DISCLOSURE DOCUMENT - HSBC · management of his portfolio. 2.5 Discretionary Portfolio Manager a...

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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


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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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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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


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


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


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:



Rs.5,00,000

Nil


Rs.5,00,000 but does not exceed

Rs.10,00,000


income exceeds Rs.5,00,000 but does not

exceed Rs. 10,00,000


Rs.10,00,000

Rs.1,00,000 plus 30% of the amount by


(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:



Rs. 2,50,000

Nil


2,50,000 but does not exceed Rs.5,00,000


income exceeds Rs. 2,50,000 but does not

exceed Rs. 5,00,000


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


Rs.10,00,000

Rs. 1,25,000 plus 30% of the amount by


* 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


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 - -


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


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


Compensation

HSBC Mutual Fund - 649

Bank and Guarantee charges


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


Sale of investments


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 - -


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


PMS advisory fees receivable


Investment advisory fee receivable


Deposit for premises


Investments


Balances with banks


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


For the year ended

DISCLOSURE DOCUMENT - HSBC · management of his portfolio. 2.5 Discretionary Portfolio Manager a...

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Transcript of DISCLOSURE DOCUMENT - HSBC · management of his portfolio. 2.5 Discretionary Portfolio Manager a...