Term Finance Certificate (TFC)

Reliance provides its clients an access to different debt instruments including TFCs / Commercial Paper in Pre - IPO.

 A corporate debt instrument issued by companies to generate short and medium-term funds.
 Corporate TFCs offer institutional investors, in particular retirement funds and insurance companies, with a viable
high yield alternative to the National Saving Schemes (NSS) and bank deposits.
 TFCs are also an essential complement to risk free, lower yielding government bonds such as PIB.
 TFCs can be issued both as a fixed or floating rate instrument and may have a call or put option.

TFC Rating

 A TFC must be rated before issuance.

 The rating reflects, the credit risk of The TFC, i.e. the issuer’s ability and commitment to repay scheduled TFC
payments.
 Currently two rating agencies PACRA and JCR-VIS are operating in Pakistan.

Income/Return structure of TFC

 Like bonds, TFCs are structured to provide regular income in the form of coupons.
 Unlike a generic bond, a TFCs principal may gradually be redeemed over the tenor of the instrument.
 TFCs are exempt from Capital gain tax. However, coupons payments are subject to income tax.

Salient features of TFC

 Redeemable capital
 Monitored by Trustee
 Return on investment may be fixed or floating

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Commercial Paper

 It is a short-term, unsecured negotiable instrument issued by companies to borrow funds.

 Commercial paper is generally used to meet immediate cash needs.
  Commonly bought by Money market funds (the issue size is often too high for individual investors).
 Generally regarded as a safe investment and not backed by collaterals.
 It includes instruments that are used in commerce in place of money, as distinguished from paper used in
investment, personal, estate, speculative, and public transactions.

Advantages of Commercial Paper

 For the investor they are highly flexible, offer attractive interest rates and carry diversified investment risks.
 Due to varying credit standings, investments in commercial papers may bring in higher yields than time
deposits with lower risks.
 It is considered to be a safe investment since the financial situation of a company can easily be predicted over
a short period.