Income Guaranteed Fund

Q1. What is the Income Guaranteed Fund?

The Income Guaranteed Fund is a Portfolio Management Service (PMS) product designed for retired persons, pension fund holders, or risk-averse individuals seeking regular income with minimal risk. The primary investments are in Fixed Income Instruments such as Fixed Deposits and Bonds.

Q2. Who is the target audience for this product?

This product is suitable for:

• Retired individuals
• Pension fund holders
• Individuals seeking steady income and wanting to avoid equity market volatility

Q3. What are the key features of this product?

• Minimum investment size: NPR 10 Lakhs
• Investment horizon: Minimum 3 years
• Lock-in period: Minimum 1 year
• Two options: Profit Withdrawal or Reinvestment

Investment and Returns

Q5. What is the asset allocation for the Income Guaranteed Fund?

• 0-20% in Listed Securities (e.g., shares, bonds, debentures)
• 20-100% in Fixed Deposits with BFIs

Q6. Can I withdraw the returns periodically?

Yes, return withdrawal is available:

• On a quarterly basis
• Withdrawal is allowed on or after the 4th working day following the quarter-end

Q7. What are the conditions for investment withdrawal?

• Withdrawal is only allowed after the one-year agreement period.
• A maximum of 50% of the initial investment can be withdrawn.

Q8. What is the Reinvestment Option?

Under the Reinvestment Option:

• Investment returns are reinvested at the defined income guaranteed rate.
• Funds can also be invested in Corporate/Government Bonds that meet specified criteria.

Q9. Are returns guaranteed in this product?

Yes, the product offers defined income guaranteed rates; however, returns depend on prevailing fixed deposit rates and agreed terms.

Fees and Charges

Q10. What is the commission fee for this product?

The commission fee is 0.5% of the principal amount.

Q11. How are fees calculated?

Fees are computed periodically based on the principal amount and investment horizon. For example:

• On a 10 Lakhs portfolio, the AMC fee per quarter is NPR 1,250 (0.5% of principal).

Q12. Is there an additional charge for reinvestment?

No separate charges are mentioned for the reinvestment option.

Risk and Mitigation

Q13. What are the risks associated with this product?

For NIC Asia Capital:

• Interest Rate Risk: Risk of paying a fixed return in a falling interest rate market
• Reinvestment Risk: Difficulty reinvesting in a downward-sloping interest market
  For Clients:
• Inflation Risk: Returns may not match inflation
• Interest Rate Risk: Receiving fixed returns in a rising interest rate market

Q14. How does NIC Asia mitigate these risks?

• Funds are placed in Fixed Deposits with BFIs that meet stringent criteria.
• Investments in Corporate/Government Bonds follow predefined parameters.
• Investment criteria are reaffirmed bi-annually (Bhadra 5 and Falgun 5).

Process Workflow

Q15. What are the steps in the operational process for this product?

1. NIC Asia Capital approaches clients for the Income Guaranteed Fund.
2. An agreement is signed outlining terms and conditions.
3. Funds are placed in Fixed Deposits at agreed BFIs.
4. NIC Asia receives periodic interest payments from BFIs.
5. NIC Asia pays the agreed returns to clients.
6. Fees and commissions are deducted periodically.

Q16. Can I switch between Profit Withdrawal and Reinvestment Options during the tenure?

Switching between options is not explicitly mentioned. Clarify during the agreement signing.

Eligibility and Criteria

Q17. What are the eligibility criteria for BFIs where funds will be placed?

BFIs must meet the following:

• Minimum 3 years of operation
• Capital Adequacy Ratio meeting NRB requirements
• CCD ratio not exceeding 80%
• Non-performing loans (NPL) below 5%
• Minimum Liquidity Ratio: 20% (A-class), 15% (others)

Q18. Are there any criteria for Corporate/Government Bond investments?

Yes, criteria include:

• Minimum 3 years of operation
• ICRA/CARE Rating of BBB+ or higher
• Maturity less than fund maturity
• Interest yield higher than market yield
• No financial crime cases or regulatory action against the institution

Miscellaneous

Q19. How will client information be managed?

NIC Asia will maintain a detailed Client Management Information System (CMIS), including:

• Client's personal and contact details
• Investment details like portfolio code, principal amount, and return withdrawal period
• Agreed rates with banks and other essential information

Q20. Can the investment policy be revised during the tenure?

Investment criteria are reviewed bi-annually to ensure compliance and risk mitigation. Any changes will be communicated to clients as per the agreement.