Name of the Scheme : Tata Balanced Advantage Fund
Type of Scheme : An open ended dynamic asset allocation fund
Category of Scheme :Hybrid category - Balanced Advantage
Investment Objective : The investment objective of the Scheme is to provide capital appreciation and income distribution to
the investors by using equity derivatives strategies, arbitrage opportunities and pure equity
investments.
However, there is no assurance or guarantee that the investment objective of the Scheme will be
achieved. The scheme does not assure or guarantee any returns.
Liquidity : The Scheme will offer units for Repurchase and Resale at NAV based prices on every Business day
on ongoing basis commencing not later than 5 Business days from the date of allotment of units
Under normal circumstances the AMC shall dispatch the redemption proceeds within 10 business
days from date of receipt of request from the Unit holder.
Benchmark : CRISIL Hybrid 35+65 - Aggressive Index
Investment Options /
Plans: Regular Plan (For applications routed through Distributors):
1. Growth
2. Income Distribution cum capital withdrawal option (IDCW)
Direct Plan (For applications not routed through Distributors):
1. Growth
2. Income Distribution cum capital withdrawal option (IDCW)
Default Option
If Growth or Income Distribution cum capital withdrawal option is not mentioned: Growth
Default Sub-Option: Reinvestment of Income Distribution Cum Capital Withdrawal Option (IDCWReinvestment)
Income Distribution option has sub-options of Payout of Income Distribution Cum Capital Withdrawal
Option (IDCW-Payout), Reinvestment of Income Distribution Cum Capital Withdrawal Option (IDCWReinvestment). & Transfer of Income Distribution Cum Capital Withdrawal Option (IDCW-Transfer).
The IDCW- payout for amount less than Rs 250/- will be compulsorily reinvested in the same suboption at ex-dividend NAV.
Please note that the income distribution shall be distributed at the discretion of the Trustees
subject to availability of distributable surplus.
Default Option : Investor should appropriately tick the ‘option’ (Income Distribution Cum Capital Withdrawal or growth)
and sub-options (payout of Income Distribution Cum Capital Withdrawal(IDCW-Payout) ,
Reinvestment of Income Distribution Cum Capital Withdrawal (IDCW- Reinvestment) and Transfer of
Income Distribution Cum Capital Withdrawal (IDCW-Transfer)) in the application form while investing
in the Scheme. If no option is mentioned / indicated in the application form by the investor then the
units will, by default, be allotted under the Direct Plan- Growth Option. If no Income Distribution Cum
Capital Withdrawal sub-option is mentioned / indicated in the application form by the investor then
the units will, by default, be allotted under the Reinvestment of Income Distribution Cum Capital
Withdrawal Option (IDCW- Reinvestment.
Default Plan: Investors are requested to note the following scenarios for the applicability of “Direct
Plan (application not routed through distributor) or Regular Plan (application routed through
distributor) ” for valid applications received under the scheme:
Scenario Broker Code mentioned by
the investor
Plan mentioned by the investor Default Plan to be
captured
1 Not mentioned Not mentioned Direct Plan
2 Not mentioned Direct Plan Direct Plan
3 Not mentioned Regular Plan Direct Plan
4 Mentioned Direct Plan Direct Plan
5 Direct Plan Not Mentioned Direct Plan
6 Direct Plan Regular Plan Direct Plan
7 Mentioned Regular Plan Regular Plan
8 Mentioned Not Mentioned Regular Plan
In cases of wrong/ invalid/ incomplete ARN codes mentioned on the application form, the application
shall be processed under Regular Plan. The AMC shall contact and obtain the correct ARN code
within 30 calendar days of the receipt of the application form from the investor/ distributor. In case,
the correct code is not received within 30 calendar days, the AMC shall reprocess the transaction
under Direct Plan from the date of application without any exit load.
Load : Entry Load: N.A.
Exit Load:
1) Redemption/Switch-out/SWP/STP on or before expiry of 365 days from the date of
allotment: If the withdrawal amount or switched out amount is not more than 12% of the
original cost of investment-Nil
2) Redemption/Switch-out/SWP/STP on or before expiry of 365 days from the 1% date of
allotment: If the withdrawal amount or switched out amount is more than 12% of the original
cost of investment. -1%
3) Redemption / Switch-out/SWP/STP after expiry of 365 days from the date of allotment-Nil
Minimum Subscription
amount under each
Plan
Direct Plan and Regular Plan:
Minimum initial investment in the scheme / plan / option: Rs. 5,000/- and in multiples of Re. 1/-
thereafter. For additional investment Rs. 1,000/- and in multiples of Re. 1/-.
The additional purchase
investment can be made in Growth or IDCW option if initial investments exist under the requested
option either in Direct or in Regular plan of the scheme.
Minimum Redemption amount will be Rs.500 or 50 units or folio available balance (Whichever is
lower)
There is no minimum amount requirement, in case of investors opting to switch “all units”
from any existing schemes of Tata Mutual Fund to this Scheme.
Duration of the Scheme : The fund, being an open ended in nature, has perpetual duration.
- A Mutual Fund - sponsored by Tata Sons Limited (TSL) and Tata Investment Corporation Limited (TICL).
- The Scheme is managed by Tata Asset Management Limited (TAML).
TATA BALANCED ADVANTAGE FUND
4
- Earnings of the Fund are exempt from income tax under Section 10(23D) of the Income Tax Act, 1961.
- Interpretation
For all purposes of this Scheme Information Document (SID), except as otherwise expressly provided or unless the context
otherwise requires:
- The terms defined in this SID includes the plural as well as the singular.
Pronouns having a masculine or feminine gender shall be deemed to include the other.
- The term “Scheme” refers to Tata Balanced Advantage Fund including the options /sub-options thereunder.
I. INTRODUCTION
A. RISK FACTORS
Standard Risk Factors:
Investment in Mutual Funds involves investment risks such as trading
volumes, settlement risk, liquidity risk, default risk including the possible
loss of principal.
As the price / value / interest rates of the
securities in which the scheme invests fluctuates, the value of investment in
the scheme may go up or down.
Mutual Fund investments are
subject to market risks, read all scheme related documents carefully.
As with any investment in stocks, shares and securities, the NAV of the
Units under this Scheme can go up or down, depending on the factors and forces
affecting the capital markets.
Past performance of the previous Schemes, the Sponsors or its Group /
Affiliates / AMC / Mutual Fund is not indicative of and does not guarantee the
future performance of the Scheme.
Investment in equity and equity related securities including option
contracts involve high degree of risks and investors should not invests in the
schemes unless they can afford to take the risk of losing their investment.
The sponsors are not responsible or liable for any loss resulting from
the operations of the scheme beyond the initial contribution of Rs. 1 lakh made
by them towards setting up of the mutual fund.
Tata Balanced Advantage Fund is only the name of the Scheme and does not
in any manner indicate either the quality of the Scheme, its future prospects
or the returns. Investors therefore are urged to study the terms of the Offer
carefully and consult their Tax and Investment Advisor before they investing in
the Scheme.
Tata Balanced Advantage
Fund is not guaranteed or assured return scheme.
Scheme Specific Risk
Factors:
Investment Risks
The price of securities may go up or down
depending on a variety of factors and hence investors may note that AMC/Fund
Manager’s investment decisions may not be always profitable. Although it is
intended to generate capital appreciation and maximize the returns by actively
investing in equity securities and utilising debt and money market instruments
as a defensive investment strategy. The price of securities may be affected
generally by factors affecting capital markets such as price and volume,
volatility in the stock markets, interest rates, currency exchange rates, foreign
investment, changes in Government and Reserve Bank of India policy, taxation,
political, economic or other developments, closure of the Stock Exchanges etc.
Investors should understand that the investment pattern indicated, in line with
prevailing market conditions, is only a hypothetical example as all investments
involve risk and there is no assurance that the Fund’s investment objective
will be attained or that the Fund may not be in a position to maintain the
indicated percentage of investment pattern under exceptional circumstances.
There is no guarantee the investment / dis-investment decision will result into
profit.
The fund may use techniques and instruments for efficient portfolio
management and to attempt to hedge or reduce the risk. However these techniques
and instruments if imperfectly used have the risk of the fund incurring losses
due to mismatches particularly in a volatile market. The Fund’s ability to use
these techniques may be limited by market conditions, regulatory limits and tax
considerations (if any). The use of these techniques is dependent on the
ability to predict movements in the prices of securities being hedged and
movements in interest rates. There exists an imperfect correlation between the
hedging instruments and the securities or market sectors being hedged. Besides,
the fact that skills needed to use these instruments are different from those
needed to select the Fund’s / plan’s securities. There is a possible absence of
a liquid market for any particular instrument at any particular time even
though the futures and options may be bought and sold on an organised exchange.
The use of these techniques involves possible impediments to effective
portfolio management or the ability to meet repurchase / redemption requests or
other short-term obligations because of the percentage of the Fund’s assets
segregated to cover its obligations.
Liquidity and Settlement
Risks
The liquidity of the Scheme’s investments may be inherently restricted
by trading volumes, transfer procedures and settlement periods. From time to
time, the Scheme will invest in certain securities of certain companies,
industries, sectors, etc. based on certain investment parameters as adopted
internally by AMC. While at all times the AMC will endeavour that excessive
holding/investment in certain securities of
industries, sectors, etc. by the Scheme(s) are avoided, the funds invested by
the Scheme in certain securities of industries, sectors, etc. may acquire a
substantial portion of the Scheme’s investment portfolio and collectively may
constitute a risk associated with non-diversification and thus could affect the
value of investments. Reduced liquidity in the secondary market may have an
adverse impact on market price and the Scheme’s ability to dispose of
particular securities, when necessary, to meet the Scheme’s liquidity needs or
in response to a specific economic event or during restructuring of the Scheme’s
investment portfolio.
Regulatory
Risk
The value of the securities may be affected by uncertainties such as
changes in government policies, changes in taxation and other developments in
the laws and regulations.
Risk
associated with Unlisted Securities
Securities which are not quoted on the stock
exchanges are inherently liquid in nature and carry a larger liquidity risk in
comparison with securities that are listed on the exchanges or offer other exit
options to the investors, including the put options. The liquidity and
valuation of the scheme’s investments due to its holdings of unlisted
securities may be affected if they have to be sold prior to the target date of
disinvestment.
Risk
associated with Short Selling
The Scheme may enter into short selling
transactions, subject to SEBI and RBI Regulations. Short-selling is the sale of
shares that the seller does not own at the time of trading. Instead, he borrows
it from someone who already owns it. Later, the short seller buys back the
stock he shorted and returns the stock to close out the borrowing. If the price
of the stock has fallen, he can buy the stock back for less than he received
for selling it and profits from it (the difference between higher short sale
price and the lower purchase price). However, Short positions carry the risk of
losing money and these losses may grow theoretically unlimited if the stock
price increases without limit and shall result into major losses in the
portfolio. For example, if dealer/fund manager short 1000 shares at Rs.650 each
hoping to make a profit but the share price increase to Rs.900, portfolio will
end up losing Rs.250,000 (1000*250).
Securities
Lending by the Mutual Fund
The Scheme may participate in securities lending
and borrowing scheme in accordance with Securities Lending Scheme, 1997,
Regulation 44 (4) of SEBI ( Mutual Funds ) Regulations ,1996, SEBI circular no
MFD/CIR/01/047/99 dated February 10, 1999,framework for short selling and
borrowing and lending of securities notified by SEBI circular no
MRD/DoP/SE/Cir-14/2007 dated December 20, 2007 and SEBI circular no SEBI / IMD
/ CIR No 14 / 187175/ 2009 dated December 15, 2009 and SEBI circular no
CIR/MRD/DP/122/2017 dated November 17, 2017. The Scheme shall also follow other
relevant regulations /guidelines issued by stock exchange(s) from time to time.
The Scheme shall participate in Securities Borrowing and Lending only with the
SEBI approved intermediaries.
Securities Lending means the lending of securities to SEBI approved
intermediaries for a tenure of 1 to 12 months at a negotiated compensation in
order to enhance returns of the scheme portfolio. The securities lent will be
returned by the borrower on the expiry of the stipulated period. The AMC will
adhere to the following strict internal limits should it engage in Securities
Lending.
Not more than 25% of the net assets of the Scheme can be deployed in
stock lending. Collateral would always be obtained by the approved
intermediary. Collateral value would always be more than the value of the
security lent. Collateral can be in form of cash, bank guarantee, and government
securities, as may be agreed upon with the approved intermediary, and would
also be subject to a mark to market valuation on a daily basis.
Example:
A scheme has a security of a company which it
would wish to hold for a long period of time as a core holding in the portfolio
as per the fund manager’s plan. In that case the investors would be benefited
only to the extent of the rise in the value of the security, from time to time if any, on the exchange. If the
scheme is enabled to lend the said security to a borrower who would be wanting
to take advantage ofthe market fluctuations in its price, the borrower would
return the security to the lender (fund) at a stipulated time or on demand for
a negotiated compensation. The scheme’s unitholders can enhance their returns
to the extent of the compensation it will earn for lending the same. An
adequate security or collateral will have to be maintained by the intermediary.
This should always be higher than the cost of the security. Thus it is in the
interest of the investors that returns can be enhanced by way of stock lending
rather than hold the security only for capital appreciation potential.
Thus the
scenario under which the scheme would participate in stock lending would be:
1.
There is a holding of security
e.g. of XYZ Ltd in the scheme which the fund manager wants to be the core
holding of the fund for approximately 6 to 12 months.
2.
There is a borrower (not
mutual fund) for the security, (who has taken a short position in the market
and needs the said security of XYZ Ltd to settle it) who is willing to put up a
proper collateral for the same.(In all cases higher than the price of the
script).
3. The
borrower is represented by a proper recognized intermediary.
4. The
agreement is to return the security or the amount so negotiated at a particular
period of time or on demand.
Then the security will be lent by the scheme and the unitholders would
benefit from the additional compensation earned for lending, apart from the capital
appreciation which also happens in that stock. Thus, to summarize, stock
lending would be done by the schemeonly in the following circumstances:
a) If
permitted by trustees and the extent SEBI regulations in that regard, from time
to time.
b) If such
activity generates additional returns for the scheme and helps to enhance the
scheme returns.
c) If
considering the above and other factors all considered in totality, such
activity is in the interest of unitholders in the scheme.
Securities
Lending Risks
It may be noted that this activity would have the inherent probability
of collateral value drastically falling in times of strong downward market
trends, rendering the value of collateral inadequate until such time as that
diminution in value is replenished by additional security. It is also possible
that the borrowing party and/or the approved intermediary may suddenly suffer
severe business setback and become unable to honour its commitments. This,
along with a simultaneous fall in value of collateral would render potential
loss to the Scheme. Besides, there will also be temporary illiquidity of the
securities that are lent out and the Scheme(s) will not be able to sell such
lent out securities until they are returned.
Risks
associated with investing in debt securities
Investments in money market instruments would involve a moderate credit
risk i.e. risk of an issuer’s liability to meet the principal payments.
Additionally, money market securities, while fairly liquid, lack a
well-developed secondary market, which may restrict the selling ability of the
Scheme and may lead to the Scheme incurring losses till the security is finally
sold.
Money
market instruments are also subject to price volatility due to factors such as
changes in interest rates (when interest rates in the market rise, the value of
a portfolio of money market instruments can be expected to decline), general
levels of market liquidity, market perception of
credit
worthiness of the issuer of such instruments and risks associated with settlement
of transactions and re-investment of
intermediate cash flows. The NAV of the Scheme’s Units, to the extent
that the Scheme is invested in money market instruments, will consequently be
affected by the aforesaid factors. The AMC endeavours to manage such risk by
the use of in house credit analysis.
Investments
in different types of securities are subject to different levels and kinds of
risk. Accordingly, the Scheme’s risk may increase or decrease depending upon
its investment pattern. E.g. investments in corporate bonds carry a higher
level of risk than investments in Government Securities Further, even among
corporate bonds, bonds which have a higher rating are comparatively less risky
than bonds which have a lower rating.
Interest rate/price risk: As with all debt securities, changes in
interest rates may affect the NAV of the Scheme since the price of a fixed
income instrument falls when the interest rates move up and vice versa. The
effect is more prominent when the duration of the instrument is higher. Hence
the NAV movement of the Scheme consisting of predominantly fixed income
securities is likely to have inverse correlation with the movement in interest
rates. In case of a floating rate instrument, this risk is lower as a result of
periodic reset of the coupon. During the life of floating rate security or a
swap, the underlying benchmark index may become less active and may not capture
the actual movement in the interest rates or at times the benchmark may cease
to exist. These types of events may result in loss of value in the portfolio.
Government
securities do carry price risk depending upon the general level of interest
rates prevailing from time to time. The extent of fall or rise in the prices is
a function of the coupon rate, days to maturity and the increase or decrease in
the level of interest rates. The price of the Government securities (existing
and new) is influenced only by movements in interest rates in financial
systems.
Floating
rate securities issued by the Government (coupon linked to treasury bill
benchmark or an inflation linked bond) have the least sensitivity to interest
rate movements compared to other securities. Some of these securities are
already in issue and the fund manager believes that more such securities may become
available in future. These securities can play an important role in minimising
interest rate risk in a portfolio.
Spread
risk: Though the sovereign yield curve might remain constant, investments in
corporate bonds are exposed to the risk of spread widening between corporate
bonds and gilts. Typically, if this spread widens, the prices of the corporate
bonds tend to fall and so could the NAV of the Scheme. Similar risk prevails
for the investments in the floating rate bonds, where the benchmark might remain
unchanged, but the spread over the benchmark might vary. In such an event, if
the spread widens, the price and the NAV of a Scheme could fall.
Sovereign
risk: The Central Government of a country is the issuer of the local currency
in that country. The Government raises money to meet its capital and revenue
expenditure by issuing debt or discounted securities. Since payment of interest
and principal amount has a sovereign status implying no default, such
securities are known as securities with sovereign credit. For domestic
borrowers and lenders, the credit risk on such Sovereign credit is near zero
and is popularly known as “risk free security” or “Zero Risk security”. Thus
Zero-Risk is the lowest risk, even lower than a security with “AAA” rating and
hence commands a yield, which is lower than a yield on “AAA” security.
Credit risk or default risk:
This refers to inability of the issuer of the debt security to make timely
payments of principal and/or interest due. In case of investments in government
securities, the credit risk is minimal. It is reflected in the credit rating of
the issuer. Hence if the credit rating of the issuer is downgraded, the price
of the security will suffer a loss and the NAV will fall. Credit risk factors
pertaining to lower rated securities also apply to lower rated zero coupon and
deferred interest kind bonds. Lower rated zero coupon and deferred interest
kind bonds carry an additional risk in that, unlike bonds that pay interest
through
the period of maturity, the Scheme by investing in these bonds will
realize no cash till the cash payment date and if the issuer defaults, the
Scheme may obtain no return on its investment.
Liquidity
risk: This represents the possibility that the realised price from selling the
security might be lesser than the valuation price as a result of illiquid
market. If a large outflow from the Scheme is funded by selling some of the
illiquid securities, the NAV could fall even if there is
No change
in interest rates. Illiquid securities are typically quoted at a higher yield
than the liquid securities and have higher bid offer spreads. Investment in
illiquid securities results in higher current yield for the portfolio.
Liquidity risk is a characteristic of the Indian fixed income market today. In
addition, money market securities, while fairly liquid, lack a well-developed
secondary market, which may restrict the selling ability of the Scheme and may
lead to the Scheme incurring losses till the security is finally sold.
The
corporate debt market is relatively illiquid vis-a-vis the government
securities market. 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.
Re-investment
risk: This is associated with the fact that the intermediate cash flows
(coupons or principal payment in case a security gets called or repurchased)
may not be reinvested at the same yield as assumed in the original
calculations.
Settlement risk: Different segments of Indian financial markets have
different settlement periods and such periods may be extended significantly by
unforeseen circumstances. Delays or other problems in settlement of
transactions could result in temporary periods when the assets of the Scheme
are not invested and no return is earned thereon. The inability of the Scheme
to make intended securities purchases, due to settlement problems, could cause
the Scheme, to miss certain investment opportunities. Similarly, the inability
to sell securities held in the Scheme’s portfolio, due to the absence of a well
developed and liquid secondary market for debt securities, may result at times
in potential losses to such Scheme in the event of a subsequent decline in the
value of securities held in the portfolio of the Scheme.
Market
risk: Lower rated or unrated securities are more likely to react to
developments affecting the market and the credit risk than the highly rated
securities which react primarily to movements in the general level of interest
rates. Lower rated or unrated securities also tend to be more sensitive to
economic conditions than higher rated securities.
In addition
to the factors that affect the values of securities, the NAV of Units of the
Scheme will fluctuate with the movement in the broader fixed income market,
money market and derivatives market and may be influenced by factors
influencing such markets in general including but not limited to economic
conditions, changes in interest rates, price and volume volatility in the bond
and stock markets, changes in taxation, currency exchange rates, foreign investments,
political, economic or other developments and closure of the stock exchanges.
Investments
in different types of securities are subject to different levels and kinds of
risk. Accordingly, the Scheme’s risk may increase or decrease depending upon
its investment pattern. E.g. investments in corporate bonds carry a higher
level of risk than investments in Government securities. Further, even among
corporate bonds, bonds which have a higher rating are comparatively less risky
than bonds which have a lower rating.
Securitised Debt:
Securitized Debt such as Mortgage Backed
Securities (“MBS”) or Asset Backed Securities (“ABS”) is a financial instrument
(bond) whose interest and principal payments are backed by an underlying cash
flow from another asset. Asset Securitization is a process whereby commercial
or consumer credits are packaged and sold in the form of financial instruments.
A typical process of asset securitization involves sale of specific receivables
to a Special Purpose Vehicle (SPV) set up in the form of a trust or a company.
The SPV in turn issues financial instruments
(promissory notes, participation certificates or other debt instruments) also
referred to as “Securitized Debt” to the investors evidencing the beneficial
ownership of the investors in the receivables. The financial instruments are
rated by an independent credit rating agency.
Risks Associated with
Securitised Debt
Risk due to prepayment: In case of securitized
debt, changes in market interest rates and pre-payments may not change the
absolute amount of receivables for the investors but may have an impact on the
reinvestment of the periodic cash flows that an investor receives on
securitized papers. In the event of pre-payment of the underlying debt,
investors may be exposed to changes in tenor and yield.
Liquidity Risk: Presently, despite recent legal
developments permitting the listing of securitized debt instruments, the
secondary market for securitized debt in India is not very liquid. Even if a
more liquid market develops in the future, secondary transactions in such
instruments may be at a discount to initial issue price due to changes in the
interest rate structure.
Limited Recourse and Credit Risk: Certificates issued on investment in
securitized debt represent a beneficial interest in the underlying receivables
and there is no obligation on the issuer, seller or the originator in that
regard. Defaults on the underlying loan can adversely affect the pay outs to
the investors and thereby, adversely affect the NAV of the Scheme. While it is
possible to
repossess and sell the underlying asset, various factors can delay or
prevent repossession and the price obtained on sale of such assets may be low.
Bankruptcy Risk: If the originator of securitized debt instruments in
which the Scheme invests is subject to bankruptcy proceedings and the court in
such proceedings concludes that the sale of the assets from originator to the
trust was not a 'true sale', then the Scheme could experience losses or delays
in the payments due. Normally, care is taken in structuring the securitization
transaction so as to minimize the risk of the sale to the trust not being
construed as a 'true sale'.
Risk of Co-mingling: Servicers in a
securitization transaction normally deposit all payments received from the
obligors into a collection account. However, there could be a time gap between
collection by a servicer and depositing the same into the collection account.
In this interim period, collections from the loan agreements by the servicer
may not be segregated from other funds of the servicer. If the Servicer fails
to remit such funds due to investors, investors in the Scheme may be exposed to
a potential loss.
Risk
Controls for Securitised Debt
1. Risk
profile of securitized debt vis a vis risk appetite of the scheme:
Securitized Debt is a financial instrument
(bond) whose interest and principal payments are backed by an underlying cash
flow from another asset. In line with the investment strategy of the Scheme and
considering that there would be no intermediate redemption pressures for the
Fund Manager, the Scheme may take exposure to rated Securitized Debt with the
intent to enhance portfolio yield without compromising on credit quality.
2.
Policy relating to
originators based on nature of originator, track record, NPAs, losses in
earlier securitized debt, etc The evaluation parameters of the originators are
as under:
Track
record
Willingness to pay, through credit enhancement facilities etc. Ability
to pay
Business
risk assessment, wherein following factors are considered:
- Outlook
for the economy (domestic and global)
- Outlook
for the industry
- Company
specific factors
Track
record
We ensure that there is adequate past track
record of the Originator before selection of the pool including a detailed look
at the number of issuances in past, track record of issuances, experience of
issuance team, etc. We also look at the credit profile of the Originator for
its own debt. We normally invest only if the Originator’s credit rating is at
least ‘AA’ (+/- or equivalent) or above by a credit rating agency recognized by
SEBI.
Willingness
to pay
As the securitized structure has underlying collateral structure,
depending on the asset class, historical NPA trend and other pool / loan
characteristics, a credit enhancement in the form of cash collateral, such as
fixed deposit, bank guarantee etc. is obtained, as a risk mitigation measure.
Ability
to pay
This
assessment is based on a detailed financial risk assessment.
A traditional SWOT analysis is used for identifying company specific
financial risks. One of the most important factors for assessment is the
quality of management based on its past track record and feedback from market
participants. In order to assess financial risk a broad assessment of the
issuer’s financial statements is undertaken to review its ability to undergo
stress on cash flows and asset quality.
Business
risk assessment, wherein following factors are considered:
- Outlook
for the economy (domestic and global)
- Outlook
for the industry
- Company
specific factors
In addition a detailed review and assessment of rating rationale is done
including interactions with the company as well as agency.
Typically we would avoid investing in securitization transaction
(without specific risk mitigant strategies / additional cash/security
collaterals/ guarantees) if we have concerns on the following issues regarding
the originator / underlying issuer:
High
default track record/ frequent alteration of redemption conditions / covenants
High leverage ratios - both on a standalone basis as well on a fated
level/ group level. This is very important in case of single borrower loan sell
down
Higher proportion of re-schedulement of underlying assets of the pool or
loan Higher proportion of overdue assets of the pool or the underlying loan
Poor
reputation in market
Insufficient
track record of servicing of the pool or the loan
3.
Risk mitigation strategies
for investments with each kind of originator Risk Mitigation Strategies
Investments in securitized debt will be done based on the assessment of
the originator which is carried out by the Fixed Income team based on the
in-house research capabilities as well as the inputs from the independent
credit rating agencies.
In order
to mitigate the risk at the issuer/originator level, the Fixed Income team will
consider various factors which will include:
size and
reach of the originator
the
infrastructure and follow-up mechanism
quality of information disseminated by the issuer/originator; and the
Credit enhancement for different type of issuer/originator
the
originator’s track record in that line of business
4. The level of diversification with respect to the underlying assets,
and risk mitigation measures for less diversified investments
Majority of securitized debt investments shall be in asset backed pools
wherein the underlying assets could be Medium and Heavy Commercial Vehicles,
Light Commercial Vehicles (LCV), Cars, and Construction Equipment, Mortgages
etc.
The Fund Manager will invest in securitized debt which are rated ‘AA’
(+/- or equivalent) or above by a credit rating agency recognized by SEBI.
While the risks mentioned above cannot be eliminated completely, they may be minimized
by considering the diversification of the underlying assets as well as credit
and liquidity enhancements.
Table 1:
illustrates the framework that will be applied while evaluating investment
decision relating to a pool securitization transaction:
|
Characteristics Mortgage
|
Commercial
|
CAR
|
2
wheelers
|
Micro
|
Person
|
Single
|
|
Sell
|
Others
|
|
/Type
of Pool
|
Loan
|
Vehicle
|
and
|
|
|
Finance
|
al
|
Downs
|
|
|
|
|
|
|
Construction
|
|
|
Pools
|
Loans
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
Up to
120
|
Up
|
to
|
60
|
Up to
60
|
Up to
60
|
Up to
12
|
Up to
36
|
Case
|
by
|
case
|
Any other
|
|
Average
|
months
|
months
|
|
months
|
months
|
months
|
months
|
basis
|
|
|
class
|
of
|
|
maturity
|
(in
|
|
|
|
|
|
|
|
|
|
|
securitize
|
|
Months)
|
|
|
|
|
|
|
|
|
|
|
|
d
|
debt
|
|
Collateral
|
In excess
|
In
|
excess
|
of
|
In
|
In
excess of
|
In excess
|
In
|
Case
|
by
|
case
|
would be
|
|
margin
|
of 3%
|
5%
|
|
|
excess
|
5%
|
of 10%
|
excess
|
basis
|
|
|
evaluated
|
|
(including cash
|
|
|
|
of 5%
|
|
|
of 10%
|
|
|
|
on a case
|
|
,guarantees,
|
|
|
|
|
|
|
|
|
|
|
|
by
|
case
|
|
excess interest
|
|
|
|
|
|
|
|
|
|
|
basis
|
|
|
spread
|
,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subordinate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
Loan
|
95%or
|
100%
|
or 95%
or
|
95%
|
or
|
Unsecure
|
unsecur
|
Case by case
|
|
to Value Ratio
|
lower
|
lower*
|
lower
|
lower
|
|
d
|
ed
|
basis
|
|
Average
|
|
Minimum
|
Minimum
6
|
Minimu
|
Minimum 6
|
|
Minimum
|
Minimu
|
Case by case
|
|
seasoning
of the
|
3
months
|
months
|
m 6
|
months
|
|
1
month
|
m 2
|
basis
|
|
Pool
|
|
|
|
months
|
|
|
|
months
|
|
|
Maximum
single
|
5%
|
5%
|
1%
|
1%
|
|
<1%
|
<1%
|
Case by case
|
|
exposure range
|
|
|
|
|
|
|
|
basis
|
|
Average
|
single
|
<5%
|
<5%
|
<1%
|
<1%
|
|
<1%
|
<1%
|
Case by case
|
|
exposure
|
range
|
|
|
|
|
|
|
|
basis
|
|
%
|
|
|
|
|
|
|
|
|
|
* LTV based on chasis value
Note: The information contained herein is based
on current market conditions and may change from time to time based on changes
in such conditions, regulatory changes and other relevant factors. Accordingly,
our investment strategy, risk mitigation measures and other information
contained herein may change in response to the same.
In addition to the framework as per the table
above, we also take into account following factors, which are analyzed to
ensure diversification of risk and measures identified for less diversified
investments:
Size of the loan: The size of each loan is generally analyzed on a
sample basis and an analysis of the static pool of the originator is undertaken
to ensure that the same matches with the static pool characteristics. It also
indicates whether there is high reliance on very small ticket size borrower
which could result in delayed and expensive recoveries.
Average
original maturity of the pool: The analysis of average maturity of the pool is
undertaken to evaluate whether the tenor of the loans are generally in line
with the average loans in the respective industry and repayment capacity of the
borrower.
Default
rate distribution: The Fixed Income team generally ensures that all the
contracts in the pool are current to ensure zero default rate distribution.
Geographical Distribution: The analysis of
geographical distribution of the pool is undertaken to ensure prevention of
concentration risk.
Risk
Trenching: Typically, we avoid investing in Securitized debt in the form of sub
ordinate tranche, without specific risk mitigant strategies / additional cash /
security collaterals/ guarantees, etc.
Credit
enhancement facility - credit enhancement facilities in the form of cash
collateral, such as fixed deposits, bank guarantee etc. could be obtained as a
risk mitigation measure.
Liquid facility - these
parameters will be evaluated based on the asset class as mentioned in the table
above
Structure of the pool of underlying assets - The structure of the pool
of underlying assets would be either single asset class or combination of
various asset classes as mentioned in the table above. We could add new asset
class depending upon the securitization structure and changes in market
acceptability of asset classes
Investment in the Single Loan Securitization
would be done based on the assessment of credit risk associated with the
underlying borrower as well as the originator. The Fixed Income team will
adhere internal credit process and perform a detailed review of the underlying
borrower prior to making investments.
5. Minimum retention period
of the debt by originator prior to securitization
Issuance of securitized
debt is governed by the Reserve Bank of India. RBI norms cover the "true
sale" criteria including credit
enhancement and liquidity
enhancements. In addition, RBI has proposed minimum holding period of between
nine and twelve
months for assets before
they can be securitized. The minimum holding period depends on the tenor of the
securitization
transaction. The Fund will
invest in securitized debt that are
compliant with the laws and
regulations.
6. Minimum retention
percentage by originator of debts to be securitized
Issuance of securitized debt is governed by the Reserve Bank of India.
RBI norms cover the "true sale" criteria including credit enhancement
and liquidity enhancements, including maximum exposure by the originator in the
PTCs. In addition, RBI has proposed minimum retention requirement of between
five and ten percent of the book value of the loans by the originator. The
minimum retention requirement depends on the tenor and structure of the
securitization transaction. The Fund will invest in securitized debt that are
compliant with the laws and regulations.
7.
The mechanism to tackle
conflict of interest when the mutual fund invests in securitized debt of an
originator and the originator in turn makes investments in that particular
scheme of the fund
An investment by the scheme in any security is done after detailed analysis
by the Fixed Income team and in accordance with the investment objectives and
the asset allocation pattern of a scheme. All investments are made on an arm’s
length basis without consideration of any investments (existing/potential) in
the schemes made by any party related/involved in the transaction. The robust
credit process ensures that there is no conflict of interests when a scheme
invests in securitized debt of an originator and the originator in turn makes
investments in that particular scheme. Normally the issuer who is securitizing
instrument is in need of money and is unlikely to have long term surplus to
invest in mutual fund scheme.
Furthermore, there is clear cut segregation of duties and
responsibilities with respect to Investment function and Sales function.
Investment decisions are being taken independently based on the above mentioned
parameters and investment by the originator in the scheme is based on their own
evaluation of the scheme vis a vis their investment objectives.
8.
The resources and mechanism
of individual risk assessment with the AMC for monitoring investment in
securitized debt
The risk
assessment process for securitized debt, as detailed in the preceding
paragraphs, is same as any other credit. The investments in securitized debt
are done after appropriate research by credit analyst. The ratings are
monitored for any movement.
The
resources for and mechanisms of individual risk assessment with the AMC for
monitoring investment in securitized debt are as follows:
Fixed
Income Team - Risk assessment and monitoring of investment in Securitized Debt
is done by credit team.
Ratings are monitored for any movement - Based on the cash-flow report
and analyst view, periodic review of utilization of credit enhancement shall be
conducted and ratings shall be monitored accordingly.
Wherever the schemes portfolio is disclosed, the AMC may give a
comprehensive disclosure of Securitised debt instruments held in line with SEBI
requirement.
Note: The information contained herein is based on current market
conditions and may change from time to time based on changes in such
conditions, regulatory changes and other relevant factors. Accordingly, our
investment strategy, risk mitigation measures and other information contained
herein may change in response to the same.
Risks
associated with investing in derivatives
The Scheme will invest in derivative products in accordance with and to
the extent permitted under the Regulations and by RBI. Derivative products are
specialized instruments that require investment techniques and risk analysis
different from those associated with stocks and bonds. The use of a derivative
requires an understanding not only of the underlying instrument but of the
derivative itself. Trading in derivatives carries a high degree of risk
although they are traded at a relatively small amount of margin which provides
the possibility of great profit or loss in comparison with the principal
investment amount. Thus, derivatives are highly leveraged instruments. Even a
small price movement in the underlying security could have an impact on their
value and consequently, on the NAV of the Units of the Scheme.
Derivative products are leverage instruments and can provide
disproportionate gains as well as disproportionate losses to the investors.
Execution of such strategies depends upon the ability of the Fund Manager to
identify such opportunities. Identification and execution of the strategies to
be pursued by the Fund Manager involved uncertainty and decision of Fund
Manager may not always be profitable. No assurance can be given that the Fund
Manager will be able to identify or execute such strategies.
Derivative products are specialized instruments
that require investment techniques and risk analysis different from those associated
with stocks and bonds. Derivatives require the maintenance of adequate controls
to monitor the transactions entered into, the ability to assess the risk that a
derivative add to the portfolio and the ability to forecast price of securities
being hedged and interest rate movements correctly. There is a possibility that
a loss may be sustained by the portfolio as a result of the failure of another
party (usually referred to as the “counterparty”) to comply with the terms of
the derivatives contract. Other risks in using derivatives include the risk of
mis-pricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and indices.
The risks associated with the use of derivatives
are different from or possibly greater than, the risks associated with
investing directly in securities and other traditional investments”.
The
derivatives market in India is nascent and does not have the volumes that may
be seen in other developed markets, which may result in volatility to the
values.
The Scheme(s) may face execution risk, whereby the rates
seen on the screen may not be the rate at which the ultimate execution of the
derivative transaction takes place.
The Scheme(s) may find it difficult or impossible to
execute derivative transactions in certain circumstances. For example, when
there are insufficient bids or suspension of trading due to price limit or
circuit breakers, the Scheme(s) may face a liquidity issue.
Investments in index futures face
the same risk as the investments in a portfolio of shares representing an
index. The extent of loss is the same as in the underlying stocks.
The Scheme bears a risk that it may not be able to
correctly forecast future market trends or the value of assets, indices or
other financial or economic factors in establishing derivative positions for
the Scheme.
There is the possibility that a loss may be sustained by
the portfolio as a result of the failure of another party (usually referred to
as the "counter party") to comply with the terms of the derivatives
contract. The counter party may default on a transaction before settlement and
therefore, the Scheme(s) are compelled to negotiate with another counterparty
at the then prevailing (possibly unfavourable) market price.
The risk of loss in trading futures contracts can be
substantial, because of the low margin deposits required, the extremely high
degree of leverage involved in futures pricing and the potential high volatility
of the futures markets.
Where derivatives are used for hedging, such use may
involve a basic risk where the instrument used as a hedge does not match the
movement in the instrument/underlying asset being hedged. The risk may be
inter-related also e.g. interest rate movements can affect equity prices, which
could influence specific issuer/industry assets.
Other risks in using derivatives
include the risk of mispricing or improper valuation of derivatives and the
inability of derivatives to correlate perfectly with underlying assets, rates
and indices.
Trading
through mutual fund trading platforms of BSE and/ or NSE
In respect of transaction in Units of the Scheme through BSE and/ or
NSE, allotment and redemption of Units on any Business Day will depend upon the
order processing/settlement by BSE and/ or NSE and their respective clearing
corporations on which the Mutual Fund has no control.
Performance Risk: The Scheme’s performance can
decrease or increase, depending on a variety of factors, which may affect the
values and income generated by a Scheme’s portfolio of securities. The returns
of the Scheme’s investments are based on the current yields of the securities,
which may be affected generally by factors affecting capital markets such as
price and volume, volatility in the stock markets, interest rates, currency
exchange rates, foreign investment, changes in government and Reserve Bank of
India policy, taxation, political, economic or other developments and closure
of the stock exchanges. Investors should understand that the investment pattern
indicated for the Scheme, in line with prevailing market conditions, is only a
hypothetical example as all investments involve risk and there can be no
assurance that the Scheme’s investment objective will be attained nor will the
Scheme be in a position to maintain the model percentage of investment pattern/
composition particularly under exceptional circumstances so that the interest
of the unit holders are protected. The AMC will endeavour to invest in highly
researched growth companies, however the growth associated with equities may be
generally high as also the erosion in the value of the investments/portfolio in
the case of the capital markets passing through a bearish phase is a distinct
possibility. A change in the prevailing rates of interest is likely to affect
the value of the Scheme’s investments and thus the value of the Scheme’s Units.
The value of money market instruments held by the Scheme generally will vary
inversely with the changes in prevailing interest rates.
Risks
Associated with Investments in REITs and InvITS:
• Market Risk: REITs and InvITs Investments are volatile and
subject to price fluctuations on a daily basis owing to factors impacting the
underlying assets. AMC/Fund Manager’s will do the necessary due diligence, but
actual market movements may be at variance with the anticipated trends.
• Liquidity Risk: As the liquidity of the investments made
by the Scheme(s) could, at times, be restricted by trading volumes, settlement
periods, dissolution of the trust, potential delisting of units on the exchange
etc, the time taken by the Mutual Fund for liquidating the investments in the
scheme may be high in the event of immediate redemption requirement. Investment
in such securities may lead to increase in the scheme portfolio risk.
• Reinvestment Risk: Investments in REITs & InvITs may
carry reinvestment risk as there could be repatriation of funds by the Trusts
in form of buyback of units or dividend pay-outs, etc. Consequently, the proceeds
may get invested in assets providing lower returns.
• Regulatory/Legal Risk: REITs and InvITs being new asset
classes, rights of unit holders such as right to information etc. may differ
from existing capital market asset classes under Indian Law
Risk of
Writing of Call Option Under a Cover Call Strategy
Under a delivery settlement a call writer will have to
part with the physical holding of security which was originally intended for
long term holding
Risks associated with Segregated Portfolio
Investor holding units of segregated portfolio may not able to
liquidate their holding till the time recovery of money from the issuer.
Security comprises of segregated portfolio may not realise any
value.
Listing of units of segregated portfolio in recognised stock
exchange does not necessarily guarantee their liquidity. There may not be
active trading of units in the stock market. Further trading price of units on
the stock market may be significantly lower than the prevailing NAV
Risk associated with
potential change in Tax structure
This summary of tax implications given in the
taxation section (Units and Offer Section III) is based on the current
provisions of the applicable tax laws. This information is provided for general
purpose only. The current taxation laws may change due to change in the ‘Income
Tax Act 1961’ or any subsequent changes/amendments in Finance
Act/Rules/Regulations. Any change may entail a higher outgo to the scheme or to
the investors by way of securities transaction taxes, fees, taxes etc. thus
adversely impacting the scheme and its returns.
Risk Control / Mitigation
measures for equity investments and related investments:
Investment in equity has an inherent market risk
which cannot be mitigated generally. However, following measures have been
implemented with an objective to mitigate /control other risks associated with
equity investing:
Nature
of Risk
Regulatory
Risk
Poor Portfolio Quality
Performance
Risk
Liquidity
Risk
Concentration
Risk
Mitigation Measures
Online monitoring of various exposure limits by the Front Office System.
Also as a backup, manual controls are also implemented.
Pre-approved universe of stocks based on strong fundamental research.
New stock addition only with the prior approval of investment committee.
Periodical review of stock wise profit & loss. Review of scheme
performance vis. a vis. Benchmark index as well as peer group.
Periodical review of the liquidity position of each scrip (Market
capitalization, average volume in the market vis. a vis. Portfolio Holding)
Cap on
maximum single sector exposure. Cap on maximum single stock exposure
Risk Control / Mitigation
measures for Debt and related Investments:
Nature of
Risk Liquidity Risk
Credit
Risk
Interest
Rate Risk
Regulatory
Risk
Mitigation Measures
Focus on
good quality paper at the time of portfolio construction
Portfolio
exposure spread over various maturity buckets to in line with maturity of a
scheme.
In house dedicated team for credit appraisal Issuer wise exposure limit
Rating
grade wise exposure limit
Periodical
portfolio review by the Board of AMC
Close watch on the market events Active duration management
Portfolio
exposure spread over various maturities.
Online monitoring of various exposure limits by the Front Office System
also as a backup, manual controls are implemented.
B. REQUIREMENT OF MINIMUM
INVESTOR IN THE SCHEME
The scheme shall have a minimum of 20 investors and no single investor
shall account for more than 25% of the corpus of the Scheme. The two conditions
mentioned above shall be complied with on a calendar quarter basis, on an
average basis, as specified by SEBI. If there is a breach of the 25% limit by
any investor over the quarter, a rebalancing period of one month would be
allowed and thereafter the investor who is in breach of the rule shall be given
15 days’ notice to redeem his exposure over the 25 % limit. Failure on the part
of the said investor to redeem his exposure over the 25 % limit within the
aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the
applicable Net Asset Value on the 15th day of the notice period. However, in
case the Scheme under the scheme does not have a minimum of 20 investors, on an
average basis, in the stipulated period (i.e. during the concerned calendar
quarter), the provisions of Regulation 39(2) (c) of the SEBI (MF) Regulations
would become applicable automatically without any reference from SEBI and
accordingly the Scheme shall be wound up and the units would be redeemed at
applicable NAV. The Scheme shall adhere to the requirements prescribed by SEBI
from time to time in this regard.
C. SPECIAL CONSIDERATIONS
Investors are urged to study the terms of the SID carefully before
investing in the Scheme, and to retain this SID for future reference.
Tax Consequences
Redemption by the unitholders due to change in the fundamental attribute
(if any, in future) of the scheme or due to any other reason may entail tax
Consequences for which the
Trustees, AMC, Fund or any of their Directors / employees shall not be liable.
Disclosure / Disclaimer
To the best of the knowledge and belief of the Directors of the Trustee
Company, information contained in this SID is in accordance with the SEBI
Regulations and facts and
does not omit anything likely to have a material impact on the importance of
such information.
Neither
this SID nor the Units have been registered in any jurisdiction. The
distribution of this SID in certain jurisdictions may be restricted or subject
to registration requirements and, accordingly, persons who come into possession
of this SID are required to inform themselves about, and to observe, any such
restrictions. No persons receiving a copy of this SID or any accompanying
application form in any such jurisdiction may treat this SID or such
application form as constituting an invitation to them to subscribe for Units,
nor should they in any event use any such application form, unless in the
relevant jurisdiction such an invitation could lawfully be made to them and
such application form could lawfully be used without compliance with any
registration or other legal requirements. Accordingly, this SID does not
constitute an offer or solicitation to anyone in any jurisdiction in which such
offer or solicitation is not lawful or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation. It is the responsibility of any persons in
possession of this SID and any persons wishing to apply for Units pursuant to
this SID to inform themselves of, and to observe, all applicable laws and
Regulations of such relevant jurisdiction.
Prospective investors should review / study this SID carefully and in
its entirety and should not construe the contents hereof or regard the
summaries contained herein as advice relating to legal, taxation, or financial
/ investment matters and are advised to consult their own professional
advisor(s) as to the legal or any other requirements or restrictions relating
to the subscription, gifting, acquisition, holding, disposal (sale, transfer,
switch or redemption or conversion into money) of Units and to the treatment of
income (if any), capitalisation, capital gains, any distribution, and other tax
consequences relevant to their subscription, acquisition, holding,
capitalisation, disposal (sale, transfer, switch, redemption or conversion into
money) of Units within their jurisdiction of nationality, residence, domicile
etc. or under the laws of any jurisdiction to which they or any managed funds
to be used to purchase/gift Units are subject, and (also) to determine possible
legal, tax, financial or other consequences of subscribing / gifting to, purchasing
or holding Units before making an application for Units.
No person
has been authorised to give any information or to make any representations not
confirmed in this SID in connection with the New fund offer / Subsequent Offer
of Units, and any information or representations not contained herein must not
be relied upon as having been authorised by the Mutual Fund or the Asset
Management Company or the Trustee Company. Statements made in this SID are
based on the law and practice currently in force in India and are subject to
change therein. Neither the delivery of this SID nor any sale made hereunder
shall, under any circumstances, create any impression that the information
herein continues to remain true and is correct as of any time subsequent to the
date hereof.
Notwithstanding
anything contained in the SID the provisions of SEBI (Mutual Funds) Regulations
1996 and guidelines thereunder shall be applicable. The Trustee Company would
be required to adopt / follow any regulatory changes by SEBI / RBI etc and /or
all circulars / guidelines received from AMFI from time to time if and from the
date as applicable. The Trustee Company in such a case would be obliged to
modify / alter any provisions / terms of the SID during / after the launch of
the scheme by following the prescribed procedures in this regard.
The Mutual Fund may disclose details of the investor‘s account and
transactions there under to those intermediaries whose stamp appears on the
application form or who have been designated as such by the investor. In
addition, the Mutual Fund may disclose such details to the bankers, as may be
necessary for the purpose of effecting payments to the investor. The Fund may
also disclose such details to regulatory and statutory authorities/bodies as
may be required or necessary.
Pursuant to the provisions of Prevention of Money Laundering Act, 2002,
if after due diligence, the AMC believes that any transaction is suspicious in
nature as regards money laundering, on failure to provide required
documentation, information, etc. by the unit holder the AMC shall have absolute
discretion to report such suspicious transactions to Financial Intelligence
Unit - India / or to freeze the folios of the investor(s), reject any
application(s) / allotment of units.
Other Business Activities
of AMC:
AMC has obtained registration from SEBI vide
Registration No. INP000001058 dated September 14, 2004 to act as a Portfolio
Manager under SEBI (Portfolio Managers) Regulations, 1993. AMC has appointed
separate Fund Manager(s) for the same and back office is also segregated from
Mutual Fund Back Office.
AMC managing schemes of Tata Alternative
Investment Fund (Alternative Investment Fund-Category II & Category III).
AMC has appointed separate Fund Manager(s) for the same and back office is also
segregated from Mutual Fund Back Office.
AMC has obtained no objection from SEBI for
providing investment advisory service and investment management services to
Offshore Funds. These funds are registered with SEBI as Foreign Portfolio
Investors (FPIs). In terms of Regulation 24 (b) (vi) of SEBI (Mutual Funds)
Regulations, 1996 there is no need to appoint separate fund manager for
managing these offshore funds.
Tata Asset Management Ltd. has also received no
objection to investment management services through its subsidiary company Tata
Pension Management Ltd under regulation 24(2) of SEBI (Mutual Funds)
Regulations,1996.
AMC has implemented
necessary controls to avoid conflicts of interest in managing above activities.
All other business activities mentioned above will be explicitly
forbidden from the acquisition of any asset out of the assets of the mutual
fund scheme which involves the assumption of any liability which is unlimited
or shall not result in encumbrance of the assets of the mutual fund scheme in
any way and also should not affect the net worth requirements of Tata Asset
Management Limited for mutual fund operation.
D. DEFINITIONS & ABBREVIATION
1. “Business Day” or “Working Day”
2.
“Business Hours”
3.
“BSE’’/”NSE”
4.
“Calendar Year”
5.
“Custodian”
6.
“Entry Load”
7.
“Exit Load”
8.
“Derivative
Exposure”
9.
“Day”
10.
“Financial Year”
11.
“Group”
12.
“IMA”
13.
“Investor”
14. “Net Asset Value” or “NAV”
A day other than
Saturday and Sunday
a day on which the Bombay Stock Exchange Limited(BSE) and/or National
Stock Exchange of India Limited(NSE) are closed for trading
a day on which sale and
repurchase of units is suspended by the AMC
a day on which normal business could not be transacted due to storms,
floods, bandhs, strikes etc.
The AMC reserves the right to declare any day as a Business Day or
otherwise at any or all Investor Service
Centers.
Business
hours are from 10.00 A.M. to 3.00 P.M. on any Business Day.
The
Bombay Stock Exchange Limited / The National Stock Exchange of India Limited
A Calendar
Year shall be 12 full English Calendar months commencing from 1st January and
ending on 31st December.
ICICI
Bank
Amount
that is paid by the investors at the time of entry / subscription into the
scheme.
Amount
that is paid by the investors at the time of exit / redemption from the scheme.
SEBI Circular No. Cir / IMD
/ DF / 11 / 2010 dated August 18, 2010
Each position taken in derivatives shall have an
associated exposure as defined under. Exposure is the maximum possible loss
that may occur on a position. However, certain derivative positions may
theoretically have unlimited possible loss. Exposure in derivative positions
shall be computed as follows:
Long Futures : Futures
Price * Lot Size * Number of Contracts
Short Futures : Futures
Price * Lot Size * Number of Contracts
Option Bought : Option
Premium Paid * Lot Size * Number of Contracts
Any day
as per English Calendar viz. 365 days in a year.
A Financial Year shall be 12 full English Calendar months commencing
from 1st April and ending on 31st March.
Group” means a group as defined in clause (b) of the Explanation to
Section 5 of the Competition Act, 2002 (12 of 2003)”.
Investment Management Agreement dated 9th May, 1995, as amended from time
to time, between the TTCL & TAML.
An investor means any resident or non-resident person whether individual
or not (legal entity), who is eligible to subscribe units under the laws of
his/her/their country of incorporation, establishment, citizenship, residence
or domicile and under the Income Tax Act, 1961 including amendments thereto
from time to time and who has made an application for subscribing units under
the Scheme. Under normal circumstances, an Unit holder shall be deemed to be
the investor.
(a) In
case of winding up of the Fund:
In respect of an Unit, the amount that would be payable to the holder of
that Unit on any date if the fund were to be wound up and its assets
distributed on that date (valuing assets and liabilities in accordance with the
normal accounting policies of the Fund, but ignoring net distributable income
of the current financial year and winding up expenses).
(b)
Daily for Ongoing Sale/Redemption/ Switch:
In respect of a Unit, the amount that would be payable by/to the investor
/ holder of that Unit on any Valuation date by dividing the net assets of the
Scheme by the number of outstanding Units on the Valuation date.
15
15.
“Net Assets”
16. “Non- Resident Indian” / NRI
17.
“PermissibleInvestments”
18. “Portfolio”
19.
“Regulations”
20.
“Resident”
21.
“Scheme”
22.
“SEBI”
23.
“SEBI
Regulations”
24.
“SID”
25.
“SAI”
26.
“SIP”
27.
‘SWP”
28.
“STP”
29.
“TAML”
30.
“TICL”
31.
“TMF” or “Fund”
32.
“Total Assets”
33.
“Trust Deed”
34.
“TSL”
35. “TTCL or Trustee Company”
36.
“Unitholder”
37.
“Units”
38.
“Year”
Net Assets of the Scheme / Plan at any time
shall be the value of the Fund’s total assets less its liabilities taking into
consideration the accruals and the provisions at that time.
A person resident outside India who is a citizen
of India or is a person of Indian origin as per the meaning assigned to the
term under Foreign Exchange Management (Investment in firm or proprietary
concern in India) Regulations, 2000.
Investments made on account of the Unitholders
of the Scheme in securities and assets in accordance with the SEBI Regulations.
Portfolio at any time shall
include all Permissible Investments and Cash.
Regulations imply SEBI Regulations and the
relevant rules and provisions of the Securities and Exchange Board of India
(Depositories and participants) Regulations 1996, Public Debt Act 1944,the
relevant notifications of the Government of India Ministry of Finance
Department of Revenue, (Central Board of Direct Taxes), the Income Tax Act,
1961,Foreign Exchange Management Act, 1999 as amended from time to time and
shall also include any Circulars, Press Releases or Notifications that may be
issued by SEBI or the Government of India or the Reserve Bank of India from
time to time.
A resident means any person resident in India
under the Foreign Exchange Management Act, 1999 and under the Income Tax Act,
1961, including amendments thereto from time to time.
Tata Balanced Advantage
Fund (including Plans and Options thereunder), collectively referred
to as “the Scheme(s) and
individually, as the context permits, as the “the Scheme”
Securities & Exchange
Board of India established under the Securities & Exchange Board of
India Act, 1992.
The Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996 as amended from time to time and shall also
include any Mutual Fund Regulations, Circulars, Press Releases, or
Notifications that may be issued by SEBI or the Government of India to regulate
the activities and growth of Mutual funds.
Scheme Information Document
Statement of Additional
Information
Systematic Investment Plan, a facility to invest
systematically (daily / weekly / monthly / quarterly / half-yearly / yearly) in
the scheme.
Systematic Withdrawal Plan, a facility to redeem
systematically (daily / weekly / monthly / quarterly / half-yearly / yearly)
from the scheme.
Systematic Transfer Plan, a facility to switch
money / investment from this scheme to other scheme(s) of Tata Mutual Fund,
systematically (daily / weekly / monthly / quarterly / half-yearly / yearly)
Tata Asset Management Limited, the Asset
Management Company (AMC), a company within the meaning of the Companies Act,
1956 (1 of 1956) and includes its successors and permitted assigns.
Tata Investment Corporation Limited, a sponsor
of the TMF and a shareholder of TAML, a company within the meaning of the
Companies Act, 1913 and includes its successors and permitted assigns.
Tata Mutual Fund, a trust established under a
Trust Deed dated 9th May, 1995, under the provisions of The Indian Trusts Act,
1882, bearing SEBI registration No. MF/023/95/9.
Total Assets of the Scheme at any time shall be
the total value of the Schemes assets taking into consideration the accruals.
The Trust Deed of the Mutual Fund dated 9th May,
1995, as amended from time to time, made between TSL and TICL as the settlors,
and TTCL as the Trustee.
Tata Sons Limited, a sponsor of TMF and a
shareholder of TAML, a company within the meaning of the Companies Act, 1913
and includes its successors and permitted assigns.
Tata Trustee Company Limited, a company within
the meaning of the Companies Act, 1956 and includes its successors and
permitted assigns.
A Unit holder means any resident or non-resident
person whether individual or not (legal entity), who is eligible to subscribe
to the Scheme and who has been allotted Units under the Scheme based on a valid
application.
The security representing the interests of the
Unitholders in the Scheme. Each Unit represents one undivided share in the
assets of the Scheme as evidenced by any letter/ advice or any other statement
/ instrument issued by TMF.
A Year shall be 12 full
English Calendar months.
E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY
The
following Due Diligence Certificate has been submitted to SEBI:
It is
confirmed that:
(i)
the Scheme Information
Document forwarded to SEBI is in accordance with the SEBI (Mutual Funds)
Regulations, 1996 and the guidelines and directives issued by SEBI from time to
time.
(ii)
all legal requirements
connected with the launching of the Scheme as also the guidelines,
instructions, etc., issued by the Government and any other competent authority
in this behalf, have been duly complied with.
(iii)
the disclosures made in the
Scheme Information Document are true, fair and adequate to enable the investors
to make a well informed decision regarding investment in the proposed scheme.
(iv)
the intermediaries named in
the Scheme Information Document and Statement of Additional Information are
registered with SEBI and their registration is valid, as on date.
|
|
For Tata Asset Management Limited
|
|
Place: Mumbai
|
Upesh
K. Shah
|
|
Date:
29-10-2021
|
Head- Compliance
|
