Reliance Tax Saver (ELSS) Fund09

8/8/2019 Reliance Tax Saver (ELSS) Fund09

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Reliance Tax Saver (ELSS) Fundan opn-ndd equity linkd sving schm)

Scheme Information Document

The particulars o the Scheme have been prepared in accordance with Equity Linked

Savings Scheme, 2005 announced by the Government o India vide the Notifcation

No. 226/2005 dated 3-11-2005 and the Securities and Exchange Board o

India (Mutual Funds) Regulations 1996, (herein ater reerred to as SEBI (MF)

Regulations) as amended till date, and fled with SEBI, along with a Due Dil igence

Certifcate rom the AMC. The units being oered or public subscription have not

been approved or recommended by SEBI nor has SEBI certifed the accuracy or

adequacy o the Scheme Inormation Document.

As per the Equity Linked Savings Scheme, 2005, investment made under the scheme

shall be locked-in or a period o 3 years rom the date o allotment o units.

The Scheme Inormation Document sets orth concisely the inormation aboutthe scheme that a prospective investor ought to know beore investing. Beore

investing, investors should also ascertain about any urther changes to this Scheme

Inormation Document ater the date o this Document rom the Mutual Fund /

Investor Service Centres /Website / Distributors or Brokers.

The investors are advised to reer to the Statement o Additional Inormation (SAI)

or details o Reliance Mutual Fund, Tax and Legal issues and general inormation

on www.reliancemutual.com

SAI is incorporated by reerence (is legally a part o the Scheme Inormation

Document). For a ree copy o the current SAI, please contact your nearest Investor

Service Centre or log on to our website wwwreliancemutual.com.

The Scheme Inormation Document should be read in conjunction with the SAI

and not in isolation.

This Scheme Information Document is dated October 01, 2009.

NaMe oF MUTUal FUND

Rinc Mutu Fund11th r & 12th r, on Indibu Cntr, Twr 1

Jupitr Mi Cmpund, 841, snpti Bpt Mrg,ephintn Rd, Mumbi - 400 013T N. - 022-30994600Fx N. - 022-30994699

NaMe oF sPoNsoR CoMPaNY

Rinc Cpit limitdRgitrd ofc:H Bck, 1t Fr, Dhirubhi ambni Knwdg City,Kprkhirn, Nvi Mumbi - 400 710.

T. 022 - 30327000, Fx. 022 - 30327202Wbit : www.rinccpit.c.in

NaMe oF asseT MaNaGeMeNT CoMPaNY

Rinc Cpit at Mngmnt limitdCrprt ofc:11th r & 12th r, on Indibu Cntr, Twr 1


NaMe oF TRUsTee CoMPaNY

Rinc Cpit Trut C. limitdCrprt ofc:11th r & 12th r, on Indibu Cntr, Twr 1


Continuous offer of the Units of the face value of Rs. 10 each for cash at NAV based prices(subject to applicable load)


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TaBle oF CoNTeNTs

HIGHLIGHTS/SUMMARY OF THE SCHEME ...................................................................................................................1

I. INTRODUCTION ..................................................................................................................................................3

A. RISK FACTORS ......................................................... ............................................................. .................................................... 3

B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME .............................................................. ............................... 6

C. SPECIAL CONSIDERATIONS ....................................................... .............................................................. ............................... 6

D. DEFINITIONS & ABBREVIATIONS ........................................................ .............................................................. ..................... 7

E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY ...................................................... ......................................... 8

II. INFORMATION ABOUT THE SCHEME ..................................................................................................................9

Reliance Tax Saver (ELSS) Fund ............................................................................................................................9

A. TYPE OF THE SCHEME ..................................................... ............................................................. .......................................... 9

B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME? ...................................................... .......................................... 9

C. HOW WILL THE SCHEME ALLOCATE ITS ASSETS? .......................................................... .................................................... 9

D. WHERE WILL THE SCHEME INVEST? ............................................................ ............................................................. ........... 9

E. WHAT ARE THE INVESTMENT STRATEGIES? .......................................................... .............................................................. 9

F. FUNDAMENTAL ATTRIBUTES ..................................................... .............................................................. .............................15

G. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE? ........................................................... .............................17

H. WHO MANAGES THE SCHEME? ......................................................... .............................................................. ...................17

I. WHAT ARE THE INVESTMENT RESTRICTIONS? ..................................................... ............................................................17

J. HOW HAS THE SCHEME PERFORMED? ....................................................... ............................................................. .........19

III. UNITS AND OFFER .............................................................................................................................................20

A. NEW FUND OFFER (NFO) .......................................................... .............................................................. .............................20

B. ONGOING OFFER DETAILS ......................................................... .............................................................. .............................21

C. PERIODIC DISCLOSURES ............................................................ .............................................................. .............................32

D. COMPUTATION OF NAV ............................................................. .............................................................. .............................33

IV. FEES AND EXPENSES .........................................................................................................................................34

A. NEW FUND OFFER (NFO) EXPENSES ........................................................... ............................................................. .........34

B. ANNUAL SCHEME RECURRING EXPENSES ............................................................ ............................................................34

C. LOAD STRUCTURE....................................................................... .............................................................. .............................34

D. WAIVER OF LOAD FOR DIRECT APPLICATIONS ..................................................... ............................................................34

V. RIGHTS OF UNITHOLDERS .................................................................................................................................35

VI. PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF INSPECTIONS OR INVESTIGATIONS FORWHICH ACTION MAY HAVE BEEN TAKEN OR IS IN THE PROCESS OF BEING TAKEN BY ANY REGULATORYAUTHORITY ......................................................................................................................................................36


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HIGHLIGHTS/SUMMARY OF THE SCHEME

1. INVESTMENT OBJECTIVE

Theprimaryobjectiveotheschemeistogeneratelong-termcapitalappreciationromaportoliothatisinvestedpredominantlyinequityandequityrelatedinstruments.

However,therecanbenoassurancethattheschemesinvestmentobjectiveshallbeachieved.

2. LIQUIDITY

T / B D NAV T / B D NAV .

AsperSEBIRegulations,theMutualFundshalldespatchRedemptionproceedswithin10WorkingDaysoreceivingavalidRedemptionrequest.Apenalinteresto15%perannumorsuchotherrateasmaybeprescribedbySEBIromtimetotime,willbepaidincasetheRedemptionproceedsarenotmadewithin10WorkingDaysothedateoreceiptoavalidRedemptionrequest.However,undernormalcircumstances,theMutualFundwillendeavortodespatchtheRedemptionchequewithin34WorkingDaysromthereceiptoavalidRedemptionrequest.

3. BENCHMARK

BSE100Index

4. TRANSPARENCY/NAV DISCLOSURE

a) TheNAVwillbecalculatedanddisclosedatthecloseoeveryworkingdaywhichshallbepublishedinatleasttwodailynewspapersandalsouploadedontheAMFIwebsiteandRelianceMutualFundwebsitei.e.www.reliancemutual.com.

b) TheNAVotheSchemewillbecalculatedanddeclaredbytheFundoneveryWorkingDay.TheinormationonNAVmaybeobtainedbytheUnitholders,onanydayromtheoiceotheAMC/theoiceotheRegistrarinHyderabadoranyotheotherDesignatedInvestorServiceCentres.

c) Investorsmayalsoobtaininormationonthepurchase/salepriceoragivendayonanyWorkingDayromtheoiceotheAMC/theoiceotheRegistrarinHyderabad/anyotheotherDesignatedInvestorServiceCentres.

d) ForanyNAVinormation,investormayalsocallourTouchbasecustomerservicecentreat30301111(24X7),callersoutsideIndia,pleasedial91-40-30301111or180030011111.

e) PublicationoAbridgedHal-yearlyUnaudited/AuditedFinancialResultsinthenewspapersorasmaybeprescribedundertheRegulationsromtimetotime.

) CommunicationoPortolioonahal-yearlybasistotheUnitholdersdirectlyorthroughthePublicationsorasmaybeprescribedundertheRegulationsromtimetotime.

g) DespatchotheAnnualReportsotherespectiveSchemeswithinthestipulatedperiodasrequiredundertheRegulations.

5. LOADS

1. E L

Nil

In accordance with the requirements speciied by the SEBI circular no. SEBI/IMD/CIR No.4/18230/09 dated une 30, 2009 no entryInaccordancewiththerequirementsspeciiedbytheSEBIcircularno.SEBI/IMD/CIRNo.4/18230/09datedune30,2009noentryloadwillbechargedorpurchase/additionalpurchase/switch-inacceptedbyRMFwitheectromAugust01,2009.Similarly,noentryloadwillbechargedwithrespecttoapplicationsorregistrationsunderSystematicInvestmentPlans/SystematicTranserPlans(includingRelianceSIPInsure,SalaryAddVantage,RecurringInvestmentPlanorCorporateEmployeesandDividendTranserPlan)acceptedbyRMFwitheectromAugust01,2009.

Theuprontcommissiononinvestmentmadebytheinvestor,iany,willbepaidtotheARNHolder(AMFIregisteredDistributor)directlybytheinvestor,basedontheinvestorsassessmentovariousactorsincludingservicerenderedbytheARNHolder.

2. Ex L

Nil

With eect rom August 01, 2009, exit load/ CDSC (i any) up to 1% o the redemption value charged to the unit holder by RMF onWitheectromAugust01,2009,exitload/CDSC(iany)upto1%otheredemptionvaluechargedtotheunitholderbyRMFonredemptionounitswillberetainedbyeachotheschemesinaseparateaccountandwillbeutilizedorpaymentocommissionstotheARNHolderandtomeetothermarketingandsellingexpenses.

Anyamountinexcesso1%otheredemptionvaluechargedtotheunitholderasexitload/CDSCwillbecreditedtotherespectiveschemeimmediately.

PursuanttoSEBIcircularNo.SEBI/IMD/CIRNo.14/120784/08datedMarch18,2008,witheectromApril1,2008,noentryloadorexitloadshallbechargedinrespectobonusunitsandounitsallottedonreinvestmentodividend.

3. I S S

SwitchIntotheundromotherschemesispossibleonallbusinessdays.However,SwitchOutacilityisavailableonlyaterexpiryolock-in-periodo3years.Attheapplicableloadsintherespectiveschemes.

4. I P/I O S

NoloadapplicableorInterPlan/InterOptionSwitch.


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5. Cg D S Cg

Nil

6. MINIMUM APPLICATION AMOUNT

Rs.500/-andinmultiplesoRe.500/-thereater

M A I

Rs.500/-andinmultiplesoRe.500/-thereater

7. CHOICE OF INVESTMENT PLANS:

RelianceTaxSaver(ELSS)FundhasaGrowthPlanandDividendPlan.GrowthPlanhasGrowthOptionandDividendPlanhasDividendPayoutOptionandDividendRe-investmentOption.

DetailsotheabovePlans/optionsareasunder:

1. G P

(i) G O

2. D P2. D P

(i) D P O

(ii) D R O

. FLEIBILITY. FLEIBILITY

Unitholderswillhavetheexibilitytoaltertheallocationotheirinvestmentsamongthescheme(s)oeredbytheMutualFund,inordertosuittheirchanginginvestmentneeds,byswitchingtheirunitsbetweenpermissiblescheme(s)/plans/optionsotheMutualFund,ater

thestatutorylock-inperiodo3Years. 9. TA BENEFITS

(Asperpresenttaxlaws)

TheinvestmentundertheRelianceTaxSaver(ELSS)FundiseligibleordeductionunderSection80CotheIncomeTaxAct,191(theAct)

Section80C(2)(xiii)interalia,providesasollows:

xiii) as subscription to any units o any Mutual Fund notifed under clause (23D) o section 10 or rom the Administrator or thespecifed company under any plan ormulated in accordance with such scheme as the Central Government may, by notifcationin the Ofcial Gazette, speciy in this behal

TheollowingtaxbeneftswouldbeavailabletotheeligibleinvestorbeinganIndividualoraHinduUndividedFamily(HUF),subjecttotheulfllmentotherelevantconditionsoSection80CotheAct.

InvestmentmadebytheeligibleinvestorbeinganIndividualoraHinduUndividedFamilyintheschemewillqualiyordeductionunderSection80CoIncomeTaxAct,191uptoRupeesOneLakh.

LongTermCapitalgainsbenefts,subjecttoprovisionsotheAct.

UnitsheldundertheSchemeotheFundarenottreatedasassetswithinthemeaningosection2(ea)otheWealth-taxAct,1957andare,thereore,notliabletoWealth-tax.

TheaboveshouldnotbeconstruedtobetaxadviceandthesameissubjecttoanychangethatmaybeaectedintheActoranyguidelines/amendments/rules/clariicationsissuedinrespectthereoromtimetotime.

10. REPATRIATION

NRIs/FIIsmayinvestonarepatriablebasisasperRBIrulesandregulations.InvestorsintheSchemearenotbeingoeredanyguaranteed/assuredreturns.


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I INTRODUCTION

A. RISK FACTORS

1. S R F

a) MutualFundsandsecuritiesinvestmentsaresubjecttomarketriskssuchastradingvolumes,settlementrisk,liquidityriskanddeaultriskincludingthepossiblelossoprincipalandthereisnoassuranceorguaranteethattheobjectivesotheSchemewillbeachieved.

b) Astheprice/value/interestratesothesecuritiesinwhichtheschemeinvestsluctuates,thevalueoyourinvestmentintheschememaygoupordown

c) PastperormanceotheSponsor/AMC/MutualFunddoesnotguaranteeutureperormanceothescheme.

d) RelianceTaxSaver(ELSS)FundisonlythenameotheSchemeanddoesnotinanymannerindicateeitherthequalityotheschemeoritsutureprospectsandreturns.

e) TheSponsorisnotresponsibleorliableoranylossresultingromtheoperationotheSchemebeyondtheirinitialcontributionoRs.1lakhtowardsthesettingupotheMutualFundandsuchotheraccretionsandadditionstothecorpus.

) Thepresentschemeisnotaguaranteedorassuredreturnscheme.TheMutualFundisnotguaranteeingorassuringanydividend/bonus.TheMutualFundisalsonotassuringthatitwillmakeperiodicaldividend/bonusdistributions,thoughithaseveryintentionodoingso.Alldividend/bonusdistributionsaresubjecttotheavailabilityodistributablesurplusotheScheme.

2. SCHEME SPECIFIC RISK FACTORS

a) R g Eq

TheSchemebeinganequityschemewillbeaectedbytherisksassociatedwiththeequitymarket.

EquityandEquityrelatedinstrumentsonaccountoitsvolatilenaturearesubjecttopriceluctuationsondailybasis.Thevolatilityinthevalueotheequityandequityrelatedinstrumentsisduetovariousmicroandmacroeconomicactorsaectingthesecuritiesmarkets.

Thismayhaveadverseimpactonindividualsecurities/sectorandconsequentlyontheNAVoScheme. TheinabilityotheSchemetomakeintendedsecuritiespurchasesduetosettlementproblems,couldcausetheSchemetomisscertain

investmentopportunitiesasincertaincases,settlementperiodsmaybeextendedsigniicantlybyunoreseencircumstances.Similarly,theinabilitytosellsecuritiesheldintheschemesportoliomayresult,attimes,inpotentiallossestothescheme,shouldtherebeasubsequentdeclineinthevalueothesecuritiesheldintheschemesportolio.

Tradingvolumes,settlementperiodsandtranserproceduresmayrestricttheliquidityotheinvestments.Thismayimpacttheabilityotheunitholderstoredeemtheirunits.Inviewothis,theTrusteehastheright,initssolediscretiontolimitredemptions(includingsuspendingredemptions)undercertaincircumstances.

TheAMCmayinvestinunlistedsecuritiesthatoerattractiveyieldswithintheregulatorylimit.Thismayhoweverincreasetheriskotheportolioastheseunlistedsecuritiesareinherentlyilliquidinnatureandcarrylargerliquidityriskascomparedtothelistedsecuritiesorthosethatoerotherexitoptionstotheinvestors.

InvestmentsinequityandequityrelatedsecuritiesinvolvehighdegreeorisksandinvestorsshouldnotinvestintheSchemeunlesstheycanaordtotaketheriskolosingtheirinvestment.

b)b) R g B

InvestmentinDebtissubjecttoprice,credit,andinterestraterisk.

TheNAVotheSchememaybeaected,interalia,bychangesinthemarketconditions,interestrates,tradingvolumes,settlementperiodsandtranserprocedures.

Corporatedebtsecuritiesaresubjecttotheriskoanissuersinabilitytomeetinterestandprincipalpaymentsonitsdebtobligations(creditrisk).Debtsecuritiesmayalsobesubjecttopricevolatilityduetoactorssuchaschangesininterestrates,generallevelomarketliquidityandmarketperceptionothecreditworthinessotheissuer,amongothers(marketrisk).TheInvestmentManagerwillendeavortomanagecreditriskthroughin-housecreditanalysis.TheSchememayalsousevarioushedgingproductsromtimetotime,asareavailableandpermittedbySEBI,toattempttoreducetheimpactounduemarketvolatilityontheSchemesportolio.

TheNAVotheSchemesUnits,totheextentthattheSchemeisinvestedinixedincomesecurities,willbeaectedbychangesinthegenerallevelointerestrates.Wheninterestratesdecline,thevalueoaportoliooixedincomesecuritiescanbeexpectedtorise.Conversely,wheninterestratesrise,thevalueoaportoliooixedincomesecuritiescanbeexpectedtodecline

InvestinginBondsandFixedIncomesecuritiesaresubjecttotheriskoanIssuersinabilitytomeetprincipalandinterestpaymentsobligation(creditrisk)andmayalsobesubjecttopricevolatilityduetosuchactorsasinterestratesensitivity,marketperceptionothecreditworthinessotheissuerandgeneralmarketliquidity(marketrisk).

Thetimingotransactionsindebtobligations,whichwillotendependonthetimingothePurchasesandRedemptionsintheScheme,mayresultincapitalappreciationordepreciationbecausethevalueodebtobligationsgenerallyvariesinverselywiththeprevailinginterestrates.

I R R: Aswithalldebtsecurities,changesininterestrateswillaecttheSchemesNetAssetValueasthepricesosecuritiesgenerallyincreaseasinterestratesdeclineandgenerallydecreaseasinterestratesrise.Pricesolonger-termsecuritiesgenerallyluctuatemoreinresponsetointerestratechangesthandoshorter-termsecurities.InterestratemovementsintheIndiandebtmarketscanbevolatileleadingtothepossibilityolargepricemovementsupordownindebtandmoneymarketsecuritiesandtherebytopossiblylargemovementsintheNAV.


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Lq M R: Thisreerstotheeaseatwhichasecuritycanbesoldatornearitstruevalue.Theprimarymeasureoliquidityriskisthespreadbetweenthebidpriceandtheoerpricequotedbyadealer.LiquidityriskischaracteristicotheIndianixedincomemarket.

C R:Creditriskordeaultriskreerstotheriskwhichmayariseduetodeaultonthepartotheissuerotheixedincomesecurity(i.e.willbeunabletomaketimelyprincipalandinterestpaymentsonthesecurity).BecauseothisriskdebenturesaresoldatayieldspreadabovethoseoeredonTreasurysecurities,whicharesovereignobligationsandgenerallyconsideredtobereeocreditrisk.Normally,thevalueoaixedincomesecuritywillluctuatedependingupontheactualchangesintheperceivedlevelocreditriskaswellastheactualeventodeault.

R R: Thisriskreerstothe interestratelevelsatwhichcashlowsreceivedromthesecuritiesintheSchemeorrommaturitiesintheSchemearereinvested.Theadditionalincomeromreinvestmentistheinterestoninterestcomponent.Theriskreerstotheallintherateorreinvestmentointerimcashlows.

R

CREDITRISK LIQUIDITYRISK PRICERISK

Listed Dependsoncreditquality RelativelyLow Dependsondurationoinstrument

Unlisted Dependsoncreditquality RelativelyHigh Dependsondurationoinstrument

Secured Relativelylow RelativelyLow Dependsondurationoinstrument

Unsecured Relativelyhigh RelativelyHigh Dependsondurationoinstrument

Rated Relativelylowanddependsontherating RelativelyLow Dependsondurationoinstrument

Unrated Relativelyhigh RelativelyHigh Dependsondurationoinstrument

DierenttypesosecuritiesinwhichtheschemewouldinvestasgivenintheSchemeInormationDocumentcarrydierentlevelsandtypesorisk.Accordingly,theschemesriskmayincreaseordecreasedependinguponitsinvestmentpatterne.g.corporatebonds,carryahigherleveloriskthanGovernmentsecurities.Furtherevenamongcorporatebonds,bondswhichareAAAratedarecomparativelylessriskythanbondswhichareAArated.

c)c) R g g S

TheFundmayinvestinoverseasdebt/equities/ADRs/GDRswiththeapprovaloRBI/SEBI,subjecttosuchguidelinesasmaybeissuedbyRBI/SEBI.Thenetassets,distributionsandincomeotheschememaybeaectedadverselybyluctuationsinthevalueocertainoreigncurrenciesrelativetotheIndianRupeetotheextentoinvestmentsinthesesecurities.Repatriationosuchinvestmentmayalsobeaectedbychangesintheregulatoryandpoliticalenvironments.TheschemesNAVmayalsobeaectedbyaluctuationinthegeneralandspeciiclevelointerestratesinternationally,orthechangeinthecreditproilesotheissuers.

d)d) R g D

V RV R

TheriskinvaluingtheDebt&Equityderivativeproductsduetoinadequatetradingdatawithgoodvolumes.Derivativeswithlongerdurationwouldhavehigherriskvizaviztheshorterdurationderivatives.

M M R

Theday-to-daypotentialoraninvestortoexperiencelossesromluctuationsinunderlyingstockpricesandderivativesprices. S R

TheriskinherentinthecapitalmarketduetomacroeconomicactorslikeInlation,GDP,Globalevents.

Lq R

Theriskstemmingromthelackoavailabilityoderivativesproductsacrossdierentmaturitiesandwithdierentriskappetite.

I V

Theestimatedvolatilityoanunderlyingsecurityspriceandderivativesprice.

I R R

TheriskstemmingromthemovementoInterestratesinadversedirection.Aswithallthedebtsecurities,changesintheinterestrateswillaectthevaluationotheportolios.

C R (D R)

Deaultriskistheriskthatlosseswillbeincurredduetothedeaultbythecounterpartyoroverthecounterderivatives.

S R

TheriskarisingduetoailureooperationalprocessesollowedbytheexchangesandOTCparticipantsorthederivativestrading.

R

RCAMmayusevariousderivativeproducts,romtimetotime,inanattempttoprotectthevalueotheportolioandwithanintentiontoenhanceUnitholdersinterestotheScheme.


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a. AsandwhentheSchemetradesinthederivativesmarketthereareriskactorsandissuesconcerningtheuseoderivativesthatinvestors should understand. Derivative productsare specialized instruments thatrequire investment techniques andriskanalysisdierentromthoseassociatedwithstocksandbonds.Theuseoaderivativerequiresanunderstandingnotonlyotheunderlyinginstrumentbutothederivativeitsel.Derivativesrequirethemaintenanceoadequatecontrolstomonitorthetransactionsenteredinto,theabilitytoassesstheriskthataderivativeaddstotheportolioandtheabilitytoorecastpriceorinterestratemovementscorrectly.Thereisapossibilitythatalossmaybesustainedbytheportolioasaresultotheailureoanotherparty(usuallyreerredtoasthecounterparty)tocomplywiththetermsothe derivativescontract.Otherrisksinusingderivativesincludetheriskomispricingorimpropervaluationoderivativesandtheinabilityoderivativestocorrelateperectlywithunderlyingassets,ratesandindices.

b. Derivativeproductsareleveragedinstrumentsandcanprovidedisproportionategainsaswellasdisproportionatelossestotheinvestor.Executionosuchstrategiesdependsupontheabilityoheundmanagertoidentiysuchopportunities.Identiicationandexecution

othestrategiestobepursuedbytheundmanagerinvolveuncertaintyanddecisionoundmanagermaynotalwaysbeproitable.Noassurancecanbegiventhattheundmanagerwillbeabletoidentiyorexecutesuchstrategies.

c. Therisksassociatedwiththeuseoderivativesaredierentromorpossiblygreaterthan,therisksassociatedwithinvestingdirectlyinsecuritiesandothertraditionalinvestments.

e)e) R A S D

TheSchememayinvestinSecuritiseddebt.

Aswithanyotherdebtinstrument,theollowingriskactorshavetobetakenintoconsiderationwhileinvestinginPTCs:

a. CreditRisk:SincemostothePTCsaredrawnromacherrypickedpoolounderlyingassets,theriskodelay/deaultduetopoorcreditqualityislow.FurthermoremostothePTCsenjoyadditionalcashlowcoverageintermsosubordinationbyanotherlowerclassoPTCsorintermsoexcesscashcollateralisation.

b. LiquidityRisk:SincethematurityothePTCswillbeinlinewiththematurityotheFMP,theriskarsingromlowsecondarymarketliquidityosuchinstrumentsislow.

c. PriceRisk/InterestRateRisk:Thepriceriskotheseinstrumentsshallbeinlinewiththematurity/durationosuchinstruments.Howevergiventheactthattheseinstrumentswillhaveamaturityproileupto2years,thedurationriskisrelativelyless.

d. DomesticSecuritiseddebtcanhavedierentunderlyingassetsandtheseassetshavedierentriskcharacteristics.Thesemaybeasgivenintheollowingexample:

Security1-BackedbyreceivablesopersonalloansoriginatedbyXYZBank

Speciic Risk Factors:Loss duetodeaultand/or paymentdelay on Receivables, PrematureTermination o FacilityAgreements,Limitedlosscover,DelinquencyandCreditRisk,LimitedLiquidityandPriceRisk,Originator/CollectionAgentRisk,BankruptcyotheOriginator,Co-minglingounds

Security2-SeniorSeriesPassThroughCertiicatesbackedbycommercialvehiclesandtwo-wheelerloanandloanreceivablesromABCBankLimited

)) R S Sg & S Lg

SecuritiesLendingisalendingosecuritiesthroughanapprovedintermediarytoaborrowerunderanagreementoraspeciiedperiodwiththeconditionthattheborrowerwillreturnequivalentsecuritiesothesametypeorclassattheendothespeciiedperiodalongwiththecorporatebeneitsaccruingonthesecuritiesborrowed.IncasetheSchemeundertakesstocklendingundertheRegulations,itmay,attimesbeexposedtocounterpartyriskandotherrisksassociatedwiththesecuritieslending.UnitholdersotheSchemeshouldnotethattherearerisksinherenttosecuritieslending,includingtheriskoailureotheotherparty,inthiscasetheapprovedintermediary,tocomplywiththetermsotheagreemententeredintobetweenthelenderosecuritiesi.e.theSchemeandtheapprovedintermediary.Suchailurecanresultinthepossiblelossorightstothecollateralputupbytheborrowerothesecurities,theinabilityotheapprovedintermediarytoreturnthesecuritiesdepositedbythelenderandthepossiblelossoanycorporatebeneitsaccruingtothelenderromthesecuritiesdepositedwiththeapprovedintermediary.

Short-sellingisthesaleosharesthatthesellerdoesnotownatthetimeotrading.Instead,heborrowsitromsomeonewhoalreadyownsit.Later,theshortsellerbuysbackthestockheshortedandreturnsthestocktocloseouttheloan.Ithepriceothestockhasallen,hecanbuythestockbackorlessthanhereceivedorsellingitandproitsromit(thedierencebetweenhighershortsalepriceandthelowerpurchaseprice).However,Shortpositionscarrytheriskolosingmoneyandtheselossesmaygrowtheoreticallyunlimitedithepriceincreaseswithoutlimitandshallresultintomajorlossesintheportolio.

g)g) O S S R (i) Lq :Theamountinvestedinthescheme,includingdividendamountreinvestedunder

DividendPlanshallbesubjecttoalock-ino3years.

(ii) TheliquidityotheSchemesinvestmentsmaybeinherentlyrestrictedbytradingvolumes,settlementperiodsandtranserprocedures.Intheeventoaninordinatelylargenumberoredemptionrequests,oroare-structuringotheSchemesinvestmentportolio,theseperiodsmaybecomesignifcant.PleasereadtheSectionsothisSchemeInormationDocumententitledS CandRg L R .

(iii) Although,theobjectiveotheFundistogenerateoptimalreturns,theobjectivemayormaynotbeachieved.TheinvestorsmaynotethatitheAMC/InvestmentManagerisnotabletomakerightdecisionregardingthetimingoincreasingexposureindebtsecuritiesintimesoallingequitymarket,itmayresultinnegativereturns.Giventhenatureoscheme,theportolioturnoverratiomaybeon


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thehighersideandtheAMCmaychangetheullportoliocommensuratewiththeinvestmentdecisionsandAssetAllocationotheScheme.Attimes,suchchurningoportoliomayleadtolossesduetosubsequentnegativeorunavorablemarketmovements.

(iv) ThetaxbeneitsdescribedinthisSchemeInormationDocumentareasavailableunderthepresenttaxationlawsandareavailablesubjectto relevantconditions.Theinormationgivenisincludedonlyorgeneralpurposeand isbasedonadvisereceivedbytheAMCregardingthelawandpracticecurrentlyinorceinIndiaandtheUnitholdersshouldbeawarethattherelevantiscalrulesortheirinterpretationmaychange.Asisthecasewithanyinvestment,therecanbenoguaranteethatthetaxpositionortheproposedtaxpositionprevailingatthetimeoaninvestmentintheSchemewillendureindeinitely.Inviewotheindividualnatureotaxconsequences,eachUnitholderisadvisedtoconsulthis/herownproessionaltaxadvisor.

(v) S R F CreditAndRatingDowngradeRisk,PrepaymentAndForeclosuresRiskorSeniorPTCSeries,PrepaymentAndForeclosuresRiskorSeniorPTCSeries,ServicingAgentRisk,Co-minglingRisk,BankruptcyotheSeller.

(vi) TheNAVotheschemetotheextentinvestedinDebtandMoneymarketsecuritiesarelikelytobeaectedbychangesintheprevailingratesointerestandarelikelytoaectthevalueotheSchemesholdingsandthusthevalueotheSchemesUnits.

(vii) TheAMCmay,consideringtheoverallleveloriskotheportolio,investinlowerrated/unratedsecuritiesoeringhigheryields.Thismayincreasetheriskotheportolio.

(viii)Securitieswhicharenotquotedonthestockexchangesareinherentlyilliquidinnatureandcarryalargeramountoliquidityrisk,incomparisontosecuritiesthatarelistedontheexchangesoroerotherexitoptionstotheinvestor,includingaputoption.TheAMCmaychoosetoinvestinunlistedsecuritiesthatoerattractiveyields.Thismayincreasetheriskotheportolio.

(ix) Whilesecuritiesthatarelistedonthestockexchangecarrylowerliquidityrisk,theabilitytoselltheseinvestmentsislimitedbytheoveralltradingvolumeonthestockexchanges.Moneymarketsecurities,whileairlyliquid,lackawell-developedsecondarymarket,whichmayrestrictthesellingabilityotheSchemeandmayleadtotheSchemeincurringlossestillthesecurityisinallysold.

(x) InvestmentdecisionsmadebytheAMCmaynotalwaysbeproitable,eventhoughitisintendedtogeneratecapitalappreciationandmaximizethereturnsbyactivelyinvestinginequityandequityrelatedsecurities.

B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME

TheScheme/Planshallhaveaminimumo20investorsandnosingleinvestorshallaccountormorethan25%othecorpusotheScheme/Plan(s).However,isuchlimitisbreachedduringtheNFOotheScheme,theFundwillendeavortoensurethatwithinaperiodothreemonthsortheendothesucceedingcalendarquarterromthecloseotheNFOotheScheme,whicheverisearlier,theSchemecomplieswiththesetwoconditions.IncasetheScheme/Plan(s)doesnothaveaminimumo20investorsinthestipulatedperiod,theprovisionsoRegulation39(2)(c)otheSEBI(MF)RegulationswouldbecomeapplicableautomaticallywithoutanyreerenceromSEBIandaccordinglytheScheme/Plan(s)shallbewoundupandtheunitswouldberedeemedatapplicableNAV.Thetwoconditionsmentionedaboveshallalsobecompliedwithineachsubsequentcalendarquarterthereater,onanaveragebasis,asspecifedbySEBI.Ithereisabreachothe25%limitbyanyinvestoroverthequarter,arebalancingperiodoonemonthwouldbeallowedandthereatertheinvestorwhoisinbreachotheruleshallbegiven15daysnoticetoredeemhisexposureoverthe25%limit.Failureonthepartothesaidinvestortoredeemhisexposureoverthe25%limitwithintheaoresaid15dayswouldleadtoautomaticredemptionbytheMutualFundontheapplicableNetAssetValueonthe15thdayothenoticeperiod.TheFundshalladheretotherequirementsprescribedbySEBIromtimetotimeinthisregard.

C. SPECIAL CONSIDERATIONS, IF ANY

1. I D

TheMutualFundisnotassuringorguaranteeingthatitwillbeabletomakeregularperiodicaldistributions/distributebonusunitstoitsUnitholdersthoughithaseveryintentiontomanagetheportoliosoastomakeperiodicalincome/bonusdistributionstoUnitholders.PeriodicaldistributionswillbedependentonthereturnsachievedbytheAssetManagementCompanythroughtheactivemanagementotheportolio.Periodicaldistributionsmaythereorevaryromperiodtoperiod,basedoninvestmentresultsotheportolio.

2. Rg P / Rg R

TheTrusteemay,inthegeneralinterestotheUnitholdersotheschemeunderthisSchemeInormationDocumentandkeepinginviewtheunoreseencircumstances/unusualmarketconditions,limitthetotalnumberoUnitswhichmayberedeemedonanyWorkingDayto5%othetotalnumberoUnitsthenissuedandoutstandingunderanyScheme/PlanorsuchotherpercentageastheTrusteemaydetermine.

TheTrusteemay,atitssolediscretioninresponsetounoreseencircumstancesorunusualmarketconditionsincluding,butnotlimitedto,extremevolatilityothestock,ixedincomeandmoneymarkets,extendedsuspensionotradingonthestockexchanges,naturalcalamities,communicationbreakdowns,internalsystembreakdowns,strikes,bandhs,riotsorothersituationswheretheTrusteeinconsultationwithRCAM,considersthatsuchsuspensionisnecessary,limitthetotalnumberoUnitswhichmayberedeemedonanyworkingdayto5%

othetotalnumberoUnitstheninissueorsuchhigherpercentageastheTrusteemaydetermineinanyparticularcase

AnyUnits,whichbyvirtueotheselimitationsarenotredeemedonaparticularWorkingDay,willbecarriedorwardorredemptiontothenextWorkingDay,inthe ordero receipt.RedemptionssocarriedorwardwillbepricedonthebasisotheRedemptionPriceotheWorkingDayonwhichredemptionismade.Undersuchcircumstances,totheextentmultipleredemptionrequestsarereceivedatthesametimeonasingleWorkingDay,redemptionswillbemadeonpro-ratabasis,basedonthesizeoeachredemptionrequest,thebalanceamountbeingcarriedorwardorredemptiontothenextWorkingDay(s).

3. S P R U

Thepurchaseand/orredemptionoUnitsmaybesuspendedwithpriorapprovaloTrusteesandAssetManagementCompanygivingthedetailsocircumstancesandjustiicationortheproposedactionshallalsobeinormedtoSEBIinadvance,temporarilyorindeinitelywhenanyotheollowingconditionsexistatone/moreDesignatedInvestorServiceCenters:


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Thestockmarketstopsunctioningortradingisrestricted;

Periodsoextremevolatilityinthestockmarket,ixedincomeormoneymarket,which,intheopinionotheInvestmentManager,areprejudicialordetrimentaltotheinterestotheinvestors;

Naturalcalamity;or

Foranybulkprocessinglikedividend,etc.

Ibanksdonotcarry-outanyothenormalBankingactivitiesatoneormoreDesignatedInvestorServiceCenters

IntheeventobreakdowninthemeansocommunicationusedorthevaluationoinvestmentsotheScheme,withoutwhichthevalueothesecuritiescannotbeaccuratelycalculated.

IntheeventoanyorcemajeureordisasterthataectsthenormalunctioningotheAMCorthedesignatedinvestorservicecenters.

SEBI,byorder,sodirects.

RMFalsoreservestherightatitssolediscretiontowithdrawsaleoUnitsintheSchemetemporarilyorindeinitely,itheAMCviewsthatincreasingtheSchemessizeurthermayprovedetrimentaltotheexistingunitholdersotheScheme.Anorder/requesttopurchaseUnitsisnotbindingonandmayberejectedbytheTrustee,theAMCortheirrespectiveagents,unlessithasbeenconirmedinwritingbytheAMCoritsagentsand(or)paymenthasbeenreceived.

D. DEFINITIONS AND ABBREVIATIONS

InthisScheme InormationDocument, the ollowingwords and expressions shall havethemeaningspecifed below, unless the contextotherwiserequires:

A NAV : ApplicableNAVistheNetAssetValueperUnitatthecloseotheBusinessDayonwhichtheapplicationorpurchase orredemption/switchis received at thedesignatedinvestorservice

centreandisconsideredacceptedonthatday.Anapplicationisconsideredacceptedonthatday,subjecttoitbeingcompleteinallrespectsandreceivedpriortothecut-otimeonthatBusinessDay.

A Mg C/ AMC/I Mg/RCAM

: RelianceCapital AssetManagement Limited,the AssetManagementCompany incorporatedundertheCompaniesAct,195,andauthorizedbySEBItoactastheInvestmentManagertotheSchemesoRelianceMutualFund(RMF)

CDSC : ContingentDeerredSalesCharge,achargeimposedwhentheunitsare redeemedwithintheirstouryearsounitownership.TheSEBI(MutualFund)Regulations,199providesthataCDSCmaybechargedonlyortheirstouryearsaterpurchaseandmandatesthemaximumamountthatcanbechargedineachyear.

C O : OerotheUnitswhentheschemebecomesopen-endedatertheclosureotheNewFundOer.

C : DeutscheBank,NVMumbai,actingasCustodiantotheScheme,oranyothercustodianwhoisappointedbytheTrustee.

Dg I S C(DISC / O )

: AnylocationasmaybedeinedbytheAssetManagementCompanyromtimetotime,whereinvestorscantendertherequestorsubscription,redemptionorswitchingounits,etc.

ELSS : Equity Linked Saving Scheme, 2005 and notiied by Ministry o Finance (Department oEconomicAairs)videnotiicationsdatedNovember3,2005andDecember13,2005.

E L : Loadonsubscriptions/switchin.Eq : Such instruments like Convertible bondsand debentures and warrantscarrying the rightto

obtainequitysharesandderivativeinstruments.Ex L : Loadonredemptions/switchout.FII : ForeignInstitutionalInvestors,registeredwithSEBIundertheSecuritiesandExchangeBoardo

India(ForeignInstitutionalInvestors)Regulations,1995.I Mg Ag(IMA)

: TheAgreemententeredintobetweenRelianceCapitalTrusteeCo.LimitedandRelianceCapitalAssetManagementLimitedbywhichRCAMhasbeenappointedtheInvestmentManagerormanagingtheundsraisedbyRMFunderthevariousSchemesandallamendmentsthereo.

L : AchargethatmaybeleviedasapercentageoNAVatthetimeoentryintothescheme/plansoratthetimeoexitingromthescheme/plans.

L Cq : AChequehandledlocallyanddrawnonanybank,whichis amemberothebankersclearinghouselocatedattheplacewheretheapplicationormissubmitted.M F Rg/Rg

: SecuritiesandExchangeBoardo India(MutualFunds)RegulationsasamendedromtimetotimeandsuchotherregulationsasmaybeinorceromtimetotimetoregulatetheactivitiesoMutualFunds.

N A V/NAV : NetAssetValue/ NAVotheUnitsin eachplanotheSchemeiscalculatedinthemannerprovidedinthisSchemeInormationDocumentorasmaybeprescribedbyRegulationsromtimetotime.TheNAVwillbecomputeduptoourdecimalplaces.

NRI : Non-ResidentIndian.PIO : PersonoIndianOrigin


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P/O : TheSchemeoerstheollowingPlans:

GrowthPlan

GrowthOption

DividendPlan

DividendPayoutOption

DividendReinvestmentOptionP P : PurchasePricetotheinvestoroUnitsoanyotheplanscomputedinthemannerindicatedin

thisSchemeInormationDocument.RBI / R B I : ReserveBankoIndia,establishedundertheReserveBankoIndiaAct,1934..RCL/S/S : RelianceCapitalLimited

RCTC/T/T C : RelianceCapitalTrusteeCo.Limited,aCompanyincorporatedundertheCompaniesAct,195,andauthorizedbySEBIandbytheTrustDeedtoactastheTrusteeoRelianceMutualFund.

R P : RedemptionPricetotheinvestoroUnitsoanyotheplanscomputedinthemannerindicatedinthisSchemeInormationDocument.

Rg /K : KarvyComputersharePvt.Ltd.,whohavebeenappointedastheRegistraroranyotherRegistrarwhoisappointedbyRCAM.

RMF/M F/ F : RelianceMutualFund(ormerlyknownasRelianceCapitalMutualFund),aTrustunderIndianTrustAct,1882andregisteredwithSEBIvideregistrationnumberMF/022/95/1datedune30,1995.

SAI : StatementoAdditionalInormation.S : RelianceTaxSaver(ELSS)Fund(anopen-endedequitylinkedsavingsScheme)SEBI : TheSecuritiesandExchangeBoardoIndia.SID : SchemeInormationDocumentissuedbyRelianceMutualFund,oeringunitsoRelianceTax

Saver(ELSS)FundorSubscription.T D : TheTrustDeedenteredintoon April24,1995betweentheSponsorand theTrustee,andall

amendmentsthereo.T F : ThecorpusotheTrust,unitcapitalandallpropertybelongingtoand/orvestedintheTrustee.U : Theinterestotheinvestorsinanyotheplans,otheschemewhichconsistsoeachUnit

representingoneundividedshareintheassetsothecorrespondingplanothescheme.U : ApersonwhoholdsUnit(s)underthescheme.U R : Unitholderswhosenamesappearontheunitholdersregisterotheconcernedplan/(s)onthe

dateodeterminationoDividend/Bonus,subjecttorealisationothecheque.Wg D : Abusinessdaymeansanydayotherthan(1)Saturday(2)Sundayor(3)adayonwhichThe

StockExchange,MumbaiorNationalStockExchangeLimitedorReserveBankoIndiaorBanksinMumbaiareclosedor(4)adayonwhichthereisnoRBIclearing/settlementosecuritiesor(5)adayonwhichthesaleand/orredemptionand/orswitchesoUnitsissuspendedbytheTrustees/AMCor(7)adayonwhichnormalbusinesscouldnotbetransactedduetostorms,loods,bandhs,strikesoranyothereventsastheAMCmayspeciyromtimetotime.

W Ex S I D g Rg.

E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

I :

1. TheSchemeInormationDocumentoRelianceTaxSaver(ELSS)Fund,orwardedtoSEBI,isinaccordancewiththeSEBI(MutualFunds)Regulations,199andtheguidelinesanddirectivesissuedbySEBIromtimetotime.

2. AlllegalrequirementsconnectedwiththelaunchingotheSchemeasalsotheguidelines,instructionsetc.,issuedbytheGovernmentandanyothercompetentauthorityinthisbehal,havebeendulycompliedwith.

3. ThedisclosuresmadeintheSchemeInormationDocumentaretrue,airandadequatetoenabletheinvestorstomakeawellinormeddecisionregardinginvestmentintheproposedScheme.

4. TheintermediariesnamedintheSchemeInormationDocumentandStatementoAdditionalInormationareregisteredwithSEBIandtheirregistrationsarevalid,asondate,tothebestoourknowledgeandbelie.

P : M N: S T. VD : M 21, 2009 Dg: C O

N:TheDueDiligenceCertiicateasstatedabovewassubmittedtotheSecuritiesandExchangeBoardoIndiaonMay22,2009.


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II. INFORMATION ABOUT THE SCHEME R Tx S (ELSS) F

A. TYPE OF THE SCHEME

Anopen-endedEquityLinkedSavingsScheme

B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME?


However,therecanbenoassurancethattheschemesinvestmentobjectiveshallbeachieved.

C. HOW WILL THE SCHEME ALLOCATE ITS ASSETS?

I I (% ) R P

Maximum Minimum

Equityandequityrelatedsecurities 100% 80% High

DebtandMoneyMarketInstruments 20% 0% LowtoMedium

Theabovepercentageswillbereckonedatthetimeoinvestment.

Anoveralllimito50%otheportoliovalue(i.e.netassetsincludingcash)hasbeenintroducedorthepurposeoequityderivativesinthescheme.

Theundmanagerswillollowanactiveinvestmentstrategytakingdeensive/aggressiveposturesdependingonopportunitiesavailableatvariouspointsotime.

Subject toRegulations, the assetallocation patternindicated abovemaychange romtimeto time,keeping inviewmarketconditions,opportunitiesandpolitical&economicactors.Itmustbeclearlyunderstoodthatthepercentagesstatedaboveareonlyindicativeandnot

absoluteandthattheycanvarysubstantiallydependingupontheperceptionotheAMC,theintentionbeingatalltimestoseektoprotecttheinterestsotheUnitholders.Suchchangesintheinvestmentpatternwillbeorshorttermanddeensiveconsiderations.However,suchchangesatalltimeswillcomplywithELSS2005notiications.

Cg I P

TheoverallportoliostructuringwouldaimatmoderatetohighlevelsoriskwhilethereisnoassurancethattheobjectiveotheSchememaybeachieved.TheTrusteesmayromtimetotimemodiytheinvestmentcompositionprovidedsuchmodiicationisinaccordancewiththeSchemeobjectiveandRegulationsandasamendedromtimetotimeincludingbywayoCirculars,PressReleases,NotiicationissuedbySEBIortheGovernmentoIndiatoregulatetheactivitiesandgrowthoMutualFunds,theintentbeingtoprotecttheNetAssetValueotheSchemeandunitholdersinterest.

D. WHERE WILL THE SCHEME INVEST?

TheinvestmentpolicesshallbeinaccordancewithSEBI(MutualFunds)Regulations,199andEquity Linked Saving Scheme, 2005 notiiedEquityLinkedSavingScheme,2005notiiedbyMinistryoFinance(DepartmentoEconomicAairs)videNotiicationsdatedNovember3,2005andDecember13,2005.

Consistent with the objective o the Scheme and subject to Regulations, the corpus o the Scheme will be invested in any o the ollowingConsistentwiththeobjectiveotheSchemeandsubjecttoRegulations,thecorpusotheSchemewillbeinvestedinanyotheollowingsecurities.

(a) TheundscollectedundertheSchemeshallbeinvested,totheextentoatleast80%,inequities,cumulativeconvertiblepreerencesharesandullyconvertibledebenturesandbondsocompanies.Investmentmayalsobemadeinpartlyconvertibleissuesodebenturesandbondsincludingthoseissuedonrightsbasissubjecttotheconditionthat,asaraspossible,thenon-convertibleportionothedebenturessoacquiredorsubscribed,shallbedisinvestedwithinaperiodo12months.

(b) Pendinginvestmento unds oaplanintherequiredmanner,theMutual Fund mayinvesttheundsinshort-termmoneymarketinstrumentsorotherliquidinstrumentsorboth.Aterthreeyearsothedateoallotmentotheunits,theMutualFundmayholduptotwentypercentonetassetsotheplaninshort-termmoneymarketinstrumentsandotherliquidinstrumentstoenablethemtoredeeminvestmentothoseunitholderswhowouldseektotendertheunitsorrepurchase.AnyotherixedincomesecuritiesandinstrumentsaspermittedbytheRegulations/Governmentnotiications,romtimetotime.

SubjecttotheRegulations,thesecuritiesmentionedabovecouldbelisted,unlisted,privatelyplaced,secured,unsecured,ratedorunratedandoanymaturity.ThesecuritiesmaybeacquiredthroughInitialPublicOerings(IPOs),secondarymarketoperations,privateplacementorrightsoers.

InvestmentinoverseassecuritiesshallbemadeinaccordancewiththerequirementsstipulatedbySEBIandRBIromtimetotime.


E. WHAT ARE THE INVESTMENT STRATEGIES?

INVESTMENT APPROACH & RISK CONTROL

Since investingrequiresdisciplinedriskmanagement,the AMCwouldincorporateadequate saeguardsorcontrollingrisksin theportolioconstructionprocess.Theriskcontrolprocessinvolvesreducingrisksthroughportoliodiversiication,takingcarehowevernottodilutereturnsintheprocess.TheAMCbelievesthatthisdiversiicationwouldhelpachievethedesiredleveloconsistencyinreturns.


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0

TheAMCaimstoidentiysecurities,whichoersuperiorlevelsoyieldatlowerlevelsorisks.Withtheaimocontrollingrisks,rigorousindepthcreditevaluationothesecuritiesproposedtobeinvestedinwillbecarriedoutbytheinvestmentteamotheAMC.

TheSchememayalsousevariousderivativesandhedgingproductsromtimetotime,aswouldbeavailableandpermittedbyRBI,inanattempttoprotectthevalueotheportolioandenhanceUnitholdersinterest.

TheSchememayinvestinotherSchemesmanagedbytheAMCorintheSchemesoanyotherMutualFunds,provideditisinconormitytothe investment objectiveso the Scheme and interms othe prevailingSEBI Regulations. As per the SEBI Regulations, noinvestmentmanagementeeswillbechargedorsuchinvestmentsandtheaggregateinterSchemeinvestmentmadebyallSchemesotheFundorintheSchemesunderthemanagementootherassetmanagementcompaniesshallnotexceed5%othenetassetvalueotheFund.

Ex g q :

Thescheme,subjecttoSEBIguidelinesissuedromtimetotime,mayhaveanexposureinoreignequitysecuritieswithinthepermissiblelimits.However,theexposureinsuchoreignequitysecuritieswouldnotexceedthemaximumamountpermittedromtimetotime.Boardsoassetmanagementcompanies(AMCs)andtrusteesshallexerciseduediligenceinmakinginvestmentdecisionsasrequiredunderRegulation25(2).Theyshallmakea detailedanalysisorisksandreturnsoinvestmentinoreignequitysecurities,comparingthemwithlikelyyieldso thesecuritiesavailableindomesticmarketsandhowtheseinvestmentswouldbeintheinterestoinvestors.Investmentmustbemadeinliquidactivelytradedsecurities.BoardsoAMCsandtrusteesmayprescribedetailedparametersormakingsuchinvestments,whichmayincludeidentiicationo countries, country rating, country limits, etc.Theyshallsatisythemselvesthat theAMC hasexperiencedkeypersonnel,research acilities and inrastructure or making such investments. Other specialized agencies and service providers associated with suchinvestments e.g. custodian, bank,advisors, etcshouldalso have adequateexpertiseand inrastructureacilities.Their pasttrackrecordoperormanceandregulatorycompliancerecord,itheyareregisteredwithoreignregulators,mayalsobeconsidered.Necessaryagreementsmaybeenteredintowiththemasconsiderednecessary.

I : SEBIvideitscircularno.SEBI/IMD/CIRNo.7/104753/07datedSeptember2,2007andCircularNo.SEBI/IMD/CIRNo.2/122577/08datedApril08, 2008has issued guidelines pertaining toinvestments inoverseas inancialassets.Accordinglyallthe investments inADR/GDRandoreignsecurities shall bemade incompliancewith theabovereerred circular.It isthe

investmentmanagersbeliethatoverseassecuritiesoernewinvestmentandportoliodiversiicationopportunitiesintomulti-marketandmulti-currencyproducts.However,suchinvestmentsalsoentailadditionalrisks.Oshoreinvestmentwillbemadesubjecttoany/allapprovals/conditionsthereoasmaybestipulatedbySEBI/RBI/otherregulatoryauthorities.TheFundshallappointadedicatedundmanagerorthepurposeoinvestmentinoverseasinancialassetsasprescribedintheaoresaidSEBIcircular.Theundmay,wherenecessary,appointotherintermediariesoreputeasadvisors,subcustodians,etc.or managingand administeringsuchinvestments.The eesandexpenses osuchappointmentwouldbepartotherecurringexpensesothescheme.TheappointmentosuchintermediariesshallbeinaccordancewiththeapplicablerequirementsoSEBIandwithinthepermissibleceilingsoexpenses.Theeesandexpenseswouldinclude,besidestheinvestmentsmanagement ees,custody eesand costs, eeso appointed advisorsand submanagers,transaction costsandoverseasregulatory costs.Investmentinoreignsecuritiesoersmoreopportunitiesanddiversiicationorinvestments.Investorsmaynotethattheschemeshallnotinvestinoreigndebtsecurities.

Ag R :

ItisAMCsbeliethattheinvestmentinADRs/GDRs/overseassecuritiesoernewinvestmentandportoliodiversiicationopportunitiesintomulti-market andmulti-currencyproducts. However, suchinvestmentsalso entailadditional risks. Suchinvestmentopportunitiesmay bepursuedbytheAMCprovidedtheyareconsideredappropriateintermsotheoverallinvestmentobjectivesotheschemes.SincetheScheme

wouldinvestonlypartiallyinADRs/GDRs/overseassecurities,theremaynotbereadilyavailableandwidelyacceptedbenchmarkstomeasureperormanceotheScheme.

Wehaveseenthatdierenteconomiesperormdierentlyatvariouspointsintime.Thereoreinordertomaximizethegainstotheinvestorsbyallocatingresourcestoeconomieswhicharedoingbetterthanoursandalsotodiversiytheriskarisingoutoconcentratedinvestmentsin

justonecountry,wemayproposetoinvestinoreignsecuritiesincompliancetotheregulationsromtimetotime.

Tomanagerisksassociatedwithoreigncurrencyandinterestrateexposure,theFundmayusederivativesoreicientportoliomanagementincludinghedgingandinaccordancewithconditionsasmaybestipulatedbySEBI/RBIromtimetotime.

TotheextentthattheassetsotheSchemeswillbeinvestedinsecuritiesdenominatedinoreigncurrencies,theIndianRupeeequivalentothenetassets,distributionsandincomemaybeadverselyaectedbythechangesinthevalueocertainoreigncurrenciesrelativetotheIndianRupee.Therepatriationocapitalalsomaybehamperedbychangesinregulationsconcerningexchangecontrolsorpoliticalcircumstancesaswellastheapplicationtoitotheotherrestrictionsoninvestment.

Oshoreinvestmentswillbemadesubjecttoany/allapprovals,conditionsthereoasmaybestipulatedbySEBI/RBIandprovidedsuchinvestmentsdonotresultinexpensestotheFundinexcessotheceilingonexpensesprescribedbyandconsistentwithcostsandexpenses attendant tointernationalinvesting.The Fundmay, wherever necessary, appoint other intermediaries oreputeas advisors,custodian/sub-custodiansetc.ormanagingandadministeringsuchinvestments.

TheappointmentosuchintermediariesshallbeinaccordancewiththeapplicablerequirementsoSEBIandwithinthepermissibleceilingsoexpenses.Theeesandexpenseswouldillustrativelyinclude,besidestheinvestmentmanagementees,custodyeesandcosts,eesoappointedadvisorsandsub-managers,transactioncosts,andoverseasregulatorycosts.

D M I I

TheIndianDebtmarketisacingmajorshitintherecenttimes.ThesubstantialgrowthinMutualFundcollectionsinthepastewyearshaveprovidedaneasyrouteortheinvestorstochannelisetheirsavingsintothedebtmarket,whichotherwiseislargelydominatedbyBanksandotherInstitutionalinvestors.


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Atpresent,theIndiandebt marketis dominatedbyissuesoCentralGovernmentbonds,Coporate DebenturesandPSUBonds.The newSecuritisedinstrumentsarealsoveryattractiveintheprimarymarket.RiskassociatedwithsecuritizedDebtorPTCsarecreditrisk,liquidityriskandpricerisk/interestraterisk.TheotherinstrumentsavailableorinvestmentareCommercialPapers,CertiicateoDeposits,Governmentguaranteedbonds,etc.

BriedetailsabouttheinstrumentsaregivenbelowasonOctober1,2009.

I L/ U C Y Rg

A O 1, 2009.

Lq R

CentralGovernmentSecurities(Annualised) Listed 3.32%-8.37% High Low

CorporateDebentures/PSUBonds Listed 5.5%-8.85% Moderate Low

CPs/CDs(shortterm) Unlisted 3.00%-5.55% High LowCallMoney Unlisted 2.25%-3.30% High Low

MiborlinkedPapers Listed 250-300bps Low Low

AbriedescriptionaboutyieldspresentlyavailableonCentralGovt.Securities/Bonds&Debenturesovariousmaturitiesisasollows:Annualisedyields(asonOctober1,2009)are:

Y < 1 27 711 1120

CentralGovernmentsecurities 3.32%-4.0% 5.9%-7.34% 7.13%-7.81% 7.88%-8.37%

Debentures/Bonds(AAArated) 5.5%-5.75% .80%-8.70% 8.70%-8.85% -

THEPRICEANDYIELDONVARIOUSDEBTINSTRUMENTSFLUCTUATEFROMTIMETOTIMEDEPENDINGUPONTHEMACROECONOMICSITUATION,INFLATIONRATE,OVERALLLIQUIDITYPOSITION,FOREIGNEXCHANGESCENARIO,ETC.ALSO,THEPRICEANDYIELDVARIESACCORDINGTOMATURITYPROFILE,CREDITRISKETC

S Lg F:

InaccordancewiththeMutualFundRegulationstheFundmayengageinstocklendingactivities.Accordingly,theSchememaylendsecuritiestotheextentoitsentireportoliootheSchemetoanyborrowerthroughanapprovedintermediary.TheSecuritieswillbelentbytheapprovedintermediaryagainstcollateralsreceivedromtheborrower,oraixedperiodotime,onexpiryowhichthesecuritieslentwillbereturnedbytheborrower.

Itmaybenotedthatthisactivitywouldhavetheinherentprobabilityocollateralvaluedrasticallyallingintimesostrongdownwardmarkettrends,resultingininadequatevalueocollateraluntilsuchtimeasthatdiminutioninvalueisreplenishedbyadditionalsecurity.Itisalsopossiblethattheborrowingpartyand/ortheapprovedintermediarymaysuddenlysuerseverebusinesssetbackandbecomeunabletohonouritscommitments.ThisalongwithasimultaneousallinvalueocollateralwouldrenderpotentiallosstotheScheme.Besides,therecanalsobetemporaryilliquidityothesecuritiesthatarelentoutandtheschememaynotbeabletosellsuchlentoutsecurities.

TRADING IN DERIVATIVES

Theschemeintendstousederivativesorpurposesthat maybepermittedbySEBI MutualFundregulationsromtimeto time.DerivativetransactionsthatcanbeundertakenbytheSchemeincludeawiderangeoinstruments,including,butnotlimitedto

Futures

Options

Swaps

Anyotherinstrument,asmaybepermittedbystatutoryauthoritiesromtimetotime.

Derivativescanbeeitherexchangetradedorcanbeoverthecounter(OTC).

ExchangetradedderivativesarelistedandtradedonStockExchangeswhereasOTCderivativetransactionsaregenerallystructuredbetweentwocounterparties.

Derivativeproductsareleveragedinstrumentsandcanprovidedisproportionategainsaswellasdisproportionatelossestotheinvestor.Executionosuchstrategiesdependsupontheabilityoheundmanagertoidentiysuchopportunities.Identiicationandexecutionothestrategiestobepursuedbytheundmanagerinvolveuncertaintyanddecisionoundmanagermaynotalwaysbeproitable.Noassurancecanbegiventhattheundmanagerwillbeabletoidentiyorexecutesuchstrategies.Therisksassociatedwiththeuseoderivativesaredierentromorpossiblygreaterthan,therisksassociatedwithinvestingdirectlyinsecuritiesandothertraditionalinvestments.

SEBIhasvideitscirculardatedanuary20,200andSeptember22,200interaliaspeciiedtheguidelinespertainingtotradingbyMutualFundsinExchangeTradedderivatives.

Allderivativepositiontakenintheportoliowouldbeguidedbytheollowingprinciples.

i. PositionlimitortheMutualFundinindexoptionscontracts

a. TheMutualFundpositionlimitinallindexoptionscontractsonaparticularunderlyingindexshallbeRs.500croreor15%othetotalopeninterestothemarketinindexoptions,whicheverishigher,perStockExchange.

b. Thislimitwouldbeapplicableonopenpositionsinalloptionscontractsonaparticularunderlyingindex.


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ii. PositionlimitortheMutualFundinindexuturescontracts:

a. TheMutualFundpositionlimitinallindexuturescontractsonaparticularunderlyingindexshallbeRs.500croreor15%othetotalopeninterestothemarketinindexutures,whicheverishigher,perStockExchange.

b. Thislimitwouldbeapplicableonopenpositionsinalluturescontractsonaparticularunderlyingindex.

iii. Additionalpositionlimitorhedging

Inadditiontothepositionlimitsatpoint(i)and(ii)above,theMutualFundmaytakeexposureinequityindexderivativessubjecttotheollowinglimits:

1. Shortpositionsinindexderivatives(shortutures,shortcallsandlongputs)shallnotexceed(innotionalvalue)theMutualFund'sholdingostocks.

2. Longpositionsinindexderivatives(longutures,longcallsandshortputs)shallnotexceed(innotionalvalue)theMutualFund'sholdingocash,governmentsecurities,T-Billsandsimilarinstruments.

iv. PositionlimitorMutualFundorstockbasedderivativecontracts.TheMutualFundpositionlimitinaderivativecontractonaparticularunderlyingstock,i.e.stockoptioncontractsandstockuturescontracts,isdeinedintheollowingmanner:-

1. ForstocksinwhichthemarketwidepositionlimitislessthanorequaltoRs.500crore,theMutualFundpositionlimitinsuchstockshallbe20%othemarketwidepositionlimit.Furhter,positioninutures,willnotbemorethan10%oapplicablemarketwidepositionlimitorRs.150crores,whicheverislower.

2. ForstocksinwhichthemarketwidepositionlimitisgreaterthanRs.500crore,CombinedpositioninstockoptionsandutureswillnotbemorethanRs300Croresor20%omarketwideposition,whicheverislower.Further,positioninutures,willnotbemorethan10%oapplicablemarketwidepositionlimitorRs150crores,whicheverislower.

v. PositionlimitoreachschemeoaMutualFundorstockbasedderivativecontracts.

Thescheme-wisepositionlimit/disclosurerequirementsshallbe

1. Forstockoptionandstockuturescontracts,thegrossopenpositionacrossallderivativecontractsonaparticularunderlyingstockoaschemeoamutualundshallnotexceedthehighero:

1%othereeloatmarketcapitalization(intermsonumberoshares)or5%otheopeninterestinthederivativecontractsonaparticularunderlyingstock(intermsonumberocontracts).

2. This position limits shallbeapplicable on thecombinedpositioninallderivativecontracts on an underlying stockata StockExchange.

3. Forindexbasedcontracts,MutualFundsshalldisclosethetotalopeninterestheldbyitsschemeorallschemesputtogetherinaparticularunderlyingindex,isuchopeninterestequalstoorexceeds15%otheopeninterestoallderivativecontractsonthatunderlyingindex.

I

IndexFutures

IndexFutureshavebeenintroducedbyBSEandNSE.Generallythreeutureso1month2monthsand3monthsarepresentlytradedontheseexchanges.TheseuturesexpireonthelastworkingThursdayotherespectivemonths.

ItheNity(Index)was1875atthebeginningoamonthandthequotesorthethreeutureswereasunder:

Month BidPrice OerPrice

1 1880 1885

2 1900 1915

3 1910 1930

TheFundcanbuyanIndexomonth1onthelastdayothemonthpriortomonth1intheillustrationaboveatanoerpriceo1885.

Numericalexampleouturestrade

FollowingtablewillgiveanoverviewothenewderivativepolicypermittedbySEBI:

S. N D T L L

1 IndexOptions MutualFundLevel Highero

Rs500crores

15%oopeninterestposition

2 IndexFuture MutualFundLevel Highero

Rs500crores

15%oopeninterestposition


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3 Indexderivatives MutualFundLevel Additionallimitsorhedging(overandabove1&2)

1. Shortpositionsinindexderivatives(shortutures,shortcallsandlongputs)shallnotexceed(innotionalvalue)theMutualFundsholdingostocks.

2. Longpositionsinindexderivatives(longutures,longcallsandshortputs)shall not exceed (in notional value) the Mutual Fundsholding o cash,governmentsecurities,T-Billsandsimilarinstruments.

4 Stockderivatives MutualFund 1. Marketwideposit ionlimitlessthan500crores Combinedpositioninstockoptionsandutureswillnotbemorethan20%

omarketwidepositions Further, position in utures, will not be more than 20% o applicable

MarketwidepositionsorRs150Croreswhicheverislower

2. Marketwidepositionlimitmorethan500crore CombinedpositioninstockoptionsandutureswillnotbemorethanRs

300Croresor20%omarketwideposition,whicheverislower Further,positioninutures,willnotbemorethan10%oapplicablemarket

widepositionlimitorRs150crores,whicheverislower.5 Stockderivatives Scheme Highero

1%oreeloatmarketcapor 5%oopeninterestinthederivativescontractsSubjectto4above

Theollowingisahypotheticalexampleoatypicallikelyindexuturetradeandtheassociatedcosts.

P Ix F A P S

Indexatthebeginningothemonth 1875 1875

Priceo1MonthFuture 1885

A.ExecutionCost:CarryandotherIndexFutureCosts(1885-1875)

10 Nil

B.BrokerageCost:Assumedat0.30%orIndexFutureand0.50%orspotStocks(0.30%o1885)(0.50%o1875)

5. 9.38

C.GainsonSurplusFunds:(assumed10%returnon90%othemoneyletaterpaying10%margin)(10%*1875*90%*30days/35)

13.87 Nil

T C (A+BC) 1.79 9.3

Inthisexample,theIndexFuturetradehasresultedinproitabilitycomparedtoactualpurchaseotheunderlyingindexstocks.TheproitabilityoIndexFutureascomparedtoanindividualsecuritywillinteraliadependuponthecarryingcost,theinterestavailableonsurplusundsandthetransactioncost.

Thereareuturesbasedonstockindicesasmentionedaboveasalsouturesbasedonindividualstocks.Illustrativelistostrategiesthatcanemployutures

Sg x :

(a) Theundhasanexistingequityportioninvestedinabasketostocks.Incasetheundmanagerhasaviewthattheequitymarketsareheadeddownwards,theundcanthenhedgetheexposuretoequityeitherullyorpartiallybyinitiatingshortuturespositionsintheindex.Asimilarpositioninthelongdirectioncanalsobeinitiatedbytheundtohedgeitspositionocashandpermissibleequivalents.

Theextenttowhichthiscanbedoneisdeterminedbyexistingguidelines.

(b) Totheextentpermissiblebyextantregulationstheschemecaninitiateanakedshortpositioninanunderlyingindexuturetradedonarecognizedstockexchange.

Incasethenitynearmonthuturecontracttradingatsay,1850,andtheundmanagerhasaviewthatitwilldepreciategoingorward,theundcaninitiateasaletransactiononityuturesat1850withoutholdingaportoliooequitystocksoranyotherunderlyinglongequityposition.Oncethepriceallsto1800atersay,20daystheundcaninitiateasquare-uptransactionbybuyingthesaiduturesandbookaproito50.Correspondinglytheundcantakealongpositionwithoutanunderlyingcash/cashequivalentsubjecttotheextantregulations.

Sg S F:

IndividualstockuturesarealsoavailableintheIndianEquityMarkets.Stockuturestradeeitheratapremiumoratdiscounttothespotprices,thelevelopremiumgenerallyrelectsthecostocarry.Stockspeciicissuesmayhaveabearingonuturesasspeculatorsmayinduturesasa cost-eective way o executing their viewon thestock. However suchexecutionsusually increasethe premium/discountto thespotsigniicantly,therebygivingrisetoarbitrageopportunitiesoraund.

(a) Sellingspotandbuyinguture:IncasetheundholdsthestockoacompanyatsayRs.1000whileintheuturesmarketittradesatadiscounttothespotpricesayatRs.980thentheundmaysellthestockandbuytheutures.Onthedateoexpiryothestockuture,theundmayreversethetransactions(i.e.BuyingatSpot&Sellingutures)andearnarisk-reeRs.20/-(2%absolute)onitsholdings.Asthiscanbewithoutanydilutionotheviewotheundontheunderlyingstocktheundcanstillbeneitromanymovementothepriceinthenorthwarddirection,i.e.ionthedateoexpiryotheutures,ithestocktradesat1100whichwouldbethepriceotheuturestoo,theundwillhaveabeneitoRs.100/-wherebytheundgetsthe10%upsidemovementtogetherwiththe2%beneitonthearbitrage,andthusgettingatotalreturno12%.


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(b) Buyingspotandsellinguture:WheretheundholdsthestockoacompanytradinginthespotmarketatRs1000whileittradesatRs.1020/-inthe uturesmarketthenundmaybuythestockatspotandsellintheuturesmarkettherebyearningRs20. Incaseo

adequacyocashwiththeund,thisstrategymaybeusedtoenhancereturnsotheSchemewhichwasotherwisesittingoncash.

(c) Buyingstockuture:Wheretheschemewantstoinitiatealongpositoninastockwhosespotpriceisatsay,Rs.1000anduturesisat

980,thentheundmayjustbuytheuturescontractinsteadothespottherebybeneitingromalowercostoption.

(d) IncasetheundhasabearishviewonastockwhichistradinginthespotmarketatRs.1000/-andtheuturesmarketatsayRs.980/-

.TheundcanexpresssuchaviewsubjecttoextantSEBIregulationsbyinitiatingashortpostionintheuturescontract.Incasetheview

isrightandtheuturespricedepreciatestosay900/-theundcansquareuptheshortpositiontherebyearningaproitoRs.80/-

O:

Optioncontractsareotwotypes-CallandPut;theormerbeingtheright,butnotobligation,topurchaseaprescribednumberosharesataspeciiedpricebeoreoronaspeciicexpirationdateandthelatterbeingtheright,butnotobligation,tosellaprescribednumberoshares

ataspeciiedpricebeoreoronaspeciicexpirationdate.Thepriceatwhichthesharesarecontractedtobepurchasedorsoldiscalledthe

strikeprice.OptionsthatcanbeexercisedonorbeoretheexpirationdatearecalledAmericanOptions,whilethosethatcanbeexercisedonlyontheexpirationdatearecalledEuropeanOptions.Optioncontractsaredesignatedbythetypeooption,nameotheunderlying,expirymonth

andthestrikeprice.NumericalexamplesoOptionsCallOption(Buy):TheundbuysacalloptionatthestrikepriceosayRs.1000andpays

apremiumosayRs.50,theundwouldearnproitsithemarketpriceothestockatthetimeoexpiryotheoptionismorethan1050

beingthetotalothestrikepriceandthepremiumthereon.IonthedateoexpiryotheoptionthestockpriceisbelowRs1000,theundwillnotexercisetheoptionwhileitlosesthepremiumoRs50.

PutOption(Buy):TheundbuysaPutOptionatRs1000bypayingapremiumosayRs50.IthestockpricegoesdowntoRs.900,theundwouldprotectitsdownsideandwouldonlyhavetobearthepremiumoRs50insteadoalossoRs100whereasithestockprice

movesuptosayRs.1100theundmaylettheOptionexpireandoregothepremiumtherebycapturingRs.100upsideaterbearingthe

premiumoRs50.

WritingaCallOption:TheundwritesacalloptionatRs.1050andearnsapremiumo,say,Rs.10.IthepriceishigherthanRs.1050,sayRs.1100/-atexpirythentheoptionisexercised,theFundearnsthepremiumoRs.10/-butlosesthedierencebetweenthemarketpriceandtheexercisepricei.e.Rs.50/-.IncasethestockpriceislessthanRs.1050,theundgetstokeepthepremiumoRs.10/-.

WritingaPutOption:TheundwritesaputoptionwiththestrikepriceoRs1000andearnsapremiumosayRs20.IncasethestocktradesatRs950theputoptionwillbeexercised,theundwillearnthepremiumoRs.20/-butlossesthedierencebetweentheexercisepriceandthemarketpricewhichisRs.50/-.Wherethestocktradesatabovetheexerciseprice,theoption-holderwillnotexercisetheoptionandletitexpire.InthiscasetheundwillearnthepremiumincomeoRs.20.

Theaboveouroptionpositionscanbeinitiatedinbothindexbasedoptionsaswellasstockspeciicoptions.Permissiblestrategiesinvolvingindexoptionsandstockspeciicoptionswouldbethesameasthatoindexuturesandstockspeciicuturesrespectively.

TheAMCretainstherighttoenterintosuchderivativetransactionsasmaybepermittedbytheapplicableregulationsromtimetotime.

D D

IntermsoCircularNo.MFD.BC.191/07.01.279/1999-2000andMPD.BC.187/07.01.279/1999-2000datedNovember1,1999anduly7,1999respectivelyissuedbyReserveBankoIndiapermittingparticipationbyMutualFundsinInterestRateSwapsandForwardRateAgreements,theFundwillusederivativeinstrumentsorthepurposeohedgingandportoliobalancing.TheAMCwouldundertakethesameorsimilarpurposesonly.

I R S (IRS)

AnIRSisan agreementbetweentwopartiesto exchangestatedinterestobligationsoran agreedperiodinrespectoa notionalprincipalamount.Themostcommonormisaixedtoloatingrateswapwhereonepartyreceivesaixed(predetermined)rateointerestwhiletheotherreceivesaloating(variable)rateointerest.

F R Ag (FRA)

AFRAisbasicallyaorwardstartingIRS.Itisanagreementbetweentwopartiestopayorreceivethedierencebetweenanagreedixedrate(theFRArate)andtheinterestrate(reerencerate)prevailingonastipulateduturedate,basedonanotionalprincipalamountoranagreedperiod.TheonlycashlowisthedierencebetweentheFRArateandthereerencerate.AsisthecasewithIRS,thenotionalamountsarenot

exchangedinFRAs. EAMPLE OF A DERIVATIVES TRANSACTION

BasicStructureoASwap

BankAhasamonthRs10croresliability,currentlybeingdeployedincall.BankBhasaRs10croresmonthasset,beingundedthroughcall.Bothbanksarerunninganinterestraterisk.

Tohedgethisinterestraterisk,theycanenterintoamonthMIBOR(MumbaiInterBankOeredRate)swap.Throughthisswap,Awillreceiveaixedpreagreedrate(say7%)andpaycallontheNSEMIBOR(thebenchmarkrate).BankAspayingatcallonthebenchmarkratewillneutralizetheinterestrateriskolendingincall.Bwillpay7%andreceiveinterestatthebenchmarkrate.BankAsreceivingocallonthebenchmarkratewillneutralizehisinterestrateriskarisingromhiscallborrowing.


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Themechanismisasollows:

AssumetheswapisorRs.10croreromMarch1,2002toSeptember1,2002.Aisaixedratereceiverat7%andBisaloatingratereceiverattheovernightcompoundedrate.

OnMarch1,2002AandBwillexchangeonlyanagreementohavingenteredthisswap.ThisdocumentationwouldbeasperInternationalSwapsandDerivativesAssociation(ISDA).

Onadailybasis,thebenchmarkrateixedbyNSEwillbetrackedbythem.OnSeptember1,2002theywillcalculatetheollowing:

AisentitledtoreceiveinterestonRs.10croreat7%or184daysi.e.Rs.35.28lakh,(thisamountisknownat thetimetheswapwasconcluded)andwillpaythecompoundedbenchmarkrate.

Bisentitledtoreceivedailycompoundedcallrateor184days&pay7%ixed.

OnSeptember1,2002,ithetotalinterestonthedailyovernightcompoundedbenchmarkrateishigherthanRs.35.28lakhs,AwillpayBthedierence.Ithedailycompoundedbenchmarkrateislower,thenBwillpayAthedierence.

EectivelyBankAearnsinterestattherateo7%p.a.orsixmonthswithoutlendingmoneyormonthsixed,whileBankBpaysinterest@7%p.a.ormonthsonRs.10crore,withoutborrowingormonthsixed.

TheAMCretainstherighttoenterintosuchderivativetransactionsasmaybepermittedbytheSEBIregulationsromtimetotime.Forrisksassociatedwithinvestmentsinderivativesinvestorsarerequestedtoreertopageno.othisSchemeInormationDocument.

PORTFOLIO TURNOVER POLICY:

Giventhe natureothe scheme,theporolioturnoverratiomaybeveryhigh.Consequently,it isdiiculttoestimatewith anyreasonablemeasureoaccuracy,thelikelyturnoverintheportolio.Theeectohigherportolioturnoverratiocouldbehigherbrokerageandtransactioncosts.

F. FUNDAMENTAL ATTRIBUTES

FollowingaretheundamentalattributesinaccordancewithRegulation18(15)(A)otheSEBI(MF)Regulations,199:

1. T

Open-endedequitylinkedsavingsscheme

2. I Oj

a) M Oj:


b)b) I P:

Undernormalcircumstances,theassetallocationundertheSchemewillbeasollows:

I I (% )

R P

Maximum Minimum

Equityandequityrelatedsecurities 100% 80% High

DebtandMoneyMarketInstruments 20% 0% LowtoMedium

Theabovepercentageswillbereckonedatthetimeoinvestment.


Theundmanagerswillollowanactiveinvestmentstrategytakingdeensive/aggressiveposturesdependingonopportunitiesavailableatvariouspointsotime.

3. T I

)) Lq /

Beinganopen-endedscheme,theunitsarenotproposedtobelistedonanystockexchange.However,theTrusteereservestherighttolisttheunitsasandwhenopen-endSchemesarepermittedtobelistedundertheRegulations,anditheTrusteeconsidersitnecessaryintheinterestounitholdersotheScheme.

Repurchase/redemptionounitsasreerredtoinRedemption.

Theschemeprovidesrepurchase/switch-outacilityonallBusinessDaysatNAVbasedpricesateraninitiallock-in-periodothreeyearsromthedateoallotmentounits.

Aterthelockinperiodothreeyears,theUnitHoldershallhaveoptiontotendertheunitstotheMutualFund,orrepurchase.However,intheeventothedeathothesubscriber,thenomineeorlegalheir,asthecasemaybe,othedeceasedsubscribershallbeabletowithdrawtheinvestmentonlyaterthecompletionooneyearromthedateoallotmentotheunitstothesubscriberoranytimethereater.


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) Aggg F x g S

)) N F O (NFO) Ex

TheseexpensesareincurredorthepurposeovariousactivitiesrelatedtotheNFOlikesalesanddistributioneespaidmarketingandadvertising,registrarexpenses,printingandstationary,bankchargesetc.

BeinganongoingSchemedetailsasregardNFOexpenseshavenotbeenprovidedherein.

AsperSEBICircularSEBI/IMD/CirNo.1/4057/0datedApril04,200,openendedschemesarenotpermittedtochargeNFOExpensestothescheme.However,theinitialissueexpensesincurredatthetimeoNewFundOerperiodotheschemelaunchedpriortotheissueotheabovementionedcircularshallbedebitedtotheschemetotheextento%otheundsraisedandthesameshallbeamortizedoveraperiodnotexceedingiveyears.Anyexpensemorethan%otheinitialnetassetsshallbebornebytheAMC.

) A S Rg Ex

These arethe ees andexpensesoroperatingthe scheme.TheseexpensesincludeInvestmentManagementandAdvisoryFeechargedbytheAMC,RegistrarandTranserAgentsee,marketingandsellingcostsetc.asgiveninthetablebelow:

TheAMChasestimatedthatupto2.50%otheweeklyaveragenetassetsotheschemewillbechargedtotheschemeasexpenses.Fortheactualcurrentexpensesbeingcharged,theinvestorshouldreertothewebsiteothemutualund.

P % N A

InvestmentManagement&AdvisoryFee 1.25

CustodialFees 0.01

Registrar&TranserAgentFeesincludingcostrelatedtoprovidingaccountsstatement,dividend/redemptioncheques/warrantsetc.

0.08

Marketing&SellingExpensesincludingAgentsCommissionandstatutoryadvertisement 0.34

Brokerage&TransactionCostpertainingtothedistributionounits 0.0

AuditFees/Feesandexpensesotrustees 0.01

Costsrelatedtoinvestorcommunications 0.01

Costsoundtranserromlocationtolocation -

OtherExpenses 0.20

TotalRecurringExpenses 2.50

ThepurposeothetableistoassisttheInvestorinunderstandingthevariouscostsandexpensesthatanInvestorintherespectivePlans/optionswillbeardirectlyorindirectly.

TheseestimateshavebeenmadeingoodaithaspertheinormationavailabletotheInvestmentManagerbasedonpastexperienceandaresubjecttochangeinter-seasperactual.TypesoexpenseschargedshallbeaspertheSEBI(MF)Regulations.

WhiletheAMCeesremainsthesame,theothercategoriesorecurringexpensesmaychangeinter-seandthetotalexpensesshallnotexceedthe limitspermittedbySEBI.Subjectto SEBIRegulations,theTrusteesreservestherightto modiy theabovetotalestimateorrecurringexpensesonaprospectivebasis

IntermsotheRegulations,[email protected]%otheaverageweeklynetassetsoracorpusuptoRs.100croresand1%onthebalanceamountaboveRs.100crores,calculatedonadailybasis.However,noAMCeescanbechargeableonRCAMsinvestmentintheScheme.TheTrusteeCompany,RCTC,[email protected]%otheUnitCapitaloalltheSchemesoRMFon1stAprileachyearorasumoRs.5,00,000/-whicheverislowerorsuchothersumasmaybeagreeduponbetweentheSettlor(RCL)andtheTrustee(RCTC)romtimetotimeinaccordancewiththeSEBIRegulationsoranyotherauthority,romtimetotime.

TheFundwillstrivetoreducethelevelotheseexpensessoastokeepthemwellwithinthemaximumlimitsallowedbySEBI.ExpensesonanongoingbasiswillnotexceedtheollowingpercentageotheweeklynetassetsorsuchmaximumlimitsasmaybespecifedbySEBIRegulationsromtimetotime.

ThetotalexpensesotheschemeincludingtheinvestmentmanagementandadvisoryeeshallnotexceedthelimitsstatedinRegulation52()whichareasollows:

N A Mx Ex %

UptoRs.100crores 2.50%

NextRs.300crores 2.25% NextRs.300crores 2.00%

Balance 1.75%

Providedthatsuchexpensesshallbelesserbyatleast0.25%othedailyaveragenetassetsoutstandingineachfnancialyearinrespectoaschemeinvestinginbonds.

A g NotApplicable

InaccordancewithRegulation18(15A)otheSEBI(MF)Regulations,theTrusteesshallensurethatnochangeintheundamentalattributesotheScheme(s)andthePlan(s)/Option(s)thereunderorthetrustoreeandexpensespayableoranyotherchangewhichwouldmodiytheScheme(s)andthePlan(s)/Option(s)thereunderand aecttheinterestsoUnitholdersis carriedout

unless:


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AwrittencommunicationabouttheproposedchangeissenttoeachUnitholderandanadvertisementisgiveninoneEnglishdailynewspaperhavingnationwidecirculationaswellasinanewspaperpublishedinthelanguageotheregionwheretheHead

OiceotheMutualFundissituated;and

TheUnitholdersaregivenanoptionoraperiodo30daystoexitattheprevailingNetAssetValuewithoutanyexitload.

G. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE?

BSE 100 Ix

Consideringtheinvestmentintheundmadeinequity/equityrelatedsecuritieswiththeobjectiveoachievinglongtermgrowthocapital,weproposetohaveBSE100asabenchmarksincemajorityothestocksrelatetothebroaderinvestmentphilosophyotheundwhichisto

investinstockswithpotentialoruturegrowthandgoodtrackrecord.

H. WHO MANAGES THE SCHEME?

N Ag EQ

T N xg g g

10

N S g

AshwaniKumar

39 B.Sc., MBA -Finance

Over10yearsoexperience

2003-tilldate

Reliance Capital Asset ManagementLtd.-FundManager-Equity

19922003

ZurichAssetmanagementCo.IndiaP.Ltd-SeniorResearchAnalyst

RelianceIndexFundSinceFeb2005tillApril08

RelianceVisionFundSinceune2003

RelianceTaxSaver(ELSS)Fund-SinceSept2005

RelianceEquityAdvantageFundSinceAug2007

RelianceMonthlyIncomePlanSincean2004

RelianceNaturalResourcesFundSinceFeb2008

I. WHAT ARE THE INVESTMENT RESTRICTIONS?

Theinvestmentpolicyotheschemecomplywiththerules,regulationsandguidelineslaidoutinSEBI(MutualFunds)Regulations,199.AspertheRegulations,speciicallytheSeventhSchedule,theollowinginvestmentlimitationsarecurrentlyapplicable:\

1. TheSchemeshallnotinvestmorethan15%oitsNAVindebtinstrumentsissuedbyasingleissuer,whichareratednotbelowinvestmentgradebyacreditratingagency.Thisinvestmentlimitmaybeextendedto20%otheNAVotheSchemewiththepriorapprovalotheBoardotheTrusteeCompanyandtheBoardotheAMC.

Providedthatsuchlimitshallnotbeapplicableortheinvestmentsingovernmentsecurities.

Provided urtherthatinvestmentwithin such limitcanbemadeinmortgagedbacked securitizeddebtswhichare ratednotbelowinvestmentgradebyacreditratingagencyregisteredwithBoard.

2. The Schemeshall notinvestmorethan10%oitsNAVin unrateddebtinstrumentsissuedbyasingleissuerandthetotal osuchinstrumentsshallnotexceed25%otheNAVotheScheme.AllsuchinvestmentswillbemadewiththepriorapprovalotheInvestmentCommitteeoRCAM.

N: Debentures,irrespectiveo anyresidualmaturityperiod(aboveorbelowone year),shallattracttheinvestmentrestrictionsasapplicableordebtinstrumentsasspeciiedunderclause1and1Aabove.Further,itisclariiedthattheinvestmentlimitsmentionedin(1)and(2)aboveareapplicabletoalldebtsecuritieswhichareissuedbypublicbodies/institutionssuchaselectricityboards,municipalcorporations,statetransportcorporationsetc.guaranteedbyeithercentralorstategovernment.Governmentsecuritiesissuedbycentral/stategovernmentoronitsbehalbyRBIareexemptromtheabovereerredinvestmentlimits.

3. Nomutualundschemeshallinvestmorethanthirtypercentoitsnetassetsinmoneymarketinstrumentsoanissuer:

ProvidedthatsuchlimitshallnotbeapplicableorinvestmentsinGovernmentsecurities,treasurybillsandcollateralizedborrowingandlendingobligations.

4. TheMutualFundunderallitsschemestakentogetherwillnotownmorethan10%oanycompaniespaidupcapitalcarryingvotingrights.

5. TransersoinvestmentsromoneschemetoanotherschemeintheMutualFundshallbeallowedonlyi:

i) Suchtransersaredoneattheprevailingmarketpriceorquotedinstrumentsonspotbasis;

ii) Thesecuritiessotranserredshallbeinconormitywiththeinvestmentobjectives&policiesotheSchemetowhichsuchtranser

hasbeenmade.

. TheSchemeshallmeetthesales,marketingandothersuchexpensesconnectedwithsalesanddistributionoschemeromtheentryloadinaccordancewiththeregulationsasapplicableromtimetotime

7. TheSchememayinvestinanotherschemeunderthesameassetmanagementcompanyorinanyothermutualundwithoutcharginganyees,providedtheaggregateinterschemeinvestmentsmadebyallSchemesunderthesamemanagementcompanyorinschemesunderthemanagementoanyotherAMCshallnotexceed5%oNAVotheMutualFund.[Providedthatthisclauseshallnotapplytoanyundoundsscheme.]

8. TheMutualFundshallbuyandsellsecuritiesonthebasisodeliveriesandshallinallcasesopurchases,takedeliveryorelativesecuritiesandinallcasesosale,deliverthesecuritiesandshallinnocaseputitselinapositionwherebyithastomakeshortsaleorcarryorwardtransactionsorengageinbadlainance:


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P thata mutualundmayengagein shortsellingo securitiesin accordancewiththe rameworkrelatingtoshort sellingandsecuritieslendingandborrowingspeciiedbytheBoard:

P thatamutualundmayenterintoderivativestransactionsinarecognizedstockexchange,subjecttotherameworkspeciiedbytheBoard.

ProvidedurtherthatsaleogovernmentsecurityalreadycontractedorpurchaseshallbepermittedinaccordancewiththeguidelinesissuedbytheReserveBankoIndiainthisregard.

9. The Fund shall get the securitiespurchasedortranserredinthename otheFundonaccount otheconcerned scheme,whereverinvestmentsareintendedtobeoalong-termnature.

10. Theundsschemesshallnotmakeanyinvestmentin:

i) Anyunlistedsecurityoanassociateorgroupcompanyothesponsor

ii) Anysecurityissuedbywayoprivateplacementbyanassociateorgroupcompanyothesponsor

iii) Thelistedsecuritiesogroupcompaniesothesponsorwhichisinexcesso25%othenetassetsothescheme.

11. TheSchemeshallnotinvestinaundoundsscheme.

12. Pendingdeploymentoundsotheschemeinsecuritiesintermsotheinvestmentobjectivesandpoliciesothescheme,theMutualFundcaninvesttheundotheschemeinshorttermdepositsoscheduledcommercialbankssubjecttotheguidelinesasapplicableromtimetotime.

13. NotermloansoranypurposewillbeadvancedbytheScheme.

14. TheFundshallnotinvestmorethan5%oitsNAVintheunlistedequitysharesorequityrelatedinstruments.

15. TheAMCmayinvestintheSchemeinthenewundoer.However,itshallnotchargeanyinvestmentmanagementeeonsuchamountsinvestedbyit.

1. TheSchemeshallnotinvestmorethan10%oitsNAVinequityshares/equityrelatedinstrumentsoanycompany.

Providedthat,thelimito10%shallnotbeapplicableorinvestmentsinindexundorsector/industryspeciicscheme.

However,theSchemeatanypointotimewillnotinvestmorethan10%otheNAVotheSchemeinasinglecompany.

17. Incaseanycompanyhasinvestedmorethan5%othenetassetvalueoascheme,theinvestmentmadebythatschemeorbyanyotherschemeothesameMutualFundinthatcompanyoritssubsidiaries,iany,shallbebroughttothenoticeotheTrusteesbyRCAMandbedisclosedinthehal-yearlyandannualaccountswithjustiicationorsuchinvestmentprovidedthatthelatterinvestmenthasbeenmadewithinoneyearothedateotheormerinvestmentcalculatedoneitherside.

18. RCAMshallnotundertakeanyotherbusinessexceptthatpermittedundertheMFRegulations.RCAMshallmeetwiththecapitaladequacyrequirements,iany,separatelyoreachotheseparateactivity,ianyundertakenbytheAMCandobtainseparateapproval,inecessaryundertheMFRegulations.

19. TheSchememayinvestinOverseassecuritiesinaccordancewiththeregulationsasapplicableromtimetotime.

20. TheSchemewillcomplywithanyotherregulationsapplicabletotheinvestmentsomutualundsromtimetotime.

21. AggregatevalueoilliquidsecuritiesotheScheme,whicharedeinedasnon-traded,thinlytradedandunlistedequityshares,shallnotexceed15%othetotalassetsotheScheme.

22. TheFundshallnotborrowexcepttomeettemporaryliquidityneedsotheFundorthepurposeorepurchase/RedemptionoUnitsorpaymentointerestandDividendtotheUnitholders.

ProvidedthattheFundshallnotborrowmorethan20%othenetassetsoanyindividualSchemeandthedurationotheborrowingshallnotexceedaperiodomonths.

AtRMF,toensurerobustriskmanagementandadequateportoliodiversiicationinternalInvestmentpolicyorvariousdebtschemeshasbeenramed.TheinvestmentpolicyatRMFspeciieslimitsbothonoverallbasis(acrossallschemes)aswellasonindividualschemelevel.Guidelinesorollowingparametersorliquidaswellasnonliquidschemeshasbeenspeciiedinthepolicy:

1. EligibleInstruments:Deinestheeligibleinstrumentswheretheschemecaninvest

2. MinimumLiquidity:Deinestheinstrumentsconsideredasliquidinstrumentsandtheminimuminvestmentsintheseinstrumentsas

apercentageototalnetassets

3. MaximumIlliquidcomponent:Deinestheinstrumentsconsideredasilliquidandthemaximuminvestmentthatcanbemadeintheseinstrumentsasapercentageonetassets.

4. Rating:Deinesminimumand/ormaximuminvestmentinaparticularratingasapercentageototalportolio.

5. Maturity:Deinedtheweightedaveragematurityoaportolio.Alsodeinestheweightedaveragematurity,maximumandmaturityorcertainassettypeslikecorporatebond,PTCs,Giltsetc

AlltheSchemessecuritiesinvestmentwillbeintranserablesecurities.

Allinvestmentrestrictionsstatedaboveshallbeapplicableatthetimeomakinginvestment.


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TheSchemewillnotenterintoanytransaction,whichexposesittounlimitedliabilitiesorresultsintheencumberingoitsassetsinanywaysoastoexposethemtounlimitedliability.

Theseinvestmentlimitations/parametersasexpressed/linkedtothenetasset/netassetvalue/capital,shallintheordinarycourse,applyasatthedateothemostrecenttransactionorcommitmenttoinvest.Changesdonothavetobeeectedmerelybecauseoappreciationordepreciationinvalueorbyreasonothereceiptoanyrights,bonusesorbeneitsinthenatureocapitaloroanyschemeoarrangementororamalgamation,reconstructionorexchange,oratanyrepaymentorredemptionorotherreasonoutsidethecontrolotheFund,anysuchlimitswouldtherebybebreached.Itheselimitsareexceededorreasonsbeyonditscontrol,AMCshalladoptasapriorityobjectivetheremedyingothatsituation,takingdueaccountotheinterestsotheUnitholders.

TheTrusteeCompanyinconsultationwithAMCmayaltertheseabovestatedlimitationsromtimetotime,andalsototheextenttheRegulationschange,soastopermittheSchemetomakeitsinvestmentsintheullspectrumopermittedinvestmentsinordertoachieveitsinvestmentobjectives&policies.Assuch,allinvestmentsotheSchemewillbemadeinaccordancewiththeRegulationsincluding

ScheduleVIIthereoandtheFundamentalAttributesothisScheme.

TheinvestmentinForeignequitySecuritiesshallbeinaccordancewithSEBIRegulations.

I AMC S: RCAMreservestherighttoinvestitsownundsintheSchemeuptoamaximumextentoitsnetworth.AsperSEBIRegulations,suchinvestmentsarepermitted,subjecttodisclosurebeingmadeintheSchemeInormationDocument.Further,RCAMshallnotchargeanyeesonitsinvestmentintheScheme,unlessallowedtodosounderSEBIRegulationsintheuture.

J. HOW HAS THE SCHEME PERFORMED?

CompoundedAnnualisedReturnsasonSeptember30,2009 SchemeReturns% BenchmarkReturns%

Returnsorthelast1year 3.5 33.4

Returnsorthelast3years 9.14 12.14

Returnsorthelast5years N.A N.A

Returnssinceinception 13.51 19.5

Calculationassumethatallpayoutsduringtheperiodhavebeenre-investedintheunitsotheschemeatthethenprevailingNAV.

AllthereturnsareoGrowthPlan-GrowthOption


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III. UNITS AND OFFER

Thissectionprovidesdetailsyouneedtoknoworinvestinginthescheme.

A. NEW FUND OFFER (NFO)

Thissectionisnotapplicable,astheongoingoerotheSchemehascommencedatertheNFO,andtheUnitsareavailableorcontinuoussubscriptionandredemption.

Howeverdetailsrelevantduringtheongoingoerhavebeenprovidedherein.

P/O RelianceTaxSaver(ELSS)FundhasaGrowthPlanandDividendPlan.GrowthPlanhasGrowthOptionandDividendPlanhasDividendPayoutOptionandDividendRe-investmentOption.

DetailsotheabovePlans/optionsareasunder:

() G P: TheGrowthPlanisdesignedorinvestorsinterestedincapitalappreciationontheirinvestmentandnotregularincome.Accordingly,theFundwillnotdeclaredividendsundertheGrowthPlan.TheincomeearnedontheGrowthPlanscorpuswillremaininvestedintheGrowthPlan.

GrowthPlanhasGrowthoption:

G O:TheGrowthPlanhasaGrowthOption.UnderthisOption,therewillbenodistributionoincomeandthe returns to theinvestor areonly by way o capitalgains/appreciation,i any, through redemption atapplicableNAVotheunitsheldbythem.

() D P:TheDividendPlanh

Documents

Reliance Tax Saver (ELSS) Fund09