CAT. I - are those which invest in start-ups or early stage ventures, social ventures, SMEs, infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified.

CAT. II - are those which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the AIF Regulations. AIFs such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator shall be included under this category.

Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIFs.

CAT. III  – are those which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. AIFs such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other Regulator shall be included in this category.

Regulatory Requirement:  The Sponsors are required, in accordance with Regulation 10 of the AIF Regulations, commit at least  2.5%  of the aggregate Capital Commitments of all Contributors or  Rs. 5 Crores , whichever is lower.

Commitmen t by Sponsors of the Bharat Credit Opportunities Fund – I: The Sponsors have committed  to invest Rs. 20 crores i.e. Rs. 15 crores higher than mandatorily required  which shows their faith in and commitment to the fund.

Only Qualified Contributors can invest in an AIF. A Qualified Contributor is any person* over the age of 18 years, but does not include:

a)  Any person who cannot acquire or hold Units without being in breach of any law or requirement of India or such other jurisdiction as applicable to such person, whether on its own or in conjunction with any other relevant circumstances

b)  Any person whose holding of Units, in the opinion of the Trustee and Investment Manager, might result in the Fund incurring any liability in respect of taxes or suffering any other pecuniary disadvantage, which the Trust might not otherwise have incurred or suffered, and

c)  Any custodian, nominee or trustee for any person described in clauses ‘a’ and ‘b’ above

*Person means and includes any legal or natural person, an individual (including any non-resident Indian (NRI), overseas citizen of India (OCI) and person of Indian-origin (PIO)), banks, insurance companies, body corporate, estates, family offices, non-banking finance companies, societies, Hindu undivided family, corporation, partnership (whether limited or unlimited), limited liability company, body of individuals, association, trust, proprietorship, institutional investor or any other institution, entity or organization, whether Indian or foreign or entity in the International Financial Service Centre in India, whether regulated or not, whether incorporated or not, including a government or an agency or instrumentality thereof and, employee welfare funds, pensions, endowments, sovereign wealth funds, and where the context so requires, includes a reference to such Person’s, executors, administrators, successors, substitutes (including persons taking by novation) and permitted assigns.

The investments can be made from a NRE / NRO account and the money shall be paid back into the same account.

The investor has to submit a Tax Residency Certificate stating that he / she is a tax resident of the US. The investor also has to fill in Form 10F on the Indian income tax portal at https://eportal.incometax.gov.in/. There are several websites on Google which show how this can be done.

There is a tax deduction of 15% on the income earned (over the principal amount invested). The investor can claim the Indo US tax treaty benefits for the tax deducted in India.

The Investment Manager charges the AIF a fee for services rendered by it as defined in the Investment Management Agreement. Management Fee is charged to holders of Class A and Class B units only.

Management Fee is payable annually, in advance.

Management Fee will accrue from the date on initial closing of the Fund and is payable upto the date the Fund is wound up or closed.

Hurdle Rate is the minimum percentage of return given to an investor before the Investment Manager can take his share of the return.

It is calculated from the date of receipt of capital contribution from the investor, till the dates the capital is returned to the investor.

The share of returns made by the Investment Manger after paying the hurdle rate to investors, is called Carry.

After the hurdle rate is paid to investors, the Investment Manager shall get his share till it reached the carry percentage of the hurdle rate paid to the investor. This is called Catch Up.