBC Group, one of the largest banking and financial
services organizations, in the world. Headquartered in London, HSBC operates
through long-established businesses in five regions: Europe, the Asia-Pacific region,
the Americas, the Middle East and Africa. Through its global network of some 6,900
offices in 84 countries and territories, HSBC provides a comprehensive range of
financial services to more than 125 million customers: personal, commercial,
corporate, institutional and investment and private banking clients.
HSCI offers integrated investment banking services, securities and corporate finance
& advisory. HSCI is a member of BSE Limited and National Stock Exchange of India
Limited (capital and derivative market segments) and is a registered Research Analyst
and a category I Merchant Banker and underwriter with the 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 more than
100 of India’s largest, actively traded securities across industry groups.
Global Investment Banking: HSCI provides public and private sector corporates and
government clients with strategic and financial advice in the areas of mergers and
acquisitions, primary and secondary market funding, privatizations, structured
financial solutions and project export finance.
HSCI holds 100% of the paid up equity share capital of the AMIN.
3.2.2. Board of Directors
(i) Sayed P Mustafa
Sobha Ivory Apartments, Flat 251, 5th floor
7/1, St. John’s Road, Bangalore 560 042
Executive Director
Ex Vice President Treasury, M&A and Investor Relations, Hindustan Unilever
Limited
Mr Mustafa holds a bachelor’s degree from St Stephens College, University of
Delhi and is a Chartered Accountant and a Fellow of the Institute of Chartered
Accountants of England and Wales. He has worked in the UK for a number of
years and was a Partner in a Chartered Accountants firm in London prior to his
joining Unilever. At Unilever, he had held several senior management and
leadership positions over a number of years and his responsibilities covered
strategic financial restructuring, mergers and acquisitions, development of
external communication strategy, management of the supply chain, business
performance, commercial controls and Financial & Management Accounting.
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(ii) Kishori J Udeshi
15, Sumit Apartment, 31 Carmichael Road, Mumbai 400026
Executive Director
Ex-Deputy Governor, Reserve Bank of India
Ms Kishori Udeshi has a M.A. Degree in Economics from Bombay University.
She moved on to a professional career in central banking and became the first
woman to be appointed as Deputy Governor of the Reserve Bank of India.
As Deputy Governor of RBI, she was on the Board of SEBI, NABARD, Exim
Bank and was the Chairman of Bharatiya Reserve Bank Note Mudran (Pvt)
Ltd., Bangalore. She was also the Chairman of Deposit Insurance and Credit
Guarantee Corporation.
Ms Udeshi was also a Chairperson of The Banking Codes and Standards Board
of India, set up by the RBI where she had evaluated and enforced the
observance of the Banking Codes.
(iii) Dinesh Kumar Mittal
B 71, Sector 44, Noida 201301
Executive Director
Former Secretary of Department of Financial Services,
Government of India
Mr. Dinesh Mittal has a M. Sc (Physics) Degree with specialization in
Electronics from the University of Allahabad, UP. He was the former Secretary
of Department of Financial Services, Government of India. He was awarded
Director's Gold Medal at Lal Bahadur Shastri National Academy of
Administration for standing 1st in India among I.A.S. Officers of 1977 Batch.
He played a key role in putting a framework of Special Economic Zones in
India.
(iv) Ravi Menon
16, V N Road, Fort, Mumbai – 400 001
Chief Executive Officer
HSBC Asset Management (India) Private Limited
Mr. Ravi Menon has a M.Sc. Economics degree from Birla Institute of
Technology and Science, Pilani and MBA from Symbiosis Institute of Business
Management, Pune. He has around 25 years of experience in banking and
financial services. Prior to joining HSBC AMC, Mr. Menon was Head Strategy
& Planning Inclusive Banking at HSBC. He has held various positions at
HSBC Group. He has also worked with UBS as Vice President – Investment
Banking.
3.3. Group companies/firms of the Portfolio Manager in India on turnover basis
a) The Hongkong and Shanghai Banking Corporation Limited
b) HSBC Electronic Data Processing India Private Limited
c) HSBC Professional Services (India) Private Limited
d) HSBC Securities and Capital Markets (India) Private Limited
e) HSBC Software Development (India) Private Limited
f) HSBC InvestDirect (India) Limited
g) HSBC InvestDirect Securities (India) Private Limited (formerly known as HSBC
InvestDirect Securities (India) Limited
h) HSBC InvestDirect Financial Services (India) Limited
i) HSBC InvestDirect Sales & Marketing (India) Limited
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j) HSBC Agency (India) Private Limited
k) HSBC Global Shared Services (India) Private Limited
(The above are the Group companies in India based on turnover, however they are not listed as
per turnover)
3.4. Details of the services being offered: Discretionary/ Non- discretionary/ Advisory.
The Portfolio Manager offers Discretionary, Non–discretionary and Advisory services as per
individual client agreement.
4. Penalties, pending litigation or proceedings, findings of inspection or investigations for
which action may have been taken or initiated by any regulatory authority.
4.1. All cases of penalties imposed by the SEBI or directions issued by SEBI under the Act or
Rules or Regulations made thereunder. The nature of the penalty/direction. Penalties imposed
for any economic offence and/ or for violation of any securities laws.
No penalties have been imposed on the Portfolio Manager by SEBI and no directions have
been issued by SEBI under the Act or Rules or Regulations made thereunder. There are no
penalties imposed on the Portfolio Manager for any economic offence and / or for violation
of any securities laws.
4.2. Any pending material litigation / legal proceedings against the Portfolio Manager / key
personnel with separate disclosure regarding pending criminal cases, if any.
HSBC Mutual Fund (the Fund) to which the Portfolio Manager acts as an Investment
Manager filed a Writ Petition before the High Court against 7 Recovery Notices dated
February 29, 2012 received from Income Tax Authorities (ITA). The Notices stated that the
Fund was a beneficiary of certain IL&FS Trusts (Trusts) through which certain Pass Through
Certificates (PTCs) were issued to the public and as the recovery action by the ITA against
these Trusts didn't result into recovery, hence the Fund being a beneficiary was liable to the
same. The High Court disposed-off the Writ Petition vide order dated March 15, 2012 for
AY 2009-10 and order dated March 6, 2013 for AY 2010-11, and directed that pending
hearing and final disposal of the appeals filed by the Trusts before the Commissioner of
Income Tax (Appeals) for the respective assessment years, no coercive action shall be taken
against the Fund for recovery of demand and for a period of 8 weeks thereafter to enable the
Fund to seek recourse to its remedies against the Order of the Appellate Authority, if
required. The matters relating to AY 2010-11, 2009-10 and 2007-2008 are under appeals
with CIT & ITAT. In the last 12 months, though these matters have been under the review of
CIT and ITAT, however no final pronouncement has been made yet. The matter has been
getting adjourned by the ITAT on the request of the ITA and it is unclear by when the matter
will be finally heard and closed.
4.3. Any deficiency in the systems and operations of the Portfolio Manager observed by SEBI or
any regulatory agency.
There has been no deficiency in the systems and operations of the Portfolio Manager
observed by SEBI or any regulatory agency.
4.4. Any enquiry/ adjudication proceedings initiated by SEBI against the Portfolio Manager or its
directors, principal officer or employee or any person directly or indirectly connected with
the Portfolio Manager or its directors, principal officer or employee, under the Act or Rules
or Regulations made thereunder.
a) SEBI issued a Show Cause notice dated August 7, 2009 to the Trustees of the Mutual Fund,
Mutual Fund, AMC & CEO pertaining to the changes made in the Scheme Information
Document of HSBC Gilt Fund via an Addendum. SEBI stated in the said Show Cause notice
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that the change made to the name, benchmark index and duration of the Scheme would be
construed as a change in the fundamental attribute of the Scheme and hence the applicable
provisions of the SEBI (Mutual Funds) Regulations, 1996 with respect to the same should
have been complied with. The AMC has on behalf of the Trustees of the Mutual Fund, the
Mutual Fund and CEO filed its response with relevant supporting documents with SEBI.
Subsequently, the personal hearing took place before the Whole Time Member, SEBI. After
considering the submissions made by the AMC, Whole Time Member, SEBI vide its order
dated April 23, 2010 disposed-off the show cause notice dated August 7, 2009 and warned the
Board Trustees of the Mutual Fund, the Mutual Fund, AMC and its CEO that they should
strictly comply with the law governing the conduct and business of mutual fund in securities
market.
Against the SEBI Order dated April 23, 2010, two appeals were filed with the Securities
Appellate Tribunal (SAT) by certain aggrieved investors of HSBC Gilt Fund.
SAT issued Order dated May 03, 2011 and July 5, 2012 to the Mutual Fund, Trustees of the
Mutual Fund, AMC and CEO of the AMC pertaining to the change effected in modified
duration in HSBC Gilt Fund during January 2009. SAT held that the changes brought about in
the scheme altered the fundamental attributes of the same affecting the interest of unitholders.
SAT therefore directed the AMC and related parties to comply with regulation 18(15A) of the
SEBI Regulations and provide an exit option to the appellants of the case. An appeal was
filed by the AMC against these Orders before the Supreme Court and the same admitted
before the Supreme Court, however the Supreme Court has vide Order dated January 15, 2014
dismissed the said appeal. The AMC has complied with the directions under SAT and
Supreme Court Order.
b) SEBI had initiated an enquiry against HSBC Securities and Capital Markets (India) Private
Limited (“HSCI”) and accordingly issued a Show Cause Notice dated 30 July 2008 calling
upon HSCI to show cause as to why further action should not be taken against HSCI for the
violations alleged to the have been committed by HSCI under Regulations 25 and 38 of the
SEBI (Intermediaries) Regulations, 2008. HSCI had filed a detailed response in this regard on
10 September 2008 and had sought a personal hearing in the matter. Accordingly,
submissions were made by HSCI’s counsel at the hearing held on 6 October 2008. Pursuant to
the said hearing,, SEBI has vide its letter dated March 4, 2009, informed HSCI of the enquiry
officer’s recommendation i.e. the matter is not a fit case to levy any penalty.
c) An enquiry was held under the SEBI (Procedure for Holding Enquiry by the Enquiry Officer
and Imposing Penalty) Regulations, 2002 in the matter of a voluntary open offer by Mr. V.K.
Modi, Dr. B.K. Modi, Mod Fashions and Securities Private Limited and Modikem Limited in
concert with Witta International Inc. and Sidh International Limited (collectively the
Acquirers) to the shareholders of Modi Rubber Limited. Subsequent to the enquiry officer’s
recommendations of a major penalty a show cause notice dated 1 August 2003 was issued
requiring HSCI to show cause as to why HSCI’s certificate of registration should not be
suspended for 6 months. HSCI submitted its reply and sought a personal hearing, wherein
submissions were made by HSCI’s counsel at the hearing held on 9 October 2003. SEBI vide
its order dated 9 December 2003, confirmed that HSCI had not acted negligently warranting
imposition of a penalty.
d) SEBI had initiated an enquiry against HSBC Securities and Capital Markets (India) Limited
(“HSCI”) under the SEBI (Procedure for Holding Enquiry by the Enquiry Officer and
Imposing Penalty) Regulations, 2002 in the matter of the Open Offer made by Global Green
Company Limited to the shareholders of Saptarishi Agro Industries Limited in September
2000 under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
Subsequent to the enquiry officer’s recommendations of a minor penalty i.e. HSCI be
censured, a show cause notice has been issued by SEBI requiring HSCI to show cause as to
why the said penalty should not be imposed. SEBI had subsequently vide its order dated 7th
March 2007 imposed a minor penalty of censure on the certificate of registration of HSCI.
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Thereafter, HSCI had appealed against the said order before the Securities Appellate Tribunal,
Mumbai on 23rd April 2007 wherein SAT upheld the Order passed by SEBI.
e) A Show cause Notice was issued to HSCI vide a letter dated 9 June 2000 in the matter of the
rights issue of Siemens Limited in which HSCI was acting as the Lead Manager requiring
HSCI to show cause as to why action should not be taken against HSCI for non-disclosure in
the offer document of certain litigation against Siemens Limited involving ex-employees.
Subsequently SEBI vide its letter dated 26 September 2000 advised HSCI to be cautious in
future assignments.
f) SEBI had issued administrative warning letter dated February 29, 2008 to HSCI in respect of
the matter wherein incorrect client codes and client type was punched during execution of
trade on behalf of its client HSBC Financial Services (Middle East) Limited in the scrip of
Anant Raj Industries Limited.
g) HSCI was appointed as a manager to the open offer made by India Star (Mauritius) Limited
(“India Star”) to the shareholders of Garware Offshore Services Limited which was
completed in 2008. An individual shareholder had filed a complaint with SEBI in January
2012 against India Star alleging inadequate disclosures with regard to (i) the ultimate
shareholders of India Star and (ii) one of the directors who had certain criminal charges
pending against him. SEBI had dismissed the complaint stating that the disclosures made
during the open offer were in terms of the SEBI Takeover Regulations. Thereafter the
complainant filed an appeal before the Securities Appellate Tribunal in November 2012
where HSCI was also inducted as a party. SAT passed an order dated September 3, 2013
directing SEBI to reconsider the complaint but did not express any opinion on the merits of
the case. SEBI have passed an order dated November 21, 2014 reprimanding India Star and
HSCI for non-disclosures with regard to the ultimate shareholders of India Star. The non-
disclosures of litigation against one of the directors have been held to be not required as per
the Takeover Regulations.
h) Details of penalty imposed by the exchanges on HSCI during the period 1 April 2013- 30
September 2016 excluding the penalties imposed by the Exchanges in the ordinary course of
business :-
Exchange Reason Date Penalty
Amount (Rs.)
NSE Late submission charges for CTCL system audit
report – Nov 2013
Dec 2013 1,000
BSE Fine levied in respect of post facto approval for
change in Designated Director
Mar 2016 5,725
NSE Penalty levied in respect of post facto approval
for change in Designated Director
Sept 2016 1,000
Other than as disclosed above, there are no enquiries/ adjudication proceedings initiated by
SEBI against the Portfolio Manager or its directors, principal officer or employee or any
person directly or indirectly connected with the Portfolio Manager or its directors, principal
officer or employees, under the Act or Rules or Regulations made thereunder.
The above information has been disclosed in good faith as per the information available to the
Portfolio Manager.
5. Services Offered
The Portfolio Manager offers the following three types of services:
5.1. Discretionary – the portfolio account of the client is managed at the full discretion and
liberty of the Portfolio Manager. For such the investment objective is to seek capital
appreciation over the long term.
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Currently, the Portfolio Manager manages the following mandate under discretionary
management services -
Management of Provident Fund (under Central Board of Trustees, EPFO)
This Portfolio shall invest in debt securities in accordance with the investment pattern
stipulated by the Ministry of Labour, Government of India and the guidelines issued by the
Central Board of Trustees, Employees’ Provident Fund Organisation (CBT, EPF).
The policies for investments in associates/ group companies of the Portfolio Manager and the
maximum percentage of such investments therein would be subject to the applicable laws /
regulations / guidelines and the guidelines issued by the CBT, EPF.
The investment pattern will be as set out below or as may be amended from time to time:
(Pattern of investment is as per as per notification No. G-20031/1/2007/SS-II (Pt.)) issued by
the Ministry of Labour, Government of India on April 23, 2015)
1. Investment Pattern
Category Investment Pattern Percentage of
amount to be
invested
(i)
Government Securities and related investments
a Government Securities Minimum
45% and
upto 65%
b Other Securities {'securities' as defined in section 2(h) of
the Securities Contracts (Regulation) Act, 1956} the
principal whereof and interest whereon is fully and
unconditionally guaranteed by the Central Government or
State Government.
The portfolio invested under this sub category of securities
shall not be in excess of 10% of the total portfolio of the
fund
c Units of mutual funds set up as dedicated funds for
investment in govt securities and regulated by SEBI.
Provided that the portfolio invested in such mutual funds
shall not be more than 5% of the total portfolio at any
point of time and fresh investments made in them shall not
exceed 5% of the fresh accretions in the year
(ii) Debt Instruments and Related Investments
a Listed (or proposed to be listed in case of fresh issue) debt
securities issued by bodies corporate, including banks and
public financial institutions ('Public Financial Institutions'
as defined under Section 2 of the Companies Act, 2013),
which have a minimum residual maturity period of three
years from the date of investment.
Minimum
35% and
upto 45%
b Basel III Tier-I bonds issued by scheduled commercial
banks under RBI Guidelines:
Provided that in case of initial offering of the bonds the
investment shall be made only in such Tier -I bonds which
are proposed to be listed.
Provided further that investment shall be made in such
bonds of a scheduled commercial bank from the secondary
market only if such Tier I bonds are listed and regularly
traded.
Total portfolio invested in this sub-category, at any time,
shall not be more than 2% of the total portfolio of the
fund.
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Category Investment Pattern Percentage of
amount to be
invested
No investment in this sub-category in initial offerings shall
exceed 20% of the initial offering. Further, at any point of
time, the aggregate value of Tier I bonds of any particular
bank held by the fund shall not exceed 20% of such bonds
issued by that Bank.
c Rupee Bonds having an outstanding maturity of at least 3
years issued by institutions of the International Bank for
Reconstruction and Development, International Finance
Corporation and Asian Development Bank.
d Term Deposit receipts of not less than one year duration
issued by scheduled commercial banks, which satisfy the
following conditions on the basis of published annual
report(s) for the most recent years, as required to have
been published by them under law:
i. having declared profit in the immediately preceding
three financial years:
ii. maintaining a minimum Capital to Risk . Weighted
Assets Ratio of 9%, or mandated by prevailing RBI
norms, whichever is higher;
iii. having net non-performing assets of not more than 4%
of the net advances;
iv. having a minimum net worth of not less than Rs. 200
crores.
e Units of Debt Mutual Funds as regulated by Securities
and Exchange Board of India:
Provided that fresh investment in Debt Mutual Funds shall
not be more than 5% of the fresh accretions invested in the
year and the portfolio invested in them shall not exceed
5% of the total portfolio of the fund at any point in time.
f The following infrastructure related debt instruments:
(i) Listed (or proposed to be listed in case of fresh issue)
debt securities issued by body corporates engaged mainly
in the business of development or operation and
maintenance of infrastructure, or development,
construction or finance of low cost housing.
Further, this category shall also include securities issued
by Indian Railways or any of the body corporates in which
it has majority shareholding.
This category shall also include securities issued by any
Authority of the Government which is not a body
corporate and has been formed mainly with the purpose of
promoting development of infrastructure.
It is further clarified that any structural obligation
undertaken or letter of comfort issued by the Central
Government, Indian Railways or any Authority of the
Central Government, for any security issued by a body
corporate engaged in the business of infrastructure, which
notwithstanding the terms in the letter of comfort or the
obligation undertaken, fails to enable its inclusion as
security covered under category (i) (b) above, shall be
treated as an eligible security under this sub-category.
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Category Investment Pattern Percentage of
amount to be
invested
(ii) Infrastructure and affordable housing Bonds issued by
any scheduled commercial bank, which meets the
conditions specified in (ii)(d) above.
(iii) Listed (or proposed to be listed in case of fresh issue)
securities issued by Infrastructure debt funds operating as
a Non-Banking Financial Company and regulated by
Reserve Bank of India.
(iv) Listed (or proposed to be listed in case of fresh issue)
units issued by Infrastructure Debt Funds operating as a
Mutual Fund and regulated by Securities and Exchange
Board of India.
It is clarified that, barring exceptions mentioned above, for
the purpose of this subcategory (f), a sector shall be
treated as part of infrastructure as per Government of
India's harmonized master-list of infrastructure sub-
sectors.
Provided that the investment under sub-categories (a), (b)
and (f) (i) to (iv) of this category No. (ii) shall be made
only in such securities which have minimum AA rating or
equivalent in the applicable rating scale from at least two
credit rating agencies registered with Securities and
Exchange Board of India under Securities and Exchange
Board of India (Credit Rating Agency) Regulation, 1999.
Provided further that in case of the sub-category (f) (iii)
the ratings shall relate to the Non-Banking Financial
Company and for the sub-category (f) (iv) the ratings shall
relate to the investment in eligible securities rated above
investment grade of the scheme of the fund.
Provided further that if the securities / entities have been
rated by more than two rating agencies, the two lowest of
all the ratings shall be considered.
Provided further that investments under this category
requiring a minimum AA rating, as specified above, shall
be permissible in securities having investment grade rating
below AA in case the risk of default for such securities is
fully covered with Credit Default Swaps (CDSs) issued
under Guidelines of the Reserve Bank of India and
purchased along with the underlying securities. Purchase
amount of such Swaps shall be considered to be
investment made under this category.
For sub-category (c), a single rating of AA or above by a
domestic or international rating agency will be acceptable.
It is clarified that debt securities covered under category
(i) (b) above are excluded from this category (ii).
(iii) Short-term Debt Instruments and Related Investments Upto 5%
a Money market instruments:
13
Category Investment Pattern Percentage of
amount to be
invested
Provided that investment in commercial paper issued by
body corporates shall be made only in such instruments
which have minimum rating of A1+ by at least two credit
rating agencies registered with the Securities and
Exchange Board of India.
Provided further that if commercial paper has been rated
by more than two rating agencies, the two lowest of the
ratings shall be considered.
Provided further that investment in this sub-category in
Certificates of Deposit of up to one year duration issued
by scheduled commercial banks, will require the bank to
satisfy all conditions mentioned in category (ii) (d) above.
b Units of liquid mutual funds regulated by the Securities
and Exchange Board of, India.
c Term Deposit Receipts of up to one year duration issued
by such scheduled commercial banks which satisfy all
conditions mentioned in category (ii) (d) above.
(iv) Equities and Related Investments : Minimum
5% and Upto
15% a) Shares of body corporates listed on Bombay Stock
Exchange (BSE) or National Stock Exchange (NSE),
which have:
(i) Market capitalization of not less than Rs. 5000 crore
as on the date of investment: and
(ii) Derivatives with the shares as underlying traded in
either of the two stock exchanges.
b) Units of mutual funds regulated by the Securities and
Exchange Board of India, which have minimum 65% of
their investment in shares of body corporates listed on
BSE or NSE.
Provided that the aggregate portfolio invested in such
mutual funds shall not be in excess of 5% of the total
portfolio of the fund at any point in time and the fresh
investment in such mutual funds shall not be in excess of
5% of the fresh accretions invested in the year.
c) Exchange Traded Funds (ETFs)/index Funds regulated
by the Securities and Exchange Board of India that
replicate the portfolio of either BSE Sensex Index or
NSE Nifty 50 Index.
d) ETFs issued by SEBI regulated Mutual Funds
constructed specifically for disinvestment of
shareholding of the Government of India in body
corporates.
e) Exchange traded derivatives regulated by the Securities
and Exchange Board of India having the underlying of
any permissible listed stock or any of the permissible
indices, with the sole purpose of hedging.
Provided that the portfolio invested in derivatives in
terms of contract value shall not be in excess of 5% of
the total portfolio invested in sub-categories (a) to (d)
above.
(v) Asset Backed, Trust Structured and Miscellaneous
Investments
Upto 5%
14
Category Investment Pattern Percentage of
amount to be
invested
a) Commercial mortgage based Securities or Residential
mortgage based securities.
b) Units issued by Real Estate Investment Trusts regulated
by the Securities and Exchange Board of India.
c) Asset Backed Securities regulated by the Securities and
Exchange Board of India.
d) Units of Infrastructure Investment Trusts regulated by
the Securities and Exchange Board of India.
Provided that investment under this category No. (v)
shall only be in listed instruments or fresh issues that are
proposed to be listed.
Provided further that investment under this category
shall be made only in such securities which have
minimum AA or equivalent rating in the applicable
rating scale from at least two credit rating agencies
registered by the Securities and Exchange Board of
India under Securities and Exchange Board of India
(Credit Rating Agency) Regulations, 1999. Provided
further that in case of the sub-categories (b) and (d) the
ratings shall relate to the rating of the sponsor entity
floating the trust. Provided further that if the securities /
entities have been rated by more than two rating
agencies, the two lowest of the ratings shall be
considered.
2. Fresh accretions to the fund will be invested in the permissible categories specified in this
investment pattern in a manner consistent with the above specified maximum permissible
percentage amounts to be invested in each such investment category, while also
complying with such other restrictions as made applicable for various sub-categories of
the permissible investments.
3. Fresh accretions to the funds shall be the sum of un-invested funds from the past and
receipts like contributions to the funds, dividend / interest / commission, maturity
amounts of earlier investments etc., as reduced by obligatory outgo during the financial
year.
4. Proceeds arising out of exercise of put option, tenure or asset switch or trade of any asset
before maturity can be invested in any of the permissible categories described above in
the manner that at any given point of time the percentage of the assets under the category
should not exceed the maximum limit prescribed for that category and also should not
exceed the maximum limit prescribed for the sub-categories, if any. However, asset
switch because of any RBI mandated Government debt switch would not be covered
under this restriction.
5. Turnover ratio (the value of securities traded in the year/average value of the portfolio at
the beginning of the year and at the end of the year) should not exceed two.
6. If for any of the instruments mentioned above the rating falls below the minimum
permissible investment grade prescribed for investment in that instrument when it was
purchased, as confirmed by one credit rating agency, the option of exit shall be
considered and exercised, as appropriate, in a manner that is in the best interest of the
subscribers.
15
7. Once these guidelines coming into effect, the above prescribed investment pattern shall be
achieved separately for each successive financial year through timely and appropriate
planning.
8. The investment of funds should be at arm’s length, keeping solely the benefit of the
beneficiaries in mind. For instance, investment (aggregated across such
companies/organizations described herein) beyond 5% of the fresh accretions in a
financial year will not be made in the securities of a company / organization or in the
securities of a company/organization in which such a company / organization holds over
10% of the securities issued, by a fund created for the benefit of the employees of the first
company / organization, and the total volume of such investments will not exceed 5% of
the total portfolio of the fund at any time. The prescribed process of due diligence must be
strictly followed in such cases and the securities in question must be permissible
investments under these guidelines.
9. i) The prudent investment of the Funds of a trust / fund within the prescribed pattern is the
fiduciary responsibility of the Trustees and needs to be exercised with appropriate due
diligence. The Trustees would accordingly be responsible for investment decisions taken-
to invest the funds.
ii) The trustees will take suitable steps to control and optimize the cost of management
of the fund.
iii) The trust will ensure that the process of investment is accountable and transparent.
iv) It will be ensured that due diligence is carried out to assess risks associated with any
particular asset before investment is made by the fund in that particular asset and also
during the period over which it is held by the fund. The requirement of ratings as
mandated in this notification merely intends to limit the risk associated with
investments at a broad and general level. Accordingly, it should not be construed in
any manner as an endorsement for investment in any asset satisfying the minimum
prescribed rating or a substitute for the due diligence prescribed for being carried out
by the fund/trust.
v) The trust/fund should adopt and implement prudent guidelines to prevent concentration
of investment in any one company, corporate group or sector.
10. If the fund has engaged services of professional fund/asset managers for management of
its assets, payment to whom is being made on the basis of the value of each transaction,
the value of funds invested by them in any mutual funds mentioned in any of the
categories or ETFs or Index Funds shall be reduced before computing the payment due to
them in order to avoid double incidence of costs. Due caution will be exercised to ensure
that the same investments are not churned with a view to enhancing the fee payable. In
this regard, commissions for investments in Category III instruments will be carefully
regulated, in particular.
Disclaimer – The above new Investment Pattern issued by Ministry of Labour and Employment,
Investments of Funds shall be made as per the new pattern of Investment from 01st July 2015 onwards
as per the notification issued by EPFO on 1st July 2015. It is further informed by EPFO that
investments in the following asset classes under the said pattern have been restricted as of now: -
Category Sub
Category
Asset Class
i (a) Units of mutual funds set up as dedicated funds for investment in
govt securities and regulated by SEBI
ii (b) Basel III Tier-I bonds issued by scheduled commercial banks
under RBI Guidelines:
ii ( e ) Units of Debt mutual funds as regulated by SEBI
16
ii f (iii) * Listed (or proposed to be listed in case of fresh issue) securities
issued by Infrastructure debt funds operating as a Non-Banking
Financial Company and regulated by Reserve Bank of India.
ii f (iv) * Listed (or proposed to be listed in case of fresh issue) units issued
by Infrastructure Debt Funds operating as a Mutual Fund and
regulated by Securities and Exchange Board of India.
iii ( b ) Units of Liquid mutual funds regulated by SEBI
(iv) (a to e) Equity and related Investment
v (a) * Commercial mortgage based Securities or Residential mortgage
based securities
v (b) Units issued by Real Estate Investment Trusts regulated by the
SEBI
v ( c ) Asset backed Securities regulated by SEBI
v (d) Units of Infrastructure Investment Trusts regulated by SEBI
* Investments to be done only after guidelines are communicated by EPFO
The following limits/restrictions within the categories as approved by Board will be applicable for
investments under the said pattern
1. Investment in Central Government Securities (CTG) – Minimum 10%
2. Investment in State Development Loan (SDL) – Minimum 10%
3. Investment in State Guarantee Securities (STG) – No Investment
4. Investment in Private Sector – upto 10%
All other guidelines for investments continue to remain applicable as provided in Investment Manual
which was part of Investment Management Service Agreement with the Portfolio Managers.
5.2. Non-Discretionary – the portfolio, which the Portfolio Manager manages in accordance
with the directions and permission of the client.
5.3. Advisory – the client is advised on buy/ sell decision within the overall risk profile without
any back-office responsibility for trade execution, custody or accounting functions.
5.4 Types of Securities in which the Portfolio Manager generally invests
(a) Units, Magnums and other instruments of Mutual Funds;
(b) Bank Deposits;
However in addition to the above and subject to SEBI Regulations, the Funds can
also be invested in such securities, capital and money market instruments or in fixed
income securities or variable securities of any description, by whatever name called
including:
(a) Convertible Stock and Preference Shares of Indian Companies;
(b) Debentures (Convertible and Non-convertible), Bonds and Secured Premium Notes,
Swaps, Futures and Options, Securitised Debt, Structured Products, Pass Through
Certificates and Instruments which are quasi-debt instruments, Tax-exempt Bonds of
Indian Companies and Corporations;
(c) Government and Trustee Securities;
(d) Treasury Bills;
17
(e) Commercial Papers, Certificates of Deposit and other similar Money Market
instruments
(f) Tradable or any other warrants;
(g) Such other instrument(s) offered in private placements, arrangements, treaties,
contracts or agreements for facilitating acquisition and/or disposing of investments as
the case may be;
(h) Any other eligible mode of investment within the meaning of the Regulations issued
by SEBI and amended thereto from time to time.
5.5 The policies for investments in associates/ group companies of the Portfolio Manager and
the maximum percentage of such investments therein would be subject to the applicable
laws / regulations/ guidelines.
AMIN currently does not intend to invest in any of its associate or group companies.
6. Risk factors
General Risk Factors
6.1. Securities investments are subject to market risk and there is no assurance or guarantee
that the objectives of the Portfolio will be achieved.
6.2. Past performance of the Portfolio Manager does not indicate its future performance.
6.3. Investments made by the Portfolio Manager are subject to risks arising from the
investment objective, investment strategy and asset allocation.
6.4. Investments made by the Portfolio Manager are subject to risks arising out of non-
diversification etc.
6.5. Investments in Securities are subject to market and other risks and there can be no
guarantee in any of the Portfolios mentioned in this Disclosure Document against loss
resulting from investing in the Portfolio(s) of the Portfolio Manager. The various factors
which may impact the value of the Portfolios' investments include, but are not limited to,
fluctuations in the equity and bond markets, fluctuations in interest rates, prevailing
political and economic environment, changes in government policy, factors specific to the
issuer of the securities, tax laws, liquidity of the underlying instruments, settlement
periods, trading volumes etc.
6.6. Investment decisions made by the Portfolio Manager may not always be profitable.
6.7. The tax benefits described in this Disclosure Document are as available under the present
taxation laws and are available subject to conditions. The information given is included
for general purpose only and is based on advice received by the Portfolio Manager
regarding the law and practice in force in India and the investors should be aware that the
relevant fiscal rules or their interpretation may change. As is the case with any
investment, there can be no guarantee that the tax position or the proposed tax position
prevailing at the time of an investment in the Portfolio will endure indefinitely. In view of
the individual nature of tax consequences, each investor is advised to consult his/ her own
professional tax advisor.
6.8. Prospective investors should review / study this Disclosure Document carefully and in its
entirety and shall not construe the contents hereof or regard the summaries contained
herein as advice relating to legal, taxation, or financial / investment matters and are
advised to consult their own professional advisor(s) as to the legal, tax, financial or any
other requirements or restrictions relating to the subscription, gifting, acquisition, holding,
disposal (sale or conversion into money) of Portfolio and to the treatment of income (if
18
any), capitalisation, capital gains, any distribution, and other tax consequences relevant to
their portfolio, acquisition, holding, capitalisation, disposal (sale, transfer or conversion
into money) of portfolio within their jurisdiction of nationality, residence, incorporation,
domicile etc. or under the laws of any jurisdiction to which they or any managed funds to
be used to purchase/gift portfolio of securities are subject, and also to determine possible
legal, tax, financial or other consequences of subscribing / gifting, purchasing or holding
portfolio of securities before making an investment.
6.9. Investments are subject to certain risks viz. limited liquidity in the market, settlement risk,
impeding readjustment of portfolio composition, highly volatile stock markets in India
etc. Such loss could arise due to factors which by way of illustration, include, default or
non-performance of a third party, company’s refusal to register a security due to legal stay
or otherwise, disputes raised by third parties. Mis-judgment by the Portfolio Manager or
his incapacitation due to any reason however remote is also a risk. Thus the investment in
Indian capital markets involves above average risk for investors compared with other
types of investment opportunities. Investments will be of a longer duration compared to
trading in securities. There is a possibility of the value of investment and the income there
from falling as well as rising depending upon the market situation. There is also a risk of
total loss of value of an asset and possibilities of recovery of loss in investments only
through a legal process.
6.10. The investments made are subject to external risks such as war, natural calamities, policy
changes of local / international markets which affects stock markets.
6.11. Any policy change / technology change / obsolescence of technology would affect the
investments made in a particular industry.
6.12. The Client has perused and understood the disclosures made by the Portfolio Manager in
the Disclosure Document before entering into this Agreement.
6.13. The Portfolio Manager is neither responsible nor liable for any losses resulting from the
operations of the Portfolios.
6.14. Clients are not being offered any guarantee / assured returns.
6.15. Performance of the Portfolios may be impacted as a result of specific investment
restrictions provided by the client.
6.16. Credit Risk: Credit risk or default risk refers to the risk that an issuer of a fixed income
security may default (i.e., will be unable to make timely principal and interest payments
on the security). Consequently, corporate debentures are sold at a yield above those
offered on Government Securities, which are sovereign obligations. Normally, the value
of a fixed income security will fluctuate depending upon the changes in the perceived
level of credit risk as well as any actual event of default. The greater the credit risk, the
greater the yield required for someone to be compensated for the increased risk. The least
risk perception is in case of government securities.
6.17. Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received
from the securities in the portfolio are reinvested. The additional income from
reinvestment is the "interest on interest" component. The risk is that the rate at which
interim cash flows can be reinvested may be lower than that originally assumed.
6.18. Portfolios using derivative products (such as futures and options) are affected by risks
different from those associated with stocks and bonds. Such products are highly leveraged
instruments. Small price movements in the underlying securities may have a large impact
on the value of the derivative instrument. Some of the other risks relate to mis-pricing or
improper valuation of derivatives and the inability to correlate the positions with
underlying assets, rates and indices.
19
7. Client Representation
7.1.
** Includes EPFO and Advisory Clients
7.2. Complete disclosure in respect of transactions with related parties as per the standards
specified by the Institute of Chartered Accountants of India.
Please refer Annexure I.
8. The Financial Performance of the Portfolio Manager (based on audited financial statements)
(INR ‘000)
Balance Sheet 31 March 2016 31 March 2015 31 March 2014
Shareholders' Funds
Share Capital 615,909 615,909 542,000
Reserves and Surplus 370,940
109,985 (10,885)
Total 986,849 725,894 531,115
Non-current Liabilities
Long-term borrowings 3,564 5484 3,824
Deferred tax liabilities - - -
Long-term provisions 20,497 19,079 14,175
Total 24,061 24,563 17,999
Current liabilities
Trade payables 64,286
110,837 149,329
Other current liabilities 91,640 93,214 79,743
Short-term provisions 10,686 10,260 8,009
Total 166,612 214,311 237,081
TOTAL 1,177,522 964,768 786,195
ASSETS
Non-current assets
Category of clients
No. of
clients
Funds managed
(Rs. cr)
Discretionary/ Non-
Discretionary (if
available)
Associates / Group companies
As at 31 March 2014 NIL
NA NA
As at 31 March 2015 NIL
NA NA
As at 31 March 2016 NIL NA NA
As at 31 October 2016 NIL NA NA
Others
As at 31 March 2014
129** 1,05,239.25** Discretionary & Advisory
As at 31 March 2015 2** 102,019.34 ** Discretionary & Advisory
As at 31 March 2016 2** 106,311.33** Discretionary & Advisory
As at 31 October 2016 2** 116,302.92** Discretionary & Advisory
20
Balance Sheet 31 March 2016 31 March 2015 31 March 2014
Fixed assets - - -
Tangible assets 31,672 22,375 25,274
Intangible Assets 4,344 1,309
Long-term loans and advances 375,577 2,437 393,775
Non-current investment 103,152 388,528 --
Total 514,745 414,649 419,049
Current Assets
Current investments 456,834 304,130 149,780
Trade receivables 135,880 140,864 170,869
Cash and cash equivalents 20,202 55,694 1,111
Short-term loans and advances 49,861 49,431 45,386
Other current assets - - -
Total 662,777 550,119 367,146
TOTAL 1,177,522 964,768 786,195
Profit & Loss Statement Year ended
31-Mar-16
Year ended
31-Mar-15
Year ended
31-Mar-14
Total Income 935,024 868,894 720,696
Total Expenses 673,762 735,619 680,642
Profit/(loss) before depreciation
& tax
261,262 133,275 40,054
Depreciation 16,839 19,240 13,758
Profit/(loss) before exceptional
items and tax
244,423 114,035 26,297
Exceptional items 45,000 - (101,715)
Profit Before Tax 289,423 - (75,419)
Provision for tax (net of deferred
tax)
9,037 8,907 -
Short Provision For Earlier Year 19,431
Fringe benefit tax - - -
Net Profit/(loss) after tax 260,955 105,128 (75,419)
9. Portfolio Management Performance Portfolio Management performance of the Portfolio Manager for the last three years, and in
case of discretionary Portfolio Manager, disclosure of performance indicators calculated using
weighted average method in terms of Regulation 14 of the SEBI (Portfolio Managers)
Regulations, 1993.
Portfolio
Benchmark
01/04/2015 -
31/03/2016
01/04/2014 -
31/03/2015
01/04/2013 -
31/03/2014
Portfolios HSBC Alpha Account Signature
Portfolio Guard (#Since 01/04/2014 till
date of exit of last client from portfolio
- 02/02/2015)
NA #51.38% 23.20%
Benchmarks BSE500 NA #36.87% 17.08%
21
Portfolio
Benchmark
01/04/2015 -
31/03/2016
01/04/2014 -
31/03/2015
01/04/2013 -
31/03/2014
Portfolios HSBC Alpha Account Strategic
Portfolio (~Since 01/04/2014 till date of
exit of last client from portfolio -
18/12/2014)
NA ~70.98% 26.69%
Benchmarks BSE Midcap NA ~40.69% 15.32%
Portfolios HSBC Large Cap Oriented Portfolio
(^Since 01/04/2014 till date of exit of
last client from portfolio - 23/03/2015)
NA ^36.67% 14.48%
Benchmarks Nifty NA ^27.55% 17.98%
Portfolios HSBC Select 1 Portfolio (*Since
01/04/2014 till date of exit of last client
from portfolio -23/12/2014)
NA *72.84% 42.45%
Benchmarks BSE500 NA *27.92% 17.08%
Notes: a. The returns shown above are post expenses.
b. The performance of the Portfolio Manager is calculated using weighted average method
taking each individual category of investments. c. The portfolio performance for the period April 1, 2015 to March 31, 2016 is not provided as there
were Nil clients in the equity portfolios.
10. Nature of expenses
The following are the general costs and expenses to be borne by the client availing the services of
the Portfolio Manager. However, the exact quantum and nature of expenses relating to each of the
following services is annexed to the Portfolio Management Agreement in respect of each of the
services provided.
10.1.1 Portfolio Management Fees
The Portfolio Management Fees relate to the Portfolio Management Services offered
to the Clients under discretionary management in equity strategies. The fee may be a
fixed fee or performance based fee or a combination of both, as agreed by the client
in the PMS Agreement. It also consists of Subscription Fees and Exit Load, as agreed
by the client in the PMS agreement. The nature/quantum of fees charged to clients
(approx.) is provided below.
Sr.
No.
Nature of Fee
% Range
1 Portfolio Management Fees
Annual recurring fee 1.25% to 2.25% of Daily Average AUM
Variable Fee 15% of annualized performance above a pre-
determined hurdle rate can be charged by the
portfolio manager as performance fee
depending on the fees structure opted by the
client.
Upfront Fee 0% to 2.5%
Exit Fee Nil w.e.f. 5th September 05, 2013
2 Depository / Custodian Fee At actual
3 Registration and transfer agents' fees At actual
4 Brokerage, transaction costs and other
services At actual
22
Sr.
No.
Nature of Fee
% Range
5 Fees and charges in respect of investment
in mutual funds At actual
6 Certification charges or professional
charges At actual
7 Securities lending and borrowing charges At actual
8 Any other incidental and ancillary
charges At actual
* The above fees structure is based on the latest fees structure offered by portfolio manager
and excludes service tax which will be charged at the prevailing rates.
10.1.2 Depository / Custodian fee comprise of
charges relating to custody and transfer of shares, bonds and units, opening and
operation of demat account, dematerialization and rematerialization, and / or any
other charges in respect of the investment etc.
10.1.3 Registration and transfer agents' fees comprise of
fees payable for the Registrars and Transfer Agents in connection with effecting
transfer of any or all of the securities and bonds including stamp duty, cost of
affidavits, notary charges, postage stamps and courier charges
10.1.4 Brokerage, transaction costs and other services comprise of
brokerage and other charges like stamp duty, transaction cost and statutory levies
such as service tax, securities transaction tax, turnover fees and such other levies as
may be imposed upon from time to time.
10.1.5 Fees and charges in respect of investment in mutual funds
HSBC Mutual Fund shall be recovering expenses or management fees and other
incidental expenses and such fees and charges shall be paid to the Asset Management
Company of the Mutual Funds on behalf of the Client. Such fees and charges are in
addition to the portfolio Management fees described above.
10.1.6 Certification charges or professional charges comprise of
the charges payable to outsourced professional services like accounting, taxation and
any legal services, etc.
10.1.7 Securities lending and borrowing charges comprise of
the charges pertaining to the lending of securities, costs of borrowings and costs
associated with transfer of securities connected with the lending and borrowing
transfer operations.
10.1.8 Any other incidental and ancillary charges comprise of
all incidental and ancillary expenses not recovered above but incurred by the Portfolio
Manager on behalf of the client shall be charged to the Client. The Portfolio Manager
shall deduct directly from the cash account of the client all the fees/costs as specified
above and shall send a statement to the client for the same.
The fees charged to the client for PMS come under the ambit of “fees for technical
services” under Section 194J of the Income Tax Act, 1961(“the Act”). As the section
calls for withholding tax, the client is required to withhold tax @ 10 % (plus
applicable surcharge and education cess if applicable) on the fees that the client pays
to the Portfolio Manager, if he / she fall under the following two categories:
a) Individual / HUFs - In case a client is having a total sales, gross receipts or
turnover from business exceeding Rs. 1 crore or receipts from profession
exceeding Rs. 50 lakhs (wef financial year 2016-17), during the financial year
23
immediately preceding the financial year in which such sum by way of fees for
technical services is credited or paid then he is liable to deduct tax at source on
fees credited or paid, whichever is earlier, to the portfolio manager. However, the
individuals/HUF shall not be required to deduct tax source in case such sum is
credited or paid exclusively for personal purpose of the individual/ member of the
HUF.
b) Any other person - Any other clients not covered by (a) above are liable to deduct
tax at source at the time of credit of fees or at the time of payment thereof, to the
Portfolio Manager.
This implies, the client (as mentioned in point a and b above) while making
payment or at the time of credit of the fees would have to deduct tax at source.
However, as per the Agreement with the client, the Portfolio Manager acts as ‘an
agent as well as a trustee’ of its clients and is entrusted by the client to fully
operate its bank account. Further, the clients of the Portfolio Manager have
executed a power of attorney in its favour. As the responsibility can vest with the
Portfolio Manager on account of this agreement, and as an extension to our
services, the Portfolio Manager will carry out the following on behalf of the
client:
i) Deduct tax at source at the specified rate on the fees payable by the client to
the Portfolio Manager as per the provisions of section 194J; and
ii) Make payment to the Government within the due date specified under the
Income Tax Rules, 1962.
For this purpose, we take the Permanent Account Number (PAN), the Tax Deduction
at Source Account Number (TAN) and Assessing Officer details from the client
towards the Tax Deducted at Source on behalf of the client. However, the
responsibility to issue the Tax Deduction Certificate in Form 16A and filing TDS
return remains with the client who shall provide it to the Portfolio Manager within the
statutory time limit laid down under the income tax provisions.
11. Taxation - Discloses the implications of investments in securities and the tax provisions on
Income/ Loss or Tax Deduction at Source on various investors.
The Client, i.e. Employee Provident Fund Organisation (“EPFO”) is deemed to be a recognised
Provident Fund within the meaning of that term under the Income tax Act, 1961 (“the IT Act”) as
per section 9 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and,
accordingly, any income received by the Trustees is exempt from income tax u/s 10(25) of the IT
Act.
However, the client would be best advised to consult his or her tax advisor/consultant for
appropriate counsel on tax treatment of the nature of income indicated herein.
Tax implications for other clients
11.1.1 Taxation
Disclose the implications of investments in securities and the tax provisions on Income/ Loss
or Tax Deduction at Source on various investors. The following are the tax provisions
applicable to Clients investing in the Portfolio Management Services under the taxation laws
as on the date herewith, as advised by our Tax Consultants.
24
11.1.2 Dividend
Dividends declared, distributed or paid on or after April 1, 2003 by domestic companies will
be exempt in the hands of the shareholder recipient (except where the dividend income of the
recipient exceeds ten lakh rupees) but a tax on distributed profits of 15 per cent (as increased
by surcharge @ 12 per cent), Education Cess of 2% and Secondary and Higher Education
Cess of 1%) will be payable by the domestic company. From June 1, 2013, such tax will be
computed after deducting the amount of dividend received by the domestic company from its
subsidiary where the said subsidiary has paid the tax under section 115-O (in case of domestic
subsidiary company) and under section 115BBD (in case of a foreign subsidiary company) on
such dividend.
As per amendment by the Finance Act, 2016 where the total income of an assessee includes
any income exceeding Rs 10 lakhs by way of dividend will be taxable at the rate of 10%.
Income distributed on or after April 1, 2003 by a mutual fund specified u/s 10(23D) of the
Act will be exempt in the hands of the unitholders but a tax on distributed income will be paid
under section 115R as under:
In case of distribution by a Debt fund, money market mutual fund or a liquid fund:
25per cent when income is distributed to any person being individual or Hindu
Undivided Family and
30% when income is distributed to any other person
In case of distribution by an Infrastructure Debt Fund (“IDF”) Scheme:
25 per cent in case of distribution to an individual or Hindu Undivided Family; and
30 per cent when income is distributed to any other person other than a company.
5 per cent in case of distribution to a non-resident (not being a company) and to a
foreign company.
However, no tax on such distributed income is payable by an equity oriented mutual fund.
With effect from 1 October 2014, the rates mentioned above would need to be grossed up.
Further, the tax on such distribution will be increased by surcharge @12% and further
increased by the Education Cess @ 2% and Secondary and Higher Education Cess @ 1%.
11.2 Capital Gains Tax
Profit on sale of investments, (being securities (other than a unit) listed in recognised stock
exchange in India or units of the Unit Trust of India established under the Unit Trust of India
Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond held for a
period of more than 12 months (36 months in case of any other investments) immediately
preceding the date of transfer, will be treated as long-term capital gains; in all other cases, it
would be treated as short-term capital gains. The taxability of long-term and short-term
capital gains is discussed below:
11.3.1 Transactions in securities on recognized stock exchange and in units of an equity
oriented fund:
Long term capital gains on sale of equity share in a company and on units of an
equity oriented fund are exempt from tax when the transactions for sale take
place on recognized stock exchanges and are subject to the Securities
Transactions Tax (“STT”). However, such long Term Capital Gains arising to a
company shall be taken into account in computing the book profit and income
tax payable u/s 115JB of the Act.
25
Short term capital gains on sale of equity share in a company and units of an
equity oriented fund are taxable @15%^ (when the transactions for sale take
place on recognized stock exchanges and are subject to the STT).
^ Plus applicable surcharge @ 7%/12% (in the case of a domestic company) and
2%/5% in the case of a foreign company, if any and education cess at 2% and
Secondary and Higher Education Cess @ 1% on tax and surcharge.
Additionally, STT is payable in respect of purchase of listed securities and units
of an equity oriented fund on recognized stock exchanges, as under:
Sr. No. Taxable securities transaction Rate (per
cent)
Payable by
1. Purchase of an equity share in a company
where
(a) the transaction of such purchase is entered
into in a recognized stock exchange; and
(b) the contract for the purchase of such share or
unit is settled by the actual delivery or transfer
of such share
0.1 Purchaser
2. Purchase of a unit of an equity oriented mutual fund,
where
(a) the transaction of such purchase is entered
into in a recognized stock exchange; and
(b) the contract for the purchase of such unit is
settled by the actual delivery or transfer of
such unit
Nil Purchaser
3.
Sale of an equity share in a company where -
(a) the transaction of such sale is entered into in
a recognized stock exchange; and
(b) the contract for the sale of such share is
settled by the actual delivery or transfer of
such share
0.1 Seller
Sale of an units of an equity oriented mutual fund
where -
a) the transaction of such sale is entered into in a
recognized stock exchange; and
b) the contract for the sale of such unit is settled by
the actual delivery or transfer of such units
0.001 Seller
Sale of an equity share in a company or a unit of
an equity oriented fund, where –
(a) the transaction of such sale is entered into in
a recognized stock exchange; and
(b) the contract for the sale of such share or unit
is settled otherwise than by the actual
delivery or transfer of such share or unit
0.025 Seller
4. (a) Sale of an option in securities 0.017
(0.05 wef
01 June
2016 where
option is
not
exercised)
Seller
(b) Sale of an option in securities, where option is
exercised
0.125 Purchaser
(c) Sale of a futures in securities 0.01 Seller
26
Sr. No. Taxable securities transaction Rate (per
cent)
Payable by
5. Sale of a unit of an equity oriented fund to the Mutual
Fund
0.001 Seller
6. Sale of unlisted equity shares under an offer for sale
as part of an initial public offer and shares of the
company are subsequently listed on the stock
exchange
0.2 Seller
The investor would be liable to pay STT at the above rates on the value of the securities
purchased/sold on a recognized stock exchange in India. The securities, in respect of which such
tax is leviable, are: -
Equity Shares,
Derivatives;
Units of an equity oriented fund or any other instrument issued by any
collective investment scheme to the investors in such schemes;
The value of taxable securities transaction –
(a) In the case of a taxable securities transaction relating to an option in securities,
shall be –
(i) the option premium, in respect of a transaction of sale of an option in
securities
(ii) the settlement price, in respect of a transaction of sale of an option in
securities, where option is exercised.
(b) in the case of a taxable securities transaction relating to a derivative, being “
futures”, shall be the price at which such futures is traded; and
(c) in the case of any other taxable securities transaction, shall be the price at
which such securities are purchased or sold:
STT is not available as a deduction in computing capital gains. However, from the
assessment year 2009-10, where income from taxable securities transactions referred
to above is treated as business income, the person will be eligible for deduction u/s
36(1)(xv), for the amount of STT paid.
11.3.2 Transactions in other securities or transactions not on recognized stock exchanges
(a) Tax on Long Term Gain
For Domestic Companies :
Long-term Capital Gains will be chargeable under Section 112 @20 percent^
with indexation, being listed securities or units or zero coupon bond.
However, Indexation can’t be availed on debentures. Further listed securities
and can be taxed at 10% without indexation.
For Resident Individuals and HUFs
Long-term Capital Gains will be chargeable under Section 112 @ 20 percent^
with indexation or 10 percent ^without indexation in case of transfer of long
term capital assets, being listed securities or units or zero coupon bond.
Where the taxable income as reduced by long term capital gains is below the
maximum exemption limit, the long term capital gains will be reduced to the
extent of the shortfall and only the balance long term capital gains will be
charged at the flat rate of 20 percent^.
For NRIs and foreign companies
Long-term capital gains on transfer of unlisted securities will be taxed at the
rate of 10 percent^. However, no benefit of Cost Inflation Index is available
27
and the requirement of computation of gains in foreign exchange will not
apply.
However, Long Term Capital Gains (other than unlisted securities) are
taxable @ 20 percent^ with indexation
If the NRI (not being a company) or a foreign company) does not have a
Permanent Account Number, then for the purpose of TDS, the withholding
tax rate would be 20%
The tax rates are subject to DTAA benefits available to NRIs. As per the
Finance Act, 2012, submission of tax residency certificate containing
prescribed particulars, will be a necessary (though not sufficient) condition
for granting DTAA benefits to non-residents. Also in case all the prescribed
particulars are not available in tax residency certificate then Form 10F needs
to be submitted along with tax residency certificate.
^ Plus applicable surcharge @ 7%/12% (in the case of a domestic company) and
2%/5% in the case of a foreign company, if any and education Cess at 2% and
Secondary and Higher Education Cess @ 1% on tax and surcharge.
(b) Tax on Short Term Capital Gain:
Short-term capital gains are chargeable to tax as per the progressive slab rates (see
point 11.6 for tax rates). The maximum tax rate would be 30 percent (assuming
investor falls into higher tax bracket) plus surcharge, if any and education Cess at
2% and Secondary and Higher Education Cess @ 1%.
11.3.3 Capital loss can be set off against any capital gains as follows:
Long-term capital loss of a tax year, which is chargeable to tax, cannot be set off against
short-term capital gains arising in that year. On the other hand, short-term capital loss in a
year can be set off against both short-term and chargeable long-term capital gains of the same
year.
Unabsorbed short term and long-term capital loss of prior years shall be separately carried
forward. However, short-term capital loss shall be eligible for set off against the chargeable
long term capital gains while the long term capitals loss brought forward for set off shall be
eligible to be set off only against chargeable long term capital gains of the current year.
11.3 Dividend stripping
Losses arising from the sale/transfer (including redemption) of securities (including units)
purchased up to 3 months prior to the record date (for entitlement of dividends) and sold
within 9 months (in case of units) or 3 months (in case of any other securities) after such date,
will be disallowed to the extent of income/dividend distribution (excluding redemptions) on
such units (or other securities) claimed as tax exempt by the unitholder.
11.4 Bonus stripping
In case of units purchased within a period of 3 months prior to the record date (for entitlement
of bonus) and sold/ transferred (including redeemed) within 9 months after such date, the loss
arising on transfer of original units shall be ignored for the purpose of computing the income
chargeable to tax. The loss so ignored shall be treated as cost of acquisition of such bonus
units.
11.5 The tax rates applicable to resident individuals, Hindu Undivided Families and NRIs are as
follows:
28
Slab Tax Rate*:
(A) In the case of resident individuals of the age of sixty years or more but less than eighty
years at any time during the previous year:
Particulars Rates of income tax
Where the total income does not exceed
Rs. 3,00,000
Nil
Where the total income exceeds Rs.
3,00,000 but does not exceed Rs.5,00,000
10% of the amount by which the total
income exceeds Rs. 3,00,000 but does not
exceed Rs. 500,000
Where the total income exceeds
Rs.5,00,000 but does not exceed Rs.
10,00,000
Rs. 20,000 plus 20% of the amount by which
the total income exceeds Rs.5,00,000 but
does not exceed Rs. 10,00,000
Where the total income exceeds Rs.
10,00,000
Rs. 1,20,000 plus 30% of the amount by
which the total income exceeds Rs.10,00,000
(B) In the case of every individual, being a resident in India, who is of the age of eighty
years or more at any time during the previous year:
Particulars Rates of income tax
Where the total income does not exceed
Rs.5,00,000
Nil
Where the total income exceeds
Rs.5,00,000 but does not exceed
Rs.10,00,000
20% of the amount by which the total
income exceeds Rs.5,00,000 but does not
exceed Rs. 10,00,000
Where the total income exceeds
Rs.10,00,000
Rs.1,00,000 plus 30% of the amount by
which the total income exceeds Rs.10,00,000
(C) In the case of other individuals other than those referred to in (A) and (B) above and
Hindu Undivided Families or Association of Persons or Body of Individuals, or every
artificial juridical person other than those referred to in (A) and (B) above:
Particulars Rates of income tax
Where the total income does not exceed
Rs. 2,50,000
Nil
Where the total income exceeds Rs.
2,50,000 but does not exceed Rs.5,00,000
10% of the amount by which the total
income exceeds Rs. 2,50,000 but does not
exceed Rs. 5,00,000
Where the total income exceeds
Rs.5,00,000
but does not exceed Rs.10,00,000
Rs. 25,000 plus 20% of the amount by which
the total income exceeds Rs.5,00,000 but
does not exceed Rs. 10,00,000
Where the total income exceeds
Rs.10,00,000
Rs. 1,25,000 plus 30% of the amount by
which the total income exceeds Rs.10,00,000
* Rebate from tax of upto INR 5,000 available for a resident individual whose net total
income is below Rs. 500,000 wef AY 2017-18.
The tax rates as mentioned above will be increased by education Cess at 2% and Secondary
and Higher Education Cess @ 1%.
# The tax rate as mentioned above in point 11.5 will be increase by a surcharge @15% if the
total income exceeds Rs. 1 crore, marginal relief is available.
29
11.6 Domestic Companies:
In the case of Indian Companies having total income of less than Rs. One Crore, the
tax rate applicable would be 30 percent (plus Education Cess @ 2% and Secondary
and Higher Education Cess @ 1% on the amount of tax).
In the case of Indian Companies having total income of more than Rs. One Crore, but
less than Ten crores, the tax rate applicable would be 30 percent (plus 7% surcharge
and Education Cess @ 2% and Secondary and Higher Education Cess @ 1% on the
amount of tax and surcharge).
In the case of Indian Companies having total income of more than Rs. Ten Crore, the
tax rate applicable would be 30 percent (plus 12% surcharge and Education Cess @
2% and Secondary and Higher Education Cess @ 1% on the amount of tax and
surcharge).
Notes:
1. The above provisions are as per the Finance Act 2016 and applicable for the financial year
beginning from April 01, 2016.
2. However, the client would be best advised to consult his or her tax advisor/consultant for
appropriate counsel on tax treatment of the nature of income indicated herein.
11.7 . Commodity Transaction Tax (‘CTT’)
CTT is would be levied on the value of taxable commodities transactions as follows:
Transaction
Rate Payable by
Sale of commodity derivative (other than agricultural
commodities) entered in a recognised association
0.1% Seller
12. Accounting policies- Disclose the accounting policy followed by the Portfolio Manager while
accounting for the portfolio investments of the clients.
12.1 Basis of Accounting
Books and Records would be separately maintained in the name of the client to
account for the assets and any additions, income, receipts and disbursements in
connection therewith, as provided by the SEBI (Portfolio Management)
Regulations, 1993, as amended from time to time. Accounting under the
respective portfolios will be done in accordance with Generally Accepted
Accounting Principles. As SEBI (Portfolio Management) Regulations, 1993, do
not explicitly lay down detailed accounting policies, such policies which are laid
down under SEBI (Mutual Fund) Regulations would be followed, in so for as
accounting and valuation for equities or equity related instruments are
concerned.
12.2 Maintenance of Client Account
12.2.1 In the case of investments by the Client in listed securities and in the event that
the Client is a Non-Resident Indian, as defined by SEBI from time to time and
further in instances where the Client opts for the Non-Pool Account, the
Portfolio Manager shall keep the funds of the Client in a separate designated
account to be maintained by it in a scheduled commercial bank and shall also
maintain a separate Portfolio record in the name of the Client in its books for
accounting the assets and income of the Client.
In line with SEBI circular No. IMD/DOF I/PMS/Cir- 4/2009 dated 23 June
2009, the portfolio manager keeps the funds of all clients in a separate bank
account maintained by the portfolio manager and the following conditions are
adhered to:
30
There are clear segregation of each client’s fund through proper and clear
maintenance of back office records;
Portfolio Managers do not use the funds of one client for another client;
Portfolio Managers also maintain an accounting system containing
separate client-wise data for their funds and provide statement to clients
for such accounts at least on monthly basis; and
Portfolio Managers reconcile the client-wise funds with the funds in the
aforesaid bank account on daily basis.
12.2.2 The Portfolio Manager also maintains a separate depository account of each
client.
12.3 Portfolio Valuation
12.3.1 Investments in Equity or Equity Related instruments and Debt
Securities listed on a recognized stock exchange are valued at the last
quoted closing price on the National Stock Exchange of India Limited
(NSE). If on a particular valuation date, a security is not traded on NSE,
the value at which it is traded on The Stock Exchange, Mumbai (BSE)
is used or any recognized stock exchange. If a particular security is not
listed on the NSE, then it is valued at the last quoted closing price on
the BSE on the valuation date or on a recognized stock exchange as the
case may be.
12.3.2 Non-traded and thinly traded equity securities, including those not
traded within thirty days prior to the valuation date are valued at fair
value as determined by HSBC Asset Management (India) Private
Limited. Non-traded and thinly traded Fixed Income Instruments,
including those not traded within seven days prior to the valuation date
will be valued at cost plus interest accrual till the beginning of the day
plus the difference between the redemption value and the cost spread
uniformly over the remaining maturity period of the instrument.
12.3.3 Equity securities awaiting listing are valued at fair value as determined
in good faith by HSBC Asset Management (India) Private Limited.
Fixed Income Instruments that are awaiting listing will be valued at
cost plus interest accrual till the beginning of the day plus the
difference between the redemption value and the cost spread uniformly
over the remaining maturity period of the instrument.
12.3.4 Equity share warrants listed on a recognised stock exchange are valued
at the last quoted closing price on NSE. If on a particular date the
warrant is not traded on NSE the value at which it is traded on BSE is
used. If no sale is reported at that time the last quoted closing price of
the equity shares receivable by the Portfolio when the option is
exercised less price per share payable upon exercise of the warrant and
the last dividend if any paid by the issuer of the warrants on the shares
of the issuer is used.
12.3.5 Instruments bought on ‘repo’ basis are valued at the resale price after
deduction of applicable interest up to the date of resale.
12.3.6 Investments in Mutual funds will be valued at the repurchase NAV
declared for the relevant schemes on the date of the report or the most
recent NAV will be reckoned.
31
12.3.7 In the Derivatives segment, the unrealized gains/losses for Futures and
Options will be calculated by marking all the open positions to market.
12.4 Securities Transaction
Investment securities transactions are accounted for on a trade date basis. The cost of
the investments acquired or purchased would include brokerage, stamp charges and
any charges customarily included in the broker’s contract note or levied by any statue
except STT(Securities Transaction Tax). Similarly, in case of Sale Transaction, the
above-mentioned charges will be deducted from the sale price. STT charged on
purchase/sale of securities during the financial year is recognized as an expense.
Realised Gains/Losses will be calculated by applying the First in/ First Out method.
12.5 Income/expenses
All investment incomes and expenses will be accounted on accrual basis. Dividend
will be accrued on the ex-date of the securities and the same will be reflected in the
clients’ books on the ex-date. Similarly, bonus shares will be accrued on the ex-date
of the securities and the same will be reflected in the clients’ books on the ex-date. In
the case of Fixed Income instruments, purchased/sold at Cum-interest rates, the
interest component upto the date of purchase /sale will be taken to interest
receivable/payable account and net of interest will be at the cost/sale for the purpose
of calculating realized gains/losses.
13. Investors services
13. Name, address and telephone number of the investor relation officer who shall attend to the
investor queries and complaints.
Jignesh Shah
Vice President & Head – Operations Portfolio Management Services
HSBC Asset Management (India) Private Limited
3rd Floor, Mercantile Bank Chamber,
16, V N Road, Fort, Mumbai 400 001
Tel : + 91 22 6614 5000
email : [email protected]
13.1 Grievance redressal and dispute settlement mechanism.
The Portfolio Manager shall attend to and address any client query or concern as soon
as possible to mutual satisfaction.
All disputes, differences, claims and questions whatsoever which shall arise either
during the subsistence of the agreement with a client or afterwards with regard to the
terms thereof or any clause or thing contained therein or otherwise in any way
relating to or arising there from or the interpretation of any provision therein shall be,
in the first place settled by mutual discussions, failing which the same shall be
referred to and settled by arbitration in accordance with and subject to the provisions
of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-
enactment thereof for the time being in force. The arbitration shall be held in Mumbai
and be conducted in English language.
The agreement with the client shall be governed by, construed and enforced in
accordance with the laws of India. Any action or suit involving the agreement with a
client or the performance of the agreement by the either party of its obligations will
be conducted exclusively in courts located within the city of Mumbai in the State of
Maharashtra.
32
14. Foreign Account Tax Compliance Act (FATCA): The Hiring Incentives to Restore Employment Act (the “Hire Act”) was signed into US law in
March 2010. It includes provisions generally known as FATCA. The intention of these is that
details of U.S. investors holding assets outside the US will be reported by financial
institutions to the IRS, as a safeguard against U.S. tax evasion. As a result of the Hire Act,
and to discourage non-U.S. financial institutions from staying outside this regime, financial
institutions that do not enter and comply with the regime will be subject to a 30% penalty
withholding tax with respect to certain U.S. source income (including dividends) and gross
proceeds from the sale or other disposal of property that can produce U.S. source income.
Sections 1471 through 1474 of the U.S. Internal Revenue Code impose a 30% withholding
tax on certain payments to a foreign financial institution (“FFI”) if that FFI is not compliant
with FATCA. The Company is a FFI and thus, subject to FATCA. Beginning 1 July 2014*,
this withholding tax applies to payments to the Company that constitute interest, dividends
and other types of income from U.S. sources (such as dividends paid by a U.S. corporation)
and beginning on 1 January 2017, this withholding tax is extended to the proceeds received
from the sale or disposition of assets that give rise to U.S. source dividend or interest
payments. These FATCA withholding taxes may be imposed on payments to the Company
unless (i) the Company becomes FATCA compliant pursuant to the provisions of FATCA and
the relevant regulations, notices and announcements issued thereunder, or (ii) the Company is
subject to an appropriate Intergovernmental Agreement to improve international tax
compliance and to implement FATCA. The Company intends to comply with FATCA in
good time to ensure that none of its income is subject to FATCA withholding.
* or such date as may be applicable
India has entered into Inter Governmental Agreement(“IGA”) with USA on 9th July 2015 and
has notified Income Tax rules for compliance with FATCA regulations. Further, India has
also signed a multilateral agreement on June 3, 2015, to automatically exchange information
based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters
under the Common Reporting Standard (CRS). The Portfolio Manager intends to take any
measures that may be required to ensure compliance under the terms of the IGA and local
implementing regulations. In order to comply with its FATCA/CRS obligations, the Company
will be required to obtain certain information from its investors so as to ascertain their tax
status. If the investor is a specified person, or does not provide the requisite documentation,
the Company may need to report information on these investors to the appropriate tax
authority, as far as legally permitted. If an investor or an intermediary through which it holds
its interest in the Company either fails to provide the Company, its agents or authorised
representatives with any correct, complete and accurate information that may be required for
the Company to comply with FATCA/CRS, the investor may be subject to withholding on
amounts otherwise distributable to the investor, may be compelled to sell its interest in the
Company or, in certain situations, the investor’s interest in the Company may be sold
involuntarily. The Company may at its discretion enter into any supplemental agreement
without the consent of investors to provide for any measures that the Company deems
appropriate or necessary to comply with FATCA/CRS, subject to this being legally permitted
under the IGA or the Indian laws and regulations. Other countries are in the process of
adopting tax legislation concerning the reporting of information. The Company also intends to
comply with such other similar tax legislation that may apply to the Company although the
exact parameters of such requirements are not yet fully known. As a result, the Company may
need to seek information about the tax status of investors under such other country’s laws and
each investor for disclosure to the relevant governmental authority. Investors should consult
their own tax advisors regarding the FATCA/CRS requirements with respect to their own
situation. In particular, investors who hold their Units through intermediaries should confirm
the FATCA/CRS compliance status of those intermediaries to ensure that they do not suffer
FATCA/CRS withholding tax on their investment returns.
33
15. SEBI Scores Platform
SEBI has launched a centralized web based complaints redress system (SCORES), which
enable investors to lodge and follow up their complaints and track the status of redressal of
such complaints from anywhere. This also enables the market intermediaries and listed
companies to receive the complaints from investors against them, redress such complaints and
report redressal. All the activities starting from lodging of a complaint till its disposal by
SEBI would be carried online in an automated environment and the status of every complaint
can be viewed online at any time. An investor, who is not familiar with SCORES or does not
have access to SCORES, can lodge complaints in physical form. However, such complaints
would be scanned and uploaded in SCORES for processing.
For HSBC Asset Management (India) Private Limited
Sd/-
Ravi Menon
Director
Sd/-
Kishori Udeshi
Director
Date : November 16, 2016
Place : Mumbai
Annexure - 1
Related party disclosures
Names of related parties and nature of relationship
1 Holding Company
HSBC Securities and Capital Markets (India) Private Limited
2 Ultimate Holding Company
HSBC Holdings PLC
3 Fellow subsidiaries
The Hong Kong and Shanghai Banking Corporation Limited - India Branches
HSBC Global Asset Management (Hong Kong) Limited
HSBC Software Development (India) Private Limited
HSBC Electronic Data Processing (India) Private Limited
HSBC Global Asset Management Limited
The Hong Kong and Shanghai Banking Corporation Limited, Hong Kong
HSBC Invest Direct Securities (India) Limited.
HSBC Bank Plc.
HSBC Global Asset Management (Singapore) Limited
4 Others
HSBC Mutual Fund *
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund.
5
Mr. Ravi Menon ( appointed with effect from Apr 24, 2015) Mr. Puneet Chaddha (Resigned with effect from May 24, 2016)
Ms. Naina Lal Kidwai (Resigned with effect from March 17, 2015)
As per Accounting Standard (AS 18) on ‘Related Party Disclosure’, the releated parties are as follows
Key management personnel
Related party transactions (All amounts in thousand of INR unless otherwise stated)
i) Transactions during the year are as under:
March
31,2016
March
31,2015
March
31,2016
March
31,2015
March
31,2016
March
31,2015
March
31,2016
March 31,2015
Income
Investment management fees - - - - 500,536 395,246 - -
Advisory fees - - 367,702 429,530 - - - -
Expenses
Managerial Remuneration - - - - - - 19,613 25,114
Training - - 121 239 - - - -
Brokerage and incentives - - - 3,940 1 11,930 - -
Support service charges - - 60,169 71,185 - - - -
Rent and Utilities - - 33,290 30,505 - - - -
Repairs and maintenance - Computers 4,879 5,084 8,435 425 - - - -
Scheme related expenses - - - - 7,386 32,019 - -
Compensation - - - - - 649 - -
Bank and Guarantee charges - - 2,033 1,119 - - - -
Issue of equity shares - 89,652 - - - - -
Deposit for premises - - (2,940) - - - -
Purchase of investments - - - - 977,947 846,737 - -
Sale of investments - - - - 750,639 712,100 - -
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund.
The nature and volume of transactions during the year and balances outstanding as year end with related parties in the ordinary course of business above are as
follows:
Particulars with Holding Company with fellow Subsidiaries with others* with Key Management
Notes to related party disclosures (to the extent of material transactions)
March 31,2016 March 31,2015
Investment management fees
HSBC Mutual Fund 500,536 395,246
Advisory fees
HSBC Global Asset Management (Hongkong) Limited 367,702 429,530
Managerial Remuneration
Puneet Chaddha 16,685 25,114
Training
HSBC Global Asset Management (Hongkong) Limited 101 110
Brokerage and incentives
HSBC Mutual Fund 1 -
The Hong Kong and Shanghai Banking Corporation Limited - India - 3,799
Support service charges
HSBC Global Asset Management Limited 14,234 30,354
HSBC Global Asset Management (Hongkong) Limited 27,007 22,979
The Hongkong and Shanghai Banking Corporation Ltd - Hongkong 8,760 8,540
HSBC Electronic Data Processing (India) Pvt Ltd 9,586 9,514
The Hong Kong and Shanghai Banking Corporation Limited, India 581 -
Rent and Utilities
The Hong Kong and Shanghai Banking Corporation Limited - India 33,290 30,505
Repairs and maintenance - Computers
HSBC Securities and Capital market Pvt ltd 4,879 5,084
HSBC Software Development Pvt Ltd 8,435 425
Scheme related expenses
HSBC Mutual Fund 7,386 32,019
Compensation
HSBC Mutual Fund - 649
Bank and Guarantee charges
The Hong Kong and Shanghai Banking Corporation Limited - India 2,033 1,119
Issue of equity shares
HSBC Securities and Capital market Pvt ltd - 89,652
Deposit for premises
The Hong Kong and Shanghai Banking Corporation Limited - India (2,940) -
Purchase of investments
HSBC Mutual Fund 977,947 846,737
Sale of investments
HSBC Mutual Fund 750,639 712,100
For the year ended
ii) Balances outstanding are as under:
Particulars
March
31,2016
March
31,2015
March
31,2016
March
31,2015
March
31,2016
March
31,2015
March
31,2016
March 31,2015
Assets
Investment management fee receivable - - - - 63,780 50,908 - -
PMS advisory fees receivable - - 4,703 3,048 - - - -
Investment advisory fee receivable - - 62,061 84,271
Deposit for premises - - 9,328 12,268 - - - -
Investments - - - - 559,986 306,566
Balances with banks - - 19,130 55,565 - - - -
Liabilities
Equity share capital 615,909 615,909 - - - -
Computer maintenance - 4,576 - - - - - -
Support service charges - - 32,862 28,451 - - - -
Commission/Brokerage - - 401 401 - - - -
Scheme related expenses - - - - 7,321 23,442 - -
* HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund.
with Holding with fellow Subsidiaries with others* with Key Management
Notes to related party disclosures (to the extent of material transactions)
March 31,2016 March 31,2015
Investment management fees
HSBC Mutual Fund 63,780 50,908
PMS advisory fees receivable
HSBC Global Asset Management (Hongkong) Limited 4,703 3,048
Investment advisory fee receivable
HSBC Global Asset Management (Hongkong) Limited 62,061 84,271
Deposit for premises
The Hong Kong and Shanghai Banking Corporation Limited - India 9,328 12,268
Investments
HSBC Mutual Fund 559,986 306,566
Balances with banks
The Hong Kong and Shanghai Banking Corporation Limited - India 19,130 55,565
Equity share capital
HSBC Securities and Capital market Pvt ltd 615,909 615,909
Computer maintenance
HSBC Securities and Capital market Pvt ltd - 4,576
Support service charges
HSBC Global Asset Management Limited 11,778 18,102
HSBC Global Asset Management (Hong Kong) Limited 4,833 4,739
HSBC Bank Honkgong 7,112 -
HSBC Software Development India Pvt.Ltd 7,365 -
Commission/Brokerage
The Hong Kong and Shanghai Banking Corporation Limited - India Branches 190 190
HSBC Investdirect Securities (India) Limited 211 211
Scheme related expenses
HSBC Mutual Fund 7,321 23,442
For the year ended