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  1. 1. Type of Scheme An open-ended balanced fundLaunch Date August 30, 1995Fund Objective The investment objective of the scheme is to provide income distribution and / or medium to long term capital gains while at all times emphasising the importance of capital appreciation.Fund Investment Strategy The scheme will invest in equity and equity related instruments as well as in debt and money market instruments.Asset Allocation Indicative allocations** Risk Profile Instruments ( % of total assets) Maximum Minimum High/Medium/Low Equity and Equity 75 65 High Related Instruments Debt*, Money 35 25 Low to Medium Market and Cash ** At the time of investment. Investment by the scheme in securitised debt, will not normally exceed 50% of the debt investments in the scheme. Investment in derivatives/ futures/ options may be done for hedging and portfolio balancing.Liquidity NAV calculation on all business daysOptions Available Growth & DividendMinimum Application Amount 5,000/- and in multiples of 1/- thereafterRisk FactorsStatutory DetailsConstitution: Tata Mutual Fund (TMF) has been set up as a Trust under the Indian Trusts Act, 1882.Sponsors: Tata Sons Ltd., Tata Investment Corporation Ltd.Trustee: Tata Trustee Company LimitedInvestment Manager: Tata Asset Management LimitedRisk Factors
  2. 2. 1. Mutual Funds and Securities investments are subject to market risks and there can be no assurance and no guarantee that the objectives of the Mutual Fund will be achieved.2. As with any investment in securities, the NAV of the units issued under the schemes(s) can go up or down depending on the factors and forces affecting the capital markets.3. Past performance of the Sponsors /AMC/ Mutual Fund does not indicate or guarantee the future performance of the schemes of the Mutual Fund and may not necessarily provide a basis of comparison with other investments.4. The names of the schemes do not in any manner indicate either the quality of the scheme(s), their future prospects or the returns. Investors therefore are urged to study the terms of the offer carefully and consult their Investment Advisor before they invest in the Scheme(s)5. The Sponsors are not responsible or liable for any loss resulting from the operations of the Mutual Fund beyond the contribution of an amount of 1 lac towards setting up of the Mutual Fund.6. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and the actual returns of an Investor will be based on the actual NAV which may go up or down depending on the market conditions7. The AMC has the right to limit repurchases / redemptions, under certain circumstances. Please read the section „Maximum Amount for redemption and switch-outs‟ under the heading III - A. „Ongoing Offer Details‟ of the Scheme Information Document (SID) of the concerned scheme.8. Investments made by a unitholder in foreign currency in the Scheme(s) are subject to the risk of fluctuation in the value of the Rupee.9. A unitholder may invest in the Fund(s) and acquire a substantial portion of the scheme(s) units. The repurchase of units by the unitholder may have an adverse impact on the units of the scheme(s), because the timing of such repurchase may impact the ability of other unitholders to repurchase their units.10. In case of Fixed Income Investment, changes, in the prevailing rates of interest will likely affect the value of the Scheme(s) holdings and thus the value of the Scheme(s) Units. Increased rates of interest, which frequently accompany inflation and /or a growing economy, are likely to have a negative effect on the value of the Units. The value of securities held by a Scheme(s) generally will vary inversely with changes in prevailing interest rates.11. As with debt instruments, changes in interest rate may affect the Schemes net asset value as the prices of instruments generally increase as interest rates decline and generally decrease as interest rates rise. Prices of long-term securities generally fluctuate more in response to interest rate changes than do short-term securities. Indian debt and government securities markets can be volatile leading to the possibility of price movements up or down in fixed income securities and thereby to possible movements in the NAV.12. Credit risk or Default risk refers to the risk that an issuer of a fixed income security may default (i.e. the issuer will be unable to make timely principal and interest payments on the security). Because of this risk corporate debentures are sold at a higher yield above those offered on Government Securities which are sovereign obligations and free of credit risk. Normally, the value of a fixed income security will fluctuate depending upon the changes in the perceived level of credit risk as well as any actual event of default. The greater the credit risk, the greater the yield required for someone to be compensated for the increased risk.13. The liquidity of the Schemes investment may be inherently restricted by trading volumes, transfer procedures and settlement periods. Furthermore, from time to time, the Asset Management Company, the Custodian, the Registrar, any Associate, any distributor, dealer, any company, corporate bodies, trusts, any retirement and employee benefit funds of any associate or otherwise any scheme / mutual fund managed by the Asset Management Company or by any other Asset Management Company may invest in the Scheme. While at all times the Trustee Company and the Asset Management Company will endeavour that excessive holding of Units in the Scheme among a few Unitholders is avoided, however, the funds invested by these aforesaid persons may acquire a substantial portion of the schemes outstanding Units and collectively may constitute a majority unitholder in the Scheme. Accordingly, redemption of Units held by such persons may have an adverse impact on the value of the Units of the Scheme because of the timing of any such redemptions and may impact the ability of other Unitholders to redeem their respective Units.14. The Scheme(s) may also invest in overseas financial assets. To the extent that the assets of a Scheme will be invested in securities denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes in the value of respective foreign currencies relative to the Indian Rupee. The repatriation of capital to India may also be hampered by changes in the regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.15. The Scheme(s) may invest in derivative instruments which carry a high risk return ratio. In case of investments in derivative instruments like index futures, the risk/reward would be the same as investments in portfolio of equity/fixed income securities representing an index. However, there may be a cost attached to buying an index future. Besides in case of IRS and FRA, there exists market risks. Further there could be an element of settlement risk, which could be different from the risk in settling physical securities and there is a risk attached since the Indian market for derivative instruments is untried and untested16. The securities lending activity by the Scheme(s) will have the inherent probability of collateral value drastically falling in time of strong downward market trends or due to it being comprised of tainted/forged securities, resulting in inadequate value of collateral until such time as that diminution in value is replenished by additional security. It is also possible that the borrowing party and/or the approved intermediary may suddenly suffer severe business setback and become unable to honour its commitments. This along with a simultaneous fall in value of collateral would render potential loss to the Scheme. Besides, there can also be temporary illiquidity of the securities that are lent out and the scheme may not be able to sell such lent out securities.17. Tracking errors are inherent in any index fund and such errors may cause the scheme to generate returns which are not in line with the performance of the S & P CNX Nifty / BSE SENSEX or one or more securities covered by / included in the S & P CNX Nifty / BSE SENSEX. To the extent that some assets/ funds may be deployed in Stock Lending / Money Market Operations, the Scheme will be subject to risks relating to such deployment / operations and may also contribute to tracking errors. The deviation of the NAV of the respective plan from the SENSEX or Nifty is expected to be in the range of 2-3% per annum. However it may so be that the actual tracking error can be higher or lower than the range given. In case of investments in derivative instruments like index futures, the risk/reward would be the same as investments in portfolio of shares representing an index. However, there may be a cost attached to buying an index future. Further, there could be an element of settlement risk, which could be different from the risk in settling physical shares and there is a risk attached to the liquidity and the depth of the index futures market as it is an untested market.
  3. 3. 18. Pursuant to allotment of bonus units, the NAV of the schemes would fall in proportion to the bonus allotted and as a result the total value of units held by the investor would remain the same. 19. Basis Risk (Interest Rate Movement): During the life of floating rate security or a swap the underlying benchmark index may be com e less active and may not capture the actual movement in interest rates or at times the benchmark may cease to exist. These type of events may result in loss of value in 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. However depending upon the market conditions the spreads may move adversely or favourably leading to fluctuation in NAV. In case of downward movement of interest rates, floating rate debt instruments will give a lower return than fixed rate debt instruments. 20. In case of Tata Mid Cap Fund, Trading Volumes and Settlement Periods may restrict liquidity in equity and debt investments. In case of mid cap companies such liquidity risks is likely to be high. Further prices of stock in mid cap companies are also likely to be more volatile. 21. Risks associated with Derivatives Derivative products are specialised instruments that require investment techniques and risk analysis different from those associated with stocks and bonds. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative add to the portfolio and the ability to forecast price of securities being hedged and interest rate movements correctly. There is a possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the “counterparty”) to com ply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mis-pricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. 22. Investment RisksFor Non-equity schemes:The value of, and income from, an investment in the Scheme can decrease as well as increase, depending on a variety of factors which may affect thevalues and income generated by the Scheme‟s portfolio of securities. The returns of the Scheme‟s investments are based on the current yields of thesecurities, which may be affected generally by factors affecting capital markets such as price and volume, volatility in the stock markets, interest rates,currency exchange rates, foreign investment, changes in Government and Reserve Bank of India policy, taxation, political, economic or otherdevelopments, closure of the Stock Exchanges etc. Investors should understand that the investment pattern indicated, in line with prevailing marketconditions, is only a hypothetical example as all investments involve risk and there is no assurance that the Scheme‟s investment objective will beattained or that the Scheme be in a position to maintain the model percentage of investment pattern particularly under exceptional circumstances.Different types of securities in which the scheme would invest carry different levels and types of risk. Accordingly the scheme‟s risk may increase ordecrease depending upon its investment pattern. e.g. corporate bonds carry a higher amount of risk than Government securities. Further even amongcorporate bonds, bonds which are AAA rated are comparatively less risky than bonds which are AA rated.For Equity schemes:The Scheme will endeavour to invest in highly researched growth/ value stocks with high dividend yield. However the growth associated with equitiesis generally high as also the erosion in the value of the investments/portfolio in the case of the capital markets passing through a bearish phase is adistinct possibility. The NAV of the scheme is largely dependent on the performance of the companies and the sectors wherein the investment hasbeen made.The scheme may use techniques and instruments for efficient portfolio management and to attempt to hedge or reduce the risk of such fluctuations.However these techniques and instruments if imperfectly used have the risk of the scheme incurring losses due to mismatches particularly in a volatilemarket. The Fund‟s ability to use these techniques may be limited by market conditions, regulatory limits and tax considerations (if any). The use ofthese techniques is dependent on the ability to predict movements in the prices of securities being hedged and movements in interest rates. Thereexists an imperfect correlation between the hedging instruments and the securities or market sectors being hedged. Besides, the fact that skills neededto use these instruments are different from those needed to select the Fund‟s / Scheme‟s securities. There is a possible absence of a liquid market forany particular instrument at any particular time even though the futures and options may be bought and sold on an organised exchange. The use ofthese techniques involves possible impediments to effective portfolio management or the ability to meet repurchase / redemption requests or othershort-term obligations because of the percentage of the Scheme‟s assets segregated to cover its obligations. 23. Risk Associated with Securitised Debt Scheme may invest in domestic securitized debt such as asset backed securities (ABS) or mortgage backed securities (MBS). Asset Backed Securities (ABS) are securitized debts where the underlying assets are receivables arising from automobile loans, personal loans, loans against consumer durables, etc. Mortgage backed securities (MBS) are securitized debts where the underlying assets are receivables arising from loans backed by mortgage of residential / commercial properties. ABS/MBS instruments reflect the undivided interest in the underlying pool of assets and do not represent the obligation of the issuer of ABS/MBS or the originator of the underlying receivables. The ABS/MBS holders have a limited recourse to the extent of credit enhancement provided. If the delinquencies and credit losses in the underlying pool exceed the credit enhancement provided, ABS/MBS holders will suffer credit losses. ABS/MBS are also normally exposed to a higher level of reinvestment risk as com pared to the normal corporate or sovereign debt. At present in Indian market, following types of loans are amortised: o Auto Loans (cars / commercial vehicles /two vehicles) o Residential Mortgages or Housing Loans o Consumer Durable Loans o Personal LoansThe main risks pertaining to each of the asset classes above are described below: Auto Loans (cars / commercial vehicles /two vehicles) o The underlying assets (cars etc) are susceptible to depreciation in value whereas the loans are given at high loan to value ratios. Thus, after a few months, the value of asset becomes lower than the loan outstanding. The borrowers, therefore, may sometimes tend to default on loans and allow the vehicle to be repossessed. o These loans are also subject to model risk. i.e. if a particular automobile model does not be com e popular, loans given for financing that model have a much higher likelihood of turning bad. In such cases, loss on sale of repossession vehicles is higher than usual.
  4. 4. o Commercial vehicle loans are susceptible to the cyclicality in the economy. In a downturn in economy, freight rates drop leading to higher defaults in commercial vehicle loans. Further, the second hand prices of these vehicles also decline in such economic environment.Housing Loans o Housing loans in India have shown very low default rates historically. However, in recent years, loans have been given at high loan to value ratios and to a much younger borrower classes. The loans have not yet gone through the full economic cycle and have not yet seen a period of declining property prices. Thus the performance of these housing loans is yet to be tested and it need not conform to the historical experience of low default rates.Consumer Durable Loans o The underlying security for such loans is easily transferable without the bank‟s knowledge and hence repossession is difficult. o The underlying security for such loans is also susceptible to quick depreciation in value. This gives the borrowers a high incentive to default.Personal Loans o These are unsecured loans. In case of a default, the bank has no security to fall back on. o The lender has no control over how the borrower has used the borrowed money.Further, all the above categories of loans have the following common risks: o All the above loans are retail, relatively small value loans. There is a possibility that the borrower takes different loans using the same in com e proof and thus the in com e is not sufficient to meet the debt service obligations of all these loans. o In India, there is no ready database available regarding past credit record of borrowers. Thus, loans may be given to borrowers with poor credit record. o In retail loans, the risks due to frauds are high. 24. In case of Tata Dividend Yield Fund, Risk associated with high dividend yield stocks: Though the investments would be in companies having a track record of dividend payments, the performance of the scheme would inter-alia depend on the ability of these companies to sustain dividends in future. 25. In case of Tata Infrastructure Fund, The scheme being sectors specific will be affected by risk associated with the infrastructure sector. 26. In case of Tata Service Industries Fund, The scheme being sector specific would be investing predominantly in equity and equity related instruments of the companies in the Service sector, it would be riskier than a normal diversified equity scheme. 27. Notwithstanding anything contained in the Offering Circular the provisions of SEBI (Mutual Funds) Regulations 1996 and guidelines thereunder shall be applicable. The Trustee Company would be required to adopt / follow any regulatory changes by SEBI /RBI etc and /or all circulars / guidelines received from AMFI from time to time if and from the date as applicable. The Trustee Company in such a case would be obliged to modify / alter any provisions / terms of the Offering Circular during / after the launch of the scheme by following the prescribed procedures in this regard. 28. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio. Risks in using derivatives include the risk of default of counter party, mis-pricing and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. 29. For scheme specific risk factors and other details, please read the Scheme Information Document (SID) of the concerned scheme carefully before investing.