EMKAY INVESTMENT MANAGERS LIMITED
DISCLOSURE DOCUMENT - PORTFOLIO MANAGEMENT SERVICES
(i) The Document has been filed with the Board along with the certificate in the prescribed format in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993.
(ii) The purpose of the Document is to provide essential information about the portfolio services in a manner to assist and enable the investors in making informed decision for engaging a portfolio manager.
(iii) The necessary information about the portfolio manager required by an investor before investing, and the investor may also be advised to retain the document for future reference.
(v) The detail of Principal Officer is given below: Name : Mr. Sachin Shah
Phone No. : 66121207
EMKAY INVESTMENT MANAGERS LIMITED
DISCLOSURE DOCUMENT - PORTFOLIO MANAGEMENT SERVICES
INDEX OF CONTENTS
Sr.
No. PARTICULARS PAGE NO.
1. Disclaimer Clause 1
2. Definitions 1-2
3. History, Present Business and Background of the Portfolio Manager. 2-3 4. Promoters and Directors of the Portfolio Manager and their background in brief. 3-4
5. Group Companies / Firms 4
6. Details of Services offered by the Portfolio Manager. 5-11
7. Penalties, Pending Litigations or Proceedings etc. 11
8. Risk Factors 12-14
9. Clients Representation 15
10. Disclosures in respect of transactions with related parties 15
11. Financial Performance of the Portfolio Manager 15-16
12. Performance of Products of the Portfolio Manager 16
13. Nature of Expenses for Clients 16-18
14. Tax Implications for Clients 18-19
15. Accounting Policy 19-20
16. Investor Services 20-21
17. Others 21
EMKAY INVESTMENT MANAGERS LIMITED
DISCLOSURE DOCUMENT - PORTFOLIO MANAGEMENT SERVICES 1. Disclaimer Clause
This Document has been prepared in accordance with the Securities and Exchange Board of India (Portfolio Managers) Regulations 1993. It has been filed with the Securities and Exchange Board of India (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.
2. Definitions
In this Disclosure Document, unless the context otherwise requires:
“ACT” means the Securities and Exchange Board of India, Act, 1992
(15 of 1992)
“Board” means the Securities and Exchange Board of India.
“Client” or “Investor” means any person who registers with the
Portfolio Manager for availing the services of Portfolio Management.
“Discretionary Portfolio Investment” means Portfolio
Investment Management Service where the Portfolio Manager exercises discretion as to the investment or the management of the portfolio of securities or the funds of the clients, as the case may be.
“Depository Account” means any account of the Client or for the
Client with an entity registered as a Depository Participant as per the relevant regulations.
“Financial year” means the year starting from 1st April and ending on 31st March the following year.
“Funds” means the moneys placed by the Client with the Portfolio
Manager and any accretions thereto.
“Funds Managed” means the market value of the Portfolio of the
Client as on a particular date.
“Initial Corpus” means the value of the funds and/or the market
time of registering as a client with the Portfolio Manager and subsequently accepted by the Portfolio Manager.
“Non-Discretionary Portfolio Investment” means Portfolio
Investment Management Services, which is not Discretionary.
“Portfolio” means the total holding of all investments, securities
and funds belonging to the client.
“Portfolio Manager” means Emkay Investment Managers Limited,
a company incorporated under the Companies Act, 1956 and having its registered office at 4D, 4th Floor, Hamam House, Ambalal Doshi Marg, Fort, Mumbai – 400 023.
“Regulations” means the Securities and Exchange Board of India
(Portfolio Managers) Regulations, 1993.
“Rules” means the Securities and Exchange Board of India
(Portfolio Managers) Rules, 1993.
"Securities" means securities as defined under the Securities
Contracts (Regulation) Act, 1956.
“Securities Lending” means the securities lending as per the
Securities Lending Scheme, 1997 specified by the Board.
“The Company” means Emkay Investment Managers Ltd, a
company incorporated under the Companies Act 1956, and having its registered office at 4th Floor, Hamam House, Ambalal Doshi Marg, Fort, Mumbai - 400023.
Words and Expressions used in the Disclosure Document which are not expressly defined shall be interpreted according to their general meaning and usage. The definitions are not exhaustive. They have been included only for the purpose of clarity and shall in addition be interpreted according to their general meaning and usage and shall also carry meanings assigned to them in regulations governing Portfolio Management Services.
3. History, Present Business and Background of the Portfolio Manager.
Emkay Investment Managers Ltd is a wholly owned subsidiary of Emkay Global Financial Services Ltd. Emkay Global Financial Services Limited (Company) has been providing Portfolio Management Services (PMS) to its Clients since year 2003. However, to cater the needs of existing/potential PMS Clients in more effective
and focused manner it has been decided to transfer the Portfolio Management Services Division from Emkay Global Financial Services Limited to its newly formed Wholly-Owned Subsidiary Company viz. Emkay Investment Managers Limited which was incorporated on 8th June, 2010. Through this exercise, Emkay Global Financial Services Ltd shall be able to create a separate identity and differentiate Portfolio Management Services from its other activities. This will also help the Company to conduct its Portfolio Management Services business in a more dedicated manner and in turn create value for its Clients.
4. Promoters and Directors of the Portfolio Manager and their background in brief.
4.1 Promoters.
Emkay Global Financial Services Ltd is the promoter of Emkay Investment Managers Ltd holding 100% of its equity shares either directly or through its nominees.
4.2 Particulars of Directors.
Mr. Krishna Kumar Karwa (Director)
Mr. Krishna Kumar Karwa, a rank holder Member of the Institute
of Chartered Accountants of india, is the Director of the Company. Mr. Krishna Kumar Karwa has rich and varied experience of 24 years in all aspects of the Equity Capital Markets. He is the Promoter, Managing Director and CFO of Emkay Global Financial Services Ltd. He is also the director of West Coast Paper Mills Limited, Emkay Fincap Ltd, Emkay Commotrade Ltd, Emkay Insurance Brokers Ltd, Emkay Corporate Services Private Ltd and Emkay Charitable Foundation (Section 25 Company).
Mr. Prakash Kacholia (Director)
Mr. Prakash Kacholia, a Member of the Institute of Chartered
Accountants of India, is the Director of the Company. Mr. Kacholia has a rich experience of 23 years in the capital markets with a focus on the derivative segment. He is the Promoter & Managing Director of Emkay Global Financial Services Ltd. He is also the Director of Emkay Fincap Ltd, Emkay Commotrade Ltd, Emkay Insurance Brokers Ltd, Emkay Corporate Services Pvt. Ltd.,BOI Shareholding Limited and Emkay Charitable Foundation and member of the Index Committee of Bombay Stock Exchange Ltd.
Mr. Rajesh Sharma (Director)
Mr. Rajesh Sharma, a qualified Chartered Accountant is the
Director of the Company. Mr. Sharma has rich experience of 20 years in the capital markets. He is currently on the Board of Emkay Commotrade Ltd. and Emkay Fincap Ltd.
Mr. G.P. Gupta (Non-Executive Chairman, Independent)
Mr. Gian Prakash Gupta, has over 38 years of experience in
Development Banking. He was formerly the Chairman and Managing Director of Industrial Development Bank of India and Chairman of Unit Trust of India. He was associated as Director with various prominent Companies like Bharat Heavy Electricals Ltd., National Aluminum Co. Ltd., Hindustan Aeronautics Ltd., Power Finance Corporation Ltd., PTC India Ltd. and NTPC Ltd. etc. Currently he serves on the Board of various listed companies, including Idea Cellular Ltd., Aditya Birla Nuvo Ltd., Birla Sun Life Insurance Co. Ltd., Swaraj Engines Ltd, Dighi Port Ltd. etc.
5. Group Companies / Firms
The following are Group Companies / Firms of the company reckoned on the basis of their turnover as per the Latest Audited Financial Statements as on 31.03.2011.(Name of the entity, main business area, turnover in Rs Lakhs)
Emkay Global Financial Services Ltd
(Holding Company)
Stock Broking/ Merchant & Investment Banking/ Depository Participant Services/ Mutual Fund Distribution
11826.43 (2010-11) Emkay Corporate Services
Pvt. Ltd. (Group Company)
Shares/Securities Trading/Investments and Inter Corporate Deposits
300.18 (2010-11) Cambridge Securities
(a partnership firm)
Shares/Securities Trading/Investments Commodities/Bullion Trading and Commission Agents
9.06 (2010-11) Synthetics Fibers Trading Co.
(a partnership firm) Shares/Securities Trading/Investments and Commodities/Bullion Trading 225.52 (2010-11) Emkay Commotrade Ltd. (Fellow Subsidiary) Commodity Broking 935.29 (2010-11) Emkay Fincap Ltd. (Fellow Subsidiary)
Non Banking Financial 364.33 (2010-11) Emkay Insurance Brokers Ltd.
(Fellow Subsidiary)
Direct Insurance Broking 112.27 (2010-11)
Emkay Charitable Foundation Charitable Activities ---
6. Details of Services offered by the Portfolio Manager.
6.1 The Portfolio Manager broadly offers services under the
following categories.
♦ Discretionary Services
In these services, the Clients expressly and with full knowledge of the implications conferred absolute and unfettered discretion on the Portfolio Manager in relation to all decisions concerning the Discretionary Portfolio Management Services and confirms that Portfolio Manager decisions (taken in good faith) which shall include decisions taken by any person appointed by the Portfolio Manager in deployment of the clients account is absolute and final and cannot be called in question or be open to review except on the ground of malafide, fraud, conflict or interest or gross negligence. Quarterly Statements in respect of Client’s Portfolio are being sent to the respective Clients. 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.
♦ Non-Discretionary Services
Under these services, the Client decides their own investments, with the Portfolio Manager only facilitating execution of transactions. The Portfolio Manager’s role is limited to providing research, investment advice, guidance and facilitate trade execution at the Client’s request through a Stock Broker. The Portfolio Manager shall execute orders as per the mandate received from Clients. Quarterly statements in respect Client’s Portfolio is sent to the respective Clients.
♦ Advisory Services
Under these services, the Portfolio Manager provides only investment advice. Entry / exist timing, execution and settlement is solely the client’s responsibility.
6.2 Currently, under the Discretionary Services following
products are offered to investors:
6.2.1
Emkay Capital Builder Portfolio:
This product is essentially for seasoned, large and long term investors, who want to build capital over a longer period of time (Two to Five years or more). Though medium term ideas are also considered, the emphasis would be to grow capital over a longer period of time.
This long-term outlook of investors gives us flexibility to find out tomorrows winners at the early stage. The investment can be made across all capitalizations and we shall not have any bias for the size of the company.
Under these products investment shall be made in equities and equity related instruments. These products are essentially designed for medium to large investors. A balanced and well-diversified equity portfolio shall be created based on the research inputs (i.e. technical as well as fundamental) by the team of analysts and strategists with the Portfolio Manager.
6.2.2
Emkay Classic Portfolio:
This particular product is for the investors who are looking at returns better than broader indices and at the same time they are not absolute long-term investors and have lower risk profile. This scheme is purely for Non-Resident clients only.
The objective here would be to perform better than broader indices over medium term and therefore, portfolio may book profits at regular intervals.
6.2.3
Emkay Prodigy Portfolio:
Under these products investment shall be made in equity related instruments and mutual fund units. These products are designed for smaller investors who have a medium term view to their
investments. A balanced and well-diversified equity /mutual fund portfolio shall be created based on the research inputs (i.e. technical as well as fundamental) by the team of analysts and strategists with the Portfolio Manager.
In this product the funds will be invested in under-researched and undervalued growth stocks which are likely to enter a phase of accelerated growth and/or at an infection point in their life cycle.
This product will focus on investing in stocks of companies that are driven by their internal strengths, secular economic trends or structural changes.
This product will look for suitable entry and exit points based on the valuations and momentum. This product is best suited for medium risk taking investors who are willing to invest with a medium and long term perspective.
6.2.4
Emkay Empower MultiManager Portfolio:
Empower MultiManager Portfolio is aimed at structuring a Customized Portfolio of Equity and Debt Mutual Fund based on individual mandate on risk and return equilibrium.
Empower MultiManager Portfolio is dedicated to investors having a Initial Corpus of Rs. 5 Lakhs and above with an investment objective to achieve a reasonable appreciation over medium to long term horizon (1 - 3 yrs).
Under these products investment shall be made in mutual fund units. A balanced and well-diversified mutual fund portfolio shall be created based on the research inputs by the team of analysts and strategists with the Portfolio Manager.
6.2.5
Emkay Debt PMS:
This investment option will essentially cater to the class of investors who would like to diversify their portfolios based on the style of investing. While capturing the upside in the equity markets, this product would work on a pre defined principal protection of up to 100%. Portfolio manager would endeavor to generate on a consistent basis a superior, risk adjusted return and capital appreciation. The investment made in different Debt
products may have a lock in period as depending specific Debt product. The minimum investible corpus in this scheme is Rs. 25 Lakhs.
The investments will be done with an objective to achieve optimum diversification across various companies and sectors. The Portfolio Manager may invest in future and options to generate better returns and to balance portfolio.
The un-invested amounts in all the portfolios may be deployed in Liquid Fund Schemes and or Debt-Oriented Schemes of Mutual Funds, Gilt Edged Securities, Bank Deposits and such other short-term avenues for investment. The Portfolio Manager may, with the consent of the Client, lend the securities through an Approved Intermediary for interest.
The Portfolio Manager generally does not invest in the Stocks, Mutual Funds, Debt, Deposits and other financial instruments of Group Companies. However, if invested, such investments would not exceed 10% of client’s portfolio and within the overall framework of regulations, as specified.
6.2.6
Emkay Platinum Portfolio:
The objective of Emkay Platinum is to generate capital appreciation through a research-backed equity portfolio. It is aimed at investing in blue-chip & fundamentally strong companies with high growth potential. The portfolio manager intends to invest at a time when prices of identified stocks offer reasonable value (considering the earning growth prospects) and potential capital appreciation for long term investors. Portfolio manager intends to have a well-diversified allocation with twelve-fifteen stocks in each of the portfolios, with a maximum limit of twenty-five stocks per portfolio. Investors in this scheme should have an investment horizon of two-three years.
The benchmark index for Emkay Platinum is S&P CNX Nifty.
S&P CNX Nifty is a well diversified fifty stock index accounting for twenty-one sectors of the economy. S&P CNX Nifty is computed using market capitalization weighted method. The base period selected for S&P CNX Nifty index is the close of prices on November 3, 1995. The base value of the index has been set at 1000 and a base capital of Rs.2.06 trillion. Nifty stocks represent about 59.32% of the total market capitalization as on June 30,
2008. The traded value for the last six months of all Nifty stocks is approximately 48.15% of the traded value of all stocks on the NSE.
6.2.7
Emkay Pearls Portfolio:
The objective of Emkay Pearls is to generate capital appreciation through a research-backed equity portfolio. It is aimed at investing in Mid-Cap & Small-Cap fundamentally strong companies with high growth potential. The portfolio manager intends to invest at a time when prices of identified stocks offer reasonable value (considering the earning growth prospects) and potential capital appreciation for long term investors. Portfolio manager intends to have a well-diversified portfolio with an allocation of fifteen to twenty-five stocks in each of the portfolios, with a maximum limit of thirty-five stocks per portfolio. Investors in this portfolio should have an investment horizon of two-three years. The benchmark index for Emkay Pearls is BSE Mid-Cap Index.
BSE Mid-Cap Index is a well diversified more than two-hundred stock index, comprising of scrips that gives market capitalization coverage between 80% & 95% from the list categorised (by BSE) under large-cap, mid-cap and small-cap segment based on 80%-15%-5% market-capitalization coverage respectively.
BSE Mid-Cap Index is computed using Free-float market capitalization method. The base year for BSE Mid-Cap index is 2002-2003 and the launch date was April 11, 2005. The base value of the index has been set at 1000.
6.2.8
Emkay Crystal Portfolio:
The objective of Emkay Crystal is to generate capital appreciation through a research-backed equity portfolio. It is aimed at investing in Large-Cap, Mid-Cap & Small-Cap fundamentally strong companies with high growth potential. The portfolio manager intends to invest at a time when prices of identified stocks offer reasonable value (considering the earning growth prospects) and potential capital appreciation for long term investors. Portfolio manager intends to have a well-diversified
portfolio with an allocation of fifteen to twenty-five stocks in each of the portfolios, with a maximum limit of thirty-five stocks per portfolio. Investors in this portfolio should have an investment horizon of two-three years.
The benchmark index for Emkay Crystal is BSE 500 Index
BSE 500 Index is a well diversified five-hundred stock index, comprising of scripts that gives market capitalization coverage of nearly 93% from the list categorised (by BSE) and covering all 20 major industries of the economy.
BSE 500 Index is computed using Free-float market capitalization method (effective August 16, 2005). The base year for BSE 500 index is 1999 and the launch date was August 09, 1999. The base value of the index has been set at 1000.
6.2.9
Emkay PURE I
The objective of Emkay PURE I is to generate capital appreciation through a research-backed equity portfolio. It is aimed at investing from Top 125-150 (ranked by market-cap) blue-chip & fundamentally strong companies with high growth potential. The portfolio manager intends to invest at a time when prices of identified stocks offer reasonable value (considering the earnings growth prospects) and potential capital appreciation for long term investors. Portfolio manager intends to have a well-diversified allocation with twelve-fifteen stocks in each of the portfolios, with a maximum limit of twenty-five stocks per portfolio. Investors in this portfolio should have an investment horizon of three years and more.
The benchmark index for Emkay PURE I is S&P CNX Nifty.
S&P CNX Nifty is a well diversified fifty stock index accounting for twenty-one sectors of the economy. S&P CNX Nifty is computed using market capitalization weighted method. The base period selected for S&P CNX Nifty index is the close of prices on November 3, 1995. The base value of the index has been set at 1000 and a base capital of Rs.2.06 trillion. Nifty stocks represent about 59.32% of the total market capitalization as on June 30, 2008. The traded value for the last six months of all Nifty stocks is approximately 48.15% of the traded value of all stocks on the NSE.
Emkay PURE II
The objective of Emkay PURE II is to generate capital appreciation through a research-backed equity portfolio. It is aimed at investing in Large-Cap, Mid-Cap & Small-Cap fundamentally strong companies with high growth potential. The portfolio manager intends to invest at a time when prices of identified stocks offer reasonable value (considering the earnings growth prospects) and potential capital appreciation for long term investors. Portfolio manager intends to have a well-diversified portfolio with an allocation of twenty-five to forty stocks in each of the portfolios, with a maximum limit of sixty stocks per portfolio. Investors in this portfolio should have an investment horizon of three years and more
The benchmark index for Emkay PURE II is S&P CNX 500.
The S&P CNX 500 represents about 95.78% of the free float market capitalization and about 95.37% of the total turnover on the NSE as on December 30, 2011. The S&P CNX 500 companies are disaggregated into 71 industry indices viz. S&P CNX Industry Indices. Industry weightages in the index reflect the industry weightages in the market. For e.g. if the banking sector has a 5% weightage in the universe of stocks traded on NSE, banking stocks in the index would also have an approx. representation of 5% in the index
7. Penalties, Pending Litigation’s or Proceedings etc.
Particulars Remarks
All cases of penalties imposed by the Board or the directions issued by the Board under the Act or Rules or Regulations made there under
None
The nature of penalty / direction None
Penalties imposed for any economic offence and/or
for violation of any securities law None
Any pending material litigation/legal proceedings against the portfolio manager/key personnel with separate disclosure regarding pending criminal cases, if any.
None
Any deficiency in the systems and operations of the portfolio manager observed by the Board or any regulatory agency.
Any enquiry/adjudication proceedings initiated by the Board against the portfolio manager or its directors, principal officer or employee or any person directly or indirectly connected with the portfolio manager or its directors, principal officer or employee, under the Act or Rules or Regulations made there under.
None
8. Risk Factors
8.1 Investments in securities are subject to market risks, which include price fluctuation risks. There is no assurance or guarantee that the objectives of any of the products will be achieved. The investments may not be suited to all categories of investors.
8.2 The past performance of the Portfolio Manager in any product is not indicative of the future performance in the same product or in any other products either existing or that may be offered. There is no assurance that past performances indicated in earlier products will be repeated. Investors are not being offered any guarantee or indicative returns through these products.
8.3 The names of the products do not in any manner indicate their prospects or returns. The performance in the equity products may be adversely affected by the performance of individual companies, changes in the market place, industry specific and macro economic factors.
8.4 The debt investments and other fixed income securities may be subject to interest rate risk, liquidity risk, credit risk and re-investment risk. Liquidity in these re-investments may be affected by trading volumes, settlement periods and transfer procedures.
8.5 Technology stocks and some of the investments in niche sector run the risk of volatility, high valuation, obsolescence and low liquidity. 8.6 The products may use derivatives instruments like index futures,
stock futures and options contracts, warrants, convertible securities, swap agreements or any other derivative instruments for the purpose of hedging and portfolio balancing, as permitted under the regulations and guidelines. The use of a derivative requires understanding not only of the underlying instrument but of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movement correctly.
8.7 Products using derivative / futures and options products are affected by risks different from those associated with stocks and bonds. Such products are highly leveraged instruments and their use requires a high degree of skill, diligence and expertise. Small price movements in the underlying security may have a large impact on the value of derivatives and futures and options. Some of the risks relate to wrong pricing or the improper valuation of derivatives and futures and options and the inability to correlate the positions with underlying assets, rates and indices.
8.8 In the case of stock lending, risks relate to the defaults from counter parties 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 various products offered by it. 8.9 Investments made by the Portfolio Manager are subject to risks arising from the investment objective, investment strategy and asset allocation.
8.10 Non-Diversification Risk: This risk arises when the Portfolio is not sufficiently diversified by investing in a wide variety of instruments. As mentioned above, the Portfolio Manager will attempt to maintain a diversified Portfolio in order to minimize this risk.
8.11 The Portfolio Manager is neither responsible nor liable for any losses resulting from the Portfolio Management Services.
8.12 Macro-Economic Risks: Overall economic slowdown, unanticipated corporate performance, environmental or political problems, changes to monitory or fiscal policies, changes in government policies and regulations with regard to industry and exports may have direct or indirect impact on the investments, and consequently the growth of the Portfolio.
8.13 Liquidity Risk: Liquidity of investments in equity and equity related securities are often restricted by factors such as trading volumes, settlement periods and transfer procedures. If a particular security does not have a market at the time of sale, then the Portfolio may have to bear an impact depending on its exposure to that particular security. While Securities that are listed on a stock exchange generally carry a lower liquidity risk, the ability to sell these investments is limited by overall trading volume on the stock exchange. Money market securities, while fairly liquid, lack a well developed secondary market, which may restrict the selling ability of
such securities thereby resulting in a loss to the Portfolio until such securities are finally sold.
8.14 Mutual Fund Risk: This risk arises from investing in units of Mutual funds. Risk factors inherent to equities and debt securities are also applicable to investments in mutual fund units. Further, scheme specific risk factors of each such underlying scheme, including performance of their underlying stocks, derivatives instruments, stock lending, off-shore investments etc., will be applicable in the case of investments in mutual fund units. In addition, events like change in fund manager of the scheme, take over, mergers and other changes in status and constitution of mutual funds, foreclosure of schemes or plans, change in government policies could affect performance of the investment in mutual fund units.
8.15 The arrangement of pooling of funds from various Clients and investing them in Securities could be construed as an ‘Association of Persons’ (AOP) in India under the provisions of the Income-tax Act, 1961 and taxed accordingly.
8.16 In case of investments in Mutual Fund units, the Client shall bear the recurring expenses of the Portfolio Management Services in addition to the expenses of the underlying mutual fund schemes. Hence, the Client may receive lower pre-tax returns compared to what he may receive had he invested directly in the underlying mutual fund schemes in the same proportions.
8.17 After accepting the corpus for portfolio management, the Portfolio Manager may not get an opportunity to deploy the same or there may be a delay in deployment. In such situations the Clients may suffer opportunity loss.
8.18 Clients will not be permitted to withdraw the funds/Portfolio (unless in accordance with the terms agreed with the Client). In addition, they are not allowed to transfer any of the interests, rights or obligations with regard to the Portfolio except as may be provided in the Portfolio Management Service Agreement and in the Regulations. 8.19 In case of early termination of the Portfolio Management Service
Agreement, where Client Securities are reverted to the Client, additional rights available while the Securities were held as part of the Portfolio that were negotiated by the Portfolio Manager with an investee company or its shareholders may no longer be available to the Client.
8.20 The Client has perused and understood the disclosures made by the Portfolio Manager in the Disclosure Document.
8.21 Changes in Applicable Law may impact the performance of the Portfolio.
9. Clients Representation
Category
of Clients No. Of Clients Funds Managed (Rs. Cr)
Discretionary/ Non Discretionary (if available) 01/04/2011 to 31/03/2012 01/01/11 to 31/03/11 01/04/10 to 31/12/10** 01/04/2011 to 31/03/2012 01/01/11 to 31/03/11 01/04/10 to 31/12/10** Associates /Group Companies 0 0 0 0 0 0 Discretionary Others 188 251 289 90.94 139.45 178.27* Discretionary 4 0 0 3.14 0 0 Non Discretionary Total 192 251 289 94.08 139.45 178.27*
Note:* The funds managed include funds of those clients which got closed in the same year, but have not fully withdrawn their corpus. **The above details are of the clients whose funds were managed by Emkay Global Financial Services Ltd. prior to transfer of PMS Business along with Registration Certificate to Emkay Investment Managers Ltd. with effect from January 01, 2011.
10. Disclosures in respect of transactions with related parties. Emkay Investment Managers Ltd. provides PMS services and its holding Company Emkay Global Financial Services Ltd. is the only broker who provides broking and DP facilities to the Company in this respect. The related parties who has avail the PMS services from the Company are enlisted below.
Sr. No. Name Of Related Party Nature of Relationship
1 Key Management personnel/
individuals having control or significant influence
a) Mr. Prakash Kacholia Director
2 Emkay Global Financial
11. Financial Performance of the Portfolio Manager.
Emkay Investment Managers Ltd. has been incorporated as on 8th June, 2010 and the PMS business carried out by Emkay Global Financial Services Ltd. was transferred to Emkay Investment Management Ltd. as on 1st January, 2011.
(Rs. In Lakhs)
NETWORTH As at As at As at
31st March, 2011 31st March, 2010 31st March, 2009
CAPITAL AND
RESERVES 295.35 13198.03 12632.31
LESS: Preliminary
Expenses 0.00 0.00 0.00
NET WORTH 295.35 13198.03 12632.31
Profit & Loss Account For the year ended For the year ended For the year ended 31st March, 2011 31st March, 2010 31st March, 2009
Profit Before Tax 66.98 1349.25 (844.83)
Provision for Tax 23.00 600.00 93.00
Deferred Tax Charge/(Credit) (1.38) (91.76) (372.11) Fringe Benefit Tax 0.00 0.00 33.14
Earlier Years Tax Short
Provision 0.00 1.40 (3.30)
Profit After Tax 45.35 839.61 (595.56)
Note: a) The above mentioned data for the year 2009 and 2010 pertains to Emkay Global Financial Services Ltd. and data for the year 2011 pertains to Emkay Investment Managers Ltd.
12. Performance of Products of the Portfolio Manager
The Performance of various products under Discretionary Portfolio Services under Portfolio Management Services offered by us are as under:
Scheme Period Return % Benchmark Return
Emkays Capital Builder Portfolio 1 April 10 to 31 Dec 10 21.82% S&P CNX 500 : 14.55% 1 Jan 11 to 31 Mar 11 -9.31% S&P CNX 500 : (6.37%) 1 April 11 to 31 Mar 12 -1.78% S&P CNX 500 : (8.75%) Emkays Classic Portfolio 1 April 10 to 31 Dec 10 22.53% S&P CNX 500 : 14.55% 1 Jan 11 to 31 Mar 11 -9.59% S&P CNX 500 : (6.37%) 1 April 11 to 31 Mar 12 3.25% S&P CNX 500 : (8.75%) Emkays Prodigy Portfolio 1 April 10 to 31 Dec 10 20.84% S&P CNX 500 : 14.55% 1 Jan 11 to 31 Mar 11 -11.95% S&P CNX 500 : (6.37%) 1 April 11 to 31 Mar 12 -0.68% S&P CNX 500 : (8.75%)
Emkays Empower Multimanagers 1 April 10 to 31 Dec 10 19.53% S&P CNX 500 : 14.55% Portfolio 1 Jan 11 to 31 Mar 11 -3.09% S&P CNX 500 : (6.37%)
1 April 11 to 31 Mar 12 -2.72% S&P CNX 500 : (8.75%)
Emkays Crystal Portfolio 24 Nov 11 to 31 Mar 12 32.27% S&P CNX 500 : 12.20% Emkays Perals Portfolio 24 Nov 11 to 31 Mar 12 50.38% S&P CNX 500 : 12.20% Emkay Platinum Portfolio 24 Nov 11 to 31 Mar 12 39.35% S&P CNX 500 : 12.20% Emkay Portfolio Advisory 24 Nov 11 to 31 Mar 12 55.79% S&P CNX 500 : 12.20%
Note: Returns of the clients are on weighted average basis while Performance indicators represent the absolute change in S&P CNX 500.
13. Nature of Expenses for Clients.
The following are indicative type of costs and expenses for clients availing the Portfolio Management Services. The exact basis of charge relating to each of the following services shall be annexed to the Portfolio Management Agreement at the time of execution of such agreements.
a. Management Fees
Management Fees relates to the Portfolio Management Services offered to the clients. The fee may be a fixed charge or a percentage of the quantum of funds managed and may be Performance based or a combination of any of these.
High Water Mark Principle: 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 based fees is charged. For the purpose of charging performance based fee, the frequency shall not be less than quarterly. The portfolio manager shall charge performance based fee only on increase in portfolio value in excess of the previously achieved high water mark.
(Cir. /IMD/DF/13/2010 dated October 5, 2010)
b. Custodian / Depository Fees
The charge relating to opening and operation of depository accounts, Custody and transfer charges for shares, bonds and units, dematerialization, re-materialization and other charges in connection with the operation and management of the depository accounts.
c. Registrar’s and Transfer Agent’s Fees
Charges payable to registrars and transfer agents in connection with effecting transfer of securities and bonds including stamp
charges, cost of affidavits, notary charges, postage stamp and
courier charges. d. Brokerage, Transaction Costs and Statutory Dues
The brokerage charges and other charges like service charge, stamp duty, transaction costs, turnover tax, securities transaction tax , exit and entry loads on the purchase and sale of shares, stocks, bonds, debt, deposits, units and other financial instruments.
e. Securities Lending and Borrowing Charges
The charges pertaining to the lender of securities, costs of borrowing including interest, and costs associated with transfers of securities connected with the lending and borrowing transfer operations.
f. Certification and Professional Charges
Charges payable for out sourced professional services like accounting, taxation and legal services, notarizations, certifications, attestations required by bankers or regulatory authorities.
g. Incidental Charges
Charges in connection with the courier, stamp duty, service tax, postal, telegraphic, bank account operations etc.
h. Exit Load
Charges in connection with the early withdrawal of funds (agreed
by each client in writing). The amount is charged based on some percentage of the funds managed.
14. Tax Implications for Clients.
a. General
In view of the individual nature of tax consequences, each Client is advised to consult his / her tax advisor with respect to the specific tax consequences to him / her for participation in the Portfolio Management Services. The Portfolio Manager shall not be responsible for assisting or completing the fulfillment of the client’s tax obligations.
b. Tax Deduction at Source
If any tax is required to be with held on account of any legislation, the Portfolio Manager shall be obliged to act in accordance with the regulatory requirements in this regard.
It shall be the Client’s responsibility to meet his/her advance tax obligation installments payable on the due dates under the Income Tax Act, 1961. The Portfolio Manager shall not be responsible for any advance tax payment obligations of its
Portfolio Clients.
d. Long Term Capital Gains
Investments held for more than 12 months would qualify for treatment as long-term capital gains. Any income arising from transfer of a long term capital asset, being securities, and if the transaction of sale of such securities is entered into on a recognized stock exchange in India such Long Term Capital Gains will be exempt from income tax u/s 10(38) of Income Tax Act.
e. Short Term Capital Gains
Investments held for less than 12 months would be classified as short-term capital gains and added to total income. Any income arising from the transfer of a short term capital asset, being securities, and if the transaction of sale of such securities is entered into on a recognized stock exchange in India, tax on gain on transfer of such short term capital asset is chargeable at the rate of 15% plus applicable surcharge and education and higher secondary education cess thereon.
For this “securities” and “recognized stock exchange” means:-
(i) Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.
(ii) Recognized Stock Exchange as defined in clause (f) of section 2 of Securities Contracts (Regulation) Act, 1956.
15. Accounting policy
The following Accounting policy will be applied for the Portfolio Investments of Clients:
a. Investments in Equities, Mutual Funds and Debt Instruments will be valued at the closing market prices of the exchange (BSE or NSE as the case may be) or the Repurchase Net Asset Value declared for the relevant products on the date of the report or any cut off date or the market value of the debt instrument at the cut off date. Alternatively, the last available prices on the exchange or the most recent NAV will be reckoned.
b. Realized gains/losses will be calculated by applying the first in / first out principle. For example, the earliest purchased
quantity will be reckoned for the current / most recent sale at the respective prices at both points in time.
c. For Derivatives and Futures and Options, unrealized gains and losses will be calculated by marking to market the open positions.
d. Unrealized gains / losses are the differences between the current market values/NAV and the historical cost of the securities
e. Dividends on shares and income on units in mutual funds, Bank interest, stock lending fees earned etc. shall be accounted on receipt basis. The interest on debt instruments
shall be accounted on accrual basis. f. The Portfolio Manager and the client can adopt any specific
norms or methodology for valuation of investments or accounting the same as may be mutually agreed between them on a case specific basis. The investor may contact the Relationship Managers of the Portfolio Manager for the purpose of clarifying or elaborating on any of the above policy issues. g. The cost of investments acquired or purchased will include
brokerage, stamp charges and any charge customarily included in the broker's bought note. In respect of privately placed debt instruments any front-end discount offered will be reduced from the cost of the investment.
h. Transactions for purchase or sale of investments will be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction should be recorded, in the event of a purchase, as of the date on which the scheme obtains in enforceable obligation to pay the price or, in the event of a sale, when the scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold.
i. Bonus shares to which the scheme/option becomes entitled will be recognised only when the original shares on which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements will be
recognized only when the original shares on which the right entitlement accrues are traded on the stock exchange on an ex-rights basis.
j. Corpus-in/corpus-out in the form of securities would be accounted at the closing market rate of the securities on the day of entry/withdrawal.
k. Tax deducted at source (TDS) is considered as withdrawal of Portfolio and debited accordingly.
l. Securities Transaction Tax paid on purchase/sale of securities including derivatives, during the financial year is recognized as an expense in the books of accounts.
16. Investor Services.
16.1 Contact information
Name, address and telephone number of the Investor Relations Officer who shall attend to the investor’s queries and complaints.
Name : Mr. Sachin Shah
Address : B - Ruby Mills Tower
7th Floor, South East Wing, Senapati Bapat Marg,
Dadar West,
Mumbai – 400028
Telephone : 66121207
Email : [email protected]
The official mentioned above will ensure prompt investor services. The Portfolio Manager will ensure that this official is vested with the necessary authority and independence to handle investor complaints.
16.2 Grievance Redressal and Dispute Settlement Mechanism
The Portfolio Manager will endeavor to address all complaints regarding service deficiencies or causes for grievance, for whatever reason, in a reasonable manner and time. If the investor remains dissatisfied with the remedies offered or the stand taken by the Portfolio Manager, the investor and the Portfolio Manager shall abide by the following mechanisms: -
All disputes, differences, claims and questions whatsoever arising between the Client/Investor and the Portfolio Manager and/or their
respective representatives shall be settled in accordance with and subject to the provisions of The Arbitration and Conciliation Act 1996, or any statutory modification or re-enactment thereof. Such Arbitration proceedings shall be held at Mumbai or such other place as the Portfolio Manager thinks fit.
17 Others
The Portfolio Manager and the client can mutually agree to be bound by specific terms through a written two-way agreement between themselves in addition to the standard agreement.
For Emkay Investment Managers Limited
Prakash Kacholia Krishna Kumar Karwa
Director Director
Date: 25.07.2012 Place: Mumbai