DISCLOSURE DOCUMENT. (As required under Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993)

Transcription

1 DISCLOSURE DOCUMENT (As required under Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993) (i) (ii) (iii) (iv) 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, 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. 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. 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 Phone : ravi.r.menon@hsbc.com (v) This Disclosure Document is dated May 15, 2017 Portfolio Management Services HSBC Asset Management (India) Private Limited SEBI Registration No. INP

2 TABLE OF CONTENTS Sr. No. Contents Page No. 1 Disclaimer 3 2 Definitions Description 3.1 History, Present Business and Background of the Portfolio Manager 3.2 Promoters of the Portfolio Manager, directors and their background 3.3 Group companies/firms of the Portfolio Manager in India on turnover basis 3.4 Details of the services being offered: Discretionary/ Nondiscretionary/ Advisory. 4 Penalties, pending litigation or proceedings, findings of inspection or investigations for which action may have been taken or initiated by any regulatory authority Services Offered Risk Factors Client Representation 18 8 The Financial Performance of the Portfolio Manager Portfolio Management Performance Nature of Expenses Taxation Accounting Policies Investor Services Foreign Account Tax Compliance Act (FATCA) SEBI Scores Platform 32 2

3 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 2.6 Foreign Account Tax Compliance Act (FATCA) 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. 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 2.10 Person directly or indirectly connected a Portfolio Manager who manages the funds in accordance with the directions of the client. 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 PMS Agreement includes contract entered between the Portfolio Manager and the client for the management of funds or securities of the client 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 Portfolio the total holdings of securities belonging to the client 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. INP 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 Rules The Securities and Exchange Board of India (Portfolio Managers) 3

4 Rules, Regulations The Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, and as may be amended by SEBI from time to time SEBI / Board the Securities and Exchange Board of India Securities Securities as per Securities Contracts (Regulation) Act, 1956 include: 2.20 Securities Lending Scheme 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. 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 The paid-up equity share capital of the Portfolio Manager is Rs 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. INP 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, 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 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. 4

5 As on April 30, 2017, AMIN had assets of over INR 9,921 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 April 30, 2017, AMIN had assets of approximately INR 124,041 crores under management in its PMS business including assets under the EPFO mandate Promoters of the Portfolio Manager, directors and their background Promoter HSBC Securities and Capital Markets (India) Private Limited (HSCI) HSCI is a member of the HSBC Group, one of the world s largest banking and financial services organizations. Headquartered in London, HSBC serves around 51 million customers through our four Global Businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. HSBC s network covers 73 countries and territories in Europe, the Asia- Pacific region, the Middle East, Africa, North America and Latin America. Listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by over 216,000 shareholders in 127 countries and territories. 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 Board of Directors (i) Sayed P Mustafa Sobha Ivory Apartments, Flat 251, 5th floor 7/1, St. John s Road, Bangalore Independent 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. 5

6 (ii) Kishori J Udeshi 15, Sumit Apartment, 31 Carmichael Road, Mumbai Independent 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 Independent 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 Chief Executive Officer HSBC Asset Management (India) Private Limited Mr. Ravi Menon has a M.Sc. Economics degree from Birla Institute of Technology and Science, Pilani and MBA from Symbiosis Institute of Business Management, Pune. He has around 25 years of experience in banking and financial services. Prior to joining HSBC AMC, Mr. Menon was Head Strategy & Planning Inclusive Banking at HSBC. He has held various positions at HSBC Group. He has also worked with UBS as Vice President Investment Banking 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 h) HSBC InvestDirect Financial Services (India) Limited i) HSBC InvestDirect Sales & Marketing (India) Limited j) HSBC Agency (India) Private Limited 6

7 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 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 Any pending material litigation / legal proceedings against the Portfolio Manager / key personnel with separate disclosure regarding pending criminal cases, if any. There are no material litigations including criminal cases /legal proceedings against the Portfolio Manager / Key personnel 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 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 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. 7

8 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 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, 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 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 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, 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. 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) 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 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 8

9 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 nondisclosures of litigation against one of the directors have been held to be not required as per the Takeover Regulations. g) SEBI vide its letter dated April 11, 2017 has informed HSCI of initiation of adjudication proceedings under SEBI Act, 1992, against them in connection with one of the open offer transaction managed by them. HSCI is awaiting further details from SEBI Other than as disclosed above, there are no enquiries/ adjudication proceedings initiated by SEBI against the Portfolio Manager or its directors, principal officer or employee or any person directly or indirectly connected with the Portfolio Manager or its directors, principal officer or employees, under the Act or Rules or Regulations made thereunder. The above information has been disclosed in good faith as per the information available to the Portfolio Manager. 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. Currently, the Portfolio Manager manages the following mandate under discretionary management services - s 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 b Other Securities {'securities' as defined in section 2(h) of 45% and the Securities Contracts (Regulation) Act, 1956} the upto 65% principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or State Government. 9

10 Category Investment Pattern Percentage of amount to be invested 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 b 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. 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. 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 e 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. Units of Debt Mutual Funds as regulated by Securities and Exchange Board of India: Provided that fresh investment in Debt Mutual Funds shall Minimum 35% and upto 45% 10

11 Category Investment Pattern Percentage of amount to be invested 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. (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 subsectors. 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, Provided further that in case of the sub-category (f) (iii) 11

12 Category Investment Pattern Percentage of amount to be invested 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: 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 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 crore as on the date of investment: and (ii) Derivatives with the shares as underlying traded in either of the two stock exchanges. 5% and Upto 15% 12

13 Category Investment Pattern Percentage of amount to be invested 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. (v) 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. Asset Backed, Trust Structured and Miscellaneous Investments 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, 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. Upto 5% 13

14 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. 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 takento 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. 14

15 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 01 st July 2015 onwards as per the notification issued by EPFO on 1 st July 2015 as amended from time to time. 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 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 5% 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. 15

16 5.2. Non-Discretionary the portfolio, which the Portfolio Manager manages in accordance with the directions and permission of the client 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) (b) (c) (d) (e) (f) (g) (h) Convertible Stock and Preference Shares of Indian Companies; 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; Government and Trustee Securities; Treasury Bills; Commercial Papers, Certificates of Deposit and other similar Money Market instruments Tradable or any other warrants; 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; 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 Past performance of the Portfolio Manager does not indicate its future performance Investments made by the Portfolio Manager are subject to risks arising from the investment objective, investment strategy, asset allocation and non- diversification 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 16

17 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 Investment decisions made by the Portfolio Manager may not always be profitable 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. 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 Prospective investors should review / study this Disclosure Document carefully and in its entirety and shall not construe the contents hereof or regard the summaries contained herein as advice relating to legal, taxation, or financial / investment matters and are advised to consult their own professional advisor(s) as to the legal, tax, financial or any other requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal (sale or conversion into money) of Portfolio and to the treatment of income (if any), capitalisation, capital gains, any distribution, and other tax consequences relevant to their portfolio, acquisition, holding, capitalisation, disposal (sale, transfer or conversion into money) of portfolio within their jurisdiction of nationality, residence, incorporation, domicile etc. or under the laws of any jurisdiction to which they or any managed funds to be used to purchase/gift portfolio of securities are subject, and also to determine possible legal, tax, financial or other consequences of subscribing / gifting, purchasing or holding portfolio of securities before making an investment 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 The investments made are subject to external risks such as war, natural calamities, policy changes of local / international markets which affects stock markets Any policy change / technology change / obsolescence of technology would affect the investments made in a particular industry The Client has perused and understood the disclosures made by the Portfolio Manager in the Disclosure Document before entering into this Agreement Clients are not being offered any guarantee / assured returns Performance of the Portfolios may be impacted as a result of specific investment restrictions provided by the client. 17

18 6.14. 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 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 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. 7. Client Representation 7.1. Category of clients No. of clients Associates / Group companies Funds managed (Rs. cr) Discretionary/ Discretionary available) Non- (if As at 31 March 2015 NIL NA NA As at 31 March 2016 NIL NA NA As at 31 March 2017 NIL NA NA Others As at 31 March ** 102, ** Discretionary & Advisory As at 31 March ** 106,311.33** Discretionary & Advisory As at 31 March ** 124,995.52** Discretionary & Advisory ** 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 March March 2014 Shareholders' Funds Share Capital 615, , ,000 Reserves and Surplus 370, ,985 (10,885) Total 986, , ,115 18