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KARVY CAPITAL LIMITED

PORTFOLIO MANAGEMENT SERVICES

DISCLOSURE DOCUMENT

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

1. This document supersedes the Disclosure document dated March 1, 2019 filed with

Securities and Exchange Board of India (SEBI) on March 5, 2019.

2 This Disclosure Document has been filed with SEBI along with the certificate from

independent chartered accountant in the prescribed format in terms of Regulation

14 of the SEBI (Portfolio Managers) Regulations, 1993 as amended till date.

3 The purpose of this Disclosure Document is to provide essential information about

the portfolio management services offered by Karvy Capital Limited in such manner

as to assist and enable the investors in making informed and considered decision for

engaging Karvy Capital Limited as a Portfolio Manager.

4 This document contains the necessary information about the Portfolio Manager

required by an investor.

5 Karvy Capital Limited is permitted to provide Portfolio Management Services

pursuant to its registration as a Portfolio Manager with SEBI vide Registration

number INP000004524 dated March 23, 2017 which registration shall be valid unless

it is suspended or cancelled by SEBI and is subject to payment of renewal fees to

SEBI from time to time

6 Investors should carefully read this entire document before making a decision to

avail portfolio management services from Karvy Capital Limited and retain this

document for future reference. Any other relevant information may be provided

upon request.

7 No person has been authorized to give any information or to make any

representations not confirmed in this draft Disclosure Document in connection with

the services proposed to be provided by the Portfolio Manager, and any information

or representations not contained herein must not be relied upon as having been

authorized by the Portfolio Manager.

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8 The Principal Officer designated by Karvy Capital Limited, the Portfolio Manager is:

Name of the Principal Officer Mr. PHANI SEKHAR PONANGI

Tel No: 022 6149 1500

Email : [email protected]

Address: 702, Hallmark Business Plaza,

Sant Dnyaneshwar Marg,

Bandra (E), Mumbai 400 051

9 This disclosure document is dated September 16, 2019

Portfolio Management Services KARVY CAPITAL LIMITED

INDEX

Sr No Contents Page

Number

1 Disclaimer 4

2 Definitions 4 - 8

3 Description - The Portfolio Manager 9

i History, Present Business and background of the Portfolio Manager.

9

ii Promoters of the Portfolio Manager, Directors and their background. 10-13

iii Details of the top 10 group companies of the Portfolio manager

based on turnover as on March 31, 2019 [Based on latest audited

financial statements]

13

4 Penalties/Pending Litigations/Proceedings etc 14

5 Services offered 14 - 17

6 Risk Factors 17 -22

7 Client Representation 22-23

i Category of clients as on August 31, 2019 22-23

ii Complete disclosure in respect of transactions with related parties as

per the standards specified by the Institute of Chartered

Accountants of India as on March 31, 2019

23

8 Financial Performance of Portfolio Manager, Karvy Capital Limited 23 - 24

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[Based on audited financial statements]

9 Portfolio Management Performance of the Portfolio Manager for last

3 years

25 – 26

10 Nature of Expenses 27 – 28

11 Taxation 28 – 33

12 Accounting Policies 33 – 34

13 Investor Relations officer 35 – 36

14 Grievances Redressal 35

15 Dispute Settlement Mechanism 35

16 General 36

Section 1: DISCLAIMER

This document has been prepared in accordance with the Securities Exchange Board of India

(Portfolio Managers) Regulations, 1993, as amended from time to time and other circulars

issued by SEBI from time to time and has been filed with SEBI. This Document has neither

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

the contents of this Document.

This information is not for public distribution and has been furnished to you solely for your

information and may not be reproduced or redistributed to any other person.

Section 2: DEFINITIONS

In this Agreement, unless otherwise clearly indicated by or inconsistent with the context, the

following expressions shall have the meaning assigned to them hereunder respectively:

“Act” – means the Securities and Exchange Board of India Act, 1992.

“Agreement” means the agreement that shall be entered between Karvy Capital Limited, the

Portfolio Manager and the client for the management of funds or securities of the client in

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

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

India and as may be modified from time to time and shall include all schedules and

annexures thereto and shall also include all modifications, alterations, additions or deletions

made thereto in accordance with the terms thereof.

“Board” means the Securities and Exchange Board of India.

“Bank Account” means one or more bank accounts opened, maintained and operated by

the Portfolio Manager in the name of clients or a pool account in the name of the Portfolio

Manager in which the funds handed over by the client shall be held by the Portfolio Manager

on behalf of the Client.

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“Chartered Accountant” means a chartered accountant as defined in clause (b) of sub-

section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has

obtained a certificate of practice under sub-section (1) of section 6 of that Act.

“Client” means any body corporate, partnership firm, Limited Liability Partnership,

individual, HUF, association of person, body of individuals, trust, statutory authority, or any

other person who enters into agreement with Karvy Capital limited, the Portfolio Manager

for availing the Portfolio Management Services

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

providing custodial services in accordance with the regulations issued by SEBI from time to

time. The Portfolio Manager has, effective September 5, 2018, appointed Orbis Financial

Corporation Limited as Custodian for settlement of funds, securities and corporate benefits

in the portfolio of clients.

“Depository” means Depository as defined in the Depositories Act, 1996 (22 of 1996) and

currently includes National Securities Depository Limited (NSDL) and Central Depository

Services (India) Limited (CDSL).

“Depository Account” means any account of the client or for the client with an entity

registered as depository participant under sub-section 1A of Section 12 of the Act or any

other law for the time being relating to registration of depository participants in which the

securities comprising part of the Portfolio of the Client are kept by the Portfolio Manager.

“Discretionary Portfolio Management Services” means the discretionary portfolio

management services to be rendered to a Client by Karvy Capital Limited, the Portfolio

Manager pursuant to the terms and conditions contained in the Portfolio Management

Services Agreement, where under the Portfolio Manager exercises absolute and unfettered

discretion, with regards to the investments and management of the portfolio of securities or

the funds of the client, as the case may be.

“Disclosure Document” means this draft disclosure document for offering Portfolio

Management Services.

“Financial year” means the period of twelve months commencing on 1st April every year and

ending on 31st March of the following year.

“Funds” means the monies placed by the Client with the Portfolio Manager and any

accretions thereto and also includes any further monies placed by the client with the

Portfolio Manager to be managed pursuant to the Agreement, the proceeds of the sale or

realization of the portfolio and other monies so long as the same is being managed by the

Portfolio Manager.

“Funds managed” means the market value for the equity portion of the Portfolio of the

Client and for the debt portion of the Portfolio of the Client, it means market value where

available or the sum total of the investment value viz cost and accrued interest/ redemption

premium/ amortization of premium/ discount as applicable as on date.

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“Fund Manager” (FM) means the individual/s appointed by the portfolio manager who

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

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

securities or funds of the client, as the case may be.

“Initial Corpus” means the value of the funds and the market value of securities brought in

by the client and accepted by the Portfolio Manager at the time of registering with the

Portfolio Manager for the portfolio management services In case the Initial corpus brought in

by the Client is in the form of securities, it shall be valued at the closing market price of such

securities, prevailing on recognised stock exchange [NSE/ BSE (only if security is not listed on

NSE)] on the previous working date of activation of client’s portfolio management account

by the Portfolio Manager or of the previous working day of the transfer of such securities

from client’s account to the Depository account whichever is later.

In case the initial corpus is in form of Debt, debt instruments will be valued at the market

value of the debt instrument as on cut off date (or) the latest available price on the relevant

exchange or the most recent NAV will be reckoned and where market value is not available /

ascertainable, the debt instruments will be valued at the sum total of the investment value

viz cost and accrued interest/ redemption premium/ amortization of premium/ discount as

applicable as on date.

For illiquid securities, the valuation may be provided by the issuer on a periodic basis and/or

calculated as required by the portfolio manager – basic consideration being the residual

tenor amount.

The Portfolio Manager shall not accept from the client/ client(s), in case of joint holding

funds or securities worth less than Twenty five lakh rupees.

“Investment Advisory Services” means the non exclusive, non binding services, where the

Portfolio Manager advises Clients on investments in general or gives specific advice

required by the Clients as agreed upon in the Agreement. Advice, whether general or specific

is non-binding in nature and it is entirely at client’s discretion to follow the advice.

“Non-Discretionary Portfolio Management Services” means the non-discretionary portfolio

management services to be rendered to a Client by the Portfolio Manager on the terms and

conditions pursuant to the Agreement, where under the Portfolio Manager invests and

manages the Funds of the Client based on the instructions of the Client.

“Net Asset Value” or “NAV” means the value of the Assets managed by the Portfolio

Manager, as calculated by the Portfolio Manager from time to time, depending on the

Strategy chosen by the Client.

Under section 2(76) of the Companies Act, 2013 - “Related Party” with reference to a

company, means—

(i) a director or his relative;

(ii) a key managerial personnel or his relative;

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(iii) a firm, in which a director, manager or his relative is a partner;

(iv) a private company in which a director or manager is a member or director;

(v) a public company in which a director or manager is a director or holds along with his

relatives, more than two per cent. of its paid-up share capital;

(vi) anybody corporate whose Board of Directors, managing director or manager is

accustomed to act in accordance with the advice, directions or instructions of a director or

manager;

(vii) any person on whose advice, directions or instructions a director or manager is

accustomed to act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or

instructions given in a professional capacity;

(viii) any company which is—

A. a holding, subsidiary or an associate company of such company; or

B. a subsidiary of a holding company to which it is also a subsidiary;

(ix) such other person as may be prescribed;

“Portfolio” means the total holdings of securities and / or funds belonging to the client.

“Portfolio Manager” (PM) means Karvy Capital Ltd., a company incorporated under the

Companies Act, 1956 and registered with SEBI as a Portfolio Manager in terms of SEBI

(Portfolio Managers) Regulations 1993 vide registration no. INP000004524 and having its

Registered Office at its PMS dealing office at 702, Hallmark Business Plaza, Sant

Dnyaneshwar Marg, Bandra (E), Mumbai 400 051[but may add more dealing offices in

future] and who pursuant to a contract or arrangement with a client, advises or directs or

undertakes on behalf of the client (whether as a discretionary Portfolio Manager or

otherwise) the management or administration of a portfolio of securities or the funds of the

client, as the case may be.

“Portfolio Management Services” means the Discretionary Portfolio Management Services,

and/or the Non-Discretionary Portfolio Management Services, and/or the Investment

Advisory Services, as the case may be.

“Portfolio Value” means the aggregate of the Portfolio Funds and Value of Portfolio

Securities.

“Principal Officer” means a director/an employee of the portfolio manager who is

responsible for the activities of portfolio management and has been designated as principal

officer by the portfolio manager.

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

Regulations, 1993, as amended by SEBI from time to time and includes Securities and

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Exchange Board of India (Portfolio Managers) Amendment Regulations, 2012, and rules,

guidelines or circulars issued in relation thereto from time to time.

“Strategy” means any of the Portfolio Investment categories mentioned herein or that may

be introduced by the Portfolio Manager from time to time. The Term Strategy may be

interchanged with Plans/Products/Options.

“SEBI” means the Securities and Exchange Board of India established under sub-section (1)

of Section 3 of the Securities and Exchange Board of India Act, 1992.

“Securities” means securities as defined under the Securities Contracts (Regulation) Act,

1956 and includes:

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

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

corporate

(ia) derivative;

(ib) units or any other instrument issued by any collective investment Strategy to the

investors in such Strategies;

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and

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

(id) units or any other such instrument issued to the investors under any mutual fund

Strategy;

(ii) Government securities;

(iia) such other instruments as may be declared by the Central Government to be

securities; and

(iii) rights or interest in securities.

A descriptive, but not the exhaustive list of “Securities” is given hereunder:

Shares (whether dematerialized or otherwise), derivatives (futures and options, Interest rate

swaps & Forward rate agreements etc), scrip, stocks, bonds (whether dematerialized or

otherwise), warrants, convertible debentures (whether dematerialized or otherwise), non-

convertible debentures (whether dematerialized or otherwise), securitised debt (whether

dematerialized or otherwise), fixed return investments, floating rate instruments linked to

MIBOR/ call money etc., equity shares and equity linked instruments or other marketable

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

negotiable instruments, including usage bills of exchange, trade bills, deposits or other

money market instruments, derivatives, commercial paper, certificates of deposits, units

issued by Unit Trust of India, units issued by Mutual Funds, units issued by SEBI registered

Alternative Investment Funds, mortgage backed or other asset backed securities issued by

any institution or corporate, cumulative convertible preference shares issued by any

incorporated Company and securities issued by the Central Government or a State

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Government , Pass Through Certificates , RBI auctions, open market sales conducted by RBI

or any other securities that may be issued from time to time.

“Securities lending” means the securities lending as per the Securities Lending Scheme, 1997

and related guidelines specified by SEBI.

“Structured Products” means products returns on which may be linked to Equity Index, Debt

instruments, Non Convertible Debentures and may also be based on Basket of stock, index or

stock futures with pre-defined capital protection. These are normally third party products.

The terms that are used herein and not defined herein, except where the context otherwise

so requires, shall have the same meanings as are assigned to them under the Act, the

Regulations or the Rules.

Words importing the singular include the plural and vice-versa. Words importing a gender

include the other gender.

Section 3 DESCRIPTION

i. HISTORY, PRESENT BUSINESS AND BACKGROUND OF THE PORTFOLIO MANAGER :

Karvy Capital Limited, a wholly owned subsidiary of Karvy Stock Broking Limited, was

incorporated under the Companies Act, 1956 as amended from time to time as a Private

Limited Company on December 31, 1981 with the name ‘Grant Holding and Trading

Company Private Limited’. On June 30, 2011, the name of the company was changed to

Karvy Capital Private Limited. The name of the company was further changed from Karvy

Capital Private Limited to Karvy Capital Limited with effect from February 8, 2012 and

presently Karvy Capital Limited is a Public Company domiciled in India.

Karvy Capital Limited has its Registered Office at 702, Hallmark Business Plaza, Sant

Dnyaneshwar Marg, Bandra (E), Mumbai – 400051.

Karvy Capital Limited is an Asset Management Company offering Portfolio Management

(PMS) and Alternative Investment (AIF) Services.

Karvy Capital Limited has been registered with Reserve Bank of India (‘RBI’) to carry on the

business of non-banking financial institution with effect from March 24, 1998.

Karvy Capital Limited is also acting as a Sponsor and Manager to Karvy Capital Alternative

Investment Fund (Trust) for which it has obtained Category III License on April 10, 2013.

Karvy Capital Limited is registered with SEBI as a Portfolio Manager vide registration number

INP000004524.

Karvy Capital Limited started proprietary trading in August 2010 with a focus on Quantitative

and Absolute Return strategies. Currently, Karvy Capital Limited acts as an Investment

Manager to Karvy Capital Alternative Investment Fund – a category III Alternative Investment

Fund.

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Karvy Capital Limited also has a retail debt business and acts as a facilitator for structured

finance deals. Karvy Capital Limited is also a direct sales associate and main distributor to the

various products and services being offered by Karvy Group.

Karvy Capital Limited aims to be a reputable asset manager providing comprehensive

investment solutions across asset classes to its investors. To diversify the set of offerings,

Karvy Capital Limited intends to provide customized and focused portfolio management

solutions to investors. These services would include discretionary portfolio management

services, non discretionary portfolio management services and advisory services.

Karvy Capital Limited is a group company of the Karvy Group, which is a premier integrated

financial services provider, and ranked amongst the leading corporate in the country in all its

business segments, servicing over millions of individual investors in various capacities, and

provides investor services to many corporates, comprising the who’s who of Corporate

India. KARVY group companies cover the entire spectrum of financial services such as Stock

Broking, Depository Participants, Distribution of financial products – mutual funds, bonds,

fixed deposit, equities, Insurance Repository , Commodities Broking, Personal Finance,

Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,

services related to data management and Non Banking Financial company among others.

Karvy Group has a professional management team and ranks among the best in technology

and operations.

ii. DETAILS OF PROMOTERS,DIRECTORS AND THEIR BACKGROUND:

The directors of Karvy Capital Limited as on August 20, 2019 and their background are as

follows:

Name and age: Mr. Kedar Ramesh Deshpande, aged 46 years **

Designation: Whole-time Director.

Qualification: BE Civil Engineering and MBA Marketing

Experience (General and

specific Intermediaries

activity):

Mr.Kedar Ramesh Deshpande is having over 20 years of

experience across wide-range of financial services

including retail broking, banking, education, ecommerce

and market research . He is the founder Director of Repeat

Purchase India Pvt. Ltd., an ecommerce company and COS

and Financial Catalysts Private Limited, a sales finishing

schoolfor imparting training for retail BFSI sector.

He has been associated with ICICI group for a period of 7

years. He headed the retail broking business, commodities

segment, retail demat business. Has set up the retail

broking business at Edelweiss Financial Services Ltd. and

played a key role in designing website to give clients

simplified execution.

Date of appointment: August 10, 2015

Other directorships: Name of Company Date of appointment

Repeat Purchase India August 10, 2012

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Private Limited

Landmark Capital Advisors

Private Limited

October 6, 2016

Rupeeseed Technology

Ventures Private Limited.

January 13,2017

Previous Positions held: Country Head Retail Broking in Karvy Stock Broking Limited

prior to Business Head Retail Broking in Edelweiss

Financial Services Ltd and Deputy General Manager in ICICI

Bank Ltd.

** Mr Kedar Deshpande has submitted his resignation from the services of Karvy Capital

Ltd with last working day being 30th September, 2019.

Name and age: Mr. G. Krishna Hari, aged 61 years

Designation: Director

Qualification: Bachelors degree in Commerce and an associate member

of the Institute of Chartered Accountants of India (ICAI)

Experience (General and

specific Intermediaries

activity):

He has over 30 years of experience in the areas of finance

and accounts functions encompassing fund raising,

financial reporting, management accounting, working

capital management, budgeting and forecasting and

financial due diligence reviews for mergers & acquisitions

and investment proposals. He has been associated with

the Karvy Group for the past 20 years.

Date of appointment: September 27, 2012

Other directorships: Name of Company Date of appointment

Karvy Holdings Limited March 1, 2013

Karvy Financial Services

Limited

July 29,2016

Karvy Renewable Energy

Projects Limited

December 05, 2016

Previous Positions held: Prior to joining Karvy, he was the head of finance &

accounts division in Asia Pacific Investment Trust Limited,

Hyderabad (Formerly Nagarjuna Investment Trust Limited)

an NBFC Company.

Name and age: Mr. K.P. Jeewan, aged 51 years

Designation: Director.

Qualification: B.Com (Hons Accounts), MBA

Experience

(General and

He has over 25 years of experience in investment banking,

corporate finance, fixed income, forex/interest rate structured

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specific

Intermediaries

activity):

products. He was also associated as a Vice President in Kotak

Mahindra Bank Limited, as in charge of structured products desk of

the treasury. The assignment involved structuring Derivative

products (Forex and Interest rate) for Institutional clients.

Additionally, he has worked for about a year at Kotak Mahindra

Capital Company Primary Dealers in various capacities in

investment Banking & Fixed Income.

Date of

appointment:

May 29, 2015

Other

directorships:

Not Applicable

Previous

Positions held: Head of Fixed Income Division in Karvy Stock Broking Limited

Vice President and In charge of structured products desk of the

treasury and various capacities in investment Banking & Fixed

Income in Kotak Mahindra Bank Limited

Name and age: Mr. P. B. Ramapriyan, aged 52 years


Qualification: B.Com, PGDBA

Experience

(General and

specific

Intermediaries

activity):

He has been associated with Karvy for over 2 decades and his main

strength lies in capably handling the distribution of financial

products including Equity, Bonds, Fixed Deposits and Auto Finance.

He has successfully marketed several financial products for large

number of corporate of various sizes. He is also responsible for

managing the Pan India Network of brokers and sub-brokers..

Date of

appointment:

May 29, 2015

Other

directorships:

Name of Company Date of appointment

Karvy Realty (India)

Limited

August 31,2006

Karvy Investment

Advisory Services Limited

December 22,2015

Karvy Holdings Limited February 18,2016

Landmark Capital Advisors

Private Limited

October 6,2016

Previous

Positions held: Karvy Group - Distribution of Financial products

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Name and age: Mr. Rajiv Ranjan Singh, aged 49 years


Qualification: Cost & Management Accountant

Experience

(General and

specific

Intermediaries

activity):

He has more than a decade of experience in capital markets.

He has enormous experience in finance industry with capabilities in

building strategy, revenue generation, business development and

overall customer satisfaction. At Karvy presently he heads the stock

broking segment/vertical.

Date of

appointment:

May 29, 2015

Other

directorships:

Name of Company Date of appointment

Karvy Broking (IFSC) Limited February 7, 2017

Karvy Investment Advisory

Services Limited

March, 04, 2017

Previous

Positions held: Karvy Group- Vice President & Business Head of the Equity Broking

business. Prior to Joining Karvy, he has worked with M/s.K.M Gupta

& Co, Chartered Accountants.

iii DETAILS OF THE TOP 10 GROUP COMPANIES/ FIRMS BASED ON TURNOVER AS ON

MARCH 31, 2019

Name of the Company Nature of Business Status

Karvy Data Management

Services Ltd

1. SEBI Registered KRA;

2. Data Processing, Profiling and

related services provided to various

entities

Fellow subsidiary

company

Karvy Stock Broking

Limited #

1. SEBI registered Stock Broker 2. SEBI registered Depository Participant 3. SEBI registered Portfolio Management Services 4. Distribution of financial products

5. Wealth management services

Holding Company

Karvy Digikonnect Limited IT enabled services and providing

telecommunication services

Fellow subsidiary

company

Karvy Innotech Limited IT and allied services

Karvy Forde Search Private

Limited

Manpower Services Fellow subsidiary

company

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Karvy Realty (India) Ltd. RERA registered Real Estate Broker Fellow subsidiary

company

Karvy Financial Services

Ltd.

1. Registered with the Reserve Bank of India as a Non Banking Financial Institution without accepting public deposits; 2. Registered as Point of Presence (POP) – PFRDA

Fellow subsidiary

company

Sciknow Techno Solutions

Ltd

Manufacturing and supply of

computers, smart phones, software

development etc.

Fellow subsidiary

company

Karvy Comtrade Ltd # Commodity Broker registered with: 1. Multi Commodities Exchange, 2. National Commodities and Derivatives Exchange , 3. National Multi Commodity Exchange of India Limited , 4.NCDEX Spot Exchange Limited

Fellow subsidiary

company

Karvy Holdings Ltd Core Investment Company . Group company

# Since audit of these companies is not yet complete, the data pertaining to these companies

is provisional

Section 4: PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF

INSPECTION OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE BEEN TAKEN OR

INITIATED BY ANY REGULATORY AUTHORITY

I All cases of penalties imposed by the Board

or the directions issued by Board under the

Act or Rules or Regulations made there

under

There are no penalties imposed or

litigation pending against the Karvy

Capital Limited. Details of litigations

pending against group companies/

associates of the portfolio manager

have been provided as Annexure B

to this document.

II The nature of penalty/direction Not Applicable

III Penalties imposed for any economic

offence and/or for violation of any

securities laws

Not Applicable

IV Any pending material litigation/legal

proceedings against the Portfolio

Manager/key personnel with separate

disclosure regarding pending criminal

cases, if any

Not Applicable

V Any deficiency in the systems and

operations of the Portfolio Manager

Not Applicable

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observed by the Board or any regulatory

agency

VI Any enquiry/adjudication proceedings

initiated against the Portfolio Manager or

its directors, principal officer or employee

or any person directly or indirectly

connected with the Portfolio Manager or

its directors, principal officer or employee,

under the Act or Rules or Regulations

made there under

Not Applicable

Section 5: SERVICES OFFERED

5.1 The Portfolio Manager offers the following three types of Services

a. Discretionary Services

The Portfolio account of the client is managed at the full discretion and liberty of Karvy

Capital limited, the Portfolio Manager.

Under these services, the choice as well as the timings of the investment decisions on an on-

going basis rest solely with the Portfolio Manager. The Portfolio Manager may at times and

at its own discretion, adhere to the views of the Client pertaining to the investment

/disinvestment decisions in the Client’s Portfolio. The Portfolio Manager shall have the sole

and absolute discretion to invest in respect of the Client’s account in any type of security as

per the Agreement and make such changes in the investments and invest some or all of

funds in the Client’s account in such manner and in such markets as it deems fit. The Client

may give informal guidance to customize the portfolio strategies; however, the final decision

rests with the Portfolio Manager. The securities invested / disinvested by the Portfolio

Manager for Clients in the same Strategy may differ from one Client to another Client. The

Portfolio Managers’ decision (taken in good faith) in deployment of the Clients’ account is

absolute and final and can never be called in question or be open to review at any time

during the currency of the agreement or any time thereafter except on the ground of

malafide, fraud, conflict of interest or gross negligence. This right of the Portfolio Manager

shall be exercised strictly in accordance with the relevant Acts, Rules, and Regulations,

guidelines and notifications in force from time to time.

Under these services, the Clients may authorize the Portfolio Manager to invest their Funds

in specific financial instruments or a mix of specific financial instruments or restrict the

Portfolio Manager from investing in specific financial instruments or securities. Periodical

statements in respect of Client’s Portfolio shall be sent to the respective Clients.

Details of the strategies being offered by the Portfolio Manager are contained in Annexure A.

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b. Non Discretionary

In Non-Discretionary Portfolio management, the Portfolio Manager would manage the

client’s portfolio in consultation with and as per the directions or consent of the client.

Under these services, the Clients decide their own investments with the Portfolio Manager

only facilitating the execution of transactions. The Portfolio Manager’s role would include

but not limited to providing research, structuring of clients’ portfolios, investment advice and

guidance and trade execution at the Client’s request. The Portfolio Manager shall execute

orders as per the mandate received or consent obtained from the Client. The deployment of

the Client’s Funds by the Portfolio Manager shall be as per the instructions or consent of the

Client. The rights and obligations of the Portfolio Manager shall be exercised strictly in

accordance with the Act, Rules and/or Regulations, guidelines and notifications in force from

time to time. Periodical statements in respect of Client’s Portfolio shall be sent to the

respective Clients. Details of strategies offered by the Portfolio manager under non

discretionary services can be viewed in Annexure A.

c. Advisory

Portfolio Manager will provide advisory services, as per the Regulations, which shall be in

the nature of investment advice and shall include the responsibility of advising on the

portfolio strategy, investment, disinvestment of the various securities in the client’s

portfolio, for an agreed fee, entirely at the client’s risk. The Portfolio Manger will render

the best possible advice to the client having regard to the client’s needs and the

requirements, using his own professional skills. This service will be purely of advisory in

nature under an agreed fee structure with the client. It is up to the client to accept the

recommendations/advice of Portfolio Manager and Portfolio Manager will not be held

responsible for any consequence arising out of acceptance of Portfolio Manager’s advice

under this service.

5.2 Present Investment Objective

The General Objective is to formulate and device the investment philosophy to

achieve long term growth of capital by investing in assets, which generate

reasonable risk–adjusted return . The actual portfolio management style will vary in

line with profile of each client with regards to his risk tolerance levels and specific

preferences or concerns. (The specific objective will be as mentioned in the

agreement with the client). The endeavour will be to select a diversified portfolio in

terms of exposure to various sectors and varied Industries within the sector . The

emphasis will be to Invest in companies with high Corporate Governance.

5.3 Types of securities

The Portfolio Manager/Fund Manager shall invest in all such types of Securities as

defined (kindly refer to the definition) and in all such Securities as permissible from

time to time.

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5.4 Investment in Group / associate companies

The Portfolio Manager/Fund Manager may invest in Securities of the

associate/group companies subject to the applicable laws/ regulations/ guidelines.

These investments will be carried out to achieve the investment objectives and

strategies and in the normal course of investment activity subject to the applicable

laws/regulations.

The Portfolio Manager / Fund Manager may invest in any unlisted securities of any

associate/group companies of the Portfolio Manager/ promoter. The Portfolio

Manager / Fund Manager may also invest in privately placed securities issued by

Associate/Group companies of the promoter.

5.5 Minimum Investment Amount

The Portfolio Manager shall not accept funds and/or securities from new clients,

cumulative value of which is less than Rupees Twenty Five Lakhs or as specified in

the agreement with the Portfolio Manager or as amended/specified in the SEBI

(Portfolio Managers) Regulations, 1993.

5.6 Conflict of Interest

Karvy Capital Limited, Portfolio Manager is also the Investment Manager to a

Category III Alternate Investment Fund (AIF). Since the entity is the same, the

management for both the portfolio management division and Investment

Management division remains the same. However, the personnel such as fund

manager(s), teams involved in order generation and execution will be independent

of the personnel involved in the same activity for portfolio management services.

Further, the services offered by the Investment Manager under the AIF offering and

the Portfolio Management services to clients are inherently very different. The key

difference is that as of now Portfolio management invests in low / unrated / low

rated debt instruments while the AIF invests in High Quality instruments. The AIF

fund will invest in high quality corporate, sovereign and tax-free bonds across

various maturities with high credit rating. Derivative transactions would also be

considered in these strategies. The PMS portfolio would primarily consist of debt

securities, preference capital, commercial paper, tax free bonds and pass through

certificates which may be listed or unlisted and would be of moderate quality.

Nonetheless, the management will provide their guidance and insight with relation

to monitoring of overall functioning of both the AIF and portfolio management

services and their broad macro views on the investment front shall be used for both.

Therefore there is no conflict of interest in both these activities.

The portfolio manager being an NBFC purchases securities as a part of its routine

business activity. These securities may be bought for investment or trading

purposes. Therefore Karvy Capital as discretionary portfolio manager may buy the

securities from Karvy Capital limited {NBFC}. These securities would be purchased at

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a price deemed fit by the portfolio manager and may also at times be at a premium

depending on the demand for the security. Additionally, depending on reasons such

as demand for the security prevalent at the time of purchase by Karvy Capital as

discretionary portfolio manager from itself as an NBFC , the portfolio manager may

get different prices for the same security. Effectively it is a possibility that the price

of the security bought by the portfolio manager in the above manner may differ

interse the clients of the portfolio manager on account of the same being bought at

different points of time. Karvy Capital Limited, discretionary portfolio manager shall

ensure that its rationale for all its decisions to purchase securities in the abovesaid

manner shall be documented and approved by its Investment Committee.

Section 6: RISK FACTORS

1. Investments in securities are subject to market risks including price volatility and

liquidity risk and there is no assurance or guarantee that the objectives of the

strategy will be achieved. The investment may not be suited for all categories of

investors. The past or present performance of these strategies does not indicate their

future performance.. With reference to appreciation on the portfolio, the investors

are not being offered any guaranteed returns through any of the strategies. The

Portfolio Manager also does not guarantee any capital protection for any strategy.

2. There are inherent risks arising out of investment objectives, investment strategy,

asset allocation and non-diversification of portfolio. The investment objective,

investment strategy and asset allocation may differ from client to client. However,

generally, highly concentrated portfolios with lesser number of stocks will be more

volatile than a portfolio with a larger number of stocks. Portfolios with higher

allocation to equities will be subject to higher volatility that portfolios with low

allocation to equities. Diversified portfolios (allocated across companies and broad

sectors) generally tend to be less volatile than non diversified portfolios. The names

of the various strategies do not in any manner indicate their prospects or returns.

3. Investment decisions made by the Portfolio Manager may not always be profitable

since actual market movement may be at variance with anticipated trends.

4. ETF may trade above or below their NAV. The NAV of ETF will fluctuate with changes

in market value of scheme’s holdings of underlying stocks. However, given that ETF

can be created and redeemed only in creation units directly with the Mutual Fund, it

is expected that large discounts or premiums to the NAVs of ETFs will not sustain due

to availability of arbitrage possibility. Any changes in trading regulations by the

Exchange (s) or SEBI may affect the ability of market maker to arbitrage resulting into

wider premium / discount to NAV for ETFs.

5. The performances of the strategies depend on the performance of the market and

the individual companies in which investment have been made under strategies

relative to industry specific and macro economic factors. The Portfolio Manager does

not assure or guarantee that Performance of Portfolio of the Investor shall better the

Performance of any Benchmark Index.

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6. The tax benefits described in this Disclosure Document are as available under the

present taxation laws and are available subject to conditions. The information given is

included for general purpose only and is based on advice received by the Portfolio

Manager regarding the law and practice in force in India and the investors should be

aware that the relevant fiscal rules or their interpretation may change. As is the case

with any investment, there can be no guarantee that the current tax position or the

proposed tax position prevailing at the time of an investment in the Portfolio will

endure indefinitely. In view of the individual nature of tax consequences, each

investor is advised to consult his/her own professional tax advisor regarding the

taxation aspects of his/ her portfolio investments.

7. Prospective investors should review/ study this Disclosure Document carefully and in

its entirety and shall not construe the contents hereof or regard the summaries

contained herein as advice relating to legal, taxation, or financial/investment matters.

Prospective investors are advised to consult their own professional advisor(s) as to

the legal, tax, financial or any other requirements or restrictions relating to the

subscription, gifting, acquisition, holding, disposal (sale or conversion into money) of

Portfolio and to the treatment of income(if any), capitalization, capital gains, any

distribution, and other tax consequences relevant to their portfolio, acquisition,

holding, capitalization, disposal (sale, transfer or conversion into money) of portfolio

within their jurisdiction of nationality, residence, incorporation, domicile etc. or

under the laws of any jurisdiction to which they or any managed funds to be used to

purchase/gift portfolio of securities are subject, and also to determine possible legal,

tax, financial or other consequences of subscribing/gifting, purchasing or holding

portfolio of securities before making an investment.

8. The debt investments and other fixed income securities may be subject to interest

rate risk, liquidity risk, default risk, credit risk and reinvestment risk. Liquidity in these

investments may be affected by trading volume, settlement period and transfer

procedures. Issuer of fixed income security may default or may be unable to make

timely payments of principal and interest. Net Asset Value of portfolio may be

affected due to perceived level of credit risk as well as actual event of default.

9. The corporate debt market is relatively illiquid vis-à-vis the government securities

market. There could therefore be difficulties in exiting from corporate bonds in times

of uncertainties. Further, liquidity may occur only in specific lot sizes. Liquidity in a

security can therefore suffer. Even though the Government securities market is more

liquid compared to that of other debt instruments, on occasions, there could be

difficulties in transacting in the market due to extreme volatility or unusual

constriction in market volumes or on occasions when an unusually large transaction

has to be put through. There can be no assurance that the requirements of the

securities market necessary to maintain the listing of specified debt security will

continue to be met or will remain unchanged. There may be limited/ no liquidity for a

debt security held in the client's portfolio at the time of liquidation of the portfolio for

reason of default/ delay in payment of amounts due on the said debt security by the

Issuer of the debt security

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10. The Portfolio Manager relies on the legal, financial and technical due diligence

undertaken by external professionals such as law firms, CA firms and valuation

agencies that may be appointed by the Trustee/ Issuer apart from conducting its own

due diligence which is undertaken by the in – house professionals relying on the

financials and other reports provided by the Issuer and / or other external

professionals.

11. Exposure to select Sector(s) carries the performance risk of the relevant sector, which

could outperform or underperform the market and/or various indices.

12. Some of the investments in niche sectors run the risk of volatility, high valuation,

obsolescence and low liquidity. Owing to the credit risk of debt that the strategy is

investing into, the preservation of capital is not guaranteed. In case of a default by

Issuer in any of the underlying securities, the trustees would endeavour to recover

the principal and the interest for the investors but , enforcing their legal rights by

litigating against defaulting Issuers is generally a slow and potentially expensive

process in India hence there is a risk of erosion of the principal invested in the

strategy by the investor. Additionally, the recovery process in case of a default may

take time to be implemented. Hence, at the level of each individual instrument, there

exists a risk of partial or complete capital erosion in case of a default by the Issuer. In

the event of a significant decline in property prices, the Trustee may not be able to

realise the value of the collateral or recover the principal and interest in the event of

a default by Issuer of debt security. In the event the Issuers of debt security default

on the repayment of interest and principal dues, the Trustee may not be able to

realize the full value of the collateral due to various reasons, including a possible

decline in the realizable value of the collateral, prolonged legal proceedings,

unavailability of a ready market and fraudulent actions by Issuers of debt security, or ,

the Trustee may not be able to foreclose on collateral at all. In India, foreclosure on

collateral may be subject to delays and administrative requirements that may result,

or be accompanied by, a decrease in the value of the collateral. Foreclosure on

collateral generally requires a written petition to an Indian court or tribunal. Although

special tribunals have been set up for expeditious recovery of debts due to banks, any

proceedings brought may be subject to delays and administrative requirements that

may result in, or be accompanied by, a decrease in the value of the collateral. A

decline in the value of the security could impair the Trustee’s ability to realize the

secured assets

13. The securities invested into the strategy will have credit quality of a wide range and

hence a varying amount of credit risk. Such securities may be rated or unrated. The

Issuer may be rated or unrated and if rated, the latest available credit rating will be

considered. The rating of the securities or the Issuer may be investment grade or

speculative grade Frequent rebalancing of portfolio may result in higher brokerage /

transaction cost. Also the allocation to different securities can vary from 0 to 100 %,

hence there can be a vast difference between the performance of the products and

returns generated by underlying securities.

14. Information available on some companies in which the Portfolio manager has made

investments may be limited.

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15. The performance of the strategies may be affected by change in Government Policies

including taxation, and certain unforeseen developments in political or general areas

at the national or international level. Also, the investments are subject to external

risks such as war, natural calamities and policy changes of local / international

markets which affect stock markets.

16. The performance of the strategies may also be affected and investor could lose

money over short periods due to fluctuation in NAV of Portfolio arising out of

fluctuations of interest rates, credit risk, political and geopolitical risk, currency risk,

foreign exchange risks, foreign investments, risks arising from changing business

dynamics, risk associated with investment in securities debt, risk due to movement in

Futures and options markets, changes in the general market conditions, forces

affecting the capital markets, closure of stock exchange due to circuit filter rules or

otherwise and risks associated with trading volumes, settlement periods, transfer

procedures, liquidity and settlement systems in equity and debt markets.

17. There is a possibility that loss may be sustained by the Portfolio as a result of the

failure of another party (usually referred as the “Counter party”) to comply with the

terms of the derivative contract.

18. Portfolio Manager, subject to authorization in writing by the client, may participate in

securities lending. Engaging in securities lending is subject to risks related to

fluctuations in collateral value/settlement/liquidity/default from counter party,

including corporate benefits accrued thereon. This may lead to the risk of Approved

Intermediary unable to deliver back the securities. Portfolio Manager cannot be held

liable for any loss arising out of operation of such strategies.

19. The portfolio manager may in the course of its activities, avail the services of persons

/ bodies who are not employees of the portfolio manager. The portfolio manager

would exercise due diligence when employing such persons, however there may be

losses incurred on account of any act or omission on part of such persons or bodies.

The portfolio manager disclaims liability for any loss in the portfolio on this account.

20. All portfolios under portfolio management are subject to change at anytime at the

discretion of the Portfolio Manager.

21. In the case of stock lending, risks relate to the defaults from counterparties with

regard to securities lent and the corporate benefits accruing thereon, inadequacy of

the collateral and settlement risks. The Portfolio Manager is not responsible or liable

for any loss resulting from the operations of the strategies/options.

22. Investments in the Market Linked Debentures (MLDs) are also subject to model risk.

The MLDs are created on the basis of complex mathematical models involving

multiple derivative exposures which may or may not be hedged and the actual

behavior of the securities selected for hedging may significantly differ from the

returns predicted by the mathematical models. Investments in preference capital

issues may not be backed by any collateral and would be subject to the Company Law

regulations or any other statutes that may govern their issuance from time to time.

23. Investing in any tranche of a Pass through certificate may not be backed by any

collateral.

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24. There may be limited/ No liquidity for a debt security held in the portfolio at time of

liquidation of the portfolio for reason of default/ delay in payment by the Issuer of

the debt security

25. Strategies may use derivative instrument like futures and options (index as well as

individual securities), warrants, convertible securities, swap agreements, etc. for the

purpose of hedging and/or portfolio balancing, as permitted under the

Regulations/guidelines. Strategies using such derivative products may be affected by

risks different from those associated with stock and bonds. Such derivative products

are highly leveraged instruments and their use requires a high degree of skill,

expertise and diligence. Small price movements in the underlying security may have a

large impact on the value of the derivatives and futures and options and may also

result in loss. Some of the risks relate to mis-pricing or the improper valuation of the

derivatives/futures and option and the inability to correlate the positions with the

underlying assets, rates and indices. The risk of loss associated with futures contracts

is potentially unlimited due to the low margin deposits required and the extremely

high degree of leverage involved in futures pricing. Also, the derivatives/future and

options market is nascent in India. The liquidity of the investments is guided by

trading volumes in the securities in which it invests. Although securities may be listed

on the Exchange(s), there can be no assurance that an active secondary market will

develop or be maintained. This may limit the Portfolio Manager’s ability to freely deal

with securities in the Portfolio and may lead to incurring of losses till the security is

finally sold. Different segments of the financial markets have different settlement

periods and such periods may be extended significantly due to unforeseen

circumstances. The inability of a Portfolio to make intended securities purchase due

to settlement problems could cause the portfolio to miss certain investment

opportunities. Similarly, the inability to sell securities held in the portfolio due to

absence of a well developed and liquid secondary market would at times result in

potential losses in the Portfolio, in case of a subsequent decline in the value of

securities held in the Portfolio.

26. The Portfolio Manager may invest in non-publicly offered debt securities and unlisted

securities. This may expose client’s portfolio to liquidity risks.

27. Securities, which are not listed on the Stock Exchanges, are inherently illiquid in

nature and carry a larger amount of liquidity risk, in comparison to securities that are

listed on the Exchanges or offer other exit options to the investor. The Portfolio

Manager may, at its discretion, invest in lower rated/unrated securities that offer

attractive yield, which may increase the risk of the Portfolio. Such investments shall

be subject to the scope of investments laid down in the executed agreement.

28. The Portfolio Manager may seek to create value by investing in stocks that trade

below the estimated fair value of the Company, which shall be judged by various

quantitative valuation parameters. But due to various reasons, it may so happen that

such stocks continue to languish and are not able to attain the price discovery.

Accordingly, this may have material adverse impact on the performance of the

portfolio.

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After accepting the corpus for management, the Portfolio Manager may not get an

opportunity to deploy the same or there may be delay in deployment. In such

situation the clients may suffer opportunity loss.

i. Category of clients as on August 31, 2019:

Category of Clients as on August 31,2019 :

Category of Clients No of

Clients

Funds

Managed

Remarks

(Rs. In Crs)

Associate/ Group Companies

As on August 31,2019 0 0 Discretionary

As on March 31, 2019 0 0

As on March 31, 2018 0 0 Discretionary

Others

As on August 31, 2019 1800 733.99 Discretionary

As on March 31, 2019 1553 628.27 Discretionary


Total

As on August 31, 2019 1800 733.99 Discretionary



ii. Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India (as on 31st March 2019)

S

r.

N

o

Name of the related

party Nature of Transaction

Amount

2018-19 2017-18

1

Karvy Stock Broking

Limited

Shared Services of

Expenses/ (revenue),

net

118,23,261

110,16,757

Fee income /

(expenses)

(1695,00,000) (1775,00,000)

Section 7: CLIENT REPRESENTATION

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2

Mr. Kedar Deshpande

Managerial

Remuneration paid

136,21,536 109,37,385

Sale of securities (34,60,144) -

3 Ms.Shirisha Yallam Remuneration paid - 367,981

5 Mrs. T N Srividya, wife

of Kedar Deshpande

Sale of Securities (30,22,355)

Section 8: FINANCIAL PERFORMANCE OF PORTFOLIO MANAGER (BASED ON AUDITED

FINANCIAL STATEMENTS)

As at As at As at

31-Mar-19 31-Mar-18 31-Mar-17

Rs in Lakhs Rs in Lakhs Rs in Lakhs

SOURCES OF FUNDS

Shareholders' Funds 1839.71 1571.84 1,384.44

Share Application Money - - -

Loan Funds 4010.70 4,805.24 3,455.06

Deferred Tax Liability - - -

Total 5850.41 6,377.08 4,839.50

APPLICATION OF FUNDS

Net Fixed Assets 18.12 17.19 23.34

Stock Exchange Membership

Cards

- - -

Investments 360.00 360.00 360.00

Current Assets (incl deposit) 6416.92 6629.45 5,189.78

Less: Current Liabilities and

Provisions (including long term

provisions and excluding

external borrowings)

-952.67 -641.89 -742.60

Deferred Tax Asset 8.04 12.33 8.98

Total 5850.41 6377.08 4,839.50

Summarized Financial Statement - Profit and Loss Account

For the year

ended

For the year

ended

For the year

ended

31-Mar-19 31-Mar-18 31-Mar-17

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Rs. In Lakhs Rs. In Lakhs Rs. In Lakhs

Total Income 4190.81 3,692.45 1,970.61

Total Expenses 3784.02 3,425.86 1,757.54

Profit before Depreciation and

Tax

406.79 266.59 213.07

Depreciation/Amortisation 5.83 8.10 12.44

Profit before Tax 400.96 258.49 200.63

Provision for Tax 133.09 71.09 68.61

Profit After Tax 267.87 187.40 132.02

Find below the Performance of the Portfolio Manager calculated using weighted average

Method for the three financial years 2016-2017, 2017-18, 2018-19 and the period April

2019 upto July 2019

Returns%

Period

01.04.2019-

31.08.2019

01.04.2018-

31.03.2019

01.04.2017-

31.03.2018

01.04.2016

-

31.03.2017

Discretionary PMS- Resident

Portfolio

Performan

ce (%)

Demeter

Strategy

11.27 11.87 12.05 13.70

Performan

ce (%)

S&P BSE

India

Corporate

Bond

Index#

11.70 7.81 7.28 8.98

Benchmark Five year 6.85 6.85 6.25

Section 9: PORTFOLIO MANAGEMENT PERFORMANCE OF PORTFOLIO MANAGER FOR

THE LAST THREE YEARS. IN CASE OF DISCRETIONARY PORTFOLIO MANAGER, DISCLOSURE

OF PERFORMANCE INDICATORS CALCULATED USING WEIGHTED AVERAGE METHOD IN

TERMS OF REGULATION 14(2)(b)(iv) OF THE SEBI (PORTFOLIO MANAGERS) REGULATIONS,

1993

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Performan

ce (%)

Fixed

Deposit

offered

by State

Bank of

India

Portfolio

Performan

ce (%)

Excel

Strategy

10.35 10.06 10.13 8.16$

Benchmark

Performan

ce (%)

S&P BSE

India

Bond

Index

15.52 8.49 5.41 5.37$

Benchmark

Performan

ce (%)

Five year

Fixed

Deposit

offered

by State

Bank of

India

6.85 6.85 6.50$

Portfolio

Performan

ce (%)

Aegis

Strategy -

Debt

9.10 7.06 NA NA

Benchmark

Performan

ce (%)

S&P BSE

India

Bond

Index

15.52 15.77 NA NA

Benchmark

Performan

ce (%)

Five year

Fixed

Deposit

offered

by State

Bank of

India

6.85 6.85 NA NA

Benchmark

Performan

ce (%)

Aegis

Strategy -

MLD

-36.03 27.54 NA NA

Benchmark

Performan

ce (%)

BSE 500 -17.74%

24.69 NA NA

++ Investment in Aegis strategy may have equity component in the form of market linked

debentures [MLD] and a debt component, depending on the choice of the investor. Initial

Investment in MLD was done on January 8 2019. $ The first client in the Excel portfolio was

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activated on November 8, 2016. The portfolio and benchmark performance is therefore

shown for the period 8th November 2016 to 31st March 2017.

**The first client in the Demeter portfolio was activated on July 1, 2014. Hence, the

performance has been provided from July 1, 2014 instead of April 1, 2014.

#Disclaimer: For Demeter Strategy - Earlier NSE Gsec 1-3 year Sub-maturity Index was used

as Benchmark. Due to the discontinuation of its publication by NSE beginning 1st April 2015,

the benchmark to “S&P BSE India Corporate Bond Index” is now being used.

Presently there are no Non Resident Indian clients in the Discretionary Strategies offered by

the Portfolio Manager and also there are no live Non Discretionary strategies. Therefore

performance figures for both these heads are “NIL”.

**** The rate of 5 year Fixed Deposit offered by State Bank of India is being used as a

benchmark from April 2017

Section 10: NATURE OF EXPENSES

The following are the general costs and expenses to be borne by the Client availing the

services by the Portfolio Manager. However, the exact nature of expenses relating to each of

the following services is provided in the annexure to this Risk Disclosure Document and in

the Schedule of Charges signed by the client in respect of each of the services provided.

(i) Portfolio Management and Advisory Fees

This fee relates to the portfolio management services offered by Portfolio Manager

(including advisory services) to the clients. The fee may be a Fixed Charge on the quantum of

the funds being managed (or) charges linked to portfolio return (or) combination of both. (ii)

Premature Redemption Charges/ Exit fees

If the redemption is done prematurely at the option of the client, the Portfolio Manager shall

levy the Premature Redemption Charges.

(iii) Depository Participant fee

The charges relating to opening and operation of demat accounts, custody and transfer

charges for shares, bonds and units, dematerialization and rematerialization, pledge and

removal of pledge, etc. will be as per the actual charged by the Depository Participant.

(iv) Custodian fee

The charges relating to custodian activities will be as per the actual charged by the

Custodian. For details kindly refer the annexure to this Risk Disclosure Document.

(v) Registrar and transfer agent fee

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Charges payable to the Registrar and Share Transfer Agents in connection with effecting

transfer of securities and bonds, units, etc. including stamp charges, cost of affidavits, notary

charges, postage/courier charges and other related charges will be recovered on actual. For

details kindly refer the annexure to this Risk Disclosure Document.

(vi) Placement fee :

A Placement fee will be charged as a percentage of corpus over and above the fixed

management fee and performance fee. The placement fee shall also be charged each time

corpus is infused/ brought in by the client during the lifetime of the portfolio investment.

The placement fee shall be computed as a percentage of the initial corpus brought in by the

client and if subsequent to account opening, additional corpus brought in by such client

then it shall be computed as a percentage of the additional corpus brought in. The

Placement fee shall be deducted upfront from the Client’s portfolio immediately on receiving

the corpus from the client.

(vii) Brokerage and transaction cost - The Brokerage and other charges like Goods and

Services Tax and related charges such as, Stamp duty, Security Transaction Tax, SEBI Fees,

Bank charges, Turnover tax, and other charges (if any), as per the rates existing from time to

time, will be charged on actual. Certain investments by the Portfolio Manager may require

services of Stock Broker(s) and in such cases, The investment by Portfolio Manager will be

done through Karvy Stock Broking Limited {Stock Broker}, Edelweiss Securities, Reliance

Capital Securities, HDFC securities, IDC securities, Centrum Securities, Emkay securities or

through services of only SEBI registered Stock Broker(s) as may be empanelled by the

Portfolio manager would be used as per the rates negotiated between Portfolio Manager

and such stock broker. The charges relating to brokerage as per the related party

transactions charged by Karvy Capital Limited or through any SEBI Registered stock broker

will be recovered on actual by the Portfolio Manager

(viii) Securities Lending Charges

If utilized, the charges pertaining to lending of securities and costs associated with transfer

of securities connected with lending transfer operations, Depository Participant Charges,

Share Transfer Agent Charges, etc. would be recovered on actual.

(viii) Certification Charges or Professional Charges

Any charges payable for outsourced professional services like accounting, taxation, auditing,

and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio

Manager, will be charged from the client on actual.

(ix) Incidental Expenses

Charges in connection with day to day operations like courier charges incurred in providing

physical reports relating to client’s portfolio / welcome letter / other communication to

clients , stamp duty, Goods and Services Tax , postal, telegraphic expenses, opening and

operation of bank and demat accounts or any other out of pocket expenses incurred by the

Portfolio Manager, on behalf of the client, would be recovered from the client.

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Section 11: TAXATION

General - It may be noted that the information given hereinafter is only for general

information purposes and is based on the advice received by the Portfolio Manager

regarding the law and practice currently in force in India and the Investors should be aware

that the relevant fiscal rules or their interpretation may change or it may not be acceptable

to the tax authorities. As is the case with any interpretation of any law, there can be no

assurance that the tax position or the proposed tax position prevailing at the time of an

investment in the strategy/plan/option will be accepted by the tax authorities or will

continue to be accepted by them indefinitely.

Further statements with regard to tax benefits mentioned herein below are mere

expressions of opinion and are not representations of the Portfolio Manager to induce any

investor to invest whether directly from the Portfolio Manager or indirectly from any other

persons by the secondary market operations. In view of the above, and since the individual

nature of tax consequences may differ in each case on its merits and facts, each Investor is

advised to consult his / her or its own professional tax advisor with respect to the specific tax

implications arising out of its participation in the PMS strategy/plan/option, as an investor.

In view of the above, it is advised that the investors appropriately consult their investment /

tax advisors in this regard.

Portfolio Manager cannot be held responsible for assisting or completing the fulfillment of

the client’s tax obligations.

Income arising from purchase and sale of securities under Portfolio Management Services

can give rise to business income or capital gains in the hands of the Client. The issue of

characterization of income is relevant as the tax computation and rates differ in either of the

two situations. The said issue is essentially a question of fact and depends on whether the

shares are held as business trading assets or on capital account. Based on judicial decisions,

the following factors need to be considered while determining the nature of assets as above:

a. Motive for the purchase of securities

b. Frequency of transactions

c. Length of period of holding of the securities

d. Treatment of the securities and profit or loss on their sale in the accounts of the assessee

and disclosure in notes thereto

e. Source of funds out of which the securities were acquired - borrowed or own

f. Existence of an objects clause permitting trading in securities – relevant only in the case of

corporate.

g. Circumstances responsible for the sale of securities

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h. Acquisition of the securities -from primary market or secondary market Infrastructure and

set - up employed for undertaking the securities transactions by the client

Any single factor discussed above in isolation cannot be conclusive to determine the exact

nature of the shares. All factors and principles need to be construed harmoniously.

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

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

Tax implications under the Income Tax Act, 1961 ("IT Act") arise in the hands of the Clients

(resident as well as the non-resident) under both the scenarios, viz:

a. Securities in the Portfolio held as business asset; and

b. Securities in the Portfolio held on capital account.

Additionally, non-residents (including Flls/FPIs) are governed by the applicable Double Tax

Avoidance Agreement ("DTAA), which lndia has entered into with the country of residence of

the non-resident, if that is more beneficial. The same would have to be considered on a case-

to-case basis depending upon the applicable DTAA. Ordinarily, capital gains and interest

income are taxable in lndia in the manner and at the rates prescribed under the relevant

DTAA or the relevant rates applicable in India, whichever is beneficial to the assessee.

Further, business income is normally not taxable in lndia.

Tax Deducted at Source

Presently, tax is withheld at source for non-residents. If any tax is required to be withheld on

account of any future legislation, Portfolio Manager shall be obliged to act in accordance

with the regulatory requirements in this regard.

Advance Tax installment obligations

It shall be the client’s responsibility to meet the advance tax obligation installments payable

on the due dates under the Income Tax Act, 1961.

Tax Implications - Investment in Shares or units of Equity Oriented Mutual Fund

Dividend

Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act.

Profits from sale / transfer of shares (or units of equity oriented mutual fund)

• If considered as capital gains: (capital gains = sale consideration – cost of acquisition–

expenses incurred in connection with such transfer)

Capital

Gains

Long term Capital Gains (LTCG) Short term Capital Gains (STCG)

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Period

of

holding

Rate Period

of

holding

Rate

Listed

Shares

(Where STT

is paid)

More

than 1

year

Earlier Exempt u/s *.

10(38)

1 year

or less

15%

Listed

Shares

(Where STT

is not paid)

More

than 1

year

20% with indexation

or 10% without

indexation (whichever

is more beneficial to

clients)

1 year

or less

maximum marginal rate of

tax or at slab rates, as the

case may be

Unlisted

Shares

More

than 1

year

20% with indexation 1 year

or less



case may be

Long Term capital Gains

Any investments (equity share in a company or a unit of an equity oriented fund) held for 12

months or more than 12 months would be classified as Long Term Capital Assets. Gains

arising out of such assets are called Long Term Capital Gains. These were exempt from

capital gains tax, provided the shares are sold on a recognized stock exchanges in India and

such transactions are subjected to Securities Transaction Tax (‘STT’) in accordance with

Chapter VII of the Finance (No.2) Act, 2004 and/or Income Tax Act, 1961. With effect from 1st

April 2017, in the case of equity shares, in terms of proviso to Section 10(38) of the Income

Tax Act, 1961 inserted vide Finance Act, 2017, equity shares acquired on or after 1st October’

2004 (other than the acquisition notified by the Central Government), exemption shall be

admissible only if STT was also paid at the time of acquisition of such equity shares. Finance

Bill, 2018 has withdrawn the above exemption and vide Section 112A of the Income Tax Act,

1961, tax on such long term capital gains exceeding one lakh rupees is leviable at the rate of

10%. Clients are requested to check with their Tax Advisor on the applicable rates of tax,

STT, surcharge and health and educational cess at any given point of time.

• If considered as business income - net income taxable at maximum marginal rate of tax or

at slab rates, as the case may be.

Note: surcharge (if applicable) will be charged additionally. Clients are requested to contact

their tax consultant to determine their exact tax status.

Tax Implications - Investment in Derivative instruments

Investment in derivative instruments is considered as business income & is taxable at

maximum marginal rate of tax or at slab rates, as the case may be.

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Note: surcharge (if applicable) will be charged additionally. Clients are requested to contact

their tax consultant to determine their exact tax status.

Tax Implications - Investment in Debentures or bonds

Interest income

Interest received by debenture holder is taxable under the head “Income from other

sources” at slab rates or at maximum marginal rate of tax as the case may be

Profits from sale / transfer of Debentures (or bonds)



Capital

Gains

Long term Capital Gains (LTCG) Short term Capital Gains (STCG)

Period of

holding

Rate Period

of

holding

Rate

Listed

Debenture

or bonds

More

than 1

year

20% with indexation

or 10% without

indexation (whichever

is more beneficial to

clients)

1 year

or less



case may be

Unlisted

Debenture

or bonds

More

than 3

years

20% with indexation 3 years

or less



case may be



Note: goods and services tax and related charges (if applicable) will be charged additionally.

Clients are requested to contact their tax consultant to determine their exact tax status.

Tax Implications - Investment in Debt Oriented Mutual Fund

Dividend

Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act.

Profits from sale / transfer of units

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Capital Gains Long term Capital Gains (LTCG) Short term Capital Gains (STCG)

Period of

holding

Rate Period of

holding

Rate

Debt MF units More than 3

years

20% with

indexation

3 years or less maximum

marginal rate of

tax or at slab

rates, as the

case may be



Note: goods and services tax and related charges (if applicable) will be charged additionally.

Clients are requested to contact their tax consultant to determine their exact tax status.

Capital loss

Losses under the head 'capital gains' cannot be set off against income under any other head.

Further, within the head 'capital gains', long-term capital losses cannot be adjusted against

short-term capital gains. However, short-term capital losses can be adjusted against any

capital gains. Unabsorbed long-term capital loss can be carried forward and set off against

the long-term capital gains arising in subsequent eight assessment years. Unabsorbed short-

term capital loss can be carried forward and set off against the income under the head

capital gains in subsequent eight assessment years

Securities Transaction Tax

Securities Transaction Tax is the tax leviable on the taxable securities transactions i.e.

transaction of:

(a) Purchase or sale of an equity share of a listed companies (whether delivery based or non-

delivery based) or a derivative or a unit of an equity oriented fund, entered into in a

recognized stock exchange; or

(b) Sale of a Unit of an equity oriented fund to the Unit Trust of India or Mutual Fund.

The income arising from the securities transactions shall be taxed at applicable rates under

the Income Tax Act, 1961 if Securities Transaction Tax is not applicable in respect of such

transactions.

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Section 12: ACCOUNTING POLICIES

The following is the accounting policy followed by the Portfolio Manager while accounting

for the portfolio investments of the clients.

Investment in equities will be valued on the closing price of that equity at NSE. In case of any

investments done in any equity listed on BSE only, the same will be valued based on the

closing price of that equity in BSE. In case the prices are not available from NSE or BSE Stock

exchange, then any other stock exchange shall be considered.

These shall include the Equity shares including Indian Depository Receipts and other

instruments, as the case may be. In case a share is not traded on a valuation date, latest

closing price of either principal / secondary or any other stock exchange would be used.

Equity/preference shares which are not listed on stock exchanges are included in portfolio

valuation at fair/cost value. In case an Equity share is suspended/non-traded/ awaiting

Corporate Actions, then the valuation of such equity share shall be done on the basis of good

faith relying upon prevailing practices elsewhere.

In case of the warrants been traded separately they would be valued as an equity share and

valued accordingly. In case of the non traded warrants, the warrants will be valued at the

value of the share which would be obtained on exercise of the warrant less the amount

payable on exercise of the warrant. On exercise of warrant, the warrants would be

transferred to the normal equity and valued accordingly.

For valuation of the derivatives contract, the open positions, as on the date of valuation,

shall be valued as per the last traded prices available from the relevant stock exchange, and

will be valued on the mark to market method.

In case of Mutual Fund, investments in mutual funds shall be valued at the latest available

NAV of the respective scheme. Investment in Exchange listed (ETF) shall be valued at the

closing price on the relevant exchange.

If on a valuation date Exchange Traded Funds (ETF) is not traded either on the primary or

secondary stock exchange, ETF shall be valued at the latest available NAVs of the ETF

Scheme.

Investment in debt instruments will be valued at the market value of the debt instrument as

on cut off date (or) the latest available price on the relevant exchange or the most recent

NAV will be reckoned. For illiquid securities, the valuation may be provided by the issuer on a

periodic basis and/or as required by the portfolio manager.

Realised gains/losses will be calculated on the basis of First in First out (FIFO) basis.

Transaction date will be the trade date and not the settlement or auction date.

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For derivatives transactions (if any), the unrealized gains/losses on open position will be

calculated on the mark to market method.

Unrealized gain/losses means the profit/loss not yet booked and the same will be the

difference of the current market price or NAV minus the actual purchase price (or) the

historical cost of the securities.

All income will be accounted on accrual or receipt basis, whichever is earlier. All expenses

will be accounted on due or payment basis, whichever is earlier.

Purchase and sale transactions are accounted for on contract date basis. Cost of purchase

and sale includes consideration for scrip and brokerage but excludes Securities Transaction

Tax, Service Tax & other charges paid on purchase/sale of securities. Other expenses like

Custodian charges (Safe keeping charges, Transaction charges, Fund Accounting charges, Out

of Pocket expenses) shall be accounted for as & when debited by the Custodian.

Any corporate benefits like dividend on shares, mutual fund units, interest on debt

instruments, stock lending fees etc. shall be accounted on accrual basis except interim

dividend which would be accounted on receipt basis.

Bonus shares are recorded on the ex-benefit date (ex-date). Dividend income is recorded on

the ex-dividend date (ex-date)

Tax deducted at source on interest on instruments such as Fixed Deposits etc. /Dividend is

considered as withdrawal of corpus and debited accordingly.

Portfolio Manager and the Client, on case to case basis, can mutually agree to any specific

norms or methodology for valuation of investment and/or accounting. The Client may

contact the Portfolio Manager for the purpose of clarifying or elaborating on any of the

above.

Section 13: INVESTOR RELATIONS OFFICER - IRO

The below mentioned employee has been nominated as the Investor Relations Officer by

Portfolio Manager who will attend to the investor queries and complaints:

Mr Santosh Natrajan

Karvy Capital Limited

702, Hallmark Business Plaza,

Sant Dnyaneshwar Marg, Bandra (E),

Mumbai 400 051.

Tel No. (B) 022-33055000 Tel No. (D) 02261491674

Fax No. 022-61491577 Email ID – [email protected]

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Section 14: GRIEVANCE REDRESSAL

The Portfolio Manager has dedicated an email id

[email protected] for all the investors to lodge their grievance. Apart from this,

the portfolio clients can get in touch with the IRO in person, over phone or through written

communication.

Portfolio Manager will ensure that the above IRO attends to all investor grievance/service

issues with promptness and Portfolio Manager will ensure that this IRO is vested with

necessary authority, independence and the means to handle investor grievance effectively

and immediately, within reasonable period of time.

If not satisfied with our response, you may approach SEBI with your grievance through SEBI’s

web based centralized grievance redressal system (SCORES) on http://scores.gov.in or may

also write to SEBI in physical form.

Section 15: DISPUTE SETTLEMENT MECHANISM

All disputes, differences, claims and questions, whatsoever, which shall arise either during

the subsistence of the agreement with the Client or afterwards, with regard to the terms

thereof or any clause or thing contained therein or otherwise in any way relating to or arising

there from or the interpretation of any provisions therein shall be, at the first instance,

settled by mutual discussions, failing which the same shall be referred settled in accordance

with the provisions of The Arbitration and Conciliation Act, 1996 in the form existing at the

point of time.

Such arbitration proceedings will be held at Mumbai or any other place where the Portfolio

Manager thinks fit and will be conducted in English.

The agreement with the Client shall be governed by, construed and enforced in accordance

with the laws of India.

Any action or suit involving the agreement with a Client or the performance of the

agreement by either party of their obligations will be conducted exclusively in Courts located

within the city of Mumbai in the State of Maharashtra, India.

Section 16: GENERAL

The Portfolio Manager and the client can mutually agree to be bound by specified terms

through a written two-way agreement between themselves in addition to the Portfolio

Management Services Agreement for Portfolio Management Services.

mailto:[email protected]

http://scores.gov.in/

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ANNEXURE A

A. Discretionary Portfolio Management Services

1. Demeter Portfolio

Introduction Demeter Portfolio is designed for investors seeking income and capital appreciation from

their asset allocation to debt, preference capital, commercial papers, tax free bonds and pass

through certificates. The Portfolio would be Ideal for investors looking for allocation in a

fixed income portfolio or those with current exposure in high-yielding securities looking for

diversification. Demeter Portfolio has been introduced since July 1, 2014.

Investment Objective

The investment objective is to diversify risk across sectors and instruments with the sole

intention of generating cash flows and/or capital gains through interest, preference dividend

or trading. It will help diversify the client’s investment across many papers spread across

different sectors and varied Industries within sectors where by reducing the concentration

risk. Strategy is to generate capital appreciation and income through interest, preference

dividend and trading (both in the short term and over the long term) of securities in the

secondary markets. The portfolio will primarily consist of debt securities, preference capital,

commercial paper, tax free bonds and pass through certificates.

Investment Horizon and Risk Return Profile

Demeter portfolio is recommended for investors seeking to hold a debt portfolio with

moderate to high risk appetite expecting a moderate to high yield/ return over a long term

horizon. Investment in Demeter is recommended for a period of more than 3 years.

Below is a pictoral representation of the Demeter strategy risk.

RISK

Strategy

The Investment Philosophy of Demeter strategy is that investments are sector agnostic with

a focus on growing companies. The base case strategy is to buy and hold the moderate to

high yield debt instruments however, sale at a premium before maturity will also be

explored subject to opportunities. Opportunistically, the portfolio will also target extracting

returns for market making for moderate to high yield debt instruments buying and selling

Low Moderate High

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over a short duration. The criteria for selecting securities to invest in the Demeter Portfolio

would be that the Issuer should be preferably backed by institutional Equity Investors,

Keyman risk should be minimum and Issuers capability to repay the debt on the basis of

cash flow generation cited by the Issuer. In cases of Non banking finance companies and

Micro Finance Institutions, the Asset liability management would be ascertained rather than

cash flow generation for debt repayment. The Demeter portfolio will be actively managed.

The Demeter strategy will undertake to an extent as deemed fit by the Portfolio Manager,

opportunistic buying and selling of debt securities or any other instrument in the portfolio to

improve the returns earned by investors. However, in this endeavour, the portfolio manager

may on some occasions not receive suitable exit for the securities thus bought in the

portfolio. In such cases, the portfolio manager may either decide to hold such security to

maturity or to exit it at a loss when compared with the purchase price. For investors entering

the strategy partially or wholly through their current holdings of debt instruments, the

portfolio manager will seek to diversify these holdings to reduce concentration of credit risk.

As a possible implication, the yield in Internal Rate of Return [IIR] terms and income paid out

through regular coupons of the portfolio thus achieved may be different (and lower) from

that of their current holdings.

Asset Allocation

The portfolio will be predominantly invested in debt securities, preference capital, and pass

through certificates using the securities defined below though. The debt component of

Demeter portfolio may comprise of moderate to high yield debt, which can be secured or

unsecured, convertible or non-convertible securities which may be rated or unrated by credit

rating agencies. The portfolio manager may decide to hold cash/liquid funds or any other

debt mutual fund The portfolio achieves significant diversification across real estate,

mezzanine debt and securitized debt and also amongst various borrowers within these

domains at a ticket size of only Rs. 25 lakhs. The diversification will also be achieved through

spread of investments in different Sectors and various industries within sectors. Some of the

products to which the Demeter portfolio may subscribe are as described below:

Structured Mezzanine Debt–These would include Non Convertible Debentures issued

by, high growth companies with good ROCE (Return on Capital Employed) whose end

use may be alternative to venture capital funding, equity like end use, however with

regular servicing of coupon.

Securitized Debt –Pass through certificate (PTC) issued on the basis of pool of

underlying loans to SMEs, microfinance, vehicle loans etc.

Repurchase Agreements (Repo) – Repo (Repurchase Option) is a formal agreement

between two counterparties where one party sells securities to another party with

the explicit intention of buying back the securities at a later date. The Portfolio

Manager shall enter into such Repo Agreements with counterparties holding

government bonds where the seller of the government bonds agrees to buy back the

government bonds from the Portfolio Manager at a predetermined time and rate.

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Benchmark and Targeted Yield

Both S&P BSE India Corporate Bond Index and Rate of Interest of 5 year Fixed Deposit issued

by State Bank are used for Benchmarking the performance of Demeter portfolio.Demeter

Portfolio will aim to generate 8-10% more returns than rate of interest of 5 year Fixed

Deposit issued by State Bank of India.

Performance of Strategy

Performance of the Demeter Portfolio is measured at six monthly intervals and is shown vis a

vis the benchmark in the Risk Disclosure Document filed by the Portfolio Manager with SEBI

every six months or upon occurring of any material change. The Portfolio Manager shall use

measurement tools like Modified duration, Macaulay’s duration to measure price sensitivity

of the investments and to determine the time required to recover the present value of all

cash flows from the portfolio. Prior to opting to invest in the Demeter Portfolio, prospective

clients shall be shown returns till date of a model portfolio comprising the securities in which

the Demeter portfolio is invested. The increase in portfolio value between consecutive time

periods indicates income (interest/dividend) accrual. The subsequent decline occurs due to a

payout to the investor from the issuer as well as a deduction of management fees. This

process may continue till the investor exits the strategy. Clients can also view the

performance details in the Risk Disclosure Document uploaded on www.karvycapital .com.

Securities

Investments would be made in all types of debt securities, preference capital, Commercial

paper, Tax free bonds , perpetual bonds and other bonds, pass through certificates(which

may or may not be in dematerialized form) including but not limited to debentures,

preference capital (perpetual, optionally convertible or compulsorily redeemable), pass

through certificates comprising of any tranche of any seniority including the equity tranche

of any maturity (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket

linked, real estate backed) which may be, Securitised Debt, Pass Through Certificates, Bonds,

Government securities issued or guaranteed by Central or State Government, corporate

debt of both public and private sector undertakings, securities issued by banks (both public

and private sector) and development financial institutions, fixed deposits, commercial

papers, certificate of deposit, trade bills, treasury bills and other money market instruments,

units of mutual funds, Exchange Traded Funds, units of SEBI registered Alternative

Investment Funds, floating rate debt securities and fixed income derivatives like interest rate

swaps, forward rate agreements and the like as may be permitted by the Act, Rules and/or

Regulations, guidelines and notifications in force from time to time. These securities may be

acquired through primary market issuances such as subscription to Initial public offers,

Follow on Public offers, Rights issues and private placements of securities, secondary market

purchases, auctions held by the Reserve Bank of India, open market sales of securities

conducted by Reserve Bank of India and the like.

The Portfolio may also use derivative instruments – Futures and Options – for hedging and

rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of

NRI investors.

The Portfolio manager may buy securities which have equity like nomenclature while the

features in terms of returns and convertibility will be like debt. These instruments would

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include but not be limited to securities like convertible preference shares, non convertible

compulsorily redeemable preference shares, perpetual preference shares and some

optionally convertible debentures.

Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing

price. Investment in other debt instruments will be valued as per valuation provided by the

Issuer.

With respect to the debentures being bought by Karvy Capital Limited as Discretionary

Portfolio Manager for its clients in Demeter strategy, clients may please note the following:

Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer to structure

the debenture issuance for the purpose of raising capital through the private placement

route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively associate with

the Issuer for structuring of the security in relation to the debentures, preparation of the

term sheets and related documents for sharing product details with prospective clients and

for appointment of key agents such as trustee, escrow agent, legal counsel and the like.

Karvy Capital Limited may also be the “Debenture Holder Representative and Calculating

Agent” thereby having the power to approve amongst other things - dilution of promoter

stake in the Issuer company, disbursal of amounts from escrow account to the Issuer , any

change in the security cover for the debentures and without whose consent the above

cannot occur. As a Calculating Agent, Karvy Capital Limited calculates the amount of interest

and final redemption amount due to the debenture holders.

For this, Karvy Capital Limited as an NBFC / any Karvy Group entity may receive a payment

from the Issuer which could be structured as advisory fee, discount on such debentures to

Karvy Capital Limited[NBFC] or the Karvy group entity at the time of first purchase or a

combination of the two.

Karvy Capital Limited as an NBFC / any Karvy Group entity may also be the first subscriber to

such privately placed debentures. Therefore Karvy Capital as discretionary portfolio manager

may buy the debentures from Karvy Capital limited {NBFC} or any Karvy Group entity [first

subscriber]. Such down selling by Karvy Capital Limited {NBFC} to Karvy Capital Limited

{Portfolio manager} / any Karvy Group entity may be done at a premium.

Alongside, Karvy Capital Limited as an NBFC shall continue to undertake distribution activity

with regard to the said debentures i.e to downsell the debentures to prospective clients

other than the PMS customers.

In addition to downselling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital

Limited (Portfolio Manager) may purchase debentures for clients of the Demeter strategy

through the below routes as well:

a. Primary issuance of debentures by an Issuer subscription to the debentures

by Karvy Capital PMS.

b. Offer for secondary sale of debentures by third party debenture holder(s)

Purchase of debentures by Karvy Capital PMS.

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The Portfolio Manager may, when offering Discretionary Portfolio management services , at

its discretion, purchase securities from client()s of one discretionary portfolio management

strategy for client(s) of another discretionary portfolio management strategy or from third

party at par value. Additionally,

a. The debentures which the Portfolio Manager may invest in for the client

may or may not have some form of collateral backing them. Such

collateral may include one or more amongst the following – real estate

assets, shares of the issuing company, shares of other companies related

to the issuing company, other listed or unlisted shares, escrow of

cashflows, brand, patents, fixed assets of the company etc. However,

depending on the specific collateral used and as per the interpretation of

the Companies Act, 2013 the debentures may be deemed to be secured

or unsecured in nature.

b. Investment in Instruments that are listed may not be backed by any

collateral.

c. Investments in preference capital issues may not be backed by any

collateral and would be subject to the Company Law regulations or any

other statutes that may govern their issuance from time to time.

d. Investing in any tranche of a Pass through certificate may not be backed

by any collateral.

e. Owing to the credit risk of debt that the strategy is investing into, the

preservation of capital is not guaranteed. In case of a default by issuer in

any of the underlying securities, the trustees would endeavour to

recover the principal and the interest for the investors but there is a risk

of erosion of the principal invested in the strategy by the investor.

Additionally, the recovery process in case of a default may take time to

be implemented. Hence, at the level of each individual instrument, there

exists a risk of partial or complete capital erosion in case of a default by

the issuer.

f. The securities invested into by the Demeter strategy will have credit

quality of a wide range and hence a varying amount of credit risk. Such

securities may be rated or unrated. The issuing company may be rated or

unrated and if rated, the latest available credit rating will be considered.

The rating of the securities or the issuing company may be investment

grade or speculative grade.

g. The Portfolio Manager will endeavour to follow stringent due diligence

process while selecting the securities in which to invest in. The diligence

process will typically consist of Management Analysis, Financial

Anaylysis, Product Analysis, Industry Analysis, Buyer/supplier analysis,

cash flow analysis and company/product life cycle analysis. The portfolio

manager may use services of reputed external/third party agencies for

Valuation, Financial and Legal Diligence to help in arriving at the

Investment decision.

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The investments in the Demeter strategy could carry their own set of risks. Some of these

could include:

(i) Operational Risk: The risks that arise out of systemic issues within an

organization. Operational risk is intrinsic to any business. Every company may

have sector and company specific risks which may affect operations.

(ii) Regulatory Changes

These risks may arise if various concerned authorities amend the regulatory

framework, which could impact the Issuing Company.

(iii) Downturn in the market

There can be a down turn in the market in which the issuing Company operates

which can lead to decrease in profit margins of the Issuing Company.

Kindly refer Section III below for other features of this strategy.

Fees and Expenses: Defined in Section II below

2. Excel Portfolio

Introduction

Excel Portfolio is a strategy focused on investing only in rated securities such as debt

investments, preference capital, commercial paper, corporate bonds tax free bonds and pass

through certificates across maturities, credit quality and yields and which typically have

some form of non-promoter equity interest. Investments would be made only in investment

grade and above securities. The strategy would strive to prioritize income over capital

appreciation in its portfolio. The strategy has been introduced in November 2016.


The investment objective of the strategy is to prioritize income over capital appreciation

through interest, preference dividend and trading of securities (both in the short term and

over the long term) both in the primary and secondary markets.


Excel portfolio is recommended for investors seeking to hold a debt portfolio with low to

moderate risk appetite expecting a moderate return over a long term horizon. Investment in

Excel Portfolio is recommended for a period of more than 3 years. Below is a pictoral

representation of the Excel strategy risk.

Low Moderate High

of 46

RISK

Strategy

The investment philosophy of Excel strategy is that it is sector agnostic with a focus on

growing companies. The base case strategy is to buy and hold the low to moderate yield

debt instruments. However, sale at a premium before maturity will also be explored subject

to opportunities. Opportunistically, the portfolio will also target extracting returns for

market making for low to moderate yield debt instruments – buying and selling over a short

duration. The criteria for selecting securities to invest in the Demeter Portfolio would be that

the Issuer should be preferably backed by institutional Equity Investors, Keyman risk should

be minimum, and Issuers capability to repay the debt on the basis of cash flow generation

cited by the Issuer. In cases of Non banking finance companies and Micro Finance

Institutions, the Asset liability management would be ascertained rather than cash flow

generation for debt. . The Excel strategy will undertake to an extent as deemed fit by the

Portfolio Manager, opportunistic buying and selling of debt securities or any other

instrument in the portfolio to improve the returns earned by investors. However, in this

endeavour, the portfolio manager may on some occasions not receive suitable exit for the

securities thus bought in the portfolio. In such cases, the portfolio manager may either

decide to hold such security to maturity or to exit it at a loss when compared with the

purchase price.For investors entering the strategy partially or wholly through their current

holdings of debt instruments, the portfolio manager will seek to diversify these holdings to

reduce concentration of credit risk. As a possible implication, the yield in Internal Rate of

Return [IIR] terms and income paid out through regular coupons of the portfolio thus

achieved may be different (and lower) from that of their current holdings.

Asset Allocation

The portfolio will be invested in only investment grade & above securities as defined below

particularly debt investments, preference capital, commercial paper, corporate bonds tax

free bonds and pass through certificates across maturities, credit quality and yields and

which typically have some form of non-promoter equity interest. The portfolio manager may

decide to hold cash/liquid funds or any other debt mutual fund. The Excel portfolio will be

actively managed. The portfolio achieves significant diversification across real estate,

mezzanine debt and securitized debt and also amongst various borrowers within these

domains at a ticket size of only Rs. 25 lakhs. Some of the products to which the Excel

Portfolio may subscribe are as described below:

Structured Mezzanine Debt–These would include Non Convertible Debentures issued

by, high growth companies with good ROCE (Return on Capital Employed) whose end

use may be alternative to venture capital funding, equity like end use, however with

regular servicing of coupon.

Securitized Debt –Pass through certificate (PTC) issued on the basis of pool of

underlying loans to SMEs, microfinance, vehicle loans etc.

Repurchase Agreements (Repo) – Repo (Repurchase Option) is a formal agreement

between two counterparties where one party sells securities to another party with

the explicit intention of buying back the securities at a later date. The Portfolio

Manager shall enter into such Repo Agreements with counterparties holding

of 46

government bonds where the seller of the government bonds agrees to buy back the

government bonds from the Portfolio Manager at a predetermined time and rate.


S&P BSE India Bond Index and state bank 5 year Fixed Deposit rate are the Indexes used for

Benchmarking the performance of Excel portfolio.The Excel strategy is mid yield compared

to fixed deposits issued by Banks. The Excel Portfolio will aim to generate 5-7 % more than 5

year Fixed Deposit issued by State Bank of India.


Performance of the Excel Portfolio is measured at six monthly intervals and is shown vis a vis

the benchmark in the Risk Disclosure Document filed by the Portfolio Manager with SEBI

every six months or upon occurring of any material change. The Portfolio Manager shall use

measurement tools like Modified duration, Macaulay’s duration to measure price sensitivity

of the investments and to determine the time required to recover the present value of all

cash flows from the portfolio. Prior to opting to invest in the Excel Portfolio, prospective

clients shall be shown returns till date of a model portfolio comprising the securities in which

the Excel portfolio is invested. The increase in portfolio value between consecutive time

periods indicates income (interest / dividend) accrual. The subsequent decline occurs due to

a payout to the investor from the issuer as well as a deduction of management fees. This

process may continue till the investor exits the strategy. Clients can view the performance

details in the Risk Disclosure Document uploaded on www.karvycapital.com.

Securities

Investments would be made in all types of debt securities (which may or may not be in

dematerialized form) including but not limited to debentures of any maturity (fixed, floating,

Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed) which

may be listed, unlisted, convertible, non-convertible, secured, unsecured, rated, , Securitised

Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares),

Pass Through Certificates, Bonds, Government securities issued or guaranteed by Central or

State Government, corporate debt of both public and private sector undertakings, securities

issued by banks (both public and private sector) and development financial institutions, fixed

deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other

money market instruments, units of mutual funds, Exchange Traded Funds, units of SEBI

registered Alternative Investment Funds, floating rate debt securities and fixed income

derivatives like interest rate swaps, forward rate agreements and the like as may be

permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from

time to time. These securities may be acquired through primary market issuances such as

subscription to Initial public offers, Follow on Public offers, Rights issues and private

placements of securities, secondary market purchases, auctions held by the Reserve Bank of

India, open market sales of securities conducted by Reserve Bank of India and the like.



include but not be limited to securities like non convertible compulsorily redeemable

preference shares, optionally convertible preference shares and some Optionally

convertible debentures.

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The Portfolio may also use derivative instruments – Futures and Options – for hedging and

rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of

NRI investors.



Issuer.


Portfolio Manager for its clients in Excel strategy, clients may please note the following:

Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer to structure

the debenture issuance for the purpose of raising capital through the private placement

route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively associate with

the Issuer for structuring of the security in relation to the debentures, preparation of the

term sheets and related documents for sharing product details with prospective clients and

for appointment of key agents such as trustee, escrow agent, legal counsel and the like.












with regard to the said debentures i.e to downsell the debentures to prospective clients

other than the PMS customers.

In addition to downselling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital

Limited (Portfolio Manager) may purchase debentures for clients of the Excel strategy


c. Primary issuance of debentures by an Issuer subscription to the debentures

by Karvy Capital PMS.

d. Offer for secondary sale of debentures by third party debenture holder(s)

Purchase of debentures by Karvy Capital PMS.

e. The Portfolio Manager may, when offering Discretionary Portfolio

management services , at its discretion, purchase securities from client()s of

one discretionary portfolio management strategy for client(s) of another

discretionary portfolio management strategy or from third party at par value

Additionally,

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h. The debentures which the Portfolio Manager may invest in for the client

may or may not have some form of collateral backing them. Such

collateral may include one or more amongst the following – real estate

assets, shares of the issuing company, shares of other companies related

to the issuing company, other listed or unlisted shares, escrow of

cashflows, brand, patents, fixed assets of the company etc. However,

depending on the specific collateral used and as per the interpretation of

the Companies Act, 2013 the debentures may be deemed to be secured

or unsecured in nature.

i. Investment in Instruments that are listed may not be backed by any

collateral.

j. Investments in preference capital issues may not be backed by any

collateral and would be subject to the Company Law regulations or any

other statutes that may govern their issuance from time to time.

k. Investing in any tranche of a Pass through certificate may not be backed

by any collateral.

l. Owing to the credit risk of debt that the strategy is investing into, the

preservation of capital is not guaranteed. In case of a default by issuer in

any of the underlying securities, the trustees would endeavour to

recover the principal and the interest for the investors but there is a risk

of erosion of the principal invested in the strategy by the investor.

Additionally, the recovery process in case of a default may take time to

be implemented. Hence, at the level of each individual instrument, there

exists a risk of partial or complete capital erosion in case of a default by

the issuer.

m. The securities invested into by the Excel strategy will have credit quality

of a wide range and hence a varying amount of credit risk. Investment

will be made only in investment grade & above securities. The issuing

company’s latest available credit rating will be considered. The rating of

the securities or the issuing company will be investment grade.

n. The Portfolio Manager will endeavour to follow stringent due diligence

process while selecting the securities. The diligence process will typically

consist of Management Analysis, Financial Analysis, Product Analysis,

Industry Analysis, Buyer/supplier Analysis, cash flow analysis and

company/product life cycle analysis. The Portfolio Manager may use

services of reputed external/third party agencies for Valuation, Financial

and Legal Diligence to help in arriving at the Investment decision.

The investments in the Excel strategy could carry their own set of risks. Some of these could

include:

(iv) Operational Risk: The risks that arise out of systemic issues within an

organization. Operational risk is intrinsic to any business. Every company may

have sector and company specific risks which may affect operations.

(v) Regulatory Changes

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These risks may arise if various concerned authorities amend the regulatory

framework, which could impact the Issuing Company.

(vi) Downturn in the market

There can be a down turn in the market in which the issuing Company operates

which can lead to decrease in profit margins of the Issuing Company.



3. Aegis Portfolio

Introduction Aegis Portfolio is designed for those investors who seek long-term capital appreciation from

their asset allocation to market linked debentures, non-convertible debentures, debt,

preference shares, equities, gold and other asset classes which are available through either

exchange traded products or through mutual funds or over the counter products.


The investment objective of the Strategy is to generate long term capital appreciation of

wealth through a portfolio of market linked debentures, non-convertible debentures, debt,

preference shares, equity, gold ETFs and other asset classes which are available through

either exchange traded products or through mutual funds or over the counter products.


This portfolio is recommended for investors seeking to hold primarily a market linked

debenture portfolio with moderate risk appetite expecting a market linked upside over

medium to long term horizon. Investment in Aegis is recommended for a period of more

than 3 years.

Strategy

The investment philosophy of Aegis strategy is that it is sector agnostic with a focus on

growing companies with a profitable track record. The base case strategy is to buy and hold

the instruments. The Aegis strategy will undertake to an extent as deemed fit by the

Portfolio Manager, opportunistic buying and selling of securities or any other instrument in

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the portfolio to improve the returns earned by investors. However, in this endeavor, the

portfolio manager may on some occasions not receive suitable exit for the securities thus

bought in the portfolio. In such cases, the portfolio manager may either decide to hold such

security to maturity or to exit it at a loss when compared with the purchase price. For

investors entering the strategy partially or wholly through their current holdings, the

portfolio manager may seek to diversify these holdings to reduce concentration of credit risk.

Asset Allocation

The portfolio aims to generate returns through both Debt & Equity allocation. Equity

component of the strategy would include investments in Market Linked Debentures and

debt component of the strategy will include investments in non-convertible debentures,

debt, preference shares, debt instruments while investment would also be made in mutual

funds and other asset classes in a proportion deemed appropriate for the investor and the in

accordance with the market scenario.

Investors can choose to allocate their funds in the below manner when opting for Aegis

strategy:

Option 1: 70% of the portfolio to be allocated to investments in debt securities and the

remaining 30% of the portfolio to be invested in market linked debentures;

Option 2: 40% of the portfolio to be allocated to investments in debt securities and the

remaining 60% of the portfolio to be invested in market linked debentures;

Option 3: Entire portfolio to be allocated to investment in market linked debentures only


BSE 500; S&P BSE India Bond Index and Rate of Interest of 5 year Fixed Deposit issued by

State Bank of India are used for benchmarking the performance of Aegis portfolio. The equity

component of the Aegis Portfolio will be benchmarked against BSE 500 while the debt

component will be benchmarked against S&P BSE India Bond Index. Further, the debt

component of the Aegis strategy will be invested in debt instruments to aim to generate 5-

7% more returns than rate of interest of 5 year Fixed Deposit issued by State Bank of India.


Performance of the Aegis Portfolio is measured at six monthly intervals and is shown vis a vis

the benchmark in the Disclosure Document filed by the Portfolio Manager with SEBI every six

months or upon occurring of any material change. Clients can also view the performance

details in the Risk Disclosure Document uploaded on www.karvycapital .com.

Securities

Investments may be made in all types of debt securities (which may or may not be in

dematerialized form) including but not limited to listed, unlisted, convertible, non-

convertible, secured, unsecured, rated or unrated, market linked debentures of any

maturity, and acquired through secondary market purchases, RBI auctions, open market

sales conducted by RBI etc., other public offers, bilateral offers, placements, rights, offers,

negotiated deals, etc. They could include Securitised Debt, instruments with debt like

features (eg. Compulsorily redeemable preference shares), Pass Through Certificates,

Debentures (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked,

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real estate backed), Bonds, Government securities issued or guaranteed by Central or State

Government, corporate debt of both public and private sector undertakings, securities

issued by banks (both public and private sector) and development financial institutions, fixed

deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other

money market instruments, units of mutual funds, ETFs, units of SEBI registered AIFs,

floating rate debt securities and fixed income derivatives like interest rate swaps, forward

rate agreements etc. as may be permitted by the Act, Rules and/or Regulations, guidelines

and notifications in force from time to time.

Investments may be made in various 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, equity and equity related

securities including but not limited to stocks, units of mutual funds, ETFs and other eligible

modes of investment as may permitted by the Regulations from time to time. Investments

may be made in securities acquired through secondary market purchases, open market

sales/auctions, Initial Public Offers (IPOs), other public offers, bilateral offers, placements,

rights, offers, negotiated deals, etc. These securities may be listed or unlisted.

Investments may also be made in gold ETFs and other asset classes which are available

through either exchange traded products or through mutual funds or over the counter

products.

The Portfolio may also use derivative instruments – Futures and Options. Derivative

Instruments shall, however, not be used in case of NRI investors.

Investment in equities will be valued on the closing price of that equity at NSE. In case of

investments in any stocks listed on BSE only, the same will be valued based on the closing

price of that equity at BSE. Investment in Mutual Funds and ETFs will be valued on the day

end’s NAV.

Debt investment in listed/publicly traded securities will be valued on the day end’s

NAV/closing price. Investment in other debt instruments will be valued as per valuation

provided by the Issuer


Fees and Expenses: Defined in Section II below5. Aegis Portfolio

4. Brands Equity Portfolio

Introduction Brands Equity Portfolio aims to invest in companies with a strong brand recall to generate long term capital appreciation. The portfolio will comprise of some of the best brands and includes companies with not only a strong consumer franchise but also includes names with a strong institutional recall. Strong brands tend to have a sustainable and consistent competitive advantage, strong economic moat, good quality of earnings, credible management and good corporate governance. Investing in time-tested all-weather brands

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are one of the most effective methods of creating wealth over the long term by sharing in their prosperity and success while riding the periodic equity market volatility.

It is designed for those Investors who seek long term capital appreciation from equity

allocation to this strategy. The portfolio will invest in stocks across all market capitalization

categories.


The investment objective of the strategy is to generate growth of capital and achieve returns over the benchmark index by investing in companies with not only a strong consumer franchise but also includes names with a strong institutional recall. Investment Horizon and Risk Return Profile

The Brands Equity Portfolio by the philosophy itself is a long term investment strategy. It is

recommended for investors with a high risk appetite expecting a high return over medium to

long term horizon and who seek to hold an equity portfolio of companies .

Below is a pictoral representation of the Brands Equity Portfolio strategy risk.

Strategy

The investment philosophy of the Brands Equity Portfolio is that it will focus on growing

companies in this theme.

The Brands Equity portfolio aims to achieve sustainable growth at a reasonable rate thereby

generating steady returns. The portfolio management style is active with close monitoring

and review of portfolio positions. Investments are research driven. Fundamental research

and analytical rigor are used to arrive at margin of safety. Sound risk management is

followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular

study of extraneous risks and by diversifying across companies under this theme. Discipline is

followed – Risks which are not understood are avoided. Price value gap is regularly

monitored.

The Brands Equity Portfolio aims to achieve superior compounding by using the following

investment strategy:

1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;

2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;

3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;

4. The objective is to achieve sustainable growth at a reasonable rate;

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5. Discipline is followed – Risks which are not understood are avoided. Price value gap is regularly monitored.

6. Focused portfolio with adequate stock diversification.

Asset Allocation

The Brands Equity Portfolio will seek to remain substantially invested in Equities or Equities

related instruments at all times. The cash in the portfolio may be invested in Liquid Funds or

Liquid Bees.

Benchmark

The Brands Equity portfolio will be benchmarked against the BSE 500 Index.


Performance of the Brands Equity Portfolio shall be measured at six monthly intervals and is

shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager

with SEBI every six months or upon occurring of any material change. Clients can also view

the performance details in the Risk Disclosure Document uploaded on

www.karvycapital .com.

Securities

Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The

Portfolio will also use derivative instruments – Futures and Options – for hedging and

rebalancing of the portfolio.

Investment in equities will be valued on the closing price of that stock at NSE. In case of


price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be

valued at actual cash margins paid against F&O contracts, summed with Mark to Market

profit / loss computed on the basis of closing price of such contracts.



5. Lifestyle Equity Portfolio

Introduction

Lifestyle Equity Portfolio aims to invest in companies that offer lifestyle choices with a strong brand recall among the affluent urban retail consumers. The portfolio will comprise established and emerging lifestyle consumer stories that are primed to ride the India growth story. As discretionary spending power of the Indian consumer increases, there is a marked shift towards brands offering aspirational lifestyle choices. As the share of wallet for discretionary spend goes up due to lifestyle improvements, participating in the prosperity of these Companies is a smart choice.

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categories.


The investment objective of the Lifestyle Equity strategy is to generate growth of capital and

achieve returns over the benchmark index through long term investing. Investments would

be made in companies which have a strong and sustainable business model and are growth

oriented.


The Lifestyle Equity Portfolio is recommended for investors with a high risk appetite seeking

a high return over medium to long term horizon and who seek to hold equity portfolio of

established and emerging lifestyle consumer companies.

Below is a pictoral representation of the Lifestyle Equity strategy risk:

Strategy

The investment philosophy of the Lifestyle Equity Portfolio is that it will focus on growing


The Lifestyle Equity portfolio aims to achieve sustainable growth at a reasonable rate

thereby generating steady returns. The portfolio management style is active with close

monitoring and review of portfolio positions. Investments are research driven. Fundamental

research and analytical rigor are used to arrive at margin of safety. Sound risk management

is followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular



monitored.

The Lifestyle Equity Portfolio aims to achieve superior compounding by using the following




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4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value

gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.

Asset Allocation

The Lifestyle Equity Portfolio will seek to remain substantially invested in Equities or Equities


Liquid Bees.

Benchmark

The Lifestyle Equity portfolio will be benchmarked against the BSE 500 Index.


Performance of the Lifestyle Equity Portfolio shall be measured at six monthly intervals and

is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager


the performance details in the Risk Disclosure Document uploaded on


Securities











6. Economic Reforms Equity Portfolio

Introduction

Economic Reforms Equity Portfolio aims to invest in companies which are directly related to the reforms in the government policies. Investing in sectors and companies in anticipation of a change in policy or post policy declarations. Analyzing the impact of policy changes, and investing in those sectors and companies. GST and hence formalization of the economy, or government policy on developing inland water ways, and hence increasing business of dredging companies, can be a few examples.

of 46

Many sectors await clarity and direction in the form of reforms in extant policies that were

framed to address the requirements of a different economic context. Sometimes policy

making is unable to keep pace with changing economic realities owing to either the sheer

pace of change or different priorities. Economic reforms are a continuous process as no

policy is relevant for all macro conditions. Hence no sector in the economy can claim to be

immune from the need for continuous progressive government reforms. Participating in the

sectors that present an opportunity for reforms is an effective approach to scout for the

golden mean of investing- 1. Growth which is possible due to reforms and 2. Value due to

the current opportunity being contrarian.



categories.


The investment objective of the Economic Reforms Equity Portfolio is to generate growth of

capital and achieve returns over the benchmark index through long term investing.

Investments would be made in companies which have a strong and sustainable business

model and are growth oriented.


This Economic Reforms Equity Portfolio is recommended for investors with a high risk

appetite expecting a high return over medium to long term horizon from holdings in an

equity portfolio of companies that benefit from reforms in policies of Government of India

ies,.

Below is a pictoral representation of the Economic Reforms Equity Portfolio risk:

Strategy

The investment philosophy of the Economic Reforms Equity Portfolio is that it will focus on

growing companies in this theme.

The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating

steady returns. The portfolio management style is active with close monitoring and review of

portfolio positions. Investments are research driven. Fundamental research and analytical

rigor are used to arrive at margin of safety. Sound risk management is followed. Risk

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mitigation is done to minimize portfolio downside and is achieved by regular study of

extraneous risks and by diversifying across companies under this theme. Discipline is


monitored.

The Portfolio aims to achieve superior compounding by using the following investment

strategy:


2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;




Asset Allocation

The Economic Reforms Equity Portfolio will seek to remain substantially invested in Equities

or Equities related instruments at all times. The cash in the portfolio may be invested in

Liquid Funds or Liquid Bees.


The Economic Reforms Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the Economic Reforms Equity Portfolio shall be measured at six monthly

intervals and is shown vis a vis the benchmark in the Disclosure Document filed by the

Portfolio Manager with SEBI every six months or upon occurring of any material change.

Clients can also view the performance details in the Risk Disclosure Document uploaded on


Securities










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7 . Rural Consumption Equity Portfolio

Introduction Rural Consumption Equity Portfolio focuses on businesses that have built strong rural

franchises and benefit from the prosperity in the countryside. Increase in MSP [Minimum

Support Price] which leads to increase in surplus cash in the hands of the farmers, which

boosts consumption,focus on irrigation, mechanization of farm equipment, which lead to

higher sales of irrigation equipment and tractors etc. reforms in the food processing sector,

focus on rural housing, health and sanitation, and higher budgetary support from the

government are some of the ways which will lead to higher per capita income for rural India.

As the Government would always factor in the needs of the rural economy, investing in such

businesses that are a direct play on rural lifestyle provides great diversification benefits to

the portfolio while allowing wealth creation in a segment that touches the lives of more than

50% of Indians.



categories.


The investment objective of the Rural Consumption Equity Portfolio is to generate growth of





The Rural Consumption Equity Portfolio is recommended for investors seeking to hold

equity portfolio of companies that have created strong rural frachisees, with a high risk

appetite expecting a high return over medium to long term horizon

Below is a pictoral representation of the Rural Consumption Equity Portfolio risk:

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Strategy

The investment philosophy of the Rural Consumption Equity Portfolio is that it will focus on









monitored.

The Rural Consumption Equity Portfolio aims to achieve superior compounding by using the

following investment strategy:






Asset Allocation

The Rural Consumption Equity Portfolio will seek to remain substantially invested in Equities

or Equities related instruments at all times. The cash in the portfolio may be invested in

Liquid Funds or Liquid Bees.

Benchmark

The Rural Consumption Equity portfolio will be benchmarked against the BSE 500 Index


Performance of the Rural Consumption Equity Portfolio shall be measured at six monthly





Securities

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8. Urban Inflation Equity Portfolio

Introduction Urban Inflation Equity Portfolio aims to invest in sectors such as Healthcare, Housing, and Lifestyle which experience materially higher inflation compared to the rest of the economy. Consumer Price Inflation (CPI) as measured by the government gives higher weightage to basic elements like food, housing, clothing, transportation etc. which covers the basic consumption elements. Urban Inflation for an affluent urban Indian family is the cost escalation in his expense basket which is very unlike the basket of CPI. It includes expenses on healthcare, recreation, travel, luxury clothing and goods, and other lifestyle related expenses. The affluent middle-aged Indian is responsible for building her own social security while maintaining her lifestyle as she steps into the sunset of her career in a few decades from now. Empirical and anecdotal evidence would suggest that the inflation experienced on account of social security related areas such as Healthcare and Housing or lifestyle related expenses for an urban Indian has little correlation to the consumer price inflation (CPI) being targeted by the policy makers. An effective approach to build a social security corpus and protect inflation adjusted lifestyle would be to invest and grow with the leaders in such sectors who in turn would benefit the most from the surging demand.



categories.


The investment objective of the Urban Inflation Equity Portfolio is to generate growth of





The Urban Inflation Equity Portfolio is recommended for investors with a high risk appetite

expecting a high return over medium to long term horizon and who seek to hold a equity

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portfolio in sectors like healthcare, housing and lifestyle. Below is a pictoral representation

of the Urban Inflation Equity Portfolio risk

Strategy

The investment philosophy of the Urban Inflation Equity Portfolio is that it will focus on









monitored.

The Urban Inflation Equity Portfolio aims to achieve superior compounding by using the







Asset Allocation

The Urban Inflation Equity Portfolio will seek to remain substantially invested in Equities or

Equities related instruments at all times. The cash in the portfolio may be invested in Liquid

Funds or Liquid Bees.

Benchmark

The Urban Inflation Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the Urban Inflation Equity Portfolio shall be measured at six monthly



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Securities











9. Wellness Equity Portfolio

Introduction Wellness Equity Portfolio is a thematic portfolio that invests in the ancient wisdom of Wellness- Health and Wealth. Health and Wealth are signs of wellness for the effect they have on individual empowerment, liberty and growth of an individual. Besides increasing per capita income and higher discretionary spending have led to better awareness and affordability for an affluent urban Indian to loosen her purse strings and embrace the world of wellness. In this universe there can be companies involved in health diagnostics, or hospitals, health clinics, or health clubs/ gymnasium companies and the like. This universe will also include banking and other financial companies which help preserve and increase wealth of the affluent Indian. Smart investing entails participating in themes such as Healthcare and Financial Services that not just attract one’s discretionary spend but also heralds “Wellness.”



categories.


The investment objective of the Wellness Equity Portfolio is to generate growth of capital

and achieve returns over the benchmark index through long term investing. Investments

would be made in companies which have a strong and sustainable business model and are

growth oriented.


The Wellness Equity Portfoliois recommended for investors with a high risk appetite

expecting a high return over medium to long term horizon.

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Below is a pictoral representation of the Wellness Equity Portfolio risk

Strategy

The investment philosophy of the Wellness Equity Portfolio is that it will focus on growing









monitored.

The Wellness Equity Portfolio aims to achieve superior compounding by using the following







Asset Allocation

The Wellness Equity Portfolio will seek to remain substantially invested in Equities or




The Wellness Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the Wellness Equity Portfolio shall be measured at six monthly intervals and

is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager


the performance details in the Risk Disclosure Document uploaded on www.karvycapital

.com.

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Securities

Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF).

The Portfolio will also use derivative instruments – Futures and Options – for hedging

and rebalancing of the portfolio.

Investment in equities will be valued on the closing price of that stock at NSE. In case

of investments in any stocks listed on BSE only, the same will be valued based on the

closing price of that stock in BSE. Investment in “Futures and Options”, used for

hedging, shall be valued at actual cash margins paid against F&O contracts, summed

with Mark to Market profit / loss computed on the basis of closing price of such

contracts.



10. AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio

Introduction A.I.R. (Asset Management, Insurance, Rating agencies) Equity Portfolio aims to invest in the

under penetrated, under represented (among BFSI) and high growth financial services sector

like insurance, asset management companies (AMCs), and rating agencies. Asset

management and Insurance are under penetrated in India presenting a multi-year high

growth opportunity. The portfolio also includes rating agencies, which is a highly

concentrated space and dominated by a few large players. As corporate borrowing increases

in quantum and penetrates emerging segments like Corporate bond markets, the need for a

measure of credit worthiness from the older and well entrenched rating agencies will only

increase. BFSI portfolios are routinely dominated by Banks and NBFCs to the exclusion of

material exposure to the emerging sectors of AIR in financial services. Investors focused on

participating in the high growth and under represented sectors would benefit from an

investment in the AIR portfolio.



categories.


The investment objective of the A.I.R. (Asset Management, Insurance, Rating agencies)

Equity Portfolio is to generate growth of capital and achieve returns over the benchmark

index through long term investing. Investments would be made in companies which have a

strong and sustainable business model and are growth oriented.

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This AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio

is recommended for investors seeking to hold a equity portfolio of listed companies which

are under penetrated, under represented (among BFSI) and high growth financial services

sector like insurance, asset management companies (AMCs), and rating agencies, with a high

risk appetite expecting a high return over medium to long term horizon

Below is a pictoral representation of the AIR Equity Portfolio (Asset Management,

Insurance, Rating agencies) Equity Portfolio risk:

Strategy

The investment philosophy of the AIR Equity Portfolio (Asset Management, Insurance,

Rating agencies) Equity Portfolio is that it will focus on growing companies in this theme.








monitored.

The Portfolio aims to achieve superior compounding by using the following investment

strategy:






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Asset Allocation

The AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio

will seek to remain substantially invested in Equities or Equities related instruments at all

times. The cash in the portfolio may be invested in Liquid Funds or Liquid Bees.


The AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio

will be benchmarked against the BSE 500 Index.


Performance of the AIR Equity Portfolio (Asset Management, Insurance, Rating agencies)

Equity Portfolio is measured at six monthly intervals and is shown vis a vis the benchmark in

the Disclosure Document filed by the Portfolio Manager with SEBI every six months or upon

occurring of any material change. Clients can also view the performance details in the Risk

Disclosure Document uploaded on www.karvycapital .com.

Securities









contracts.



11. MNC Equity Portfolio

Introduction MNC Equity Portfolio invests in multinational companies of repute and pedigree which are

listed on Indian Stock Exchanges and can capitalize on the India growth story as well as

leadership in exports. Most of the MNCs have performed across market cycles given the

stable fundamentals of their underlying businesses like strong brand equity, robust cash

flows, low financial leverage, technology leadership and strong corporate governance. World

over, it is well documented in the annals of investment history that well governed companies

have always created the most value over the long term. As India transitions from an

emerging market to a developed market over the next few decades, it is imperative that long

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term investment portfolios have an exposure to the MNC companies which offer a promise

of robust corporate governance.



categories.


The investment objective of the strategy is to generate growth of capital and achieve returns

over the benchmark index through long term investing. Investments would be made in

companies which have a strong and sustainable business model and are growth oriented.


The MNC Equity Portfolio is recommended for investors with a high risk appetite expecting a

high return over medium to long term horizon seeking to hold a equity portfolio of

multinational companies which are listed on Indian Exchanges .Below is a pictoral

representation of the MNC Equity Portfolio risk:

Strategy

The investment philosophy of the MNC Equity Portfolio is that it will focus on growing


The MNC Equity Portfolio aims to achieve sustainable growth at a reasonable rate thereby

generating steady returns. The portfolio management style is active with close monitoring

and review of portfolio positions. Investments are research driven. Fundamental research

and analytical rigor are used to arrive at margin of safety. Sound risk management is

followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular



monitored.

The MNC Equity Portfolio shall aim to achieve superior compounding by using the following






gap is regularly monitored.

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Asset Allocation

The MNC Equity Portfolio will seek to remain substantially invested in Equities or Equities


Liquid Bees.

Benchmark

The MNC Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the MNC Equity Portfolio shall be measured at six monthly intervals and is

shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager


the performance details in the Risk Disclosure Document uploaded on www.karvycapital

.com

Securities









contracts.



12Global Business Equity Portfolio

Introduction Global Business Equity Portfolio focuses on select companies which have built a strategic geographical presence and are expanding their footprints globally. Indian businesses are venturing into global markets on the back of opportunistic acquisitions while gaining leadership in high value exports and price leadership in certain other segments competing on scale like never before. The tail wind provided by a depreciating Rupee provides the much-needed boost periodically. Exposure to global businesses is important to diversify the India focused equity portfolios.



categories.

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The Global Business Equity Portfolio is recommended for investors with a high risk appetite

expecting a high return over medium to long term horizon .

Below is a pictoral representation of the Global Business Equity Portfolio risk.

Strategy

The investment philosophy of the strategy is that it will focus on growing companies in this

theme.








monitored.

The Global Business Equity Portfolio aims to achieve superior compounding by using the







Asset Allocation

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The Global Business Equity Portfolio will seek to remain substantially invested in Equities or



Benchmark

The Global Business Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the Global Business Equity Portfolio is measured at six monthly intervals

and is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio

Manager with SEBI every six months or upon occurring of any material change. Clients can

also view the performance details in the Risk Disclosure Document uploaded on


Securities











13Multiples Equity Portfolio

Introduction Multiples Equity Portfolio is focused on identifying deep value opportunities that are fundamentally mispriced. Such opportunities can be contrarian, undiscovered or awaiting a key reform to act as catalyst in their growth. They can represent leadership in a niche segment or can be a fallen Angel on the cusp of a turnaround. Essentially these are companies which are anticipated to have a high growth in profitability and also higher valuations as the ROCE (Return on Capital Employed) keeps improving. In traditional language they are called Multi baggers. The strategy is agnostic to market capitalization and follows a strictly bottoms-up approach. This is a high risk/return strategy with respect to the timing of achievement of business outcomes, discovery of the idea by the market and the attendant liquidity conditions and sentiment indicators. However a well-designed equity growth portfolio should contain a flavor of the multiples approach to wealth creation.



categories.

of 46






The Multiples Equity Portfolio is recommended for investors with high risk appetite

expecting a high return over medium to long term horizon

Below is a pictoral representation of the Multiples Equity Portfolio risk:

Strategy

The strategy is to identify companies that represent leadership in a niche segment or

seem to be on the cusp of a turnaround.

The investment philosophy of the strategy is that it will focus on growing companies in this

theme.








monitored.

The Multiples Equity Portfolio aims to achieve superior compounding by using the







Asset Allocation

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The Multiples Equity Portfolio will seek to remain substantially invested in Equities or



Benchmark

The Multiples Equity Portfolio will be benchmarked against the BSE 500 Index.


Performance of the Multiples Equity Portfolio shall be measured at six monthly intervals

and is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio

Manager with SEBI every six months or upon occurring of any material change. Clients can

also view the performance details in the Risk Disclosure Document uploaded on


Securities











.14 Plutus Portfolios

Introduction Plutus Portfolio is designed for investors seeking income and capital appreciation from their

asset allocation to debt, preference capital, and tax free bonds.

Plutus Portfolio is focused on investing only in rated and listed securities across debentures,

preference capital, corporate bonds, and tax free bonds across maturities, credit quality and

yields.


The investment objective is invest in various instruments to generate cash flows and/or

capital appreciation and income through interest, preference dividend and trading (both in

the short term and over the long term) of securities in the primary or secondary markets and

to reduce concentration risk by diversifying risk across sectors and industries within sectors.

The portfolio will primarily consist of debt securities, preference capital, and tax free bonds.


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Plutus portfolio is recommended for investors seeking to hold a debt portfolio with

moderate risk appetite expecting a moderate return over a long term horizon. Investment in

Plutus Portfolio is recommended for a period of more than 3 years.

Below is a pictorial representation of the Plutus strategy risk.

RISK

Strategy

The base case strategy is to build a moderate yield portfolio by buying and holding the debt

instruments across the yield spectrum (Low/moderate/high). However, sale at a premium

before maturity will also be explored subject to opportunities. Opportunistically, the

portfolio will also target extracting returns for market making for moderate to high yield

debt instruments – buying and selling over a short duration.

Asset Allocation

The portfolio will be predominantly invested in rated and listed debt securities (low,

moderate/ high yield) such as preference capital preference capital, corporate bonds, and

tax free bonds across maturities, credit quality and yields, which can be secured or

unsecured, and convertible or non-convertible using the securities defined below. The

underlying securities will be rated by credit rating agencies and listed on one or more

exchanges.

The Plutus portfolio may subscribe to :

Structured Mezzanine Debt – These would include Non Convertible Debentures issued by

profitable, high growth companies with good ROCE (Return on Capital Employed) whose end

use may be alternative to venture capital funding, equity like end use, however with regular

servicing of coupon. The Plutus portfolio shall seek to achieve significant diversification

across real estate, mezzanine debt and also amongst various borrowers within these

domains at an investment size of only Rs. 25 lakhs. The diversification will also be achieved

through spread of investments in different sectors and various industries within sectors.

The Plutus portfolio will be actively managed. The Portfolio Manager may decide to hold

cash/liquid funds or any other debt mutual fund.


S&P BSE India Corporate Bond Index and fixed deposit of 5 year tenure issued by State Bank

of India are used for benchmarking the performance of Plutus portfolio.

The strategy will target generating higher yields than Bank FD. The aim will be to generate

yields that are 7% -9% per annum higher than a 5-year SBI FD.

High Low Moderate

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Prior to opting to invest in the Plutus Portfolio, prospective clients may be shown indicative

returns through a model portfolio comprising the securities in which the Plutus portfolio may

be invested. The Portfolio Manager shall use measurement tools like Modified duration,

Macaulay’s duration to measure price sensitivity of the investments and to determine the

time required to recover the present value of all cash flows from the portfolio.

Securities

Plutus Portfolio is focused on investing only in rated and listed securities.

Investments would be made in all types of rated and listed debt securities including but not

limited to debentures of any maturity (fixed, floating, Variable Coupon, and equity index

/stocks /stocks basket linked, real estate backed) which may be listed, convertible, non-

convertible, secured, unsecured, rated, instruments with debt like features (eg.

Compulsorily redeemable preference shares), Bonds, Government securities issued or

guaranteed by Central or State Government, corporate debt of both public and private

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

development financial institutions, treasury bills and other money market instruments, units

of mutual funds, Exchange Traded Funds, floating rate debt securities and fixed income

derivatives like interest rate swaps and the like as may be permitted by the Act, Rules and/or

Regulations, guidelines and notifications in force from time to time. These securities may be

acquired through primary market issuances such as subscription to Initial public offers,

Follow on Public offers, Rights issues and private placements of securities, secondary market

purchases, auctions held by the Reserve Bank of India, open market sales of securities

conducted by Reserve Bank of India and the like.



include but not be limited to securities like non convertible compulsorily redeemable

preference shares, optionally convertible preference shares and some optionally convertible

debentures.



Issuer.


Portfolio Manager for its clients in Plutus strategy, clients may please note the following:

Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer in

structuring the debenture issuance for the purpose of raising capital through the private

placement route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively

associate with the Issuer for structuring of the security in relation to the debentures,

preparation of the term sheets and related documents for sharing product details with

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prospective clients and for appointment of key agents such as trustee, escrow agent, legal

counsel and the like.












with regard to the said debentures i.e to sell the debentures to prospective clients other

than the PMS customers.

In addition to selling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital

Limited (Portfolio Manager) may purchase debentures for clients of the Plutus strategy


Primary issuance of debentures by an Issuer. Subscription to the debentures by Karvy Capital

PMS.

Offer for secondary sale of debentures by third party debenture holder(s). Purchase of

debentures by Karvy Capital PMS.

The Portfolio Manager may, when offering Discretionary Portfolio management services , at

its discretion, purchase securities from client()s of one discretionary portfolio management

strategy for client(s) of another discretionary portfolio management strategy or from third

party at par value

Additionally,

The debentures which the Portfolio Manager may invest in for the client may or may not

have some form of collateral backing them. Such collateral may include one or more

amongst the following – real estate assets, shares of the issuing company, shares of other

companies related to the issuing company, other listed or unlisted shares, escrow of cash

flows, brand, patents, fixed assets of the company etc. However, depending on the specific

collateral used and as per the interpretation of the Companies Act, 2013 the debentures may

be deemed to be secured or unsecured in nature.

Investment in Instruments that are listed may not be backed by any collateral.

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Investments in preference capital issues may not be backed by any collateral and would be

subject to the Company Law regulations or any other statutes that may govern their issuance

from time to time.

Owing to the credit risk of debt that the strategy is investing into, the preservation of capital

is not guaranteed. In case of a default by issuer in any of the underlying securities, the

trustees would endeavor to recover the principal and the interest for the investors but there

is a risk of erosion of the principal invested in the strategy by the investor. Additionally, the

recovery process in case of a default may take time to be implemented. Hence, at the level

of each individual instrument, there exists a risk of partial or complete capital erosion in case

of a default by the issuer.

The securities invested into by the Plutus strategy will have credit quality of a wide range and

hence a varying amount of credit risk. The issuing company’s latest available credit rating will

be considered. The rating of the securities or the issuing company may be investment grade

or speculative grade.

The Portfolio Manager will endeavor to follow stringent due diligence process while selecting

the securities. The diligence process will typically consist of management analysis, financial

analysis, product analysis, industry analysis, buyer/supplier analysis, cash flow analysis and

company/product life cycle analysis. The portfolio manager may use services of reputed

external/third party agencies for valuation, financial and legal diligence to help in arriving at

the investment decision.

The criteria for Investment would be to look at proposals which have backing of institutional

Equity Investors where there is no Key man risk, return on Investment is more than cost of

borrowing and repayment is visible basis cash flow generation, In cases of Non banking

finance companies and Micro Finance Institutions, the Asset liability management would be

ascertained rather than cash flow generation for debt repayment

The investments in the Plutus strategy could carry their own set of risks. Some of these could

include:

Operational Risk: The risks that arise out of systemic issues within an organization.

Operational risk is intrinsic to any business. Every company may have sector and company

specific risks which may affect operations.

Regulatory Changes

These risks may arise if various concerned authorities amend the regulatory framework,

which could impact the Issuing Company.

Downturn in the market

There can be a down turn in the market in which the issuing Company operates which can

lead to decrease in profit margins for the Issuing Company.

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The Plutus strategy will undertake to an extent as deemed fit by the Portfolio Manager,

opportunistic buying and selling of debt securities or any other instrument in the portfolio to

improve the returns earned by investors. However, in this endeavor, the portfolio manager

may on some occasions not receive suitable exit for the securities thus bought in the

portfolio. In such cases, the portfolio manager may either decide to hold such security to

maturity or to exit it at a loss when compared with the purchase price. For investors entering

the strategy partially or wholly through their current holdings of debt instruments, the

portfolio manager will seek to diversify these holdings to reduce concentration of credit risk.

As a possible implication, the yield in Internal Rate of Return [IIR] terms including any interim

payouts may be different (and lower) from that of their current holdings.



. 15 Metis Portfolio

Introduction Metis Portfolio is designed for investors who seek long-term capital appreciation from their asset allocation to equities with a combination of investment strategies as described above viz:-.

1. Brands Equity Portfolio, 2. Lifestyle Equity Portfolio 3. Economic Reforms Equity Portfolio 4. Rural Consumption Equity Portfolio 5. Urban Inflation Equity Portfolio 6. Wellness Equity Portfolio 7. AIR Equity Portfolio 8. MNC Equity Portfolio 9. Global Business Equity Portfolio 10. Multiples Equity Portfolio

Portfolio manager has the option to allocate money across minimum 3 strategies and

maximum of 6 strategies at any given point of time. The weightage or each stock and

strategies will be decided by the fund manager not only based on the market condition from

time to time, but it will also be based on the clients risk apetite and risk profile. The aim is to

pick a combination of investment strategies for investing, which show a prospect of

maximum growth potential from time to time. The frequency of changing the portfolio etc.

would be at the descrition of the portfolio manager. The Metis portfolio will invest in stocks

across sectors and market capitalization categories. Some Shares / mutual funds may be

common across strategies chosen for the respective client.


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The investment objective of the strategy is to generate growth of capital through a blend of

value, growth opportunistic and event driven investing.


The Metis Portfolio is recommended for investors seeking to hold a equity portfolio

comprising of targeting themes and with a high risk appetite expecting a high return over

medium to long term horizon.

Below is a pictoral representation of the Brands Equity Portfolio strategy risk.

Strategy

Portfolio manager has the option to allocate money across minimum 3 strategies and

maximum of 6 strategies at any given point of time. The weightage or each stock and

strategies will be decided by the fund manager not only based on the market condition from

time to time, but it will also be based on the clients risk apetite and risk profile. The aim is to

pick themes for investing, which show a prospect of maximum growth potential from time

to time. The frequency of changing the portfolio etc. would be at the descrition of the

portfolio manager

The investment philosophy of the strategy is that it will focus on growing companies across

the selected themes.








monitored.

The Metis Portfolio aims to achieve superior compounding by using the following investment

strategy:




4. The objective is to achieve sustainable growth at a reasonable rate;

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5. Discipline is followed – Risks which are not understood are avoided. Price value gap is regularly monitored.


Asset Allocation

The Metis Equity Portfolio will seek to remain substantially invested in Equities or Equities


Liquid Bees.

Benchmark

The Brands Equity portfolio will be benchmarked against the BSE 500 Index.


Performance of the Metis Portfolio shall be measured at six monthly intervals and is shown

vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager with SEBI

every six months or upon occurring of any material change. Clients can also view the

performance details in the Risk Disclosure Document uploaded on www.karvycapital .com.

Securities









contracts.


Fees and Expenses: As defined in Section II below

For all strategies mentioned above, the Portfolio Manager shall be entitled to issue one or more series of the strategy. The portfolio manager may also decide to make periodic payouts to investors.

The fee portion below is common for all strategies whether Discretionary and Non

Discretionary Product

PLACEMENT FEE:

SECTION II: FEES AND EXPENSES PERTAINING TO THE PORTFOLIO STRATEGIES

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A Placement fee will be charged as a percentage of corpus over and above the fixed

management fee and performance fee. The placement fee shall also be charged each time

corpus is infused/ brought in by the client during the lifetime of the portfolio investment.

The placement fee shall be computed as a percentage of the initial corpus brought in by the

client and if subsequent to account opening, additional corpus brought in by such client

then it shall be computed as a percentage of the additional corpus brought in. The

Placement fee shall be deducted upfront from the Client’s portfolio. If client closes his

portfolio account prior to recovery of entire placement fee, the Portfolio Manager shall

deduct the balance Placement Fee from the proceeds payable to the client upon portfolio

closure.

PORTFOLIO MANAGEMENT FEE: The Portfolio Management fee(s) may be charged to

client(s) either as a fixed fee or as a fee linked to performance of the portfolio or a

combination of both. Details of the fixed / Performance fee which may be charged are as

follows:

FIXED MANAGEMENT FEE: Fee if charged as a Fixed Management Fee shall not exceed 3.00%

p.a. charged upto 0.75% at the end of every quarter / month [as may be agreed with clients]

on the daily average Net Asset Value of the Portfolio (inclusive of all securities and cash/bank

balance).

PERFORMANCE FEE: Fee if charged as a Performance fee shall not exceed 25% of

incremental gains beyond annualized hurdle rate not exceeding 0% on the basis of High

Water Mark Principle over the life of the investment. For existing clients, the performance

fee is being computed on a High Watermark Principle over the life of the Investment at the

end of every financial year on financial year basis. From 1st August, 2012, for new clients the

performance fees is being charged on completion of 12 months (anniversary basis) and not

financial year basis.

PREMATURE REDEMPTION CHARGES/ EXIT CHARGES: If the redemption is done prematurely

at the option of the client, the Portfolio Manager shall levy the Premature Redemption

Charges/ exit charges as may be agreed upon between the Portfolio Manager and the clients

when signing the Portfolio management Services Agreement.

Further, the below general costs and expenses shall be borne by the clients availing the

services of the portfolio manager:

Depository Participant fee

The charges relating to opening and operation of demat accounts, custody and transfer

charges for shares, bonds and units, dematerialization and rematerialization, pledge and

removal of pledge, etc. will be as per the actual charged by the Depository Participant.

Custodian fee

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The charges relating to custodian activities will be as per the actual charged by the

Custodian.

1. Registrar and transfer agent fee:

Charges payable to the Registrar and Share Transfer Agents in connection with

effecting transfer of any or all securities and bonds, units, etc. including stamp

charges, cost of affidavits, notary charges, postage/courier charges and other related

charges will be recovered on actual

2. Brokerage and transaction cost:

The Brokerage and other charges like Goods and Services Tax , Stamp duty, Security

Transaction

Tax, SEBI Fees, Bank charges, Turnover tax, and other charges (if any), as per the

rates existing from time to time, will be charged on actual.

3. Securities Lending Charges:

If utilized, the charges pertaining to lending of securities, costs associated with

transfer of securities connected with lending transfer operations, Depository

Participant Charges, Share Transfer Agent Charges, etc. would be recovered on

actual.

4. Certification Charges or Professional Charges:

Any charges payable for outsourced professional services like accounting, taxation,

auditing, and any legal services, notarizations, etc., incurred on behalf of the Client

by the Portfolio Manager, will be charged from the client on actual.

5. Fees, entry/exit loads and charges in respect of investment in mutual funds:

Mutual funds may be recovering expenses or management fees, entry/exit loads and

other incidental expenses along with services tax, if any, on such recoveries and such

fees, entry/exit loads and charges including services tax on such recoveries, as per

the relevant regulation shall be paid to the asset management company of these

Mutual Funds on the clients’ account. Such fees and charges are in addition to the

Portfolio Management fees described above.

6. Incidental Expenses

Charges in connection with day to day operations like courier charges incurred in

providing physical reports relating to client’s portfolio / welcome letter / account

statements/ other communication to clients, stamp duty, Goods and Services Tax,

postal, telegraphic expenses, opening and operation of bank and demat accounts or

any other out of pocket expenses incurred by the Portfolio Manager, on behalf of the

client, would be recovered from the client. All incidental and ancillary expenses not

covered above but incurred by the Portfolio Manager on behalf of the client would

be recovered from the client.

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SECTION III: COMMON FEATURES OF THE PORTFOLIO STRATEGIES {common features applicable to all strategies }

Minimum investment amount is Rs. 25 Lakhs.

Clients can at any time after opting for any Portfolio provide additional corpus in multiples of

one rupee to be added to the thePortfolio to be managed by the Portfolio Manager subject

to applicable fees and charges levied by the Portfolio.

Liability of a client shall not exceed client’s investment with the portfolio manager.

The Portfolio Manager shall charge audit fees, custodial/ AMC charges and other

charges/costs, attributable to the Portfolio Management Services on actual.

Any charges payable for outsourced professional services like accounting, taxation, auditing,

and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio

Manager, will be charged from the client on actual.

The Client may withdraw whole or part of the funds or securities from the portfolio account

by giving advance notice and the Portfolio Manager will endeavor to liquidate the securities

held in the strategy and return the funds or securities of the strategy, as the case may be, to

the client within reasonable time. In case the Portfolio Manager is for any reason unable to

sell the securities, the Client shall be obliged to accept the securities in the portfolio.

The Portfolio Manager will provide periodical reports as required under the regulations at

the communication address provided by the client at time of account opening. In case

Portfolio Manager is unable to provide the periodic reports in physical copy, the same shall

be provided to clients via email at the email id registered by clients at time of account

opening.

The portfolio account will be audited by the Independent Chartered Accountant every year

and copy of the Certificate issued by the Chartered Accountant will be given to the Client.

A. Non – Discretionary Portfolio Management Services

The following are illustrative, but not exhaustive, investment strategies which would be

available for client availing Non-Discretionary Portfolio Management Services.

1. Equity oriented strategies

These strategies would include equity focused strategies with the flexibility to invest

across Equity instruments available and across market capitalizations. The strategy

may invest in non convertible debentures with performance linked to an equity

instrument. Specific details of the portfolio would depend on the requirement of the

client.

2. Debt Focused strategies

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These strategies would include debt focused strategies with the flexibility to invest

across Debt instruments available including mutual funds, bonds and non convertible

debentures. The strategy may also invest in debentures providing capital protection

and offering debt like returns which may have an equity index, basket of stocks or

commodities as the underlying. Specific details of the portfolio would depend on the

requirement of the client.

3. Multi Asset strategies

These strategies would include investments across Equity, debt, gold and other asset

classes which may be available through exchange traded products or mutual funds.

Non convertible debentures (other than equity or debt) will also be included here.

Specific details of the portfolio would depend on the requirement of the client.

GLOSSARY OF TERMS USED IN THE RISK DISCLOSURE DOCUMENT AND ANNEXURE A

Discretionary portfolio: A portfolio where the funds of each client are managed individually and independently by the fund manager in accordance with the needs of the client.

Non discretionary Portfolio: A portfolio where the funds are managed by the fund manager in accordance with the directions of the client. Hurdle rate: The rate over which profit sharing / performance related fees are usually charged by portfolio managers. This is not a fixed number and would be specified in the agreement signed with the client. High Water Mark Principle: As defined by SEBI, High Water Mark shall be the highest value that the portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be the value on the date when performance fees are charged. If client is being charged performance fees, The portfolio manager shall charge performance based fee only on increase in portfolio value in excess of the previously achieved high water mark Asset allocation: Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame. Asset Classes: A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Asset classes include but are not limited to Equities, fixed-income and cash equivalents. Non convertible debentures: A debenture is a document that either creates a debt or acknowledges it, and it is a debt with or without collateral (without collateral debt will unsecured debt). Non-convertible debentures are regular debentures which cannot be converted into equity shares of the liable company. Investment vehicles: An investment vehicle is a product used by investors with the intention of having positive returns. Investment vehicles can be low-risk, such as certificates of deposit (CDs) or bonds, or can carry a greater degree of risk such as with stocks, options and futures. Alternate asset classes: Alternate asset class is a newer type of asset that was not traditionally considered to be a part of an investment portfolio. These include but would not be limited to Derivative instruments, Real Estate, Commodities (including Gold) etc. Structured Products: A market linked investment, is generally a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, commodities, debt issuance etc. Over the counter products: OTC or off-exchange products are those where trading is done directly between two parties, without any supervision of an exchange. These are used primarily where customized products are required. Macaulay’s Duration: Macaulay’s Duration measures the time required to recover the present value

KARVY CAPITAL LTD.

Page 1

ANNEXURE B - Details of all settled and pending disputes against Karvy Capital Limited/ its directors/associates as on August 2019

There have been no Enquiry/investigation/disciplinary action/adjudication/prosecution/ any other action initiated/taken or penalty imposed pending against Karvy Capital (KCAP), its associate/s or any of its directors/shareholders/partners by SEBI/exchange(s)/clearing corporation(s)/clearing house or any other regulatory authority except as mentioned below:

A. DETAILS REGARDING ACTIONS INITIATED/TAKEN/ PENDING AGAINST KARVY STOCK BROKING LIMITED

Sl.no. Details of the case SEBI/Exchange observation(s)

SEBI Action Corrective steps taken by Company towards observations

made by SEBI

Pending actions,

if any

(a) (b) (c) (d) (e)

1. SEBI vide order dated

26.05.2006,

directed, Karvy Stock

Broking Ltd. (KSBL),

not to act as a

depository

participant, passing

of final orders, except

for acting on the

instructions of

existing beneficial

owners ('BOs’). SEBI

also directed KSBL, as

a stock broker, not to

undertake any

proprietary trades in

- Subsequent to the enquiry

and hearing with the whole

time member, SEBI in its final

order dated June 22, 2007,

directed that KSBL as a DP is

prohibited from opening

new demat accounts till

December 31, 2007. SEBI

also passed an order that the

certificate of KSBL as a

broker be suspended for a

period of 3 months.

KSBL as a broker had filed an

appeal no 75 of 2007 on June

25, 2007. SAT had stayed the

(i) Subsequent to PAN being made

mandatory by regulators, the

Company has developed a

software application wherein the

PAN details provided by the

applicants are validated online

with the Income Tax website. Only

such applications where PAN

details are valid in all respects are

processed for opening BO

accounts. The Company has taken

permission from the depository for

such online validation.

(ii) The concurrent audit has been

strengthened by way of 100% audit

of account opening application

Nil

KARVY CAPITAL LTD.

Page 2



made by SEBI

Pending actions,

if any

securities, either off-

market or on market,

passing of final

orders.

order on July 4, 2007.

KSBL as a DP had filed an

appeal no 111 of 2007 on

July 17, 2007. SAT had stayed

the order on August 8, 2007.

SAT in its final order dated

June 30, 2008 set aside the

impugned order dated June

22, 2007, remanding the

matter back to SEBI with a

direction to pass separate

orders against KSBL – as a

Broker as well as a DP with

regard to the violations

emanating from the enquiry

officer’s report.

The Whole Time Member

had granted a personal

hearing as per the order of

Hon’ble SAT, wherein

submissions to SEBI have

been made by the company.

forms by external agency with

regard to compliance and

fulfillment of the documents

required as per KYC norms.

Extensive training sessions to all

the DP front office employees has

been conducted educating them

on the scrutiny required to be

done while accepting account

opening application form

(iii) Front office personnel of some

of the branches have also been

nominated for NSDL / CDSL training

for the purpose of compliance of

NCFM / NCDO certification

requirement. Fortnightly review of

the Demat accounts opened with

the same address is undertaken by

a senior resource

(iv) No applications are accepted

and accounts are opened without

an “in-person” verification and re-

verification of original documents,

KARVY CAPITAL LTD.

Page 3



made by SEBI

Pending actions,

if any

SEBI issued final order in

respect of KSBL – Depository

Participant on 28th January,

2014 and has in paragraph

20 such order clearly

concluded that KSBL –

Depository participant has

already undergone

prohibition from taking up

any new assignment for a

period of 18 months and 26

days and hence there need

not be any further penalty on

KSBL – Depository

Participant.

SEBI issued final order in

respect of KCPL – RTI on 3rd

February, 2014 and in such

order stated that since KCPL

has already undergone

prohibition from acting as

RTI for approximately 10

months no further penalty is

warranted.

required as a part of KYC, by an

employee of the Company.

Reporting of off-market

transactions submitted for

execution to the DP and

Compliance Head on a fortnightly

basis.

(v) The above corrective actions

taken by the Company have been

intimated to SEBI in our various

correspondences during the

process. An inspection has also

been conducted by SEBI during

October 2009 to review if the

procedures and processes adopted

are in order. There has been no

adverse observation by the

inspection team.

KARVY CAPITAL LTD.

Page 4



made by SEBI

Pending actions,

if any

SEBI had passed order dated

14 March 2014 prohibiting

KSBL- Broker from taking up

any new assignment or

contract or launch a new

scheme (i.e., not to take new

clients/customers) for a

period of 6 months in respect

of its business as a stock

broker.

KSBL had preferred an appeal

before Hon’ble Securities

Appellate Tribunal (SAT)

against the order. Hon’ble

SAT, vide order dated 16

April 2014, in the matter of

Appeal No 66/2014 granted

a stay on SEBI’s order dated

14 March 2014. Further, SAT

vide order dated 21 January

2015 has set aside the SEBI’s

order dated 14 March 2014

and directed SEBI to pass

appropriate order after

KARVY CAPITAL LTD.

Page 5



made by SEBI

Pending actions,

if any

hearing by the Whole Time

Member., Subsequently

hearing was held before the

WTM SEBI on 7th April, 2015.

SEBI issued final order dated

15th June, 2015 disposing off

the proceedings against KSBL

by directing it to not

undertake only new primary

market assignment including

acting as syndicate member

or providing syndication

services (procuring IPO

applications and bidding in

IPOs), directly or indirectly ,

in IPOs for a period of one

year. SEBI has also clarified

that this direction shall not

hinder the activities for

which KSBL was already

engaged for undertaking

primary market activities

before the date of the order.

W.e.f June 16, 2016 KSBL has

commenced to undertake

KARVY CAPITAL LTD.

Page 6



made by SEBI

Pending actions,

if any

new primary market

assignments including acting

as a syndicate member or

providing syndication

services (procuring IPO

applications and bidding in

IPO’s).

2 In February 2007, SEBI had initiated proceedings under section 24 of the SEBI act, against the three directors of the company, viz. Mr. C. Parthasarathy, Mr. M. Yugandhar, Mr. M. S. Ramakrishna, and Karvy Stock Broking Limited which are pending before the additional chief metropolitan magistrate, Mumbai.

-- -- -- Pending

KARVY CAPITAL LTD.

Page 7



made by SEBI

Pending actions,

if any

Arising from the above said investigation, SEBI has filed two separate complaints under section 190 of criminal procedure code r/w 68A & 621 of Companies Act-1956 against KSBL and three of its Directors, namely Mr C.Parthasarathy, Mr M.Yugandhar and Mr Ramakrishna before the Special Judge at Mumbai vide Case Nos: 66/2016 and 74/2016 before the SPecial Judge and the said complaints are pending before the said court.

KARVY CAPITAL LTD.

Page 8



made by SEBI

Pending actions,

if any

3 Two cases - BS & FC (RC 3(E)/ 2006 and 4(E)/ 2006) under Sections 120 B r/w 420, 467, 468 & 471 of IPC, under Section 68(A) of the Companies Act 1956 and under Section 13(2) r/w 13 (1) (d) of the PC Act, 1988 were registered by CBI vide charge sheet dated September 29,2007 and October 30, 2007 in the matter of Yes Bank and IDFC Ltd. after arraying Karvy Stock Broking Limited, Karvy Computershare Pvt. Ltd and Karvy Consultants Ltd and other officers of these entities including Mr. C. Parthasarathy, as co-accused. The matter

-- -- -- Pending

KARVY CAPITAL LTD.

Page 9



made by SEBI

Pending actions,

if any

is pending before the Hon’ble Special judge.

4 The Enforcement

Directorate, after

relying on the

investigations of CBI

and that of SEBI and

on the premise that

Section 467 of IPC

framed against the

co-accused

represents a

predicate offence

which is categorized

as a scheduled

offence under

Section 2(u) of the

Prevention of Money

Laundering Act-2002

(PMLA), has filed a

prosecution

-- -- -- Pending

KARVY CAPITAL LTD.

Page 10



made by SEBI

Pending actions,

if any

complaint in April

2013 bearing

no.04/2013, in terms

of the provisions of

PMLA. The matter is

pending before The

Appellate Authority

PMLA New Delhi

5. Inspection

of Portfolio

Management services

business of Karvy

Stock Broking Limited

(KSBL) conducted in

2013-14.

Based on the findings of

inspection, the company

has received a show

cause notice as to why

adjudication

proceedings should not

be initiated against the

Company.

SEBI had vide show cause

notice dated November 24,

2014 initiated adjudication

proceedings against Karvy

Stock Broking Ltd (KSBL)

(Portfolio Manager). This

adjudication was initiated

subsequent to the inspection

of KSBL as a portfolio

manager in February 2014.

KSBL has responded to the

notice vide its letter dated

January 14th, 2015. KSBL has

also filed for settlement

(consent) in the matter vide

1. The PMS Operations team

actively ensures in

coordination with the

operations team at Hyderabad

that KYC details of clients who

opt for PMS are uploaded to

KRA

2. The PMS Operations team

routinely scrutinizes account

opening forms and any

difference in ink if observed

between signatures of client

and text written by client is

immediately escalated and the

NIL

KARVY CAPITAL LTD.

Page 11



made by SEBI

Pending actions,

if any

its letter dated January 23,

2015. Hearing in the

adjudication matter was held

before the AO on June 29,

2015 wherein authorized

representatives of KSBL

appeared before the AO and

made submissions. Hearing

in the consent proceedings

was held on 5th January,

2017. KSBL has remitted an

amount of Rs 6.8 lakh

towards settlement of the

matter and the proceedings

have been closed.

form rejected for clarification

and confirmation by client

3. All teams are being repeatedly

sensitized to fact that the word

“scheme” is not to be used

with respect to PMS

documents

4. The PMS Product team is in the

process of introducing a risk

profiling tool.

KARVY CAPITAL LTD.

Page 12



made by SEBI

Pending actions,

if any

6.

Inspection of Karvy


(KSBL) as a

Depository

Participant of NSDL

and CDSL conducted

for the period from

April 2010 to March

2013.

(i)SEBI advised to take due

care while billing the clients

and avoid discrepancies in

billing.

(ii) In this regard SEBI advised

to ensure the strict

Compliance of the provisions

of the SEBI Act, 1956,

Securities Contracts

(Regulation) Rules, 1957 and

the rules, Regulations, Bye-

laws, directives/circulars

issued by the depositories

from time to time.

(i)With reference to the

observations raised by the

inspection officials pertaining to

discrepancies in billing we submit

that necessary corrective action

has been taken to prevent

recurrence of such observations.

(ii)We ensure to follow strict

compliance of the provisions of

SEBI Act, 1956, Securities

Contracts (Regulation) Rules, 1957

and the rules, Regulations, Bye-

laws, directives/circulars issued by

the depositories from time to

time.

Nil

KARVY CAPITAL LTD.

Page 13



made by SEBI

Pending actions,

if any

7. Inspection of Karvy


(KSBL) as a Broker

conducted in March

2013 by SEBI.

Instances of complaints

involving trade disputes

and instances involving

non-settlement of

funds/securities on

quarterly basis

observed.

Inadequacies in

maintenance of records

pertaining to delivery /

dispatch of contract

notes

Final observations for the

inspection have been

received. Administrative

warning has been issued by

SEBI.

Provided information on measures

such as centralized call

confirmation for loss making

customers, confirmation call for

dormant customers upon their

trade, awareness and counseling to

dealers etc

The detailed dispatch records

through Indian Post with proper

bar code for sample dates have

been provided.

Nil

8 Inspection of Karvy

Stock Broking Ltd

(KSBL) as a Broker

conducted in March

2015 by SEBI

KSBL not adhered to the

guidelines prescribed in

SEBI Master Circular

dated December 31,

2010 with respect to the

categorization of clients

based on risk.

SEBI has advised to take

necessary corrective action

to ensure non-recurrence of

the observations

Provided information on measures

such as centralized call

confirmation for loss making

customers, confirmation call for

dormant customers upon their

trade, awareness and counseling to

dealers etc

Few NRI clients were not classified

as high risk and income ranges

NIL

KARVY CAPITAL LTD.

Page 14



made by SEBI

Pending actions,

if any

Instances of investor

complaints of

unauthorized trading by

stock broker were

observed and some of

such complaints had

been redressed with

decisions of stock broker

to repay/ restore the

disputed claims on favor

of clients, by IGRP

were inadvertently captured lesser

than actual income range for few

clients

The errors have been since

rectified and necessary steps taken

to prevent non-recurrence of the

observations.

9 Writ petition filed by

KSBL w.r.t release of

arbitration award

amounts to investors

in the absence of

stay orders. KSBL had

challenged the vires

of Clause 9.3 (c) of

SEBI Circular dated

August 11, 2010

SEBI and NSE have made

submissions as

respondents in this

matter.

The writ petition is

pending disposal before

the Bombay High Court

NA NA NIL

KARVY CAPITAL LTD.

Page 15



made by SEBI

Pending actions,

if any

10 Inspection of KSBL

carried out by NSE in

October 2016

Corporate Guarantees

were extended by KSBL

to subsidiaries which

were not engaged in the

business of securities

Loans given to

subsidiaries not reduced

from networth

Penalty of Rs 25 lakh levied More than 90% of the corporate

guarantees extended to

subsidiaries has been closed.

Loans given to subsidiaries have

been recovered and going forward

would be reduced from the net

worth

NIL

B. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Data Management Services Limited., Group Company.

Sl.no.

Details of the case SEBI Observations SEBI Action Corrective steps taken by Company towards observations made by SEBI

Pending actions, if any

(a) (b) (c) (d) (e)

KARVY CAPITAL LTD.

Page 16

1 SEBI had conducted

inspection of KDMSL

KRA activity in

February 2016

Deficiencies in complaint

handling mechanism

Deficiencies in scanned

documents

System audit done

calendar year wise

instead of financial year

Warning letter dated January

23, 2017 issued by SEBI for

the deficiencies observed

Complaints handling mechanism.

Help desk team has been set up to

attend complaints from investors

and intermediaries. Separate email

ID has been created to handle

grievances.

Deficiencies in scanned

documents.

KYC documents are scanned and

uploaded by intermediaries

against KYC data uploaded to

KARVY KRA for registration.

Incomplete documents are not

rejected while processing and

discrepancies in documents are

brought to the notice of the

concerned intermediary for

rectification.

System audit was done calendar

year wise instead of financial year

wise.

Periodicity of system audit has

been changed from calendar year

to financial year.

NIL

KARVY CAPITAL LTD.

Page 17

C. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Comtrade Limited., Group Company.

Sl.no.

Details of the case MCX/NCDEX/SEBI Audit observation(s)

MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI


(a) (b) (c) (d) (e)

KARVY CAPITAL LTD.

Page 18

Sl.no.




(a) (b) (c) (d) (e)

1 On the basis of the observations reported in the PwC Audit report, the FMC had directed that a special forensic audit be conducted for the trades done by Indian Bullion Markets Association (IBMA) through the captioned Member. Accordingly, the special forensic audit was conducted by the Exchange through M/s. Borkar & Muzumdar, Chartered Accountants. Show cause notice dated August 28, 2015 enclosing therewith the audit report was issued by MCX.

Wash Trades/Cross Deals

in illiquid contracts

On the basis of the reporting

in the forensic audit report

and the personal hearing

given to the Member before

the Disciplinary Action

Committee Meeting held on

September 28, 2015, the

Committee decided that a

total penalty of Rs. 21,73,539

+ Advice (plus applicable

service tax) be levied upon

the Member. Accordingly,

the same was levied by the

Exchange and recovered

1. Blocking of contracts which

are illiquid in nature.

2. Creating awareness

amongst clients , branch

officials and authorised

persons/sub-brokers about

illiquid contracts and cross

deals.

3. Based on communication

received from the

Exchanges w.r.t dealings of

particular client, adequate

explanation is sought from

the clients and the trading

of the client in that

contract is blocked if felt

necessary.

NIL

KARVY CAPITAL LTD.

Page 19

Sl.no.




(a) (b) (c) (d) (e)

2 SEBI had inspected KCTL in the month of February 2017

Bank balances in client

bank account not

commensurate with the

credit balances as per

back office

MCX vide their letter dated

21st September, 2018 levied

a penalty of Rs 15.85 lakh on

KCTL

Necessary corrective action has

been taken to ensure that the

balances are in sync.

NIL

KARVY CAPITAL LTD.

Page 20

Sl.no.




(a) (b) (c) (d) (e)

3 For transactions by certain clients in the contracts of Guar seed and Guar Gum during the period October 2011 to March 2012 NCDEX has issued show cause notice to KCTL in August 2018

The transactions carried

out by the clients and

their related entities

through other brokers

were violative of open

interest limits and

market wide position

limits

NCDEX has proposed to levy

a monetary penalty.

The observations in the show

cause notice have been challenged

by KCTL vide their reply dated 5th

September, 2018 and have asked

for a personal hearing.

PENDING

KARVY CAPITAL LTD.

Page 21

Sl.no.




(a) (b) (c) (d) (e)

4 On 27-09-2018, KCTL along with other 300 NSEL members had received a Show Cause notice (SCN) for the paired contracts traded on NSEL platform.

SEBI had alleged that the

members had facilitated

its clients in entering into

paired contracts which is

a violation of the certain

guidelines which

impacted the fit and

proper criteria of KCTL as

a Broker. KCTL has been

granted time till 9th

November, 2018 for

filing its reply

SEBI have called for

explanation of KCTL

Vide letter dated November 6,

2018 KCTL has sent a detailed

reply refuting the allegations in the

show cause notice. Matter is

pending

Pending

KARVY CAPITAL LTD.

Page 22

D. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Financial Services Limited., Group Company.

Sl.no. Details of the case

SEBI observation(s) SEBI Action Corrective steps taken by Company towards observations made by SEBI


(a) (b) (c) (d) (e)

1.

Proceedings

under section

11B and

adjudication

proceedings

have been

initiated by SEBI

against Karvy

Financial Services

Ltd (KFSL) in the

matter of M/s

Regaliaa Realty

Ltd

In February 2012 KFSL

through invocation of

pledge, got 55% of the

shares of M/s Regaliaa

Realty Ltd transferred in

its name. SEBI observed

that KFSL had not sought

exemption prior to

invoking the pledge.

Adjudication proceedings an

d proceedings under section

11B initiated. Hearing before

Whole Time Member (WTM)

held. WTM has passed order

dated 27th October, 2016

directing KFSL to make open

offer. KFSL has preferred an

appeal before the Securities

Appellate Tribunal.Vide

order dated 26th April, 218

SAT has dismissed the appeal

filed by KFSL. KFSL is in the

process of complying with

the order dated 27th

October, 2016 passed by the

SEBI WTM.

KFSL would seek prior exemption

going forward.

NIL

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