A futures contract is an agreement made through an organized exchange to buy or sell a fixed amount of a commodity on a future date at an agreed-upon price. This financial instrument helps manage price risk and allows for speculation on future price movements.

The determination of Net Asset Value (NAV) should be done in Indian Rupee. NAV is a key metric in evaluating the value of a mutual fund’s assets minus its liabilities, and it is typically expressed in the fund’s local currency, which, in this case, is the Indian Rupee.

Investment managers can charge an Incentive Fee, which is a share in additional return earned by the Fund, in excess of the Hurdle Rate set in the Private Placement Memorandum (PPM).

In case the IPO involves a fresh issue of equity shares, and the majority of the proceeds from such fresh issue are proposed to be utilized for capital expenditure, the lock-in period for the minimum promoter contribution shall be 3 years. This means that promoters are restricted from selling or transferring their shares for a specified period to ensure their commitment and alignment with the company’s long-term goals.

Stewardship responsibilities include monitoring and actively engaging with investee companies on various matters such as financial performance, operational risk, strategy, corporate governance, board structure, remuneration, etc., and material Environmental, Social, and Governance (ESG) opportunities or risks. Stewardship emphasizes the active and responsible management of investments, focusing on long-term sustainability and ethical considerations.

At the Fund Level, when investors or unit holders need to subscribe to the corpus of the Category III Alternative Investment Fund (AIF), it is imperative to perform due diligence on operational risks, market risks, regulatory and compliance risks, strategy risk, and reputational risk faced by such funds. This ensures that potential investors have a comprehensive understanding of the risks associated with the fund before making investment decisions.

Value at Risk (VAR) has several limitations. While it is a widely used risk measure, it has shortcomings, including the assumption of normal distribution, the inability to capture tail risk adequately, and the reliance on historical data. Additionally, VAR may not fully account for sudden market changes or extreme events, making it necessary to consider its limitations when using it as a risk management tool.

The Fund’s liabilities comprise the tax expense as allocated to the investor’s account, in accordance with the Contribution Agreement. This refers to the allocation of tax expenses to investors based on the terms outlined in the Contribution Agreement governing their participation in the fund.

The Sponsor shall review policies and procedures of the Category III Alternative Investment Fund (AIF), along with its implementation, on a regular basis. The Sponsor plays a crucial role in overseeing the fund’s operations and ensuring that its policies and procedures are effectively implemented and adhered to.

Investment Managers of open-ended Category III AIFs should ensure that there is sufficient liquidity in the fund to meet potential redemption calls of investors. This means having enough liquid assets or reserves that can be readily converted to cash to accommodate investor redemptions without significantly impacting the fund’s operations.

The Fee Structure and Taxation Structure of the fund also play a vital role in the decision-making process of investors in a Category III Alternative Investment Fund (AIF). Investors often consider the fees they have to pay and the tax implications associated with their investments when making decisions about participating in a fund.

High Water Mark is the higher of the subscription price of units issued to a particular class of investors or the highest Net Asset Value (NAV) achieved at the end of any previous financial year. This mechanism ensures that performance fees are only charged on the incremental gains in the fund’s value, protecting investors from paying fees on previously earned profits.

A non-reporting financial institution is not required to register with the IRS and report financial accounts. Non-reporting financial institutions are exempt from certain reporting requirements under tax regulations, and as a result, they are not obligated to register with the IRS or report financial accounts.

Investment Managers can also use a GARP (Growth at a Reasonable Price) Investment Style, which combines the tenets of Value Investing and Growth Investing while making stock selection. GARP investors seek companies that demonstrate both growth potential and are considered reasonably priced based on fundamental valuation metrics.

If the equity share price falls, a fund with a short position will benefit, and it can continue to earn fixed income in the form of coupons on the convertible security. Short positions profit when the price of the underlying asset decreases, and the income from convertible securities can provide additional returns, making this statement true.

Employees who do not respect the Distributor’s Confidentiality Policy should be held liable for disciplinary action. This includes not disclosing confidential information to anyone outside and third-party without proper authorization, ensuring the security and confidentiality of sensitive information.

A Determinate Trust is a trust wherein the trust beneficiaries and their respective beneficial interests are ascertainable as per the terms of the Indenture of Trust or the Trust Deed at all times during its existence. In other words, the beneficiaries and their interests are clearly defined and identifiable according to the trust documentation.

Category III AIFs structured as closed-ended funds offer limited redemption options to the investors, as compared to open-ended funds. Closed-ended funds typically have a fixed maturity period, and investors can usually redeem their units only at specified intervals or upon maturity, whereas open-ended funds allow investors to redeem their units at any time.

Series NAV is computed for investors in a series of units to report the value of assets attributable per unit, as reduced by the liabilities and expenses apportioned to such series, as on a Valuation Day. It represents the net asset value specifically for a particular series within a fund structure.

If the trust is treated as an ‘association of persons,’ tax is charged on the entire income of the trust at the maximum marginal rate. The term “Indenture of Trust” typically refers to the legal document that establishes the terms and conditions of the trust, and the tax treatment depends on the classification of the trust for income tax purposes.

In the context provided, if the statement is referring to a condition where a body corporate has a net worth of at least Rs. 50 crore, then the statement is TRUE. This criterion is often used in various financial regulations or eligibility requirements where a certain level of net worth is specified for entities, such as body corporates, to meet certain qualifications or standards.

Environment, Social, and Governance (ESG) is a generic term for evaluating corporate behavior and is used interchangeably with sustainable, responsible, impact, or ethical investment. It refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business.

Category II Alternative Investment Funds (AIFs) that seek later-stage investment opportunities do not use any leverage at the fund level or indulge in complex trading operations. Category II AIFs typically include private equity funds and debt funds, and they have more flexibility in their investment strategies compared to Category I AIFs, which are focused on startups and early-stage ventures.

The Contribution Agreement records the terms on which an investor participates in a fund. It outlines the conditions, terms of investment, and other relevant details regarding the investor’s contribution to the fund.

Beta is a measure of the volatility of a fund with respect to the relevant benchmark. It indicates how sensitive the fund’s returns are to movements in the benchmark. A beta of 1 means the fund’s performance is expected to match the benchmark, while a beta greater than 1 suggests higher volatility, and a beta less than 1 indicates lower volatility than the benchmark.

Distressed debt financing through private debt funds is catching on in India in the form of refinancing settlements with banks and insolvency resolution schemes under the Insolvency and Bankruptcy Code. This legal framework governs the insolvency and bankruptcy proceedings in India, providing a structured process for resolving distressed assets and debts.

A Directional Strategy focuses on delivering absolute returns for investors by taking either a net long position (expecting prices to rise) or a net short position (expecting prices to fall) in the selected stocks or a broad-based market index. The goal is to capitalize on anticipated market trends and generate profits based on the direction of price movements.

Performance Benchmarking can also be used for the comparison of the returns generated by the Category III AIF with the returns generated by other comparable funds. This involves measuring the fund’s performance against a relevant benchmark or peer group to assess how well it has performed relative to others in the market.

A change in the Option Premium indicates the change in the probability of the option being in the money or generating a profit at expiry. The premium is the price paid for the option, and its change reflects market perceptions about the option’s potential profitability.

For individuals and HUFs with total income exceeding Rs. 5 crore, the Surcharge Rate is indeed 37%. This surcharge is an additional tax applied to the income tax liability and varies based on the total income.

The charges primarily incurred by the Fund consist of Management Fees and Performance Fees, collectively referred to as Total Fees.

Accredited Investors investing in specific funds, such as the “Large Value Fund for Accredited Investors” or Category III AIFs with regulatory concessions, are typically restricted from withdrawing their consent for such investments.

The percentage of equity shareholding in a Category III AIF is computed using the annual average of the monthly averages of either the Opening NAV (Net Asset Value) or the Closing NAV of the Fund.

Category III Alternative Investment Funds (AIFs) can be deemed as connected persons under SEBI (Securities and Exchange Board of India) regulations. They are allowed to communicate, provide, or allow access to unpublished price-sensitive information, but only in furtherance of business purposes, performance of duties, or discharge of legal obligations.

Proprietorship is least likely to be a permissible legal structure seeking registration as a Category III AIF under SEBI Regulations. Typically, entities such as Limited Liability Partnerships (LLPs), Companies, and Trusts are more suitable for AIF registration.

A revocable trust is a trust that can be revoked or modified by the Settlor (the person creating the trust) at their discretion or with the consent of the beneficiaries.

Investment managers typically prefer a low catch-up rate in the Contribution Agreement, not a high one. A low catch-up rate allows them to receive a larger share of profits until they “catch up” to their performance benchmark before the profit-sharing arrangement is applied.

The Offshore Fund has a Co-investment Arrangement with the Onshore Fund, and the Offshore investment manager has the option to enter into an Investment Advisory Arrangement with the Domestic Investment Manager.

The surcharge applicable on Dividend Income will be at 25% for Fund TI when the income, excluding Capital Gains under sections 112A and 111A, is above Rs.2 crore and less than Rs.5 crore.

The Total Exposure of the Fund is computed by adding the exposure in all long positions and exposure in short positions, providing a comprehensive measure of the fund’s overall market exposure.

The eligibility criteria for accreditation often require individuals to have an annual income of at least Rs.2 crore to qualify.

The unit holders in a Category III AIF would primarily earn income from various streams including dividend income, gains on transfer of units of the Fund, and potentially other sources such as mutual fund units.

The schedule should mention the amount of initial drawdown and the amount and timings of the subsequent drawdowns to be made during the Commitment period, which can be a fixed periodic drawdown.

Category II AIFs are not typically involved in the role of a distributor. Instead, they focus on pooling funds from investors and deploying them according to the defined investment strategy. Distributor-related activities are generally associated with other entities, such as mutual funds.

High Net Worth (HNI) investors and Institutional Investors diversify their portfolio to mitigate concentration risk by investing in various asset classes rather than focusing on only one.

NAV calculation is independent of the fund management function and is disclosed to investors at quarterly intervals for close-ended funds and monthly intervals for open-ended funds.

The leverage taken by a Category III AIF shall not exceed 2 times the Net Asset Value (NAV) of the fund.

A Portfolio Manager is banned from charging upfront fees, such as Registration Fees or Subscription Fees, to the investors directly or indirectly.

The Model Code of Conduct for Category III AIF Distributors requires disclosure of all material information, including Hurdle Rate, Management Fees, Additional Returns, Catch-up provisions, if any, expenses chargeable to the Fund, and expenses to be borne by the Investment Manager.

The Mark-to-Market process is crucial for the Investment Manager and investors to determine the fair amount of Incentive Fees payable as of a particular Valuation Day.

Any gains arising from these transactions shall be treated as ‘Profits and Gains from Business and Profession,’ and the fund should be liable to pay tax on such income at the Maximum Marginal Rate of Tax, which is 42.744%.

The Fund’s assets comprise all cash and bank account holdings, securities and investments owned by the Fund, and all interest earned on interest-bearing securities held by the Fund.

Pre-Commitment Services, such as preparation of pitch books and distribution kits (i) and facilitating fund due diligence by investors (ii), are suitable for tasks related to initial stages of fund activities.

The value of units held in any unit trust, mutual fund, Investment Corporation, or other similar investment vehicle shall be derived from the last prices published by the managers thereof, on the relevant Valuation Day.

An Angel Fund is a sub-category of a Venture Capital Fund that raises funds from angel investors and invests in accordance with the SEBI Regulations.

The Category III AIF shall ensure that the calculation of the Net Asset Value (NAV) is independent of the fund management function of the Fund.

The Manager Selection Process adopted by the Category III AIF is one of the most crucial factors reviewed in an Investment Due Diligence process.

Tax advisors are appointed by Category III AIF managers to get advice on domiciling the funds, helping them navigate tax-related considerations and implications.