CIN : L65910MH1995PLC220793 Registered Office: Reliance Centre, 7th Floor South Wing, Off Western Express Highway, Santacruz (East), Mumbai - 400 055 April 09, 2018 Dear Investor, Re.: Change in the fundamental attribute of Reliance Regular Savings Fund Debt Option At the outset we thank you for your investment in Reliance Mutual Fund and the confidence reposed in us. Further, we wish to inform you that, in accordance with SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2017/114 and SEBI/HO/IMD/DF3/CIR/P/2017/126 dated October 6, 2017 and December 4, 2017 respectively for Categorization and Rationalization of Mutual Fund Schemes, Reliance Capital Trustee Co. Ltd ( RCTC ), has approved the change in fundamental attribute of Reliance Regular Savings Fund Debt Option, with effect from May 19, 2018 ( Effective Date ). Securities and Exchange Board of India (SEBI), vide its letter no. IMD/DF3/OW/P/2018/7407/1 dated March 09, 2018 has taken note for the said proposal. Particulars of Modification Name of scheme Type of the Scheme Product Label Existing Reliance Regular Savings Fund Debt Option An Open Ended Scheme This product is suitable for investors who are seeking*: Income over medium term Investment predominantly in debt instruments having maturity of more than 1 year and money market instruments *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Proposed Reliance Credit Risk Fund An open ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds) This product is suitable for investors who are seeking*: Income over medium term Investment predominantly in AA and below rated corporate bonds *Investors should consult their financial advisors if in doubt about whether the product is suitable for them. How will the scheme allocate its assets? Instruments Debt instruments (including securitised debt) with maturity of more than 1 year Money Market instruments (including cash/call money & Reverse Repo) and debentures with maturity of less than 1 year Units issued by REITs and InvITs Indicative asset allocation (% of total assets) Maximum Minimum 100 65 Risk Profile High/ Medium/ Low Medium to Low 35 0 Low 10 0 Medium to High Instruments Corporate Bonds rated AA and below Debt & Money Market Instruments (including corporate bonds rated AA+ & above, government securities issued by Central and/ or State Government) Units issued by REITs and InvITs Indicative asset allocation (% of total Risk Profile assets) Maximum Minimum High/ Medium/Low 100 65 Medium to High 35 0 10 0 Medium to Low Medium to High
Securitised Debts will be a part of the debt securities and investment can be upto 25 percent of corpus. The above is only indicative and the Trustee/AMC, reserve the right to review or change the above pattern in the interest of the investor based on its views on the Debt market for a short term period on defensive considerations, liquidity or liability needs. The Fund may also enter into Repo, Stock Lending or such other transactions as may be permitted to mutual funds from time to time under SEBI Regulation. The AMC reserves the right to change the above asset allocation pattern in the interest of the investors depending on the market conditions for a short term period of defensive consideration. In case any deviation from the asset allocation, the fund manager will carry out rebalancing within 30 days. Where the portfolio is not re-balanced within 30 Days, justification for the same shall be placed before the Investment Committee and reasons for the same shall be recorded in writing. The Investment Committee shall then decide on the course of action. However, at all times the portfolio will adhere to the overall investment objectives of the Scheme. Corporate Bonds include all debt instruments (including securitized debt) issued by entities such as Banks, Public Sector Undertakings, Municipal Corporations, bodies corporate, companies, trusts/special Purpose Vehicles etc and would exclude investments in Government Securities issued by Central and/or State Government. Investment in liquid schemes or schemes that invest predominantly in money market instruments/ securities will be made for funds pending deployment. Debt instruments include securitized debts and liquid schemes launched by SEBI registered Mutual Fund or schemes that invest predominantly in money market instruments/ securities. Investment in securitized debts shall not exceed 50% of the net assets of the Scheme. Money market instruments include CBLO/ Repo/Reverse Repo (including corporate bond Repo), certificate of deposit, commercial papers, commercial bills, treasury bills, Government securities issued by Central and/or State Government / corporate bonds having an unexpired maturity up to one year, call or notice money, Term Deposits, usance bills (BRDS) and any other similar instruments as specified by the RBI/SEBI from time to time. The scheme may invest in derivatives upto a maximum of 50% of its net assets. The cumulative gross exposure through debt and derivative positions should not exceed 100% of the net assets of the scheme. The scheme may invest in foreign securities upto 25% of the net assets of the scheme. The Fund may also enter into Repo, Stock Lending, Short Selling or such other transactions as may be allowed to Mutual Funds from time to time Liquidity in the scheme may be provided through borrowing to meet redemptions in accordance with the SEBI Regulations The asset allocation indicated above may change from time to time keeping in view the market conditions, legislative and regulative amendments and political and economic factors, subject to Regulations. It must be clearly understood that the percentages stated above are purely indicative and can change substantially depending on the perception of the Investment Manager with the sole intention of protecting the interests of the Unitholders. The AMC reserves the right to change the above asset allocation pattern in the interest of the investors depending on the market conditions for a short term period of defensive consideration. Defensive considerations for this Scheme include maintaining an adequate float to meet anticipated levels of redemptions, expenses, and other liquidity needs. In case of any deviation from the asset allocation, the fund manager will carry out rebalancing within 30 days. Where the portfolio is not re-balanced within 30 Days, justification for the same shall be placed before the Investment Committee and reasons for the same shall be recorded in writing. The Investment Committee shall then decide on the course of action. However, at all times the portfolio will adhere to the overall investment objectives of the Scheme. 2
Where will the scheme invest? Subject to the SEBI Regulations, the Scheme may invest in various types of instruments including, but not limited to, any of the following: (a) Securities issued by any government agencies, quasi-government or statutory bodies, Public Sector Undertakings, which may or may not be guaranteed or supported by the Central Government or any state government (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills) (b) Non-convertible securities as well as nonconvertible portion of convertible securities, such as debentures, coupon bearing bonds, zero coupon bonds, deep discount bonds, Mibor-linked or other floating rate instruments, premium notes and other debt securities or obligations of public sector undertakings, banks, financial institutions, corporations, companies and other bodies corporate as may be permitted by SEBI / RBI from time to time (c) Securitised debt, pass through obligations, various tpes of securitisation issuances including but not limited to Asset Backed Securitisation, Mortgage Backed Securitisation, single loan securitisation and other domestic securitisation instruments, as may be permitted by SEBI / RBI from time to time. (d) Commercial Paper (CP), Certificate of Deposits (CD), Bills Rediscounting,CBLO, Repo (including repo in corporate bonds) and other Money Market Instruments as may be permitted by SEBI / RBI from time to time. (e) Derivatives like Interest rate swaps, Forward Rate agreements and other such instruments as permitted by RBI / SEBI (f) Deposits with banks and other bodies corporate as may be permitted by SEBI from time to time (g) Any other debt and money market instruments that may be available from time to time. (h) The scheme may invest in the liquid schemes launched by SEBI registered Mutual Fund or schemes that invest predominantly in money market instruments / securities. Subject to the Regulations, the investments may be in securities which are listed or unlisted, secured or unsecured, rated or unrated, and acquired through secondary market purchases, RBI auctions, open market sales conducted by RBI etc., Initial Public Offers (IPOs), other public offers, placements, rights, offers, negotiated deals, etc. To avoid duplication of portfolios and to reduce expenses, the Scheme may invest in any other schemes of the Fund to the extent permitted by the Regulations. In such an event, RNLAM will not charge management fees on the amounts of the Schemes so invested, unless permitted by the Regulations. Further, subject to the guidelines issued by SEBI on overseas investments, the Scheme may invest in various types of Foreign Securities including, but not limited to, any of the following: Subject to the SEBI Regulations, the Scheme may invest in various types of instruments including, but not limited to, any of the following: a) Commercial Paper (CP), Certificate of Deposits (CD), T-Bills, Bills Rediscounting, CBLO, Repo/Reverse Repo (including repo in corporate bonds). b) Corporate Bonds include all debt instruments (including securitized debt) issued by entities such as Banks, Public Sector Undertakings, Government Agencies and other Statutory Bodies, Municipal Corporations, body corporate, companies, trusts/special Purpose Vehicles etc and would exclude investments in Government Securities issued by Central and/or State Government. c) Investment in Government securities issued by Central and/ or State Government to the extent of SEBI prescribed limits. Such securities may be: i. Supported by the ability to borrow from the Treasury or ii. iii. Supported by Sovereign guarantee or the State Government or Supported by Government of India/ State Government in some other way. d) Securities issued by any government agencies, quasigovernment or statutory bodies, Public Sector Undertakings, which may or may not be guaranteed or supported by the Central Government or any state government (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills). e) Non-convertible securities as well as nonconvertible portion of convertible securities, such as debentures, coupon bearing bonds, zero coupon bonds, deep discount bonds, Mibor-linked or other floating rate instruments, premium notes and other debt securities or obligations of public sector undertakings, banks, financial institutions, corporations, companies and other bodies corporate as may be permitted by SEBI / RBI from time to time. f) Securitized debt, pass through obligations, various types of securitization issuances including but not limited to Asset Backed Securitization, Mortgage Backed Securitization, single loan securitization and other domestic securitization instruments, as may be permitted by SEBI / RBI from time to time. g) Derivatives like Interest rate swaps, Forward Rate agreements and other such instruments as permitted by RBI/ SEBI. h) Fund may use Interest Rate Futures (IRF) to create an imperfect hedge/proper hedge from time to time as per SEBI regulations. i) Deposits with banks and other bodies corporate as may be permitted by SEBI from time to time j) Any other debt and money market instruments that may be available from time to time. k) The scheme may invest in the liquid schemes launched by SEBI registered Mutual Fund or schemes that invest predominantly in money market instruments/ securities. 3
(i) Foreign debt securities (non-convertible) in the countries with fully convertible currencies (j) Overseas short term as well as long term debt instruments with rating not below investment grade by accredited/registered credit rating agencies (k) Overseas Money market instruments rated not below investment grade (l) units/securities issued by overseas mutual funds or unit trusts registered with overseas regulators and investing in permitted Foreign Securities, or unlisted overseas securities (not exceeding 10% of their net assets). (m) The Fund may also enter into Repo (Repos including repo in corporate bonds), hedging or such other transactions as may be allowed to Mutual Funds from time to time. In line with SEBI circular dated November 11, 2011 investments in corporate bond repo shall be made basis the policy approved by the Board of RNLAM and RCTC. The significant features are as follows: i. As specified in the SEBI Circular dated November 15, 2012, the base of eligible securities for mutual funds to participate in repo in corporate debt securities, is from AAA rated to AA and above rated corporate debt securities. ii. Category of counterparty & Credit rating of counterparty RMF schemes shall enter in lending via Repo only with Investment Grade counterparties (as required by SEBI Regulations) which are part of the approved debt universe (i.e. on which we have limits). iii. Restriction pertaining to tenor of Collateral For FMPs, the tenor of the collateral should expire before the maturity of the scheme. For other schemes, the collateral should comply with the maturity restrictions placed, if any, for those schemes in the Debt Investment Policy. iv. The Gross exposure of the scheme to repo transactions in corporate debt securities shall not be more than 10% of the net asset scheme. All investment restrictions stated above shall be applicable at the time of making investment. v. Applicable haircut RBI in its circular dated November 09, 2010 had indicated the haircut to be applied for such transactions as follows: S.No. Rating Minimum Haircut 1 AAA 10% 2 AA+ 12% 3 AA 15% The above haircuts are minimum stipulated haircuts where the repo period is overnight or where the remargining frequency (in case of longer tenor repots) is daily. The RBI had earlier recommended a haircut of 25%. It is proposed that we maintain a minimum haircut of 15% for all repo contract of less than 3 months, and 25% for other contracts, unless a lower haircut is approved by the Investment Committee. The Fund Manager may refer to the rating-haircut matrix published by FIMMDA, to determine the appropriate haircut. l) All investments in overseas securities will be governed based on SEBI guidelines issued from time to time. The Scheme may invest in various types of Foreign Securities including, but not limited to, any of the following: i. Foreign debt securities (non-convertible) in the countries with fully convertible currencies. ii. Overseas short term as well as long term debt instruments with rating not below investment grade by accredited/ registered credit rating agencies. iii. Overseas Money market instruments rated not below investment grade. m) The Fund may also enter into Repo (Repos including repo in corporate bonds), hedging or such other transactions as may be allowed to Mutual Funds from time to time. In line with SEBI circular dated November 11, 2011 investments in corporate bond repo shall be made basis the policy approved by the Board of RNAM and RCTC. The significant features are as follows: (i) As specified in the SEBI Circular dated November 15, 2012, the base of eligible securities for mutual funds to participate in repo in corporate debt securities is from AAA rated to AA and above rated corporate debt securities. (ii) Category of counterparty & Credit rating of counterparty RMF schemes shall enter in lending via Repo only with Investment Grade counterparties (as required by SEBI Regulations) which are part of the approved debt universe (i.e. on which we have limits). (iii) Restriction pertaining to tenor of Collateral for FMPs, the tenor of the collateral should expire before the maturity of the scheme. For other schemes, the collateral should comply with the maturity restrictions placed, if any, for those schemes in the Debt Investment Policy. (iv) Applicable haircut RBI in its circular dated November 09, 2010 had indicated the haircut to be applied for such transactions as follows: S.No. Rating Minimum Haircut 1 AAA 10% 2 AA+ 12% 3 AA 15% The above haircuts are minimum stipulated haircuts where the repo period is overnight or where the remargining frequency (in case of longer tenor repos) is daily. The RBI had earlier recommended a haircut of 25%. It is proposed that we maintain a minimum haircut of 15% for all repo contracts of less than 3 months, and 25% for other contracts, unless a lower haircut is approved by the Investment Committee. The Fund Manager may refer to the rating-haircut matrix published by FIMMDA, to determine the appropriate haircut. n) The schemes may also enter into repurchase and reverse repurchase obligations in all securities (including Repos in corporate bonds) held by them as per the guidelines and regulations applicable to such transactions. It is the intention of the scheme to trade in the derivatives market as per the Regulations. The scheme may also invest into tri-party Repo as per the prescribed guidelines of RBI. 4
(n) Overseas derivatives traded on recognized stock exchanges overseas (currently permitted only for hedging and portfolio balancing with underlying as securities) (o) Short term deposits with banks overseas where the issuer is rated not below investment grade (p) Any other permitted overseas securities / instruments that may be available from time to time. The scheme shall not invest in foreign securitised debts. Investment in Foreign Securities shall be in accordance with the guidelines issued by SEBI from time to time. The securities mentioned above could be listed, unlisted, publicly offered, privately placed, secured, unsecured, rated or unrated and of varying maturity. The securities may be acquired through public offerings (IPOs), secondary market operations, private placement, rights offers or negotiated deals. o) Overseas derivatives traded on recognized stock exchanges overseas (currently permitted only for hedging and portfolio balancing with underlying as securities). p) Short term deposits with banks overseas where the issuer is rated not below investment grade. q) Overseas Exchange Traded Funds (ETFs). r) Units/securities issued by overseas mutual funds or unit trusts registered with overseas regulators and investing in permitted Foreign Securities, Real Estate Investment Trusts (REITs) listed in recognized stock exchanges overseas or unlisted overseas securities (not exceeding 10% of their net assets). s) Any other permitted overseas securities/ instruments that may be available from time to time. The scheme shall not invest in foreign securitized debts. Investment in Foreign Securities shall be in accordance with the guidelines issued by SEBI from time to time. t) Units issued by REITs and InvITs as per SEBI guidelines. What are the investment strategies? The Fund Management Team will endeavor to maintain a consistent performance in the Scheme by maintaining a balance between safety, liquidity & profitability aspects of various investments. The Scheme will, under normal market conditions, invest its net assets in fixed income securities like Central Government securities, Treasury Bills, Corporate Bonds, and CBLO etc. The scheme may also invest its net assets in Derivatives like Interest rate swaps, Forward Rate agreements and other such instruments as permitted by RBI / SEBI. To reduce the volatility, the fund will keep a low government security exposure. The exposure in government securities will generally not exceed 50% of the corpus of the scheme. Some of the Debt Instruments may not be listed and investments will be made through public offer or private placement or secondary market open fund. The average maturity of the debt portfolio may normally be maintained between 1 and 7 years. The securities mentioned above could be listed, unlisted, publicly offered, privately placed, secured, unsecured, rated or unrated and of varying maturity. The securities may be acquired through public offerings (IPOs), secondary market operations, private placement, rights offers or negotiated deals. The fund management team will endeavor to maintain a consistent performance in the scheme by maintaining a balance between safety, liquidity and profitability aspects of various investments. The fund manager will try to achieve an optimal risk return balance for management of the fixed income portfolios. The investments in debt instruments carry various risks like interest rate risk, liquidity risk, default risk, purchasing power risk etc. While they cannot be done away with, they can be minimized by diversification and effective use of hedging techniques. The fund management team will take an active view of the interest rate movement by keeping a close watch on various parameters of the Indian economy, as well as developments in global markets. Investment views / decisions will be taken on the basis of the following parameters: 1. Prevailing interest rate scenario 2. Quality of the security / instrument (including the financial health of the issuer) However, the above is only indicative and the AMC reserves the right to change the profile based on market outlook and the interest rate scenario. 3. Maturity profile of the instrument 4. Liquidity of the security 5. Growth prospects of the company / industry 6. Any other factors in the opinion of the fund management team The above changes will be applicable to all the relevant sections of SID and KIM and the respective sections shall stand modified accordingly. All other terms and conditions as mentioned in the SID / KIM of Scheme shall remain unchanged. The above proposal is change in the Fundamental 5
Attributes of the scheme as per Regulation 18(15A) of the SEBI (Mutual Funds) Regulations, 1996 and pursuant to provision of SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2017/114 and SEBI/HO/IMD/DF3/CIR/P/2017/126 dated October 6, 2017 and December 4, 2017 respectively. Regulatory Position Pursuant to Regulation 18 (15A) of the SEBI (Mutual Funds) Regulations, 1996 ( Mutual Funds Regulations ) and pursuant to provisions of aforementioned circulars a change in the fundamental attribute in the scheme requires: (i) a written communication about the proposed change, to be sent to each unitholder and an advertisement to be released in 1 (One) English daily newspaper having nation-wide circulation and in a newspaper published in the language of the region where the head office of the mutual fund (in this case, Reliance Mutual Fund) is situated; and (ii) the unitholders to be given an option to exit at the prevailing net asset value ( NAV ), without any exit load, for a period of 30 (thirty days). Exit Option for Unit Holders: This letter serves as a communication to the unitholders of the Scheme for the change in the fundamental attributes of the Scheme. As required under Regulation 18 (15A) of the SEBI (Mutual Funds) Regulations, 1996 each unitholder of the Scheme is hereby being provided an option to exit his/her/its investment in the Scheme at the applicable NAV without exit load, subject to the terms and conditions set out below: Considering the aforementioned facts/information, and keeping in view the change in the fundamental attributes: (a) should you desire to discontinue holding the units in the Scheme, an option is being hereby provided to you to exit from the Scheme which includes redemption / switch out (wherefore you have made an investment) at the applicable NAV without any exit load at any of our Investor service Centre; (b) you may exercise the above option, without any exit load anytime during a period of 31 (Thirty One) days, commencing from April 18, 2018 till May 18, 2018 up to 3.00 p.m. (both days inclusive); [Note- It may however be noted that all such requests for exit option received after cut-off time on May 18, 2018, shall be subject to the applicable exit load, in terms of the relevant details, as specified in the SID / KIM of the Scheme]. (c) The redemption proceeds will be mailed/credited within 10 (Ten) working days from the date of receipt of the redemption request. (d) Unit holders should ensure that any change in address or pay-out bank details required by them, are updated in the Fund s records before exercising the exit option in line with the timelines as mentioned in the Statement of Additional Information / SID/ KIM. (e) the unit holders who have pledged or encumbered their units will not have the option to exit unless they procure an effective release of their pledges / encumbrances prior to the submission of redemption / switch- out requests. (f) Tax Impact on change in fundamental attributes of the Scheme is as follows: Unit holders who wish to continue: No Impact Unit holders who wish to exercise exit option: Normal tax impact in the case of redemption of Scheme/Plans as have been set forth in the SID / KIM of the Scheme Impact of Tax deduction at Source- For Resident Investor: No Tax shall be deducted at source in respect of any income credited or paid to unit holder on exercise the exit option. For Non-resident Investor (Other Than FII): Appropriate tax would need to be deducted at source u/s 195 of The Income tax Act 1961, in respect of any income credited or paid to unit holder on exercise of the exit option. Unit holders are requested to consult their Financial and Tax Professional advisors. You may further take note that: (a) in case you do not have any objection for the change in the fundamental attributes of the Scheme, no action is required to be taken at your end; (b) in case you have not exercised the exit option in the manner and within the time frame specified above, you shall be deemed to have consented to the change in the fundamental attributes of the Scheme; and (c) the impact of securities transaction tax, if any, arising out of the exit option exercised during the exit option period hereunder, shall be borne by Reliance Nippon Life Asset Management Limited (RNAM). However, any other tax consequences, arising out of exercise of exit option during the exit option period hereunder, shall be borne by the investor in line with the relevant provisions, as have been set forth in the SID / KIM of the Scheme. (d) Unit holders who are not opting for exit option, their investment shall continue in the same plan/option. 6
(e) On change in Fundamental attributes of the scheme, the ongoing SIPs, SWPs, STPs etc will continue in the existing manner for all future transactions. Yours truly, For Sd/- Sundeep Sikka Executive Director & Chief Executive Officer Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 7
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