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Kotak Mahindra Trustee Company Limited

Annual Report 2013-14 1

Directors’ ReportTo the Members ofKotak Mahindra Trustee Company Limited

The Directors present their Nineteenth Annual Report together with the audited accounts of your Company for the year ended 31st March 2014.

FINANCIAL RESULTS

The financial results of the company for the year ended 31st March 2014 is as under:

(` In Lakhs)

2013-2014 2012-2013

Gross income 1085 1,209

Profit before Depreciation and Tax 1016 1,141

Depreciation - -

Profit before Tax 1016 1,141

Profit after Tax 697 854

Balance of Profit from previous years 4318 3,464

Amount available for appropriation 5015 4,318

Proposed dividend including dividend distribution tax - -

Interim dividend including dividend distribution tax 439 -

Transfer to General reserves 70 -

Surplus carried forward to the Balance Sheet 4506 4,318

The Average Assets Under Management (AAUM) increased from ` 31,259 crores to ` 35,694 crores – a growth of 14.19%. The trustee fee revenue has grown only by 6% largely on account of a change in the mix of AAUM as compared to the previous year. The expenses of the company are in line with that of the previous year.

DIVIDEND

An interim dividend of ` 750 per share was paid to all equity shareholders on record in the Register of members on December 26, 2013. Your Directors do not recommend any further dividend for the Financial Year.

CAPITAL

The Authorized Share Capital of the Company is ` 1 crore, comprising of 10,00,000 Equity Shares of ` 10 each. The issued and paid up capital of the Company is ` 5,00,700 comprising of 50,070 Equity Shares of ` 10 each.

OPERATIONSMANAGEMENT DISCUSSION AND ANALYSIS

A few market related developments affecting the Schemes of the Mutual Fund.

Over the entire financial year, the growth rate of the economy continued to remain lackluster. During the Apr-Dec 13 period, Indian GDP grew by approximately 4.6% yoy as against 4.48% in the similar period in Apr-Dec 2012.

The current account deficit, during Apr-June 13 was at around 4.9% of GDP. This has moderated down to around 0.9% of the GDP by Dec-13. This performance is attributable to the -8.11% decline in the imports over the FY14 period, with the commensurate increase of around 3.98% in the exports. This enabled the narrowing of the trade deficit by -27.18% in FY14 to US$ 138 bn vis-à-vis the FY12 figures of US$ -190 bn.

FY2014 saw the key equity market indices, Sensex and Nifty register a growth of approximately 18% over the previous year. This performance in the equities market was on account of the surge in the equities market since October 13, wherein the belief of a likely change for reform and pro-business oriented polity, catapulted the market prices.

The debt market witnessed extreme volatility during the last financial year. The 10 year gsec yield, which was around 7.16% mid-May 13, rose to intraday high of 9.50% by Aug-13. This was attributable to QE3 triggered forex volatility; and the ensuing policy measures, which drained out the liquidity and pushed up the effective borrowing rate to around 10.25%.

Kotak Mahindra Trustee Company Limited2

Effective November 19, 2013, scrip level valuation for all debt securities greater than 60 days have been implemented at industry level, based on the security level pricing provided by CRISIL and ICRA, and in line with the guidelines recommended by AMFI. This will ensure uniformity in the valuation of securities

The key regulatory changes from SEBI during 2013-2014 have been elucidated as under:-

• Product Labelling: In order to address the issue of mis-selling, SEBI decided that effective July 1, 2013 all the mutual funds shall ‘Label’ their schemes on the prescribed parameters and to depict the colour code based on the risk involved.

• Know Your Client Requirements (KYC): SEBI has revised the disclosure requirement which is to be captured in KRA systems by amending the form prescribed for KYC Registration. This amendment will be benefiting the processing of KYC.

• Enhancing disclosures, investor education & awareness campaign, developing alternative distribution channels for Mutual Fund products, etc –

o It has now been mandatory for Mutual Funds to have transparent disclosure norms by showing detailed Monthly Average Assets under Management within 7 workings days from end of each month. This disclosure would cover the Contribution to Monthly AAUM from sponsor and its associates and other entities, from different categories of investors and state wise break up of AAUM.

o The Mutual Funds have also to disclose votes cast by them by disclosing specific rationale supporting their voting decision, on a quarterly basis on their website. The Boards of AMC and Trustee have been entrusted to review and ensure that AMCs have voted on important decisions that may have effect on the interest of investors and the rationale recorded for vote decision is prudent and adequate.

o Mutual Funds have been advised to develop a system for active support to Public Sector Unit Banks to distribute MF products through them. This is to leverage the wide bank branches and distribution reach of PSU Banks

Mutual Fund Industry developments and segment wise performance:

The total industry AAUM (Average Assets Under Management) increased from ` 7,66,593 crores for the FY 13 to ` 864900 crores for FY 14, – a growth of 12.83%. During the same period, AAUM with Kotak Mahindra Asset Management Company increased from 31259 crores to 35694 crores – a growth of 14.19%.

The Funds managed by Kotak Mahindra Asset Management Company continued to strive for consistency and risk-adjusted return to their investors over the long term. The snapshot of the performance has been presented as under:-

Equity Schemes Benchmark FY14 Returns (%) Benchmark Returns (%) Difference (%)

Kotak 50 Fund CNX Nifty Index 14.38 17.98 -3.60

Kotak Balance Crisil Balanced Fund Index 13.14 13.40 -0.26

Kotak Classic Equity CNX 500 Index 17.01 17.72 -0.71

Kotak Emerging Equity Fund S&P BSE MID CAP 17.10 15.31 1.79

Kotak Equity Arbitrage Crisil Liquid Fund Index 9.32 9.54 -0.22

Kotak Midcap Fund CNX Midcap 18.74 16.36 2.38

Kotak Opportunities Fund CNX 500 Index 20.00 17.72 2.28

Kotak Select Focus Fund CNX 200 23.63 17.98 5.65

Kotak Taxsaver Fund CNX 500 Index 9.61 17.72 -8.11

Debt Schemes Benchmark FY14 Returns (%) Benchmark Returns (%) Difference (%)

Kotak Gilt ‐ Investment Regular Plan ISEC Composite Index ‐0.41 3.96 -4.37

Kotak Banking and PSU Debt Fund Crisil Liquid Fund Index 10.28 9.46 0.82

Kotak Bond ‐ Plan A Crisil Composite Bond Fund Index 1.71 4.34 -2.63

Kotak Bond Short Term Plan Crisil Short Term Bond Fund Index 7.40 8.79 -1.39

Kotak Income Opportunities Fund Crisil Short Term Bond Fund Index 7.79 8.79 -1

Kotak Floater Long Term Scheme Crisil Liquid Fund Index 9.17 9.46 -0.29

Kotak Floater Short Term Scheme Crisil Liquid Fund Index 9.47 9.46 0.01

Kotak Liquid Crisil Liquid Fund Index 9.45 9.46 -0.01

Kotak Flexi Debt Fund Crisil Composite Bond Fund Index 9.11 4.34 4.77


Investor Awareness Programmes

During the last financial year, Kotak Mahindra Asset Management Company has undertaken about 1,000 Investment Awareness Programmes covering about 23,750 investors. This is expected to increase awareness about mutual funds as a long term lucrative investment option.

DIRECTORS

Your Company has five Directors on the Board, three of whom are Independent. During the year, seven meetings of the Board of Directors were convened.

During the year Mr. Girish Sharedalal, resigned as a Director of the Company. The Directors place on record their sincere appreciation of the valuable service rendered by Mr. Sharedalal, during his tenure as a Director.

Mr. Arun Palkar, has been appointed as an Additional Director on the Board of your company w.e.f August 28, 2013. He holds office upto the date of the ensuing Annual General Meeting of the Company and is eligible to be reappointed as a Director of the Company.

Mr. Chandrashekhar Sathe retires by rotation at the Annual General Meeting and being eligible, offers himself for re-appointment.

COMMITTEES

Pursuant to SEBI circular MFD/CIR/010/024/2000 dated January 17, 2000, during the year your Company has constituted an Audit Committee of the Board which consisted of Mr. Girish Sharedalal, Mr. Balan Wasudeo, Mr. Noshir Dastur and Mr. Chandrashekhar Sathe. Post stepping down of Mr. Girish Sharedalal, the Audit Committee comprises of Mr. Balan Wasudeo, Mr. Noshir Dastur and Mr. Chandrashekhar Sathe. Mr. Balan Wasudeo, Independent Director on the Board, is the Chairman of the Audit Committee. During the year, the committee met five times to review accounts, operations and compliance relating to schemes.

APPOINTMENT COMMITTEE

As per the directives laid down by Reserve Bank of India (RBI), your company has constituted an Appointment Committee consisting of Mr. Balan Wasudeo and Mr. Noshir Dastur. The Scope of the Committee is to ensure ‘fit & proper’ status of proposed/existing Directors of the organization.

AUDITORS

Your Company’s Auditors, M/s. Price Waterhouse, Chartered Accountants, Mumbai, retire at conclusion of the Nineteenth Annual General Meeting and offer themselves for reappointment.

REGISTERED OFFICE:

The Registered Office of the Company was shifted from 36-38A Nariman Bhavan, 227, Nariman Point, Mumbai – 400021 to 27 BKC, C-27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400051.

STATUTORY INFORMATION

Your Company did not have any employees during the year, nor did it accept any deposits during the year. It had no foreign exchange earnings or outgo. The other particulars prescribed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable since your Company is not a manufacturing company.

EMPLOYEES/HUMAN RESOURCES

Your Company does not have personnel or infrastructure of its own and uses the services of Kotak Mahindra Asset Management Company Limited.

DIRECTORS’ RESPONSIBILITY STATEMENT

Based on representations from the Management of KMAMCL who is entrusted with maintenance of the books of account of your Company, in pursuance of Section 217 (2AA) of the Companies Act, 1956, we state that:

i. Your Company has, in the preparation of the annual accounts for the year ended 31st March 2014, followed the applicable accounting standards along with proper explanations relating to material departures, if any;

ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true profit and fair view of the state of affairs of your Company as at 31st March 2014 and of the Profit of your Company for the financial year ended 31st March 2014;


iii. they have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

iv. they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the valuable guidance and support received from the Securities and Exchange Board of India, Reserve Bank of India and other Government and Regulatory agencies.

For and on behalf of the Board of Directors

Balan Wasudeo Chandrashekhar Sathe

MumbaiApril 23, 2014


Independent Auditors’ ReportTo the Membersof Kotak Mahindra Trustee Company Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of Kotak Mahindra Trustee Company Limited (the “Company”), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management’s Responsibility for the Financial Statements

2. The Company’s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act 1956 of India( the “Act”) read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

7. As required by ‘the Companies (Auditor’s Report) Order, 2003’, as amended by ‘the Companies (Auditor’s Report) (Amendment) Order, 2004’, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the “Order”), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards notified under the Companies Act 1956 of India( the “Act”) read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

(e) On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

For Price WaterhouseFirm Registration Number: 301112E

Chartered Accountants

Partha GhoshMumbai PartnerDate: April 23, 2014 Membership Number: 55913


Annexure to Independent Auditors’ ReportReferred to in paragraph 7 of the Independent Auditors’ Report of even date to the members of Kotak Mahindra Trustee Company Limited on the financial statements as of and for the year ended March 31, 2014

i. The Company does not hold any fixed assets during the year ended March 31, 2014. Therefore, the provisions of Clause 4(i) of the Order are not applicable to the Company.

ii. The Company is in the business of rendering services, and consequently, does not hold any inventory. Therefore, the provisions of Clause 4(ii) of the said Order are not applicable to the Company.

iii. The Company has not granted/taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii)[(b),(c) and (d) /(f) and (g)] of the said Order are not applicable to the Company.

iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the sale of services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. (a) According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act.

v. (b) Inour opinion, and according to the information and explanations given to us, there are no transactions made in pursuance of such contracts or arrangements exceeding the value of Rupees Five Lakhs in respect of any party during the year.

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

viii. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputed statutory dues, including provident fund, investor education and protection fund, employees’ state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, sales-tax, wealth-tax, service-tax, customs duty, and excise duty which have not been deposited on account of any dispute.

x. The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. As the Company does not have any borrowings from any financial institution or bank nor has it issued any debentures as at the balance sheet date, the provisions of Clause 4(xi) of the Order are not applicable to the Company.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order are not applicable to the Company.

xiv. In our opinion, the Company has maintained proper records of transactions and contracts relating to dealing or trading in shares, securities, debentures and other investments during the year and timely entries have been made therein. Further, such securities have been held by the Company in its own name or are in the process of transfer in its name, except to the extent of the exemption granted under Section 49 of the Act.

xv. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly, the provisions of Clause 4(xv) of the Order are not applicable to the Company

xvi. The Company has not raised any term loans. Accordingly, the provisions of Clause 4(xvi) of the Order are not applicable to the Company.

xvii. The Company has not raised any loans on short term basis. Accordingly, the provisions of Clause 4(xvii) of the Order are not applicable to the Company.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.


xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of materialfraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Price WaterhouseFirm Registration Number: 301112E


Partha GhoshMumbai PartnerDate: April 23, 2014 Membership Number: 55913


Balance Sheet as at 31st March, 2014

Notes March 31, 2014 March 31, 2013

Rupees (in Lacs) Rupees (in Lacs)

EQUITY AND LIABILITIES

Shareholders’ Funds:

Share Capital 3 5.01 5.01

Reserves and Surplus 4 4,787.94 4,529.86

Non-current liabilities

Other Long Term Liabilities 5 2.50 2.50

Current liabilities

Other Current Liabilities 6 3.07 3.07

Short term Provisions 7 23.33 9.72

Total 4,821.85 4,550.16

ASSETS

Non-current assets

Long term Loans and Advances 8 1.08 1.08

Current assets

Current Investments 9 4,570.51 4,000.00

Trade Receivables 10 83.50 91.00

Cash and Bank Balance 11 165.21 455.38

Short term Loans and Advances 12 1.55 2.70

Total 4,821.85 4,550.16

Significant accounting policies 2 #N/A!

The accompanying notes are an integral part of the financial statements.

This is the Balance Sheet referred to in our report of even date

For Price Waterhouse For and on behalf of the Board of Directors

Firms Registration Number: 301112E


Partha Ghosh

Partner Director Director

Membership No. 55913

Place: Mumbai

Date: April 23, 2014


Statement of Profit and loss for the year ended 31st March 2014

Notes April 1, 2013 to March 31, 2014

April 1, 2012 to March 31, 2013

Rupees (in Lacs) Rupees (in Lacs)

Income

Revenue from Operations 13 1,005.57 947.34

Other Income 14 79.28 261.84

Total Income 1,084.85 1,209.18

Expenses

Other expenses 15 69.12 67.73

Total Expenses 69.12 67.73

Profit Before Tax 1,015.73 1,141.45

Tax Expense

Current tax (including Rs Nil (Previous Year Rs (0.27) Lacs) for prior year) 318.30 287.73

Profit for the year 697.43 853.72

Earnings per equity share [nominal value of share ` 10] Basic and diluted [in Rupees] 16 1,393 1,705

Significant accounting policies 2

The accompanying notes are an integral part of the financial statements.

This is the Statement of Profit and Loss referred to in our report of even date




Partha Ghosh



Place: Mumbai



Cash Flow Statement for the year ended 31st March, 2014

` In Lacs

2013-14 2012-13

Rupees Rupees Rupees Rupees

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 1,015.73 1,141.45

Adjustments for

Profit on sale of current investments (46.52) (191.28)

Interest income on Fixed deposit - (6.25)

Interest on Income tax refund - -

Dividend income (32.76) (64.31)

OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 936.45 879.61

Increase / (decrease) in short-term provisions - -

Increase/ (decrease) in other current liabilities 0.00 0.16

Decrease / (increase) in trade receivables 7.50 (19.81)

Decrease / (increase) in short-term loans and advances 1.15 (1.58)

8.65 (21.23)

CASH GENERATED FROM OPERATIONS 945.10 858.38

Payment of taxes (net of refunds) (304.69) (288.86)

NET CASH FROM OPERATING ACTIVITIES (A) 640.41 569.52

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale/maturity of current investments 1,799.63 8,793.24

Purchase of Investments (2,370.14) (11,805.89)

Interest received on Fixed Deposit - 6.25

Dividend received 32.76 64.31

Profit on sale of current investments 46.52 191.28

NET CASH FROM / (USED) IN INVESTMENT ACTIVITIES (B) (491.23) (2,750.81)

CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid on equity shares (375.53) -

Tax on equity dividend paid (63.82) -

CASH FLOW FROM FINANCING ACTIVITIES (C) (439.35) -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A + B + C)

(290.17) (2,181.29)


` In Lacs

2013-14 2012-13

Rupees Rupees Rupees Rupees

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

455.38 2,636.67

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 165.21 455.38

Components of cash and cash equivalents

With banks- in current account 165.21 455.38

Total cash and cash equivalents (note 11) 165.21 455.38

Significant accounting policies 2

Note:

The above cash flow statement has been prepared under the indirect method setout in Accounting Standard (AS-3) issued by the Institute of Chartered Accountants of India.

This is the Cash Flow Statement referred to in our report of even date

This is the Balance Sheet referred to in our report of even date




Partha Ghosh



Place: Mumbai


Cash Flow Statement for the year ended 31st March, 2014

12

Notes Forming Part of the Financial Statements for the Year Ended 31St March, 2014


1. CORPORATE INFORMATION

Kotak Mahindra Trustee Company Limited is a Company incorporated on 5th July 1995.The Company is approved by SEBI to act as the Trustee for the Schemes of Kotak Mahindra Mutual Fund.

2. SIGNIFICANT ACCOUNTING POLICIES

1 (i). The Financial Statements have been prepared on historical cost basis of accounting. The Company adopts the accrual basis of accounting and the financial statements conform with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, the generally accepted accounting principles prevailing in India and the relevant provisions of the Companies Act, 1956.

(ii) All assets and liabilities have been classified as current or non current as per the Company's normal operating cycle and other criteria set out in the Schedule VI to the companies Act 1956. Based on the nature of the services and the time between the provsion of the services and their and cash equivalents, the company has ascertained its operating cycle as 12 months for purpose of current and non current classification of asset and liabilities.

2. Use of estimates:

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates and assumptions.

3. Investments:

Investments are classified into long term investments and current investments. Investments which are intended to be held for more than one year, are classified as long term investments and investments, which are intended to be held for less than one year, are classified as current investments. Long term investments are accounted at cost and any decline in the carrying value, other than temporary in nature is provided for. Current investments are valued at cost or market/fair value whichever is lower. In case of investment in mutual funds, the net asset value of units is considered as market/fair value.

4. Revenue Recognition

Trusteeship fees are recognized on accrual basis as per the rates agreed. Interest income is recognized on a time proportion basis taking into account amount outstanding and the rates applicable Dividend income is recognized when the right to receive dividend is established

5. Taxes

The Income Tax expense comprises of Current Tax and Deferred Tax. Current tax is measured at the amount expected to be paid in respect of taxable income for the year in accordance with Income Tax Act,1961. Deferred tax adjustment comprises of changes in the deferred tax assets and liabilities. Deferred tax asset and liabilities are recognized for the future tax consequences of timing differences being the difference between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets on account of timing differences are recognized only to the extent that there is reasonable certainity that sufficient future taxable income will be available against which such deferred tax asset can be realised. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted before the Balance Sheet date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the Statement of Profit and Loss in the period of the change. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised.

6. Provisions and contingent liabilities:

A provision is recognized when there is a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets recognized nor disclosed in the are neither financial statements.



March 31, 2014 March 31, 2013

Rupees (in lacs) Rupees (in lacs)

Note 3 : Share Capital

Authorised :

1,000,000 (March 31 2013:1,000,000) equity shares of Rs 10 each 100.00 100.00

Issued,Subscribed and Paid Up:

50,070 (March 31 2013:50,070) equity shares of Rs 10 each, fully paid up 5.01 5.01

TOTAL 5.01 5.01

(a) Reconciliation of number of shares

Equity Shares: As at March 31, 2014 As at March 31, 2013

Number of Shares

Amount Number of Shares

Amount

Balance as at the beginning of the year 50,070 5.01 50,070 5.01

Issued During the year - - - -

Balance as at the end of the year 50,070 5.01 50,070 5.01

(b) Rights, preferences and restrictions attached to shares

Equity Shares: The company has one class of equity shares having a par value of ` 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(c) Shares held by holding company and subsidiary of holding company As at March 31, 2014

As at March 31, 2013

Equity Shares:

50,070 Shares (March 31, 2013: 50,070 Shares) held by

Kotak Mahindra Bank Limited, India,the Holding Company and nominees 50,070 50,070

(d) Details of shares held by shareholders holding more than 5% of the aggregate shares in the Company

As at March 31, 2014 As at March 31, 2013

Percentage No of shares Percentage No of shares

Equity Shares:

Kotak Mahindra Bank Limited, India, the Holding Company and nominees

100% 50,070 100% 50,070

14



March 31, 2014 March 31, 2013


Note 4: Reserves and Surplus

General Reserve

Balance as at the beginning of the year 211.83 211.83

Add-Transferred from Surplus in Statement of Profit and Loss during the year 70.00 -

Balance as at the end of the year 281.83 211.83

Surplus in Statement of Profit and Loss

Balance as at the beginning of the year 4,318.03 3,464.31

Add-Transferred from Surplus in Statement of Profit and Loss during the year 697.43 853.72

Less: Appropriations

Interim dividend on Equity Shares for the year 375.53 -

Dividend distribution tax on Interim dividend on Equity Shares 63.82 -

Transfer to General Reserve 70.00 -

Balance as at the end of the year 4,506.11 4,318.03

Total 4,787.94 4,529.86

Note 5: Other Long Term Liabilities

Initial corpus 2.50 2.50

Total 2.50 2.50

Note 6: Other Current Liabilities

Other Creditors * (other than small scale industrial undertakings/Companies registered under Micro, Small and Medium Enterprise Development Act, 2006 #)

2.26 2.21

Statutory Payables 0.81 0.86

Total 3.07 3.07

* There are no amounts due and outstanding to be credited to Investor Education and Protection Fund

# Determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

Note 7: Short term Provisions

Provision for Tax (Net of advance tax and Tax deducted at source of ` 1025.01 Lacs 23.33 9.72

(31st March 2013:720.32 Lacs))

Total 23.33 9.72

Note 8: Long Term Loans and Advances

Advance Tax (Net of Provision for Tax of ` 648.05 Lacs (31st March 2013:648.05 Lacs)) 1.08 1.08

Total 1.08 1.08



March 31, 2014 March 31, 2013


Note 9: Current Investments

Mutual Fund (Unquoted, at cost or market value whichever is lower )

Kotak Floater Short Term - Growth

248,125.9262(31 March 2013:222,075.4057) Units of ` 1000 each 4,570.51 4,000.00

Total 4,570.51 4,000.00

Aggregate value of unquoted investments at book value 4,570.51 4,000.00

Note 10: Trade Receivables

Unsecured, considered good

Over 6 months - -

Others 83.50 91.00

Total 83.50 91.00

Note 11: Cash and Bank Balances

Cash and cash equivalents

Balances with Banks in :

current accounts 165.21 455.38

Total 165.21 455.38

Note 12: Short term Loans and Advances

Prepaid Expenses 0.91 0.93

Input Credit Receivable 0.64 1.77

Total 1.55 2.70

Note 13: Revenue from Operations

Trustee Fee 1,005.57 947.34

Total 1,005.57 947.34

Note 14: Other Income

Dividend on units of mutual fund - Current Investments 32.76 64.31

Interest on Fixed Deposit - 6.25

Profit on sale of current investments 46.52 191.28

Total 79.28 261.84

16



March 31, 2014 March 31, 2013


Note 15: Other Expenses

Directors’ sitting fees 6.75 5.55

Reimbursement of common administrative cost 47.86 48.11

Insurance 0.93 0.83

Legal and professional 1.21 0.93

Rent, rate and taxes 10.49 10.51

Auditors’ remuneration

Audit Fees 1.65 1.65

Out of Pocket Expenses 0.04 0.04

Miscellaneous 0.19 0.11

Total 69.12 67.73

Note 16.Earnings per share (EPS)

EPS computations:

Net profit after tax 697.43 853.72

Weighted average number of equity shares 50,070 50,070

Earnings per share (basic and diluted) in Rupees 1,393 1,705

Note 17. Related party disclosures

Name of related parties and related party relationship

Related parties

Holding company Kotak Mahindra Bank Limited

Fellow subsidiaries Kotak Mahindra Asset Management Company Limited (KMAMC)

Kotak Mahindra Investments Limited (KMIL)

Mutual Fund managed by Fellow Subsidiary Kotak Mahindra Mutual Fund (KMMF), managed by Kotak Mahindra Asset Management Company Limited

Related party transactions

The following table provides the total amount of balances and transactions that have been entered into with related parties for the revelant financial year.

Nature of Transactions Holding Company Fellow Subsidiary Company

Mutual Fund Managed by fellow Subsidiary

(KMMF)

Rupees (In lacs) Rupees (In lacs) Rupees (In lacs)

Balances Outstanding

Bank Balance 153.04 - -

(451.38) (-) (-)

Current Investment - Investments in Mutual Fund - - 4,570.51

(-) (-) (4,000.00)

Trade Receivables - - 83.50

(-) (-) (91.00)



Nature of Transactions Holding Company Fellow Subsidiary Company

Mutual Fund Managed by fellow Subsidiary

(KMMF)

Rupees (In lacs) Rupees (In lacs) Rupees (In lacs)

Other Long Term Liabilities - Initial Corpus 2.50 - -

(2.50) (-) (-)

Transactions during the year

Purchase / Subscription of Units - - 2,370.14

(-) (-) (11,805.89)

Sale / Redemption of Units - - 1,848.14

(-) (-) (8,984.53)

Dividend received from investment in Mutual funds - - 32.76

(-) (-) (64.31)

Investment in Fixed Deposit Placed - - -

(3,960.00) (-) (-)

Fixed Deposit Matured - - -

(3,960.00) (-) (-)

Trusteeship Fees - - 1,005.57

(-) (-) (947.34)

Interest on Fixed Deposit - - -

(6.25) (-) (-)

Reimbursement of Expenses (KMAMC) - 58.35 -

(-) (58.60) (-)

Dividend 375.53 - -

(-) (-) (-)

Figures in brackets relate to the previous year.

Note 18. Segment Information:

The Company acts as a Trustee for the Schemes of Kotak Mahindra Mutual Fund. As the Company is engaged only in one business segment and no geographical segments, the Balance Sheet as at March 31, 2014 and the Statement of profit And Loss for the year ended March 31, 2014 pertain to one business segment.

Note 19 Previous year’s figures have been reclassified, wherever necessary, to confirm with current year’s classification.




Partha Ghosh



Place: Mumbai


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