PMS RDD - Karvy Capital
Transcription
PMS RDD - Karvy Capital
KARVY CAPITAL LIMITED PORTFOLIO MANAGEMENT SERVICES DISCLOSURE DOCUMENT [As required under Regulation 14 of SEBI (Portfolio Managers) Regulation, 1993] 1. This document supercedes the Disclosure document dated November 5, 2014 filed with Securities and Exchange Board of India (SEBI) on November 10, 2014 . 2. This Disclosure Document has been filed with SEBI along with the certificate from independent chartered accountant in the prescribed format in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993 as amended till date. 3. The purpose of this Disclosure Document is to provide essential information about the portfolio management services offered by Karvy Capital Limited in such manner as to assist and enable the investors in making informed and considered decision for engaging Karvy Capital Limited as a Portfolio Manager. 4. This document contains the necessary information about the Portfolio Manager required by an investor. 5. Karvy Capital Limited is permitted to provide Portfolio Management Services pursuant to its registration as a Portfolio Manager with SEBI vide Registration number INP000004524 dated June 10, 2014. 6. Investors should carefully read this entire document before making a decision to avail portfolio management services from Karvy Capital Limited and retain this document for future reference. Any other relevant information may be provided upon request. 7. No person has been authorized to give any information or to make any representations not confirmed in this draft Disclosure Document in connection with the services proposed to be provided by the Portfolio Manager, and any information or representations not contained herein must not be relied upon as having been authorized by the Portfolio Manager. Page 1 of 33 8. The Principal Officer designated by Karvy Capital Limited, the Portfolio Manager is: Name of the Principal Officer Ms. KANIKA KHORANA Tel No: 022 6149 1500 Email : Address: [email protected] 702, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051 * The Principal Officer has been changed from Mr. Swapnil Pawar to Ms. Kanika Khorana with effect from March 13, 2015. 9. This disclosure document is dated March 30, 2015. Page 2 of 33 Portfolio Management Services KARVY CAPITAL LIMITED INDEX Sr No Contents 1 2 3 i Disclaimer Definitions Description - The Portfolio Manager History, Present Business and background of the Portfolio Manager. Page Number 4 4 8 8 ii Promoters of the Portfolio Manager, Directors and their background. 9 iii Details of the top 10 group companies of the Portfolio manager based on turnover as on March 31, 2014 11 iv Details of Services being offered. 12 4 Penalties/Pending Litigations/Proceedings etc 12 5 Services offered 13 6 Risk Factors 16 7 Client Representation 20 i Category of clients as on February 28, 2015 20 ii Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India (as on March 31,2014) Financial Performance of Portfolio Manager, Karvy Capital Limited 21 Portfolio Management Performance of the Portfolio Manager for last 3 years Nature of Expenses Taxation Accounting Policies Investor Services Grievances Redressal Dispute Settlement Mechanism General 23 8 9 10 11 12 13 14 15 16 22 24 25 30 31 32 32 33 Page 3 of 33 Section 1: DISCLAIMER This document has been prepared in accordance with the Securities Exchange Board of India (Portfolio Managers) Regulations, 1993, as amended from time to time and other circulars issued by SEBI from time to time and has been 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 this Document. This information is not for public distribution and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. Section 2: DEFINITIONS In this Agreement, unless otherwise clearly indicated by or inconsistent with the context, the following expressions shall have the meaning assigned to them hereunder respectively: “Act” – means the Securities and Exchange Board of India Act, 1992. “Agreement” means the agreement that shall be entered between Karvy Capital Limited, the Portfolio Manager and the client for the management of funds or securities of the client in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993 and SEBI (Portfolio Managers) Amendment Regulations, 2002 issued by the Securities and Exchange Board of India and as may be modified from time to time and shall include all schedules and annexures thereto and shall also include all modifications, alterations, additions or deletions made thereto in accordance with the terms thereof. “Board” means the Securities and Exchange Board of India. “Bank Account” means one or more bank accounts opened, maintained and operated by the Portfolio Manager in the name of clients or a pool account in the name of the Portfolio Manager in which the funds handed over by the client shall be held by the Portfolio Manager on behalf of the Client. “Chartered Accountant” means a chartered accountant as defined in clause (b) of subsection (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. “Client” means anybody corporate, partnership firm, individual, HUF, association of person, body of individuals, trust, statutory authority, or any other person who enters into agreement with Karvy Capital limited, the Portfolio Manager for availing the Portfolio Management Services Page 4 of 33 “Custodian” means any person who carries on or proposes to carry on the business of providing custodial services in accordance with the regulations issued by SEBI from time to time. “Depository” means Depository as defined in the Depositories Act, 1996 (22 of 1996) and currently includes National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). “Depository Account” means any account of the client or for the client with an entity registered as depository participant under sub-section 1A of Section 12 of the Act or any other law for the time being relating to registration of depository participants in which the securities comprising part of the Portfolio of the Client are kept by the Portfolio Manager. “Discretionary Portfolio Management Services” means the discretionary portfolio management services to be rendered to a Client by Karvy Capital limited, the Portfolio Manager pursuant to the terms and conditions contained in the Portfolio Management Services Agreement, where under the Portfolio Manager exercises absolute and unfettered discretion, with regards to the investments and management of the portfolio of securities or the funds of the client, as the case may be. “Disclosure Document” means this draft disclosure document for offering Portfolio Management Services. “Financial year” means the period of twelve months commencing on 1st April every year and ending on 31st March of the following year. “Funds” means the monies placed by the Client with the Portfolio Manager and any accretions thereto and also includes any further monies placed by the client with the Portfolio Manager to be managed pursuant to the Agreement, the proceeds of the sale or realization of the portfolio and any interest, dividend or other monies so long as the same is being managed by the Portfolio Manager. “Funds managed” means the market value of the Portfolio of the Client as on date. “Fund Manager” (FM) means 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 funds of the client, as the case may be. “Initial Corpus” means the value of the funds and the market value of securities brought in by the client and accepted by the Portfolio Manager at the time of registering with the Portfolio Manager for the portfolio management services. The Initial corpus brought in by the Client in the form of securities shall be valued at the closing market price of such securities, prevailing on recognised stock exchange [NSE/ BSE (only if security is not listed on NSE)] on the previous working date of activation of client’s portfolio management account by the Portfolio Manager or of the previous working day of the transfer of such securities from client’s account to the Depository account whichever is later. The Portfolio Manager shall not accept from the client, funds or securities worth less than Twenty five lakh rupees. Page 5 of 33 “Investment Advisory Services” means the non exclusive, non binding services, where the Portfolio Manager advises Clients on investments in general or gives specific advice required by the Clients as agreed upon in the Agreement. Advice,whether general or specific is non-binding in nature and it is entirely at client’s discretion to follow the advice. “Non-Discretionary Portfolio Management Services” means the non-discretionary portfolio management services to be rendered to a Client by the Portfolio Manager on the terms and conditions pursuant to the Agreement, where under the Portfolio Manager invests and manages the Funds of the Client based on the instructions of the Client. “Net Asset Value” or “NAV” means the market value of the Assets managed by the Portfolio Manager, as calculated by the Portfolio Manager from time to time, depending on the Strategy chosen by the Client. “Person directly or indirectly connected” means 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. “Portfolio” means the total holdings of securities and / or funds belonging to the client. “Portfolio Manager” (PM) means Karvy Capital Ltd., a company incorporated under the Companies Act, 1956 and registered with SEBI as a Portfolio Manager in terms of SEBI (Portfolio Managers) Regulations 1993 vide registration no. INP000004524 and having its Registered Office at its PMS dealing office at 702, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051[ but may add more dealing offices in future] and who pursuant to a contract or arrangement with a client, 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. “Portfolio Management Services” means the Discretionary Portfolio Management Services, and/or the Non-Discretionary Portfolio Management Services, and/or the Investment Advisory Services, as the case may be. “Portfolio Value” means the aggregate of the Portfolio Funds and Value of Portfolio Securities. “Principal Officer” means a director/an employee of the portfolio manager who is responsible for the activities of portfolio management and has been designated as principal officer by the portfolio manager. “Regulations” – means the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, as amended by SEBI from time to time and includes Securities and Exchange Board of India (Portfolio Managers) Amendment Regulations, 2012, and rules, guidelines or circulars issued in relation thereto from time to time. Page 6 of 33 “Strategy” means any of the Portfolio Investment categories mentioned herein or that may be introduced by the Portfolio Manager from time to time. The Term Strategy may be interchanged with Plans/Products/Options. “SEBI” means the Securities and Exchange Board of India established under sub-section (1) of Section 3 of the Securities and Exchange Board of India Act, 1992. “Securities” means securities as defined under the Securities Contracts (Regulation) Act, 1956 and includes: (i) 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 (ia) derivative; (ib) units or any other instrument issued by any collective investment Strategy to the investors in such Strategies; (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (id) units or any other such instrument issued to the investors under any mutual fund Strategy; (ii) Government securities; (iia) such other instruments as may be declared by the Central Government to be securities; and (iii) Rights or interest in securities. A descriptive, but not the exhaustive list of “Securities” is given hereunder: Shares (whether dematerialized or otherwise), derivatives (futures and options, Interest rate swaps & Forward rate agreements etc), scrip, stocks, bonds (whether dematerialized or otherwise), warrants, convertible debentures (whether dematerialized or otherwise), nonconvertible debentures (whether dematerialized or otherwise), securitised debt (whether dematerialized or otherwise), fixed return investments, floating rate instruments linked to MIBOR/ call money etc., equity shares and equity linked instruments or other marketable securities of a like nature in or of any incorporated company or other body corporate, negotiable instruments, including usage bills of exchange, trade bills, deposits or other money market instruments, derivatives, commercial paper, certificates of deposits, units issued by Unit Trust of India, units issued by Mutual Funds, units issued by SEBI registered Alternative Investment Funds, mortgage backed or other asset backed securities issued by any institution or corporate, cumulative convertible preference shares issued by any incorporated Company and securities issued by the Central Government or a State Government , Pass Through Certificates , RBI auctions, open market sales conducted by RBI or any other securities that may be issued from time to time. Page 7 of 33 “Securities lending” means the securities lending as per the Securities Lending Scheme, 1997 and related guidelines specified by SEBI. “Structured Products” means products returns on which may be linked to Equity Index, Debt instruments, Non Convertible Debentures and may also be based on Basket of stock, index or stock futures with pre-defined capital protection. These are normally third party products. The terms that are used herein and not defined herein, except where the context otherwise so requires, shall have the same meanings as are assigned to them under the Act, the Regulations or the Rules. Words importing the singular include the plural and vice-versa. Words importing a gender include the other gender. Section 3 DESCRIPTION i. HISTORY, PRESENT BUSINESS AND BACKGROUND OF THE PORTFOLIO MANAGER : Karvy Capital Limited, a wholly owned subsidiary of Karvy Stock Broking Limited, was incorporated under the Companies Act, 1956 as amended from time to time as a Private Limited Company on December 31, 1981 with the name ‘Grant Holding and Trading Company Private Limited’. On June 30, 2011, the name of the company was changed to Karvy Capital Private Limited. The name of the company was further changed from Karvy Capital Private Limited to Karvy Capital Limited with effect from February 8, 2012 and presently Karvy Capital Limited is a Public Company domiciled in India. Karvy Capital Limited has its Registered Office at 702, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai – 400051. Karvy Capital Limited is principally engaged in business of trading of shares and securities. Karvy Capital Limited has been registered with Reserve Bank of India (‘RBI’) to carry on the business of non-banking financial institution with effect from March 24, 1998. Karvy Capital Limited is also acting as a Sponsor and Manager to Karvy Capital Alternative Investment Fund (Trust) for which it has obtained Category III License on April 10, 2013. Karvy Capital Limited is registered with SEBI as a Portfolio Manager vide registration number INP000004524, for the period 10th June 2014 to 9th June 2017. Karvy Capital Limited started proprietary trading in August 2010 with a focus on Quantitative and Absolute Return strategies. Currently, Karvy Capital Limited acts as an Investment Manager to Karvy Capital Alternative Investment Fund – a category III Alternative Investment Fund. Karvy Capital Limited also has a retail debt business and acts as a facilitator for structured finance deals. Karvy Capital Limited is also a direct sales associate and main distributor to the various products and services being offered by Karvy Group. Page 8 of 33 Karvy Capital Limited aims to be a reputable asset manager providing comprehensive investment solutions across asset classes to its investors. To diversify the set of offerings, Karvy Capital Limited intends to provide customized and focused portfolio management solutions to investors. These services would include discretionary portfolio management services, non discretionary portfolio management services and advisory services. Karvy Capital Limited is a group company of the KARVY Group, which is a premier integrated financial services provider, and ranked amongst the leading corporate in the country in all its business segments, servicing over millions of individual investors in various capacities, and provides investor services to many corporates, comprising the who’s who of Corporate India. KARVY group companies cover the entire spectrum of financial services such as Stock Broking, Depository Participants, Distribution of financial products – mutual funds, bonds, fixed deposit, equities, Insurance Repository , Commodities Broking, Personal Finance, Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs, services related to data management and Non Banking Financial company among others. KARVY Group has a professional management team and ranks among the best in technology and operations. ii. DETAILS OF PROMOTERS,DIRECTORS AND THEIR BACKGROUND: The directors of Karvy Capital Limited as on March 27, 2015 and their background are as follows: Name and age: Mr. Swapnil Pawar, aged 34 years Designation: Business Head and Whole time Director. MBA from IIM-Ahmedabad and B.Tech (Aerospace Qualification: Engineering) from IIT-Mumbai Experience (General and Swapnil was the co-founder of PARK Financial Advisors, a specific Intermediaries wealth management venture which was acquired by Karvy activity): Group. PARK Financial Advisors was managing over 1000 clients and had made significant headway in building a robust analytical framework for financial planning and investment advisory. Swapnil has deep expertise in quantitative methods, corporate finance and macroeconomics. He published a book on Global Financial Crisis – titled ‘Anatomy of Froth – Demystifying the Global Financial Crisis and Lessons to Learn’ in December, 2010. March 26, 2011 Date of appointment: Other directorships: Previous Positions held: Not Applicable Prior to PARK Financial Advisors, Swapnil worked with The Boston Consulting Group – a strategy consulting firm. He advised clients across financial services, banking, engineering and technology sectors on business strategy and execution. Page 9 of 33 Name and age: Designation: Qualification: Mr. G. Krishna Hari, aged 57 years Name and age: Designation: Qualification: Mr. V. Mahesh, aged 50 years Director Bachelors degree in Commerce and an associate member of the Institute of Chartered Accountants of India (ICAI) Experience (General and He has over 27 years of experience in the areas of finance specific Intermediaries and accounts functions encompassing fund raising, financial reporting, management accounting, working activity): capital management, budgeting and forecasting and financial due diligence reviews for mergers & acquisitions and investment proposals. He has been associated with the Karvy Group for the past 15 years. September 27, 2012 Date of appointment: Other directorships: Name of Company Date of appointment Karvy Holdings Limited March 1, 2013 Karvy Realty & Services March 2 , 2015 Limited Prior to joining Karvy, he was the head of finance & Previous Positions held: accounts division in Asia Pacific Investment Trust Limited, Hyderabad (Formerly Nagarjuna Investment Trust Limited) an NBFC Company. Experience (General and specific Intermediaries activity): Date of appointment: Other directorships: Director Graduate in BA - Corporate Secretary ship from University of Madras. He also holds a Post Graduate degree in Commerce from University of Madras (M.Com) and a Post Graduate Diploma in Computer Applications. He has work experience spanning over two decades and has in depth exposure to operations on most financial services businesses. Commencing his professional stint with Karvy’s Registry business where he has to his credit managing over 300 Initial Public Offerings and other forms of offerings, he was amongst the first few to work closely on the Book Building process initiated by SEBI in 1995 June 29, 2011 Name of Company Buoyant Consultants Pvt. Ltd Karvy Realty (India) Limited Contours Motors & Dealers Private Limited Karvy Data Management Services Ltd. [Managing Director] Efin Services (India) Private Limited Date of appointment April 1, 2002 August 31, 2006 December 14, 2007 April 21, 2008 February 20, 2009 Page 10 of 33 Karvy Financial Services Limited Karvy Forex & Currencies Private Limited Karvy Insurance Repository Limited Karvy Global Services Limited Karvy Solar Power Limited Karvy Insights Limited Karvy Analytics Limited July 17, 2009 March 10, 2011 November 30, 2011 January 21, 2014 January 28 , 2015 February 19, 2015 March 02 , 2015 Mr. V Mahesh resigned from Karvy Holdings Limited w.e.f.09.02.2015 and Karvy Realty & Services Limited w.e.f.02.03.2015. Previous Positions held: After initially working with Mass Computer Services Ltd (MCS) as an Assistant Vice President, he moved to Karvy Mr. Hrishikesh Parandekar, erstwhile director of Karvy Capital Limited has tendered his resignation effective October 8, 2014. iii DETAILS OF THE TOP 10 GROUP COMPANIES/ FIRMS BASED ON TURNOVER AS ON MARCH 31, 2014 [ based on audited financials]: S. NO Name of the Company Nature of Business Status Turnover (in Rs) Group company 2,94,01,86,003 1 Karvy Financial Services Ltd. Financial Services-NBFC 2 Karvy Stock Broking Limited SEBI Registered Stock broker, Depository Participant, Portfolio Parent Manager Company 2,84,06,43,123 3 Karvy Computershare Pvt. Ltd. SEBI Registered Registrar and Share Transfer Agent Group company 2,47,28,12,421 4 Karvy Data Management Services Ltd Transaction Processing Group company 1,95,22,07,870 Karvy Comtrade Ltd. FMC/ NCDEX /MCX/NMCE/ACE / ICEX/ NCDEX Spot Exchange / National Spot Exchange registered commodity broker Group company 34,99,63,220 5 Page 11 of 33 6 Karvy Consultants Limited 7 Karvy Holdings Limited Consultancy and advisory services Group company 23,45,25,362 Consulting and Advisory Services Group company 19,53,77,751 8 Karvy Realty (India) Ltd. Realty Services Group company 17,01,79,052 9 Karvy Investor Services Ltd. SEBI Registered Merchant Banker and Underwriter. Group company 8,51,87,260 10 Karvy Middle East LLC, Dubai Commercial Broker Group company 5,25,83,337 iv DETAILS OF THE SERVICES BEING OFFERED: Karvy Capital Limited, Portfolio Manager, offers Discretionary, Non discretionary & Advisory services as per the preference and agreement with the individual client. For details of the services offered kindly refer Annexure A. Section 4: PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF INSPECTION OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE BEEN TAKEN OR INITIATED BY ANY REGULATORY AUTHORITY I All cases of penalties imposed There are no penalties imposed or litigation by the Board or the directions pending against the Karvy Capital Limited. issued by Board under the Act Details of litigations pending against group or Rules or Regulations made companies/ associates of the portfolio manager there under have been provided as Annexure B to this document. II The nature of penalty/direction Not Applicable III Penalties imposed for any Not Applicable economic offence and/or for violation of any securities laws IV Any pending material Not Applicable litigation/legal proceedings against the Portfolio Manager/key personnel with separate disclosure regarding pending criminal cases, if any V Any deficiency in the systems Not Applicable Page 12 of 33 and operations of the Portfolio Manager observed by the Board or any regulatory agency VI Any enquiry/adjudication proceedings initiated 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 there under Section 5: Not Applicable SERVICES OFFERED 5.1 The Portfolio Manager offers the following three types of Services a. Discretionary Services The Portfolio account of the client is managed at the full discretion and liberty of Karvy Capital limited, the Portfolio Manager. Under these services, the choice as well as the timings of the investment decisions on an ongoing basis rest solely with the Portfolio Manager. The Portfolio Manager may at times and at its own discretion, adhere to the views of the Client pertaining to the investment /disinvestment decisions in the Client’s Portfolio. The Portfolio Manager shall have the sole and absolute discretion to invest in respect of the Client’s account in any type of security as per the Agreement and make such changes in the investments and invest some or all of funds in the Client’s account in such manner and in such markets as it deems fit. The Client may give informal guidance to customize the portfolio strategies; however, the final decision rests with the Portfolio Manager. The securities invested / disinvested by the Portfolio Manager for Clients in the same Strategy may differ from one Client to another Client. The Portfolio Managers’ decision (taken in good faith) in deployment of the Clients’ account is absolute and final and can never be called in question or be open to review at any time during the currency of the agreement or any time thereafter except on the ground of malafide, fraud, conflict of interest or gross negligence. This right of the Portfolio Manager shall be exercised strictly in accordance with the relevant Acts, Rules, and Regulations, guidelines and notifications in force from time to time. Under these services, the Clients may authorize the Portfolio Manager to invest their Funds in specific financial instruments or a mix of specific financial instruments or restrict the Portfolio Manager from investing in specific financial instruments or securities. Periodical statements in respect of Client’s Portfolio shall be sent to the respective Clients. Page 13 of 33 Details of the strategies being offered by the Portfolio Manager are contained in Annexure A. b. Non Discretionary In Non-Discretionary Portfolio management, the Portfolio Manager would manage the client’s portfolio in consultation with and as per the directions or consent of the client. Under these services, the Clients decide their own investments with the Portfolio Manager only facilitating the execution of transactions. The Portfolio Manager’s role would include but not limited to providing research, structuring of clients’ portfolios, investment advice and guidance and trade execution at the Client’s request. The Portfolio Manager shall execute orders as per the mandate received or consent obtained from the Client. The deployment of the Client’s Funds by the Portfolio Manager shall be as per the instructions or consent of the Client. The rights and obligations of the Portfolio Manager shall be exercised strictly in accordance with the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. Periodical statements in respect of Client’s Portfolio shall be sent to the respective Clients. Details of strategies offered by the Portfolio manager under non discretionary services can be viewed in Annexure A. c. Advisory Portfolio Manager will provide advisory services, as per the Regulations, which shall be in the nature of investment advice and shall include the responsibility of advising on the portfolio strategy, investment, disinvestment of the various securities in the client’s portfolio, for an agreed fee, entirely at the client’s risk. The Portfolio Manger will render the best possible advice to the client having regard to the client’s needs and the requirements, using his own professional skills. This service will be purely of advisory in nature under an agreed fee structure with the client. It is up to the client to accept the recommendations/advice of Portfolio Manager and Portfolio Manager will not be held responsible for any consequence arising out of acceptance of Portfolio Manager’s advice under this service. 5.2 Present Investment Objective The General Objective is to formulate and device the investment philosophy to achieve long term growth of capital by investing in assets, which generate reasonable risk–adjusted return . The actual portfolio management style will vary in line with profile of each client with regards to his risk tolerance levels and specific preferences or concerns. (The specific objective will be as mentioned in the agreement with the client). 5.3 Types of securities The Portfolio Manager/Fund Manager shall invest in all such types of Securities as defined (kindly refer to the definition) and in all such Securities as permissible from time to time. Page 14 of 33 5.4 Investment in Group / associate companies The Portfolio Manager/Fund Manager may invest in Securities of the associate/group companies subject to the applicable laws/ regulations/ guidelines. These investments will be carried out to achieve the investment objectives and strategies and in the normal course of investment activity subject to the applicable laws/regulations. The Portfolio Manager / Fund Manager may invest in any unlisted securities of any associate/group companies of the Portfolio Manager/ promoter. The Portfolio Manager / Fund Manager may also invest in privately placed securities issued by Associate/Group companies of the promoter. 5.5 Minimum Investment Amount The Portfolio Manager shall not accept funds and/or securities from new clients, cumulative value of which is less than Rupees Twenty Five Lakhs or as specified in the agreement with the Portfolio Manager or as amended/specified in the SEBI (Portfolio Managers) Regulations, 1993. 5.6 Conflict of Interest Karvy Capital Limited, Portfolio Manager is also the Investment Manager to a Category III Alternate Investment Fund (AIF). Since the entity is the same, the management for both the portfolio management division and Investment Management division remains the same. However, the personnel such as fund manager(s), teams involved in order generation and execution will be independent of the personnel involved in the same activity for portfolio management services. Further, the services offered by Karvy Capital Limited under the AIF offering and the Portfolio Management services to clients are inherently very different. The key difference is that while the investments under the AIF route are primarily in the derivative segment, investments made as a portfolio manager may encompass the entire gamut of products in the financial space. Further, trades in the AIF are generated through the system by use of defined algorithms whereas the portfolio manager uses a lot of thought process in picking the instrument based on fundamental analysis for investment be it equity, debt or mutual funds. Nonetheless, the management will provide their guidance and insight with relation to monitoring of overall functioning of both the AIF and portfolio management services and their broad macro views on the investment front shall be used for both. As described above, due to the difference in the nature of the investments under AIF and portfolio management services offered, it may happen that a scrip is purchased / held for a client of the Karvy Capital Limited, the portfolio manager while the Page 15 of 33 algorithm which dictates trades in the AIF generates an opposite signal say “sell” instruction for the same scrip usually as the trigger for a trade could be a quantitative factor rather than a fundamental factor. Further, the holding period for the trade may be shorter for the AIF .Therefore Karvy Capital Limited, the Investment Manager to the AIF may sell the same scrip while maintaining “buy” for the same scrip for its portfolio management clients. Such a situation could show opposite trading positions in the AIF and Portfolio Management Services. The portfolio manager being an NBFC purchases securities as a part of its routine business activity. These securities may be bought for investment or trading purposes. Therefore Karvy Capital as discretionary portfolio manager may buy the securities from Karvy Capital limited {NBFC}. These securities would be purchased at a price deemed fit by the portfolio manager and may also at times be at a premium depending on the demand for the security. Additionally, depending on reasons such as demand for the security prevalent at the time of purchase by Karvy Capital as discretionary portfolio manager from itself as an NBFC , the portfolio manager may get different prices for the same security. Effectively it is a possibility that the price of the security bought by the portfolio manager in the above manner may differ interse the clients of the portfolio manager on account of the same being bought at different points of time. Karvy Capital , discretionary portfolio manager shall ensure that its rationale for all its decisions to purchase securities in the abovesaid manner shall be documented and approved by its Investment Committee. Section 6: RISK FACTORS 1. Investments in securities are subject to market risks including price volatility and liquidity risk and there is no assurance or guarantee that the objectives of the strategy will be achieved. The investment may not be suited for all categories of investors. The past or present performance of these strategies does not indicate the future performance of the same strategy or any other future strategies launched subsequently by Portfolio Manager. With reference to appreciation on the portfolio, the investors are not being offered any guaranteed or indicative returns through any of the strategies. The Portfolio Manager also does not guarantee any capital protection for any strategy. 2. There are inherent risks arising out of investment objectives, investment strategy, asset allocation and non-diversification of portfolio. The investment objective, investment strategy and asset allocation may differ from client to client. However, generally, highly concentrated portfolios with lesser number of stocks will be more volatile than a portfolio with a larger number of stocks. Portfolios with higher allocation to equities will be subject to higher volatility that portfolios with low allocation to equities. Diversified portfolios (allocated across companies and broad sectors) generally tend to be less volatile than non diversified portfolios. The names of the various strategies do not in any manner indicate their prospects or returns. Page 16 of 33 3. Investment decisions made by the Portfolio Manager may not always be profitable since actual market movement may be at variance with anticipated trends. 4. ETF may trade above or below their NAV. The NAV of ETF will fluctuate with changes in market value of scheme’s holdings of underlying stocks. However, given that ETF can be created and redeemed only in creation units directly with the Mutual Fund, it is expected that large discounts or premiums to the NAVs of ETFs will not sustain due to availability of arbitrage possibility. Any changes in trading regulations by the Exchange (s) or SEBI may affect the ability of market maker to arbitrage resulting into wider premium / discount to NAV for ETFs. 5. The performances of the strategies depend on the performance of the market and the individual companies in which investment have been made under strategies relative to industry specific and macro economic factors. The Portfolio Manager does not assure or guarantee that Performance of Portfolio of the Investor shall better the Performance of any Benchmark Index. 6. 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 current 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 regarding the taxation aspects of his/ her portfolio investments. 7. 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. Prospective investors 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), capitalization, capital gains, any distribution, and other tax consequences relevant to their portfolio, acquisition, holding, capitalization, 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. 8. The debt investments and other fixed income securities may be subject to interest rate risk, liquidity risk, credit risk and reinvestment risk. Liquidity in these investments may be affected by trading volume, settlement period and transfer procedures. Issuer of fixed income security may default or may be unable to make timely payments of principal and interest. Net Asset Value of portfolio may be affected due to perceived level of credit risk as well as actual event of default. Page 17 of 33 9. The corporate debt market is relatively illiquid vis-à-vis the government securities market. There could therefore be difficulties in exiting from corporate bonds in times of uncertainties. Further, liquidity may occur only in specific lot sizes. Liquidity in a security can therefore suffer. Even though the Government securities market is more liquid compared to that of other debt instruments, on occasions, there could be difficulties in transacting in the market due to extreme volatility or unusual constriction in market volumes or on occasions when an unusually large transaction has to be put through. There can be no assurance that the requirements of the securities market necessary to maintain the listing of specified debt security will continue to be met or will remain unchanged. 10. Exposure to select Sector(s) carries the performance risk of the relevant sector, which could outperform or underperform the market and/or various indices. 11. Technology and pharmaceutical stocks and some of the investments in niche sectors run the risk of volatility, high valuation, obsolescence and low liquidity. 12. Frequent rebalancing of portfolio may result in higher brokerage / transaction cost. Also the allocation to different securities can vary from 0 to 100 %, hence there can be a vast difference between the performance of the products and returns generated by underlying securities. 13. Information available on some companies in which the Portfolio manager has made investments may be limited. 14. The performance of the strategies may be affected by change in Government Policies including taxation, and certain unforeseen developments in political or general areas at the national or international level. Also, the investments are subject to external risks such as war, natural calamities and policy changes of local / international markets which affect stock markets. 15. The performance of the strategies may also be affected and investor could lose money over short periods due to fluctuation in NAV of Portfolio arising out of fluctuations of interest rates, credit risk, political and geopolitical risk, currency risk, foreign exchange risks, foreign investments, risks arising from changing business dynamics, risk associated with investment in securities debt, risk due to movement in Futures and options markets, changes in the general market conditions, forces affecting the capital markets, closure of stock exchange due to circuit filter rules or otherwise and risks associated with trading volumes, settlement periods, transfer procedures, liquidity and settlement systems in equity and debt markets. 16. There is a possibility that loss may be sustained by the Portfolio as a result of the failure of another party (usually referred as the “Counter party”) to comply with the terms of the derivative contract. 17. Portfolio Manager, subject to authorization in writing by the client, may participate in securities lending. Engaging in securities lending is subject to risks related to fluctuations in collateral value/settlement/liquidity/default from counter party, including corporate benefits accrued thereon. This may lead to the risk of Approved Intermediary unable to deliver back the securities. Portfolio Manager cannot be held liable for any loss arising out of operation of such strategies. Page 18 of 33 The portfolio manager may in the course of its activities, avail the services of persons / bodies who are not employees of the portfolio manager. The portfolio manager would exercise due diligence when employing such persons, however there may be losses incurred on account of any act or omission on part of such persons or bodies. The portfolio manager disclaims liability for any loss in the portfolio on this account. All portfolios under portfolio management are subject to change at anytime at the discretion of the Portfolio Manager. 18. In the case of stock lending, risks relate to the defaults from counterparties with regard to securities lent and the corporate benefits accruing thereon, inadequacy of the collateral and settlement risks. The Portfolio Manager is not responsible or liable for any loss resulting from the operations of the strategies/options. 19. Investments in the Market Linked Debentures (MLDs) are also subject to model risk. The MLDs are created on the basis of complex mathematical models involving multiple derivative exposures which may or may not be hedged and the actual behaviour of the securities selected for hedging may significantly differ from the returns predicted by the mathematical models. 20. Strategies may use derivative instrument like futures and options (index as well as individual securities), warrants, convertible securities, swap agreements, etc. for the purpose of hedging and/or portfolio balancing, as permitted under the Regulations/guidelines. Strategies using such derivative products may be affected by risks different from those associated with stock and bonds. Such derivative products are highly leveraged instruments and their use requires a high degree of skill, expertise and diligence. Small price movements in the underlying security may have a large impact on the value of the derivatives and futures and options and may also result in loss. Some of the risks relate to mis-pricing or the improper valuation of the derivatives/futures and option and the inability to correlate the positions with the underlying assets, rates and indices. The risk of loss associated with futures contracts is potentially unlimited due to the low margin deposits required and the extremely high degree of leverage involved in futures pricing. Also, the derivatives/future and options market is nascent in India. The liquidity of the investments is guided by trading volumes in the securities in which it invests. Although securities may be listed on the Exchange(s), there can be no assurance that an active secondary market will develop or be maintained. This may limit the Portfolio Manager’s ability to freely deal with securities in the Portfolio and may lead to incurring of losses till the security is finally sold. Different segments of the financial markets have different settlement periods and such periods may be extended significantly due to unforeseen circumstances. The inability of a Portfolio to make intended securities purchase due to settlement problems could cause the portfolio to miss certain investment opportunities. Similarly, the inability to sell securities held in the portfolio due to absence of a well developed and liquid secondary market would at times result in potential losses in the Portfolio, in case of a subsequent decline in the value of securities held in the Portfolio. Page 19 of 33 21. The Portfolio Manager may invest in non-publicly offered debt securities and unlisted securities. This may expose client’s portfolio to liquidity risks. 22. Securities, which are not listed on the Stock Exchanges, are inherently illiquid in nature and carry a larger amount of liquidity risk, in comparison to securities that are listed on the Exchanges or offer other exit options to the investor. The Portfolio Manager may, at its discretion, invest in lower rated/unrated securities that offer attractive yield, which may increase the risk of the Portfolio. Such investments shall be subject to the scope of investments laid down in the executed agreement. 23. The Portfolio Manager may seek to create value by investing in stocks that trade below the estimated fair value of the Company, which shall be judged by various quantitative valuation parameters. But due to various reasons, it may so happen that such stocks continue to languish and are not able to attain the price discovery. Accordingly, this may have material adverse impact on the performance of the portfolio. 24. After accepting the corpus for management, the Portfolio Manager may not get an opportunity to deploy the same or there may be delay in deployment. In such situation the clients may suffer opportunity loss. Section 7: CLIENT REPRESENTATION i. Category of clients as on February 28 2015: Category of Clients as on 28th Feb, 2015 : Category of Clients No of Clients Funds Managed (Rs. In Crs) Associate/ Group Companies As on 28th Feb, 2015. 0 0 As on 31st March 2014. 0 0 As on 31st March 2013. 0 0 As on 31st March 2012. 0 0 Others As on 28th Feb, 2015. As on 31st March 2014. As on 31st March 2013. As on 31st March 2012. Remarks Discretionary Discretionary Discretionary Discretionary 143 0 0 0 56.71 0 0 0 Discretionary Discretionary Discretionary Discretionary 143 0 0 0 56.71 0 0 0 Discretionary Discretionary Discretionary Discretionary Total As on 28th Feb, 2015. As on 31st March 2014. As on 31st March 2013. As on 31st March 2012. Page 20 of 33 ii. Sr. No 1. Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India (as on 31st March 2014) Name of the related party Karvy Stock Broking Limited Nature of Transaction Amount 2013-14 2012-13 - 40,000,000 Issuance of Equity Share Capital Margin deposit received back, - -10,000,000 net Loans given / (refunded)# 191,550,000 99,550,000 Loans taken / (repaid)# 39,000,000 26,940,000 Interest income 3,147,865 1,884,939 Interest expense 106,669 389,646 Brokerage on trading in 145,576 445,119 securities* Shared Services of Expenses/ 40,165,888 15,288,984 (revenue), net Karvy Financial Services Loans taken / (repaid)# 18,000,000 125,000,000 2. Limited Interest expense 80,814 234,839 Shared Services of Expenses/ 1,711,931 (revenue), net Karvy Realty (India) Loans given / (refunded)# 7,000,000 3. Limited Interest income 5,178 Shared Services of Expenses/ 24,970,000 -19,000,000 (revenue), net Karvy Comtrade Brokerage on trading in 15,789 9,119 4. Limited securities* Karvy Investor Services Loans taken / (repaid)# 20,000,000 5. Limited Interest expense 22,192 Karvy Forex & Shared Services of Expenses/ 10,548 6. Currencies Pvt. Ltd. (revenue), net Systematic Edge Fund Investments made 27,500,000 7. Fee income 3,331,551 Mr. Hrishikesh Loans taken / (repaid)# 10,000,000 8. Parandekar Interest expense 26,302 Mr. Swapnil Pawar Managerial Remuneration 7,456,464 3,044,655 9. paid # Maximum loan given / taken at any time during the year * Trading in Securities is carried out in the normal course of business at the prevailing market prices Section 8: FINANCIAL PERFORMANCE OF PORTFOLIO MANAGER (BASED ON AUDITED FINANCIAL STATEMENTS}) As at March 31, 2014 Rs in Lakhs (Audited) As at March 31, 2013 Rs in Lakhs (Audited) As at March 31, 2012 Rs in Lakhs (Audited) Page 21 of 33 SOURCES OF FUNDS Shareholders' Funds 859.15 599.52 262.37 - - - 2,080.62 1,127.39 150.00 0.53 - - 2,940.30 1,726.91 412.37 48.64 42.51 51.17 - - - 279.00 4.00 4.00 2,719.06 1,708.53 408.04 (1,064.05) (118.57) (121.20) Net Current Assets 2,612.66 1,589.96 286.84 Deferred Tax Asset - 90.44 70.35 2,940.30 1,726.91 412.37 Share Application Money Loan Funds Deferred Tax Liability Total APPLICATION OF FUNDS Net Fixed Assets Stock Exchange Membership Cards Investments Current Assets Less: Current Liabilities and Provisions Total Summarized Financial Statement - Profit and Loss Account For the year ended March 31, 2014 Rs. In Lakhs For the year ended March 31, 2013 Rs. In Lakhs Total Income 1,403.95 682.50 98.75 Total Expenses 1,023.70 753.34 325.69 380.25 (70.84) (226.94) 15.00 12.11 8.46 Profit before Depreciation and Tax Depreciation/Amortisation For the year ended March 31, 2012 Rs. In Lakhs Page 22 of 33 Profit before Tax 365.24 (82.94) (235.40) Provision for Tax 105.61 (20.09) (70.38) Profit After Tax 259.63 (62.85) (165.03) Section 9: PORTFOLIO MANAGEMENT PERFORMANCE OF PORTFOLIO MANAGER FOR THE LAST THREE YEARS. IN CASE OF DISCRETIONARY PORTFOLIO MANAGER, DISCLOSURE OF PERFORMANCE INDICATORS CALCULATED USING WEIGHTED AVERAGE METHOD IN TERMS OF REGULATION 14(2)(b)(iv) OF THE SEBI (PORTFOLIO MANAGERS) REGULATIONS, 1993 01.07.2014 28.02.2015* Period 01.04.2013 – 31.03.2014 01.04.2012 – 31.03.2013 Discretionary PMS Resident Portfolio Performance Benchmark Performance Demeter Strategy 12.5% - NSE G-Sec Sub maturity 1-3 Yr-TRI 5.01% - Discretionary PMS Non- Resident Portfolio Performance Demeter Strategy - - - Benchmark Performance NSE G-Sec Sub maturity 1-3 Yr-TRI - - - *The first client in the portfolio was activated on July 1, 2014. Hence, the performance has been provided from July 1, 2014 instead of April 1, 2014. Section 10: NATURE OF EXPENSES The following are the general costs and expenses to be borne by the Client availing the services by the Portfolio Manager. However, the exact nature of expenses relating to each of the following services is provided in the annexure to this Risk Disclosure Document and in the Schedule of Charges signed by the client in respect of each of the services provided. (i) Portfolio Management and Advisory Fees Page 23 of 33 This fee relates to the portfolio management services offered by Portfolio Manager (including advisory services) to the clients. The fee may be a Fixed Charge on the quantum of the funds being managed (or) charges linked to portfolio return (or) combination of both. For details kindly refer the annexure to this Risk Disclosure Document. (ii) Premature Redemption Charges If the redemption is done prematurely at the option of the client, the Portfolio Manager shall levy the Premature Redemption Charges. For details kindly refer the annexure to this Risk Disclosure Document. (iii) Custodian/Depository Participant fee The charges relating to opening and operation of demat accounts, custody and transfer charges for shares, bonds and units, dematerialization and rematerialization, pledge and removal of pledge, etc. will be as per the actual charged by the Depository Participant/Custodian. For details kindly refer the annexure to this Risk Disclosure Document. (iv) Registrar and transfer agent fee Charges payable to the Registrar and Share Transfer Agents in connection with effecting transfer of securities and bonds, units, etc. including stamp charges, cost of affidavits, notary charges, postage/courier charges and other related charges will be recovered on actual. For details kindly refer the annexure to this Risk Disclosure Document. (v) Placement fee : A Placement fee not exceeding 5% on the investment value will be charged in some of the strategies over and above the fixed management fee and performance fee. The placement fee, if charged, shall be deducted from client’s initial corpus. For details kindly refer the annexure to this Risk Disclosure Document. (vi) Brokerage and transaction cost The Brokerage and other charges like Service tax and related charges such as Education cess, Stamp duty, Security Transaction Tax, SEBI Fees, Bank charges, Turnover tax, and other charges (if any), as per the rates existing from time to time, will be charged on actual. For details kindly refer the annexure to this Risk Disclosure Document. The investment by Portfolio Manager will be done through such SEBI registered Stock Broker(s) as may be empanelled by the Portfolio manager only and would as per the rates negotiated between Portfolio Manager and such stock broker. The charges relating to brokerage as per the related party transactions charged by Karvy Capital Limited or through any SEBI Registered stock broker will be recovered on actual by the Portfolio Manager (vii) Securities Lending and Borrowing Charges If utilized, the charges pertaining to lending of securities, cost of borrowing including interest and costs associated with transfer of securities connected with lending and borrowing transfer operations, Depository Participant Charges, Share Transfer Agent Charges, etc. Page 24 of 33 would be recovered on actual. For details kindly refer the annexure to this Risk Disclosure Document. (viii) Certification Charges or Professional Charges Any charges payable for outsourced professional services like accounting, taxation, auditing, and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio Manager, will be charged from the client on actual. For details kindly refer the annexure to this Risk Disclosure Document. (ix) Incidental Expenses Charges in connection with day to day operations like courier charges incurred in providing physical reports relating to client’s portfolio / welcome letter / other communication to clients , stamp duty, service tax, postal, telegraphic expenses, opening and operation of bank and demat accounts or any other out of pocket expenses incurred by the Portfolio Manager, on behalf of the client, would be recovered from the client. For details kindly refer the annexure to this Risk Disclosure Document. Section 11: TAXATION General It may be noted that the information given hereinafter is only for general information purposes and is based on the advice received by the Portfolio Manager regarding the law and practice currently in force in India and the Investors should be aware that the relevant fiscal rules or their interpretation may change or it may not be acceptable to the tax authorities. As is the case with any interpretation of any law, there can be no assurance that the tax position or the proposed tax position prevailing at the time of an investment in the strategy/plan/option will be accepted by the tax authorities or will continue to be accepted by them indefinitely. Further statements with regard to tax benefits mentioned herein below are mere expressions of opinion and are not representations of the Portfolio Manager to induce any investor to invest whether directly from the Portfolio Manager or indirectly from any other persons by the secondary market operations. In view of the above, and since the individual nature of tax consequences may differ in each case on its merits and facts, each Investor is advised to consult his / her or its own professional tax advisor with respect to the specific tax implications arising out of its participation in the PMS strategy/plan/option, as an investor. In view of the above, it is advised that the investors appropriately consult their investment / tax advisors in this regard. Portfolio Manager cannot be held responsible for assisting or completing the fulfillment of the client’s tax obligations. Income arising from purchase and sale of securities under Portfolio Management Services can give rise to business income or capital gains in the hands of the Client. The issue of Page 25 of 33 characterization of income is relevant as the tax computation and rates differ in either of the two situations. The said issue is essentially a question of fact and depends on whether the shares are held as business trading assets or on capital account. Based on judicial decisions, the following factors need to be considered while determining the nature of assets as above: a. Motive for the purchase of securities b. Frequency of transactions c. Length of period of holding of the securities d. Treatment of the securities and profit or loss on their sale in the accounts of the assessee and disclosure in notes thereto e. Source of funds out of which the securities were acquired - borrowed or own f. Existence of an objects clause permitting trading in securities – relevant only in the case of corporate. g. Circumstances responsible for the sale of securities h. Acquisition of the securities -from primary market or secondary market Infrastructure and set - up employed for undertaking the securities transactions by the client Any single factor discussed above in isolation cannot be conclusive to determine the exact nature of the shares. All factors and principles need to be construed harmoniously. Investors may refer to CBDT instruction no. 1827 dated August 31, 1989 read with CBDT Circular no. 4 dated June 15, 2007 for further guidance on the matter. Tax implications under the Income Tax Act, 1961 ("IT Act") arise in the hands of the Clients (resident as well as the non-resident) under both the scenarios, viz: a. Securities in the Portfolio held as business asset; and b. Securities in the Portfolio held on capital account. Additionally, non-residents (including Flls/FPIs) are governed by the applicable Double Tax Avoidance Agreement ("DTAA), which lndia has entered into with the country of residence of the non-resident, if that is more beneficial. The same would have to be considered on a caseto-case basis depending upon the applicable DTAA. Ordinarily, capital gains and interest income are taxable in lndia in the manner and at the rates prescribed under the relevant DTAA or the relevant rates applicable in India, whichever is beneficial to the assessee. Further, business income is normally not taxable in lndia. Tax Deducted at Source Presently, tax is withheld at source for non-residents. If any tax is required to be withheld on account of any future legislation, Portfolio Manager shall be obliged to act in accordance with the regulatory requirements in this regard. Advance Tax installment obligations Page 26 of 33 It shall be the client’s responsibility to meet the advance tax obligation installments payable on the due dates under the Income Tax Act, 1961. Tax Implications - Investment in Shares or units of Equity Oriented Mutual Fund Dividend Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act. Profits from sale / transfer of shares (or units of equity oriented mutual fund) • If considered as capital gains: (capital gains = sale consideration – cost of acquisition– expenses incurred in connection with such transfer) Capital Gains Listed Shares (Where STT is paid) Listed Shares (Where STT is not paid) Unlisted Shares Long term Capital Gains (LTCG) Period of Rate holding More than 1 Exempt u/s. year 10(38) Short term Capital Gains (STCG) Period of Rate holding 1 year or less 15% More than 1 year 1 year or less maximum marginal rate of tax or at slab rates, as the case may be 1 year or less maximum marginal rate of tax or at slab rates, as the case may be More than 1 year 20% with indexation or 10% without indexation (whichever is more beneficial to clients) 20% with indexation • If considered as business income - net income taxable at maximum marginal rate of tax or at slab rates, as the case may be. Note: Education Cess & Surcharge &Higher Education Cess and surcharge (if applicable) will be charged additionally. Clients are requested to contact their tax consultant to determine their exact tax status. Tax Implications - Investment in Derivative instruments Investment in derivative instruments is considered as business income & is taxable at maximum marginal rate of tax or at slab rates, as the case may be. Note: E.Cess & S.&H.E.Cess and surcharge (if applicable) will be charged additionally. Clients are requested to contact their tax consultant to determine their exact tax status. Page 27 of 33 Tax Implications - Investment in Debentures or bonds Interest income Interest received by debenture holder is taxable under the head “Income from other sources” at slab rates or at maximum marginal rate of tax as the case may be Profits from sale / transfer of Debentures (or bonds) • If considered as capital gains: (capital gains = sale consideration – cost of acquisition– expenses incurred in connection with such transfer) Capital Gains Long term Capital Gains (LTCG) Period of Rate holding Short term Capital Gains (STCG) Period of Rate holding Listed Debenture or bonds More than 1 year 1 year or less maximum marginal rate of tax or at slab rates, as the case may be Unlisted Debenture or bonds More than 3 years 3 years or less maximum marginal rate of tax or at slab rates, as the case may be 20% with indexation or 10% without indexation (whichever is more beneficial to clients) 20% with indexation • If considered as business income - net income taxable at maximum marginal rate of tax or at slab rates, as the case may be. Note: Education Cess & Surcharge &Higher Education Cess and surcharge (if applicable) will be charged additionally. Clients are requested to contact their tax consultant to determine their exact tax status. Tax Implications - Investment in Debt Oriented Mutual Fund Dividend Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act. Profits from sale / transfer of units • If considered as capital gains: (capital gains = sale consideration – cost of acquisition– expenses incurred in connection with such transfer) Capital Gains Long term Capital Gains (LTCG) Period of Rate holding Short term Capital Gains (STCG) Period of Rate holding Page 28 of 33 Debt MF units More than 3 years 20% with indexation 3 years or less maximum marginal rate of tax or at slab rates, as the case may be • If considered as business income - net income taxable at maximum marginal rate of tax or at slab rates, as the case may be. Note: Education Cess & Surcharge &Higher Education Cess and surcharge (if applicable) will be charged additionally. Clients are requested to contact their tax consultant to determine their exact tax status. Capital loss Losses under the head 'capital gains' cannot be set off against income under any other head. Further, within the head 'capital gains', long-term capital losses cannot be adjusted against short-term capital gains. However, short-term capital losses can be adjusted against any capital gains. Unabsorbed long-term capital loss can be carried forward and set off against the long-term capital gains arising in subsequent eight assessment years. Unabsorbed shortterm capital loss can be carried forward and set off against the income under the head capital gains in subsequent eight assessment years Securities Transaction Tax Securities Transaction Tax is the tax leviable on the taxable securities transactions i.e. transaction of: (a) Purchase or sale of an equity share of a listed companies (whether delivery based or nondelivery based) or a derivative or a unit of an equity oriented fund, entered into in a recognized stock exchange; or (b) Sale of a Unit of an equity oriented fund to the Unit Trust of India or Mutual Fund. The income arising from the securities transactions shall be taxed at applicable rates under the Income Tax Act, 1961 if Securities Transaction Tax is not applicable in respect of such transactions. Section 12: ACCOUNTING POLICIES The following is the accounting policy followed by the Portfolio Manager while accounting for the portfolio investments of the clients. Page 29 of 33 Investment in equities will be valued on the closing price of that equity at NSE. In case of any investments done in any equity listed on BSE only, the same will be valued based on the closing price of that equity in BSE. In case the prices are not available from NSE or BSE, then any other stock exchange shall be considered. These shall include the Equity shares including Indian Depository Receipts and other instruments, as the case may be. In case a share is not traded on a valuation date, latest closing price of either principal / secondary or any other stock exchange would be used. Equity shares which are not listed on stock exchanges are included in portfolio valuation at fair/cost value. In case an Equity share is suspended/non-traded/ awaiting Corporate Actions, then the valuation of such equity share shall be done on the basis of good faith relying upon prevailing practices elsewhere. In case of the warrants been traded separately they would be valued as an equity share and valued accordingly. In case of the non traded warrants, the warrants will be valued at the value of the share which would be obtained on exercise of the warrant less the amount payable on exercise of the warrant. On exercise of warrant, the warrants would be transferred to the normal equity and valued accordingly. For valuation of the derivatives contract, the open positions, as on the date of valuation, shall be valued as per the last traded prices available from the relevant stock exchange, and will be valued on the mark to market method. In case of Mutual Fund, investments in mutual funds shall be valued at the latest available NAV of the respective scheme. Investment in Exchange listed (ETF) shall be valued at the closing price on the relevant exchange. If on a valuation date Exchange Traded Funds (ETF) is not traded either on the primary or secondary stock exchange, ETF shall be valued at the latest available NAVs of the ETF Scheme. Investment in debt instruments will be valued at the market value of the debt instrument as on cut off date (or) the latest available price on the relevant exchange or the most recent NAV will be reckoned. For illiquid securities, the valuation may be provided by the issuer on a periodic basis and/or as required by the portfolio manager. Realised gains/losses will be calculated on the basis of First in First out (FIFO) basis. Transaction date will be the trade date and not the settlement or auction date. For derivatives transactions (if any), the unrealized gains/losses on open position will be calculated on the mark to market method. Unrealized gain/losses means the profit/loss not yet booked and the same will be the difference of the current market price or NAV minus the actual purchase price (or) the historical cost of the securities. All income will be accounted on accrual or receipt basis, whichever is earlier. All expenses will be accounted on due or payment basis, whichever is earlier. Page 30 of 33 Purchase and sale transactions are accounted for on contract date basis. Cost of purchase and sale includes consideration for scrip and brokerage but excludes Securities Transaction Tax, Service Tax & other charges paid on purchase/sale of securities. Other expenses like Custodian charges (Safe keeping charges, Transaction charges, Fund Accounting charges, Out of Pocket expenses) shall be accounted for as & when debited by the Custodian. Any corporate benefits like dividend on shares, mutual fund units, interest on debt instruments, stock lending fees etc. shall be accounted on accrual basis except interim dividend which would be accounted on receipt basis. Bonus shares are recorded on the ex-benefit date (ex-date). Dividend income is recorded on the ex-dividend date (ex-date) Tax deducted at source on interest on instruments such as Fixed Deposits etc. /Dividend is considered as withdrawal of corpus and debited accordingly. Portfolio Manager and the Client, on case to case basis, can mutually agree to any specific norms or methodology for valuation of investment and/or accounting The Client may contact the Portfolio Manager for the purpose of clarifying or elaborating on any of the above. Section 13: INVESTOR RELATIONS OFFICER - IRO The below mentioned employee has been nominated as the Investor Relations Officer by Portfolio Manager who will attend to the investor queries and complaints: Mr. Pankaj Bhagat Karvy Capital Limited 702, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051. Tel No. (B) 022-33055000 Tel No. (D) 02261491622 Fax No. 022-61491577 Email ID – [email protected] Section 14: GRIEVANCE REDRESSAL Page 31 of 33 The Portfolio Manager has dedicated an email id [email protected] for all the investors to lodge their grievance. Apart from this, the portfolio clients can get in touch with the IRO in person, over phone or through written communication. Portfolio Manager will ensure that the above IRO attends to all investor grievance/service issues with promptness and Portfolio Manager will ensure that this IRO is vested with necessary authority, independence and the means to handle investor grievance effectively and immediately, within reasonable period of time. If not satisfied with our response, you may approach SEBI with your grievance through SEBI’s web based centralized grievance redressal system (SCORES) on http://scores.gov.in or may also write to SEBI in physical form. Section 15: DISPUTE SETTLEMENT MECHANISM All disputes, differences, claims and questions, whatsoever, which shall arise either during the subsistence of the agreement with the 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 provisions therein shall be, at the first instance, settled by mutual discussions, failing which the same shall be referred settled in accordance with the provisions of The Arbitration and Conciliation Act, 1996 in the form existing at the point of time. Such arbitration proceedings will be held at Mumbai or any other place where the Portfolio Manager thinks fit and will be conducted in English. 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 either party of their obligations will be conducted exclusively in Courts located within the city of Mumbai in the State of Maharashtra, India. Page 32 of 33 A. Discretionary Portfolio Management Services 1. Demeter Portfolio Introduction Demeter Portfolio is designed for investors seeking income and capital appreciation from their asset allocation to debt. Investment Objective The investment objective of the strategy is to generate long term capital appreciation and income through interest and trading (both in the short term and over the long term) of securities in the secondary markets. The portfolio will primarily consist of high yielding debt securities. Investment Horizon and Risk Return Profile Demeter portfolio is recommended for investors seeking to hold a debt portfolio with moderate to high risk appetite expecting a moderate return over a long term horizon. Asset Allocation The portfolio will be predominantly invested in debt using the securities defined below. The portfolio manager may decide to hold cash/liquid funds if required. Securities Investments would be made in all types of debt securities (which may or may not be in dematerialized form) including but not limited to debentures of any maturity (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed) which may be listed, unlisted, convertible, non-convertible, secured, unsecured, rated or unrated, Securitised Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares), Pass Through Certificates, Bonds, Government securities issued or guaranteed by Central or State Government, corporate debt of both public and private sector undertakings, securities issued by banks (both public and private sector) and development financial institutions, fixed deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other money market instruments, units of mutual funds, Exchange Traded Funds, units of SEBI registered Alternative Investment Funds, floating rate debt securities and fixed income derivatives like interest rate swaps, forward rate agreements and the like as may be permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. These securities may be acquired through primary market issuances such as subscription to Initial public offers, Follow on Public offers, Rights issues and private placements of securities, secondary market purchases, auctions held by the Reserve Bank of India, open market sales of securities conducted by Reserve Bank of India and the like. The Portfolio manager may buy securities which have equity like nomenclature while the features in terms of returns and convertibility will be like debt. These instruments would include but not be limited to securities like non convertible compulsorily redeemable preference shares and some Optionally convertible debentures. Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing price. Investment in other debt instruments will be valued as per valuation provided by the Issuer. With respect to the debentures being bought by Karvy Capital Limited as Discretionary Portfolio Manager for its clients in Demeter strategy, clients may please note the following: Karvy Capital Limited as an NBFC / any Karvy Group entity has assisted the Issuer to structure the debenture issuance for the purpose of raising capital through the private placement route. Karvy Capital Limited as an NBFC / any Karvy Group entity has actively associated with the Issuer for structuring of the security in relation to the debentures, preparation of the term sheets and related documents for sharing product details with prospective clients and for appointment of key agents such as trustee, escrow agent, legal counsel and the like. Karvy Capital Limited is also the “Debenture Holder Representative and Calculating Agent” thereby having the power to approve amongst other things - dilution of promoter stake in the Issuer company, disbursal of amounts from escrow account to the Issuer , any change in the security cover for the debentures and without whose consent the above cannot occur. As a Calculating Agent, Karvy Capital Limited calculates the amount of interest and final redemption amount due to the debenture holders. For this, Karvy Capital Limited as an NBFC / any Karvy Group entity has received a payment from the Issuer which could be structured as advisory fee, discount on such debentures to Karvy Capital Limited [NBFC] or the Karvy group entity at the time of first purchase or a combination of the two. Karvy Capital Limited as an NBFC / any Karvy Group entity is also the first subscriber to such privately placed debentures. Therefore Karvy Capital as discretionary portfolio manager will buy the debentures from Karvy Capital limited {NBFC} or any Karvy Group entity [first subscriber]. Such downselling by Karvy Capital Limited {NBFC} to Karvy Capital Limited {Portfolio manager} / any Karvy Group entity may be done at a premium. Alongside, Karvy Capital Limited as an NBFC shall continue to undertake distribution activity with regard to the said debentures i.e to downsell the debentures to prospective clients other than the PMS customers. In addition to downselling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital Limited (Portfolio Manager) may purchase debentures for clients of the Demeter strategy through the below routes as well: a. Primary issuance of debentures by an Issuer debentures by Karvy Capital PMS b. Purchase of debentures by Karvy Capital PMS. Additionally, a. the debentures which the Portfolio Manager may invest in for the client will usually have some form of collateral backing them. Such collateral may include one or more amongst the following – real estate assets, shares of the issuing company, shares of other companies related to the issuing company, other listed or unlisted shares, escrow of cashflows, brand, patents, fixed assets of the company etc. However, depending on the specific collateral used and as per the interpretation of the Companies Act, 2013 the debentures may be deemed to be secured or unsecured in nature. b. Owing to the credit risk of high yield debt that the strategy is investing into, the preservation of capital is not guaranteed. In case of a default by issuer in any of the underlying securities, the trustees would endeavour to recover the principal and the interest for the investors but there is a risk of erosion of the principal invested in the strategy by the investor. Additionally, the recovery process in case of a default may take time to be implemented. Hence, at the level of each individual instrument, there exists a risk of partial or complete capital erosion in case of a default by the issuer. c. The high yield debentures invested into by the Demeter strategy will have credit quality of a wide range and hence a varying amount of credit risk. Such debentures may be rated or unrated. The issuing company may be rated or unrated and if rated, the latest available credit rating will be considered.. The rating of the debentures or the issuing company may be investment grade or speculative grade. The debentures investments in the Demeter strategy could carry their own set of risks. Some of these could include: (i) Operational Risk: The risks that arise out of systemic issues within an organization. Operational risk is intrinsic to any business. Every company may have sector and company specific risks which may affect operations. (ii) Regulatory Changes These risks may arise if various concerned authorities amend the regulatory framework, which could impact the Issuing Company. (iii) Downturn in the market There can be a down turn in the market in which the issuing Company operates which can lead to decrease in profit margins of the Issuing company. The Demeter strategy will undertake to an extent as deemed fit by the Portfolio Manager, opportunistic buying and selling of debt securities to improve the returns earned by investors. However, in this endeavour, the portfolio manager may on some occasions not receive suitable exit for the securities thus bought in the portfolio. In such cases, the portfolio manager may either decide to hold such security to maturity or to exit it at a loss when compared with the purchase price. For investors entering the strategy partially or wholly through their current holdings of debt instruments, the portfolio manager will seek to diversify these holdings to reduce concentration of credit risk. As a possible implication, the yield in Internal Rate of Return [IIR] terms and income paid out through regular coupons of the portfolio thus achieved may be different (and lower) from that of their current holdings. Kindly refer Section III below for other features of this strategy. Fees and Expenses: Defined in Section II below 2. Soteria Portfolio Introduction Soteria Portfolio is a strategy focusing on debt investments across maturities, credit quality and yields aiming to provide investors regular income and capital appreciation from their investments. Investment Objective The investment objective of the strategy is to generate long term capital appreciation and income through interest and trading of securities (both in the short term and over the long term) in the secondary markets. Investment Horizon and Risk Return Profile Soteria portfolio is recommended for investors seeking to hold a debt portfolio with low to moderate risk appetite expecting a moderate return over a long term horizon using short term transactions in fixed income instruments. Asset Allocation The portfolio will be predominantly invested in debt using the securities defined below. The portfolio manager may decide to hold cash/liquid funds if required. Securities Investments would be made in all types of debt securities (which may or may not be in dematerialized form) including but not limited to debentures of any maturity (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed) which may be listed, unlisted, convertible, non-convertible, secured, unsecured, rated or unrated, Securitised Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares), Pass Through Certificates, Bonds, Government securities issued or guaranteed by Central or State Government, corporate debt of both public and private sector undertakings, securities issued by banks (both public and private sector) and development financial institutions, fixed deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other money market instruments, units of mutual funds, Exchange Traded Funds, units of SEBI registered Alternative Investment Funds, floating rate debt securities and fixed income derivatives like interest rate swaps, forward rate agreements and the like as may be permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. These securities may be acquired through primary market issuances such as subscription to Initial public offers, Follow on Public offers, Rights issues and private placements of securities, secondary market purchases, auctions held by the Reserve Bank of India, open market sales of securities conducted by Reserve Bank of India and the like. The Portfolio manager may buy securities which have equity like nomenclature while the features in terms of returns and convertibility will be like debt. These instruments would include but not be limited to securities like non convertible compulsorily redeemable preference shares and some Optionally convertible debentures. Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing price. Investment in other debt instruments will be valued as per valuation provided by the Issuer. Kindly refer Section III below for other features of this strategy. Fees and Expenses: As defined in Section II below 3. Metis Portfolio Introduction Metis Portfolio is designed for investors who seek long-term capital appreciation from their asset allocation to equities. The portfolio will invest in stocks across sectors, market capitalization categories and investment themes. Investment Objective The investment objective of the strategy is to generate growth of capital through a blend of value, growth opportunistic and event driven investing. Investment Horizon and Risk Return Profile This Portfolio is recommended for investors seeking to hold a diversified equity portfolio with moderate risk appetite expecting a moderate return over medium term horizon. Asset Allocation The Portfolio will seek to remain substantially invested in Equities or Equities related instruments at all times. Cash in the portfolio may be invested in Liquid schemes of Mutual Funds or Liquid Bees. Securities Investments will be made in various equity and equity related securities including but not limited to stocks, convertible/non-convertible and/or cumulative/non-cumulative preference shares, convertible and/or cumulative/non-cumulative debentures, bonds and warrants carrying the right to obtain equity shares, units of mutual funds, Exchange Traded Funds and other eligible modes of investment as may permitted by the Regulations from time to time. Investments may be made in securities acquired through secondary market purchases, open market sales/auctions, Initial Public Offers (IPOs), other public offers, placements, rights, offers and the like. These securities may be listed or unlisted. The Portfolio will also use derivative instruments – Futures and Options – for hedging and rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of NRI investors. Kindly refer Section III below for other features of this strategy. Fees and Expenses: As defined in Section II below 4. Aegis Portfolio Aegis Portfolio is designed for those investors who seek long-term capital appreciation from their asset allocation to equities, debt, gold and other asset classes which are available through either exchange traded products or through mutual funds. Investment Objective The investment objective of the Strategy is to generate long term capital appreciation of wealth through a portfolio of debt, equity, gold ETFs and other asset classes which are available through either exchange traded products or through mutual funds. Investment Horizon and Risk Return Profile This Portfolio is recommended for investors seeking to hold a diversified multi asset portfolio with moderate risk appetite expecting a moderate return over medium term horizon. Asset Allocation The portfolio will be invested in Equities, Debt, Gold ETFs and other asset classes in a proportion deemed appropriate for the investor and the in accordance with the market scenario. Securities Investments will be made in various equity and equity related securities including but not limited to stocks, convertible/non-convertible and/or cumulative/non-cumulative preference shares, convertible and/or cumulative/non-cumulative debentures, bonds and warrants carrying the right to obtain equity shares, units of mutual funds, ETFs and other eligible modes of investment as may permitted by the Regulations from time to time. Investments may be made in securities acquired through secondary market purchases, open market sales/auctions, Initial Public Offers (IPOs), other public offers, bilateral offers, placements, rights, offers, negotiated deals, etc. These securities may be listed or unlisted. Investments would be made in all types of debt securities (which may or may not be in dematerialized form) including but not limited to listed, unlisted, convertible, nonconvertible, secured, unsecured, rated or unrated debentures of any maturity, and acquired through secondary market purchases, RBI auctions, open market sales conducted by RBI etc., other public offers, bilateral offers, placements, rights, offers, negotiated deals, etc. They could include Securitised Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares), Pass Through Certificates, Debentures (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed), Bonds, Government securities issued or guaranteed by Central or State Government, corporate debt of both public and private sector undertakings, securities issued by banks (both public and private sector) and development financial institutions, fixed deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other money market instruments, units of mutual funds, ETFs, units of SEBI registered AIFs, floating rate debt securities and fixed income derivatives like interest rate swaps, forward rate agreements etc. as may be permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. Investments will also be made in gold ETFs and other asset classes which are available through either exchange traded products or through mutual funds. The Portfolio will also use derivative instruments – Futures and Options – for hedging and rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of NRI investors. Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment in Mutual Funds and ETFs will be valued on the day end’s NAV. Debt investment in listed/publicly traded securities will be valued on the day end’s NAV/closing price. Investment in other debt instruments will be valued as per valuation provided by the Issuer. Kindly refer Section III below for other features of this strategy. Fees and Expenses: As defined in Section II below 5. Caerus Portfolio Caerus Portfolio is designed for those investors who seek long-term capital appreciation through opportunistic and event driven trades taken in their portfolio having an allocation to equities (listed & unlisted), debt (listed & unlisted) and other asset classes which are available through either exchange traded products or through mutual funds. Investment Objective The investment objective of the Strategy is to generate long term capital appreciation of wealth through a portfolio of debt, equity and other asset classes which are available through either exchange traded products or through mutual funds. Capital appreciation will be generated through opportunistic and event driven trades taken in securities. Investment Horizon and Risk Return Profile This Portfolio is recommended for investors seeking to hold a diversified portfolio with moderate risk appetite expecting a moderate return over medium term horizon. Asset Allocation The portfolio will be invested in Equities, Debt and other asset classes in a proportion deemed appropriate for the investor and the in accordance with the market scenario. Securities Investments will be made in various equity and equity related securities including but not limited to stocks, convertible/non-convertible and/or cumulative/non-cumulative preference shares, convertible and/or cumulative/non-cumulative debentures, bonds and warrants carrying the right to obtain equity shares, units of mutual funds, ETFs and other eligible modes of investment as may permitted by the Regulations from time to time. These securities may be acquired through primary market issuances such as subscription to Initial public offers, Follow on Public offers, Rights issues and private placements of securities , secondary market purchases, open market sales/auctions and the like. These securities may be listed or unlisted. Investments would be made in all types of debt securities (which may or may not be in dematerialized form) including but not limited to listed, unlisted, convertible, nonconvertible, secured, unsecured, rated or unrated debentures of any maturity, and acquired through secondary market purchases, RBI auctions, open market sales conducted by RBI etc., other public offers, bilateral offers, placements, rights, offers, negotiated deals, etc. They could include Securitised Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares), Pass Through Certificates, Debentures (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed), Bonds, Government securities issued or guaranteed by Central or State Government, corporate debt of both public and private sector undertakings, securities issued by banks (both public and private sector) and development financial institutions, fixed deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other money market instruments, units of mutual funds, ETFs, units of SEBI registered AIFs, floating rate debt securities and fixed income derivatives like interest rate swaps, forward rate agreements etc. as may be permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. Investments will also be made in other asset classes which are available through either exchange traded products or through mutual funds. The Portfolio will also use derivative instruments – Futures and Options – for hedging and rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of NRI investors. Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment in Mutual Funds and ETFs will be valued on the day end’s NAV. Debt investment in listed/publicly traded securities will be valued on the day end’s NAV/closing price. Investment in other debt instruments will be valued as per valuation provided by the Issuer. Kindly refer Section III below for other features of this strategy. Fees and Expenses: As defined in Section II below 6. Eos Portfolio Eos Portfolio is designed for those investors who seek long-term capital appreciation primarily through Private Investment in Public Equity. The portfolio may consist of investments in Equity & debt. Investment Objective The investment objective of the Strategy is to generate long term capital appreciation of wealth through Private Investment in Public Equity. Investments may be done in the form of Equity or debt. Investments will also be made in the primary market. Investment Horizon and Risk Return Profile This Portfolio is recommended for investors seeking to hold a diversified portfolio with moderate risk appetite expecting a moderate return over medium term horizon. Asset Allocation The portfolio will be invested primarily in Equities & Debt. Allocation will be decided on the availability of opportunities and as deemed appropriate for the investor. Securities Investments will be made in various equity and equity related securities including but not limited to stocks, convertible/non-convertible and/or cumulative/non-cumulative preference shares, convertible and/or cumulative/non-cumulative debentures, bonds and warrants carrying the right to obtain equity shares, units of mutual funds, ETFs and other eligible modes of investment as may permitted by the Regulations from time to time. These securities may be acquired through primary market issuances such as subscription to Initial public offers, Follow on Public offers, Rights issues and private placements of securities, secondary market purchases, open market sales/auctions and the like. These securities may be listed or unlisted. Investments would be made in all types of debt securities (which may or may not be in dematerialized form) including but not limited to listed, unlisted, convertible, nonconvertible, secured, unsecured, rated or unrated debentures of any maturity, and acquired through secondary market purchases, RBI auctions, open market sales conducted by RBI etc., other public offers, bilateral offers, placements, rights, offers, negotiated deals, etc. They could include Securitised Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares), Pass Through Certificates, Debentures (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed), Bonds, Government securities issued or guaranteed by Central or State Government, corporate debt of both public and private sector undertakings, securities issued by banks (both public and private sector) and development financial institutions, fixed deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other money market instruments, units of mutual funds, ETFs, units of SEBI registered AIFs, floating rate debt securities and fixed income derivatives like interest rate swaps, forward rate agreements etc. as may be permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from time to time. Investments will also be made in other asset classes which are available through either exchange traded products or through mutual funds. The Portfolio will also use derivative instruments – Futures and Options – for hedging and rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of NRI investors. Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment in Mutual Funds and ETFs will be valued on the day end’s NAV. Debt investment in listed/publicly traded securities will be valued on the day end’s NAV/closing price. Investment in other debt instruments will be valued as per valuation provided by the Issuer. Kindly refer Section III below for other features of this strategy. Fees and Expenses: As defined in Section II below For all strategies mentioned above, the Portfolio Manager shall be entitled to issue one or more series of the strategy. The portfolio manager may also decide to make periodic payouts to investors. SECTION II: FEES AND EXPENSES PERTAINING TO THE PORTFOLIO STRATEGIES The fee portion below is common for all strategies mentioned in Annexure A PLACEMENT FEE: A placement fee not exceeding 5.00% on the investment will be charged over and above the Fixed Management Fee and Performance fee as defined below. The placement fee, if charged, shall be deducted from client’s corpus both initial and at time of making fresh infusion. ADDITIONAL DETAIL REGARDING CALCULATION OF PERFORMANCE SHARING FEE: In case where the portfolio comprises of debentures, the issuers may deduct TDS before paying out funds to the investors. In case TDS has been deducted, for the purpose of calculation of profit made by the investor, the TDS amount will be added back. This profit arrived at (after adding back the TDS amount) will be used to calculate the applicable performance sharing fee. The Portfolio Manager shall charge audit fees, custodial/ AMC charges and other charges/costs, attributable to the Portfolio Management Services at actual. The Client will also have to bear brokerage charges not exceeding @2.50% of the transaction value and other incidental charges/fees/duties and taxes including Securities Transaction Tax at actual. Clients have the following fee options: Option 1: Fixed Management Fee up to 5.00% p.a. FIXED MANAGEMENT FEE: The Fixed fee for all strategies above(without profit sharing) charged by the Portfolio Manager will not exceed 5.00% p.a. charged up to 1.25% at the beginning of every quarter on the Net Asset Value of the Portfolio (inclusive of all securities and cash/bank balance) or the outstanding capital as detailed in the agreement between the client and the portfolio manager. The portfolio manager may charge the management fee for the first year on an upfront basis at the time of investment. Following charges shall be payable by the client upon withdrawal from all strategies above under Option 1: Withdrawal when made Charges payable by Client In case of withdrawal before 60 months of date from which client account is activated a) Fixed Management Fee up to 5% p.a. and b) Exit fees up to 5% When exiting, after completing a period of 60 months of date from which client account is activated Fixed management fee up to 5% p.a. till the day client exits the strategy. Option 2: Fixed Management Fee NIL & Performance fees up to 30% on all gains PERFORMANCE FEE: The Performance fee in this option will not exceed 30% of incremental gains beyond annualized hurdle rate not exceeding 0% on the basis of High Water Mark Principle over the life of the investment. The performance fee will be charged on quarterly basis. Following charges shall be payable by the client upon withdrawal from all strategies above under Option 2: Withdrawal when made Charges payable by Client In case of withdrawal before 60 months of date from which client account is activated a) Performance fee up to 30% of incremental gains beyond annualized hurdle rate not exceeding 0% will be charged (Performance fee payable will be calculated on the NAV on the day of exit) and a) Exit fees up to 5% When exiting, after completing a period of 60 months of date from which client account is activated Performance Fee up to 30% of incremental gains beyond annualized hurdle rate not exceeding 0% on the basis of High Water Mark Principle based on the NAV of the day of exit. Option 3: Fixed Management Fee up to 5% p.a. & Performance fees up to 30% FIXED MANAGEMENT FEE: The Fixed fee for all strategies above (without profit sharing) will not exceed 5.00% p.a. which is up to 1.25% at the beginning of every quarter on the Net Asset Value of the Portfolio (inclusive of all securities and cash/bank balance) or the outstanding capital as detailed in the agreement between the client and the portfolio manager. The portfolio manager may charge the management fee for the first year on an upfront basis at the time of investment. PERFORMANCE FEE: The Performance fee in this option will not exceed 30% of incremental gains beyond annualized hurdle rate not exceeding 15% (or a specific benchmark pre- decided with the client) on the basis of High Water Mark Principle over the life of the investment. The performance fee will be charged on quarterly basis. Following charges shall be payable by the client upon withdrawal from all strategies above under Option 3: Withdrawal when made In case of withdrawal before 60 months of date from which client account is activated Charges payable by Client a) Fixed management fee payable up to 5.00% p.a. and b) Performance fee payable up to 30% of incremental gains beyond annualized hurdle rate not exceeding 15% (or a specific benchmark pre-decided with the client) will be charged (Performance fee payable will be calculated on the NAV on the day of exit) and a) Exit fees up to 5% When exiting, after completing a period of 60 months of date from which client account is activated a) Fixed Management fee up to 3% p.a. and b) Performance Fee up to 30% of incremental gains beyond annualized hurdle rate not exceeding 15% (or a specific benchmark pre-decided with the client) on the basis of High Water Mark Principle based on the NAV of the day of exit. The final fee structure and fee charging frequency may vary with every client and would be pre decided between the portfolio manager and the client. This may be changed during the term of the PMS arrangement upon mutual consent by the investor and the portfolio manager. SECTION III: COMMON FEATURES OF THE PORTFOLIO STRATEGIES {common features applicable to all strategies} Minimum investment amount is Rs. 25 Lakhs. Liability of a client shall not exceed client’s investment with the portfolio manager. The Portfolio Manager shall charge audit fees, custodial/ AMC charges and other charges/costs, attributable to the Portfolio Management Services on actual. Any charges payable for outsourced professional services like accounting, taxation, auditing, and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio Manager, will be charged from the client on actual. The Client may withdraw whole or part of the funds or securities from the portfolio account by giving advance notice and the Portfolio Manager will endeavor to liquidate the securities held in the strategy and return the funds or securities of the strategy, as the case may be, to the client within reasonable time. In case the Portfolio Manager is for any reason unable to sell the securities, the Client shall be obliged to accept the securities in the portfolio. The Portfolio Manager will provide periodical reports as required under the regulations at the communication address provided by the client at time of account opening. In case Portfolio Manager is unable to provide the periodic reports in physical copy, the same shall be provided to clients via email at the email id registered by clients at time of account opening. The portfolio account will be audited by the Independent Chartered Accountant every year and copy of the Certificate issued by the Chartered Accountant will be given to the Client. A. Non – Discretionary Portfolio Management Services The following are illustrative, but not exhaustive, investment strategies which would be available for client availing Non-Discretionary Portfolio Management Services. 1. Equity oriented strategies These strategies would include equity focused strategies with the flexibility to invest across Equity instruments available and across market capitalizations. The strategy may invest in non convertible debentures with performance linked to an equity instrument. Specific details of the portfolio would depend on the requirement of the client. 2. Debt Focused strategies These strategies would include debt focused strategies with the flexibility to invest across Debt instruments available including mutual funds, bonds and non convertible debentures. The strategy may also invest in debentures providing capital protection and offering debt like returns which may have an equity index, basket of stocks or commodities as the underlying. Specific details of the portfolio would depend on the requirement of the client. 3. Multi Asset strategies These strategies would include investments across Equity, debt, gold and other asset classes which may be available through exchange traded products or mutual funds. Non convertible debentures (other than equity or debt) will also be included here. Specific details of the portfolio would depend on the requirement of the client. GLOSSARY OF TERMS USED IN THE RISK DISCLOSURE DOCUMENT AND ANNEXURE A Discretionary portfolio: A portfolio where the funds of each client are managed individually and independently by the fund manager in accordance with the needs of the client. Non discretionary Portfolio: A portfolio where the funds are managed by the fund manager in accordance with the directions of the client. Hurdle rate: The rate over which profit sharing / performance related fees are usually charged by portfolio managers. This is not a fixed number and would be specified in the agreement signed with the client. High Water Mark Principle: As defined by SEBI, High Water Mark shall be the highest value that the portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be the value on the date when performance fees are charged. The portfolio manager shall charge performance based fee only on increase in portfolio value in excess of the previously achieved high water mark Asset allocation: Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame. Asset Classes: A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Asset classes include but are not limited to Equities, fixed-income and cash equivalents. Non convertible debentures: A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral (hence, unsecured debt). Non-convertible debentures are regular debentures which cannot be converted into equity shares of the liable company. Investment vehicles: An investment vehicle is a product used by investors with the intention of having positive returns. Investment vehicles can be low-risk, such as certificates of deposit (CDs) or bonds, or can carry a greater degree of risk such as with stocks, options and futures. Alternate asset classes: Alternate asset class is a newer type of asset that was not traditionally considered to be a part of an investment portfolio. These include but would not be limited to Derivative instruments, Real Estate, Commodities (including Gold) etc. ANNEXURE B - Details of all settled and pending disputes against Associates of Karvy Capital Limited as on February 15, 2015 There have been no pending disputes or imposition of any major strictures by any financial sector regulator or by a court of law against Karvy Stock Broking Limited/ its directors/associates, except as mentioned below: A. Sl.no. 1 DETAILS REGARDING SEBI ACTIONS INITIATED/TAKEN/ PENDING AGAINST KARVY STOCK BROKING LIMITED Details of the case SEBI observation(s) Corrective steps taken by Company towards Pending actions, observations made by SEBI if any (a) (b) (c) (d) (e) Inspection of Karvy Stock Based on the findings of (i)Based on the findings of inspection, (i) Copy of order book is maintained physically and NIL Broking Limited (KSBL) inspection, adjudication adjudication proceedings were initiated in case of telephonic orders through voice loggers. proceedings were initiated against the Company. Records of all such transactions are also being conducted in 2003-04. against the Company. maintained in the system. (ii)The adjudicating officer vide his order dated November 18, 2005 (ii) Separate teams have been formed for imposed a penalty of Rs. 2 lakhs on the monitoring different activities relating to trading and automation of various processes like pay-in company which has been paid. and pay-out of securities, providing confirmations to clients on trades executed etc., getting the LBC’s and other confirmation documents from the clients. 1 SEBI Action 2 Two enquiry proceedings No deviation observed by SEBI were initiated against Karvy in the processes. Securities Limited (now merged with Karvy Stock Broking Limited). Sl.no. Details of the case SEBI observation(s ) (b) (a) 3 (i).Administrative warning issued in the matter of Software Technology Group International Limited on August 3, 2004 (ii). Administrative warning issued in the matter of 10 scrip report (Aarti Industries Limited, Aarti Drugs Limited, Havells India Limited, Jindal Polyester Limited, Kajaria Ceramics Limited, KRBL Limited, Lyka Lab Limited, Nirma Limited, Opto Circuit (I) Limited, Tasc Pharmaceuticals Limited on October 12, 2 One of the proceedings was dropped vide order dated April 23, 1999 and another was dropped by Board Decision in the meeting held on November 09, 2002. The proceedings have been dropped by SEBI and no action has been taken / no penalty was levied / no warning has been issued to the Company. SEBI Action (c) NIL Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (d) With respect to the administrative warnings dated 03.08.2004 and NIL 12.10.2007 received by the Company from SEBI, the company has redefined the policy on risk monitoring and has adopted various measures for improving the processes systems and surveillance for effective control and monitoring on the trades done by clients. The complete broking operations based on the feedback received from the exchanges were redefined and activities/processes reorganized subsequent to the issuance of adjudication order and administrative warnings to the company. i. Risk monitoring and surveillance team has been strengthened for (e) 2007. monitoring the trades done by clients continuously. ii. Separate teams have been formed for monitoring different activates relating to trading and automation of various processes like pay-in and pay out of securities, providing confirmations to clients on trades executed, etc, have been implemented for strengthening the monitoring procedures and to reduce manual errors. iii. SMS alerts are sent to clients at the end of the day for trades done by them. Trade confirmations are also sent to clients through emails at the end of the day. iv. The company has ensured that only individuals/entities registered with SEBI act as sub brokers and all clients dealing through sub brokers mandatorily open the trading account with the company by submitting proper KYC documentation. v. Trading platform has been enhanced by incorporating mechanisms for effective control on the trades done by clients based on value, scrip and quantity. There have also been multiple inspections by both the Exchanges and there has been no untoward observation with regard to any of the activities pointed out in the adjudication order of the administrative warnings. 3 Sl.no. SEBI observation(s) Details of the case 4 (a) (b) Administrative warning issued by IVD-ID 4 ON January 19,2009 in the matter of IPO irregularities (complaint of Shri Vimal Kumar Surana). This warning was not issued in the matter of IPO irregularities, but regarding opening of Beneficial Owner accounts. - SEBI Action (c) Corrective steps taken by Company towards observations made Pending actions, if any by SEBI (d) (i) The Company has ensured that demat accounts are opened only on receipt of valid and completely filled application form along with proper supporting KYC documents towards Proof of Identity and Proof of Address. (ii) The company strictly follows the maker – checker concept for all processes relating to depository services. On receipt of the application, the application form and supporting documents are verified at the branch and a receipt is issued to the client. The documents provided as POI and POA are verified with the originals and certified by the official accepting the application form. (iii) A detailed scrutiny and verification of the application forms and the documentation is done once again at the Head Office before the accounts are opened and activated. The accounts opened are subject to a 100% concurrent audit by an external agency. A welcome kit providing complete client master information of the demat account opened, DIS booklet etc. is dispatched to the clients for their reference. (iv) Training is also provided to the staff / officials involved in the activities of account opening and are kept informed about the circulars and guidelines issued by the regulatory authorities regarding demat account opening from time to time. 4 (e) Sl.no. SEBI observation(s) Details of the case 5 Corrective steps taken by Company towards observations made by Pending actions, if any SEBI SEBI Action (a) (b) (c) (d) (e) SEBI vide order dated 26.05.2006, directed, Karvy Stock Broking Ltd. (KSBL), not to act as a depository participant, pending enquiry and passing of final orders, except for acting on the instructions of existing beneficial owners ('BOs’). SEBI also directed KSBL, as a stock broker, not to undertake any proprietary trades in securities, either off-market or on market, pending enquiry and passing of final orders. - (i) Subsequent to the enquiry and hearing with the whole time member, SEBI in its final order dated June 22, 2007, directed that KSBL as a DP is prohibited from opening new demat accounts till December 31, 2007. SEBI also passed an order that the certificate of KSBL as a broker be suspended for a period of 3 months. (i) Subsequent to PAN being made mandatory by regulators, the Company has developed a software application wherein the PAN details provided by the applicants are validated online with the Income Tax website. Only such applications where PAN details are valid in all respects are processed for opening BO accounts. The Company has taken permission from the depository for such online validation. NIL (ii) The concurrent audit has been strengthened by way of 100% audit of account opening application forms by external agency with regard to compliance and fulfillment of the documents (ii) KSBL as a broker had filed an required as per KYC norms.Extensive training sessions to all the DP appeal no 75 of 2007 on June 25, front office employees has been conducted educating them on the 2007. SAT had stayed the order on scrutiny required to be done while accepting account opening application form July 4, 2007. (iii) KSBL as a DP had filed an appeal no 111 of 2007 on July 17, 2007. SAT had stayed the order on August 8, 2007. (iii) Front office personnel of some of the branches have also been nominated for NSDL / CDSL training for the purpose of compliance of NCFM / NCDO certification requirement. Fortnightly review of the Demat accounts opened with the same address is undertaken (iv) SAT in its final order by a senior resource dated June 30, 2008 set (iv) No applications are accepted and accounts are opened aside the impugned order dated June 22, 2007, without an “in-person” verification and re-verification of original remanding the matter back documents, required as a part of KYC, by an employee of the to SEBI with a direction to Company. Reporting of off-market transactions submitted for 5 pass separate orders against KSBL – as a Broker as well as a DP with regard to the violations emanating from the enquiry officer’s report. The Whole Time Member had granted a personal hearing as per the order of Hon’ble SAT, wherein submissions to SEBI have been made by the company. SEBI issued final order in respect of KSBL – Depository Participant on 28th January, 2014 and has in paragraph 20 such order clearly concluded that KSBL – Depository participant has already undergone prohibition from taking up any new assignment for a period of 18 months and 26 days and hence there need not be any further penalty on KSBL – Depository Participant. SEBI issued final order in respect of KCPL – RTI on 3rd February, 2014 and in such order stated that since KCPL has already undergone prohibition from acting as RTI for 6 execution to the DP and Compliance Head on a fortnightly basis. (v) The above corrective actions taken by the Company have been intimated to SEBI in our various correspondences during the process. An inspection has also been conducted by SEBI during October 2009 to review if the procedures and processes adopted are in order. There has been no adverse observation by the inspection team. approximately 10 months no further penalty is warranted. •SEBI has issued final order dated 14th March, 2014 in respect of KSBL-Broker wherein it has set aside the earlier recommendation of suspension of registration of KSBL as a stock broker and has instead directed KSBL to not undertake any new assignment (i.e not to take up any new clients) in its capacity as a stock broker for a period of six months, which will come in force one month from the date of the order. KSBL has preferred an appeal before the SAT against the impugned order. SAT vide its order dated 21st January 2015 has quashed and set aside the impugned order of SEBI dated 14th March 2014 and restored the matter to the file of SEBI for passing fresh order on merits. Sl.no. SEBI observation(s) Details of the case (b) (a) 6 A matter between Shri Jaidev Kumar Jain , we have received a KSBL & others is going on before District letter from SEBI that Consumer Disputes Redressal Forum, Gwalior (EFD DRA the complaint does 7 SEBI Action (c) Corrective steps taken by observations made by SEBI Company towards Pending actions, if any (d) (e) Karvy Comtrade Limited approached the client, Mr. Jaidev Kumar Jain and resolved the investor Grievance. Mr. Jaidev Kumar Jain vide its letter dated NIL I). The complainant is a client of our subsidiary company Karvy Comtrade Ltd., a member of MCX, NCDEX, National Spot Exchange Ltd. The case was actually filed against Karvy Comtrade Ltd. As the order of the District Consumer Forum was unreasonable and also the same pertains to Karvy Comtrade Ltd, an appeal was filed before the State Consumer Forum. MP State Consumer Dispute Redressal Commission, Bhopal in its order dated 24.09.2011 stated that the Appellant is not a consumer within the meaning under sec2(1)(d) of the act and does not fall within the parameters of the explanation hereinabove. Under these circumstances, MP State Consumer Dispute Redressal Commission found that both the appeals are not maintainable before the consumer forum. Both the appeals are dismissed. As a result, complaint is also dismissed. Sl.no. SEBI Observation(s) Details of the case (b) (a) 7 Administrative Warning dated July 13, 2010 issued in the case of PAN mismatches in IDR issue of SCPLC/IPO of Parabolic Drug Ltd. 8 not come under the purview of SEBI. SEBI Action (c) 17.04.2012 addressed to Karvy Comtrade Limited submitted the letter of satisfaction. Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (d) (e) The PAN mismatches have been identified as those of walk-in clients who are not registered with clients and have utilized the distribution services of the company. KSBL has already developed a bidding software application for entry of the information provided in the IPO bid application form by the client and has also obtained required permission from the Stock Exchanges for utilizing the NIL software for IPO bidding. The bidding application software also has an in built provision where by the applicant’s details are validated if they are the registered clients of the Company. KSBL, as a stock broker, is not currently authorized to utilize the bulk PAN verification facility provided by NSDL and is therefore not able to validate the PAN of walk in clients. To avoid these PAN mismatches, the Company is in the process of requesting NSDL to provide the utility for bulk verification of PAN with the ITD website already provided to the Depository participants and registrars so that the utility can be incorporated in the bidding application software developed and validation of PAN is done online at the time of bidding the application itself. The Company is also checking and analyzing the viability and methodology of implementing the concept of maker checker in the IPO bidding process to minimize the errors as the time frame available for bidding of the application is very less. Sl.no. SEBI Observation(s) Details of the case 8 SEBI Action Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (a) (b) (c) (d) (e) SEBI had initiated proceedings under section 24 of the SEBI act, against the three directors of the company, viz. Mr. C. Parthasarathy, Mr M. Yugandhar, Mr. M. S. Ramakrishna, and Karvy Stock Broking Limited which are pending before the additional chief metropolitan magistrate, -- -- -- Pending 9 Mumbai. Sl.no. SEBI Observation(s) Details of the case 9 SEBI Action Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (a) (b) (c) (d) (e) A complaint was lodged by SEBI with Central Bureau of Investigation, Mumbai on 20.02.2006 alleging frauds committed by certain individuals / entities, in connivance with certain bank officials and depository participants in the IPOs of IDFC and Yes Bank to obtain undue pecuniary benefits by illegally cornering large number of shares which were offered to Retail Investors by opening various fictitious / benami bank accounts and demat accounts. It was stated by SEBI in the complaint that Karvy Stock Broking Ltd had purportedly relied upon the bogus documents furnished by the individuals who acted as front entities (key operators) to the ultimate beneficiaries who had -- -- -- Pending 10 financed the fictitious applications. Karvy Stock Broking Ltd had accepted letters purportedly issued by BhOB as POI and POA of the persons for opening demat accounts and such documents purportedly received prima facie appeared to be forged and hence it appears that Karvy Stock Broking Ltd had not done Know Your Client verifications. Sl.no. 10 SEBI Observation(s) Details of the case SEBI Action Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (a) (b) (c) (d) (e) Two cases - BS & FC (RC 3(E)/ 2006 and 4(E)/ 2006) under Sections 120 B r/w 420, 467, 468 & 471 of IPC, under Section 68(A) of the Companies Act 1956 and under Section 13(2) r/w 13 (1) (d) of the PC Act, 1988 were registered by CBI in the matter of Yes Bank and IDFC Ltd. after arraying Karvy Stock Broking Limited, Karvy Computershare Pvt. Ltd and Karvy Consultants Ltd and other officers of these entities -- -- -- Pending 11 including Mr. C. Parthasarathy, as co-accused. The matter is pending before the Hon’ble Special judge. Sl.no. 11 Sl.no. SEBI Observation(s) Details of the case SEBI Action Corrective steps taken by Company towards observations made by SEBI Pending actions, if any (a) (b) (c) (d) (e) Subsequently, the Enforcement Directorate, after relying on the investigations of CBI and that of SEBI and on the premise that Section 467 of IPC framed against the co-accused represents a predicate offence which is categorized as a scheduled offence under Section 2(u) of the Prevention of Money Laundering Act-2002 (PMLA), has filed a prosecution complaint bearing no.04/2013, in terms of the provisions of PMLA. The matter is pending before The Appellate Tribunal PMLA New Delhi -- -- -- Pending Details of the case SEBI observation(s) (a) (b) 12 SEBI Action (c) Corrective steps taken by Company towards observations made by SEBI (d) Pending actions, if any (e) 12 Inspection of Portfolio Management services business of Karvy Stock Broking Limited (KSBL) conducted in 2013-14. Based on the findings of inspection, the company has received a show cause notice as to why adjudication proceedings should not be initiated against the Company. Based on the findings of inspection, the company has received a show cause notice as to why adjudication proceedings should not be initiated against the Company. The Company has responded to the said show cause notice in writing 1. The PMS Operations team actively ensures NIL in coordination with the operations team at Hyderabad that KYC details of clients who opt for PMS are uploaded to KRA 2. The PMS Operations team routinely scrutinizes account opening forms and any difference in ink if observed between signatures of client and text written by client is immediately escalated and the form rejected for clarification and confirmation by client 3. All teams are being repeatedly sensitized to fact that the word “scheme” is not to be used with respect to PMS documents 4. The PMS Product team is in the process of introducing a risk profiling tool . B. DETAILS REGARDING SEBI ACTIONS INITIATED/ TAKEN/ PENDING AGAINST ASSOCIATES OF KARVY STOCK BROKING LIMITED 13 Sl.no. Details of the case 1 (a) In the matter of IPO of Rajesh Exports Ltd., 2 SEBI observation(s) (b) In the matter of transfer of equity The following alleged violations have shares of Bellary Steels and Alloys been cited in the notice (i) failure to comply with SEBI Circular No. 001 Limited (2000-2001) dated 09-05-2001 (clauses 7 & 11) and (ii) failure to exercise due diligence, care and skill expected from a professional SEBI registered market intermediary (clause 2,3 & 16 of Schedule III read with Regulation 13 of Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agent) Regulations, 1993. 14 SEBI Action (c) A warning letter dated October, 10, 2002, directing us to be cautious in future and to adhere to all the Rules, Regulations, Circulars and Guidelines issued by SEBI strictly. After receipt of the copies of the documents relied upon by SEBI, reply to the notice was filed on 09-04-2009. KCPL attended a personal hearing on May 11, 2009 and also subsequently submitted the written submissions on 15th May, 2009. After a detailed investigation and personal hearing, the adjudication proceedings were disposed off in favour of the company vide order dated January 5, 2010, without levying any penalty, monetary or otherwise. Corrective steps taken by Company towards observations made by SEBI (d) Pending actions, if any (e) NIL Not applicable as the Company NIL has not been reprimanded / warned for non-compliance nor was any penalty levied / action taken against the company. Sl.no. Details of the case SEBI observation(s) SEBI Action 3 (i) SEBI had initiated enquiry proceedings against Karvy Consultants Limited (KCL) (whose Certificate of Registration was transferred to Karvy Computershare Private Limited (KCPL) under regulation 6(1) of the Enquiry Regulations. (ii) SEBI had initiated adjudication proceedings in the year 2004 in matter of issuance of physical shares against the applications for electronic allotment (DEMAT). KCL which acted as registrars to the IPO of UCO Bank Limited in September 2003 had not abided by the code of conduct as specified by SEBI in schedule III read with Regulation 13 of SEBI (Registrar to Issues and Share Transfer Agents) Regulations 1993. Subsequent to the personal hearing on November 6, 2009, with the enquiry officer, the proceedings against the company were disposed off vide order dated 12th July, 2010 in favour of the company, without levying any penalty. 15 A penalty of Rs. 10 lakhs was imposed by the AO which was subsequently reduced to Rs. 1.50 lakhs by Hon’ble Securities Appellate Tribunal (SAT). Corrective steps taken by Pending actions, Company towards if any observations made by SEBI The Company had reviewed NIL the processes and had ensured a second level verification of the details captured from the IPO application forms to ensure that such errors do not occur again. Also, the company has been strictly adhering to the various norms, rules and regulations laid down by SEBI and other regulatory authorities in IPO processing from time to time. 4 Vide order dated 26.05.2006, KCPL was directed not to act as a registrar to an issue and as a share transfer agent, pending enquiry and passing of final order, except for the assignment already contracted before passing of interim order dated April 27, 2006. The direction was not applicable to KCPL as Registrar and Transfer Agent to Mutual Funds. Failure to exercise due diligence in weeding out multiple and fictitious / benami applications, issuance of consolidated refund orders and failure to maintain arms length distance with other Karvy entities Subsequent to the enquiry and hearing with the whole time member, SEBI in its order dated 22.02.2007 lifted the directions issued vide an earlier order dated 26.5.2006 without prejudice to the pending enquiry proceedings against its associate company Karvy stock Broking Limited (KSBL), without any further directions. Subsequent to the enquiry and hearing granted to the associate company, KSBL, SEBI passed a another order dated June 22, 2007 wherein it reiterated that KCPL is prohibited to act as Registrars to the issue for a period of 9 months and since KCPL had already undergone prohibition for more than the said 9 months period, therefore, there shall be no further directions against KCPL. KCPL had filed an appeal no 153 of 2007 before Securities Appellate Tribunal (SAT) challenging the order dated June 22, 2007. SAT after the hearing, vide it order dated June 30, 2008 set aside the impugned order dated June 22, 2007 and referred the matter back to SEBI for passing a separate and distinct order after giving a fresh hearing to the company. SEBI issued final order in respect of KCPL – RTI on 3rd February, 2014 and in such order stated that since KCPL has already undergone prohibition from acting as RTI for approximately 10 months no further penalty is warranted. 16 The company has already NIL undergone prohibition of not acting as a RTI for more than 10 months. The changes in the regulations such as making PAN mandatory has helped in implementing the revised process for verifying duplication of PAN numbers in weeding out multiple applications in addition to matching the names, addresses and the DP ID and Client IDs of the applicants. The refund amounts are being credited electronically directly to the bank accounts of the applicants through RTGS, ECS and NEFT. C. Details of action initiated / taken/pending, i f a ny , by SEBI against Karvy Investor Services Limited., Group Company. Sl.no. 1 Details of the case SEBI observation(s) (a) (b) Advisory letter was issued to Karvy investor services Limited SEBI has given an administrative warning vide as a Merchant Banker in the year 2005. letter dated IVD/ID5/MSR/PB/47713/05 dated August 22, 2005for providing incorrect and misleading information / particulars to the Board that no pre-IPO presentations were made by the company, Fortune Informatics Ltd. KISL vide its letter dated September 10, 2005 has assured that it shall ensure that there would be no deviations in compliance of the regulatory requirements. 17 SEBI Action (c) Corrective steps taken by Company towards Pending actions, if observations made by SEBI any (d) (e) In depth training has been imparted to the NIL personnel involved in the merchant banking activities. Scrutiny of every document diligently is being done by a senior official and verification of all the facts and figures mentioned in the document is also done before the same is filed with SEBI. Checklist of documents being filed done to ensure all the documents and information is being provided to SEBI. 2 An administrative warning was given by SEBI vide letter reference no CFD/DIL/ISSUES/SC/65284/2006 dated April 20, 2006 when DRHP of Shirt Company (India) Ltd. was filed without incorporating the suggestions made earlier by SEBI in respect of the risk element when the DHRP Opto Circuits Ltd. was filed. It was confirmed vide letter dated April 24, 2006 NIL not to SEBI that adequate steps have been taken to incorporated. ensure that the risk element is reflected appropriately in the headings of risk factors appearing in the DRHPs submitted. In reply, KISL has submitted that the DRHP of Shirt Company (India) Ltd was filed much before the DRHP of Opto Circuits Ltd. and hence the observations suggested by SEBI could be incorporated 3 SEBI has given a warning vide letter reference no CFD/DIL/ SC /ISSUES/54996/2005 dated November 30, 2005 highlighting the deficiencies such as, inconsistent disclosures, statements without supporting facts and non-compliance with various provisions of the SEBI (DIP) Guidelines, 2000 in the draft Letter of Offer of Agro Dutch Industries Ltd. In response, it was informed by KISL to SEBI vide letter dated April 13, 2006 that KISL would ensure that it shall henceforth submit offer documents of good standard quality. 18 In depth training was imparted to the personnel NIL involved in the merchant banking activities. Scrutiny of every document diligently is being done by a senior official and verification of all the facts and figures mentioned in the document is also done before the same is filed with SEBI. Checklist of documents being filed done to ensure all the documents and information is being provided to SEBI. be C.DETAILS REGARDING ANY OTHER LITIGATION PERTAINING TO ASSOCIATES OF KARVY STOCK BROKING LIMITED (I) ARBITRATION PENDING AT NSE PERTAINING TO KARVY STOCK BROKING LIMITED Name of the Applicant Baljit Singh Dagar Ram Chandra Nayak Sanjeev Kumar Chadha Aarthi Acharaya Sonam Gailson B K Mishra Radheshyam Biyani Harbans Kaur NSE Region Remarks Status Delhi Kolkata We have filed Appeal u/s 34 at District court New Delhi, Court proceedings are going on We have filed Appeal u/s 34 at District court Cuttack, Court proceedings are going on Appeal under process Appeal under process Amount in INR 108700 176099 Delhi We have filed Appeal u/s 34 at District court New Delhi, Court proceedings are going on Appeal under process 271792.05 Chennai Delhi Kolkata Delhi Appeal under process Appeal under process Appeal under process Appeal under process 100000 303531 534592.48 600527 Appeal under process 131231 Poonam Sharma Delhi Appeal under process 96477 K.S.Malayappan Thangammal Sibnath Das Chennai Chennai Kolkata We have filed Appeal u/s 34 at District court Bangalore, Court proceedings are going on We have filed Appeal u/s 34 at District court Jammu, Court proceedings are going on We have Appealed u/s 34 at District court Jamshedpur, Court proceedings are going on Arbitration and Appeal award against us. We have Appealed at district court Delhi u/s 34. Court proceedings are going on Arbitration and Appeal award against us. We have Appealed at district court Delhi u/s 34. Court proceedings are going on Arbitration and Appeal award against us. We have Appealed at district court Delhi u/s 34. Court proceedings are going on Client filed Appeal at NSE and matter is pending . Client filed Appeal at NSE and matter is pending . We have filed Appeal at NSE and the matter is pending. Reserved for award Reserved for award Appeal under process at NSE Appeal under process at NSE Arbitral award in our favour. Received on 21-02-2015 Arbitration under process 61000 305000 109883 Delhi Vimal Kumar Kanpur Gupta Govindrao Bangalore Kulkarni We have filed Appeal at NSE and the matter is pending. G .Babu Rao We have filed Arbitration and matter is pending Hyderabad Client has filed an Arbitration, Hearing over matter reserved for award 19 129279.80 185000 16250 (II) DETAILS OF LEGAL CASES PENDING AGAINST KARVY STOCK BROKING LIMITED Sl No Name 1 T P Pramaleela Amount Case No. OS:305/2011 Status/Remarks The client has preferred Civil Suit against the order of Consumer Forum in Complaint No. 48/2010 which was awarded in our favour 1,00,000 2 S Manu 3 GV Ramachandra 4 Shashikanth Thimmapur 5 ARVIND KUMAR 6 TAPAN KUMAR BISWAL 7 MOHAN SINGH 8 SANJAY KUMAR AGARWAL 2,15,000 Appeal No. 1049/2011 Complaint No. 64/2010 was awarded in our favour at Consumer forum in Tumkur Branch, aggrived by the order of the CF, the client has preferred appeal before the State Commission - Bangalore, appeal admitted awaiting the further legal process, argument complete by both the parties posted for orders. (Member retired fresh hearing) 4,50,000 Appeal: 2323/2011 Claiming for losses on the ground of old age, health and ignorance of trade done in his account, client is disputing signature on contract and the same was referred to handwriting experts. The complaint was dimssed on the grounds that he is not a consumer on 10/11/2010, now after 190 days he has filed the appeal before the State Commission. CRP No: 258/2012 Setting aside the impugned order dated 30/3/12 and B Report filed by IO of Market Police Station in Crime No. 29/2009 at IV JMFC, Belgaum. The matter is under process. 1328/2009 Delays in payments of dues by the client. Arbitration award was in favor of KSBL. Client filed the case in alipore court against arbitration award. 174/2009 Cheque bounce case against the client. Arbitration award was in favor of KSBL. Client filed the case in district court against arbitration award 5400000 3,44,830 63,000 Cheque bounce case against the client. Client has filed counter case in Sahibgunj Court alleging unauthorized trade and debit. 4,77,429 CCN.602/200 9 CCN.604/200 9 2,89,624 F&O/M072/2008/C 93,278 F&O/K0041/2009 The Client refused to pay the outstandings. We had filed for arbitration against the client and got award in our favour. In between the client got transferred from Ambikapur to Dhamtari. We have filed a recovery suite against the client in Dhamtari Court. Last time after a lot of dates and persuasion we were supposed to get the case registered against the client, in between the judge got transferred. Now again the hearing process is going on. Delays in payments of dues by the client. Arbitration award was in favor of KSBL. Execution petition has been filed before the Chief Judge at City Civil Court Bilaspur. 3,63,112 9 SHOBHA SONI 10 ASHISH SHARMA 20 Cheque returned uncleared. Arbitration award was in favor of KSBL. Client has filed appeal petition against Arbitration Award in Dist Judge Darjeeling. 11 AJAY CHANDRA SATPATHY 12 SANJAY BHATTER 13 ASIM CHATTERJEE 14 AJOY KRISHNA ROY 15 LAL BAHADUR SINGH S.NO 1 PARTIES NAME Srichand Rupeja 127/2009 Cheque bounce case against the client. Arbitration award was in favor of KSBL. Execution Petition has been filed in Kolkata, however client has moved to undisclosed location and cannot be contacted. 1106/08 The client has filed arbitration against us. Arbitration Award was in our favour but the client is absconding and is not traceable. 84,057 1788/2011 The criminal complaint filed against the Company along with Aritration case. But the Arbitrator passed award against the Client. Based on the award passed by the Arbitrator, we are asking for dismiss of complaint filed by the Client. Client filed the complain for unauthorised trade in his trading a/c in Consumer Forum. 75,000 60/2011 Client sent legal notice through District Comsumer forum , Buxar, for oppurtunity loss due to trade square-up by KSBL. 1,12,000 CASE NO. 600/2011 NAME OF COURT CDRF, Lucknow 2 Ankur Mahal 334/2011 CDRF, Meerut 3 Vidya Sagar awasthi R.S.No.13/ 2006 D. J. , Lucknow 4 Durgesh N. Khanna Complaint No.08/200 8 CDRF, Kanpur Nagar 21 CASE DETAILS Amount The client has filed this complaint against KSBL before the CDRF, Lucknow, and has claimed 1,50,000 Rs.1,50,000/- alongwith 18% interest. He has made allegation that many unauthorised trades have been executed in his trading account without his instruction betweenOctober 2009 to Feb 2010. The complainant has claimed that due to deficiency in service of the O. P. his late father Mr. Rajpal Singh 2,25,490 suffered a loss of Rs. 2,25,490/- from his demat account No.366407. Which he has prayed to be compensated alongwith 18% interest. The client had claimed through arbitration Rs.32,857/- for loss against unauthorised trades which was rejected on account of lack of merrits by the arbitrator on18-02-2006. Thereafter, the application of the client u/s 34 of the arbitration act was dismissed by the D. J. , Lucknow, on 06-02-13. The complaint/claim of the client for for rs.1,77,549/- was dismissed by the consumer Forum, Kanpur, by The case was dismissed on the order dated 29-12-12 on account of lack of evidences against which this Appeal has been filed by the 29/12/2012 as the client for a decree of Rs.1,10,992.75 and 50000/- for mental agony and rs.2000/- as cost of the case. complainant was not been hence his total claim is for Rs.1,62,992.75. considered to be a consumer. 5 Manish Kumar vs KK Sharma & Others Mrs. Suruchi Atreja Singh, J. M., Rohtak. 6 Rakesh chandra 7 Parth Singh Rai 8 Surendra Singh 690/2007 9 Gurbux Singh 691/2007 10 Harsh Kr.Chawla 1111/2009 CDRF-I, Lko 11 Ayodhya Nath Chaturvedi vs Dhirendra Mohan Chaturvedi & others 407/2012 Civil Judge(S.D) II,Mathura 12 Daya Shankar Dubey 451/2012 CDRF, Jaipur R. S. No.12/200 6 Case No.418/12 Mr. Manish Kumar (the complainant) has filed this complaint against Mr. K. K. Sharma, Rakesh Negi & Sarvesh Pandey due to dispute in payment for computer systems supplied by him to karvy branches. As per complaint the claim amount is Rs.1,66,799/- D. J., Lucknow The client had claimed Rs. 1,36,880/- through arbitration against the unauthorised trades which was Case was dismissed by D. J. , rejected by the arbitrator on account of merrits on 18-02-2006. Thereafter, the application of the client Lucknow on 06-02-13 u/s 34 of the arbitration act was dismissed by the D. J. Lucknow on 06-02-13. CDRF, Jaipur This complaint has been filed by Parth Singh Roy (UCC - 111591) against the loss of Rs. 300000/- (Rs. Three Lacs) caused by employees of Jaipur branch of KSBL in his Trading account which was adjusted by sale of shares from his demat account. CDRF -II, Lko This complaint has been filed by Mr. Surendra Singh (Client Id. - 21177324) against the fraudulent transfer and sale of 50 shares of Matrix Lab Limited on 21-12-2004 and 35 shares on 23-12-2004 from his demat account without his instruction. CDRF -II, Lko This complaint was filed by Guru Bux Singh (died on 19-03-2009) and his wife Smt. Sheela Kaur who's joint demat a/c no. is 21160811. They alleged that O. P. no. (1) , (2) and (3) have fraudulently transferred and sold 300 equity shares of HDFC from their joint demat account in collusion with each other . So, they have claimed the shares or the value of the same along with 15% interest. 22 80,000 This complaint has been filed by Harsh Kumar Chawala U C C - 233L 4263 and Clint Id - 21332619. He has alleged that unauthorised trades were executed in his trading account from 18-05-2007 to 07-06-2007 due to which he incurred a loss of Rs. 80000/- in his trading account. So, this amount he has claimed along with other reliefs. As per para (25) of the Plaint, this suit / Injunction petition has been filed by the plaintiff Ayodhyanath No specific claim of any Chturvedi for order of injunction against the defendant no. (1) Dhirendra Mohan Chaturvedi and amount has been made by defendant no. (2) Virendra Mohan Chaturvedi and all the other defendants that the shares which have the complainant from Karvy been transferred by the defendant no. (1) and (2) by way of cheating from the demat account of the in this case. plaintiff be not further transferred to any other's demat or trading account and the same be not sold by any of the defendants or the proceeds of the same be not given to defendant no. (1) or (2) by any other defendant. So, the court has summoned KSBL i. e. defendant no. (3) and (4) for submission of the status of the demat or trading acounts lying with Karvy in the name of the plaintiff and the defendant no. (1) and (2). In this complaint, the client Mr. Daya Shankar Dubey has denied from his trades and has allegated that 6,20,000 the trades have been executed in his trading account without his instruction except a few trades. And, he has claimed for the amount of cheques he had given for purchase of some particular shares i. e. valued at Rs.6,20,000/- along with compensations. 13 Raj Narayan Tandan Case no.87/09 CDRF Sitapur As per complaint, the client Mr. Raj Narain Tandon has clained Rs.44795/- for the loss caused to him because 60 shares of Imfosys Technology could not be sold as per his instruction and time and he had to pay Rs.3430/- for the shares auctioned. Hence, he suffered a loss of Rs.48225/-. further, he has claimed Rs. 10000/- as cost of the case and Rs.15000/- for mental agony and harassment and Rs.23000/- for deficiency in service. Therefore, total claim = Rs.96225/- which he has wrongly mentioned in complaint as Rs.98225/- along with interest @ 18% per month. 14 Ram Gopal Verma CDRF Mirzapur 15 Nirupama Shrivastava Case No.137/20 08 326 / 2009 16 Amisha 47 / 2011 ADJMandsaur 17 Smt. Santosh 46 / 2011 ADJMandsaur As per complaint, client Ram Gopal Verma has claimed the value of 300 shares of allahabad bank @ Rs.99/- per share = Rs. 29700/- along with 5% interest from 02-01-05 = Rs.35640/- , Rs. 25000/- for mental agony and harassment and Rs.20000/- for cost of the case. hence, Total = Rs.80640/The complainant Nirupama Srivastav has claimed 1000 shares of DCW Ltd., 1000 shares of IGL, 50 shares of Maruti Suzuki India Ltd. And 37 shares of Allahabad Bank from the O.P. KSBL along with cost of mental agony and the cost of the case. As per arbitration award dated 10-11-2008 Amisha Modi had to pay to the applicant Karvy Rs.3,10,796/within 30 days from the date of award against which the client has filed an application u/s 34 of the arbitration act before the D. J. Mandsaur, is pending. The counter claim of the client of Rs.15,55000/was rejected by the arbitrator. As per arbitration award dated 07-11-2008 Smt. Santosh had to pay to the applicant Karvy the claim amount of Rs. 1,14,539.89 within 30 days from the date of award against which the client has filed an application u/s 34 of the arbitration act before the D. J. , Mandsaur, which is pending thereat now. And, the counter claim of the client of Rs.7,50,000/- was rejected by the arbitrator. 18 Banita Jain Comp 517/2008 CDRF, Kanpur Dehat The complainant has alleged that she had given a cheque of Rs.300400/- to the O.P. towards her Trading account no.285500003 which was duly received by the O.P. on 11-08-2007. But she had not given any instruction for execution of any trade in her account. Whereas, the O.P. has executed many trades without her instruction and has caused loss to the complainant to the tune of Rs. 300400/- and again a debit of Rs.70022.35 is reflecting in her trading account for which the O.P. is responsible. So, the complainant has claimed a sum of Rs. 300400/- along with cost and compensation towards the interest, cost and litigation. 19 Priti Poddar 706 /2009 Civil Judge (S D), Kanpur Nagar This suit has been filed by the plaintiffs for mandatory injunction against the defendants. In this suit the value of shares have been mentioned in three parts such as Rs.7,41,629.95 and Rs.2,01,821.35 and Rs.9,43,451.30 which have been transferred fraudulently from the demat accounts of the plaintiffs and proforma defendant no.4 and 5. In this suit, defendant no. 3. (1) and (2) i.e. Karvy Stock broking Limited, are the proforma parties. And the demat accounts related to this suit have been freeged as per instruction of the court. CDRF - I, Lucknow 23 Case was dismissed against the complainant on 13-09-13 for non presentation of evidences by the Complainant. 20 Sudesh Kr. Gupta D. J., Patiala House, This objection petition u/s 34 of the Arbitration Act has been filed by Mr. Sudesh Kumar Gupta against the award dated 11-08-2012 passed by the Arbitrator in favour of KSBL. As per award, the amount of Rs.8,18,026.16 is recoverable from the the respondent Sudesh Kumar Gupta on account of trades carried out by him in his account. 8,18,026 21 Sanjogita Gupta D. J., Patiala House, 5,04,199 22 Alpana Malik D. J., Patiala House, 23 Manju Saraswat This objection petition u/s 34 of the Arbitration Act has been filed by Smt. Sanjogita Gupta against the award dated 01-08-2008 passed by the arbitrator in vafour of the applicant KSBL. As per award, the respondant Sanjogita Gupta shall pay Rs.5, 04,198.84 to the applicant KSBL along with simple interest @ 10 % p a from the date of award till the date of payment. This objection petition u/s 34 of the Arbitration Act has been filed by Smt Alpana Malik against the award dated 24-07-2008 passed by the arbitrator in favour of the applicant KSBL. As per award, the respondant shall pay Rs.1,38,916.91 to the applicant along with simple interest @ 10% p a from the date of order till the date of payment. This Execution case was filed by Smt. Manju Saraswat and her daughters for enforcement of the order dated 26-04-2011 passed by the CDRF Kanpur Nagar in complaint no. 362/2008. The Consumer Forum, Kanpur Nagar has issued certificate of recovery against the O.P. KSBL against which an Appeal has been filed by KSBL before, the State Commission at Lucknow, upon which the proceeding of recovery has been stayed. 24 Kamala Devi Execution Case No.62/201 1 - In Re: Complaint No.362/20 08 Title Suit No. CDRF, Kanpur Nagar Civil Judge (J D), Patiala 24 This suit has been filed by Smt. Kamala Devi against KSBL and others for injunction (against the respondants) on transfer or sale of her 1200 shares of ESSIL Packaging Ltd. From the demat account where the same has been wrongly transferred and for decree of declaration of title in favour of the plaintiff. The said shares were purchased by the plaintiff in her Trading account (with Karvy branch at Patiala) which were then kept in her demat account (with Karvy branch at Patiala) and thereafter transferred to the demat account of defendant no. (2), as per plaint. W. S. on behalf of Karvy has been filed. 1,38,917 25 Zakiya Sultana Execution case no.03/2013 against Complaint No. 58/2008 CDRF, Jaunpur This complaint has been decided on 07-09-2012 in favour of the complainant. As per judgment, the complainant had opened a demat account no.20863866 with Karvy at Jaunpur, in which she had deposited 45 shares of Reliance Industries and 45 shares of Reliance communication. The O.P./ Karvy had already provided DIS Booklet to Zakiya. However, another DIS Booklet was issued in the name of Zakiya Sultana, without due inquiry or verification of the signature of the client, when one Arshad Ali presented a printed application form in the name and signature (which was not matching) of Zakiya Sultana (to karvy branch) which authorised Mr. Arshad Ali to receive DIS slips on behalf of Zakiya Sultana. And, thereafter the shares in question were transferred through two of those DIS slips bearing signature of Zakiya Sultana which were not matching with the signature of the client (given on Member Client - Agreement) to the demat account of one Mr. Pramod Kumar Verma of Abhipra Capital at Jaunpur. The O.P. Karvy had absolutely denied the allegations of the complainant. But, as per order, the O.P. will either provide 45 shares of Reliance Industries and 45 shares of Reliance Communication to the complainant within one month or the value of those shares as per value on the date of transfer of the same along with Rs.1000/- as cost of the case. 26 Smt. Saroj Gupta comp.203/ 2010 CDRF - I, Lucknow The complainant Saroj Gupta has claimed Rs. 97,379.30 as cost and compensation towards the loss caused to her shares and the litigation. She has alleged that she has kept many shares in her demat account no.11153499 which was suspended by the O.P. for a long time even after depositing the A M C and the required address proof to the O.P. She could not make transaction of her shares lying in the demat account. So, she suffered loss in respect of value of the shares. 27 Praveen Kr. 1091/12 Singh Banwari Pd. 366/2012 Mourya and Brij Mohan Mourya Tribhuwan Das 73/2013 CDRF, Lucknow CDRF, Gorakhpur Complaint of unauthorized trades executed in trading account. CDRF, MATHURA The complainant had claimed that the O.P. had executed unauthorized trade in his acount and caused a loss of Rs. 259903/- and Paise 75. But this claim has already been decided by the Arbitrator Mr. Divakar Dev in favour of the O.P. and the application was rejected. Abhinandan Jain Lokpal Sharma 1529/13 CDRF, jaipur 278/12 CDRF, Jaipur The complainant Abhinandan Jain (client of Jaipur) has claimed as follows: Rs.15000/- for the loss caused in trading, Rs. 11000/- as cost of the case and Rs. 10000/- as compensation for mental agony. The Complainant has demanded Rs.150000/- for the loss incurred by him in his trading account and Rs. 21000/- for Advocate's fee along with other compensation. 28 29 30 31 25 1,15,548 97,379 5,50,000 Complaint of unauthorized trades 2,59,904 32 Anil Kumar Taneja Contempt Case No.78/201 3 In Re: Complaint No.296/20 11 Appeal No. A/2013/62 1 CDRF, Ajmer As per order of the CDRF, Ajmer, O. P. No.3, KSBL, Ajmer, has to pay Rs. 49000/- of the application Case Closed on 21-11-2013 amount with interest @ 9% and Rs. 1000/- as cost of the case. after compliance of the order passed in Complaint No.296/2011, on payment of Rs.63230/to the complainant. 33 Durgesh Narain Khanna State Commission, Lucknow Amarjit Singh Case No. 271/2013 CDRF, Ambala City This appeal has been filed by Durgesh N. Khanna against the impugned order dated 29-12-12 of the The complainant had CDRF, Kanpur. claimed Rs.110992/- along with compensation in his Complaint No.08/2008 filed before the CDRF, Kanpur Nagar. The Complainant gave a cheque of Rs.5000/- to the O. P. for purchase of shares which was cleared by The Complainant has the O.P. But, this amount was wrongly crdited to the trading account No.343160 of the Complainant's claimed Rs.5000/- with wife in place of the trading account No.343197 of the Complainant, without the consent of the interest @ 18% and complainant. And, the O. P. failed to rectify the error even after legal notice from the Complainant. Rs.20000/- towards mental agony and Rs.5000/- as cost of the case. 34 35 KailashChande r Trama Cr. Appeal --/2013 This appeal has been filed by the appellant against his conviction in cheque bounce case against two cheques of Rs.100000/- each. 36 Avtar Singh Gill Consumer Complaint Dist. & Sessions Judge CDRF, Ludhiana 37 Patwant kaur Gill Consumer Complaint CDRF, Ludhiana This Complaint has been filed for reversal of 2000 shares of Ispat Industries, 2000 shares of J P Complainant has claimed Hydro,2255 shares of Venkey's India Ltd. And 7000 shares of Zee News or the value of the shares in the shares in question or the question as on 19/12/2009 along with compensation. value of the same as on 19/12/2009. 26 This Complaint has been filed for reversal of 1000 shares of Idea, 4000 shares of J P Hydro and 3000 shares of R P L or the value of the shares in question along with compensation. Complainant has claimed the shares in question or the value of the same as on 19/12/2009. S.No 1 2 CASE NO O P No. 106 of 2013 NAME OF THE PARTIES Sujatha Gattu and others Vs. KSBL and others O S No. 1084 of 2013 Srivalli Vs. Jyothy and others COURT SUBJECT AMOUNT (Rs.) I Senior Civil Judge, Hyderabad The Plaintiff filed petition before the Civil Court for granting Not applicable, since KSBL is formal party The matter posted for Succession Certificate. As her deceased husband was and there is no liability to KSBL. KSBL will enquiry. holding some shares. The matter posted for enquiry. implement the orders of the Court. District Judge, L B Nagar, The Civil Suit filed for partition and allotment of share in the Not applicable, since KSBL is formal party The matter posted for property left over by deceased Sri. S Bhaskar Rao. The and there is no liability to KSBL. KSBL will enquiry. shares of the deceased are said to lying in DP account implement the orders of the Court. maitained by KSBL. Hence, suit filed for their share, both in movable and immovable. MATTER PERTAINING TO KARVY STOCK BROKING LIMITED PENDING BEFORE THE NATIONAL CONSUMER COMMISSION, NEW DELHI 1 Revision C H N V Sri The National The Complaint filed before the District Forum, 40 shares of MRF (Rs. 9,05,650/) Petition Ram Vs. KSBL Consumer Machilipatnam for transfer of 40 shares of MRF along with No. 39 Commission, costs of Rs. 10000/ and Rs. 20000/ as compensation. But the of 2013 New Delhi Forum granted 40 shares of MRF along with costs of Rs. 1000/ and Rs. 5000/ as compensation. Against the said orders, KSBL filed appeal before the State Commission, Hyderabad. In the said appeal the Commission set aside the orders passed by the District Forum. Now, the Complainant filed Revision Petition before the National Consumer Commission, New Delhi. S.No. 1 Name of the Client Bhaskar M Pandya Amount Exchange NSE-Mumbai 13,58,486 27 REMARKS On receipt of the notices from the National Commission, New Delhi, we have engaged the services of Mr. PK Seth and filed vakalat before the Commission. The matter posted for arguments of Complainant's Counsel. Remarks Client appealed in Bombay High Court. On receipt of the Award passed by the Arbitrator, the Cleint filed appeal against the award and the same is pending for hearing. 2 NSE-Mumbai Jitendra Chaudhary 5,56,823 No Client Name S.Narayanasamy 1 Amount Case Number os 486/2008 1ST ADM,Coimbatore Court Name OS 851/2010 PDM,Coimbatore OS 654 / 2010 1 ADJ, Coimbatore EP 225/2010 DJ, Coimbatore EP 226/2010 DJ, Coimbatore EP 227/2010 DJ, Coimbatore EP 228/2010 DJ, Coimbatore 50,000 P.Shanmugam 2 4,000 Thilago Sulochana 3 15,54,000 Tamilarasi 4 3,20,856 V Chidambaram 5 5,89,628 C Indhra 6 73,171 V Arumugam 7 Client appealed in Bombay High Court. On receipt of the Award passed by the Arbitrator, the Cleint filed appeal before the High Court of Mumbai, but, the High Court dismissed the Appeal. Once again, the Client preferred an appeal before the Supreme Court of India. 2,31,408 Service tax matters, under dispute The Department of Central Excise and Customs has raised a demand with respect to the Service Tax on brokerage/commission earned on distribution of mutual funds of Rs. 5,157,611 (Previous year: Rs. 5,157,611) which has been contested by the erstwhile Karvy Securities Limited, now merged with the Company, before the Honourable High Court of Andhra Pradesh. The entire amount had been paid under protest. The High Court of Andhra Pradesh has quashed the said circular vide order dated 1 September 2004. Aggrieved by the said order, the Department of Central Excise and Customs has filed a Special Leave Petition with the Honourable Supreme Court of India, which is pending for hearing. 28 DETAILS OF LITIGATION/ DISPUTES PERTAINING TO KARVY COMPUTERSHARE PRIVATE LIMITED Contingent Liability as of March, 2014 - Corporate Registry Division Case No. Court/ Forum Complainant name Unit 66/98 Rajnandgoan Ms Sunitha Corporation Bank Non receipt of share cert after transfer Contingent Liability (in Rs.) 17,800.00 2 647/98 Mylapore V Ramachandran & Padma Ramachandran IDBI - equity return of interest & deficiency of service 1,03,120.00 3 1/99 Nalbary Dulal Deka IDBI - equity transfer of shares & mental agony 30,000.00 4 CD /98 Chennai Nitya Mohan Kolipakkam IDBI - equity non receipt of fully paid stickers & compensation 50,000.00 5 148/98 Chennai Ghanshyam Sahu IDBI - equity non receipt of fully paid stickers & compensation 2,00,000.00 6 CDRF Karnal Narendra Kumar Flexi Bonds II issue of Deep Discount Bonds or refund of amount and costs 9,500.00 7 CDRF Raebarelli Ram Prakash Trivedi Bank of Baroda Waive interest on call money and compensation for delay in service and costs 21,000.00 8 CDRF Raebarelli Jagdish Saran Agarwal Bank of Baroda transfer of shares, compensation & costs 25,000.00 9 CDRF Karnal Pradeep Kumar Bank of Baroda issue of fully paid stickers, compensation & costs 50,000.00 10 CDRF Pratapgarh Shiripal Mishra Bank of Baroda issue of fully paid stickers and dividend for the year 1997-98, compensation & costs 67,290.00 11 CDRF Jhunjhunu Ratan Lal Bank of Baroda issue of fully paid stickers and dividend for the year 1997-98, compensation & costs 6,240.00 12 148/98 Chennai C L Choudhary & others Agro Dutch transfer of shares, compensation & costs 13,200.00 13 ID 584/2000 Hyderabad Sudha Rani Karvy Matter posted for trial, cross examination 56,448.00 Sl No. 1 29 Nature of complainant 14 126/2008 Jhansi Meera Devi Gupta Power Grid allotment of shares, financial loss, legal expenses, mental agony 15 244/2008 Shivpuri Lokesh Sharma Power Grid non-credit of shares and refund 16,000.00 16 214/2008 Jalandhar Ashok Kumar Arora REC non credit of shares, refund, legal expenses, travelling expenses, court fee, mental agony, etc 22,941.00 17 131/2009 Bareilly forum Kanhaiyalal Agarwal Bank of Baroda Transmission of his name as karta in place of the deceased karta. 25,000.00 18 38/2009 Consumer forum at Kota Arun Kumar Sharma Strides Arcolabs Claim for 25 shares of the company in lieu of the old shares. 50,000.00 19 752/09 Jaipur forum Mohit Agarwal JSW Steel claim for 130 shares after merger and benefits. 50,000.00 20 872/09 Jaipur Forum Neeraj Gupta GMRI DETAILS OF LITIGATION/ DISPUTES PERTAINING TO KARVY COMTRADE LIMITED S. Client Name Client Branch Region Amount Appeal NO. Code involved filed by 1 Pooja Cold Storage 2 Amarnath Cheppali 800727 Vanita Luthra 56158 3 Sri Ganganagar Rajasthan PUNE (Sub Brok) Maharashtra MUMBAI COMM (Sub brok) Maharashtra 22,36,703 30 15,000 Court Status as on 31-3-2014 Nature of case KCTL City Civil Court Hyderabad Awaiting for Judgement Civil suit filed for freeze other accounts of the client. KCTL Criminal Court erramanzil Case transferred to Pune Criminal court Cheque bounce case for recovery of the amount, Criminal case. KCTL Nampally Criminal court Investigation by the police done Private complaint for recovery of the amount from the client. 1,94,850 59,00,000 Non refund in IPO 1,25,402.00 4 Sivashakthi 36428 ERODE Coimbatore KCTL Nampally Criminal court Investigation by the police done Private complaint for recovery of the amount from the client. KCTL Bangalore Criminal Court Appearance of the client Cheque bounce case for recovery of the amount, Criminal case. KCTL Criminal court Kochi Investigation by the police Cheque bounce case for recovery of the amount, Criminal case. Client Rajasthan High court Stay of all proceedings Cheating case filed by the client against NCDEX and also made KCTL as a party, criminal case in FIR No. 2/12. There after KCTL has filed Quash Petition in the High Court of Jodhpur, Rajasthan challanging the FIR No. 2/12. The same is pending. 8,00,000 5 Arun Kumar 36490 CHITRADURGA SOUTH KARNATAKA 6 Nazar 55083 KOCHI Kerala 36,255 2,52,192 7 Purushotam Nagapal and State of Rajasthan Sri Ganganagar Rajasthan DETAILS OF LITIGATION/ DISPUTES PERTAINING TO KARVY INVESTMENT ADVISORY SERVICESLIMITED [FORMERLY KNOWN AS KARVY INSURANCE BROKING LIMITED] Sl.No Name of the Matter Case Description Amount Remarks/Next Hearing Date Complainant Pending Claimed before 1 Arvind Kumar Singh 2 T R Mohana 3 Kamuben Patel Consumer Forum Customer was sold the policy as a single premium but the policy had a 3 year premium paying term. The customer has already sent a notice to SBI life on 16/05/2011 for which SBI has sent response on 24/05/2011 denying the refund of Rs.25000 premium Consumer Forum Customer has taken NHP group insurance policy with NICL for 1 year. Claim rejected due to non submission of Customer id proof. 26,131 Consumer Forum Customer has taken a NHP group insurance policy with sum insured for 4.00 lac. The customer was diagnosed with "Bilateral Osteoarthritis of Knee Joint" and undergone a surgery. Claim rejected due to non submission of Original Money receipt for Rs.4,01,391/and also non submission of Customer id proof. 4,05,835 31 25,000 Appealed against the Judgement/Order of the consumer Forum. Next hearing dt is on 2nd Sep'14 Case dismissed in our favour. 19th Aug'14 4 Naeem Khan Consumer Forum As per customer he was promised that a coverage for Rs.1,52,000 but policy was issued for SA of Rs.82,192. • Policy was not cancelled even after submission of all relevant documents 40,200 • Was not provide the free accidental cover of Rs.100,000 • Customer is now claiming for cancellation of policy + refund of premium Rs.15200+ Rs.25000 expense for treatment on account of ill health + 10000 miscellaneous expenses. 5 Shamshad Begum 6 Ashok Modi 7 BETHA RAMA RAO Legal Notice The complainant has taken the medical insurance policy to cover health insurance from National Insurance Company Limited vide Policy Nos.154400/46/10/8500000691, UHID No.NIC0008462907. The part settlement was already done by NICL. Remaining is pending due to submission of incomplete documentation. Consumer Claim rejected due to the complainant has declared his previous aliments. Forum Pending 2,50,000 6th Aug'14 63,457 27th Aug'14 Consumer Forum Claim rejected due to non submission of Doctor's certificate, past prescription, Original medicine bills, Original Investigation bills, Customer Id proof and age proof, etc., 35,000 1st Sep'14 8 B Radhakrishna Consumer Forum Customer has taken an mediclaim policy for 1.00 lac sum insured. Complaint received towards non renewal of NHP Policy. 3,711 Pending 9 Parul Saxena Legal Notice Free Look Cancellation case. TALIC has responded confirming that the policy documents, as per their dispatch records, was received by the customer on 02nd Feb 2011 & cancellation request was received on 03rd Nov 2011. Hence request for cancellation & subsequent refund has been rejected. 10 Ashok Kumar Chaubey 11 Kanthi Nagaraj Legal Notice Customer has taken a mediclaim policy under NHP. Customer's wife has undergone pregnancy & had a benefits upto to 25,000/-. Due to non submission of documents in required time, hence the claim got rejected. Consumer Customer has taken NHP group insurance policy with NICL for 1 year. Customer has Forum / undergone eye treatment and paid Rs.24,000/- towards treatment charges. Due to non Legal Notice submission of required documents in time, the claim got rejected. 32 14th Aug'14 25,000 Pending at Forum, Next hearing 19th Sep'14 24,000 5th Aug'14 DETAILS OF ARBITRATION CASE FILED AGAINST KARVY INVESTOR SERVICES LIMITED S. Case Name of the Court & Place Subject No. No. Party 1 NA Escorts Services Limited Sole Arbitrator, Sri Rajeev Saxena, Advocate, New Delhi. Signature of the Directors Sl.No. Name of the Director 1 SWAPNIL PAWAR 2 Escorts filed Arbitration Petition for recovey of 1486350.00 amounts from Karvy Investor Services Ltd., (along with interest) towards their charges for introducing of client as per MOU dated 30.10.2002. Signature V MAHESH Place MUMBAI HYDERABAD Place: Mumbai Date: March 30, 2015 33 Claim Amount (Rs.) Remarks The Company appointed Counsel and filed Vakalat. In written statement, the Company informed that they have not signed any MOU on behalf of the Company and the alleged MOU signed by Mr. PB Ramanujam, is not valid, since he doesn't have any authorisation issued by the Company to sign on the documents on behalf of the Company.