PORTFOLIO MANAGEMENT SERVICES DISCLOSURE DOCUMENT OF … - PMS.pdf · PORTFOLIO MANAGEMENT SERVICES...

1

WAI/Disclosure Document/31.07.2019

PORTFOLIO MANAGEMENT SERVICES

DISCLOSURE DOCUMENT

OF

IIFL WEALTH ADVISORS (INDIA) LTD.

(SEBI Registration No. INP000006651)

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

(i) The Document has been filed with the Board (SEBI) along with the certificate in the

prescribed format in terms of Regulation 14 of SEBI (Portfolio Managers) Regulation

1993.

(ii) The purpose of the Document is to provide essential information about the Portfolio

Management Services (PMS) in a manner to assist and enable the investors in making

informed decision for engaging a Portfolio Manager.

(iii) The document contains necessary information about the Portfolio Manager required by

an investor before investing, and the investor may also be advised to retain the document

for future reference.

(iv) Name of Principal Officer : Mr. Subbiah Somasundaram

Address : Lemuir House, 10 G. N. Chetty Road, T. Nagar,

Chennai 600017

Phone No(s) : 04442922358

E-mail address : [email protected]

(v) Disclosure Document as on 31.07.2019

2


Index of contents

Sr. No. Contents Page No.

1 Disclaimer clause 3

2 Definitions 3

3 Description about Portfolio Manager 6

4 Penalties, pending litigations or proceedings, findings of

inspections or investigations for which actions may have been taken

or initiated by any regulatory authority.

9

5 Services offered 10

6 Risk Factors 33

7 Client Representation 35

8 The Financial Performance of Portfolio Manager 37

9 Portfolio Management Performance of the Portfolio Manager 38

10 Nature of Expenses 41

11 Taxation 43

12 Accounting Policies 42

13 Investor Services 45

14 Form C 47

3


Contents of Disclosure Document

1) Disclaimer clause:

The particulars given in this Document have been prepared in accordance with the SEBI

(Portfolio Managers) Regulations’ 1993 and filed with SEBI. This Document has neither been

approved nor disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the

contents of the document. You are requested to retain the document for future reference.

2) Definitions:

Unless the context or meaning thereof otherwise requires, the following expressions shall have

the meaning assigned to them hereunder respectively: -

(a) “Act” means the Securities and Exchange Board of India, Act 1992 (15 of 1992) as

amended from time to time.

(b) “Agreement” means agreement between Portfolio Manager and its Client in terms of

Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993 and SEBI (Portfolio

Managers) Amendment Regulation, 2002 issued by Securities and Exchange Board of

India and shall include all recitals, schedules, exhibits and Annexure attached thereto, and

any amendments made to this Agreement by the Parties in writing.

(c) “Application” means the application made by the Client to the Portfolio Manager to place

monies and/or securities mentioned therein with the Portfolio Manager for Portfolio

Management Services. Upon execution of the Agreement by the Portfolio Manager, the

Application shall be deemed to form an integral part of the Agreement, provided that in

case of any conflict between the contents of the Application and the provisions of the

Agreement, the provisions of the Agreement shall prevail.

(d) “Assets” means (i) the Portfolio and/or (ii) the Funds and includes all accruals, benefits,

allotments, calls, refunds, returns, privileges, entitlements, substitutions and / or

replacements or any other beneficial interest, including dividend, interest, rights, bonus as

well as residual cash balances, if any (represented both by quantity and in monitory value),

in relation to or arising out of Assets.

(e) “Bank Account” means one or more accounts opened, maintained and operated by the

Portfolio Manager with any of the Scheduled Commercial Banks in the name of the Client

or a pool account in the name of Portfolio Manager to keep the Funds of all clients.

(f) “Board” or “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.

(g) “Client” means the person who enters into an Agreement with the Portfolio Manager for

managing its portfolio / funds.

(h) “Custodian” means any person who carries on or proposes to carry on the business of

providing custodial services.

(i) “Depository Account” means one or more account or accounts opened, maintained and

operated by the Portfolio Manager in the name of the Client, with any depository or

depository participant registered under the SEBI (Depositories and Participants)

Regulations 1996.

4


(j) “Discretionary Portfolio Management Services” means the portfolio management

services rendered to the client, by the Portfolio Manager on the terms and conditions

contained in the Agreement with respect to the Assets (including the Portfolio and Funds)

of the Client, where the Portfolio Manager exercises its sole and absolute discretion with

respect to investments or management of the Assets of the Client, entirely at the Client’s

risk, in such manner as the Portfolio Manager may deem fit.

(k) “Document” means Disclosure Document

(l) “Financial year” means the year starting from April 1 and ending on 31st March of the

following year

(m) “Funds” means monies managed by the Portfolio Manager on behalf of the Client

pursuant to this Agreement and includes monies mentioned in the Application, any further

monies placed by the Client with the Portfolio Manager for being managed pursuant to

this Agreement, the proceeds of the sale or other realization of the Portfolio and interest,

dividend or other monies arising from the Assets, so long as the same is managed by the

Portfolio Manager.

(n) “High Water Mark” means value of the highest Closing NAV achieved by the Portfolio

in any year during the subsistence of this Agreement (adjusted for any additional

funds/withdrawals by the Client in that year) and net of Portfolio Management Fees,

incidental charges for that period.

(o) “Investment Advice” means advice relating to investing in, purchasing, selling or

otherwise dealing in securities or investment products, and advice on investment portfolio

containing securities or investment products, whether written, oral or through any other

means of communication for the benefit of the client and shall include financial planning.

(p) “Investment Management and Advisory Fees” shall have the meaning attributed

thereto in sub Clause (vi) of Clause ((9) of this Document under the head Nature of

Expenses

(q) “Net Asset Value” (NAV): Net Asset Value is the market value of assets in portfolio

consisting of equity, derivative, debt, mutual funds units, cash, cash equivalents, accrued

interest or benefits, receivables, if any etc. less payable, if any.

(r) “Non-Discretionary Portfolio Management Services” means the portfolio management

services rendered to the client, by the Portfolio Manager on the terms and conditions

contained in the Agreement with respect to the Assets (including the Portfolio and Funds)

of the Client, where the Portfolio Manager shall provide advice in relation to assets but

does not exercise any discretion with respect to investments or management of the Assets

of the Client, and invests and manage the Assets only after seeking and taking approval

from the Client, entirely at the Client’s risk.

(s) “Parties” means the Portfolio Manager and the Client; and “Party” shall be construed

accordingly.

(t) “Person” includes any individual, partners in partnership, limited liability partnership,

central or state government, company, body corporate, cooperative society, corporation,

trust, society, Hindu Undivided Family or any other body of persons, whether

incorporated or not.

(u) “Portfolio Manager” means any person who pursuant to a contract or arrangement with

a client, advises or directs or undertakes on behalf of the client (whether as discretionary

portfolio manager or otherwise) the management or administration of portfolio of

securities or the funds of the client, as the case may be, entirely at the Client’s risk. For

the purpose of this Document, Portfolio Manager is IIFL Wealth Advisors (India) Limited.

5


(v) “Portfolio” means the Securities and/or fund managed by the Portfolio Manager on behalf

of the Client pursuant to this Agreement and includes any Securities mentioned in the

Application, any further Securities placed by the Client with the Portfolio Manager for

being managed pursuant to the Agreement, Securities acquired by the Portfolio Manager

through investment of Funds and bonus and rights shares in respect of Securities forming

part of the Portfolio, so long as the same is managed by the Portfolio Manager.

(w) “Principal Officer” means a director of the Portfolio Manager, who is responsible for the

activities of portfolio management and has been designated as principal officer by the

portfolio manager.

(x) “Regulations” means the Securities and Exchange Board of India (Portfolio Managers)

Regulations, 1993, as amended from time to time;

(y) “Rules” means Securities and Exchange Board of India (Portfolio Managers) Rules,

1993, as may be amended from time to time.

(z) “Scheduled Commercial Bank” means any bank included in the second Schedule to the

Reserve Bank of India Act, 1934(2 of 1934).

(aa) “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 as amended from

time to time.

(bb) “Securities” includes: “Securities” as defined under the Securities Contracts (Regulation)

Act, 1956; Shares, scripts, stocks, bonds,(including securities such as pass through

certificates and other securitised instruments) warrants, convertible and non-convertible

debentures, fixed return investments, equity linked instruments, negotiable instruments,

deposits, money market instruments, commercial paper, certificates of deposit, units issued

by the Unit Trust of India and/or by any mutual funds, exchange traded funds, mortgage

backed or other asset backed securities, derivatives, derivative instruments, options, futures,

foreign currency commitments, hedges, swaps or netting off and any other securities issued

by any company or other body corporate, any trust, any entity, the Central Government,

any State Government or any local or statutory authority and all money rights or property

that may at any time be offered or accrue (whether by rights, bonus, redemption, preference,

option or otherwise) and whether in physical or dematerialized form in respect of any of the

foregoing or evidencing or representing rights or interest therein; and any other instruments

or investments (including borrowing or lending of securities) as may be permitted by

applicable law from time to time.

Words and expressions used in this disclosure document and not expressly defined shall be

interpreted according to their general meaning and usage. The definitions are not exhaustive.

They have been included only for the purpose of clarity and shall in addition be interpreted

according to their general meaning and usage and shall also carry meanings assigned to them

in regulations governing Portfolio Management Services.

3) Description about Portfolio Manager:

i) History, Present business and Background of the Portfolio Manager:

a) History of the Portfolio Manager:

IIFL Wealth Advisors (India) Limited (WAI) is a wholly owned subsidiary of IIFL Wealth

Management Limited effective November 22, 2018.

6


IIFL Wealth Advisors (India) Limited is also AMFI Registered Mutual Fund Distributor

having Number ARN – 20995.

IIFL Wealth Advisors (India) Limited is registered with SEBI as Investment Advisor vide

Registration no. INA20001336.

b) Present Business and Background:

Currently, the company provides discretionary, non-discretionary portfolio management

services and investment advisory services besides distribution of mutual funds and other

securities to its clients.

As an independent advisory firm, WAI covers the entire spectrum of wealth management

services. WAI services cover solutions that integrate the following components that go into

growing, preserving and transferring wealth.

• Income & Asset Protection

• Wealth Creation & Preservation

• Tax & Structuring Service

WAI solutions cover any or all of the above components of wealth management and we

have built expertise in integrating them into seamless solutions. All WAI services start from

the Client’s requirement and are customized to suit Client’s needs.

The company provides Wealth Management solution for High Net worth Individuals and

Emerging High Net worth Individuals. It works with Corporate, Trusts, Banks and

Institutional Treasuries in providing customized investment solutions.

WAI’s business philosophy is to address the core investment needs and to provide

customized, comprehensive and structured investment solutions that aim to achieve the

future financial needs of WAI’s Clients. WAI’s investment philosophy is to continuously

and consistently deliver results despite changing global economic and market conditions.

WAI has adequate staff strength that carries along with them rich experiences from Capital

Market and Equity Research. The organisation finds its strength in its team of energetic and

confident individuals.

WAI currently is focused on providing personalized service to its client base comprising of

high and emerging net-worth individuals. The company has always aimed at providing

value added services to the client which align with the client’s long-term goals of wealth

creation. In pursuance of this goal, the company leverages its research capabilities to provide

Portfolio Management Services with an aim to generate long term returns based on detailed

fundamental research.

ii) Directors and Promoters of the Portfolio Manager:

WAI is wholly owned subsidiary of IIFL Wealth Management Ltd (IIFLW). IIFLW on

November 22, 2018, acquired 100% shareholding of WAI. IIFLW is engaged in business

of Portfolio Manager, Stock Broker, Depository Participant, Research Analyst and

7


Investment Advisor. IIFLW is also registered with AMFI as a distributor of mutual funds.

IIFLW provides wealth management services to various HNI / Ultra HNI clients and inter

alia distributes various securities and financial products, including mutual funds, Alternative

investment funds, debentures and structured products. IIFLW acts as the Sponsor to IIFL

Mutual Fund and schemes launched as Alternative Investment Funds, managed by group

companies;

Director’s Background

a) Mr. Sandeep Jethwani:

Mr. Sandeep Jethwani has more than 12 years of experience in direct client and team

management with regional responsibilities including setting up of new branches. As a part

of the founding team at IIFL Investment Managers, Mr. Sandeep led the setup of offices in

various locations including Mumbai, Pune, Goa and Gujarat. He is an alumnus of IIM

Bangalore and VJTI Mumbai.

b) Mr. Pramod Kumar:

Mr. Pramod Kumar has over 26 years of experience in various aspects of capital markets

and investment advisory. Primary focus in various assignments has been in constructing

portfolios and designing investment solutions and strategies for clients using equities,

bonds, mutual funds and derivatives. This focus allowed for detailed analysis of business,

companies, investment products and tax structures. The other focus area throughout his

career was client relationship management. This allowed for certain degree of skill to be

built in communicating investment ideas and strategies to clients and reporting the progress

of their investment portfolios in a transparent, regular and an ethical manner. Working for

the investment advisory and capital market industry for the entire career has brought in a

great respect for regulation and keeping the clients interest as the major criteria, which in

turn has resulted in rewarding experience.

c) Mr. Yatin Shah

Mr. Shah is a Co-Founder & Executive Director at IIFL Investment Managers and has more

than sixteen years of experience in the financial services industry, across equity research

and private wealth management. Under his leadership, IIFL Investment Managers has

emerged as a pre-eminent leader in the domestic private wealth management space, advising

more than 10,000 ultra-high net-worth families. He started his career with Khandawala

Securities in Equity Research. Earlier he was associated with Kotak Group for more than 3

years in their Wealth Management division. Yatin has acquired his M.Sc. degree in Finance

from Cass Business School, London.

iii) Group company information

The top ten group companies of the Portfolio Manager on turnover basis, as per the audited

financial statements (FY 2017-2018) are as below:

8


1. IIFL Holdings Limited

2. India Infoline Finance Limited

3. India Infoline Housing Finance Limited

4. IIFL Wealth Finance Limited

5. IIFL Wealth Management Limited

6. IIFL Securities Limited (formerly known as India Infoline Limited. Change of

name effective from March 07, 2018)

7. IIFL Facilities Services Limited

8. IIFL Asset Management (Mauritius) Limited

9. IIFL Asset Management Limited

10. Samasta Microfinance Limited

iv) Details of services offered by the Portfolio Manager:

Discretionary Services:

The Portfolio Manager shall be acting in a fiduciary capacity with regard to the Client’s

account consisting of investments, accruals, benefits, allotments, calls refunds, returns

privileges, entitlements, substitutions and/or replacements or any other beneficial interest

including dividend, interest, rights, bonus as well as residual cash balances, if any

(represented both by quantity and in monetary value). The Portfolio Manager shall be acting

both as an agent as well as a trustee of the Client’s account.

Under these services, the choice as well as the timings of the investment decisions rest solely

with the Portfolio Manager. In other words, the Portfolio Manager shall have the sole and

absolute discretion to invest Clients’ Funds in any type of Securities and in any market as it

deems fit as per the executed agreement. The Securities invested / disinvested by the

Portfolio Manager for Clients in the same plans may differ from Client to Client. The

portfolio managers’ decision (taken in good faith) in deployment of the Clients’ fund is

absolute and final and cannot 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 mala fide,

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.

Notes:

• Investment under Portfolio Management Services will be only as per the applicable SEBI

Regulations;

• The un-invested amounts forming part of the Client’s Assets may be at the discretion of the

Portfolio Manager be held in cash or deployed in Liquid fund schemes, Exchange Traded

Index Funds, debt oriented schemes of Mutual funds, Gilt schemes, Bank deposits and other

short term avenues for Investment.

• The Portfolio Manager, with the consent of the Client, may lend the securities through an

Approved Intermediary, for interest.

9


• All of the above strategies are based on client’s investment objective(s) and should not be

construed as any Scheme promoted by the Company.

Non-Discretionary Services:

In the case of non-discretionary services, the investment objectives and the securities to be

invested would be entirely decided by the Client. The same could vary widely from client

to client. However, the execution would be carried out only after obtaining the approval

from the Client.

Under Non-Discretionary category, the investment decisions of the Portfolio Manager are

guided by the instructions received from the client under an agreement executed between

the portfolio manager and the client. The deployment of funds is at the sole discretion of the

client and is to be exercised by the portfolio manager in a manner strictly complies with the

client’s instruction. The decision of the client in deployment of funds and the handling of

his / her / its portfolio is absolute and final. The role of the Portfolio Manager apart from

adhering to investments or divestments upon instructions of the client is restricted to

providing market intelligence, research reports, trading strategies, trade statistics and such

other material which will enable the client to take appropriate investment decisions. For the

purpose of acting on client’s instructions, the Portfolio Manager shall take instructions in

writing or through any other media mutually agreed such as email, fax, telephone or suitable

and secured message and may include managing, renewing and reshuffling the portfolio,

buying and selling of securities, keeping safe custody of the securities and monitoring book

closures, dividend, bonus, rights, etc. so that all benefits accrue to the client’s portfolio, for

an agreed fee structure, entirely at the client’s risk.

Investment Advisory Services:

Portfolio Manager advice clients regarding investment/disinvestment in Securities.

However, discretion lies with the client whether to act upon it or to ignore the advice. The

Portfolio Manager will provide advisory portfolio management services, in terms of the

SEBI (Portfolio Manager) Regulations, 1993 and SEBI (Investment Advisers) Regulations,

2013, which shall be in the nature of Investment advice and may include advice relating to

investing in, purchasing, selling or otherwise dealing in securities or investment products,

and advice on investment portfolio containing securities or investment products, whether

written, oral or through any other means of communication for the benefit of the client.

Investment advice shall be for an agreed fee structure and for a period agreed and entirely

at the client’s risk. The Portfolio Manager shall act in a fiduciary capacity towards its client.

4) Penalties, pending litigation or proceedings, findings of inspection or investigations for

which action may have been taken or initiated by any regulatory authority:

Sr. No. Particulars Remarks

1 All cases of penalties imposed by the Board or the directions issued by

the Board under the Act or Rules or Regulations made there under:

None

2 The nature of the penalty / direction: None

10


3 Penalties imposed for any economic offence and/or violation of any

securities laws

None

4 Any pending material litigation / legal proceedings against the

portfolio manager / key personnel with separate disclosure regarding

pending criminal cases, if any:

None

5 Any deficiency in the systems and operations of the portfolio manager

observed by the Board or any regulatory agency:

None

6 Any enquiry / adjudication proceedings initiated by the Board 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:

Refer

Annexure

A

No penalties / directions have been issued by the SEBI under the SEBI Act or Regulations made

there against the Company. There are no pending material litigations or legal proceedings, findings

of inspections or investigations for which action has been taken or initiated by any regulatory

authority against the Portfolio Manager or its Directors, principal officers or employees or any

person directly or indirectly connected with the Portfolio Manager under the SEBI Act and

Regulations made there under relating to Portfolio Management Services.

The associate/ group companies of IIFL WAI are engaged in providing various financial services

including Stock Broking, Depository Business, NBFC etc. In the normal course of its Broking and

Depository business there arise arbitration matters/ client / Exchange proceedings before respective

Exchange / Depository / Forums, most of which get rectified / disposed-off in the normal course.

5) Services offered

Details of PMS Plans:

Minimum Investment Amount: Rs. 25.00 lakhs across all plans given below or as per

minimum investment amount prescribed by SEBI

I. Advisory Portfolio Plan

Type of PMS Service: Non-Discretionary

Objective: Long-term capital appreciation and/or income generation through investments

in a combination of debt, equity both directly and through mutual fund schemes in line

with Client’s investment objective.

Scope: The plan will enable a client to invest in a combination of equity and equity-

related, debt and debt-related instruments in line with his investment objective. The

investments could be either directly into listed equity shares and related instruments or

directly into bonds and related instruments or into mutual fund schemes. Funds could be

moved between the various instruments from time to time. The plan will not permit clients

to invest in derivative instruments other than for hedging purposes.

11


Suitable for: The long-term investor who is aware of the risks associated with investing

in the capital market, and seeks superior returns offered by the same over a 3-5-year

horizon or longer.

Underlying Asset class: Equity, Debt and related Mutual Funds schemes

Asset Allocation: Allocation to individual asset classes will be as per the individual

client’s requirements.

Withdrawal by client

Apart from any entry / exit loads that may be charged by the mutual fund schemes that

are invested in, there will be no entry / exit fees or charges at the time of entry into or exit

from the PMS.

• Part withdrawal shall be allowed for any amount subject to the fulfillment of the

minimum balance criteria as defined for the Advisory Portfolio Plan.

II. Opportunities Portfolio Plan

Type of PMS Service: Discretionary

Objective: The plan seeks to generate long-term capital appreciation from a portfolio of

stocks that have growth potential greater than broad market average or those that are

quoting below their intrinsic value. While this plan could invest in companies across

market capitalization segments, it is expected that investments would predominantly be

in large and large mid cap companies. The Plan may also invest in Equity mutual funds,

exchange traded funds and index funds. Funds could be moved between the various

instruments from time to time. At times when market conditions dictate that funds be held

in cash form, they may be deployed in debt / liquid / ultra-short bond funds / fixed maturity

plans / liquid ETFs or any other debt schemes launched by mutual funds.

Strategy: The plan will adopt a ‘buy and hold’ strategy in listed equity shares and other

equity-related securities of companies. Stock selection would be on a ‘bottom-up’

approach, with investment decisions based on the growth potential or value arbitrage.

Underlying Asset class: Equity, Debt and related Mutual Funds schemes. The plan will

not invest in other asset classes, and also not take up any positions in the F&O segment,

other than for purely hedging and for portfolio re-balancing purposes.

Asset Allocation: Allocation to individual asset classes will be assigned based on fund

manager’s conviction, market conditions and keeping in mind the predesigned norms.

Concentration: The plan will, under normal conditions, invest in a portfolio comprising

up to 15 stocks. However, the number of stocks may vary both ways depending on market

conditions.

Benchmark NIFTY 50 Index

12


Risk Management Measures: The following restrictions will apply at the time of

purchase:

▪ Single stock/Equity Mutual Fund Scheme: Exposure not to exceed 25% of total

NAV of the portfolio;

▪ Single sector: Exposure not to exceed 55% of total NAV of the portfolio;

▪ No limit on investments into debt / liquid / liquid plus / liquid ETFs / short-term

funds;

▪ Not more than 40% into a single group of companies.

▪ ETF and Index funds would not be subject to these restrictions

In cases where the Client introduces the corpus in the form of stocks or securities either

at the beginning or during the course of the Plan the portfolio manager will have a period

of 12 months from the date of the introduction of such stock or security to align the

portfolio in accordance with the above risk management criteria.

Suitable for: The investor who is aware of the risks associated with investing in equity

shares, and the relatively higher risks associated with illiquid shares of mid and small

sized companies, but who is seeking higher than market returns offered by the same in an

actively managed long-term portfolio.

III. Opportunities (NR) Portfolio Plan


Objective: The plan seeks to generate long-term capital appreciation from a portfolio of

stocks that have growth potential greater than broad market average or those that are

quoting below their intrinsic value. While this plan could invest in companies across

market capitalization segments, it is expected that investments would predominantly be

in large and large mid cap companies. The Plan may also invest in equity mutual funds,

exchange traded funds and index funds. Funds could be moved between the various

instruments from time to time. At times when market conditions dictate that funds be held

in cash form, they may be deployed in debt / liquid / ultra-short bond funds / fixed maturity

plans / liquid ETFs or any other debt schemes launched by mutual funds.

Strategy: The plan will adopt a ‘buy and hold’ strategy in listed equity shares and other

equity-related securities of companies. Stock selection would be on a ‘bottom-up’

approach, with investment decisions based on the growth potential or value arbitrage.






Concentration: The plan will, under normal conditions, invest in a portfolio comprising

up to 15 stocks. However, the number of stocks may vary both ways depending on market

conditions.

13


Benchmark: NIFTY 50 Index

Risk Management Measures: The following restrictions will apply:

▪ Single stock/Equity Mutual Fund Scheme: Exposure not to exceed 25% of total


▪ Single sector: Exposure not to exceed 55% of total NAV of the portfolio;

▪ No limit on investments into debt / liquid / liquid plus / liquid ETFs / short-term

funds;

▪ Not more than 40% into a single group of companies.

▪ ETF and Index funds would not be subject to these restrictions

In cases where the Client introduces the corpus in the form of stocks or securities either

at the beginning or during the course of the Plan the portfolio manager will have a period

of 12 months from the date of the introduction of such stock or security to align the

portfolio in accordance with the above risk management criteria.

Suitable for: The investor who is aware of the risks associated with investing in equity

shares, and the relatively higher risks associated with illiquid shares of mid and small

sized companies, but who is seeking higher than market returns offered by the same in an

actively managed long-term portfolio.

IV. Select Portfolio Plan


Objective: Long-term capital appreciation through investments in listed equity shares,

IPO’s, equity & debt mutual fund schemes, Bonds, Index Funds and ETFs.

Strategy: The plan will adopt a strategy of active management by investing in listed

equity shares, IPO’s, equity and debt mutual fund schemes, Bonds, Index Funds and

ETF’s with the objective of generating long-term capital appreciation. The equity mutual

fund schemes will generally be selected from among the open-ended diversified schemes

with a consistent track record. While this plan could invest in companies across market

capitalization segments, it is expected that investments in listed equity shares would be

made predominantly in large and large mid cap companies. The plan may also invest in

Index Funds and ETF’s. The plan may also invest in debt mutual funds and direct bonds

of all types to take advantage of the interest rate movements. At times when market

conditions dictate that funds be held in cash form, they may be deployed in liquid / ultra-

short bond funds or any other debt schemes launched by mutual funds. The plan will not

invest in derivative instruments other than for hedging purposes.

Underlying Asset class: Equity, Debt and related direct Bonds and Mutual Funds

schemes. The plan will not invest in other asset classes, and also not take up any positions

in the F&O segment, other than for purely hedging and for portfolio re-balancing

purposes.



14


Benchmark: CRISIL Hybrid 35 + 65 Aggressive Index

Risk Management Measures: The following restrictions will apply:

▪ Single equity stock exposure through the secondary market not to exceed 20%

of the total NAV of the portfolio;

▪ Not more than 45% into a single equity mutual fund scheme;

▪ Not more than 55% into a single mutual fund debt scheme.

▪ Not more than 55% on face value basis into a single Direct Bond of rating AA+

or above.

The above limits will not apply for investments made into liquid schemes, index funds,

ETF’s and ultra-short-term schemes where the investments can go up to 100%.

In cases where the Client introduces the corpus in the form of units of mutual fund at the

beginning or during the course of the Plan, the portfolio manager will have a period of 12

months from the date of the introduction of such units to align the portfolio in accordance

with the above risk management criteria.



horizon or longer.

V. Income Generator Plan


Objective: Capital preservation, income generation and capital appreciation through

investments predominantly in fixed income securities and equities.

Strategy:

Fixed Income

The Plan will adopt an active management style and invest across the yield curve in the

following securities with objective to generate income and take advantage of interest rate

movements. The Plan will invest in anyone or more of the following:

• Certificates of Deposit – rated A1 or equivalent

• Commercial Papers – rated A1 or equivalent

• Money Market (Liquid) mutual funds

• Debt mutual funds – Ultra Short-Term Bond, Short Term, Income and Gilt Mutual

Fund Schemes

• Debt ETF’s & Index Funds

• Coupon bearing bonds – Taxable or Tax Free (Sovereign)

• Coupon – bearing Bonds - Taxable or Tax-Free (PSU issuers)

• Coupon – bearing Bonds, including Pass Through Certificates and any other type

of securitised instruments- (Corporate issuers) – rated AA or higher

• Zero – Coupon Bonds – PSU or corporate issuers – rated AA or higher

• Preference Shares – rated AA or higher

15


Equities

The Plan will also with objective to generate long term capital appreciation invest in

equities through the following type of securities

• Listed equity shares of companies (primary or secondary market)

• Equity mutual funds including ETFs and index funds.

The focus of the Plan would be to invest in combination for the long term (greater than 3

years) and generate income at regular intervals.




Asset Allocation:

▪ Equity and equity-related (including mutual funds, stocks & equity ETFs) - 0% to

25%

▪ Debt and debt-related (including mutual funds & debt ETFs) - 0% to 100%

Benchmark: CRISIL Composite Bond Fund Index

Risk Management Measures: The following restrictions (with respect to the NAV of the

Plan as on the date of investment) will apply:

▪ Not more than 20% in Certificates of Deposit issued by a single bank;

▪ Not more than 10% in Commercial Papers issued by a single issuer;

▪ No investment in CDs and CPs rated lower than A1 or equivalent;

▪ Not more than 20% in bonds (taxable or tax-free) issued by a single PSU issuer

with AAA rating; and not more than 10% in bonds (taxable or tax-free) issued

by a single PSU issuer rated AA or AA+;

▪ Not more than 10% in bonds issued by a single corporate entity with AAA rating;

and not more than 5% in bonds issued by a single corporate entity rated AA or

AA+;

▪ Not more than 25% in aggregate in bonds (taxable or tax-free) issued rated lower

than AAA;

▪ Not more than 30% in a single debt mutual fund scheme (whether open-ended

or close-ended);

▪ Not more than 10% in Preference Shares issued by a single company;

▪ Equity mutual fund investments to be only through open-ended equity or

balanced mutual fund schemes; not more than 25% in any single scheme;

▪ Not more than 15% in direct equity shares of a single company;

The above limits will not apply for investments made into central government securities,

money market (liquid) funds and ultra-short-term bond funds, where investments could

go upto 100%.

In cases where the Client introduces the corpus in the form of units of mutual funds at the

beginning or during the course of the Plan, the portfolio manager will have a period of 12

16


months from the date of the introduction of such units to align the portfolio in accordance


Suitable for : The long-term investor who is aware of the risks associated with investing

in market-linked fixed income securities in particular, and in the capital markets in

general, and seeks superior returns offered by the same over a 3-5-year horizon or longer.

VI. Implemented Solutions Plan


Objective: The objective of the Plan is to generate long term capital appreciation by

investing in multiple asset classes and investment security vehicles according to four

different risk-return patterns through four sub-plans. Long term appreciation will be

generated by actively adjusting asset allocation among multiple asset classes. Each of the

four sub-plans will have varying asset allocations suitable for its specific investment

objective. Each sub-plan will be constructed based on a model which will take both

quantitative and qualitative investment factors.

Strategy: The Plan proposes to invest in multiple asset classes which would comprise of

Sr.

No. Asset Class Investment vehicles:

1 Equity

Direct exposure to Equities, Mutual Funds, Index Funds,

Exchange Traded Funds, and Global Equity Feeder Funds

domiciled in India

2 Debt

Mutual Funds, Exchange Traded Funds, Bonds (including Tax

Free Bonds, Inflation Indexed Bonds, Zero Coupon Bonds,

Deep Discount Bonds), Global Bond Feeder Funds domiciled

in India

3 Commodity Gold Exchange Traded Funds, ETFs and Mutual Funds

4 Cash Mutual Funds and Exchange Traded Funds

Underlying Asset class: Equity, Debt, Commodity ETFs and liquid and other Mutual

Funds schemes. The plan will not invest in other asset classes, and also not take up any

positions in the F&O segment, other than for purely hedging purposes.


manager’s conviction, market conditions and keeping in mind the following norms.

Asset Class Sub-Plan 1 -

Conservative

Sub-Plan 2-

Moderate

Sub-Plan 3 –

Moderately

Aggressive

Sub-Plan 4 –

Aggressive

Low High Low High Low High Low High

Money

Market

0% 20% 0% 40% 0% 40% 0% 40%

17


Fixed Income 85% 100% 35% 90% 35% 70% 15% 55%

Equity 0% 15% 10% 35% 25% 60% 25% 85%

Commodities 0% 0% 0% 10% 0% 15% 0% 20%

Benchmark:

Portfolio Benchmark

Sub-Plan 1 - Conservative CRISIL Liquid Fund Index

Sub-Plan 2 - Moderate CRISIL Hybrid 75 + 25 Conservative Index

Sub-Plan 3 - Moderately Aggressive CRISIL Hybrid 50 + 50 Moderate Index

Sub-Plan 4 - Aggressive CRISIL Hybrid 35 + 65 Aggressive Index


purchase:

▪ Single stock / equity or debt mutual fund: Exposure not to exceed 25% of total


▪ Single sector (stocks only): Exposure not to exceed 55% of total NAV of the

portfolio;

▪ Not more than 40% into a single group of companies (stocks only);

▪ Index ETF’s and Index Funds would not be subject to the above restrictions;

▪ Liquid Funds, Ultra Short-Term Fund and Liquid ETF’s would not be subject to

the above restrictions

In cases where the Client introduces the corpus in the form of Securities at the beginning

or during the course of the Plan, the portfolio manager will have a period of 12 months

from the date of the introduction of such Securities to align the portfolio in accordance


Suitable for:

Sub-Plan 1 - Conservative: This is suited for investors with very low tolerance to

volatility in capital. The portfolio is oriented towards capital protection with minimal risk

to principal invested. The portfolio return trajectory is expected to exhibit low volatility.

The objective is to generate long term performance that outperforms inflation.

Sub-Plan 2 - Moderate: This is suited for investors with moderately conservative risk

appetite and return expectation of inflation plus 100 basis points over a 3-year period. The

return trajectory is expected to be consistently above risk free rate of return. The secondary

objective is to outperform bank fixed deposit returns by 200 basis points post tax over a

3-year period.

Sub-Plan 3 - Moderately Aggressive: This is suited for investors with moderate risk

appetite and return expectation to outperform inflation on a post-tax basis in a 3-year cycle

by around 200 basis points per annum. The portfolio return trajectory is expected to be to

18


be less volatile over its bench mark. The secondary objective is to outperform bank fixed

deposit returns by 200 basis points post tax and CRISIL Balanced Fund Index by 100

basis points over a 3-year period. The portfolio is suited for a client with capital building

objective, high savings rate and who does not anticipate cash flow from the portfolio for

a 3-year period.

Sub-Plan 4 – Aggressive: This is suited for investors with high risk appetite and relatively

higher returns expectations. The primary portfolio objective is to outperform inflation on

a post-tax basis over a 3-year period by around 500 basis points per annum. The portfolio

return trajectory is expected to be less volatile compared to Nifty over a 3-year period.

The secondary objective is to outperform Nifty on a 3-year basis with relatively lower

volatility. The portfolio is suited for a client whose primary capital building objective,

high savings rate and who does not expect cash flow from the portfolio for a 3-year period.

VII. Implemented Solutions (NR) Plan


Objective: The objective of the Plan is to generate long term capital appreciation by

investing in multiple asset classes and investment security vehicles according to four

different risk-return patterns through four sub-plans. Long term appreciation will be

generated by actively adjusting asset allocation among multiple asset classes. Each of the

four sub-plans will have varying asset allocations suitable for its specific investment

objective. Each sub-plan will be constructed based on a model which will take both

quantitative and qualitative investment factors.

Strategy: The Plan proposes to invest in multiple asset classes which would comprise of

Sr.

No. Asset Class Investment vehicles:

1 Equity

Direct exposure to Equities, Mutual Funds, Index Funds,

Exchange Traded Funds, and Global Equity Feeder Funds

domiciled in India

2 Debt

Mutual Funds, Exchange Traded Funds, Bonds (including

Tax Free Bonds, Inflation Indexed Bonds, Zero Coupon

Bonds, Deep Discount Bonds), Global Bond Feeder Funds

domiciled in India

3 Commodity Gold Exchange Traded Funds, ETFs and Mutual Funds

4 Cash Mutual Funds and Exchange Traded Funds

Underlying Asset class: Equity, Debt, Commodity ETFs and liquid and other Mutual

Funds schemes. The plan will not invest in other asset classes, and also not take up any

positions in the F&O segment, other than for purely hedging purposes.


manager’s conviction, market conditions and keeping in mind the following norms.

19


Asset Class Sub-Plan 1 -

Conservative

Sub-Plan 2-

Moderate

Sub-Plan 3 –

Moderately

Aggressive

Sub-Plan 4 –

Aggressive

Low High Low High Low High Low High

Money

Market

0% 20% 0% 40% 0% 40% 0% 40%

Fixed Income 85% 100% 35% 90% 35% 70% 15% 55%

Equity 0% 15% 10% 35% 25% 60% 25% 85%

Commodities 0% 0% 0% 10% 0% 15% 0% 20%

Benchmark:

Portfolio Benchmark

Sub-Plan 1 - Conservative CRISIL Liquid Fund Index

Sub-Plan 2 - Moderate

CRISIL Hybrid 75 + 25 Conservative

Index

Sub-Plan 3 - Moderately Aggressive CRISIL Hybrid 50 + 50 Moderate Index

Sub-Plan 4 - Aggressive

CRISIL Hybrid 35 + 65 Aggressive

Index


purchase:

▪ Single stock / equity or debt mutual fund: Exposure not to exceed 25% of total


▪ Single sector (stocks only): Exposure not to exceed 55% of total NAV of the

portfolio;

▪ Not more than 40% into a single group of companies (stocks only);

▪ Index ETF’s and Index Funds would not be subject to the above restrictions;

▪ Liquid Funds, Ultra Short-Term Fund and Liquid ETF’s would not be subject to

the above restrictions

In cases where the Client introduces the corpus in the form of Securities at the beginning

or during the course of the Plan, the portfolio manager will have a period of 12 months

from the date of the introduction of such Securities to align the portfolio in accordance


Suitable for:

Sub-Plan 1 - Conservative: This is suited for investors with very low tolerance to

volatility in capital. The portfolio is oriented towards capital protection with minimal risk

to principal invested. The portfolio return trajectory is expected to exhibit low volatility.

The objective is to generate long term performance that outperforms inflation.

20


Sub-Plan 2 - Moderate: This is suited for investors with moderately conservative risk

appetite and return expectation of inflation plus 100 basis points over a 3-year period. The

return trajectory is expected to be consistently above risk free rate of return. The secondary

objective is to outperform bank fixed deposit returns by 200 basis points post tax over a

3-year period.

Sub-Plan 3 - Moderately Aggressive: This is suited for investors with moderate risk

appetite and return expectation to outperform inflation on a post-tax basis in a 3-year cycle

by around 200 basis points per annum. The portfolio return trajectory is expected to be to

be less volatile over its bench mark. The secondary objective is to outperform bank fixed

deposit returns by 200 basis points post tax and CRISIL Balanced Fund Index by 100

basis points over a 3-year period. The portfolio is suited for a client with capital building

objective, high savings rate and who does not anticipate cash flow from the portfolio for

a 3-year period.

Sub-Plan 4 – Aggressive: This is suited for investors with high risk appetite and relatively

higher returns expectations. The primary portfolio objective is to outperform inflation on

a post-tax basis over a 3-year period by around 500 basis points per annum. The portfolio

return trajectory is expected to be less volatile compared to Nifty over a 3-year period.

The secondary objective is to outperform Nifty on a 3-year basis with relatively lower

volatility. The portfolio is suited for a client whose primary capital building objective,

high savings rate and who does not expect cash flow from the portfolio for a 3-year period.

XVIII Advisory Portfolio Plan II

Type of PMS Service: Non-Discretionary

Objective: Long-term capital appreciation and/or income generation through investments

in a combination of debt, equity both directly and through mutual fund schemes in line

with Client’s investment objective.

Scope: The plan will enable a client to invest in a combination of equity and equity-

related, debt and debt-related instruments in line with his investment objective. The

investments could be either directly into listed equity shares and related instruments or

directly into bonds and related instruments or into mutual fund schemes. Funds could be

moved between the various instruments from time to time. The plan will not permit clients

to invest in derivative instruments other than for hedging purposes.



horizon or longer.

Underlying Asset class: Equity, Debt and related Mutual Funds schemes

Asset Allocation: Allocation to individual asset classes will be as per the individual

client’s requirements.

Withdrawal by client

21


Apart from any entry / exit loads that may be charged by the mutual fund schemes that

are invested in, there will be no entry / exit fees or charges at the time of entry into or exit

from the PMS.

• Part withdrawal shall be allowed for any amount subject to the fulfillment of the

minimum balance criteria as defined for the Advisory Portfolio Plan II

Policy for Investment in Group/Associate Companies

The Portfolio Manager may utilize the services of the Group Companies and / or any

associate company established or to be established at a later date, in case such a company

is in a position to provide requisite services to the Portfolio Manager. The Portfolio

Manager will conduct its business with the aforesaid companies (including their

employees or relatives) on commercial terms and on arm’s length basis and at mutually

agreed terms and conditions and to the extent permitted under SEBI Regulations after

evaluation of the competitiveness of the pricing offered and the services to be provided

by them.

The Portfolio Manager may invest in shares, units of mutual funds, alternative investment

funds, debt, deposits and other financial instruments issued or managed by the portfolio

manager or any of the group / associate companies of the Portfolio Manager to the extent

permitted under the SEBI Regulations.

Type of Securities where investments may be made by the Portfolio Manager under any

of the above-mentioned Services

(i) Shares, scrips, stocks, bonds, debentures, debentures stock or other marketable

securities of a like nature in or of any incorporated company or other body corporate;

(ii) Derivative(s);

(iii) Units or any other instrument issued by any collective investment scheme;

(iv) Security receipt as defined in clause (zg) of section 2 of the Securitization and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(v) Government securities;

(vi) Units or any other such instrument issued to the investors under any scheme of mutual

fund, alternative investment fund, venture capital fund;

(vii) Any certificate or instrument (by whatever name called), issued to any investor by

any issuer being a special purposes distinct entity which possesses any debt or receivable,

including mortgage debt, assigned to such entity, and acknowledging beneficial interest

of such investor in such debt or receivable, including mortgage debt, as the case may be;

(viii) Such other instruments as may be declared by the Central Government to be

securities;

(ix) Rights or interest in securities;

The above mentioned securities are illustrative in nature. Investments can be made in

various equity and equity related securities including 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, units of alternative investment funds, ETFs and other eligible modes of

investment as may have permitted by the Regulations from time to time. The Portfolio

Manager may from time to time invest the idle cash balance in units of Liquid Schemes

22


of Mutual Funds. Investments can be made in listed, unlisted, convertible, non-

convertible, secured, unsecured, rated or unrated or of any maturity, and acquired through

secondary market purchases, RBI auctions, open market sales conducted by RBI etc.,

Initial Public Offers (IPOs), other public offers, bilateral offers, placements, rights, offers,

negotiated deals, etc. The debt category will include all types of debt securities including

but not limited to Securitised Debt, Pass Through Certificates, Debentures (fixed, floating,

Variable Coupon, and equity index /stocks /stocks basket linked), Bonds, Government

securities issued or guaranteed by Central or State Government, non-convertible part of

partially convertible securities, corporate debt of both public and private sector

undertakings, securities issued by banks (both public and private sector) and development

financial institutions, bank fixed deposits, commercial papers, certificate of deposit, trade

bills, treasury bills and other money market instruments, units of mutual funds, units of

SEBI registered alternative investment funds & Venture Capital Funds, 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.

Asset Classes for investment will always be subject to the scope of investments as may be

agreed upon between the Portfolio Manager and the Client by way of any agreement,

explicit or implied including this disclosure document, addenda thereof, other documents

and communications in writing and emails duly authenticated and exchanged between the

client and WAI.

6) Risk Factors:

The investments made in the securities are subject to market risk and there is no assurance or

guarantee that the value of or return on the investments made will always appreciate, it could

depreciate to an unpredictable extent. Following are the risk factors as perceived by

management:

• Investment in equities, debt instruments, derivatives and mutual funds are subject to market

risks and there is no assurance or guarantee that the objective of the portfolios will be

achieved.

• As with any investment in securities, the NAV of the portfolio can go up or down depending

upon the factors and forces affecting the capital markets.

• The performance of the portfolios may be affected by changes in Government policies,

general levels of interest rates and risks associated with trading volumes, liquidity and

settlement systems in equity and debt markets.

• The past performance of the Portfolio Manager does not indicate the performance of the any

portfolio in future. Investors are not being offered any guaranteed returns through these

Portfolios

• The names of the portfolios do not in any manner indicate their prospects or returns. The

performance in the equity portfolio may be adversely affected by the performance of

individual companies, changes in the market place and industry specific and macro-

economic factors.

• Investors may note that Portfolio Manager’s investment decisions may not be always profitable, as actual market movements may be at variance with anticipated trends.

• Investors may not be able to voluntarily withdraw from the portfolio. In addition, they may not be able to transfer any of the interests, rights, or obligations with regard to the

23


Portfolio except as may be provided in the client agreement and the applicable regulations.

• The Portfolio Manager is not responsible for the ongoing risk profiling of its existing investors. The investor should read the disclosure document and terms and conditions of the product properly before making any investment decision

• Investments in debt instruments are subject to default risk and interest rate risk. Interest rate

risk results from changes in demand and supply for money and other macroeconomic factors

and creates price changes in the value of the debt instruments. Consequently, the NAV of

the portfolio may be subject to fluctuation.

• Investments in debt instruments are subject to reinvestment risks as interest rates prevailing

on interest amount or maturity due dates may differ from the original coupon of the bond,

which might result in the proceeds being invested at a lower rate.

• Risks arising out of non-diversification of portfolio- A highly concentrated portfolio/plan

will carry higher amount of risk as compared to a fairly well diversified portfolio

• The portfolio may invest in non-publicly offered debt securities and unlisted equities. This

may expose the portfolio to liquidity risks.

• Engaging in securities lending is subject to risks related to fluctuations in collateral

value/settlement/liquidity/ counter party.

• The portfolio may use derivatives instruments like index futures, stock futures and options

contracts, warrants, convertible securities, swap agreements or any other derivative

instruments for the purpose of hedging and portfolio balancing, as permitted under the

Regulations and guidelines.

• Usage of derivatives will expose the portfolio to certain risks inherent to such derivatives.

As and when the portfolios invest in the derivatives market there are risk factors and issues

concerning the use of derivatives that investors should understand. Derivative products are

specialized instruments that require investment techniques and risk analyses different from

those associated with stocks and bonds. The use of a derivative requires an understanding

not only of the underlying instrument but of the derivative itself. Derivatives require the

maintenance of adequate controls to monitor the transactions entered into, the ability to

assess the risk that a derivative adds to the portfolio and the ability to forecast price or

interest rate movements correctly. There is the possibility that a loss may be sustained by

the portfolio as a result of the failure of another party (usually referred to as the “counter

party”) to comply with the terms of the derivatives contract. Other risks in using derivatives

include the risk of mis-pricing or improper valuation of derivatives and the inability of

derivatives to correlate perfectly with underlying assets, rates and indices. Thus, derivatives

are highly leveraged instruments. Even a small price movement in the underlying security

could have a large impact on their value. The total exposure of the client’s portfolio will not exceed his funds placed with the portfolio manager and the maximum loss in the worst-case scenario will be limited to the client’s portfolio. In case of all the above-mentioned strategies the downside will be restricted to the client’s portfolio

• If the portfolio are invested in foreign securities or securities denominated in foreign

currency, the value of such investment may also be adversely affected due to fluctuation in

foreign currency apart from other factors which can be political restriction, change in

regulations etc.

• The NAV may be affected by changes in settlement periods and transfer procedures.

• Risk arising from the Investment objective, investment strategy and asset allocation, market

risk, political and geopolitical risk and risk arising from changing business dynamics may

affect portfolio returns.

24


• The Clients may not be able to avail of securities transaction tax credit benefit and/or tax

deduction at source (TDS) credit and this may result in an increased incidence of tax on the

Clients. The Client may incur a higher rate of TDS/Dividend Distribution Tax in case the

investments are aggregated in the name of the Portfolio Management plan.

• The portfolio manager shall take all reasonable steps to invest the funds in a prudent manner

such decisions shall not always prove to be profitable or correct. Consequently, any loss

arising from such decisions shall be a risk assumed by the client.

• Performance of the Portfolios may be impacted as a result of specific investment restrictions

provided by the client.

7) Client Representation:

a) Details of client’s accounts active:

Sr.

No.

Category of clients

No. of

clients

Funds managed

(Amt in Rs. in

Lakhs)

Discretionary/ Non-

Discretionary/Advisory

i)

Group company

2016-17, 2017-18 &

2018-19

N.A. N.A. N.A.

ii) Others:

▪ 2016-17 257 77665.49 Non-Discretionary

▪ 2016-17 76 345935.64 Discretionary

▪ 2016-17 5 25616.83 Advisory

▪ 2017-18 302 98190.50 Non-Discretionary

▪ 2017-18 103 368169.70 Discretionary

▪ 2017-18 4 27200.40 Advisory

▪ 2018-19 289 121647 Non-Discretionary

▪ 2018-19 85 347852 Discretionary

▪ 2018-19 4 28874.56 Advisory

b) Complete Disclosure in respect of transactions with related parties as per the Accounting

standards specified by the Institute of Chartered Accountants of India:

Transactions with related parties for the period ended 31.03.2019

a) List of Related parties:

25


Nature of relationship Name of party

Director / Key Management Personnel

Mr. A. Pramod Kumar, Director Mr. Sandeep Jethwani, Director (w.e.f November

22,2018) Mr. Yatin Shah, Director (w.e.f November 22,2018) Mr. V. Mahadevan (resigned w.e.f November 22,2018) Mr. Chandu Nair (resigned w.e.f November 22,2018)

Holding Company IIFL Wealth Management Limited Other Related Parties *

(Ultimate Holding Company upto April

01, 2018)

IIFL Holdings Limited

Fellow Subsidiaries

IIFL Asset Management Limited IIFL Trustee Limited IIFL Wealth Finance Limited IIFL Investment Adviser and Trustee Services Limited IIFL Alternate Asset Advisors Limited IIFL Distribution Services Limited IIFL Wealth Securities IFSC Limited (w.e.f June 22,

2018) IIFL Altiore Advisors Private Limited (w.e.f November

05, 2018) IIFL Wealth Employee Benefit Trust (upto March 31,

2018) IIFL Wealth Employee Benefit Trust (w.e.f August 01,

2018) IIFL Private Wealth Management (Dubai) Limited IIFL (Asia) Pte. Limited IIFL Inc. IIFL Private Wealth Hong Kong Limited IIFL Asset Management (Mauritius) Limited (Formerly

IIFL Private Wealth (Mauritius) Ltd) IIFL Private Wealth (Suisse) SA (upto Feb 28, 2019) IIFL Securities Pte. Limited IIFL Capital (Canada) Limited IIFL Capital Pte. Limited

Other Related Parties *

(Group Companies upto April 01, 2018)

IIFL Securities Limited (Formerly known as India

Infoline Limited) IIFL Commodities Limited (Formerly known as India

Infoline Commodities Limited) India Infoline Finance Limited IIFL Home Finance Limited IIFL Insurance Brokers Limited (Formerly known as

India Infoline Insurance Brokers Limited) IIFL Management Services Limited (Formerly India

Infoline Insurance Services Limited) IIFL Wealth (UK) Limited

26


IIFL Capital Inc. IIFL Facilities Services Limited (Formerly known as

IIFL Real Estate Limited) Clara Developers Private Limited Samasta Microfinance Limited (w.e.f March 01, 2017) IIFL Asset Reconstruction Limited (w.e.f May 09,

2017)

Other related parties

Mr. Karan Bhagat Mr. Amit Shah (resigned w.e.f. January 24, 2019) Mr. Nirmal Jain Mr. Venkataraman Rajamani General Atlantic Singapore Fund Pte Limited Ms. Shilpa Bhagat (Spouse of Mr. Karan Bhagat) Ms. Madhu Jain (Spouse of Mr. Nirmal Jain) Mr. Prakashchandra Shah (Relative of Mr. Yatin Shah) India Infoline Foundation Kyrush Investments Kyrush Realty Private Limited Naykia Realty Private Limited India Alternatives Investment Advisors Private Limited

(Fellow Subsidiary Upto March 31, 2017) Yatin Investment Orpheous Trading Private Limited Ardent Impex Private Limited 5paisa Capital Limited 5paisa P2P Limited 5paisa Insurance Brokers Limited MNJ Consultants Private Limited Sunder Bhawar Ventures Private Limited Sunder Bhanwar Holiday Home Private Limited ( Upto

Mar 04, 2018) Khimji Kunverji & Co (Chartered Accountant Firm of

Mr. Nilesh Vikamsey) Yatin Prakash Shah (HUF) Nirmal Madhu Family Private Trust Kalki Family Private Trust Kush Family Private Trust Kyra Family Private Trust Bhagat Family Private Trust Kyrush Family Private Trust Naykia Family Private Trust Prakash Shah Family Private Trust Naysa Shah Family Private Trust Kiaah Shah Family Private Trust

27


I) Date of Demerger – 1 April 2018 being the appointed date in terms of the Composite Scheme of

Arrangement amongst India Infoline Finance Limited ("IIFL Finance”), IIFL Holdings Limited ("IIFL

Holdings”), India Infoline Media and Research Services Limited (“IIFL M&R”), IIFL Securities

Limited (“IIFL Securities”), IIFL Wealth Management Limited (“IIFL Wealth") and IIFL Distribution

Services Limited (“IIFL Distribution”), and their respective shareholders, under Sections 230 - 232 and

other applicable provisions of the Companies Act, 2013 (“Scheme”) approved by the Board of Directors

of the Holding Company at its meeting held on January 31, 2018, and approved by the National

Company Law Tribunal Bench at Mumbai (Tribunal) on March 07, 2019 under the applicable

provisions of the Companies Act, 2013.

b) Significant Transactions with related parties Amount in Rs.

Nature of

Transaction

Holdi

ng

Com

pany

Fellow

Subsidiari

es

Group

Compani

es

Other

Relate

d

Partie

s

Key

Manageria

l Personnel

Total

Remuneration

Mr Pramod

Kumar 2018-19 - -

1,20,53,000

1,20,53,000

2017-18

1,00,70,985

1,00,70,985

Mr

Mahadevan 2018-19 - -

92,40,000

92,40,000

2017-18

77,21,361

77,21,361

Dividend Paid

Mr Pramod

Kumar 2018-19

41,96,018

41,96,018

2017-18 95,004

95,004

Mr

Mahadevan 2018-19

36,70,924

36,70,924

2017-18 83,115

83,115

Mr Chandu

Nair 2018-19

11,80,000

11,80,000

2017-18

26,717

26,717

PMS fee income

Mr Pramod

Kumar 2018-19

76,309

76,309

2017-18

71,667

71,667

Mr K R

Anandakuma

ran Nair

2018-19

4,94,608

4,94,608

28


2017-18

4,96,195

4,96,195

Mr Chandu

Nair 2018-19

4,58,088

4,58,088

2017-18

6,61,487

6,61,487

Proceeds from sale of fixed assets

Mr Pramod

Kumar 2018-19

5,50,000

5,50,000

2017-18

-

-

Mr

Mahadevan 2018-19

13,04,690

13,04,690

2017-18

-

-

Allocation / Reimbursement of expenses Paid

IIFL

Alternate

Assets

Advisors Ltd

2018-19

1,30,454

- -

1,30,454

2017-18

- - -

-

Allocation / Reimbursement of expenses Received

IIFL Wealth

Management

Ltd

2018-19

18,71

,920

- -

18,71,920

2017-18

- - -

-

c) Amount due to / from related

parties (Closing Balance)

Nature of

Transaction

Holdi

ng

Com

pany

Fellow

Subsidiari

es

Group

Compani

es

Other

Relate

d

Partie

s

Key

Manageme

nt

Personnel

Total

Sundry payables:

IIFL Wealth

Management

Ltd

2018-19

18,71

,920

18,71,920

Sundry receivables:

IIFL

Alternate

Assets

Advisors Ltd

2018-19

1,30,454

1,30,454

29


30


8) The financial Performance of Portfolio Manager

8.1 Capital Structure (Rs. in lakhs)

As on

31st Mar-2019

As on

31st Mar-2018

As on

31 Mar- 2017

a) Share Capital

• Paid-up capital:

Equity

• Paid up Capital:

Preference

• Share Forfeiture

account

534.34

0.50

534.34

0.50

534.34

0.50

b) Share Premium - - -

c) Free reserves

(excluding re-valuation

reserves)

1906.23 1343.43 708.51

d) Total (a) + (b) + (c) 2441.07 1878.27 1241.42

8.2 Deployment of Resources (Rs. in lakhs)

As on

31st Mar-2019

As on

31st Mar-2018

As on

31-Mar-2017

(a) Fixed Assets (net of

depreciation) *

22.94

35.93 29.43

(b) Plant & Machinery and

Office Equipment (net of

depreciation) *

125.40

115.33 137.85

(c) Quoted Investments

(Stock in trade)

0.00

0.00 0.00

(d) Unquoted Investments

(Investments in mutual

funds)

2317.91 1919.12 1215.21

(e) Details of Liquid Assets

(net)

161.1 -41.09

-167.96

(f) Others-

Investment in Subsidiaries 0.00 3.00 3.00

Deferred Revenue

Expenditure not written

off

0.00 0.00 0.00

* Regrouped

31


8.3 Major Sources of Income: (Rs. in lakhs)

Income

As on

31st Mar-2019

As on

31st Mar 2018

As on

31st Mar -2017

*Fees charged as

% of issue

(a) Fee Income 3102.78 2993.42 2241.68

N. A.

(b) Others 230.32 95.20 48.55 N. A.

8.4 Net Profit (Rs. In lakhs)

Profit after

taxation

As on

31st Mar-2019

As on

31st Mar-2018

As on

31-Mar-2017

827.57 663.64 308.06

Performance of the Portfolio Manager for the last 3 years

Name of the Product

Year (For the Full

Financial year)

Portfolio

Performance (%),

Net of all fees and

charges levied by the

Portfolio Manager

Benchmark

Performance

%

Non-Discretionary – Advisory

Portfolio.

Activation Date: 21st Aug 2009

Benchmark: CRISIL Hybrid 50

+ 50 Moderate Index

2018-19 6.69% 13.54%

2017-18 8.78% 7.48%

2016-17 17.45% 13.67%

Discretionary - Opportunities

Portfolio Activation Date:

2nd May 2013 Bench Mark:

CNX Nifty

2018-19 3.57% 14.93%

2017-18

6.60%

10.25%

2016-17

18.08%

18.55%

Discretionary – Select Portfolio 2018-19 6.60% 10.76%

2017-18 6.17% 8.04%

32


Activation Date: 15th Jul 2013

Bench Mark: CRISIL Balanced

Fund Index

2016-17 14.10% 15.29%

Discretionary – Implemented

Solutions Plan - Aggressive.

Activation Date: 11th Jun 2014

Benchmark: CNX Nifty

2018-19 5.96 % 10.76%

2017-18 6.06% 10.25%

2016-17 16.27% 18.55%


Solutions Plan- Conservative

Activation Date: 18th Jun 2014

Bench Mark: CRISIL Liquid

Fund Index

2018-19 6.63% 7.60%

2017-18 5.93%

7.06%

2016-17 9.99% 7.23%

Discretionary –Income

Generator Plan

Activation Date: 22nd Sep 2014

Bench Mark: CRISIL

Composite Bond Fund Index

2018-19 5.32% 6.33%

2017-18 11.20% 5.01%

2016-17

6.46% 10.98%


Solutions Plan- Moderate

Activation Date: 15th Dec 2014

Bench Mark: Nifty 30%: Crisil

Bond Fund Index 70%


Solutions Plan- Aggressive

(NR)

Activation Date: 6th Feb 2015

Bench Mark: CNX Nifty

2018-19 6.12% 9.96%

2017-18

6.60%

6.47%

2016-17

11.98% 12.53%

2018-19 3.10% 10.76%

2017-18 5.38% 10.25%

2016-17 18.22% 18.55%

2018-19 4.44% 13.54%

33



Solutions Plan- Moderately

Aggressive

Activation Date: 8th Jan 2016

Bench Mark: Nifty 50%:

Crisil Bond Fund Index 50%

2017-18 5.81% 7.48%

2016-17

14.37%

13.67%


Solutions Plan- Moderately

Aggressive (NR)


Bench Mark: Nifty50%: Crisil

Bond Fund Index 50%

2018-19 5.77% 13.54%

2017-18

5.24%

7.48%

2016-17 4.29% 5.97%


Solutions – Moderate (NR)

Activation Date: 22nd May 2017

Bench Mark: Nifty30%:Crisil

Bond Fund Index 70%

2018-19 5.92% 9.96%

2017-18 4.63% 5.01%

2016-17 N.A. N.A.

Non-Discretionary – Advisory

Portfolio II


Benchmark: S&P_CNX_500

2018-19 7.85% N A

2017-18

3.99%

3.75%

2016-17

N.A.

N.A.

Discretionary – Opportunities

Portfolio (NR) Activation Date:

7th Feb 2018

Benchmark: CNX Nifty

2018-19 2.32% 14.93%

2017-18

-1.21%

-3.66%

2016-17

N.A.

N.A.

34


9) Nature of expenses:

Various expenses / cost / charges / fees etc. related to management of portfolio will be debited

to the client’s account as and when incurred or provided. The following are indicative types of

expenses for clients availing the Portfolio Management Services:

i) Custody Fees: Custodian fees would be recovered by us for assuming responsibility for

ensuring all administrative matters such as settlement of transactions, collection of dividend,

collection of bonus shares and all other corporate benefits related to the portfolio including

depository charges. In case a custody work is outsourced to any Custodian then the fees charged

by the Custodian would be levied.

ii) Registrar & Transfer Agent Fees: Would be recovered, if applicable. Fees payable for the

Registrars and Transfer Agents in connection with effecting transfer of any or all of the

securities and bonds including stamp duty, cost of affidavits, notary charges, postage stamps

and courier charges.

iii) Brokerage & Transaction Cost: The investments under the Portfolio Management Plan

would be usually done through registered members of stock exchange who charge brokerage

up to a maximum of 1% of contract value. In addition to the brokerage, GST & other statutory

levies, transaction cost, stamp duty, turnover tax, Securities transaction tax or any other tax

levied by statutory authority (ies), foreign transaction charges (if any) and other charges on the

purchase and sale of shares, stocks, bonds, debt, deposits, other financial instruments may also

be levied by the broker

The Distribution Division of the company stands to earn fees / brokerage / commission /

incentives on investments made under various PMS plans as would be paid by the AMC to a

distributor in the normal course. In this connection, it is to be noted that any entry / exit fees or

any other charges, including taxes of any kind, charged by the AMCs at the time of investment

/ redemption will be on the client’s account.

List of Approved Custodians, Share Brokers & Depository Participants, involved for Portfolio

Management activities

I. Share Broker

a. Emkay Global Financial Services Ltd. -SEBI Regi. No. NSE Cash

INB230901838.

b. IIFL Wealth Management Limited- SEBI Regi. No. INZ000011437

2 Custodian - HDFC Bank

a. NSDL Depository IDs IN300126, IN301151, IN301549, IN300476

b. CDSL Depository IDs 13012400

3 Custodian - IL&FS Securities Services Limited

a. NSDL Depository IDs IN300095

b. CDSL Depository IDs 16014800

4. Authorised Person with Emkay Global Financial Services Ltd.

35


a. BSE (Cash) Registration AP0101850175778

b. NSE (FO) Registration AP0946011583

iv) GST & Other Statutory Levies: As applicable from time to time on various charges levied

by Portfolio Manager.

v) Certification and professional charges: Charges payable for outsourced professional

services like accounting, auditing, taxation and legal services etc. for documentation,

notarisation, certifications & attestations required by bankers or regulatory authorities including

legal fees etc. or for any other purpose.

vi) Management & Advisory Fees:

i) The Management Fees relate to the portfolio management services offered to the Clients.

The fee may be a fixed charge or a percentage of the quantum of the funds being managed or

linked to portfolio returns achieved or a combination of any of these with high watermark as

mutually agreed in PMS agreement.

ii) Upfront Fees:

The Portfolio Manager may levy the charges as Upfront Fee at such fixed percentage as may be

agreed between the Portfolio Manager and the Clients, which will be calculated on the amount

of Funds introduced by the Clients. The said fees shall be recovered from the Funds introduced

by the clients.

iii) Exit Fees:

In case of Discretionary Portfolio Plans, client may exit the Plan with 30 days prior notice.

Exit under this Plan either partially or in full before completion of one year could attract an

exit fees of a maximum of 2% at the discretion of the Portfolio Manager in addition to

Investment Management & Advisory Fees that will be charged by the Portfolio Manager as

per the agreed terms. All other costs and charges associated with the exit will be on the client’s

account.

Vii) Incidental Expenses: Charges in connection with the courier expenses, stamp duty,

service tax, depository charges, postal, telegraphic, opening and operation of bank accounts

etc.

viii)Other charges: As may be mutually agreed between client and Portfolio Manager.

Manner of payment:

Client shall pay by way of cheque/ DD/ Debit to the client portfolio account, as per the

respective fee schedule applicable to the portfolio services opted by the client.

10) Taxation:

Income Tax

1. General

36


In view of the individual nature of tax consequences, each Client is advised to consult his or her

tax advisor with respect to the specific tax consequences arising to him/her from participation

in any of the investments. The tax implications given below are based on the existing provisions

of the Income tax Act, 1961 (“the IT Act”) and rules made thereunder. The Portfolio Manager

accepts no responsibility for any loss suffered by any Investor as a result of current taxation law

and practice or any changes thereto.

2. Tax Rates:

The rates specified in this section pertain to the financial year 2019-20 as per the amendments

proposed by the by the Finance bill (No. 2), 2019. The Finance (No. 2) bill, 2019 would become

an Act after receiving approval from both the houses of Parliament and consent of the President

of India. The rates are exclusive of Surcharge and Health and Education cess, if any, as leviable.

2.1. Tax rates for specific type of assessees are as below:

Assessee % of Income

Tax

Individuals, Hindu Undivided Family (‘HUF’), Association of Persons

(‘AOP’), Body of Individuals (‘BOI’)

Applicable slab

rates

Domestic Company having turnover/gross receipt not exceeding

Rs.400 crore in financial year (‘FY’) 2017-18 25%

Partnership Firm [including Limited Liability Partnership (’LLP’)] and

Domestic Company having turnover/gross receipt exceeding Rs. 400 crore in

FY 2017-18

30%

Foreign Company 40%

2.2. The slab rates for individuals / HUF / AOP / BOI are as follows

Total Income Tax rates (c)

Up to Rs. 2,50,000 (a) (b) (c) Nil

From Rs. 2,50,001 to Rs. 5,00,000 5%

From Rs. 5,00,001 to Rs. 10,00,000 20%

Rs. 10,00,001 and above 30%

a) The Central Government vide the interim budget for FY 2019-20 has provided for a

rebate on tax on total income of upto INR 5,00,000 for individual assessee.

b) In the case of a resident individual of the age of 60 years or more but less than 80 years,

the basic exemption limit is INR. 3,00,000.

c) In the case of a resident individual of the age of 80 years or more, the basic exemption

limit is INR. 5,00,000.

d) Surcharge on income-tax is applicable as stated in para 2.3 below. Additionally, Health

and Education Cess, at the rate of 4% is leviable on the aggregate of income-tax and

surcharge.

37


2.3. Surcharge rates are provided below:

Type of

Investor

Surcharge* rate as a % of income-tax

If income

is less

than INR

50 lakhs

If income

is more

than 50

lakhs but

less than

INR 1

Crores

If income

exceeds INR

1 Crores but

less than

INR 2

Crores

If income

exceeds INR 2

Crores but

less than INR

5 Crores

If income

exceeds INR

5 crores

Individual,

HUF, AOP,

BOI

(Resident &

foreign)

Nil 10% 15% 25% 37%

Type of

Investor

Surcharge* rate as a % of income-tax

If income does not

exceed 1 crore

If income exceeds INR 1

but less than INR 10

crore

If income exceeds

INR 10 crore

Partnership firm

(Domestic &

foreign)

Nil 12% 12%

Domestic

Company

Nil 7% 12%

Foreign

Company

Nil 2% 5%

3. Tax deduction at source

If any tax is required to be withheld on account of any present or future legislation, the Portfolio

Manager will be obliged to act in this regard.

The income tax provisions provide that where a recipient of income (which is subject to

withholding tax) does not have a Permanent Account Number, then tax is required to be

deducted by the payer at higher of the following i.e. rates specified in relevant provisions of the

IT Act, or rates in force or at 20%. However, this provision of the IT Act shall not apply in

38


respect of payments in the nature of interest, royalty, fees for technical services and payments

on transfer of any capital asset to a non-resident, subject to furnishing of certain details and

documents.

4. Advance tax instalment obligations

It will be the responsibility of the Client to meet the advance tax obligation instalments payable

on the due dates prescribed under the IT Act.

5. Tax implications for the Investors:

The following are the various income streams that can arise from securities held under the PMS

–

• Dividend income on shares;

• Income distributed by Mutual Funds;

• Interest income on debt securities; and

• Gains on sale of securities; or

• Buy-back of securities held in companies.

5.1.Dividend income on shares

Dividend on shares (referred to in section 115-O of the IT Act) continue to be exempt under the

IT Act in the hands of the investors. However, as per section 115BBDA of the IT Act, in case

of any resident assessee other than specified assessee (defined below), if the dividend income

(from a domestic company) exceeds Rs. 10 lakhs, then such dividend income is taxable at 10%

(plus applicable Surcharge and Health and Education cess) on gross basis.

As per Explanation (b) to section 115BBDA of the IT Act, ‘specified assessee’ means a person

other than-

I. a domestic company; or

II. a fund or institution or trust or any university or other educational institution or any hospital

or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi)

or sub-clause (via) of clause (23C) of section 10; or

III. a trust or institution registered under section 12A or section 12AA.

The Investee Companies would be liable to pay Dividend Distribution Tax (‘DDT’) on the

dividend declared, distributed or paid at the rate of 15% (plus applicable Surcharge and Health

and Education cess) on a grossed-up basis.

5.2.Income distributed by Mutual Funds.

The dividend received from Mutual funds should be exempt from tax in the hands of the

Investors. However, the Mutual fund would be liable to pay tax on income distributed as

follows:

o In case of mutual funds (other than equity oriented mutual funds):

39


• at the rate of 25% (plus Surcharge at the rate of 12 percent and Health and Education

cess at the rate of 4 percent) on income distributed to individuals and HUFs; and


cess at the rate of 4 percent) on income distributed to persons other than individuals

and HUFs.

o In case of equity oriented mutual funds:


cess at the rate of 4 percent) on income distributed to any person.

As per section 115R(2A) of the IT Act, additional income-tax on the income distributed to unit-

holders should be levied on the amount of income to be distributed including such additional

tax (i.e. grossing-up), as against levy on only the amount of income to be distributed. This may

result in a higher effective tax rate.

5.3.Interest income on debt securities

Interest income arising on securities could be characterised as ‘Income from Other Sources’ or

‘business income’ depending on facts of the case. In either case, interest income should be

subject to tax as per the rates mentioned in para 2.1 & 2.2 above.

Any expenses incurred to earn such interest income should be available as deduction, subject

to the provisions of the IT Act.

5.4.Gains on sale of securities

Income arising from the purchase and sale of securities can give rise to either capital gains or

business income in the hands of the investor. The issue of characterisation of income is relevant

as the income tax computation and rates differ in the two situations.

The characterisation is essentially a question of fact and depends on whether the shares are held

as business/ trading assets or as capital assets.

The Central Board of Direct Taxes (‘CBDT’) has issued a circular1 which deals with listed

shares/ securities which states that:

• Where the assessee opts to treat the listed shares/ securities as stock-in-trade, the income

arising from the transfer of such listed shares/ securities would be treated as business

income.

1 Circular no. 6/ 2016 dated February 29, 2016

40


• If the assessee desires to treat the gains arising from transfer of listed shares/ securities held

for a period of more than 12 months as capital gains, the same shall not be put to dispute

by the Assessing Officer.

The aforementioned circular shall not apply in a case where the genuineness of the transaction

itself is questionable.

The CBDT has issued a letter2 on characterisation of income from transfer of unlisted shares.

As per the letter, income arising from transfer of unlisted shares would be taxable under the

head ‘Capital Gains’, irrespective of the period of holding. However, it would not be necessarily

applied in the situations where:

• the genuineness of the transactions in unlisted shares itself is questionable; or

• the transfer of unlisted shares is related to an issue pertaining to lifting of corporate veil;

or

• the transfer of unlisted shares is made along with the control and management of

underlying business.

Investors may also refer to CBDT instruction no. 1827 dated 31 August, 1989 read with CBDT

Circular no. 4 dated 15 June, 2007 for further guidance on this matter.

5.4.1. Gains characterised as capital gains

The IT Act provides for a specific mechanism for computation of capital gains. Capital gains

are computed by deducting from the sale consideration, the cost of acquisition and certain other

expenses. The tax payable on capital gains would depend on whether the capital gains are long-

term or short-term in nature.

Depending on the period for which the securities are held, capital gains earned by the Investors

would be treated as short term or long term capital gains. The taxability of capital gains is

discussed below:

Type of instrument Period of holding Characterization

Listed Securities (other than

Units) and units of equity

oriented Mutual Funds

More than twelve (12) months Long-term Capital Asset

Twelve (12) months or less Short-term Capital Asset

Unlisted shares of a company

More than twenty four (24)

months Long-term Capital Asset

Twenty four (24) or less Short-term Capital Asset

Other securities More than thirty six (36) months Long-term Capital Asset

Thirty six (36) months or less Short-term Capital Asset

2 Letter F.No.225/12/2016/ITA.II dated May 2, 2016

41


Taxability of capital gains under the IT Act (without considering the benefits under the tax

treaties for non-resident investors) should be as follows:

Sr.

No Particulars

Resident

beneficiaries

Non-resident

beneficiaries

[Note 6]

Foreign

Portfolio

investors

(‘FPI’)

Tax rate (%) excluding applicable Surcharge

and Education cess

1

Short-term capital gains on

transfer of listed equity shares,

to be listed shares sold through

offer for sale and units of an

equity oriented mutual fund on

which Securities Transaction

Tax (‘STT’) has been paid

15%

15%

15%

2

Any other short-term capital

gains

30% [Note

1]

30% (in case

firms/LLP/foreign

non-corporates) /

40% (in case of

foreign company)

30% [Note 4]

3

Long-term capital gains on

transfer of:

(i) listed equity shares on

which STT has been paid

both at the time of

acquisition and sale of such

shares; or

(ii) units of equity oriented

mutual fund on which STT

has been paid on transfer

[refer note 2]

10% [ [Note

5] [on

income in

excess of

INR 1 lakh]

10% [Note 5] [on

income in excess

of INR 1 lakh]

10% [Note 5]

[on income in

excess of INR

1 lakh]

4

Long term capital gains on sale

of listed bonds or listed

debentures

10%

(without

indexation)

10% (without

indexation) [Note

3]

10% [Note 5]

5


transfer of listed mutual fund

units (other than equity oriented

fund)

20% (with

indexation)

20% (with

indexation)

10% [Note 5]

7 Long-term capital gains on 20% 10% [Note 3 and 10% [Note 5]

42


transfer of unlisted bonds or

unlisted debentures

(without

indexation)

5]

8


transfer of unlisted securities

(other than unlisted bonds and

unlisted debentures)

[refer note 7]

20% (with

indexation)

10% [Note 3 and

5]

10% [Note 6]

Note 1:

Assuming highest slab rates for resident individual investors. In case of domestic companies

having total turnover or gross receipts not exceeding INR 400 crores in the Financial Year 2017-

18 (Assessment Year 2018-19), the tax rate would be 25% (plus Surcharge and Health and

Education cess).

Note 2:

The cost of acquisition of equity shares or units of an equity oriented mutual funds acquired

before

1 February 2018, shall be higher of:

- the actual cost of acquisition; and

- Lower of:

o Fair market value as on 31 January 2018, determined in the prescribed manner; and

o Value of consideration received or accruing upon transfer.

The CBDT issued a notification no. 3875 dated 1 October 2018, wherein the list of transactions

have been specified in respect of which the provision of sub-clause (a) of clause (iii) of sub-

section (1) of section 112A of the IT Act shall not apply.

Note 3:

The revenue may seek to apply a higher tax rate of 20% considering the judicial precedent.

Note 4:

Without considering foreign exchange benefit

Note 5:

Without considering indexation and foreign exchange fluctuation benefit

Note 6:

In case, the investments are made by Non-resident Indians (‘NRI’), then such investors are

entitled to be governed by the special tax provisions under Chapter XII-A of the IT Act and if

43


such investors opt to be governed by these provisions, any long-term capital gains should be

taxable at the rate of 10% (plus applicable Surcharge and Health and Education Cess) without

considering the indexation benefit.

Note 7:

As per section 50CA of the IT Act, where the consideration received or accruing on account of

transfer of unlisted shares is less than the fair market value of such share, determined in the

prescribed manner, the fair value as determined should be deemed to be the full value of

consideration for the purpose of computing capital gains.

5.4.2. Gains are characterised as ‘Business income’

If the gains are characterised as Business Income then the same should be taxable on net income

basis at the rate of 30% (plus applicable Surcharge and Health and Education cess) for resident

investors. The Finance (No. 2 Bill), has however proposed to reduce the tax rate to 25% in case

of domestic companies having a total turnover or gross receipts not exceeding 400 crores in the

FY 2017-18 (AY 2018-19).Kindly note, we have assumed highest rate for resident individual

investors.

If the gains are characterised as Business Income then the same should be taxable on net income

basis at at 40% (plus applicable Surcharge and Health and Education cess) for foreign company

if it has a Business Connection/ Permanent Establishment in India, and such income is

attributable to the Business Connection/ Permanent Establishment of the non-resident in India.

Further, for non-resident investors (other than a foreign company) a tax rate of 30% should be

levied.

5.4.3. Proceeds on buy-back of shares by company

As per the Section 10(34A) of the IT Act, gains arising on buy-back of shares (not being shares

listed on a recognised stock exchange) are exempt in the hands of investors. However, as per

section 115QA of the IT Act, a distribution tax at the rate of 20% is payable by an Indian

company on distribution of income by way of buy-back of its shares if the buy-back is in

accordance with the provisions of the Companies Act. Such distribution tax is payable on the

difference between consideration paid by such Indian company for the purchase of its own

shares and the amount that was received by the Indian investee company at the time of issue of

such shares, determined in the manner prescribed. In this regard, Rule 40BB of IT Rules provide

for mechanism for determining the amount received by the Indian company in respect of issue

of shares.

44


The Finance (No. 2) Bill, 2019, has proposed that the provisions of section 10(34A) and section

115QA of the IT Act shall also be applicable in case of buy-back of listed shares. The proposed

amendment would be effective from 5 July 2019.

6. Other tax considerations

6.1. Foreign Portfolio Investors (‘FPI’)

As per section 2(14) of the IT Act, any investment in securities made by FPIs in accordance

with the regulations made under the Securities and Exchange Board of India is treated as a

capital asset. Consequently, any income arising from transfer of securities by FPIs are to be

treated as capital gains.

Under section 115AD of the IT Act, long-term capital gains arising from transfer of securities

shall be taxable at the rates mentioned in paragraph 5.4.1 above.

As per section 196D of the IT Act, no deduction of tax shall be made from any income by way

of capital gains arising from the transfer of securities referred to in section 115AD, payable to

a FPI.

Under section 115AD of the IT Act, interest income received by FPIs should be taxable at 20%

plus applicable Surcharge and Health and Education cess. However, interest referred to in

section 194LD of the IT Act should be taxable at 5% plus applicable Surcharge and Health and

Education cess, subject to fulfilment of conditions.

6.2. Non-resident investors (including FPI):

A non-resident investor would be subject to taxation in India only if;

• it is regarded a tax resident of India; or

• being a non-resident in India, it derives (a) Indian-sourced income; or (b) if any

income is received / deemed to be received in India; or (c) if any income has accrued /

deemed to have accrued in India in terms of the provisions of the IT Act.

Section 6 of the IT Act was amended by the Finance Act, 2015 to provide that a foreign

company should be treated as a tax resident in India if its place of effective management

(‘POEM’) is in India in that year. The Finance Act, 2016 provided that the said amended

provisions are effective from 1 April 2017. POEM has been defined to mean a place where key

management and commercial decisions that are necessary for the conduct of the business of an

entity as a whole are, in substance made.

The CBDT had vide its Circular dated 24 January 2017, issued guiding principles for

determination of POEM of a Company. The CBDT had vide circular dated 23 February 2017,

clarified that provisions of Sec 6(3)(ii) relating to POEM would not apply to companies having

turnover or gross receipts less than or equal to INR 50 crores during the Financial Year.

45


As per section 90(2) of the IT Act, the provisions of the IT Act would apply to the extent they

are more beneficial than the provisions of the Double Taxation Avoidance Agreement (‘Treaty’)

between India and the country of residence of the non-resident investor (subject to GAAR

provisions discussed below). However, no assurance can be provided that the Treaty benefits

will be available to the non-resident investor or the terms of the Treaty will not be subject to

amendment or reinterpretation in the future. The taxability of such income of the non-resident

investor, in the absence of Treaty benefits or where the non-resident investor is from a country

with which India has no Treaty, would be as per the provisions of the IT Act.

In order to claim Treaty benefits, the non-resident investor has to furnish the Tax Residency

Certificate (‘TRC’) issued by the foreign tax authorities. Further, the non-resident investor shall

be required to furnish such other information or document as may be prescribed. In this

connection, the CBDT vide its notification dated August 1, 2013 has prescribed certain

information in Form No. 10F to be produced along with the TRC, if the same does not form

part of the TRC.

The income-tax authorities may grant Treaty benefit (after verifying the TRC) based on the

facts of each case.

6.3. STT:

STT is applicable on various transactions executed on stock exchanges as follows:

(a) 0.10% on the purchase of equity shares in a company on a recognised stock exchange in

India where the contract for purchase is settled by the actual delivery or transfer of

shares;

(b) 0.10% on the sale of equity shares in a company on a recognised stock exchange in India

where the contract for sale is settled by the actual delivery or transfer of shares;

(c) 0.001% on the sale of units of equity oriented funds on a recognised stock exchange in

India where the contract for sale is settled by the actual delivery or transfer of units

(d) 0.025% on the sale of equity shares in a company or units of equity oriented funds on a

recognised stock exchange in India where the contract for sale is settled otherwise than

by the actual delivery or transfer of shares or unit;

(e) 0.01% on the sale of futures in securities;

(f) 0.05% on the sale of options in securities;

(g) 0.125% on the purchase of options in securities, where options are exercised;

(h) 0.001% on the sale of units of equity oriented fund to the Mutual Fund.

(i) 0.2% on sale of unlisted equity shares under an offer for sale

6.4. Receipt of any property at a value below fair market value

Section 56(2)(x), provides that if any assesse receives any property (including shares and

securities) without consideration or for inadequate consideration in excess of INR 50,000 as

46


compared to the fair market value, fair market value in excess of such consideration shall be

taxable in the hands of the recipient as Income from Other Sources. The above rates would be

subject to availability of benefits under the tax treaty, if any in case of non-resident assessee.

As per Section 50CA of IT Act, if there is a transfer of unquoted shares of a company at a value

lesser than the fair market value, then the fair market value should be deemed to be the full

value of sale consideration for computing the capital gains for such unquoted shares. The CBDT

has notified rules for computation of FMV for the purpose of section 50CA of the IT Act.

The Finance (No. 2) Bill, 2019 has proposed that the above provision shall not apply to any

consideration received / accruing on transfer by certain class of persons and subject to

fulfillment of conditions, as may be prescribed.

The CBDT has issued rules with revised mechanism for computation of FMV for the purpose

of section 56(2)(x) of the IT Act.

Accordingly, such other income would be chargeable to tax (i) at the rate of 30% (plus

applicable rates of surcharge and cess) in case of resident investors (assuming highest slab rate

for resident individual) (ii) at the rate of 40% plus applicable rates of surcharge and cess) in

case of foreign companies (ii) at the rate of 30% (plus applicable rates of surcharge and cess)

in case of non-resident firms/LLPs.

The Finance Bill (No. 2), 2019 has proposed that the above provision shall not apply to any sum

of money or any property received by such class of persons and subject to fulfilment of

conditions as may be prescribed.

6.5. General Anti Avoidance Rules (‘GAAR’):

GAAR may be invoked by the Indian income-tax authorities in case arrangements are found to

be impermissible avoidance arrangements. A transaction can be declared as an impermissible

avoidance arrangement, if the main purpose of the arrangement is to obtain a tax benefit and

which satisfies one of the 4 (Four) below mentioned tainted elements:

• The arrangement creates rights or obligations which are ordinarily not created between

parties dealing at arm's-length;

• It results in directly / indirectly misuse or abuse of the IT Act;

• It lacks commercial substance or is deemed to lack commercial substance in whole or in

part; or

• It is entered into, or carried out, by means, or in a manner, which is not normally

employed for bona fide purposes.

In such cases, the tax authorities are empowered to reallocate the income from such

arrangement, or recharacterise or disregard the arrangement. Some of the illustrative powers

are:

47


• Disregarding or combining or recharacterising any step in, or a part or whole of the

arrangement;

• Ignoring the arrangement for the purpose of taxation law;

• Relocating place of residence of a party, or location of a transaction or situation of an

asset to a place other than provided in the arrangement;

• Looking through the arrangement by disregarding any corporate structure; or

• Recharacterising equity into debt, capital into revenue, etc.

The GAAR provisions would override the provisions of a Treaty in cases where GAAR is

invoked. The necessary procedures for application of GAAR and conditions under which it

should not apply, have been enumerated in Rules 10U to 10UC of the IT Rules. The IT Rules

provide that GAAR should not be invoked unless the tax benefit in the relevant year does not

exceed INR 3 crores.

On 27 January 2017, the CBDT has issued clarifications on implementation of GAAR

provisions in response to various queries received from the stakeholders and industry

associations. Some of the important clarifications issued are as under:

• Where tax avoidance is sufficiently addressed by the Limitation of Benefit Clause (‘LOB’)

in a Tax Treaty, GAAR should not be invoked.

• GAAR should not be invoked merely on the ground that the entity is located in a tax efficient

jurisdiction.

• GAAR is with respect to an arrangement or part of the arrangement and limit of INR 3

crores cannot be read in respect of a single taxpayer only.

6.6. FATCA Guidelines

According to the Inter-Governmental Agreement read with the Foreign Account Tax

Compliance Act (FATCA) provisions and the Common Reporting Standards (CRS), foreign

financial institutions in India are required to report tax information about US account holders

and other account holders to the Indian Government. The Indian Government has enacted rules

relating to FATCA and CRS reporting in India. A statement is required to be provided online

in Form 61B for every calendar year by 31 May. The Reporting Financial Institution is expected

to maintain and report the following information with respect to each reportable account:

a. the name, address, taxpayer identification number [‘TIN’ (assigned in the country of

residence)] and date and place of birth [‘DOB’ and ‘POB’ (in the case of an individual)];

b. where an entity has one or more controlling persons that are reportable persons:

i. the name and address of the entity, TIN assigned to the entity by the country of its

residence; and

ii. the name, address, DOB, POB of each such controlling person and TIN assigned to

such controlling person by the country of his residence;

c. account number (or functional equivalent in the absence of an account number);

48


d. account balance or value (including, in the case of a cash value insurance contract or annuity

contract, the cash value or surrender value) at the end of the relevant calendar year; and

e. the total gross amount paid or credited to the account holder with respect to the account

during the relevant calendar year.

Further, it also provides for specific guidelines for conducting due diligence of reportable

accounts, viz. US reportable accounts and Other reportable accounts (i.e. under CRS).

6.7. Multilateral Convention to implement Tax Treaty related measures to prevent Base Erosion and

Profit Shifting

The Organisation of Economic Co-operation and Development (‘OECD’) released the

Multilateral Convention to implement Tax Treaty related measures to prevent Base Erosion and

Profit Shifting (‘MLI’). The MLI, amongst others, includes a "principal purpose test", wherein

Tax Treaty benefits can be denied if one of the principal purpose of an arrangement or a

transaction was to, directly or indirectly, obtain tax benefit. The MLI has also expanded the

scope of permanent establishment to include agent (excluding an independent agent) playing

principal role, leading to routine conclusion of contracts without material modification. For this

purpose, an agent is not considered independent if it acts exclusively or almost exclusively on

behalf of one or more closely related enterprises. India has been an active participant in the

entire discussion and its involvement in the BEPS project has been intensive. In a ceremony

held in Paris on 7 June 2017, various countries including India, signed the MLIs.

Recently, the Union Cabinet of India issued a press release dated 12 June 2019, approving the

ratification of the MLI to implement tax treaty related measures to prevent BEPS. The

application of MLI to a Tax Treaty is dependent on ratification as well as positions adopted by

both the countries signing a Tax Treaty.

On June 25, 2019, India has taken the final step for implementation of MLI by depositing its

instrument of ratification with the OECD. The effect of such ratification by India can be known

only after MLI positions of respective Tax Treaty partners are known.

6.8. Minimum Alternate Tax

The IT Act provides for levy of Minimum Alternate Tax (‘MAT’) on corporates if the tax

amount calculated at the rate of 18.5% (plus applicable surcharge and cess) of the book profits,

as the case may be, is higher than the tax amount calculated under the normal provisions of the

IT Act.

If MAT is held to be applicable to the Investors, then income receivable by such Investors from

their investment in the Fund shall also be included to determine the MAT.

The MAT provisions are not applicable to a non-resident if, (a) the assessee is a resident of a

49


country with which India has DTAA and the assessee does not have a permanent establishment

in India; or (b) the assessee is a resident of a country with which India does not have a Tax

Treaty and is not required to seek registration under the Indian corporate law.

6.9. Alternate Minimum Tax

The IT Act provides for levy of Alternate Minimum Tax (‘AMT’) on non-corporate tax payers

if the tax amount calculated at the rate of 18.5% (plus applicable surcharge and cess) of the

adjusted total income, as the case may be, is higher than the regular income-tax payable under

the normal provisions of the IT Act.

If AMT is held to be applicable to the Investors, then income receivable by such Investors from

their investment in the Fund shall also be included to determine the AMT.

6.10. Dividend stripping

Where any person buys or acquires any securities or units of a mutual fund or the Unit trust of

India within a period of three months prior to the record date (i.e., the date that may be fixed

by a company for the purposes of entitlement of the holder of the securities to receive dividend

or by a Mutual Fund or the Administrator of the specified undertaking or the specified

company, for the purposes of entitlement of the holder of the units to receive income, or

additional unit without any consideration, as the case may be) and such person (i) sells or

transfers such securities within a period of three months after record date, or (ii) such unit

within a period of nine months after such record date, and (iii) the dividend or income on such

securities or unit received or receivable by such person is exempt, then, any loss arising to such

person on account of such purchase and sale of securities or unit, to the extent such loss does

not exceed the amount of such dividend or income received or receivable, would be ignored

for the purposes of computing his income chargeable to tax.

6.11. Expenditure incurred in relation to income not includible in the total income

As per the provisions of section 14A of the IT Act read with rule 8D of the IT Rules, if any

income of the investors does not form part of the total income or is exempt under the provisions

of the IT Act then any expenditure incurred by the Investor, directly or indirectly, in relation

to such income will not be allowed as deduction for the purpose of calculating the total taxable

income of the Investor.

6.12. Bonus stripping

Where any person buys or acquires any units of a mutual fund or the Unit Trust of India within

a period of three months prior to the record date (i.e., the date that may be fixed by a Mutual

Fund or the Administrator of the specified undertaking or the specified company, for the

purposes of entitlement of the holder of the units to receive additional unit without any

consideration) and such person is allotted additional units (without any payment) on the basis

of holding of the aforesaid units on the record date, and if such person sells or transfers all or

any of the original units within a period of nine months after the record date while continuing

50


to hold all or any of the additional units, then any loss arising to him on account of such

purchase and sale of all or any of the units would be ignored for the purpose of computing his

income chargeable to tax. Further, the loss so ignored would be deemed to be the cost of

acquisition of such additional units as are held by him on the date of sale or transfer of original

units.

6.13. Carry-forward of losses and other provisions (applicable irrespective of the residential

status)

In terms of section 70 read with section 74 of the IT Act, short term capital loss arising during

a year can be set-off against short term as well as long term capital gains. Balance loss, if any,

shall be carried forward and set-off against any capital gains arising during the subsequent 8

assessment years. A long term capital loss arising during a year is allowed to be set-off only

against long term capital gains. Balance loss, if any, shall be carried forward and set-off against

long term capital gains arising during the subsequent 8 assessment years.

6.14. Issue of shares at premium by a private company

As per the provisions of section 56(2)(viib) of the Act, where a privately held company issues

its shares to a resident assessee at a premium (i.e. over and above the face value of such shares),

then the consideration received by the company for such issue of shares in excess of the fair

market value (‘FMV’) of the shares is required to be taxed in the hands of the company. In this

regard, rule 11U and 11UA provide mechanism for computation of FMV for the purpose of

section 56(2)(viib) of the IT Act. An exemption is provided for receipt of consideration by a

venture capital undertaking from a specified fund

6.15. Proposed change in the India tax regime

The Government of India intends to replace the current Income-Tax Act, 1961 with a new direct

tax code (“DTC”) in consonance with the economic needs of the country. The task force is in

the process of drafting a direct tax legislation keeping in mind, tax system prevalent in various

countries, international best practices, economic needs of the country, among others. At this

stage, it is not possible to comment on the final provisions that the new DTC will seek to enact

into law and consequently, no views in that regard are being expressed. There can be no

assurance as to the implications of the final new DTC for the Company and its investors.

6.16. Goods and Services Tax

GST will be applicable on services provided by the Portfolio Manager to its Clients.

Accordingly, GST at the rate of 18% would be levied on fees if any, payable towards portfolio

management fee.

11) Accounting Policies:

a) Accounting under the respective portfolios is being done in accordance with general

accounting principles as SEBI (Portfolio Managers) Rules and Regulations do not explicitly lay

down detailed accounting policies, The existing policies are:- Dividend income earned by the

Portfolio shall be recognized, not on the date the dividend is declared, but on the date the share

51


is quoted on an ex-dividend basis. For investments, which are not quoted on the stock exchange,

dividend income would be recognized on the date of declaration of dividend.

b) In respect of all interest-bearing investments, income shall be accrued on a day-to-day basis

as it is earned. Therefore, when such investments are purchased, interest paid for the period

from the last interest due date up to the date of purchase should not be treated as a cost of

purchase but shall be debited to Interest Accrual Account on purchase. Similarly, interest

received at the time of sale for the period from the last interest due date up to the date of sale

must not be treated as an addition to sale value but shall be credited to Interest Accrual Account

on sale

c) In determining the holding cost of investments and the gains or loss on sale of investments,

the “First in First Out” (FIFO) method shall be followed for each security.

d) Transactions for purchase or sale of investments shall be recognized as of the trade date and

not as of the settlement date, so that the effect of all investments traded during a financial year

are recorded and reflected in the financial statements for that year. Where investment

transactions take place outside the stock market, for example, acquisition through private

placement or purchases or sales through private treaty, the transaction would be recorded, in

the event of a purchase, as of the date on which the portfolio obtains an enforceable obligation

to pay the price or, in the event of a sale, when the portfolio obtains an enforceable right to

collect the proceeds of sale or an enforceable obligation to deliver the instruments sold.

e) Bonus shares to which the portfolio becomes entitled shall be recognized only when the

original shares on which the bonus entitlement accrues are traded on the Stock Exchange on an

ex-bonus basis. Accordingly, date of recognition of bonus shares is construed as date of

acquisition for the purpose of computing short term/ long-term capital gain.

f) Rights entitlements shall be recognized only when the original shares on which the right

entitlement accrues are traded on the Stock Exchange on an ex-right basis. Right entitlement

till the time right shares are applied for, shall be valued on the basis of price at which right

entitlement are traded on the Stock Exchange. In case the right entitlement are not tradable on

Stock Exchange then such right entitlement will be valued at “nil” price. Once right shares are

applied, the entitled quantity shall be recognized on the date of application and the cost will be

taken at offer price. Accordingly, date of recognition of rights shares is construed as date of

acquisition for the purpose of computing short term/ long-term capital gain. In case if any excess

shares are applied along with entitled quantity, the same will be recognized as share application

and shares, if any, allotted against such additional shares will be recognized on the date of

allotment.

g) The cost of investments acquired or purchased shall include grossed-up brokerage, service

tax/ GST and other statutory levies, stamp charges and any other charge customarily included

in the broker’s note except for Securities Transaction Tax. In respect of privately placed debt

instruments any front-end discount offered may be reduced from the cost of the investment. The

sale consideration shall be calculated after deducting brokerage, service tax /GST and other

statutory levies stamp charges and any other charge customarily included in the broker’s note

except for Securities Transaction Tax.

h) In case of corpus received in the form of stock, the same is accounted for in PMS accounts

on the date on which the stock is credited in the demat account opened for this purpose at the

closing price of the stock on the previous working day of such credit. Accordingly, date of credit

as aforesaid shall be construed as date of acquisition and cost as stated above is considered as

cost of acquisition for the purpose of tracking performance and computing investment

management and advisory fees.

52


i) Other expenses shall be recognized on accrual basis.

j) Gain/ loss on futures trade will be accounted on closing the future position. Till the time,

position is open, the initial margin paid for such trade will be accounted as Initial margin on

futures contract and daily mark to market margin will be accounted as Daily Mark to Market

Margin on Futures contract.

k) Premium paid on the option contract will be accounted for on trade date.

l) All equity trading for resident clients are executed on a pool basis. For Non-discretionary

portfolio, the allocation in case of shortfall of securities will be in the order of receipt of

approval by the portfolio manager from the client. In case of discretionary, the allocation in

case of shortfall will be on proportionate basis.

m) Delisted/suspended securities are valued @ Re.0.01 per share.

Tax Implications where transaction in securities is in the nature of Trade or Business

Income arising from purchase and sale of shares (for the sake of brevity, the term “Shares” has

been used below as an illustration but the same includes other types of securities) can give rise

to business income or capital gains in the hands of the investor.

The issue of income characterization as above is essentially a question of fact and dependent on

whether the shares are held as Business\Trading assets or Capital Account. Based on judicial

decisions, all of the following factors and principles need to be considered while determining

the nature of assets as above:

▪ Motive for the purchase of shares

▪ Frequency of transactions and the length of period of holding of the shares.

▪ Treatment of the shares and profit or loss on their sale in the accounts of the assessee.

▪ Source of funds out of which the shares were acquired – borrowed or own.

▪ Existence of an objects

▪ permitting trading in shares – relevant only in the case of corporate.

▪ Acquisition of the shares – from primary market or secondary market.

▪ Infrastructure employed for the share transactions by the client including the

appointment of managers, etc.

Any single factor discussed above in isolation cannot be conclusive to determine the nature of

shares transactions. All factors and principles need to be construed harmoniously. Further, the

background of the investor (Professional vs. a trader in shares) would also be a relevant factor

in determining the nature of the shares.

Considering the above, the profits or gains arising from transaction in securities could be taxed

either as “Profits and Gains of Business or Profession” under Section 28 of the Income Tax Act

or as “Capital Gains” under section 45 of the Income Tax Act.

However, the client is advised to consult his / her / their tax advisor or consultant for appropriate

advice on tax treatment.

12) Investor Services:

53


(i) The details of investor relation officer who shall attend to the investor queries and complaints

are mentioned here below:

Name of the person Ms. Anita Sampath

Address Lemuir House, Ground Floor, 10 G N Chetty Road, T Nagar,

Chennai – 600017

Email [email protected]

Telephone 044-42922367

The official mentioned above will ensure prompt investor services. The portfolio manager will

ensure that this official is vested with the necessary authority, independence and the means to

handle investor complaints.

(ii) Grievances redressal and Dispute settlement mechanism.

Grievances, if any, that may arise pursuant to the Portfolio Management Services Agreement

entered into shall as far as possible be redressed through the administrative mechanism by the

Portfolio Manager and are subject to SEBI (Portfolio Managers) Regulations 1993 and any

amendments made thereto from time to time. However, all the legal actions and proceedings

are subject to the jurisdiction of court in Chennai only and are governed by Indian laws.

The Portfolio Manager will endeavor to address all complaints regarding service deficiencies

or causes for grievance, for whatever reason, in a reasonable manner and time. If the Investor

remains dissatisfied with the remedies offered or the stand taken by the Portfolio Manager, the

investor and the Portfolio Manager shall abide by the following mechanisms: -

All disputes, differences, claims and questions whatsoever arising between the Client and the

Portfolio Manager and/or their respective representatives shall be settled in accordance with the

provision of The Arbitration and Conciliation Act, 1996 or any statutory requirement,

modification or re-enactment thereof for the time being in force. Such arbitration proceedings

shall be held at Chennai or such other place as the Portfolio Manager thinks fit.

There will be occasions when investors have a complaint against intermediary registered with

SEBI. In the event of such complaint investor should first approach the concerned intermediary

against whom investor has a complaint. However, if investor may not be satisfied with their

response, then investor may lodge their complaint online with SEBI in SCORES. The following

is the link of the same: http://scores.gov.in/

SCORES facilitate investors to lodge their complaint online with SEBI and subsequently view

its status.

14. ADDITIONAL DISCLOSURES:

WAI may avail/s the below mentioned services from IIFL Group for consideration, under

normal course of business;

With respect to services offered by WAI under the portfolio management services or securities

recommended, advised or acquired under PMS or in respect of services of any intermediary

recommended by WAI, the Client may note the following:

mailto:anita.sampath@iiflw.

http://scores.gov.in/

54


a)WAI and its group and associate companies are engaged in providing various financial

services and for the said services (including the service for acquiring and sourcing the securities

acquired/advised under PMS) the said companies may charge fees or remuneration in form of

arranger fees, distribution fees, referral fees, advisory fees, management fees, trustee fees,

commission, brokerage, transaction charges, underwriting charges, issue management fees and

other fees.

b)WAI’s associates act as Investment Manager and Trustee to Scheme(s) of Mutual Fund,

Alternative Investment Funds in which Portfolio Manager may invest and accordingly they may

earn management and trustee fees, for the same.

c) PMS trades may be done through IIFL Wealth Management Limited or authorized group

companies.

Apart from above, investment may be made in securities of associates & group companies,

investment transaction may be done with WAI, its associates and group companies as

counterparties and WAI including its subsidiaries and associates may receive various forms of

remuneration linked to the PMS or Advisory services offered to the Client.

The transactions with WAI, associates or group companies will be done at arm’s length and

under normal course of investment transactions;

For IIFL Wealth Advisors (India) Ltd.

sd/- sd/-

Pramod Kumar Sandeep Jethwani

Director Director

Date: 07/08/2019

Place: Mumbai

IIFL WEALTH ADVISORS (INDIA) LTD

(FORMERLY KNOWN AS IIFL WEALTH ADVISORS (INDIA) PRIVATE LIMITED)

Reg. Address: Lemuir House, Ground Floor, No.10, G.N.Chetty Road T.Nagar, Chennai 600 017

(An IIFL Group Company)

Tel: (91-44) 4215 2356/57 | Fax: (91-44) 4215 2358 CIN: U74140TN2004PLC053285

FORM C

SECURITIES AND EXCHANGE BOARD OF INDIA (PORTFOLIO MANAGERS) REGULATIONS,

1993 (Regulation 14)

_____________________________________________________________________________________ We confirm that: The Disclosure Document forwarded to the Board is in accordance with the SEBI (Portfolio Managers) Regulations, 1993 and the guidelines and directives issued by the Board from time to time. The disclosure made in the document are true, fair and adequate to enable the investors to make a well-informed decision regarding entrusting the management of the portfolio to us / investment in the Portfolio Management Plans; The Disclosure Document has been duly certified by M.P. Chitale & Co, Chartered Accountants represented by its partner Ms. Vidya Barje (Membership No.104994) on August 19, 2019 having office at 1/11, Prabhadevi Ind. Estate, 1st Flr., Opp. Siddhivinayak Temple, Veer Savarkar Marg, Prabhadevi, Mumbai - 25. Tel 43474301-03.

Enclosed is a copy of the chartered accountants’ certificate to the effect that the disclosures made in the document are true, fair and adequate to enable the investors to make a well-informed decision. Sd/- Signature of the Principal Officer Name: Subbiah Somasundaram Place: Mumbai Date: 19/08/2019

DETAILS OF DISCIPLINARY ACTION INITIATED BY REGULATORS AGAINST IIFL ASSOCIATE/GROUP COMPANIES

A) PAST AND COMPLETED - Fully Exonerated/Proceedings dropped by Regulators/Orders fully complied with: I) INDIAN REGULATORS

1. IIFL Securities Limited (Formerly known as India Infoline Limited):

Sr.

No.

Particulars Regulatory

Authority

Subject Matter/Allegations Orders/Findings Corrective Measures

implemented/Present

Status

1. SEBI Enquiry Notice

in 2001

SEBI Client dealings in the scrip of

Cyberspace Infosys Limited

during the year 2000 & 2001.

As per Enquiry Officer report,

IIFL was totally exonerated

from all charges.

Exonerated

2. SEBI adjudication

proceedings notice

dated September

08, 2008 under

Depository Act.

SEBI Allegations of non-compliance of

provisions of SEBI (DP)

Regulations and Depositories

Act.

Preferred consent

proceedings. Consent Order

passed by SEBI on June 05,

2009 and the proceedings

were dropped by SEBI.

Settlement Charges Rs 75,000

and Administration Charges Rs

25000 vide consent order. The

same was paid.

Clarified on factual

inaccuracies. No further

clarification was required

by SEBI – Proceedings

dropped

Sr.

No.


Authority


implemented/Present

Status


Notice dated

November 28, 2008

SEBI Clients dealing in GHCL Shares.

Allegations of violation of

provisions of SEBI (Prohibition of

Fraudulent &Unfair Trade

Practices relating to securities

Market) Regulations, 2003.

All charges against IIFL were

rejected vide SEBI Order dated

June 15, 2009

Proceedings dropped


Notice dated

August 27, 2009

SEBI Allegations of non-compliance of

provisions of SEBI (Stock Broker

& Sub broker) Regulations, 1992

Preferred consent

proceedings. Consent Order

was passed by SEBI on May 18,

2010 and the proceedings

were dropped by SEBI.

Settlement Charges Rs

25,00,000 / - vide consent

order. The same was paid.

Submitted the

compliance and

corrective measures to

SEBI vide letter dated

November 27, 2009.

Proceedings dropped.


Notice dated

November 27, 2009

SEBI Clients dealing in GHCL Shares.

Allegations of violation of

provisions of SEBI (Prohibition of

Fraudulent &Unfair Trade

Practices relating to securities

Market) Regulations, 2003.

Reply submitted to SEBI. SEBI

vide Order dated April 03,

2012 and dropped the

proceedings.

Stopped Trading with

GHCL group of clients.

Proceedings dropped.

Sr.

No.


Authority


implemented/Present

Status

6. SEBI Adjudication

proceedings notice

dated January 03,

2011.

SEBI Asian Star Co. Ltd. - Allegation of

violation of Regulation 7 Clause

A(1) & A(2) of Code of Conduct

for Stock Brokers.

SEBI had issued Order no:

BM/AO – 7/2012 dated

January 12, 2012. We had filed

an Appeal against the said

Order before SAT.

SAT vide its order dated

October 1, 2012 has upheld

the order of adjudicating

officer of SEBI imposing a

penalty of Rs. 5 lacs against

IIFL. IIFL has accepted the

Order and the said penalty

was paid.

Order fully complied

with.

7. SEBI Enquiry Notice

dated April 27,

2010.

SEBI Allegations of violation of

provisions of SEBI (Stock Broker

& Sub broker) Regulations, 1992

SEBI had issued Order no:

MIRSD1/ASM/BS/11344/2013

– dated May 13, 2013.

Pursuant to our detailed

replies and submissions during

personal hearings, SEBI noted

that the alleged deficiencies /

violations have already been

rectified by us and concurred

with the Enquiry officer’s

recommendations and warned

us to be careful & cautious in

Proceedings concluded.

Sr.

No.


Authority


implemented/Present

Status

future. With the above order,

the pending matter was

concluded.

8. Enquiry Notice

dated March 03,

2010

SEBI

Three Clients dealing in the

shares of Pyramid Saimira

Theatre Ltd.

in 2009 involving three transactio

ns totaling trading value

of Rs.110660/- and brokerage

of Rs. 553/- only. Allegations of

violation of provisions of SEBI

(Stock Brokers and Sub brokers)

Regulations, 1992 in the clients

dealing.

Show Cause notice received

from SEBI on July 23, 2015,

reply to the same has been

submitted to SEBI on 11-Aug-

2015

We have strengthened our system for monitoring SEBI/Exchange orders on daily basis and freezing of accounts immediately. Dedicated person in back office & compliance have been appointed. The Whole Time Director

passed order dated

November 10, 2015 with

warning Noticee (India

Infoline Limited) to be

more careful and

cautious in the conduct of

its business and to

adhere to and comply

with all the statutory

provisions while carrying

out its activities in the

Sr.

No.


Authority


implemented/Present

Status

securities market. Matter

is closed.

9. SEBI Order dated

September 28, 2005

and June 16, 2006

in the matter of IFSL

SEBI No violation against IIFL was

observed. However advised not

to deal for 3 clients pending

investigation.

No Show Cause Notice

received from SEBI.

As per SEBI advice trading

for these clients was

stopped with immediate

effect and complied.

10. SEBI Order dated

October 5, 2005

and June 20, 2006

in the matter of M/s

Ind Tra Deco Ltd

SEBI No violation against IIFL was

observed. However advised not

to deal in the scrip and pending

investigation.


received from SEBI.

As per SEBI advice trading

in the scrip was stopped

w.e.f. 6/10/2005 and

complied.

11. SEBI Order dated

March 21, 2006 in

the matter of Shri.

Lalit Dua.

SEBI Lalit Dua was an independent

research analyst, whose reports

were published in our website.

SEBI has advised not to publish

any reports of Shri Lalit Dua and

pending investigation.


received from SEBI.

As per SEBI advice

stopped publishing

reports with immediate

effect i.e. 22/3/06 and

complied.

12. SEBI letter dated

July 13, 2010

SEBI Parabolic Drugs Limited wherein

SEBI advised us to gear up at our

back office system and ensure

efficient control to minimize PAN

mismatches while making data


received from SEBI.

We ensured compliance

to avoid recurrence of

such mismatches and the

same was confirmed to

SEBI vide our replies

dated July 30, 2010 and

Sr.

No.


Authority


implemented/Present

Status

entry in IPO biddings in future. August 27, 2010.


June 18, 2008

SEBI Osian LPG Bottling Limited

wherein SEBI had advised us to

be careful and to ensure that the

shares are sold/purchased by the

client or credited to respective

client’s account directly instead

of through our Beneficiary

account.


received from SEBI.

Complied with the same

and rectified our system

and confirmed to SEBI

vide letter dated July 25,

2008.


February 09, 2011

SEBI Pertaining to non bidding of

applications in Coal India Ltd.

IPO, SEBI advised us not to act as

syndicate member in IPO till

resolution of such matters and

further advise.

Resolution status submitted to

SEBI and SEBI had withdrawn

their restrictions vide its letter

dated March 11, 2011.

As per SEBI advice, we

had resolved the issues

and confirmed to SEBI.


March 12, 2014

SEBI India Infoline Finance Limited

came out with a public issue of

non convertible debentures vide

prospectus dated September 05,

2013. India Infoline Limited (IIL)

was acting as one of the

SEBI communicated that it was

not appropriate to allow the

issuer company to request a

credit rating agency to assign

the rating issued for the public

issue to be used for the

IIL has taken a note of

SEBI’s advice for its

merchant banking

activities and complied

with.

Sr.

No.


Authority


implemented/Present

Status

merchant bankers to the said

issue. In the draft prospectus,

the credit rating of “AA-“ from

ICRA Limited was disclosed.

Subsequent to filing of the draft

prospectus, on the request of

India Infoline Finance Limited,

ICRA Limited agreed for the said

rating to be used for private

placement of NCDs by India

Infoline Finance Limited.

subsequent issues and use

better rating issued by other

agencies for its public issue

especially after the filing of the

draft prospectus.

SEBI advised IIL to be careful in

future and not to allow such

instances in future issues

managed by IIL.

16. Adjudication show

cause notice dated

August 10, 2017

under Rule 4(1) of

the SEBI (Procedure

for Holding Inquiry

and imposing

penalties by

Adjudicating

Officer) Rules, 1995

(‘SEBI Regulations’)

read with Section

15 I of Securities

and Exchange Board

SEBI SEBI notice in the matter of United Spirits Limited includes observations and allegation as follows:- a) Shri Atul Saroagi was trading

through the account of Ms. Vimala Devi Kalantri said client informed orally over a call to accept communications from Shri Atul Saroagi without any supporting document in this regard.

b) It has been alleged that IFFL was not able to provide appropriate reason regarding the IPV of client based at

SEBI order dated February 23, 2018 imposed penalty of 2,00,000/- (Rupees Two Lakh Only)

Reply to the SEBI SCN has been submitted on November 24, 2017 providing clarification with supporting documents. Matter concluded with the issue of SEBI order dated February 23, 2018.

Sr.

No.


Authority


implemented/Present

Status

of India Act, 1992 in

the matter of

United Spirits Ltd.

Chennai been done at Mumbai.

17. Adjudication show

cause notice dated

July 13, 2017 under

Rule 4(1) of the SEBI

(Procedure for

Holding Inquiry and

imposing penalties

by Adjudicating

Officer) Rules, 1995

(‘SEBI Regulations’)

read with Section

15 I of Securities

and Exchange Board

of India Act, 1992

SEBI SEBI notice includes observations and allegation as follows:- Non disclosure under Regulations 13 (1) read 13(5) of PIT Regulations, 2015 and Regulations 7(1) read with 7(2) of SEBI (SAST) Regulations, 1997 read with Regulation 35 of SEBI (SAST) Regulations, 2011 in the scrip of Shree Ashtavinayak Cine Vision Limited (“SACV”).

SEBI vide order dated March

28, 2018 dropped proceedings

against IIFL.

Exonerated

2. IIFL Insurance Brokers Limited (Formerly known as India Infoline Insurance Brokers Limited):

Sr.

No.


Authority


implemented/Present

Status

1. Show Cause Notice

dated July 02, 2013

IRDA Observations of inspection on

insurance broking business during

the period November 2009 to

March 2012.

Observations of non-

compliance with the

provisions of Insurance

Brokers Regulations. Detailed

Reply to the Notice on the

compliances submitted to

IRDA vide letter dated July

11, 2013.

The reply to show cause

notice was submitted.

However, IRDA refused

to accord renewal of

license vide order dated

October 28, 2013. An

appeal was filed to the

Chairman of the IRDA

against the aforesaid

order. IRDA levied a

penalty of Rs. 35 lacs

and renewed license

with retrospective effect

for period 2011-2014.

Complied.

2 IRDA Letter dated

26-Nov-2015

IRDA Observation Noticed during review

of the renewal application

submitted on 25-09-2014


compliance with the

provisions of Insurance

Brokers Regulations

IRDA Levied a penalty of

Rs 17.20 lacs and

renewed the license for

the period 2014-2017.

Complied.

3. India Infoline Finance Limited

Sr.

No.


Authority


implemented/Present

Status

1 SEBI issued a show

cause notice dated

October 25, 2013

in the matter of

M/s Parekh

Aluminex Limited

SEBI The SCN alleged violation of

Regulations 3(a), 4 (1), 4 (2) (a)

and 4 (2) (g) of the SEBI

(Prohibition of Fraudulent Trade

Practices) Regulations, 2003

(“PFUTP Regulations”) by India

Infoline Finance Limited.

The matter was disposed of

by an order dated January

13, 2015.

Following submission of

replies and personal

hearing in the matter,

the adjudicating officer

passed an order dated

January 13, 2015

concluding that the

charges against India

Infoline Finance Limited

do not stand established

and the matter was

disposed off.

2 Adjudication Show

cause Notice dated

February 4, 2016

SEBI Show cause Notice under Rule

4(1) of the SEBI (Procedure for

Holding Inquiry and imposing

penalties by Adjudicating Officer)

Rules, 1995 (‘SEBI Regulations’)

requiring the steps taken by India

Infoline Finance Limited (‘the

Company’) in redressal of

Investors grievances.

The matter was disposed of

by an order dated August 23,

2017.

Detailed reply submitted

explaining the redressal

process and requesting

disposal of the

proceedings.

3 RBI issued a show

cause notice dated

RBI Deficiencies with regard to KYC & RBI concluded the matter Suitably implemented.

Sr.

No.


Authority


implemented/Present

Status

April 26, 2017 in

connection with

loans extended by

IIFL to NSEL Clients.

Loan documents, Securities etc. with the cautionary advice.

4. IIFL Home Finance Limited ( Formerly known as India Infoline Housing Finance Limited (IHFL)

Sr.

No.


Authority


implemented/Present

Status

1 Show Cause Notice

dated September

20, 2010

National

Housing Bank

(NHB)

NHB issued a show cause notice

alleging contravention of the

Housing Finance Companies (NHB),

Directions, 2010 (the Directions)


compliance with the

paragraph 24 and 26 of the

Directions, 2010 and as to

why IHFL should continue to

be regarded as a housing

finance company

Detailed reply to the

Notice was submitted to

NHB vide letter dated

October 06, 2010. We

clarified the position and

had furnished the details

as requisitioned by NHB.

No further

communication was

received from NHB in

this regard.

Sr.

No.


Authority


implemented/Present

Status

2 Show Cause Notice

dated May 6, 2013

National

Housing Bank

(NHB)

NHB issued a show cause notice for

non-furnishing the information w.r.t.

opening of new branches

NHB issued a show cause

notice and imposed penalty

of Rs. 5,000 vide its letter

dated July 16, 2013 for non-

furnishing the information

w.r.t. opening of new

branches

We vide our letter dated

November 8, 2013 paid

the penalty. The matter

has been resolved.

5. IIFL Holdings Limited

Sr.

No.


Authority


implemented/Present

Status

1 Compounding

Application filed with

RBI for regularization

of investments in

overseas subsidiary,

namely India Infoline

DMCC, Dubai.

RBI Delay in submission of NOC received

from SEBI for the overseas investment

made in India Infoline Commodities

DMCC, Dubai required under Regulation

7 of Foreign Exchange Management

(Transfer or Issue of any Foreign

Security) Regulation 2004.

RBI has passed a

compounding order

vide No. MCO4182

dated March 8, 2017.

Company had paid

Rs.2,03,420/- towards

compounding fees and

the matter was

concluded by RBI vide its

letter dated April 03,

2017. Complied.

6. IIFL Asset Management Limited (Formerly known as India Infoline Asset Management Company Limited):

Sr. No.

Particulars Regulatory Authority

Subject Matter/Allegations Orders/Findings Corrective Measures implemented/Present Status

1 SEBI letter dated November 27, 2014

SEBI Inspection of Registrar and Share Transfer Agent for India Infoline Asset Management Company Limited

Advised to take due care and strengthen systems concerning certain errors / deficiencies / violations noticed in R&T activities

Necessary steps have been taken to avoid recurrence of said errors and systems have been strengthened & complied.

2 SEBI letter dated February 25, 2015

SEBI Inspection of books of accounts and other records of IIFL Private Equity Fund

advised to maintain proper KYC records; disclose full details of key investment team, disciplinary history including closed cases and summary of operational actions and clearly disclose all modifications made in the Private Placement Memorandum.

Fully Complied

3 SEBI letter dated May 22, 2017

SEBI Reporting of exceptions to Compliance Test Report (CTR)

Advised to take due care and improvise the compliance standards to avoid recurrence in respect of dealing with Associate Broker.

Necessary steps have been taken to avoid recurrence of said errors and systems have been strengthened & complied. 4 SEBI letter dated

November 26, 2015 SEBI Inspection of IIFL Mutual

Fund for the period Feb 01, 2013 to March 31, 2014

Advised to take due care and strengthen systems concerning certain errors / deficiencies / violations noticed activities

Necessary steps have been taken to avoid recurrence of said errors and systems have been strengthened.

5 SEBI letter dated October 19, 2016

SEBI Inspection of books of accounts and other records of IIFL Opportunities Fund

Advised for complying with the investment cap in an individual investee company as per the regulations.

Necessary steps have been taken to strengthen the systems.

6 SEBI letter dated December 11, 2017

SEBI Inspection of Registrar and Share Transfer Agent for IIFL Mutual Fund

Advised to take steps to strengthen systems concerning data updations and letters of confirmation of lien sent to investor



Sr. No.



1 SEBI letter dated March 01, 2016 SEBI Inspection of books of accounts and other records of IIFL Wealth Management Limited under SEBI (Portfolio Managers) Regulations, 1993

Advised for ensuring Compliance with the regulations.


8. IIFL Commodities Limited (Formerly known as India Infoline Commodities Limited)

Sr. No.



1 SEBI Order dated February 22, 2019

SEBI The SCN issued for enquiry under

the Regulation 5(e) of the SEBI

(Intermediaries) Regulations,

2008 & Regulation 7(1) of SEBI

(Stock Brokers & Sub Brokers)

Regulations, 2015 by SEBI

concerning the fit and proper

person criteria for considering

registration as commodity broker

for application for registration

dated December 23, 2015.

SEBI vide its Order dated February 22, 2109, in exercise of the powers conferred under Regulation 28 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 read with regulation 7(1) of Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, declared IICL is “not a fit and proper person” to hold directly or indirectly, the certificate of registration as a commodity derivative broker and hereby, reject the application dated December 23, 2015 filed by IICL for registration as commodity derivatives broker and shall cease to act, directly or indirectly, as a commodity derivatives broker.

IICL is seeking legal advice and evaluating to prefer an Appeal against the said Order dated February 22, 2019.

REGULATORS OUTSIDE INDIA

1. IIFL Capital Inc:

Sl. No Regulatory Authority Subject Matter/Allegations Brief of Orders/Findings Present Status

1 Financial Industry Regulatory

Authority (FINRA) United States

The Firm registered as a broker dealer, for

a period of time, missed to meet the

regulatory minimum net capital

requirement, due to an inadvertent miss -

classification of receivables in books of

accounts.

Settled the matter with

payment of USD 15,000

to FINRA.

Complied and Minimum Net

Capital Requirement is

thereafter properly

maintained.

B) PENDING MATTERS

1. IIFL Securities Limited (Formerly known as India Infoline Limited):

Sr.

No.


Authority

Subject Matter/Allegations Orders/Findin

gs

Corrective Measures

implemented/Present Status

1 SEBI Enquiry notice dated

May 2, 2017 based on the

inspection conducted during

February 2014 covering

period from 2011 to 2014 in

respect of segregation of

clients’ funds.

SEBI SEBI notice includes observations as follows:- a) failed to do segregation of own funds from clients’ funds; b) misused credit balance of clients’ funds for debit balance clients’ funds; and c) not designated the client bank account appropriately.

NA Reply to SEBI notice submitted providing clarification with supporting documents and highlighting the corrective measures adopted and implemented including compliance with SEBI Circular on enhanced risk based supervision. During the span of 3 years from the date of concluding the onsite inspection, 3 supplementary

Sr.

No.


Authority


gs

Corrective Measures


reports were issued in this matter which has been suitably replied. Matter pending with SEBI.

2 Adjudication show cause

notice dated April 09, 2019

under Rule 4 of the SEBI

(Procedure for Holding

Inquiry and imposing

penalties by Adjudicating

Officer) Rules, 1995 (‘SEBI

Regulations’) read with

Section 15 I of Securities and

Exchange Board of India Act,

1992 in the matter of Atul

Saroagi in the script of Saint

Gobain Sekurit Limited.

SEBI SEBI notice in the matter of Saint Gobain Sekurit Limited the following observations and allegation as follows:- a) Shri Atul Saroagi was

trading through the account of Ms. Vimala Devi Kalantri and the said client informed orally over a call to accept communications from Shri Atul Saroagi without any supporting document in this regard.

b) IIFL has failed in exercising due skill, care and diligence in the conduct of its business which is allegedly, in violations of Clause A(2) of the Code of Conduct for Stock Brokers.

Reply filed

with SEBI on

May 20, 2019

Matter pending with SEBI.

2. IIFL Commodities Limited (Formerly known as India Infoline Commodities Limited)

Sr. No.


Subject Matter/Allegations Orders/Findings

Corrective Measures implemented/Present Status

1 (i) Notice issued by EOW

(ii) SEBI Enquiry Show cause Notice was received

(iii) Notice issued by SFIO, Mumbai

(iv) Investigation by the Enforcement Directorate- Mumbai

(v) High Court Committee constituted by High Court.

(i) EOW

(ii) SEBI

(iii) SFIO

(iv) ED

(v) HCC

EOW

(i) A Criminal Complainant was filed by one of the Investors, Mr. Pankaj Saraf against NSEL and others. EOW Mumbai registered a FIR based on the allegations of criminal conspiracy, fraud and criminal breach trust.

Notice received in

connection with the

investigation into matter

of NSEL defaults in

payments to various

clients and related

matters. In this regard,

EOW issued

notices/summons for

submission of information

/documents/statements

from IICL.

SEBI

(ii) The SCN issued for enquiry under the Regulation 25(1) of the SEBI (Intermediaries) Regulations, 2008 & SEBI (Stock Brokers & Sub Brokers) Regulations, 2015 by SEBI against few brokers including IICL. Further to the enquiry report, IICL received a fresh Show Cause Notice

NA

(i) The Complaint is under investigation by the EOW and the same is pending investigation.

(ii) As reported in the recent press release, we understand that EOW has filed charge sheet against 63 individuals and companies, including IICL. The Charge sheet is yet to served on IICL.

IICL submitted its detailed

response/documents/information/statements

through various letters and appearances from 2013

till date to EOW. No further communications are

received.

(iii) SEBI vide its Order dated February 22, 2019, have declared IICL is “not a fit and proper person” to hold directly or indirectly, the certificate of registration as a commodity derivative broker and rejected the application dated December 23, 2015 filed by IICL for registration as commodity derivatives Broker. IICL filed an Appeal against the said Order, before Securities Appellate Tribunal on April 11, 2019.

(iv) IICL submitted its detailed response/documents/information/statement through various letters and appearances to SFIO till date. No further communications are received.

(v) IICL submitted its detailed response/documents/information/statement through various letters and appearances to ED till date. No further communications are received.

(vi) High Court Committee, Mumbai

A detailed reply by way of an affidavit was filed

by the Company and the matter was also duly

represented before the committee, in response

2 MCX letter dated April 12, 2018 based on the Inspection Report dated 2014-15

ii) MCX MCX vide its letter has levied a penalty of Rs.3,30,00,211/- in respect of violation observed during the inspection inter alia for incorrect margin reporting and alleged violation of Exchange Bye-laws and Business Rules related to the inspection of the books of accounts and other related documents for the F.Y. 2014-5.

NA i) The Company has challenged the penalty levied by MCX before Securities Appellate Tribunal by way of an Appeal. ii) The SAT heard the matter on September 18, 2018 and directed MCX to submit its reply to the Appeal within a week and the Company will submit its rejoinder by the next date of hearing. The MCX filed its reply and the Company was directed to submit its rejoinder. Accordingly, the company filed the rejoinder on January 16, 2019. The matter is listed for hearing on July 1, 2019 before the Honorable SAT.

3 MCX letter dated April 12, 2018 based on the Inspection Report dated 2015-16

ii) MCX MCX vide its letter has levied a penalty of Rs.1,19,24,568/- in respect of violation observed during the inspection inter alia for incorrect margin reporting and alleged violation of Exchange Bye-laws and Business Rules related to the inspection of the books of accounts and other related documents for the F.Y. 2015-16.

NA The Company has challenged the penalty levied by MCX before Securities Appellate Tribunal by way of an Appeal. The SAT heard the matter on September 18, 2018 and directed MCX to submit its reply to the Appeal within a week and the Company will submit its rejoinder by the next date of hearing. The MCX filed its reply and the Company was directed to submit its rejoinder. Accordingly, the company filed the rejoinder on January 16, 2019. The matter is listed for hearing on July 1, 2019 before the Honorable SAT.

3. IIFL Insurance Brokers Limited (Formerly known as India Infoline Insurance Brokers Limited)

Sr.

No.


Authority


gs

Corrective Measures


1 Show Cause Notice dated

February 26, 2019

IRDA Observations of inspection on

insurance broking business

during the period 2014-15 and

2015-16

Detailed Reply

to the Notice

on the

compliances

submitted to

IRDA vide

letter dated,

April 08 2019.

Matter pending with IRDA

4. IIFL Wealth (UK) Limited

a. Material pending litigation

A civil suit has been filed before the High Court of Justice, Business and Property courts of England and Wales, Queens Bench division,

Commercial Court (“Court”) against IIFL UK, Ramu Ramasamy, Palaniyapan Ramasamy and Amit Shah (collectively, the “Defendants”) by

Prashant Hasmukh Manek, Sanjay Chandi and EAGM Ventures (India) Private Limited (“Claimants”). The Claimants claim that they had agreed to

sell their shares in Hermes i-Tickets Private Limited to Great Indian Retail Private Limited as a result of certain representations purportedly made

by the Defendants. IIFL UK and Amit Shah filed a joint statement of defence with the Court and also responded to Claimants’ request for further

information. In June 2018, the Claimants filed their reply to the joint statement of defence with the Court. The claim amount in the matter is €

26.53 million, in addition to such further sums that are to be assessed in respect of consequential losses relating to the earn out consideration.

Ramu Ramasamy & Palaniyapan Ramasamy have vide their application dated 25 April 2019 to the Court, challenged the jurisdiction of the Court.

The Claimants have submitted their reply to the said jurisdictional challenge on July 5, 2019. The matter is currently pending.

5. IIFL Wealth Finance Limited

1. 1. A commercial arbitration petition was filed in October 2018 by Ecogreen Cleantech Private Limited (“P1”) and D N Niranjan Kani (“P2”) (P1 and P2 “Petitioners”) in the Bombay High Court against IIFL Wealth Finance Limited (“Respondent”). P1 had signed a master financing agreement with the Respondent to avail loan of ` 6.5 crore approximately and pledged the unlisted equity shares held by P2 as security for such loan. The Respondent sent margin shortfall notices to P1 due to certain reasons. Apprehending that the Respondent will sell the security, the Petitioners approached the court. Pending the outcome of the arbitration, the Petitioners prayed for: (i) restraining the Respondent from demanding repayment of the loan (ii) restraining the Respondent from selling the security. The court has appointed the arbitrator in the matter. Presently, the Respondent has been restrained from selling the security. The matter is pending.

2. A commercial arbitration petition was filed in October 2018 by Holista Tranzworld Private Limited (“P1”) and D N Niranjan Kani (“P2”) (P1 and P2 “Petitioners”) in the Bombay High Court against IIFL Wealth Finance Limited (Respondent). P1 had signed a master financing agreement with the Respondent to avail loan of ` 1.5 crore approximately and pledged the unlisted equity shares held by P2 as security for such loan. The Respondent sent margin shortfall notices to P1 due to certain reasons. Apprehending that the Respondent will sell the security, the Petitioners approached the court. Pending the outcome of the arbitration, the Petitioners prayed for: (i) restraining the Respondent from demanding repayment of the loan (ii) restraining the Respondent from selling the security. The court has appointed the arbitrator in the matter. Presently, the Respondent has been restrained from selling the security. During the pendency of the proceedings before the arbitrator, P1 has made payment of the dues. Necessary steps are being taken for closure of the proceedings.


1. A Suit has been filed in the City Civil Court, Calcutta by a petitioner (“P1”) against banks and financial institutions including IIFL Wealth Management Limited (“IIFLWM”) in November 2018. P1’s father passed away in March, 2018. His deceased father has several accounts with banks and investments monitored by financial institutions, IIFLWM being one of them. P1 has requested the banks/financial institutions to provide him with the information pertaining to such accounts/investments but some of them had refused to provide the same. Apprehending that the other successors of his deceased father will attempt to close the accounts/withdraw the investments to deprive P1 of his share, P1 has prayed that the court orders the banks/financial institutions to provide P1 with the information regarding the accounts/investments. The matter is pending.

2. A Suit has been filed in the City Civil Court, Calcutta by a petitioner (“P1”) against banks and financial institutions including IIFL Wealth Management Limited (“IIFLWM”) and P1’s mother and P1’s younger brother in November 2018. P1’s father passed away in March, 2018.

His deceased father has several accounts with banks and investments monitored by financial institutions, IIFLWM being one of them. Suspecting that the other successors of his deceased father (P1’s mother and P1’s younger brother) are colluding with some of the banks/financial institutions to close the accounts/withdraw the said investments to deprive him of his share, P1 has prayed that the court orders the banks/financial institutions not to carry out any transactions without the written consent of P1. The matter is pending.

3. IIFL Wealth Management Limited (“IIFLW”) had taken certain business space from Access Serviced Offices Private Limited (“Accessworks”) pursuant to a Workspace Service Agreement for a monthly fee and certain amount of security deposit. Due to a fire, the business centre was rendered un-operational and IIFLW was moved to an alternate accommodation. However, the alternative accommodation was inconvenient and had several quality and service issues. As a result, the Agreement was terminated by IIFLW and a refund of the security deposit was sought. Accessworks did not refund the security deposit citing reasons. As the security deposit was not refunded even after several follow ups and long correspondence exchanged between parties, IIFLW filed a plaint on 23rd July, 2019 before the City Civil Court at Dindoshi. The Suit will be lodged after the statutory remedy of pre-institution mediation is exhausted in accordance with the procedure prescribed under the Commercial Courts Act, 2015. A Mediation Form has been filed in the Mediation Department of the City Civil Court at Dindoshi and the same has been numbered as Serial No. 1053/19. The mediation is pending.”

7. IIFL Trustee Limited -

IIFL Income Opportunities Fund Series – Special Situations, a Close Ended Debt Scheme of IIFL Private Equity Fund, had subscribed to 1,500

Series I Debentures of face value of Rs.1,00,000/- (Rupees one lakh) each aggregating to Rs.150,00,00,000/- (Rupees one hundred and fifty

crore) issued by Ashvi Developers Private Limited. The investment was secured, among other securities, by a corporate guarantee from Ariisto

Developers Private Limited (“ADPL”). There was a default in repayment of debentures. One, M/s Dipco Private Limited, in its capacity as financial

creditor of ADPL, initiated NCLT proceedings against ADPL. NCLT ordered the commencement of corporate insolvency resolution process of ADPL

on 20.11.2018. NCLT appointed an Insolvency Resolution Professional (IRP). The said IRP issued public announcement calling upon the creditors

of ADPL to submit their claims to IRP. In response, IIFL Trustee Limited, acting on behalf of the aforesaid Fund, submitted the Fund’s claim

amounting to Rs. 365,59,05,019 (Rupees three hundred sixty five crore fifty nine lakh five thousand nineteen) as a financial creditor of ADPL.

Some of the creditors who had also filed their claims, challenged the acceptance of the Fund’s claim by the IRP filing an application before the

NCLT, Mumbai. IIFL Trustee Limited, on behalf of the Fund, has filed the reply in the matter. The matter is pending.

M. P. Chitale & Co. Chartered Accountants 1/11, Prabhadevi Ind. Estate, 1st Flr., Opp. Siddhivinayak Temple, Veer Savarkar Marg, Prabhadevi, Mumbai - 25 Tel.: 43474301-03 Fax : 43474304

The Board of Directors, IIFL Wealth Advisors (India) Limited, Lemuir House, 10 G. N. Chetty Road, T. Nagar, Chennai 600 017. We have examined the Disclosure Document dated July 31, 2019, for Portfolio Management prepared in accordance with Regulation 14 of SEBI (Portfolio Managers) Regulations, 1993 by IIFL Wealth Advisors (India) Limited, having its office at Lemuir House, 10 G. N. Chetty Road, T. Nagar, Chennai 600 017. Based on our examination of attached Disclosure Document, audited annual accounts of IIFL Wealth Advisors (India) Limited and its other group companies and other relevant records and information furnished by Management, we certify that the disclosures made in the attached Disclosure Document for Portfolio Management are true, fair and adequate to enable the investors to make a well informed decision. We have relied on the representations given by the management about the penalties or litigations against the Portfolio Manager mentioned in the disclosure document. We are unable to comment on the same. This certificate has been issued for submission to the Securities and Exchange Board of India for the sole purpose of certifying the contents of the Disclosure Document for Portfolio Management and should not be used or referred to for any other purpose without our prior written consent. For M.P. Chitale & Co. Chartered Accountants Firm Reg. No. 101851W

Vidya Barje Partner M. No. 104994 Mumbai, August 19, 2019 UDIN: 19104994AAAARO2504

Date post:	13-May-2020
Category:	Documents
Upload:	others
View:	14 times
Download:	0 times

PORTFOLIO MANAGEMENT SERVICES DISCLOSURE DOCUMENT OF … - PMS.pdf · PORTFOLIO MANAGEMENT SERVICES...

Documents