Peerless Investment in Debt, Equity and Arbitrage

86 Pages·2016·0.51 MB·English

Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

SCHEME INFORMATION DOCUMENT

PEERLESS INVESTMENT IN DEBT, EQUITY AND ARBITRAGE (IDEA) FUND

(An open ended equity scheme)

Offer of Units of Rs. 10 each for cash during the
New Fund Offer and continuous offer for Units at NAV based prices

New Fund Offer Opens on: _________________
New Fund Offer Closes on: _________________
Scheme re-opens on: within 5 business days from the date of allotment

Name of Mutual Fund: Peerless Mutual Fund

Name of the Sponsor: The Peerless General Finance & Investment
Company Ltd.

Name of Asset Management Company: Peerless Funds Management Company Limited

Name of Trustee Company: Peerless Trust Management Company Limited

Addresses, Website of the entities: Address:
Asset Management Company (AMC):
Peerless Funds Management Company Limited
Registered Office:
“Peerless Mansion”, 3rd Floor,
1, Chowringhee Square,
Kolkata- 700 069

Trustee Company:
Peerless Trust Management Company Limited
Registered Office:
“Peerless Mansion”, 3rd Floor,
1, Chowringhee Square,
Kolkata- 700 069

Website:
www.peerlessmf.co.in

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

The particulars of the Scheme have been prepared in accordance with the Securities and
Exchange Board of India (Mutual Funds) Regulations 1996, (herein after referred to as SEBI
(MF) Regulations) as amended till date, and filed with SEBI, along with a Due Diligence
Certificate from the Asset Management Company (AMC). The Units being offered for public
Subscription have not been approved or recommended by SEBI nor has SEBI certified the
accuracy or adequacy of the Scheme Information Document.

The Scheme Information Document sets forth concisely the information about the scheme that a
prospective investor ought to know before investing. Before investing, investors should also
ascertain about any further changes to this Scheme Information Document after the date of this
Document from the Mutual Fund / Investor Service Centres / Website / Distributors or
Brokers.

The investors are advised to refer to the Statement of Additional Information (SAI) for
details of Peerless Mutual Fund, Tax and Legal issues and general information on
www.peerlessmf.co.in

SAI is incorporated by reference (is legally a part of the Scheme Information Document). For
a free copy of the current SAI, please contact your nearest Investor Service Centre or log on to
our website.

The Scheme Information Document should be read in conjunction with the SAI and not in
isolation.

This Scheme Information Document is dated 11 January 2016.

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

TABLE OF CONTENTS

HIGHLIGHTS/ SUMMARY OF THE SCHEME........................................................................... 5 - 8
1. Investment objective
2. Liquidity
3. Benchmark
4. Transparency/NAV Disclosure
5. Loads & Transaction Charges
6. Plans & Options
7. Minimum Application Amount
8. Applications Supported by Blocked Amount (ASBA)

I. INTRODUCTION.......................................................................................................................... 8 - 22
A. RISK FACTORS
i. Standard Risk Factors
ii. Scheme Specific Risk Factors
B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME
C. SPECIAL CONSIDERATIONS, if any
D. DEFINITIONS
E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

II. INFORMATION ABOUT THE SCHEME........................................................................ 23 - 47
A. TYPE OF THE SCHEME
B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME
C. HOW WILL THE SCHEME ALLOCATE ITS ASSETS?
D. WHERE WILL THE SCHEME INVEST?
E. WHAT ARE THE INVESTMENT STRATEGIES
F. FUNDAMENTAL ATTRIBUTES
a. Type of a scheme
b. Investment Objective
c. Terms of Issue
G. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE?
H. WHO MANAGES THE SCHEME?
I. WHAT ARE THE INVESTMENT RESTRICTIONS?
J. HOW HAS THE SCHEME PERFORMED?

III. UNITS AND OFFER................................................................................................................ 47 - 79
A. NEW FUND OFFER (NFO)
New Fund Offer Period
New Fund Offer Price
Maximum Amount to be raised (if any)
Where can you submit the filled up applications
How to Apply
B. ONGOING OFFER DETAILS
Ongoing Offer Period
C. PERIODIC DISCLOSURES
D. COMPUTATION OF NAV

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

IV. FEES AND EXPENSES............................................................................................................. 79 - 84
A. NEW FUND OFFER (NFO) EXPENSES
B. ANNUAL SCHEME RECURRING EXPENSES
C. LOAD STRUCTURE& TRANSACTION CHARGES
D. WAIVER OF LOAD FOR DIRECT APPLICATIONS

V. RIGHTS OF UNITHOLDERS........................................................................................................ 84
-
VI. PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF
INSPECTIONS OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE BEEN
TAKEN OR IS IN THE PROCESSF BEING TAKEN BY ANY REGULATORY
AUTHORITY................................................................................................................................... 84 - 85
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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

HIGHLIGHTS/SUMMARY OF THE SCHEME

Investment objective

The investment objective of the scheme is to provide capital appreciation and income
generation by using equity and equity related instruments, arbitrage opportunities, and
investments in debt and money market instruments. However, there is no assurance or
guarantee that the investment objective of the scheme will be achieved. The scheme does not
assure or guarantee any returns.

Liquidity

The Scheme offers Units for Subscription and Redemption at NAV based prices on all Business
Days on an ongoing basis, commencing not later than 5 business days from the date of closure
of NFO period. The AMC shall dispatch the Redemption proceeds within 10 Business Days
from date of receipt of request from the Unit holder.

Benchmark
SO 9

The Scheme performance would be benchmarked against a customized composite benchmark
comprising of Nifty 50 Index, CRISIL Liquid Fund Index and CRISIL Composite Bond Fund
Index.

The Composition of the benchmark would be 25% Nifty 50 Index + 45% CRISIL Liquid Fund
Index + 30% CRISIL Composite Bond fund Index

CRISIL Liquid Fund Index seeks to track the performance of a debt portfolio that includes
CBLO, Commercial Papers and Certificates of Deposit. The same is appropriate for
benchmarking the income generated by the equity arbitrage opportunities.

CRISIL Composite Bond Fund Index seeks to track the performance of a debt portfolio that
includes government securities and AAA/AA rated corporate bonds.

The Nifty 50 Index is a well diversified 50 stock index accounting for multiple sectors of the
economy.

Transparency/NAV Disclosure

The AMC will calculate the NAVs for all the Business Days. The NAV of the Scheme shall be
SO published at least in two daily newspapers having circulation all over India on all Business
Days. The Asset Management Company (“AMC”) shall update the NAVs on its website
17 (a)
(www.peerlessmf.co.in) and of the Association of Mutual Funds in India (“AMFI”)
(www.amfiindia.com) before 9.00 p.m. every Business Day. In case of any delay, the reasons for
such delay would be explained to AMFI in writing. If the NAVs are not available before the
commencement of Business Hours on the following day due to any reason, the Mutual Fund
shall issue a press release giving reasons and explaining when the Mutual Fund would be able
to publish the NAV.

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

The AMC will disclose the portfolio of the Scheme within one month from the close of each half
year (i.e. 31st March and 30th September) either by sending a complete statement to all the Unit
holders or by publishing the same by way of advertisement in one national English daily
newspaper circulating in the whole of India and in a newspaper published in the language of
the region where the Head Office of the Mutual Fund is situated. The portfolio statement will
also be displayed on the website of the AMC and AMFI.

The AMC will make available the Annual Report of the Scheme within four months of the end
of the financial year.

Loads
Entry Load : Not Applicable
Exit Load : Nil

Pursuant to SEBI circular no. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009, no entry
load will be charged by the scheme to the investor.

The upfront commission on investment made by the investor, if any, shall be paid to the ARN
Holder (AMFI registered Distributor) directly by the investor, based on the investor's
assessment of various factors including service rendered by the ARN Holder.

Exit Load charged, if any, shall be credited to the Scheme. Service tax on exit load shall be paid
out of the exit load proceeds and exit load net of service tax shall be credited to the Scheme.

The switch of investments from Regular Plan to Direct Plan shall be subject to applicable exit
load if any. Further, no exit load shall be levied in case of switches from Direct Plan to Regular
Plan.

Transaction Charges
SEBI, vide its circular no. Cir/IMD/DF/13/2011 dated 22 August 2011 has allowed mutual
funds to levy a transaction charge on subscriptions of Rs.10,000/- and above, which shall be
deducted by the AMC from subscription amount and paid to the distributors.

For more details on Load Structure and Transaction Charges, refer to the paragraph ‘Load
Structure & Transaction Charges’.

Plans & Options

The Scheme has following Plans:

1. Regular Plan: This Plan is for investors who wish to route their investment through any
distributor.

2. Direct Plan: This Plan is for investors who wish to invest directly without routing the
investment through any distributor. This Plan shall have a lower expense ratio
excluding distribution expenses, commission, etc and no commission for distribution of
Units will be paid / charged under the Direct Plan.

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

Each of the Plans as above shall have two options:

1. Growth
2. Dividend (Payout and Re-investment).
If Dividend payable under Dividend Payout option is equal to or less than Rs. 100/- then the
Dividend would be compulsorily reinvested in the option of the Scheme.
Investors should indicate the Plan/Option for which the subscription is made by indicating the
choice in the appropriate box provided for the purpose in the application form.

The following criteria will be considered for Uniform disclosure on treatment of applications
under Direct/Regular plans:

Scenario Broker Code mentioned Plan mentioned by the Default Plan to be captured
by the investor investor
1 Not mentioned Not mentioned Direct Plan
2 Not mentioned Direct Direct Plan
3 Not mentioned Regular Direct Plan
4 Mentioned Direct Direct Plan
5 Direct Not Mentioned Direct Plan
6 Direct Regular Direct Plan
7 Mentioned Regular Regular Plan
8 Mentioned Not Mentioned Regular Plan

In cases of wrong/ invalid/ incomplete ARN codes mentioned on the application form, the
application shall be processed under Regular Plan. The AMC shall contact and obtain the
correct ARN code within 30 calendar days of the receipt of the application form from the
investor/ distributor. In case, the correct code is not received within 30 calendar days, the AMC
shall reprocess the transaction under Direct Plan from the date of application without any exit
load.

Further, in case of valid application received without indicating any choice of Option, the
following Default Option will be considered for allotment:

1. Growth Option - where Growth or Dividend Option is not indicated;

2. Dividend Reinvestment - where Payout or Reinvestment is not indicated under Dividend
Option.

The Plans and Options stated above will have a common portfolio.

Minimum Application Amount

Rs. 1,000/-and in multiples of Re. 1/- thereafter

Minimum Additional Purchase Amount

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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

Rs. 100 and in multiples of Re. 1/- thereafter

Minimum application amount is applicable only at the time of creation of new folio.

Applications Supported by Blocked Amount (ASBA)

Investors may apply through the ASBA process during the NFO period of the Scheme by filling
in the ASBA form and submitting the same to their respective banks, which in turn will block
the amount in the account as per the authority contained in ASBA form, and undertake other
tasks as per the procedure specified therein.

For complete details on ASBA process, refer Statement of Additional Information (SAI)
made available on our website www.peerlessmf.co.in.

INTRODUCTION

A. RISK FACTORS
SO 2

i. Standard Risk Factors:

1) Investment in Mutual Fund Units involves investment risks such as trading volumes,
settlement risk, liquidity risk, default risk including the possible loss of principal.

2) As the price / value / interest rate of the securities in which the Scheme invests fluctuates,
the value of your investment in the Scheme may go up or down depending on the various
factors and forces affecting the capital markets and money markets.

3) Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance
of the Scheme.

4) The name of the Scheme does not in any manner indicate either the quality of the Scheme or
its future prospects and returns.

5) The sponsor is not responsible or liable for any loss resulting from the operation of the
Scheme beyond the initial contribution of Rs. 1 lakh made by it towards setting up the Fund.

6) The present scheme is not a guaranteed or assured return Scheme.

II. Scheme Specific Risk Factors

Risks associated with Equity and Equity Related Instruments:

Equity and Equity Related Instruments by nature are volatile and prone to price fluctuations on
a daily basis due to macro and micro economic factors. The value of Equity and Equity Related
Instruments may fluctuate due to factors affecting the securities markets such as price volatility,
volumes traded, interest rates, currency exchange rates, changes in law/policies of the
Government, taxation laws, political, economic or other developments, which may have an
adverse impact on individual securities, a specific sector or all sectors. Consequently, the NAV
of the Units issued under the Scheme may be adversely affected.
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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

Equity and Equity Related Instruments listed on the stock exchange carry lower liquidity risk;
however the Scheme’s ability to sell these investments is limited by the overall trading volume
on the stock exchanges. In certain cases, settlement periods may be extended significantly by
unforeseen circumstances. The inability of the Scheme to make intended securities purchases
due to settlement problems could cause the Scheme to miss certain investment opportunities.
Similarly, the inability to sell securities held in the Scheme's portfolio may result, at times, in
potential losses to the Scheme, if there is a subsequent decline in the value of securities held in
the Scheme's portfolio.

Investments in equity and equity related instruments involve a degree of risk and investors
should not invest in the Scheme unless they can afford to take the risk of losing their
investment.

Risks associated with Fixed Income Securities:

Interest-Rate Risk: Fixed income securities such as government bonds, corporate bonds and
Money Market Instruments run price-risk or interest-rate risk. Generally, when interest rates
rise, prices of existing fixed income securities fall and when interest rates drop, such prices
increase. The extent of fall or rise in the prices depends upon the coupon and maturity of the
security. It also depends upon the yield level at which the security is being traded.

Re-investment Risk: Investments in fixed income securities carry re-investment risk as interest
rates prevailing on the coupon payment or maturity dates may differ from the original coupon
of the bond.

Basis Risk: The underlying benchmark of a floating rate security or a swap might become less
active or may cease to exist and thus may not be able to capture the exact interest rate
movements, leading to loss of value of the portfolio.

Spread Risk: In a floating rate security the coupon is expressed in terms of a spread or mark up
over the benchmark rate. In the life of the security this spread may move adversely leading to
loss in value of the portfolio. The yield of the underlying benchmark might not change, but the
spread of the security over the underlying benchmark might increase leading to loss in value of
the security.

Liquidity Risk: The liquidity of a bond may change, depending on market conditions leading
to changes in the liquidity premium attached to the price of the bond. At the time of selling the
security, the security can become illiquid, leading to loss in value of the portfolio.

Credit Risk: This is the risk associated with the issuer of a debenture/bond or a Money Market
Instrument defaulting on coupon payments or in paying back the principal amount on
maturity. Even when there is no default, the price of a security may change with expected
changes in the credit rating of the issuer. It is to be noted here that a Government Security is a
sovereign security and is the safest. Corporate bonds carry a higher amount of credit risk than
Government Securities. Within corporate bonds also there are different levels of safety and a
bond rated higher by a particular rating agency is safer than a bond rated lower by the same
rating agency.
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Peerless Investment in Debt, Equity and Arbitrage (IDEA)Fund

Liquidity Risk on account of unlisted securities: The liquidity and valuation of the Scheme
investments due to their holdings of unlisted securities may be affected if they have to be sold
prior to their target date of divestment. The unlisted security can go down in value before the
divestment date and selling of these securities before the divestment date can lead to losses in
the portfolio.

Settlement Risk: Fixed income securities run the risk of settlement which can adversely affect
the ability of the fund house to swiftly execute trading strategies which can lead to adverse
movements in NAV.

Risks associated with investments in derivatives:
SO 5

The Scheme may invest in derivative products in accordance with and to the extent permitted
under the Regulations and by RBI. Derivative products are specialized instruments that require
investment techniques and risk analysis different from those associated with stocks and bonds.
The use of a derivative requires an understanding not only of the underlying instrument but of
the derivative itself. Trading in derivatives carries a high degree of risk although they are
traded at a relatively small amount of margin which provides the possibility of great profit or
loss in comparison with the principal investment amount. Thus, derivatives are highly
leveraged instruments. Even a small price movement in the underlying security could have an
impact on their value and consequently, on the NAV of the Units of the Scheme.

Investment in derivatives also requires the maintenance of adequate controls to monitor the
transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and
the ability to forecast price or interest rate movements correctly. Even a small price movement
in the underlying security could have an impact on their value and consequently, on the NAV
of the Units of the Scheme.

The Scheme may face execution risk, whereby the rates seen on the screen may not be the rate at
which the ultimate execution of the derivative transaction takes place.

The Scheme may find it difficult or impossible to execute derivative transactions in certain
circumstances. For example, when there are insufficient bids or suspension of trading due to
price limit or circuit breakers, the Scheme may face a liquidity issue.

The options buyer's risk is limited to the premium paid, while the risk of an options writer is
unlimited. However the gains of an options writer are limited to the premiums earned.

The exchange may impose restrictions on exercise of options and may also restrict the exercise
of options at certain times in specified circumstances and this could impact the value of the
portfolio.

The writer of a put option bears the risk of loss if the value of the underlying asset declines
below the exercise price. The writer of a call option bears a risk of loss if the value of the
underlying asset increases above the exercise price.

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