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SBI MUTUAL FUND

 

INVITES SUBSCRIPTIONS TO

 

MAGNUM MONTHLY INCOME PLAN – FLOATER*

*(An open-ended Scheme. Monthly Income is not assured and is subject to the availability of distributable surplus)

 

Initial Issue of Magnums of face value of Rs. 10 /- each for cash at par during IPO and at NAV related prices on an ongoing basis

 

 

Initial Offer open for _____ days from ­­­­­­­­­­­__________ to ______________

 

Scheme reopens for continuous sale and repurchase from. ____________

 

Principal Trustee:

 

State Bank of India

 

Asset Management Company:

 

SBI Funds Management Private Limited

(A joint venture between SBI and Societe` Generale` Asset Management Company)

191 E Maker Towers, Cuffe Parade, Mumbai 400 005

 

APPLICATION FORMS ARE AVAILABLE WITH AMFI CERTIFIED SBIMF AGENTS, STOCK EXCHANGE BROKERS, AUTHORIZED BRANCHES OF SBI, SBIMF INVESTOR SERVICE CENTRES, SBIMF INVESTOR SERVICE DESKS & SBI FUNDS MANAGEMENT’S CORPORATE OFFICE. APPLICATION FORMS ARE AVAILABLE FOR DOWNLOAD AT www.sbimf.com

 

 

This offer document sets forth information about the scheme that a prospective investor ought to know before investing. The scheme particulars have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended till date, and filed with SEBI. The Magnums being offered for public subscription have not been approved or disapproved by the SEBI nor has the SEBI certified the accuracy or adequacy of the offer document. The investors are required to read the terms of offer carefully before investing. The offer document should be retained by the investors for future reference. The offer document shall remain effective till a material change (other than a change in the fundamental attributes and within the purview of the offer document) occurs and thereafter the changes shall be filed with SEBI and circulated to the Magnum holders.”


 

I. CONTENTS

I.       CONTENTS-----------------------------------------------------------------------------------------------           2

II.      DEFINITIONS AND EXPLANATIONS OF TERMS USED-------------------------------------           3

III.    RISK FACTORS-----------------------------------------------------------------------------------------           6

IV.    HIGHLIGHTS OF THE SCHEME---------------------------------------------------------------------           8

V.     DUE DILIGENCE CERTIFICATE--------------------------------------------------------------------           9

VI.    EXPENSES------------------------------------------------------------------------------------------------          10

VII.   CONDENSED FINANCIAL INFORMATION-----------------------------------------------------          14

VIII. CONSTITUTION OF THE MUTUAL FUND-------------------------------------------------------          19

IX.    INVESTMENT OBJECTIVES & POLICIES--------------------------------------------------------          25

X.      MANAGEMENT OF THE FUND---------------------------------------------------------------------          34

XI.    UNITS AND OFFER------------------------------------------------------------------------------------          42

XII.   SALE OF MAGNUMS----------------------------------------------------------------------------------          45

XIII. DIVIDEND AND DISTRIBUTIONS-----------------------------------------------------------------          48

XIV. INTER-SCHEME TRANSFERS-----------------------------------------------------------------------          49

XV.   ASSOCIATE TRANSACTIONS----------------------------------------------------------------------          50

XVI. BORROWING BY THE MUTUAL FUND----------------------------------------------------------          51

XVII. NAV AND VALUATION OF ASSETS OF THE SCHEME-------------------------------------          53

XVIII. REDEMPTION AND REPURCHASE--------------------------------------------------------------          56

XIX. ACCOUNTING POLICIES-----------------------------------------------------------------------------          59

XX.   TAX TREATMENT OF INVESTMENTS IN MUTUAL FUNDS-------------------------------          61

XXI. INVESTORS’ RIGHTS AND SERVICES------------------------------------------------------------          62

XXII. INVESTOR GRIEVANCES REDRESSAL MECHANISM---------------------------------------          66

XXIII. PENDING LEGAL PROCEEDINGS AND OTHER INFORMATION------------------------          69


II. DEFINITIONS AND EXPLANATIONS OF TERMS USED

The AMC:                      The Asset Management Company; refers to “SBI Funds Management Pvt. Ltd. (SBIFM)”, a joint venture between SBI and Societe` Generale` Asset Management Company (SGAM)) which manages the assets of investors in various schemes of SBI Mutual Fund.

AMC Fees:                    Investment management & advisory fees charged by the AMC to the scheme as disclosed in the section on “Expenses” in the offer document.

The Auditors:                  The statutory auditors to the scheme whose appointment is approved by the board of trustees of SBI Mutual Fund. This is disclosed under the section “Management of the Fund” in the Offer Document.

Business Day:                 means (i) a day other than Saturday and Sunday, (ii) a day on which banks in Mumbai are not required or not obligated by law or executive order to remain closed, (iii) a day on which the sale and redemption of Magnums is not suspended.

Contingent Deferred Sales Charge (CDSC):      CDSC is a charge imposed when the Magnums are redeemed within the first four years of Unit ownership. Under the SEBI Regulations, the Fund can charge CDSC to Magnum holders exiting from the scheme within 4 years of entry. The SEBI Regulations mandates the maximum amount that can be charged in each year. 

The Custodians:              The custodians to the scheme whose appointment is approved by the board of trustees of SBI Mutual Fund. This is disclosed under the section “Management of the Fund” in the Offer Document.

Date of Application:        The date of receipt of a valid application complete in all respects for issue or repurchase (depending upon the context) of Magnums of the scheme by the SBI MF Corporate Office/ SBI MF Investor Service Centres/Investor Service Desks or the Head Office or the designated centres of the Registrar.

Derivatives:                    Derivatives are financial contracts of pre-determined fixed duration, whose values are derived from the value of an underlying primary financial instrument, commodity or index, such as: interest rates, exchange rates, commodities, and equities.

Equity and Equity related instruments: Instruments include stocks and shares of companies, foreign currency convertible bonds, ADRs/GDRs, derivative instruments like stock future/options and index futures and options, warrants, convertible Preference Shares.

Forward Rate Agreements (FRA): A FRA is a forward starting Interest Rate Swap for only one period.

The Fund:                       means SBI Mutual Fund (SBIMF); constituted as a Trust with SBI as the Principal Trustee under the provisions of Indian Trusts Act, 1882, and registered with SEBI.

Gilts / Govt. Securities: Securities created and issued by the Central Government and/or State Government, as defined under section 2 of Public Debt Act 1944.

Interest Rate Swaps:       IRS is a financial contract between two parties exchanging a stream of interest payments for a notional principal amount on multiple occasions till maturity. Typically, one party receives a pre-determined fixed rate of interest while the other party receives a floating rate, which is linked to a mutually agreed benchmark with provision for mutually agreed periodic resets.

ISCs/ISDs:                     Investor Service Centres/Investor Service Desks opened by SBI Mutual Fund at various locations in India, listed in the section “Investors’ Rights & Services” in the Offer Document.

Magnum:                        One undivided unit issued under the scheme by SBI Mutual Fund.

Magnum Holder:             Any eligible applicant who has been allotted and holds a valid Magnum in his/her/its name.

Money Market Instruments: Commercial Paper ,Commercial Bills, Certificates of Deposit, Treasury Bills, Bills Rediscounting, Repos, Government securities having an unexpired maturity of less than 1 year, Call or notice money, Usance Bills and any other such short-term instruments as may be allowed under the regulations prevailing from time to time.

NAV:                             The Net Asset Value of the Magnums of the scheme

NAV related price:         The Repurchase Price and the Sale Price are calculated on the basis of NAV and are known as NAV related prices. The repurchase price is calculated by deducting the exit load factor (if any) from the NAV and the sale price is calculated by adding the entry load factor (if any) to NAV.

NRI:                              An Indian who in any previous year has not resided for a period/s amounting in all to 182 days or has not resided within the four years preceding that year for a period or periods more than 365 days or for a period or periods more than 60 days in that year.

NSE MIBOR:                 NSE MIBOR is an acronym for National Stock Exchange (NSE) Mumbai Inter Bank Offer Rate. This rate is computed by NSE on basis of indication by various market participants and published daily.

The Offer:                      The issue of Magnums of the scheme as per the terms contained in this Offer Document.

Offer Document:            This document issued by SBI Mutual Fund, containing the terms of offering Magnums of the scheme of SBI Mutual Fund for subscription as per the terms contained herein.

Options:                          An Option gives holder the right (but not the obligation) to buy or sell a security or other asset during a given time for a specified price called the ‘Strike’ price.

Permissible Investment:   Collective or group investments made on account of the Magnum holders of the Fund in accordance with the SEBI Regulations.

The Principal Trustee:     State Bank of India

RBI                          :     Reserve Bank of India, established under Reserve Bank of India Act, 1934.

The Registrars           :     The registrars and transfer agents to the scheme whose appointment is approved by the Board of Trustees of SBI Mutual Fund. This is disclosed under the section “Management of the Fund” in the Offer Document.

Repos                       :     Sale of Government Securities with simultaneous agreement to repurchase them at a later date.

Redemption/ Repurchase Load: The repurchase load means a charge paid by the investor at the time of exit from the scheme.

Repurchase Price      :     Repurchase price is the price at which an investor redeems his/ her Magnums in the scheme.

Reverse Repos          :     Purchase of government securities with simultaneous agreement to sell them at a later date.

Sale Price                 :     The Sale Price is the price an investor pays for a Magnum of the scheme at the time of entry.

Sales Load                :     Sales Load means a one-time charge that the investor pays at the time of entry into the scheme.

SBI                           :     State Bank of India, having its Corporate Office at State Bank Bhavan, Madame Cama Road, Mumbai - 400 021. Also referred to as the Sponsor or the Settlor or the Principal Trustee.

SBIMF                     :     SBI Mutual Fund (see “the Fund”)

SBIFM                     :     SBI Funds Management Pvt. Ltd. (see “the AMC”)

 

SBIMFTCPL:                 SBI Mutual Fund Trustee Company Private Limited (see “The Trustees”), a wholly owned subsidiary of SBI,  incorporated under the provisions of the Companies Act, 1956.  The registered office of SBI Mutual Fund Trustee Company Private Limited is situated at 191, Maker Tower `E’, Cuffe Parade, Mumbai 400 005.

SGAM             :              Société Générale Asset Management

 

The Scheme:                 Magnum Monthly Income Plan – Floater* (MMIP – Floater) of SBI Mutual Fund. (*An open-ended Scheme. Monthly Income is not assured and is subject to the availability of distributable surplus)

 

SEBI:                             Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992.

SEBI Regulations:           Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 for the time being in force and as amended from time to time.

The Settlor:                     State Bank of India

The Sponsor:                  State Bank of India, having its Corporate Office at State Bank Bhavan, Madame Cama Road, Mumbai - 400 021, which has made an initial contribution of Rs. 5 lakhs towards the trust fund and has appointed a Board of Trustees to supervise the activities of the Fund.

Switchover:                    Simultaneous application by a Magnum holder for repurchase of Magnums under one scheme (or a option under the scheme) of SBI Mutual Fund and, through the repurchase proceeds, for the purchase of fresh/additional Magnums under another scheme (or another option under the same scheme) of SBI Mutual Fund which is open for issue at the time.

The Trustees:                 SBI Mutual Fund Trustee Company Private Limited (SBIMFTCPL) is the Trustee to the Mutual Fund vide the Restated and Amended Trust Deed dated December 29, 2004, to supervise the activities of the Fund as disclosed in the section “Constitution of the Mutual Fund” in the Offer Document.

.

Unit Capital:                  The aggregate face value of the Magnums issued and outstanding under the scheme.

III. RISK FACTORS

1. Standard Risk Factors

a)    Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the Fund’s objective will be achieved.

b)    As with any investment in securities, the NAV of the Magnums issued under the scheme can go up or down depending on the factors and forces affecting the capital markets.

c)    Past performance of the Sponsor / AMC / Mutual Fund does not guarantee the future performance of the schemes of the Mutual Fund.

d)    MMIP - Floater is only the name of the scheme and does not, in any manner, indicate either the quality of the scheme or its future prospects and returns.

e)    State Bank of India, the sponsor, is not responsible or liable for any loss resulting from the operation of the scheme beyond the initial contribution made by it of an amount of Rs. 5 lakhs towards setting up of the mutual fund.

2. Scheme-specific Risk Factors

a.       The Trustees, AMC, Fund, their directors or their employees shall not be liable or any tax consequences that may arise in the event that the scheme is wound up for the reasons and in the manner provided under the Offer Document. 

b.       Redemption by the Magnum Holder due to change in the fundamental attributes of the Scheme or due to any other reasons may entail tax consequences.  The Trustees, AMC, Fund their directors or their employees shall not be liable for any tax consequences that may arise.

c.       The tax benefits described in this Offer Document are as available under the present taxation laws and are available subject to relevant condition.  The information given is included only for general purpose and is based on advice received by the AMC regarding the law and practice currently in force in India and the Investors and Magnum Holders should be aware that the relevant fiscal rules or their interpretation may change.  As in the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of the investment in the Scheme will endure indefinitely.  In view of the individual nature of tax consequences, each Investor / Magnum Holder is advised to consult his/her own professional tax advisor.

d.       MMIP - Floater would be investing in debt and money market instruments (such as call money market, term/notice money market, repos, reverse repos and any alternative to the call money market as may be directed by the RBI) as also in equity & equity related instruments. The liquidity of the scheme’s investments is inherently restricted by trading volumes and settlement periods. In the event of an inordinately large number of redemption requests, or of a restructuring of the scheme’s investment portfolio, these periods may become significant. In view of the same, the Trustees have the right in their sole discretion to limit redemptions (including suspending redemptions) under certain circumstances.

e.       Different types of securities in which the scheme would invest as given in the Offer Document carry different levels of risk. Accordingly the scheme’s risk may increase or decrease depending upon the investment pattern. For e.g. corporate bonds carry a higher amount of risk than Government Securities. Further even among corporate bonds, bonds, which are AAA rated, are comparatively less risk than bonds, which are AA rated.

f.        Subject to necessary approvals, the Scheme may invest in overseas markets, which carry a risk on account of fluctuations in the foreign exchange rates.

g.       Stock Lending: There are risks inherent to securities lending, including the risk of failure of the other party, in this case the approved intermediary, to comply with the terms of the agreement. Such failure can result in the possible loss of rights to the collateral, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of any corporate benefits accruing thereon.

h.       Investments under the scheme may also be subject to the following risks:

i.                     Credit risk: Credit risk is risk resulting from uncertainty in counterparty’s ability or willingness to meet its contractual obligations. This risk pertains to the risk of default of payment of principal and interest. Government Securities have zero credit risk while other debt instruments are rated according to the issuer’s ability to meet the obligations.

ii.                   Liquidity Risk pertains to how saleable a security is in the market. If a particular security does not have a market at the time of sale, then the scheme may have to bear an impact depending on its exposure to that particular security.

iii.                  Interest Rate risk is associated with movements in interest rate, which depend on various factors such as government borrowing, inflation, economic performance etc. The values of investments will appreciate/depreciate if the interest rates fall/rise.

iv.                 Reinvestment risk: This risk arises from uncertainty in the rate at which cash flows from an investment may be reinvested. This is because the bond will pay coupons, which will have to be reinvested. The rate at which the coupons will be reinvested will depend upon prevailing market rates at the time the coupons are received.

v.                   Equity and equity related risk: Equity instruments carry both company specific and market risks and hence no assurance of returns can be made for these investments.

vi.                 Derivative risks: The derivatives will entail a counter-party risk to the extent of amount that can become due from the party. The cost of hedge can be higher than adverse impact of market movements.  An exposure to derivatives in excess of the hedging requirements can lead to losses. An exposure to derivatives can also limit the profits from a genuine investment transaction. Efficiency of a derivatives market depends on the development of a liquid and efficient market for underlying securities and also on the suitable and acceptable benchmarks.

i.         The Mutual Fund is not assuring any dividend nor is it assuring that it will make any dividend distributions. All dividend distributions are subject to the availability of distributable surplus and would depend on the performance of the scheme.

j.         As per SEBI circular SEBI/IMD/Cir No. 10/22701/03 dated 12th December 2003 each scheme and individual plan(s) under the schemes should have a minimum of 20 investors and no single investor should account for more than 25% of the corpus of such scheme/plan(s). In case of non fulfillment with either of the above two conditions in a three month time period or the end of the succeeding calendar quarter, whichever is earlier, from the close of the Initial Public Offer of open-ended schemes or on an ongoing basis for each calendar quarter, the schemes/plans shall be wound up by following the guidelines prescribed by SEBI and the investor’s money would be redeemed at applicable NAV.

Investors should study the Offer Document carefully in its entirety and should not construe thereof as advice relating to legal, taxation, investment or any other matters. Investors are advised to consult their legal, tax, investment and other professional advisors to determine possible legal, tax, financial or other considerations of subscribing to or redeeming Magnums, before making a decision to invest/redeem Magnums.

 

IV. HIGHLIGHTS OF THE SCHEME

1.       An open-ended scheme available for initial issue for 30 days from _____ to ______. The scheme will reopen for continuous sale and repurchase on an ongoing basis from ________.

2.       Magnums will be available at par during the Initial Public Offer (IPO) period and at NAV related prices on an ongoing basis after the scheme goes open-ended.

3.       MMIP – Floater Plan* would have two Options for investment – Dividend Option and Growth Option.

4.       The Dividend Option would have sub-options of Monthly Dividend, Quarterly Dividend and Annual Dividend, which would endeavour to declare dividends on a monthly, quarterly and annual basis respectively. Returns in the Growth Option would be through capital appreciation only.

5.       MMIP-Floater Plan* would have an exit load of not exceeding 0.5% for exit within six months from the date of investment for investments. There would be no entry load.

6.       NAV, Sale and Repurchase prices for all the options under the Scheme would be computed and published on all business days. For applications for sale/repurchase of Magnums received before 3:00 p.m. on any business day, Magnums would be allotted /redeemed based on the NAV related price of the same day. For applications for sale/repurchase of units received after 3:00 p.m. on any business, Magnum would be issued/redeemed units based on the NAV related prices of the next business day.

7.       The Scheme provides for the Systematic Investment Plan (SIP) facility through which periodic investments can be made.  This facility is not available during the IPO. Minimum investment under SIP is Rs. 3000 (Rs. 500 p.m. for 6 months). This facility is available only at the designated collection centre locations.

8.       The scheme provides for the Systematic Withdrawal Plan facility through which a minimum of Rs. 500 can be withdrawn every month or quarter by issuing advance instructions to the Registrars at any time.

9.       The Mutual Fund provides the facility of Systematic Transfer Plan under which investors may transfer a predetermined amount or units from one scheme of the Mutual Fund to the other without any load for a period upto six months.

10.   Switchover between Growth option and the Dividend option of the Scheme would be at NAV. Switchover from this Scheme to other schemes of the Mutual Fund will be at NAV related prices.

11.   Tax benefits: As per the prevailing tax laws,

a.       Tax benefit is available under sections 48 & 112 of the Income Tax Act, 1961 on capital gains for resident Indians. The Magnum holders will have the option to pay the long-term capital gains tax @ 10% (plus applicable surcharge) without the cost inflation index benefit or @ 20% (plus applicable surcharge) with the cost inflation index benefit, whichever is more beneficial. Short Term Capital Gains Tax would be at the prevailing income-tax slab as applicable to the investor. There will be no Tax Deducted at source for resident investors in respect of capital gains tax.

b.       Income distributed by debt schemes will be subject to a dividend distribution tax of 12.5 % (plus applicable surcharge) for individual investors and 20 % (plus applicable surcharge) for other including corporate investors but the income is tax free in the hands of the investor.

c.       Magnums held under this scheme will not be liable to wealth tax and gift tax.

These tax exemptions will strictly be governed by the related provisions and the relevant tax laws as amended from time to time.


V.  DUE DILIGENCE CERTIFICATE

 

It is confirmed that:

 

I.        The draft offer document forwarded to SEBI is in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, and the guidelines and directives issued by SEBI from time to time;

II.     All legal requirements connected with the launching of the scheme as also the guidelines, instructions, etc., issued by the Government and any other competent authority in this behalf, have been duly complied with.

III.   The disclosures made in the offer document are true, fair and adequate to enable the investors to make a well informed decision regarding investment in the proposed scheme;

IV.  All the intermediaries named in the offer document are registered with SEBI and till date such registration is valid.

 

 

Signature:

 

                                                                                                Name: P.G. R. Prasad

                                                                                                Managing Director

                                                              SBI Funds Management Private Limited

 

Date: 16th March 2005

Place: Mumbai.


 

VI. EXPENSES

1. Magnum holder transaction expenses or Sales Load

The following table illustrates the expenses that the investors will incur on their purchases/ sales of Magnums under this scheme:

 

Nature of expense

Charge*

Entry load that maybe imposed on purchases of Magnums

 

Nil

Sales load if any on issue of Magnums in lieu of dividends

 

Not applicable

Exit load that maybe imposed on purchases of Magnums

·         For investments upto and including Rs. 50 lakhs

·         For investments above Rs. 50 lakhs

 

 

0.5% for exit within 6 months from the date of investment

 

Nil

Contingent Deferred Sales Charge

Nil

Switchover load

·         Interscheme switches

·         Intrascheme switches

 

At applicable entry/exit loads

Nil

* The charges stated above are a percentage of the NAV.

Under the Regulations, the Fund can also charge a Contingent Deferred Sales Charge (CDSC) to magnum holders exiting from the scheme within 4 years of entry. The AMC reserves the right to introduce a load structure, levy a different load structure or remove the load structure in the scheme at any time after giving notice to that effect to the investors through an advertisement in an English language daily that circulates all over India as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated.

In any case, should the load structure change in future, such changes in load will be applicable only to prospective investors who invest after the date specified in the advertisement and not to the existing investors on the amounts already invested by them.

The Mutual Fund will also endeavour to keep the investors informed through the following measures:

i)                    An addendum detailing the changes will be attached to the offer documents and abridged offer documents. The addendum will also be available with the distributors/brokers and will also be sent alongwith the newsletter sent to the magnum holders immediately after the changes.

ii)                   The Mutual Fund will display the changes/modifications in the offer document in the form of a notice at all ISCs and distributors/brokers office.

iii)                 The introduction of the exit load/CDSC alongwith the details will be stamped in the acknowledgement slip issued to the investors on submission of the application form and will also be disclosed in the statement of accounts issued after the introduction of such load/CDSC.

iv)                 Any other measures which the Mutual Fund considers necessary in the interest of the magnum holders.

 

 

All loads including CDSC are intended to enable the AMC to recover expenses incurred for promotion or distribution and sales (including agents’ commission) of the schemes. All loads including CDSC for each scheme shall be maintained in separate accounts and may be utilized towards meeting the selling and distribution expenses. Any surplus in these accounts may be credited to the scheme, whenever felt appropriate by the AMC.

In accordance with SEBI Regulations, the repurchase price will not be lower than 93% of the NAV and the sale price will not be higher than 107% of the NAV, and the difference between sale price and repurchase price shall not exceed 7% of the sale price.

2. Initial Issue Expenses

(a) Present scheme

The initial issue expenses charged to the scheme will be up to 6% of the corpus collected and the rest will be borne by the AMC.

For the information of the investors, the initial issue expenses are estimated on a target amount of Rs. 50 crores and would approximately be 3.00% of the resources mobilized. The details are as follows:

Nature of expense

%

Advertising expenses

1.60

Registrar expenses

0.05

Printing

0.25

Marketing expenses

1.00

Other expenses

0.10

Total

3.00

 

The above expenses are subject to change as per actuals. The initial issue expenses will be amortized over a period not exceeding five years.

The concept of amortization is explained by means of an example below:

Assume that the initial issue expenses incurred under the scheme are 3.00% (Rs. 15000000) for a mobilization of Rs. 50 crores.

If this expense is spread over five years, the expense per year works out to 0.60% (Rs. 3000000) or Rs. 8219 per day.

The impact of this expense on the NAV calculation will be as follows:

Net Asset Value of the scheme on the first day after initial subscription: Rs. 50 crores

Number of units: 5 crores

Amortization expenses: Rs. 8219

NAV per unit: Rs.9.9998 (500000000-8219)/50000000

The example does not factor any appreciation on the investments, which would be possible under normal market conditions. If the appreciation is also factored in, then the NAV would under normal market conditions be above Rs. 10.

The total initial issue expense is estimated to be around Rs. 1.5 crores which is 3 % for a target corpus of 50 crores. This is an indicative figure only and the initial issue expenses will change in proportion to the initial issue corpus mobilized as indicated in the table below:

Target Corpus

Amount subscribed by the investor

Amount available for investment (Rs.)

Amount available for Initial Issue Expense (Rs.)

25 crores

100

95.00

5.00

75 crores

100

97.68

2.32

100 crores

100

98.00

2.00

 

 

b. Past Schemes

Scheme Name

Estimated Issue Expenses

Actual Issue Expenses

Remarks

Magnum Sector Funds Umbrella – Emerging Businesses Fund

5.60 % of the Initial issue corpus

 

Rs. 3.29 crores or 2.05% of the initial issue corpus

Launched as an additional Sector in Magnum. Sector Funds Umbrella. Deviation is on account higher mobilizations during the IPO

Magnum Income Fund - Floating Rate Plan

0.77% of the initial issue corpus

Rs. 3.65 lakhs or 0.083 % of the initial issue corpus

Launched as an additional Plan in Magnum. Income Fund. Deviation is on account higher mobilizations during the IPO

Magnum NRI Investment Fund

4.50% of the initial issue corpus

Rs. 1.08 crores or 2.65% of the initial issue corpus

The initial issue expenses were borne by the scheme

Magnum Gilt Fund – PF Plan

Borne by the scheme. No estimate was given

Rs. 35 lakhs or 0.1% of the initial issue corpus

Launched as an additional Plan in Magnum Gilt Fund

Magnum Institutional Income Fund

0.58% of the initial issue corpus

Rs. 49777 or 0.00158% of the initial issue corpus

Deviation is on account higher mobilizations during the IPO

Magnum Income Plus Fund

2.75% of the initial issue corpus

Rs. 78.75 lakhs or 2% of the initial issue corpus

The initial issue expenses were borne by the AMC

c. Annual scheme recurring expenses

The fees and expenses of operating the scheme on an annual basis, expressed as a percentage of the amount of the scheme’s weekly average net assets, are estimated as follows:

 

Nature of expense

 (%)

AMC Fees

0.50

Marketing expenses

0.85

Registrar expenses

0.12

Custodial Charges

0.08

Miscellaneous expenses *

0.10

Total

1.65

 

*Miscellaneous expenses include Trustee Fee, Audit Fee, Banking & Handling Charges, Investor Communication expenses.

 

The AMC reserves the right to increase and decrease the fee within the ceilings prescribed under SEBI Regulations. The above annual recurring expenses are only the estimates and the actual expenses may vary from the above estimates but will be restricted to the ceilings of recurring expenses stated in Regulation 52(6) of the SEBI (Mutual Funds) Regulation, which are as follows:

 

Category of expense
Ceilings as per SEBI

Investment management & advisory fee to be charged by the AMC.

Subject to the following ceilings :

i) Not exceeding 1.25% of the average weekly net assets of the scheme outstanding in the year as long as the net assets do not exceed Rs. 100 crores and

ii) 1% of the amount in excess of Rs. 100 crores where net assets so calculated exceed Rs. 100 crores

Fees and expenses of Trustees

0.01% of the average weekly net assets, subject to a minimum of Rs. 15 lakhs to be allocated across all schemes of the fund.

Custodian fee

On actuals, within the overall ceiling mentioned below

Registrar Services for transfer of units sold or redeemed

On actuals, within the overall ceiling mentioned below

Brokerage & Transaction cost

On actuals, within the overall ceiling mentioned below

Audit fees

On actuals, within the overall ceiling mentioned below

Marketing & selling expenses, including agent commission, if any

On actuals, within the overall ceiling mentioned below.

 

Cost of investor communication & statutory advertising

On actuals, within the overall ceiling mentioned below

Cost of providing account statements & dividend redemption warrants

On actuals, within the overall ceiling mentioned below

Cost of fund transfer from location to location

On actuals, within the overall ceiling mentioned below

Insurance premium paid by the fund

On actuals, within the overall ceiling mentioned below

Winding up costs

On actuals, within the overall ceiling mentioned below

Total Expenses Charged to the scheme

Subject to the following limits :

i) 2.25% on the first Rs. 100 cr. of average weekly net assets.

ii) 2.00% on the next Rs. 300 cr. of average weekly net assets

iii) 1.75% on the next Rs. 300 cr. of the average weekly net assets

iv) 1.50% on the balance of the average weekly net assets

 

The purpose of the table is to assist the investor in understanding the various costs and expenses that an investor in the scheme will bear directly or indirectly. Any expenses incurred in excess of the above overall limits will be borne by the AMC.


 

VII. CONDENSED FINANCIAL INFORMATION

1. Historical Per Unit Statistics

The financial information for Schemes/Plans launched by the Mutual Fund during the last three fiscal years and updated for the current fiscal year upto 14th November 2003 is detailed below:

Particulars                                                                                       MICF – STP (growth)                                      STP (Dividend)

                                                                                               2003-2004          2002-2003           2003-2004

NAV at the beginning of the period (Rs.)                                        10.3249                10.0131                10.1451

Net income per unit                                             (Rs.)                       0.61                   0.720                      0.13

Dividends per unit                                                 (Rs.)                            -                     0.47                      0.30

Transfer to reserves                                                                                 -                          -                           -

NAV at the end of the period                                (Rs.)                  10.7993                10.3249                10.1427

Annualized return since inception for the period        (%)                       6.98                 3.139*                    2.28*

Net Asset at the end of the period (Rs.)                                            140.15                 133.96                  175.38

Ratio of Recurring expenses to Net Assets (%)                                    0.85                     0.45                      0.85

CRISIL Liquid Fund Index (Benchmark)                                              4.91                     2.7*                    1.98*

(Date of allotment of units: 25th September 2002 (Growth Option); 23rd May2003 (Dividend Option))

Particulars                                                                 Magnum Gilt (ST-Div)                   

                                                                             2003-2004       2002-2003       2001-2002       2000-2001

NAV at the beginning of the period (Rs)                        10.1251             10.0666             10.0649                     10

Net income per unit (Rs.)                                                   0.58                  0.98                  1.13                0.285

Dividends per unit (Rs.)                                                     0.43                0.676                  1.06                  0.22

Transfer to reserves                                                               -                       -                 -0.05                       -

NAV at the end of the period (Rs.)                               10.1405             10.1251             10.0666             10.0649

Annualized return since inception for the period (%)            9.09                  9.56                12.42                2.85*

Net Asset at the end of the period (Rs.)                              7.54                  7.45                27.90                35.13

Ratio of Recurring expenses to Net Assets (%)                   1.51                  1.46                  1.14                  1.13

Benchmark Index                                                           1 year             3 years             5 years      Since launch

I SEC SI- BEX(%)                                                            7.63                 N.A.                 N.A.                 N.A.

(Date of allotment of units: 23rd December 2000)

Particulars                                                                                      Magnum Gilt (ST-Growth)                     

                                                                               2003-2004         2002-2003         2001-2002         2000-2001

NAV at the beginning of the period (Rs.)                       12.4907             11.6405             10.2785                     10

Net income per unit (Rs.)                                                   0.70                  0.87                  1.64                0.278

Dividends per unit (Rs.)                                                          -                       -                       -                       -

Transfer to reserves (Rs.)                                                       -                       -                 -1.54                       -

NAV at the end of the period (Rs.)                               13.1539             12.4907             11.6405             10.2785

Annualized return since inception for the period (%)            9.92                10.27                11.23                2.78*

Net Asset at the end of the period (Rs.)                            18.28             15.5700                  9.62                  5.17

Ratio of Recurring expenses to Net Assets (%)                   1.41                  1.36                  1.13                  1.26

Benchmark Index                                                           1 year             3 years             5 years      Since launch

I SEC SI- BEX(%)                                                            7.63                 N.A.                 N.A.                 N.A.

(Date of allotment of units: 23rd December 2000)

* - indicates the returns for periods less than one year are in absolute terms only and not annualized.

 

Particulars                                                                                           Magnum Gilt (LT-Div)                    

                                                                             2003-2004       2002-2003       2001-2002       2000-2001

NAV at the beginning of the period                               10.2259             10.2267             10.1264                     10

Net income per unit                                                           1.00                  1.56                  2.38                0.426

Dividends per unit                                                              0.75              1.1750                  2.15                  0.30

Transfer to reserves                                                               -                       -                       -                       -

NAV at the end of the period                                        10.3335             10.2259             10.2267             10.1264

Annualized return since inception for the period (%)           17.23                17.91                26.25                4.26*

Net Asset at the end of the period (Rs.)                          438.89              336.88              516.66              258.66

Ratio of Recurring expenses to Net Assets (%)                   1.20                  1.12                  1.05                  0.62

Benchmark Index                                                           1 year             3 years             5 years      Since launch

I SEC LI- BEX(%)                                                          16.23                 N.A.                 N.A.                 N.A.

(Date of allotment of units: 23rd December 2000)

Particulars                                                                                               Magnum Gilt (LT-Growth)          

                                                                             2003-2004       2002-2003       2001-2002       2000-2001

NAV at the beginning of the period                               14.5102                12.94             10.3258                     10

Net income per unit                                                           1.16                    1.1                  2.94                0.326

Dividends per unit                                                                   -                       -                       -                       -

Transfer to reserves                                                               -                       -                 -2.49                       -

NAV at the end of the period                                        15.8537             14.5102                12.94             10.3258

Annualized return since inception for the period (%)           17.23                17.79                27.74                3.26*

Net Asset at the end of the period (Rs.)                          513.45              231.33                51.27                14.13

Ratio of Recurring expenses to Net Assets (%)                   1.51                  1.52                  1.31                  1.24

Benchmark Index                                                           1 year             3 years             5 years      Since launch

I SEC LI- BEX(%)                                                          16.23                 N.A.                 N.A.                 N.A.

(Date of allotment of units: 23rd December 2000)

Particulars                                                                MMIP - MD                              MMIP - QD             

                                                                 2003-2004 2002-2003 2001-2002 2003-2004 2002-2003 2001-2002

NAV at the beginning of the period                   10.1080         10.04             10       10.2279         10.06         10.00

Net income per unit                                               0.67          0.60          0.83            0.34           0.35          0.92

Dividends per unit                                                 0.48         0.721          0.79            0.70        0.6150          0.86

Transfer to reserves                                                   -          0.05         -0.04                                  -               -

NAV at the end of the period                           10.6350     10.1080         10.04       10.5183      10.2279     10.0600

Annualized return since inception for the period (%) 10.09        8.28          9.63          10.31           8.66         10.18

Net Asset at the end of the period (Rs.)                 9.60          6.43          9.32            6.72           3.27         10.81

Ratio of Recurring expenses to Net Assets (%)      1.05          1.49          1.51            1.83             1.3          1.50

Benchmark Index                                                           1 year             3 years             5 years      Since launch

CRISIL MIP Blended Index (%)                                      14.67                 N.A.                  NA.                 N.A.

(Date of allotment of units: 23rd March 2001)

* - indicates the returns for periods less than one year are in absolute terms only and not annualized.

Particulars                                                                MMIP – AD                              MMIP - GR             

                                                                 2003-2004 2002-2003 2001-2002 2003-2004 2002-2003 2001-2002

NAV at the beginning of the period                   10.1250         10.04             10       11.9613              11             10

Net income per unit                                               0.81          0.17          1.09            0.53           0.96          1.00

Dividends per unit                                                      -       0.7750          1.05                                  -               -

Transfer to reserves                                                   -               -               -                                  -         -0.83

NAV at the end of the period                           11.4041     10.1250         10.04        1.9985      11.9613             11

Annualized return since inception for the period (%) 12.02        9.68         11.97          10.42           9.26          8.97

Net Asset at the end of the period (Rs.)                 9.76          8.29             12          20.94         17.22         22.34

Ratio of Recurring expenses to Net Assets (%)      1.82          1.23          1.51            1.82           1.41          1.58

Benchmark Index                                                           1 year             3 years             5 years      Since launch

CRISIL MIP Blended Index (%)                                      14.67                 N.A.                 N.A.                 N.A.

(Date of allotment of units: 23rd March 2001)

Particulars                                                                                                             MINDEX                       

                                                                                                     2003-2004       2002-2003       2001-2002

NAV at the beginning of the period                                                         8.9449                10.18                     10

Net income per unit                                                                                   6.41                 -1.33                  0.18

Dividends per unit                                                                                           -                       -                       -

Transfer to reserves                                                                                       -                       -                  0.02

NAV at the end of the period                                                                14.3242              8.9449                10.18

Annualized return since inception for the period (%)                                   21.77                 -8.87                  1.8*

Net Asset at the end of the period (Rs.)                                                      7.67                22.42                29.04

Ratio of Recurring expenses to Net Assets (%)                                           0.88                    1.1                  0.20

S&P CNX Nifty Index(%) (Benchmark Index)                                         21.80                 -11.2                2.68*

(Date of allotment of units: 17th January 2002)

Particulars                                                                                                                  MCBP                       

                                                                                                     2003-2004       2002-2003       2001-2002

NAV at the beginning of the period                                                       10.9807                10.06                     10

Net income per unit                                                                                   0.37                  0.67                  0.06

Dividends per unit                                                                                           -                       -                       -

Transfer to reserves                                                                                       -                       -                  0.05

NAV at the end of the period                                                                12.5643             10.9807                10.06

Annualized return since inception for the period (%)                                   13.50                  8.29                  0.6*

Net Asset at the end of the period (Rs.)                                                      6.75                  5.03                  3.46

Ratio of Recurring expenses to Net Assets (%)                                           2.25                  2.25                  0.30

Benchmark Index                                                           1 year             3 years             5 years      Since launch

CRISIL MIP Blended Index (%)                                        4.67                 N.A.                 N.A.                  N.A           

(Date of allotment of units: 28th January 2002)

* - indicates the returns for periods less than one year are in absolute terms only and not annualized.

Particulars                                                                                                     Magnum Income Fund (Bonus Plan)

                                                                                                                             2003-2004       2002-2003

NAV at the beginning of the period                                                                               11.3843             11.4079

Net income per unit                                                                                                           0.14                       -

Dividends per unit                                                                                                                   -                       -

Transfer to reserves                                                                                                               -                       -

NAV at the end of the period                                                                                        11.0197             11.3843

Annualized return since inception for the period (%)                                                           6.58*               -0.21*

Net Asset at the end of the period (Rs.)                                                                          149.01              155.31

Ratio of Recurring expenses to Net Assets (%)                                                                   1.65                  1.61

CRISIL Composite Bond Index (%) Benchmark Index                                                      6.19*               -0.63*

(Date of allotment of units: 20th January 2003)

(Bonus units in the ratio 1:2 and 1:10 were allotted on 20/01/2003 and 18/09/2003 respectively under this Plan)

 

Particulars                                                                             Magnum Income Plus - Saving

                                                                                                                                   Growth         Dividend

                                                                                                                             2003-2004       2003-2004

Nav at the beginning of the period                                                                                 10.0200             10.0200

Net income per unit                                                                                                           0.02                  0.02

Dividends per unit                                                                                                                   -                       -

Transfer from Reserves                                                                                                          -                       -

NAV at the end of the period                                                                                        10.0203             10.0202

Annualized return since inception of the period                                                                          

Net Asset at the end of the period        Rs.Cr.                                                                   13.09                  8.93

Ratio of Recurring expenses to Net Assets (%)                                                                   1.60                  1.60

CRISIL Composite Bond Index (%)                                                                                  0.09*

(Date of allotment of units: 23rd October, 2003)

Particulars                   Magnum Income Plus - Investment

                                                                                                                                   Growth         Dividend

                                                                                                                             2003-2004       2003-2004

Nav at the beginning of the period                                                                                 10.0209             10.0209

Net income per unit                                                                                                           0.02                  0.02

Dividends per unit                                                                                                                   -                       -

Transfer from Reserves                                                                                                          -                       -

NAV at the end of the period                                                                                        10.0228             10.0228

Annualized return since inception of the period                                                                         -                     

Net Asset at the end of the period        Rs.Cr.                                                                     9.28                  9.39

Ratio of Recurring expenses to Net Assets (%)                                                                   1.60                  1.60

CRISIL MIP Blended Index (%)                                                                                      0.75*

(Date of allotment of units: 23rd October, 2003)

Note: The NAV for 2003-2004 is dated as on 14th November 2003 and for the other years dated 31st March 2003. The compounded annualized returns have been calculated since inception of the schemes, taking adjusted NAV, i.e., after adjusting dividends paid out on initial NAV of Rs. 10/- per Magnum. * - indicates the returns for periods less than one year are in absolute terms only and not annualized.

2.    Disclosure under Regulation 25(11)

As on 14th November 2003, SBI Mutual Fund has made the following investments in companies, which hold units in excess of 5% of the Net Asset Value of any scheme of SBI Mutual Fund:

Name of Scheme             Name Of Scrip                                                     Total Value % of holding to the 
                                                                                                                         Rs. Lacs NAV of the Scheme
                                                                                                                             (Cost)                   (Cost)

MMPS 93                         SBI(Equity)*, ITC Ltd. (Eq), WIPRO Ltd.(Eq), Bajaj Auto Ltd.(Eq            1528.87  5.91

Magnum Index Fund         SBI(Eq)*, Bajaj Auto Ltd.(Eq), WIPRO Ltd. (Eq), ITC Ltd. (Eq)                   155.00  20.20
                                        Infosys Ltd.(Eq), Grasim ( Eq), Tata Motors (Eq)                                                   

MEF                                SBI(Eq)*, Bajaj Auto Ltd.(Eq), WIPRO Ltd.(Eq), Grasim (Eq) 3159.79             24.84
                                        Infosys Ltd.(Eq), Tata Motors (Eq), Bank of
Baroda(Eq)                                        

MELS 95                          Bajaj Auto Ltd.(Eq), WIPRO Ltd.(Eq), Grasim (Eq),        505.59                     23.21
                                        Infosys Ltd.(Eq)Tata Motors (Eq), Bank of
Baroda(Eq)                                          

MGLF - 94                       Bajaj Auto Ltd.(Eq), WIPRO Ltd.(Eq), Grasim ( Eq),       595.16                    23.30 
                                        Infosys Ltd.(Eq), Tata Motors (Eq), Bank of
Baroda(Eq)                                        

MSFU - Contra                 Bajaj Auto Ltd.(Eq), Grasim (Eq)                                     166.08                     16.16

MMIP - AD                     Tata Motors (Eq)                                                               4.59                       0.47

MMIP - GR                      SBI(Eq)*, Tata Motors (Eq)                                              22.00                       1.05

MMIP - MD                     SBI(Eq)*, Tata Motors (Eq)                                                8.80                       0.92

MTGS - 93                       WIPRO Ltd.(Eq), Tata Motors (Eq), Tata Motors (Warrants)* 155.64                3.08

MBALF -95                     ITC Ltd. (Eq), Grasim ( Debt), Infosys (Eq), EXIM (Debt), 1591.98                 16.93
                                        Tata Motors (Eq), Tata Motors (Warrants)*                                                            

MLIF - 98                        Grasim (Debt), Grasim (Debt), EXIM Bank (Debt)         1346.86                       1.03

MGF - 99                         WIPRO (Eq), ITC Ltd. (Eq), Infosys (Eq), Tata Motors (Eq)
                                        Tata Motors (Warrants)*                                               2354.40                     10.55

MELS - 96                       WIPRO (Eq), ITC Ltd. (Eq), Infosys (Eq), Tata Motors (Eq),
                                        Tata Motors (Warrants)**                                               125.98                     16.40

MSFU - IT                       WIPRO (Eq), Infosys (Eq)                                            1133.58                     26.30

MTP - 94                         WIPRO Ltd.(Eq), ITC Ltd. (Eq), Infosys (Eq), Tata Motors (Eq)
                                        Tata Motors (Warrants)*                                                327.12                     12.92

MSFU - FMCG                ITC Ltd. (Eq)                                                                 162.79                     11.48

MICF - STP                     Grasim (Debt), EXIM Bank(Debt), EXIM Bank(Debt)    2784.21                       8.83

Magnum ChildrensBenefit Plan                                                               Tata Motors (Eq)                       9.15  1.36

MICF - Cash                    EXIM Bank(Debt), Bajaj Auto Ltd.(Debt), UTI Bank (Debt)
                                        UTI Bank (Debt)                                                          4332.90                       5.10

MICF - Growth                 UTI Bank (Debt), EXIM Bank (Debt), EXIM Bank (Debt),
                                        EXIM Bank (Debt)                                                       2410.18                       7.16

* - Sponsor of the Mutual Fund

These investments comprise debt, equity and money market instruments. SBI Mutual Fund is of the opinion that the said companies are fundamentally strong and possess a high potential for growth and are market leaders in their respective fields. Accordingly, investments were made in the said companies. The investments made by some schemes of SBIMF in bonds issued by associate companies including State Bank of India and its subsidiaries are in compliance with the investment restrictions contained in clause 9 of the seventh schedule to the SEBI (MF) Regulations, 1996.


 

VIII. CONSTITUTION OF THE MUTUAL FUND

1.  Constitution

SBI Mutual Fund has been constituted as a Trust, sponsored by SBI.  SBI has made an initial contribution of Rs. 5 lacs towards setting up of the Mutual Fund.  SBI has been designed as the Principal Trustee and has appointed SBIMFTCPL to supervise the activities of the Fund.  SBIMFTCPL has entrusted the work of management of the Fund to SBI Funds Management Private Limited, an Asset Management Company

2.  Objective of SBI Mutual Fund

The basic objective of SBI Mutual Fund is to mobilize savings from a wide cross-section of people and to provide attractive returns, security and liquidity through investments in capital and money markets.

3.  The Sponsor

The State Bank of India or SBI having its Corporate Office at State Bank Bhavan, Madame Cama Road, Mumbai - 400 021, is the largest public sector bank in India with 9039 branches in India and 51 offices in 30 countries worldwide. In addition to this, SBI also has 7 associates and 1 banking subsidiary in addition to other non-banking subsidiaries in India.  State Bank of India holds 63% stake in SBI Funds Management Private Limited.

 

The financial performance SBI is summarized below:

 

Year ended March 31st

2004

2003

2002

2001

2000

Turnover / Total Income (Rs. Cr.)

38073

36827

33985

30021

25770

Profit after Tax (Rs. cr.)

3681

3105

2432

1604

2051

Equity Capital (Rs. cr.)

526

526

526

526

526

Free Reserves (Rs. cr.)

19705

16677

14698

12935

11620

Net Worth (Rs. Cr.)

20231

17203

15224

13461

12147

Deposits (Rs. Cr.)

318619

296123

270560

216121

196821

Earnings per share (Rs.)

69.94

59.00

46.20

30.48

38.98

Book Value per share (Rs.)

384.62

326.86

289.21

255.76

230.93

Capital Adequacy Ratio (%)

13.53%

13.50%

13.35

12.79

11.49

Dividend paid (%)

10%

85%

60%

50%

50%

 

4. Board of Directors of SBIMFTCPL

The Board of Directors of SBIMFTCPL consists of the following eminent persons:

 

Name

Address

Principal Occupation

Current Directorships

Dr. Arvind Virmani

Chairman, Board of Trustees

(Independent)

4-B/2, Sir Ganga Ram Hospital Marg, New Delhi – 110060

Director and Chief Executive Indian Council for Research on International Economic Relations

1.       Member, Expert Group on Trade and Investment

2.       Member, Centre for Policy Research

3.       Member, Market Development Advisory Committee

4.       Member (Part time), Telecom Regulatory Authority of India.

Dr.(Smt.) Malati Anagol

Trustee (Independent)

Flat No. 6, Koumari, Ahimsa Marg, Khar (West), Mumbai – 400 052

Economist

1. Director, Imeco Ultrasonics Pvt.

    Ltd.

2.  Director, Imeco Cleaning &

     Welding Equipments (P) Ltd.

 

Prof. S. K. Barua

Trustee

(Independent)

Indian Institute of Management, Vastrapur, Ahmedabad-

380 015

Professor,

IIM,

Ahmedabad

 

1.       Director, Indian Oil Corporation Ltd.

2.       Director, Securities Trading Corporation of India Ltd.

 

Shri Mukund. M. Chitale

Trustee

(Independent)

205, Agarwal Shyamkamal – A

Vile Parle (E)

Mumbai 400 057

Chartered Accountant

 

1.       Director, Sun Vaccum Formers Pvt. Ltd.

2.       Director, E-Serve International Ltd.

3.       Director, Deposit Insurance and Credit Guarantee Corporation

4.       Director, ASREC (India) Ltd.

5.       Director, IDBI Bank Ltd.

6.       Director, Oil and Natural Gas Corporation Ltd.

7.       Director, Larsen & Toubro Ltd.

Shri S. K. Hariharan (Associate)

 

State Bank of India

Corporate Centre

Nariman Point

Mumbai 400 021

Deputy Managing Director & CCO, State Bank of India

1.       Director, Credit Information Bureau (India) Ltd.

2.       Director, Asset Reconstruction Company (India) Ltd.

 

Apart from one nominee member of State Bank of India, no other Trustee is an Associate of the Sponsor or the AMC. SBIMF has been complying with SEBI regulations stipulating that two third members must be independent.

 

5.  Duties and Obligations of Trustees and Substantial Provisions of the Trust Deed:

The Board of Trustees monitors the activities of the AMC. In the last financial year, the Board of Trustees met 6 times. Periodic reports, including quarterly reviews of each scheme, are submitted by the AMC to the Trustees. Specific approval of the Trustees is obtained on important matters such as a new scheme design and launch.

 

Under the Trust Deed constituting the Mutual Fund and SEBI (Mutual Fund) Regulations, 1996, the Trustees have several rights, duties and obligations including the following:

 

a)      To enter into an investment management agreement with the AMC with the prior approval of SEBI.

 

b)      To ensure that the investment management agreement contains such clauses as are mentioned in the Fourth Schedule of SEBI (Mutual Fund) Regulations, 1996 and such other clauses as are necessary for the purpose of making investment.

 

c)      To ensure before the launch of any scheme that the AMC has: -

 

        i        systems in place for its back office, dealing room and accounting;

 

       ii        appointed all key personnel including fund manager(s) for the scheme(s) and submitted their bio-data which shall contain the educational qualifications, past experience in the securities market with the trustees, within 15 days of their appointment;

 

     iii        appointed auditors to audit its accounts;

 

     iv        appointed a compliance officer to comply with regulatory requirements and to redress investor grievances;

 

      v        appointed registrars and laid down parameters for their supervision;

 

     vi        prepared a compliance manual and designed internal control mechanisms including audit systems;

 

   vii        specified norms for empanelment of brokers and marketing agents.

 

d)      To ensure that the AMC has been diligent in empanelling the brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker.

 

e)      To ensure that the AMC has not given any undue or unfair advantage to any associates or dealt with any of the associates of the asset management company in any manner detrimental to the interest of the magnum holders.

 

f)       To ensure that the transactions entered into by the asset management company are in accordance with SEBI (Mutual Fund) Regulations, 1996 and the scheme.

 

g)      To ensure that the AMC has been managing the mutual fund schemes independently of other activities and have taken adequate steps to ensure that the interests of investors of one scheme are not being compromised with those of any other scheme or of other activities of the asset management company.

 

h)      To ensure that all activities of the AMC are in accordance with the provisions of SEBI (Mutual Fund) Regulations, 1996.

 

i)        Where the trustees have reason to believe that the conduct of business of the mutual fund is not in accordance with SEBI (Mutual Fund) Regulations, 1996 and the scheme they shall forthwith take such remedial steps as are necessary by them and shall immediately inform the SEBI of the violation and the action taken by them.

 

j)        To file the details of his/her holdings in securities on a quarterly basis with the trust.

 

k)      To be accountable for, and be the custodian of, the funds and property of the respective schemes and to hold the same in trust or the benefit of the unit holders in accordance with SEBI (Mutual Fund) Regulations, 1996 and the provisions of trust deed.

 

l)        To take steps to ensure that the transactions of the mutual fund are in accordance with the provisions of the trust deed.

 

m)    To be responsible for the calculation of any income due to be paid to the mutual fund and also of any income received in the mutual fund for the holders of the units of any scheme in accordance with SEBI (Mutual Fund) Regulations, 1996 and the trust deed.

 

n)      To obtain the consent of the magnum holders :-

 

        i        whenever required to do so by the SEBI in the interest of the magnum holders; or

 

       ii        whenever required to do so on the requisition made by three fourths of the magnum holders of any scheme; or

 

     iii        when the majority of the trustees decide to wind up or prematurely redeem the units;

 

o)      To call for the details of transactions in securities by the key personnel of the AMC in his own name or on behalf of the AMC and shall report to the SEBI, as and when required.

 

p)      To quarterly review all transactions carried out between the mutual fund, Asset Management Company and its associates.

 

q)      To continuously review the net worth of the AMC and in case of any shortfall, ensure that the AMC make up for the shortfall as per clause (f) of sub-regulation (1) of regulation 21 of SEBI (Mutual Fund) Regulations, 1996.

 

r)       To periodically review all service contracts such as custody arrangements, transfer agency of the securities and satisfy itself that such contracts are executed in the interest of the magnum holders.

 

s)       To ensure that there is no conflict of interest between the manner of deployment of its net worth by the AMC and the interest of the magnum holders.

 

t)        To periodically review the investor complaints received and the redressal of the same by the AMC.

 

u)      To abide by the Code of Conduct as specified in the fifth schedule of SEBI (Mutual Fund) Regulations, 1996.

 

v)      To furnish to the SEBI on a half yearly basis: -

 

        i        a report on the activities of the mutual fund;

 

       ii        a certificate stating that the trustees have satisfied themselves that there have been no instances of self dealing or front running by any of the trustees, directors and key personnel of the AMC;

 

     iii        a certificate to the effect that the AMC has been managing the schemes independently of any other activities and in case any activities of the nature referred to in sub-regulation (2) of regulation 24 of SEBI (Mutual Fund) Regulations, 1996 have been undertaken by the AMC and has taken adequate steps to ensure that the interests of the magnum holders are protected.

 

w)    The independent Trustees referred to in regulation 16 shall give their comments on the report received from the AMC regarding the investments made by the schemes in the securities of group companies of the Sponsor.

x) The trustees shall ensure that no change in the fundamental attributes of any scheme or the trust or fees and expenses payable or any other change which would modify the scheme and affects the interest of Magnum holders, shall be carried out unless, a written communication about the proposed change is sent to each Magnum holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and the Magnum holders are given an option to exit at the prevailing Net Asset Value without any exit load.

 

Explanation: For the purposes of this clause “fundamental attributes” means the investment objectives and terms of a scheme as defined later in the offer document under the section “Investment Objectives and Policies”.

 

As per the sub-regulation (25), the Trustees shall exercise due diligence as under:

A. General Due Diligence:

(i)                  the Trustees shall be discerning in the appointment of the directors on the Board of the asset management company.

(ii)                Trustees shall review the desirability of continuance of the asset management company if substantial irregularities are observed in any of the schemes and shall not allow the asset management company to float new schemes.

(iii)               The trustee shall ensure that the trust property is properly protected, held and administered by proper persons and by a proper number of such persons.

(iv)              The trustee shall ensure that all service providers are holding appropriate registrations from the Board or concerned regulatory authority.

(v)                The Trustees shall arrange for test checks of service contracts.

(vi)              Trustees shall immediately report to Board of any special developments in the mutual fund.

 

B. Specific Due Diligence:

The Trustees shall:

(i)                  Obtain internal audit reports at regular intervals from independent auditors appointed by the Trustees.

(ii)                Obtain compliance certificates at regular intervals from the asset management company.

(iii)               Hold meeting of trustees at frequent intervals.

(iv)              Consider the reports of the independent auditors and compliance reports of Asset Management Company at the meetings of trustees for appropriate action.

(v)                Maintain records of the decisions of the Trustees at their meetings and of the minutes of the meetings.

(vi)              Prescribe and adhere to a code of ethics by the Trustees, Asset Management Company and its personnel.

(vii)             Communicate in writing to the asset management company of the deficiencies and

(viii)           checking on the rectification of deficiencies.

 

 

 

 

 

6.  Trusteeship Fees

As per the provisions of the Trust Deed, the Trustees, viz., SBIMFTCPL is entitled to a trusteeship fee of 0.01% p.a. of net asset value of each scheme, subject to a minimum fee of Rs. 15 lakhs to be allocated across schemes in proportion to their weekly average NAVs.  Fees, however, can be modified with the approval of the Trustees within reasonable limits

7.  Modifications to the Trust Deed

No amendments to the Trust Deed will be carried out without the prior approval of SEBI and the Magnum holders’ approval would be obtained where it affects the interests of the Magnum holder.

 

 

IX. INVESTMENT OBJECTIVE AND POLICIES

 

1. Investment Objective

To provide regular income, liquidity and attractive returns to investors in addition to mitigating the impact of interest rate risk through an actively managed portfolio of floating rate and fixed rate debt instruments, equity, money market instruments and derivatives.

 

2a. Asset Allocation pattern

The broad asset allocation pattern under normal circumstances would be as follows:

Nature of instrument

Normal Allocation (% of Net Assets)

Risk Profile

Equity and equity related instruments including derivatives

Not more than 15%

Medium to High

Floating Rate and Fixed rate Debt instruments, Floating Rate and Fixed rate Money Market instruments and derivatives^

Atleast 85%

Low to Medium

Securitized Debt

Not more than 10% of the investments in debt instruments

Medium to High

 

^Investments in Floating rate securities would be atleast 65% of the net assets of the scheme while the balance would be invested in fixed rate securities, money market instruments and/or equity related instruments. In the absence of Floating Rate securities, the Fund Manager may swap fixed rate returns for floating rate returns through derivatives like Interest Rate Swap/Forward Rate arrangements as permitted under Regulations. The scheme may also invest in short term deposits of scheduled commercial banks as permitted under the Regulations.

Fixed/Floating rate Money market instruments will include Commercial Paper, Commercial Bills, Certificates of Deposit, Treasury Bills, Bills Rediscounting, Repos, Government securities having an unexpired maturity of less than 1 year, Call or notice money, Usance Bills and any other such short-term instruments as may be allowed under the Regulations. The Scheme may also in invest in short term deposits of scheduled commercial banks as permitted under the Regulations.

Fixed/Floating rate debt instruments will include Corporate Debenture and Bonds/PSU, FI, Government guaranteed Bonds, Government Securities including Securitized Debt and International Bonds.

Investments in Securitized Debt will not exceed 10% of the investment in Floating rate/fixed rate instruments while investments in International Bonds will be within the SEBI stipulated limits. The Mutual Fund has set exposure limits in respect of the various types of derivative transactions that are permitted by the SEBI guidelines, which is detailed in Section 3a(vi) in this chapter.

 

* Money Market Instruments will include Commercial Paper, Commercial Bills, Certificates of Deposit, Treasury Bills, Bills Rediscounting, Repos, Government securities having an unexpired maturity of less than 1 year, Call or notice money, Usance Bills and any other such short-term instruments as may be allowed under the regulations prevailing from time to time.

Debt instruments in which the scheme invests shall be rated as not below investment grade by atleast one recognized credit rating agency authorized under the SEBI Act, 1992. In case of short-term instruments, investments will be restricted to the instruments having CRISIL rating of P-2 and above and/or ICRA rating of A-2 and above or equivalent rating by other rating agencies. In case a debt instrument is not rated, mutual funds may constitute committees who can approve such proposals for investments in unrated instruments subject to the approval of the detailed parameters for such investments by the Board of Directors and Board of Trustees.

Investment in equities would be through primary as well as secondary market, private placement, preferential/firm allotments etc and in derivatives. The funds raised under the scheme shall be invested only in transferable securities as per Regulation 44(1), Schedule 7 of the SEBI (Mutual Funds) Regulations, 1996.

The investments will be made in primary as well as secondary markets. The portfolio will be sufficiently diversified so as to reduce the risk of underperformance due to unexpected security specific factors.  Performance will depend on the Asset Management Company’s ability to assess accurately and react to changing market conditions. The scheme may also enter into repurchase and reverse repurchase obligation in all securities held by it as per the guidelines and regulations applicable for such transactions. Any investment in Government securities may be in securities supported by ability to borrow from the Treasury, or sovereign or state government guarantee, or supported by the Government of India / a State Government in any other manner. Further, the scheme may participate in securities lending, invest in foreign securities and trade in derivatives as permitted under SEBI (MF) Regulations, 1996.

The above investment pattern is indicative and may be changed by the Fund Manager from time to time, keeping in view market conditions, market opportunities, applicable regulations, legislative amendments and other political and economic factors. It must be clearly understood that the percentages stated above are only indicative and not absolute and that they can vary substantially depending upon the perception of the AMC, the intention being at all times to seek to protect the interests of the Magnum Holders. The funds raised under the scheme shall be invested only in transferable securities as per Regulation 44(1), Schedule 7 of the SEBI (Mutual Funds) Regulations, 1996 as amended from time to time.

There can be no assurance that the investment objective of the scheme will be realized. The scheme will also review these investments from time to time and the Fund Manager may churn the portfolio to the extent as considered beneficial to the investors.

2b. Debt Market in India.

The debt market is active since the mid 1990s as prior to it was a captive market-SLR requirement by Banks. This market was predominantly gilt oriented, until corporate papers became a part of it since late 1990s.The money market in India consists of the following instruments; treasury bills, commercial papers, certificates of deposits, short Non-Convertible Debentures-fixed and floaters and term lending instruments. The debt market consists of gilts, corporate debt papers and other approved securities (government guaranteed papers). The nature of instruments is in the form of plain vanilla bonds, floaters, zero coupon bonds-deep discounted bonds, securitized papers and structured debt papers. The Wholesale Debt Market segment is available both at National Stock Exchange (NSE) and The Stock Exchange, Mumbai (BSE). The players in Indian debt market are commercial banks, mutual funds, financial institutions, insurance companies and others. The retail secondary debt market is absent in India. The Reserve Bank of India has recently introduced a dealing and settlement platform for gilts. At present, the average daily turnover on NSE WDM is around Rs.3000 crore. The following is the yield matrix as on date:

Instruments

Indicative yield range

Overnight rates

4.75%-5.00%

90 day Commercial Paper

5.40%-5.50%

91-day T-bill

5.30-.40%

1 year G-sec

5.70-.85%

5 year G-sec

6.40-6.60%

10 year G-sec

6.70-.90%

1 year AAA Bond

5.80-5.95%

5 year AAA Bond

6.90-7.05%

 

3. Trading in Derivatives

a) Use of Derivatives

(i) The Fund may use any hedging techniques that are permissible now or in future, under SEBI regulations, in consonance with the scheme’s investment objective, including investment in derivatives such as interest rate swaps. As per SEBI guidelines, the Fund’s trading in derivatives shall be restricted to hedging and portfolio balancing purposes. The Fund shall fully cover its position in the derivatives market by holding underlying securities / cash or cash equivalents / option and / or obligation for acquiring underlying assets to honour the obligations contracted in the derivatives market. The Fund shall maintain separate records for holding the cash and cash equivalents / securities for this purpose. The securities held shall be marked to market by the AMC to ensure full coverage of investments made in derivative products at all times.

 

(ii) Illustration: Interest Rate Swap (IRS)

Assume that a Mutual Fund has INR 10 crore, which is to be deployed in overnight products for 7 days.  This money will be exposed to interest rate risk on daily basis.  The fund can buy an Interest Rate Swap receiving fixed interest rate and paying NSE MIBOR.

The deal will be as under:

 

Counterparty Bank                                                                    Mutual Fund

 

                                           Floating rate (NSE MIBOR)

Receives                                                                                   Pays

 

                                                Fixed rate (8.75%)

Pays                                                                                         Receives

 

 

The cash flows on a notional principal amount of Rs. 10 crores would be-

 

 

 

(in Rs. Crore)

 

 

Principal

NSE MIBOR

Interest

Amount

Day 1

 

10.0000

8.10%

.0022192

10.00221918

Day 2

 

10.00222

8.20%

.0022466

10.00446575

Day 3

 

10.00447

8.30%

.002274

10.00673973

Day 4 (for 2 days)

Saturday

10.00674

8.15%

.0044658

10.01120548

Day 5

Sunday

 

Holiday

 

 

Day 6

 

10.01121

8.40%

.0023014

10.01350685

Day 7

 

10.01351

8.50%

.0023288

10.01583562

Floating Interest Payable

 

 

.0158356164

Fixed Interest Receivable

 

 

.0167808219

Net Receivable for Mutual Fund receiving fixed rate

 

 

.0009452055

 

In this example Mutual Fund stands to gain by receiving fixed rates.  As the NSE MIBOR floating rate is decided daily, in adverse scenario, the Mutual Fund may have to pay the difference.

 

The counter-party providing Swap, Options, Forward Rate Agreements (FRAs) will do the same at a cost.

 

(iii) The risks involved in derivatives are:

1.                   The cost of hedge can be higher than adverse impact of market movements.

2.                   The derivatives will entail a counter-party risk to the extent of amount that can become due from the party.

3.                   An exposure to derivatives in excess of the hedging requirements can lead to losses.

4.                   An exposure to derivatives can also limit the profits from a genuine investment transaction.

5.                   Efficiency of a derivatives market depends on the development of a liquid and efficient market for underlying securities and also on the suitable and acceptable benchmarks.

 

Methods to tackle these risks:

1.       Hedging will not be done on a carpet basis but based on a view about interest rates, economy and expected adverse impact.

2.       Limits of appropriate nature will be developed for counter parties

3.       Such an exposure will be backed by assets in the form of cash or securities adequate to meet cost of derivative trading and loss, if any, due to unfavourable movements in the market.

(iv) The losses that may be suffered by the investors as a consequence of such investments:

1.       As the use of derivatives is based on the judgement of the Fund Manger, the view on market taken may prove wrong resulting in losses.

2.       The upside potential of investments may be limited on account of hedging which may cause opportunity losses.

 

(v) The use of derivatives for hedging will give benefit of: 

1.                   Curtailing the losses due to adverse movement in interest rates

2.                   Securing upside gains at cost

 

(vi) Exposure limits: The Mutual Fund has set the following exposure limits in respect of for the operations of the various types of derivative transactions that are permitted by the SEBI guidelines.

 

SR NO.

DERIVATIVE

 

DESCRIPTION

LIMIT

1

Index futures

Buy

Buy futures against cash to protect against rising market

To the extent of cash / equivalents in the portfolio. Max. limit 25% of portfolio.

2

Index futures

Sell

Hedging of portfolio against expected market downturn

Up to 50% of equity portion of the fund

3

Index Options - Call

Buy

Buy index calls against cash (existing /expected) to protect against rising market

To the extent of cash / equivalents in the portfolio. Max. limit 15% of portfolio

4

Index Options – Call

Sell

Covered Call Sale- against existing portfolio

Up to 15%of equity portion of the fund

5

Index Options – Put

Buy

Buy index puts to hedge existing portfolio

Up to 50% of equity portion of the fund

6

Index Options – Put

Sell

Covered Put Sale- Possible top sell index puts against existing / expected cash

To the extent of cash / equivalents in the portfolio. Max. limit 10% of portfolio

7

Stock futures

Buy

Buy against cash to protect against rising share prices

To the extent of cash / equivalents in the portfolio. Max. limit 25% of portfolio; per scrip limit 10%

8

Stock futures

Sell

Sell against existing stock – Hedging against downside on existing stock in the face of expected volatility in the stock price

To the extent of the particular scrip holding in the portfolio; per scrip limit 10%

9

Stock options - Call

Buy

Buy against cash to protect against rising share prices

To the extent of cash / equivalents in the portfolio. Max. limit 15% of portfolio; per scrip limit 5%

10

Stock options - Call

Sell

Sell against existing stock

To the extent of the particular scrip holding in the portfolio; per scrip limit 10%

11

Stock options - Put

Buy

Purchase against existing stock. Hedging against downside on existing stock in the face of expected volatility in the stock price

To the extent of the particular scrip holding in the portfolio; per scrip limit 10%

12

Stock options - Put

Sell

Covered Put Sale against cash

To the extent of cash / equivalents in the portfolio. Max. limit 15% of portfolio; per scrip limit 5%

 

b) Valuation

(i)                  The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the SEBI Regulations.

(ii)                The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the SEBI Regulations.

c) Reporting

The AMC shall cover the following aspects in their reports to trustees periodically, as provided for in the Regulations:

(i)                  Transactions in derivatives, both in volume and value terms.

(ii)                Market value of cash or cash equivalents / securities held to cover the exposure.

(iii)               Any breach of the exposure limit laid down in the scheme offer document.

(iv)              Short-fall, if any, in the assets covering investment in derivative products and the manner of bridging it.

The Trustees shall offer their comments on the above aspects in the report filed with SEBI under sub regulation (23) (a) of regulation 18 of SEBI Regulations.

 

4. Portfolio turnover

The Portfolio Turnover is defined as the lower of the value of purchases or sales as a percentage of the average corpus of the Scheme during a specified period of time. The Asset Management Company does not have a policy statement on portfolio turnover. Generally, the Asset Management Company's portfolio management style is conducive to a low portfolio turnover rate. However, there are trading opportunities that present themselves from time to time. These trading opportunities may be due to trading opportunities in equities, changes in interest rate policy by the Reserve Bank of India, shifts in the yield curve, credit rating changes or any other factors where in the opinion of the fund manager there is an opportunity to enhance the total return of the portfolio. It will be the endeavour of the fund manager to keep portfolio turnover rates as low as possible.

 

5. Investment limitations

The investment policies of the scheme comply with the rules, regulations and guidelines laid out in the SEBI (MF) Regulations, 1996. As per the Regulations, specifically the Seventh Schedule, the following investment limitations are applicable to schemes of Mutual Funds.

 

a.       The scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company. Such limit shall not be applicable for investments in government securities and money market instruments. Also investment within such limit can be made in mortgaged-backed securitized debt, which is rated not below investment grade by a credit rating agency registered with the Board.

 

b.       The Scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the Scheme. All such investments shall be made with the prior approval of the Board of Trustees and the board of Asset Management Company.

c.       Debentures, irrespective of any residual maturity period (above or below one year), shall attract the investment restrictions as applicable for debt instruments as specified under 5(a) and 5(b) of this section.

d.       The Fund Schemes shall not own more than 10% of any company's paid up capital carrying voting rights or such percentage as may be stipulated by SEBI from time to time;

e.       Transfer of investments from one scheme to another scheme, including this scheme, under the Mutual Fund shall be allowed only if:

(i)                  Such transfers are done at the prevailing market price for quoted securities on spot basis; explanation – “spot basis” shall have the same meaning as specified by the stock exchange for spot transactions, and

(ii)                The securities so transferred shall be in conformity with the investment objective of the relevant scheme to which such transfer has been made.

e.       The scheme may purchase or sell securities to any other scheme of the Mutual Fund as stated above.

f.        The initial issue expenses in respect of any scheme, including this scheme, may not exceed 6% of the funds raised under that scheme.

g.       The Mutual Fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance.

h.       The scheme shall provide that the securities be purchased or transferred in the name of the Mutual Fund for the relevant scheme, wherever the investments are intended to be of a long-term nature.

i.         Pending deployment of funds of the scheme in securities pursuant to the investment objectives of the scheme the Mutual Fund can invest the funds of the scheme in short-term deposits of scheduled commercial banks.

j.         The assets of the scheme shall not in any manner be used in short selling or carry forward transactions.

k.       The mutual fund under all its schemes will not own more than ten per cent of any company's paid up capital carrying voting rights.

l.         The scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interscheme investment made by all schemes under the same management or in schemes under the management of any other Asset Management Company shall not exceed 5% of the net asset value of the mutual fund.

m.     The mutual fund will enter into derivatives transactions in a recognized stock exchange for the purpose of hedging and portfolio balancing, in accordance with the guidelines issued by the Board.

n.       The scheme shall not make any investment in;

        i        Any unlisted security of an associate or group company of the sponsor; or

       ii        Any security issued by way of private placement by an associate or group company of the sponsor; or

     iii        The listed securities of group companies of the sponsor, which is in excess of 25% of the net assets.

o.       The scheme shall not invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company and shall not invest more than 5% of its NAV in the unlisted equity shares or equity related instruments.

p.       The scheme shall not make any investment in any Fund of Funds scheme.

In addition to the above limitations, the Mutual Fund follows certain internal norms vis-à-vis limiting exposure to a particular scrip, sector, etc in respect of diversified equity funds, which are detailed below:

 

Sector Weight in BSE – 100

Index Weight + 10 % (Subject to a cap of 30%)

 

These internal norms will also be applicable for this scheme.

 

 

 

6. Fundamental Attributes

The fundamental attributes and salient features of the scheme are set out below for the purpose of inviting subscriptions to the scheme from the public.

The following attributes will be considered as fundamental attributes:

 

a)                  Type of scheme: Open-end income scheme

b)                  Investment Objective:

Main Objective: To provide regular income while mitigate interest rate risk.

Investment Pattern: Atleast 85% investments in a actively managed portfolio of floating rate and fixed rate debt instruments and money market instruments and the balance in equity instruments. The asset allocation pattern is detailed in Section IX (2).

c)                  Terms of Issue:

Sale of Units: Units would be offered for subscription on all business days at NAV related prices as detailed in Section XII.

Liquidity: The scheme would provide repurchase facility to investors on all business days. The repurchase facility is detailed in Section VIII

Aggregate fee and expenses: Would be restricted to the ceilings of recurring expenses stated in Regulation 52(6) of the SEBI (Mutual Funds) Regulation. The fee and expenses proposed to be charged by the scheme is detailed in Section VI.

 

The fundamental attributes as defined above or fees and expenses payable or any other change which would modify the scheme and affects the interest of Magnum holders, shall not be carried out unless, a written communication about the proposed change is sent to each Magnum holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and the Magnum holders are given an option to exit at the prevailing Net Asset Value without any exit load.

7.  Investments in other schemes

 

According to the Clause 4 of Schedule 7 read with Regulation 44(1), of the SEBI (MF) Regulations, 1996:

 

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter-scheme investments made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.

8.  AMC’s investments in the scheme

 

The AMC may invest in the scheme, either in the initial issue or on an ongoing basis, such amount, as they deem appropriate. But the AMC shall not be entitled to charge any management fees on this investment in the scheme. Investments by the AMC will be in accordance with Regulation 24(3) of the SEBI (MF) Regulations, 1996 which states that:

 

“The asset management company shall not invest in any of its schemes unless full disclosure of its intention to invest has been made in the offer document, provided that the asset management company shall not be entitled to charge any fees on its investment in the scheme.”

9. Procedures followed for Investment decisions

The proposals for investments in equity/debt or market instruments originate from the Fund Manager and are routed through the Chief Investment Officer (CIO) to the Investment Committee. The committee comprising the Managing Director, Chief Operating Officer, CIO, Heads of Equity and Debt, Fund Managers, Debt and Equity Dealers decide on the proposals of the Fund Managers. Each proposal is a written document with reasons for the proposed sale/purchase or reasons for rejection (if any) are recorded. The risk origination is done based on the guidelines issued by SEBI or Board of Trustees. Concurrent auditors periodically check these and their reports are placed before the Audit Committee, which is comprised of the independent Directors and Trustees.

The monitoring of decisions is taken through quarterly secondary and primary market report to the Directors. The Secondary market report details the top 20 purchases and sale decisions in the quarter, the details of losses booked and the reasons thereof. All primary market decisions are reported.

The performance of the diversified equity schemes reported to the AMCs and Trustees is benchmarked against the BSE 100 and also to comparable schemes in the industry while sector funds are benchmarked to respective indices and also to comparable schemes in the industry while the performance of the debt schemes are reviewed through the rankings issued by CRISIL/Value Research etc. The scheme would be benchmarked to the CRISIL MIP Blended Index

10. Underwriting

The scheme will not take up underwriting of the securities of other issuers.

 

11. Stock lending

Stock lending means the lending of stock to another person or entity for a fixed period of time, at a negotiated compensation. The securities lent will be returned by the borrower on expiry of the stipulated period.

The Fund may in future carry out stock-lending activity under any of its schemes, in order to augment its income. Stock-lending may involve risk of default on part of the borrower. However, this risk will be substantially reduced as the Fund has opted for the “Principal Lender Scheme of Stock Lending”, where entire risk of borrower’s default rests with approved intermediary and not with the Fund. There may also be risks associated with Stock Lending such as liquidity and other market risks.

Any stock lending done by the scheme shall be in accordance with any Regulations or guidelines regarding the same.

The AMC will apply the following limits, should it desire to engage in Stock Lending:

a.         Not more than 20% of the net assets can generally be deployed in Stock Lending

b.      Not more than 5% of the net assets can generally be deployed in Stock Lending to any single counter party.

 

12. Fund’s Policy on Unclaimed Redemption Amount

The unclaimed redemption and dividend amounts are being deployed by the mutual funds in call money market or money market instruments only and the investors who claim these amounts during a period of three years from the due date shall be paid at the prevailing Net Asset Value. Investors can claim the amount at NAV prevailing at the end of the third year. The income earned on such funds may be used by the Fund for the purpose of investor education. The AMC would make a continuous effort to remind the investors through letters to take their unclaimed amounts. The AMC may charge an investment management fee not exceeding 50 basis points for managing unclaimed amounts. The policy is in line with the SEBI circular No. MFD/CIR/ 9 /120 /2000 dated 24/11/2000

 

X.  MANAGEMENT OF THE FUND

The Board of Trustees of SBI Mutual Fund has entrusted the management of the Fund to SBI Funds Management Private Ltd., the AMC. Further details regarding the set up are furnished in the following paragraphs.

1.  About the AMC

 

SBI Funds Management Private Limited (SBIFM) having its corporate office at 191, Maker Tower “E”, 19th Floor, Cuffe Parade, Mumbai 400 005 is a Joint Venture between SBI and SGAM.   As per the audited accounts on 31st March, 2004, the authorized and paid-up capital of the AMC was Rs. 50 crores and the Networth of the AMC was Rs. 64.83 Crores.  Pursuant to the Shareholders and Share Purchase Agreement dated November 5, 2004 entered into amongst State Bank of India (SBI), Societe Generale Asset Management (SGAM), Societe Generale S.A. and SBI Funds Management Private Limited (SBIFM), 37% of the paid up share capital of the AMC (i.e. 18, 50,000 equity shares of Rs. 100/- each) had been transferred by SBI to SGAM on December 21, 2004.

SBIFM had entered into an Investment Management Agreement with the Trustees of SBI Mutual Fund on 14th May, 1993 and also a supplemental thereto on 28th April, 2003 and the same have been replaced by Restated and Amended Investment Management Agreement entered into between SBIMFTCPL and SBIFM on December 29, 2004. In terms of this Agreement, SBIFM has assumed the day to day investment management of the fund and in that capacity makes investment decisions and manages the SBI Mutual Fund Schemes in accordance with the scheme objectives, Trust Deed, provisions of Investment Management Agreement and SEBI Regulations & Guidelines.

 

To date, SBIFM has successfully launched and managed 36 schemes (including 2 offshore funds) of SBI Mutual Fund of which 18 (including 2 offshore funds) schemes have been redeemed. Of the 18 schemes still being managed, 15 are open-ended schemes and the rest are close-ended schemes, with total net assets of around Rs.6200 crores (as on 28th February 2005).

In addition to the investment management activity, SBI Funds Management Private Limited has also been granted a certificate of registration as a Portfolio Manager with Registration Code INP000000852. The Certificate of Registration is valid for a period of three years upto 15th January 2007. The AMC certifies that there would be no conflict of interest between the Asset Management activity and the Portfolio Management activity.

 

 2.    Société Générale Asset Management (SGAM)

SGAM having its Corporate Office at 2, place de la Coupole 92400, Courbevoie, France is a subsidiary of Societe Generale Group, which established one of the first French mutual funds in the year 1964.   SGAM was established in 1996 and took over the asset management activities of Societe Generale group.   SGAM is present in all major international markets. 

SGAM offers private and corporate clients and international institutional investors a wide range of investment products and services to fulfill their specific requirements. 

 

The Societe Generale (SG) Group is one of the well-known financial services groups in the euro zone. The Group employs over 88000 people worldwide across 3 core businesses of retail banking and financial services, global investment management and services and corporate and investment banking. The retail banking and financial services business line serves over 15 million customers spread across 32 countries.

3.  AMC Fees

For management of the above funds, the AMC at present charges a fee not exceeding 1.25% of the weekly average NAV of each scheme, which is charged to the respective scheme.

 

In future, the AMC may modify the fee from scheme to scheme, within the limits specified in the Regulations and disclosed in the offer documents of the respective schemes.

4.  Board of Directors

The Board of Directors of SBIFM comprises the following eminent persons:

 

(i)                  Mr. A. K. Purwar                                            Corporate Centre,                     

Chairman                                                          Nariman Point

            State Bank of India                                            Mumbai 400 021

            (Associate Director)

 

(ii)                Mr. A. G. Kalmankar                                     Corporate Centre,

Deputy Managing Director & GE                       Nariman Point

            (Associates & Subsidiaries)                               Mumbai 400 021                       

State Bank of India                                                       

            (Associate Director)

 

(iii)               Mr. Manu Chadha                                          B-30, Connaught Place

Chartered Accountant                                       Kuthiala Building

(Independent Director)                                      New Delhi 110 001

 

(iv)       Mr. Ashwin Dani                                            6/A, Shantinagar

            Asian Paints (India) Limited                               Vakola Pipeline Road

            Vice Chairman & Managing Director                 Santacruz (East)

            (Independent Director)                                      Mumbai 400 055.

 

(v)        Mr. Pradeep Mallick                                      A/2 Pallonji Mansion 

(Independent Director)                                      43 Cuffe Parade

Mumbai – 400 005

 

(vi)       Mr. P.G.R. Prasad                                          191, Maker Towers ‘E’

            Managing Director                                            Cuffe Parade

            SBI Funds Management Private Limited             Mumbai 400 005.

            (Associate Director)

 

(vii)      Prof. G. Sethu

Professor                                                          Plot 82, Sector 17, Vashi

Indian Institute of Capital Markets                      Navi Mumbai - 400 705

(Independent Director)

 

(viii)      Mr. Alain Clot                                                37 boulevard du President Roosevelt

CEO of SGAM and Member of                                     78110 Le Vesinet

SG Group Management Committee                    France

            (Associate Director)

 

(ix)       Mr. Christian d’Allest                                    21 rue Crozatier

Director International Network and                    75012 paris

Member of the Executif Committee                    France

(Associate Director)

 

(x)        Mr. P.G. Kakodkar                                        6, Palm Grove

Ex-Chairman, State Bank of India                      Behind Hotel Goa International

(Independent Director)                                      Miramar

Tonca, Panaji

Goa 403 002”

5. Key Personnel

The day-to-day operations of the AMC are looked after by experienced and qualified professionals, consisting of senior officials on deputation from the State Bank of India as well as directly recruited officials of the AMC.

a. The top key management personnel of SBI Funds Management Pvt. Ltd. are

Name & Age

Designation

Educational Qualifications

Business Experience

Shri P.G. R. Prasad

59 years

Associated with SBI MF since November 2002

Managing Director

B.Sc., CAIIB, CFA

Experience of over 34 years with SBI, including 9 years as a senior executive.

Last Assignment – Managing Director, Indo-Nigerian Bank Ltd., Nigeria

Mr. Didier Turpin

48 years

Associated with SBIMF since December 2004

Deputy Chief Executive Officer

Expert comptable memorialiste (equivalent to Chartered Accountant)

DESS in Business Law (equivalent to MBA)

Masters in Tax Law (Paris I Sorbonne)

Experience of over 16 years with Société Générale Group, France, in various areas in the securities industry

Shri N. Sethuram Iyer

52 years

Associated with SBI MF since January 2003

Chief Investment Officer

B.Sc. (Chem)

Experience of over 27 years with SBI working in the areas of Credit and Forex. Last Assignment – SVP (Credit and Investments), SBI in Tokyo

 

6. Fund Managers

 

Fund Manager

Name of Scheme

Qualifications

Experience

Mr. K. Ram Kumar

Vice President

40 years

Magnum Income Fund (Floating Rate Plan)

Magnum InstaCash Fund

B. Sc. I.C.W.A.I., C.A.I.I.B., Diploma in Business Finance (ICAI)

Experience of over 14 years in the Mutual Fund industry and presently managing funds with net assets of about Rs. 2500 crores.

Mr. Sandip Sabharwal

33 Years

Vice President and Head (Equity)

 

Magnum Balanced Fund, Magnum Equity Fund, Magnum NRI Investment Fund (FAP)

Magnum Multiplier Plus 93, Magnum Global Fund, Magnum TaxGain Scheme 93, Magnum Sector Funds Umbrella

 

B. Tech., P.G.D.M.

Experience of over 8 years in the mutual fund industry and presently managing funds with net assets of about Rs. 1200 crores.

 

Ms. Bekxy Kuriakose

Chief Manager

26 years

 

Magnum Monthly Income Plan

Magnum Children’s Benefit Plan, Magnum Income Plus Fund, Magnum NRI Investment Fund (STBP, LTBP)

B.A. PGDM

Experience of over 4 years in the Mutual Fund industry and presently managing funds with net assets of about Rs. 900 crores

Mr. Ganti. N. Murthy

36 Years

Asst. Vice President

Magnum Gilt Fund,

Magnum Income Fund (Growth, Dividend and Bonus Plans)

B. Sc., Masters in Financial Management

Experience of over 12 years in the mutual fund industry and presently managing funds with net assets of about Rs. 1650 crores.

Last Assignment – Fund Manager, Debt, Chola Mutual Fund

Ms. Bekxy Kuriakose would be the Fund Manager for MMIP - Floater.

 

The Equity Research team comprises of 4 junior management professionals having related experience of around 3 years.

 

7. Dealers

Name & Age

Designation

Qualifications

Experience

Mr. Nitin Jain

33 Years

Associated with SBI MF since March 2004

Chief Manager and Equity Dealer

 

BE, MMS

9 Years in Equity Research and Trading.

Last assignment – Equity Sales with IDBI Capital Market Services Limited

Mr. Killol Pandya

28 Years

Associated with SBI MF since June 2003

Senior Manager and Debt Dealer

B.Com, DPCM, MMS (Fin)

Over 6 years of experience in Debt trading

Last assignment – IL&FS Investmart India

 

 

 

 

8. Company Secretary cum Compliance Officer

 

Name & Age

Designation

Qualifications

Experience

Shri. Raju Nanwani

32 years

Associated with SBI MF

since December 2003

Chief Manager

B. Com, LLB (G), FCS

Over 8 years of experience in Company Secretarial and legal functions Last Assignment – National Stock Exchange of India Ltd.

           

9. Chief Risk Officer

 

Name & Age

Designation

Qualifications

Experience

Ms. Aparna Nirgude

33 years

 

Vice President

B. Com, M.B.A

Experience of over 9 years in the mutual fund industry in the area of equity research and funds management

 

10. Investor Relation Officer

 

Name & Age

Designation

Qualifications

Experience

Shri. Kanda Subramanian

45 years

Associated with SBI MF since June 2004

Asst. Vice President

B. Sc., C.A.I.I.B.

Experience of over 25 years with SBI, including working as Manager – Development Banking

 

The Investor Relations Officer will look into investor grievances regarding deficiencies, if any, in the services provided by the Registrars or the Investor Service Centres. He can be contacted at the address given in the section on ‘Investor’ Rights and Services’. The AMC will have the discretion to change the Key Personnel depending on operational necessities and in the overall interest of the Fund.

11.  Duties and Obligations of the Asset Management Company:

Under the SEBI (Mutual Fund) Regulations, 1996 and the Investment Management Agreement the AMC has the following obligations:

 

a)      to take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any scheme is not contrary to the provisions of SEBI (Mutual Fund) Regulations 1996 and the Trust Deed.

 

b)      to exercise due diligence and care in all its investment decisions as would be exercised by other persons engaged in the same business.

 

c)      to be responsible for the acts of commissions or omissions by its employees or the persons whose services have been procured by the AMC.

 

d)      to submit to the trustees quarterly reports of each year on its activities and the compliance with SEBI (Mutual Fund) Regulations 1996.

 

e)      The trustees at the request of the Asset Management Company may terminate the assignment of the AMC at any time provided that such termination shall become effective only after the trustees have accepted the termination of assignment and communicated their decision in writing to the AMC.

 

f)       Notwithstanding anything contained in any contract or agreement or termination, the AMC or its directors or other officers shall not be absolved of liability to the mutual fund for their acts of commissions or omissions, while holding such position or office.

g)      not to deal in securities through any broker associated with the sponsor or a firm which is an associate or a sponsor beyond 5% of the daily gross business of the mutual fund.

 

h)      not to utilize the services of the sponsor or any of its associates, employees or their relatives, for the purpose of any securities transaction and distribution and sale of securities.

 

Provided that the AMC may utilize such services if disclosure to that effect is made to the unit holders and the brokerage or commission paid is also disclosed in the half yearly/annual accounts of the mutual fund *.

 

* Note: Please note that the AMC utilizes the services of some branches of the SBI Group as authorized collecting branches for the scheme. It may also utilize the services of some of the Associate companies of SBI for various transactions. This has also been mentioned in the section ‘Associate Transactions’. Suitable disclosure as required under SEBI (MF) Regulations 1996 will be made in the half yearly and annual accounts of the Fund.

 

i)        to file with the trustees the details of transactions in securities by the key personnel of the asset management company in their own name or on behalf of the asset management company and to also report to the SEBI, as and when required by the SEBI.

 

j)        In case the AMC enters into any securities transactions with any of its associates, a report to that effect shall be sent to the trustees at their next meeting.

 

k)      In case any company has invested more than 5% of the net asset value of a scheme, the investment made by that scheme or by any other scheme of the same mutual fund in that company or its subsidiaries shall be brought to the notice of the trustees by the AMC and to be disclosed in the half yearly and annual accounts of the respective schemes with justification for such investment provided the latter investment has been made within one year of the date of the former investment calculated on either side..

 

l)        to file with the trustees and the SEBI-

 

        i        detailed bio-data of all its directors alongwith their interest in other companies within fifteen days of their appointment; and

 

       ii        any change in the interests of directors every six months.

 

     iii        A quarterly report to the trustees giving details and adequate justification about the purchase and sale of the securities of the group companies of the Sponsor or the Asset Management Company, as the case maybe, by the Mutual fund during the said quarter.

m)    to file with the trustees a statement of holdings in securities of the directors of the AMC with the dates of acquisition of such securities at the end of each financial year.

 

n)      not to appoint any person as key personnel who has been found guilty of any economic offence or involved in violation of securities laws.

 

o)      to appoint registrars and share transfer agents who are registered with the SEBI.

 

Provided if the work relating to the transfer of units is processed in-house, the charges at competitive market rates may be debited to the scheme and for rates higher than the competitive market rates, prior approval of the trustees shall be obtained and reasons for charging higher rates shall be disclosed in the annual accounts.

 

p)      to abide by the Code of Conduct as specified in the fifth schedule of SEBI Regulations.

 

12.  Registrars

 

SBIMF will utilize the services of M/s Computer Age Management Services (Private) Ltd/, (SEBI Registration Number: INR 000002813) located at Gems Foundation, 383, Anna Salai, Saidapet Chennai 600 015 as Registrars and Transfer Agents to the scheme. The Board of Trustees and the AMC have satisfied themselves that the Registrar has adequate capacity to discharge responsibilities with regard to processing of applications and dispatch of Magnum certificates / Statement of Accounts to investors within the time limit prescribed in the SEBI Regulations and that they have sufficient capacity to handle investor complaints. The AMC reserves the right to change the Registrars at any time with the approval of the Board of Trustees and the Committee of Board of Directors of the AMC.

13.  Register of Magnum holders

 

A register of Magnum holders under this scheme containing the necessary particulars will be maintained at the office of the Registrar to the scheme and at such place(s) as the Trustees may decide.

 

 

13.  Custodians

 

SBIMF Mutual Fund has appointed CITI BANK N.A. (SEBI Registration Number:IN/CUS/004) situated at 77 Ramnord House, Dr. Annie Besant Road, Worli, Mumbai - 400 018 situated at as the Custodians for the scheme.

The Custodians will be required to take delivery of all properties belonging to the scheme and to hold them in separate custody account and also separately from the assets of the custodians and their clients. The Custodians will make efforts to have the properties of the Fund registered in the name of the Fund and will deliver them only as per instructions of the AMC and on receipt of the consideration. The Custodians shall collect, receive and deposit in the account or accounts of the Fund with the Bank, income, dividend, interest, rights and other payments of whatever kind with respect to the securities and other assets and items of alike nature of the Fund held by or to the order of the Custodians and shall execute such ownership and other confirmations as are necessary. The Custodians shall be generally authorized to attend to all non-discretionary and procedural details for discharge of normal custodial functions in connection with the sale, purchase, transfer and other assets held for the account of the fund by the Custodians as an Agent except as may otherwise be directed by the Fund. For their services, the Custodians shall be paid a custodial fee as agreed upon by the AMC and the Custodians and within the limits given in the section “Expenses”. The AMC reserves the right to change the Custodians at any time with the approval of the Board of Trustees and the Committee of Board of Directors of the AMC.

14.  Auditors

 

SBIMF has appointed M/s Chandabhoy & Jassoobhoy, 208, Phoenix House, ‘A’ Wing, 2nd Floor, 462, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013 as the auditors to the scheme.  The Board of Trustees of SBIMF shall review the appointment of auditors after every two years or at such time as may be deemed fit in the opinion of the Board. The AMC reserves the right to change the Auditors at any time with the approval of the Board of Trustees and the Committee of Board of Directors of the AMC.

15.  Collecting Banker(s)

 

SBIMF will utilize the services of State Bank of India as the principal collecting banker (SEBI Registration No.INBI00000038) for the scheme during the initial offer period. Please note that the AMC may utilize the services of branches of the SBI Group or any other bank as authorized collecting branches for the scheme. This has also been mentioned under the section “Associate Transactions”. The branches will be paid handling charges as per the prevailing market rates and/or as negotiated with them. For applications directly solicited and collected by the branches of SBI or its associates, they may also be paid an agent commission at a rate not exceeding the rate of commission being paid to other agents for the scheme.


XI.              UNITS AND OFFER

1. Issue Price

Initial Issue: Rs. 10/- per Magnum for cash at par.

 

Ongoing basis: On an ongoing basis, Magnums under the scheme will be offered for sale on any working day at NAV related prices. The number of units allotted will be equal to the amount invested divided by the Public Offering Price (POP) for the same working day for applications received at the collection centres before 3.00 p.m. and POP of next working day for applications received at the collection centres after 3.00 p.m., viz. for an application received on Tuesday after 3.00 p.m. the POP will be based on the closing NAV of Wednesday. Applications received by post will be deemed to have been submitted on date of receipt at the registrar’s end.

 

POP: The POP is based on the applicable NAV and it includes the sales charge (if any). This is calculated as follows:

 

POP = Applicable NAV per Magnum [1 + (applicable sales charge / 100)]

 

2. Options for investment

MMIP - Floater is an open-end scheme offering investor two options for investment – Growth Option and Dividend Option. Under the Dividend Option, sub-options of Monthly Dividend, Quarterly Dividend and Annual Dividend would be provided. Facility of payout/reinvestment of dividend would be provided. Dividend declaration under the individual sub-options would be at the discretion of the Fund Manager subject to the availability of distributable surplus and with the approval of the Managing Director. No income or distribution of dividend is assured under the MMIP-Floater Plan*.  The Growth Option would not declare dividends and returns in this option would be through capital appreciation only. Both options however have the option to declare bonus units subject to the availability of distributable surplus. Both the options would be maintained as a common portfolio.

3. Target Corpus

The AMC seeks to raise a minimum corpus of Rs. 1 crore, under the scheme. The AMC reserves the right to retain in full, the subscription received over and above the target corpus.

The AMC reserves the right of discretion to close the scheme for subscription with one day’s notice.

4. Refund of application money

In case of failure to mobilize the minimum amount mentioned above, the mutual fund and the asset management company are liable to refund the application money to the applicants in accordance with Regulation 35 of SEBI (MF) Regulations, 1996, within a period of six weeks from the date of closure of subscription by registered AD and by cheque or demand draft marked “A/C Payee” to the applicants. Also, in the event of delay in refunding the amounts within 6 weeks, the AMC shall be liable to pay interest to the applicant at a rate of 15% p.a. on the expiry of 6 weeks from the date of closure of subscription list and will be charged to the AMC.  Refund orders will be marked “a/c payee only” and will be in favour of and dispatched to the first/sole applicant, by registered post.

 

Regulation 35(3) states that:

 

“Any amount refundable shall be refunded within a period of six weeks from the date of closure of subscription list, by registered A.D. and by cheque or demand draft marked “A/c payee” to the applicants.”

 

Regulations 35(4) further states that:

 

“In the event of failure to refund the amounts within the period specified in sub-regulation (3), the asset management company shall be liable to pay interest to the applicants at a rate of fifteen percent per annum on the expiry of six weeks from the date of closure of the subscription.”

5. Date of opening of subscription list: _________________

6. Period for which subscription is open

Initial Issue: The subscription will be open to the public for 30 days from the commencement of banking hours on ­­­­­­­­­_______ to the close of banking hours on the ________. The AMC reserves the right to extend the closing date, subject to, however, the condition that the subscription shall not be kept open for more than 30 days. However, the AMC reserves the right to close the subscription earlier, after giving a day’s notice to the investors. The AMC also reserves the right to suspend the issue at any time after a week’s notice.

 

On Ongoing basis: The scheme will be open for fresh subscription on a daily basis from __________, on any working day. However, the Fund may temporarily suspend acceptance of fresh applications at any time.

7. Allotment

Allotment will be made to all applicants in the initial offer provided the applications are complete in all respects and are in order. The allotment will be made as on _________.

 

On an ongoing basis issue of Magnums may be discontinued or suspended if the trustees feel that increase in the size of the fund would be detrimental to the interest of existing investors. Application for issue of Magnums will not be binding on the fund and may be rejected.

 

Investors will be issued a Magnum Statement of Account in lieu of Magnum Certificates. Dispatch of Magnum statements of account will be made as soon as possible but before the scheme reopens for continuous offer in case of IPO investments and not later than 10 days from the date of investment for investments made after the scheme reopens for continuous subscription. If an investor specifically requests the Registrars in writing for issue of a Magnum Certificate, the Magnum Certificates shall be sent to the investor within 6 weeks of receipt of request as stipulated under SEBI Regulation 36.

8. Interest on application money

No interest will be paid on the application amount.

9.  Date of commencement of the scheme

­­­­­­­­­­­­­­­­_______________

10. Listing & Transfer

Magnums purchased under the scheme are not transferable and since units are available for repurchase on all business days on an ongoing basis, the scheme will not be listed on any stock exchange.

11. Jurisdiction

The jurisdiction for any matters or disputes arising out of the scheme shall reside with the Courts in India.

12. Power to Make Rules

 

The Trustees may from time to time, with prior approval of SEBI, prescribe such terms or make such rules for the purpose of giving effect to the provisions of this scheme with power to the AMC to add to, alter or amend all or any of the terms or rules that may be framed from time to time. However, any alteration amounting to a change in fundamental attributes of the scheme shall be made only in accordance with SEBI Regulations as stated elsewhere in the offer document.

 

13. Power to remove difficulties

 

In case of any difficulty in giving effect to the provisions of the scheme, the Trustees may do anything not inconsistent with such provisions, which appears to them to be necessary, desirable or expedient, for the purpose of removing such difficulty.

14. Scheme to be binding

 

The Trustees may, from time to time, add to or otherwise vary or alter all or any of the features or terms of the scheme, with prior approval of SEBI and the Magnum holders in accordance with SEBI Regulations, and the same shall be binding on each Magnum holder and any person(s) claiming through or under it, as if each Magnum holder or such person(s) expressly agreed that such features or terms should be so binding.

 

15. Termination of the scheme

 

The Trustees reserve the right to terminate the scheme at any time if the corpus of the scheme falls below Rs. 1 crore.

 

Regulation 39(2) of the SEBI Regulations provides that any scheme of a mutual fund may be wound up after repaying the amount due to the magnum holders:

 

(a) on the happening of any event which, in the opinion of the Trustees, requires the scheme to be wound up; or

 

(b) if 75% of the magnum holders of a scheme pass a resolution that the scheme be wound up; or

 

(c) if SEBI so directs in the interest of the unit holders.

 

Where a scheme is wound up under the above Regulation, the trustees shall give a notice disclosing the circumstances leading to the winding up of the scheme:

 

(a) to SEBI; and

 

(b) in two daily newspapers having circulation all over India & a vernacular newspaper circulating at the place where the mutual fund is formed.

 

In case of termination of the scheme, the Trustees shall proceed as follows:

 

From the proceeds of the assets of the scheme, the Trustees shall first discharge all liabilities of the scheme and make provision for meeting the expenses of the winding-up of the scheme, including the fees of the AMC. The Trustees shall distribute the proceeds to the Magnum holders, in proportion to their respective interest in the assets of the

scheme as on the date when the decision for winding up was taken, all proceeds derived from the realization of the investments, after recovering all costs, charges, expenses, claims, liabilities, whether actual or contingent, incurred, made or apprehended by the Trustees in connection with or arising out of the termination of the scheme. It will be ensured that the redemption proceeds are dispatched to the Magnum holder within a maximum period of 10 working days from the date of redemption for the holders of Statement of Account, or from the date he/ she has tendered the Magnum certificates to the Registrars.

 

XII. SALE OF UNITS

1. How to apply

Initial Issue: Applications complete in all respects together with necessary remittance may be submitted before the closing of the offer at any SBIMF Investor Service Centres/Investor Service Desks, SBI MF Corporate Office, designated office of Registrar and the Investor Service Centres of the Registrar or other such collecting centres as may be designated by AMC. The application amount in cheque or Demand Draft shall be payable to “SBIMF - MMIP - Floater. No outstation cheques or stockinvests will be accepted. For valid applications made through outstation drafts (i.e., at such locations where there is no authorized collecting branch for the Issue of the scheme) payable at a collecting branch where the application is deposited, the draft charges incurred (as per guidelines of Indian Banks Association) may be reimbursed to the investors. In such a case, the draft charges may be deducted upfront from the application amount. Applications by mail should be mailed directly to the Registrars and must be accompanied by a Demand Draft payable at Chennai.

 

Investors are advised to fill up the details of their bank account numbers on the application form in the space provided. Please refer to the para “Bank Account Numbers” later in this section. Investors can also opt for Electronic Credit Clearing System (ECS) facility being offered at select centres and receive direct credit of their repurchases into their bank accounts through designated Banks.

 

Ongoing Basis: After the scheme reopens for sale/repurchase, applications to the scheme, complete in all respects together with necessary remittance, may be submitted at the SBIMF Investor Service Centres, the designated offices of the Registrar or such other collection centres as may be designated by the AMC. The number of units allotted will be equal to the amount invested divided by the Public Offering Price (POP) for the same working day for applications received at the collection centres before 3.00 p.m. and POP of next working day for applications received at the collection centres after 3.00 p.m. Applications received by post will be deemed to have been submitted on date of receipt at the registrar’s end. In case of payment by cheques, the amount of investment will be deemed to be the amount realized net of bank charges (if any). In case of applications made by a demand draft, the draft charges may be deducted from the amount to be invested, only for applications sent by mail from centres not having a collection account for the scheme.

 

Procedure for NRIs: Applications on a Repatriable basis will be made by remitting funds from abroad through normal banking channels or by submitting payments made by demand drafts purchased from FCNR accounts or by cheques drawn on NRE accounts or through Special Non-resident Rupee Accounts maintained with banks authorized to deal in foreign exchange in India. NRI applicants are requested to instruct the bank branch through which they have made the remittance or where they have the NRE / FCNR / Special Non-resident Rupee Account to send the necessary FIRCs in original on security paper to the registrars as soon as possible to enable early processing of their applications. A copy of these instructions to the bank may also be enclosed along with the application to expedite the follow-up by the registrars.

 

 

All investors may make only a cheque/D.D. for the application amount payable to the scheme as specified in the application form. The investors are advised to fill up the details of their bank account numbers on the application form in the space provided. Please refer to the para “Bank Account Numbers” later in this section. No cash will be accepted.

 

 

Investors are advised to retain the acknowledgement slip signed/stamped by the collection centre where they submit the application.

2. Systematic Investment Plan (SIP) facility

Under SIP, a minimum of Rs. 1000 can be invested every month for six months/Rs.500 every month for a year by indicating in the application form or by issuing advance instructions to the Registrars at any time.

 

For individual investors, the fund offers a Systematic Investment Plan (SIP) at all our Investor Service Center locations. Under this Facility, an investor can invest a fixed amount – (a) every month for six months (subject to a minimum of Rs. 2000 and in multiples of Rs. 100) (b) every month for one year (subject to a minimum of Rs. 1000 and in multiples of Rs. 100) through post-dated cheques at applicable NAV-related prices.  This facility will help the investor to average out their cost of investment over a period of six months or one year and thus overcome the short-term fluctuations in the market.

 

This facility is not available during the initial issue. For subsequent applications, investors must indicate their choice on their application form in the box provided for the purpose. The post-dated cheques must be dated the 5th/15th/25th of every month and drawn in favour of the scheme as specified in the application form and crossed “Account Payee Only”. The application may be mailed to the Registrars directly or submitted at any of the Investor Service Centres. The amount will be invested in the scheme at the closing NAV of the date of realization of the cheques. The number of Magnums allotted to the investor will be equal to the amount invested during the month divided by the POP for that day. An intimation of the allotment will be sent to the investor. The investor may terminate the facility after giving at least three weeks’ written notice to the Registrar. For all payments made by cheques, the date of realization of a cheques will be taken as the date of investment and the amount invested will be deemed to be the amount realized net of bank charges (if any).

 

3. Systematic Withdrawal Plan –

Under SWP, a minimum of Rs. 500 can be withdrawn every month or quarter by indicating in the application form or by issuing advance instructions to the Registrars at any time. SWP entails redemption of certain number of Magnums that represents the amount withdrawn. Thus it will be treated as capital gains for tax purposes. A minimum balance of 25% of the net assets should be maintained in the investment account under all conditions failing which the balance amount in the investor’s folio maybe compulsorily redeemed by the Mutual Fund.

 

4. Systematic Transfer Plan is a combination of systematic withdrawal from one scheme and systematic investment into another scheme. Therefore the minimum and maximum amount of withdrawals applicable under SWP would be applicable to STP also. Similarly the minimum investments applicable for each scheme under SIP would be applicable to STP. STP facility would allow investors to transfer a predetermined amount or units from one scheme of the Mutual Fund to the other.  The transfer would be effected on any business day as decided by the investor at the time of opting for this facility. STP would be permitted for a period of six months between two schemes. The transfer would be affected on the same date of every month (or on the subsequent business day, if the date of first transfer is a holiday) on which the first transfer was affected. STP can be terminated by giving advance notice to the Registrars.

5.  Minimum amount of subscription per application

Initial Offer and Ongoing basis:

The minimum amount of subscription per application is Rs. 10000/- and in multiples of Rs. 1000/- thereafter. For investors opting for Systematic Investment Plan, the minimum amount of subscription per application is Rs. 12000/-. Systematic Investment Plan is not available during the initial offer period.

 

The Mutual Fund reserves the right to alter the minimum subscription amount under the scheme.

6. Maximum amount of subscription per application

No upper limit.

7. Who can invest

(A) The following categories of Indian nationals are eligible to invest in the scheme: (i) Adult individuals. (ii) Adult individuals, not exceeding three, either - jointly, or - on either/any one or survivor basis, or - on first holder or survivor basis. (iii) Minors through their parents/step parents/guardians (applications of minors jointly with adults not allowed) (iv) Hindu Undivided Family (HUF) in the name of karta. (v) Companies/Bodies corporate/PSUs/Banks/Financial Institutions registered in India. Applications by above should be accompanied by their Memorandum/Articles of Association, and a copy of the Resolution authorizing the investment, and list of authorized signatories with specimen signatures. (vi) Religious/Charitable/Other Trusts, wakfs and societies registered under the applicable laws and authorized to invest in mutual funds. Applications by above should be accompanied by their Trust Deed, certified copy of the Board Resolution authorizing the investment, and list of authorized signatories with specimen signatures. (vii) Partnership firms. (viii) An association of persons or body of individuals, in either case, consisting only of husband and wife, governed by the system of community of property in force in the state of Goa and the Union Territory of Dadra, Nagar Haveli, Daman & Diu. (ix) Army/Air force/Navy/Paramilitary funds and other eligible institutions.

(B) Non-Resident Indians (NRIs) can invest on fully repatriable basis. NRIs can also apply on a non-repatriable basis from their NRO Account.

8. Defective applications liable for rejection

Applications not complete in any respect are liable to be rejected. In the event of non-allotment of Magnums, no interest will be paid on the money refunded. In case of any representation to the Trustees against the disqualification of any application, the decision of the Trustees will be final.

9. Bank Account Numbers

In order to protect the interest of the Magnum Holders from fraudulent encashment of cheques, SEBI has made it mandatory for investors in mutual funds to state their bank account numbers in their applications. Investors are requested to provide these details in the space provided in the application form. This measure is intended to avoid fraud / misuse or theft of warrants in transit. Kindly note that applications not containing these details may be rejected.

 

10. Permanent Account Number (PAN)

Pursuant to the Notification No. 288 of 2004 dated. 1st December 2004 issued by the Central Board of Direct Taxes, it is brought to the notice of all investors that with effect from 1st January 2005, while making an application for purchase of units for Rs. 50000 or more in a mutual fund, investors should compulsorily quote their Permanent Account Number (PAN) in the application form. Purchase of units would include Fresh purchases, additional purchases, Switch, Systematic Investment Plan/Systematic Transfer Plan. Further Investors at the time of application must also submit PAN photocopy, PAN letter, refund order or demand notice from IT department, where in PAN is mentioned. No other form of declaration will be accepted. In case of joint applications, the PAN of all the applicants should be quoted supported by the submission of relevant documents. 

In case a person, making an application for purchase of units in a mutual fund is a minor and does not have any income chargeable to income-tax, he/she shall quote the PAN of his/her father or mother or guardian, as the case may be, in the application form.

In case a person does not have a permanent account number and makes an application for purchase of units in a mutual fund, the said investor should make a declaration in Form No. 60 /Form No. 61 giving therein the particulars the transaction.

Applications where the PAN is not quoted or the declaration is not provided in the Form 60/Form No. 61 (where the investor does not have a PAN) would be rejected by the Mutual Fund without any reference to the investor.

 

11. Unique Identification Number (UIN)

Pursuant to the Securities and Exchange Board of India (Central Database for Market Participants) Regulations, with effect from 1st January 2005, specified investors such as Body Corporates should quote the Unique Identification Number (UIN) obtained under the MAPIN database in lieu of the Unique Client Code while making an application for purchase/redemption of units in a mutual fund. Purchase of units means and includes Fresh purchases, additional purchases, Switch-in, Systematic Investment Plan/Systematic Transfer Plan. Redemption of units means and includes partial/full redemptions, Switch-out, Systematic Withdrawal Plan/Systematic Transfer Plan.

 

 

XIII. DIVIDEND AND DISTRIBUTIONS

1. Returns to the Investors

Under the Growth option, no dividends will be distributed. The returns to investors will be through capital gains at the time they choose to repurchase any or all of their holdings. Investors may refer to the next section “Redemption and Repurchase” for further information.

Under the Dividend option, the sub-options of Monthly Dividend, Quarterly Dividend and Annual Dividend would endeavour to declare dividends on a monthly, quarterly and annual basis respectively. The declaration of dividends would depend on the investment performance of the scheme and would be at the discretion of the fund manager and with the approval of the Managing Director. The declaration of dividends and the percentage to be distributed will depend upon the NAV at that time and no returns are assured under the scheme.

Refer to the section “Tax Treatment of Investments in Mutual Funds” for further information on the tax liabilities for investors on account of capital gains/dividends.

 

2. Dividend Reinvestment Plan

The magnum holders may reinvest any dividend due to them, at no sales charge by indicating at the appropriate place in the application form. The dividend reinvestment may be cancelled on receipt of a request from the magnum holders for the same.

 

3. Mode of Distribution

The dividends will be distributed to the investors under the Dividend Option through warrants mailed to them within 30 days of declaration of dividends. Investors residing in such places where Electronic Clearing Facility is available will have the option of receiving their dividend directly into their specified bank account through ECS. In such a case, only an advice of such a credit will be mailed to the investors.

 

4. Electronic Credit Clearing Service (ECS)

ECS is a facility offered by the Reserve Bank of India for facilitating better customer service by direct credit of dividend or redemption amount to an investor’s bank account through electronic credit. This helps in avoiding loss of dividend or redemption warrants in transit or fraudulent encashment. This facility is optional for the investors in the scheme.

Dividends or redemption proceeds may be distributed through the ECS facility to investors residing in any of the cities where such a facility is available. Payments of up to Rs.1, 00,000/- per transaction can be made through the ECS.

All investors will have to provide the additional details required in the space provided on the application form. If they have also opted for the ECS facility, their bank branch will directly credit the amount due to them to their account wherever the payment is through ECS. The Registrars will send a separate advice to the investors informing them of the direct credit.

The ECS facility will be offered by the Fund in any centre only if there is sufficient demand for the facility. In places where such a facility is not available or if the facility is discontinued by the scheme for any reason, or in cases where the dividends or redemption proceeds exceed Rs. one lakh, the dividend / redemption warrants will be mailed to the investors.

 

XIV. INTER-SCHEME TRANSFERS

Policy on Inter-scheme Transfers

The scheme, or any other scheme of the Mutual Fund, may make investments or effect a sale of some of its investments by means of transfers from one scheme to another in the same mutual fund. Such transfers will be done in accordance with clause 3 of seventh schedule to SEBI Regulations and subject to the following conditions:

 

i) Such transfers are done at the prevailing market price for quoted instruments on spot basis. (Where such a spot price is not available or if the market is closed, the inter-scheme transfer may be done at the latest closing price available).

 

ii) The securities so transferred would be in accordance with the investment objective of the transferee scheme.

 

iii) The registration and accounting of the transaction is effected on a spot basis so that the NAV of the scheme is impacted.

 

XV. ASSOCIATE TRANSACTIONS

1. Who is an associate?

For the purpose of this section, an associate or group company shall include State Bank of India (SBI), its subsidiaries (including the AMC), joint ventures and the associate banks of SBI and SGAM.

2. Investments in Associate or Group Companies of the Sponsor

As per SEBI Regulation, the scheme will not invest more than 25% of net assets of the scheme in the securities of the State Bank Group companies. Further, the aggregate investment made by all the SBI Mutual Fund schemes in the securities of State Bank Group companies will not exceed 25% of the net assets of the fund as a whole. No investment shall be made in any unlisted security of an associate or Group Company of the Sponsor, any security issued by way of private placement by an associate or group company of the Sponsor.

As on 31st January 2005, all the schemes of the Mutual Fund have Rs. 30.82 crores invested in the various equity and debt instruments of State Bank Group Companies of which Rs. 4.09 crores are invested in equity and Rs. 26.73 crores are invested in debt. The scheme shall not invest in privately placed or unlisted securities of associates / group companies.

3. Underwriting Obligations of SBI Mutual Fund

As on date, SBIMF has no underwriting obligations.

4. Subscription in Issues Lead Managed by Associates of Sponsor

In the last three fiscal years, different schemes of the Fund have subscribed to some of the issues lead managed by SBI Capital Markets Ltd. The details of these are as follows:

 

Name of the Company

Type

Quantity Applied

Quantity

Allotted

Amount

(Rs. lakhs)

Corporation Bank

Equity (pp)

2000000

93100

           74.48

ICICI Banking Corporation

Equity

4150000

386100

         135.14

Gujarat Gas Company Ltd.

Debentures

20

20

200.00

Krishna Baghya Jala Nigam Ltd.

Debentures

500

500

500.00

National Aluminum Co. Ltd.

Debentures

500000

450000

4500.00

Deepak Fertilizers

Debentures

500

500

500.00

State Bank of Bikaner & Jaipur

Equity

30000

30000

162.00

BHARAT PETROLEUM CORPORATION LTD.

Debentures

15

15

1500

EXIM Bank

Debentures

    2,000

  2,000

2000

BHARAT HEAVY ELECTRICALS

Debentures

35

35

3500

HPCL

Debentures

         50

      50

            500

Neyveli Lignite Corporation Ltd.

Debentures

       200

    200

          2000

NALCO

Debentures

       500

    500

            500

Hindustan Aeronautics Ltd.

Debentures

          1

        1

            500

L & T PTC

Debentures

2864

2864

2864

IFFCO PTC

Debentures

2810

2810

2811

NHYD PTC

Debentures

5425

5425

5425

JNPT

Debentures

545

545

545

ITI Limited

Debentures

6

6

300

Bharti Shipyard Ltd

Equity

2250000

129900

86

Indian Petrochemicals Ltd.

Equity

4312245

532400

905

Power Trading Corporation

Equity

15000000

725000

116

Petronet LNG

Equity

8215600

4500000

675

However, these investments may or may not stand in the books of concerned schemes at present.

5. Associate Broker

At present, SBI Mutual Fund has empanelled SBI Capital Markets Limited as Associate Broker.

6. Collecting Banker(s) and Distributors

SBIMF will utilize the services of State Bank of India as the collecting banker for the scheme. 

7. Collecting Branches

The AMC may utilize the services of some branches of the SBI Group as authorized collecting branches for the scheme. The list of collecting branches will be printed in the application form. They will be paid handling charges at such a rate as may be prevalent in the market at the time of the issue and/or as negotiated with the concerned banks.

8. Agent Commission

For applications directly solicited and collected by the branches of SBI or by any associates, they may also be paid an agent commission at a rate not exceeding the rate of commission being paid to other agents for the scheme.

9. Other Associate Transactions

Individual schemes of SBI Mutual Fund lend in the Call Money Market from time to time in order to continuously earn returns on their short term surplus cash. This is in accordance with the applicable Regulations. SBI, SBI Commercial & International Bank, any of SBI’s associate banks or SBI Gilts Ltd. may be some of the players who may borrow from SBI Mutual Fund at market rates. SBI Capital Markets Ltd. was appointed as the Principal Marketing Advisors for Magnum Gilt Fund.

At present, the Fund does not have any other transaction with the Sponsor or its associates apart from those disclosed above. In future, however, SBI or any associates of SBI (including but not limited to SBI Capital Markets and/or SBI Securities Ltd.) may be entrusted the work of marketing, book-building, distribution or any other activity connected with the scheme or any other schemes of SBI Mutual Fund, as may be allowed by SEBI or any other competent authority, and within the relevant provisions of Regulations prevailing from time to time.

 

XVI. BORROWING BY THE MUTUAL FUND

1. Borrowing by the scheme

Under Regulation 44(2) of SEBI (MF) Regulations, 1996, the Fund is allowed to borrow to meet its temporary liquidity need of the Scheme for the purpose of repurchase, redemption of Magnums or payment of interest or dividend to the Magnum Holders. Further, as per the Regulation, the Fund shall not borrow more than 20% of the Net Assets of the Scheme and the duration of such borrowing shall not exceed a period of six months.

 

The scheme wise details of borrowings by the Mutual Fund during the last fiscal (2003-04) is detailed below:

Scheme

Amount (Rs.)

Amount as % to NAV

Purpose of borrowing

Time

MSFU – Contra Fund

24 lakhs

3.58%

Repurchase

6 days

MIIF – Savings Plan

13 crores

4.59%

Repurchase

2 days

MICF - DIV

21.5 crores

3.85

Repurchase

2 days

MICF - STP

1.5 crores

0.51%

Repurchase

1 day

MICF – STP

15.70 crores

6.50%

Repurchase

3 days

MICF - CASH

16.26 crores

1.94%

Repurchase

1 day

MICF – CASH

10.50 crores

1.28%

Repurchase

5 days

MICF - CASH

5 crores

0.61%

Repurchase

2 days

 

There were no outstanding for any schemes as on 31st March 2004.

If the scheme decides to borrow, it may borrow either from SBI Group banks and / or any other bank(s) or from any other sources as may be decided by the AMC. The loans may be without collateral or may consider using a part of the scheme’s assets as collateral with the prior approval of the Board of Directors of the AMC and the Board of Trustees of the scheme.

2. Potential risk of loss to the AMC / Magnum holders

The borrowing by the scheme will not involve any potential loss to the AMC or to the Magnum holder. However, it will involve a certain cost on account of interest paid on borrowing at market rates as may be negotiated with the concerned lender. In any case, the scheme may resort to borrowings only if the possible benefit from borrowings exceeds the cost of immediate liquidation of its assets for meeting repurchase needs / dividend payments / interest payments.


 

 

XVII. NAV AND VALUATION OF ASSETS OF THE SCHEME

1.  Valuation of Assets pertaining to the scheme

 

Valuation of Assets, computation of NAV, repurchase price and their frequency of disclosure will be in accordance with the provisions of SEBI (MF) Regulations 1996/Guidelines/Directives issued by SEBI from time to time. The assets of the scheme will be valued based on the following valuation norms.

 

A.     Traded Securities

a) The securities shall be valued at the last quoted price on the stock exchange.

b)      When the securities are traded on more than one recognized stock exchange, the securities shall be valued at the last quoted closing price on the stock exchange where the security is principally traded. It would be left to the Asset Management Company to select the appropriate stock exchange, but the reasons for the selection should be recorded in writing. There should however be no objection for all scrips being valued at the prices quoted on the stock exchange where a majority in value of the investments is principally traded.

c)      Once a stock exchange has been selected for valuation of a particular security, reasons for change of the exchange shall be recorded in writing by the Asset Management Company.

d)      When on a particular valuation day, a security has not been traded on the selected stock exchange the value at which it is traded on another stock exchange may be used.

e)      When a security is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the selected stock exchange or any other stock exchange, as the case may be, on the earliest previous day may be used provide such date is not more than thirty days prior to the valuation date.

 

B.     Thinly Traded Securities 

(i) Thinly Traded Equity/Equity Related Securities:

When trading in an equity/equity related security (such as convertible debentures, equity warrants, etc.) in a month is less than Rs. 5 lakhs or the total volume is less than 50,000 shares, it shall be considered as a thinly traded security and valued accordingly.

In case trading in an equity security is suspended upto 30 days, then the last traded price would be considered for valuation of that security. If an equity security is suspended for more than 30 days, then the Asset Management Company/Trustees will decide the valuation norms to be followed and such norms would be documented and recorded.

(ii) Thinly Traded Debt Securities:

A debt security (other than Government Securities) that has a trading volume of less than Rs. 5 crores in the previous calendar month shall be considered as a thinly traded security based upon information provided by the relevant stock exchange on the volume of debt securities traded.

A thinly traded debt security as defined above would be valued as per the norms set for non-traded debt security.

 

C.     Non-Traded Securities    

When a security is not traded on any stock exchange for a period of thirty days prior to the valuations date, the scrip must be treated as a ‘non-traded’ scrip.

 

D.     Valuation of Non-traded/Thinly traded securities

Non-traded/Thinly traded securities shall be valued “in good faith” by the asset management company on the basis of appropriate valuation methods laid down below. For the purpose of valuation of non-traded/thinly traded securities, the following principles will be adopted:

 

(a)    Based on the latest available Balance Sheet, net worth shall be calculated as follows:
Net Worth per share = [share capital + reserves (excluding revaluation reserves) – Misc. expenditure and Debit Balance in P&L A/c] Divided by No. of Paid up Shares.

(b)    Average capitalization rate (P/E ratio) for the industry based upon either BSE or NSE data shall be taken and discounted by 75% i.e. only 25% of the Industry average P/E shall be taken as capitalization rate (P/E ratio). Earnings per share of the latest audited annual accounts will be considered for this purpose.

(c)    The value as per the net worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 10% for ill-liquidity so as to arrive at the fair value per share.

(d)     In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalized earning.

(e)    In case where the latest balance sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero.

(f)     In case an individual security accounts for more than 5% of the total assets of the scheme, an independent valuer shall be appointed for the valuation of the said security.

(ii)(a) Non Traded /Thinly Traded Debt Securities of upto 182 Days to Maturity:

As the money market securities are valued on the basis of amortization (cost plus accrued interest till the beginning of the day plus the difference between the redemption value and the cost spread uniformly over the remaining maturity period of the instruments) a similar process should be adopted for non-traded debt securities with residual maturity of upto 182 days, in the absence of any other standard benchmarks in the market. All other non traded Non Government debt instruments shall be valued using the method suggested in (ii) (b) hereof"

 

(ii)(b) Non Traded/ Thinly Traded Debt Securities of Over 182 Days to Maturity:

For the purpose of valuation, all Non Traded Debt Securities would be classified into "Investment grade" and "Non Investment grade" securities based on their credit ratings. The non-investment grade securities would further be classified as "Performing" and "Non Performing" assets

All Non Government investment grade debt securities, classified as not traded, shall be valued on yield to maturity basis as described below.

All Non Government non-investment grade performing debt securities would be valued at a discount of 25% to the face value

All Non Government non-investment grade non performing debt securities would be valued based on the provisioning norms.

The approach in valuation of non traded debt securities will be based on the concept of using spreads over the benchmark rate to arrive at the yields for pricing the non traded security.

The Yields for pricing the non traded debt security would be arrived at using the process as defined below.

Step A

A Risk Free Benchmark Yield is built using the government securities (GOI Sec) as the base. GOI Securities are used as the benchmarks as they are traded regularly; free of credit risk; and traded across different maturity spectrums every week.

Step B

A Matrix of spreads (based on the credit risk) are built for marking up the benchmark yields. The matrix is built based on traded corporate paper on the wholesale debt segment of an appropriate stock exchange and the primary market issuances. The matrix is restricted only to investment grade corporate paper.

Step C

The yields as calculated above are Marked-up/Marked-down for ill-liquidity risk

Step D

The Yields so arrived are used to price the portfolio

 

E.      Valuation of securities with Put/Call Options

The option embedded securities would be valued as follows:

a.       Securities with call option:

The securities with call option shall be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option.

In case there are multiple call options, the lowest value obtained by valuing to the various call dates and valuing to the maturity date is to be taken as the value of the instrument.

b.       Securities with Put option

The securities with put option shall be valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to put option

In case there are multiple put options, the highest value obtained by valuing to the various put dates and valuing to the maturity date is to be taken as the value of the instruments.

c.       Securities with both Put and Call option on the same day

The securities with both Put and Call option on the same day would be deemed to mature on the Put/Call day and would be valued accordingly.

 

(ii)(c) Government securities (not traded for more than 30 days or one which would qualify as a thinly traded security) will be valued at cost plus accrual and amortizing the discount or premium over the like of the security.

 

F.      Illiquid Securities:

(a) Aggregate value of "illiquid securities" of scheme, which are defined as non-traded, thinly traded and unlisted equity shares, shall not exceed 15% of the total assets of the scheme and any illiquid securities held above 15% of the total assets shall be assigned zero value.

(b) The Mutual fund will disclose as on March 31 and September 30, the scheme-wise total illiquid securities in value and percentage of the net assets while making disclosures of half yearly portfolios to the Magnum holders. In the list of investments, an asterisk mark shall also be given against all such investments, which are recognized as illiquid securities.

2. Determination of Net Asset Value

The value determined as above, will be adjusted for the following:

a) All income and expenditure accrued.

b) Major expenses like management fees and other periodic expenses to accrue on a day to day basis.

c) The basis for calculation of NAV will be subject to regulations and guidelines of the SEBI issued from time to time.

d) The NAV would be rounded off to four decimal places for the scheme.

 

Minor expenses, if any, will not be accrued on a day to day basis if they do not affect the NAV by more than 1%.

 

The Mutual Fund shall comply with the investment valuation norms spelt out in the Eighth Schedule of SEBI Regulations.

 

The Net Asset Value per Magnum shall be calculated by dividing the Net Assets of the scheme by the total number of Magnums outstanding on the valuation date, as follows:

 

                       

                        Total unit capital + Reserves + Income (net of expenses)

                        + Appreciation / -depreciation in investments

NAV = --------------------------------------------------------------------------------

                         Total no. of Magnums outstanding

 

Any changes in securities and in the number of units will be recorded in the books not later than the first valuation date following the date of transaction. If this is not possible given the frequency of the NAV disclosure, the recording may be delayed upto a period of seven days following the date of the transaction, provided that as a result of the non-recording, the NAV calculations shall not be affected by more than 2%.

 

The NAV alongwith Sale and Repurchase prices will be calculated on all business days and will be published atleast in two daily newspapers on a daily basis as prescribed by SEBI.

 

 

XVIII. REDEMPTION AND REPURCHASE

 

1. Repurchase facility

 

The Magnums purchased under this scheme can be sold back to the fund on any business day after the scheme goes open-ended. For applications received at the Registrar’s Office, SBI MF Investor Service Centres/Investor Service Desks or SBI MF Corporate Office before 3.00 p.m. on any business day, the repurchase price will be based on the closing NAV of the same day and for applications received at the registrar’s end after 3.00 p.m. on any business day, the repurchase price will be calculated based on the closing NAV of the next working day. e.g. for an application received on Tuesday before 3.00 p.m., the repurchase price will be calculated based on Tuesday’s closing NAV and for a repurchase application received on Tuesday after 3.00 p.m., the repurchase price will be based on the closing NAV of Wednesday. Applications received by post will be deemed to have been submitted on the date of receipt at the registrar’s end.

 

The repurchase price for the above will be based on the prospective NAV of the following day and it will incorporate the applicable repurchase load, if any. In case the offices of the AMC or the registrars or the Banks are closed for any reason the repurchase date will be taken as the date of the next working day.

 

The repurchased Magnums will be extinguished and will not be reissued.

 

The magnum holder may request the redemption of a specified rupee amount or a specified number of Magnums. The redemption would be permitted to the extent of the credit balance in the magnum holder’s account. The number of magnums redeemed will be equal to the amount redeemed divided by the applicable repurchase price. The number of magnums redeemed will be subtracted from the magnum holder’s account and a revised account statement will be issued to the magnum holder. Magnums purchased by cheque cannot be redeemed till the cheque is cleared.

 

An exit load of 0.5% would be charged for exit within six months from the date of investment for investments amounts upto and including Rs. 50 lakhs. There would be no exit load for investments above Rs. 50 lakhs. There will be no load for switchovers between the two Options in the scheme but switchover between schemes will be at NAV related prices.

2. Minimum Amount of Repurchase per Application

The minimum amount of repurchase would be Rs 1000/- or 100 Magnums whichever is lower. If as a result of repurchase the balance in the account of an investor falls below Rs. 10000/-the fund will reserve the right to compulsorily redeem the account completely at applicable repurchase price, after giving him/her 30 days’ notice requesting him to enhance the balance by making fresh investments.

3. How to Repurchase

The application for repurchase can be made on a pre-printed repurchase application form sent along with the Magnum Statement of Account mailed to the investor. In this connection, the repurchase applications along with the Magnum certificates (if any) should be submitted to the Registrars or at SBI MF Investor Service Centres.

 

For applications made on either / anyone or survivor basis, only one of the holders needs to sign on the repurchase application. However, the repurchase warrant will normally be issued in the name of the first holder only.

 

A complete list of the ISCs is given in the section ‘Investors’ Rights & Services’. SBIMF may appoint additional centres for acceptance of applications, if required.

4. Repurchase Schedule and Service Standards

The redemption will be permitted to the extent of credit balance in the Magnum holders’ account. The repurchase warrant will normally be dispatched to the investor within 5 business days from the date of repurchase.

5. Right to Limit Redemptions

The Mutual Fund reserves the right to temporarily suspend further reissues or repurchases under the scheme in case of any of the following:

- a natural calamity or

- in case of conditions leading to a breakdown of the normal functioning of securities markets or

- periods of extreme volatility or illiquidity

- under a SEBI or Government directive

- under a court decree / directive

Suspension or restriction of repurchase/redemption facility under any scheme of the mutual fund shall be made applicable only after the approval from the Board of Directors of the Asset Management Company and the Trustee. The approval from the Board of Directors and the Trustees giving details of circumstances and justification for the proposed action shall also be informed to SEBI in advance.

6. Switchover facility

Magnum holders under the scheme will have the facility of switchover between the two options in the scheme at NAV. Switchover between this scheme and other schemes of the Mutual Fund would be at NAV related prices. At the time of switchover, the investors will be required to surrender Magnum certificates / Statement of Accounts.

Switchovers would be at par with redemption from the outgoing Option/scheme and would attract the applicable tax provisions at the time of switchover.

7. Loan facility

Magnum holders can obtain loan against their Magnums from any bank, subject to relevant RBI regulations and the respective bank’s instructions, by getting a lien registered / recorded with the Registrars. In addition to this Magnum holders can obtain loans against their Magnums from State Bank of India by getting a lien registered/recorded with the Registrars subject to the conditions of State Bank of India.

 

 

Magnum holders who have borrowed against their Magnums by recording a lien against their holding can avail of repurchase facility only after the receipt of instructions from the concerned lender that the loan has been repaid in full and the lien can be discharged. In case such an instruction is not received, the lender can apply for redemption in his favour. In such a case, the Mutual Fund reserves the right to redeem the Magnums in favour of the concerned lender after giving 15 days notice to the Magnum holder.

 

8. Nomination facility/ succession

Nomination facility is available only for individuals applying on their own behalf, either singly or jointly upto three. Applicants can nominate only one person. This facility is also available to NRI investors. Only resident Indian individuals maybe nominated. This will however be subject to change, if any, in the guidelines of RBI/other regulators. Applicants may change their nomination at any time during the currency of the scheme.

 

9. Redemption record

 

Till date SBI Mutual Fund has redeemed 16 schemes. The redemption details for these schemes are given below:

 

 

Scheme

Redeemed on

Compounded Annualized Yield (p.a.)

MRIS 87

30th June 1993

15.26%

MTSS 88-89

31st Mar 1994

21.89%

MRIS 89

31st Mar 1994

15.73%

MTSS 90

31st Mar 1995

15.38%

MRIS 90

31st July 1995

11.46%

MMIS 89

31st Dec 1996

13.99%

MEX 91

19th Nov 1997

2.60%

MTPL 91

19th May 1999

15.78%

MBF

31st Jan 2000

17.17%

MMIS 91

30th June 2000

14.13%

MELS 91

31st Mar 2001

12.30%

GIFTS A & B

31st Mar 2002

4.42% (GIFTS B)

MMIS 98(I)

31st Mar 2003

12.5% guaranteed for five years

MMIS 97

30th June 2003

11.57%

MMIS 98 (II)

31st January 2004

10.83%

(Growth option)

MTP – 94

31st March 2004

3.99%

 

 

However, please note that past performance is not necessarily indicative of the future results.

10.  Extension record

 

The Magnum Monthly Income Scheme 1991 (MMIS’91) has been extended by 3 years from its original redemption on 30.06.1997 to 30.06.2000. The extension was done after obtaining an approval from SEBI. An option was granted to all the investors to exit, if they so chose, at the assured return price of Rs. 100 per Magnum. Simple yield p.a. as on 30.06.1997 was 14.13%.

 

Three other equity schemes – Magnum Equity Fund (previously known as Magnum Multiplier Scheme 1990 (MMS’90)), Magnum Multiplier Plus Scheme 1993 (MMPS’93) and Magnum TaxGain Scheme 1993 (MTGS (93) - have also been converted to open-end schemes w.e.f. 1st January 1998 and 1st April 1998 and 11th November 1999 respectively, after giving the existing investors an option to redeem their Magnums, if they so chose, at NAV related prices. Magnum Global Fund, an equity scheme, launched on 24th August 1994, with redemption date of 30th September 1999, has also been converted into an open-end scheme w.e.f. 1st October 1999, after giving the existing investors an option to redeem their Magnums, if they so chose, at NAV related prices.

 

XIX. ACCOUNTING POLICIES

1. Accounting year end

The accounts of the scheme shall be closed every year as on 31st March. The Trustees shall cause the accounts of the scheme to be maintained in such form and manner as may be decided by them and in accordance with the SEBI (MF) Regulations, 1996. The Trustees and the AMC shall, at the close of each half year, i.e., 30th September and 31st March, publish the financial results of the scheme, as provided in SEBI (MF) Regulations, 1996.

2. Other Accounting Policies and Standards

a. For the purposes of the financial statements, mutual fund shall mark all investments to market and carry investments in the balance sheet at market value. However, since the unrealized gain arising out of appreciation on investments cannot be distributed, provision has to be made for exclusion of this item when arriving at distributable income.

b. Dividend income earned by a scheme should be recognized, not on the date the dividend is declared, but on the date the share is quoted on an ex-dividend basis. For investments which are not quoted on the stock exchange, dividend income must be recognized on the date of declaration.

c. In respect of all interest-bearing investments, income must be accrued on a day to day basis as it is earned. Therefore when such investments are purchased, interest paid for the period from the last interest due date upto the date of purchase must not be treated as a cost of purchase but must be debited to Interest Recoverable Account. Similarly, interest received at the time of sale for the period from the last interest due date upto the date of sale must not be treated as an addition to sale value but must be credited to Interest Recoverable Account.

d. In determining the holding cost of investments and the gains or loss on sale of investments, the “average cost” method must be followed.

e. Transactions for purchase or sale of investments should be recognized as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction should be recorded, in the event of a purchase, as of the date on which the scheme obtains in enforceable obligation to pay the price or, in the event of a sale, when the scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold.

f. Bonus shares to which the scheme becomes entitled should be recognized only when the original shares on which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements should be recognized only when the original shares on which the right entitlement accrues are traded on the stock exchange on an ex-rights basis.

g. Where income receivable on investments has accrued but has not been received for the period specified in the guidelines issued by the Board, provision shall be made by debiting to the revenue account the income so accrued in the manner specified by guidelines issued by the Board.

h. When in the case of an open-ended scheme units are sold, the difference between the sale price and the face value of the unit, if positive, should be credited to reserves and if negative is debited to reserve, the face value being credited to Capital Account. Similarly, when in respect of such a scheme, units are repurchased, the difference between the purchase price and face value of the unit, if positive should be debited to reserves and, if negative, should be credited to reserves, the face value being debited to the capital account.

i. In the case of an open-ended scheme, when units are sold an appropriate part of the sale proceeds should be credited to an Equalization Account and when units are repurchased an appropriate amount should be debited to Equalization Account. The net balance on this account should be credited or debited to the Revenue Account. The balance on the Equalization Account debited or credited to the Revenue Account should not decrease or increase the net income of the fund but is only an adjustment to the distributable surplus. It should therefore be reflected in the Revenue Account only after the net income of the fund is determined.

j.          The cost of investments acquired or purchased should include brokerage, stamp charges and any charge customarily included in the broker’s bought note. In respect of privately placed debt instruments any front-end discount offered should be reduced from the cost of the investment.

k.         Underwriting commission should be recognized as revenue only when there is no devolvement on the scheme. Where there is devolvement on the scheme, the full underwriting commission received and not merely the portion applicable to the devolvement should be reduced from the cost of the investment

The Mutual Fund shall comply with the accounting policies and standards spelt out in the Ninth Schedule of SEBI Regulations.


XX. TAX TREATMENT OF INVESTMENTS IN MUTUAL FUNDS

 

Information on Tax Benefits

The following paragraphs in this section give information on various tax benefits available to the Magnum holders.

The provisions mentioned in the following paras are based on the law and practice as on the date of this offer document, i.e., the Income-tax Act, 1961 and as amended by the changes approved as per the Finance Act 2004.

Prospective investors should not treat the contents of this section of the offer document as advice relating to legal, taxation, investment or any other matter and are recommended to consult their own professional advisors concerning the acquisitions, holding or disposal of the Magnums.

1. Tax Benefits to Magnum holders:

All tax benefits will be available only to the Magnum holder or the first named holder in case the Magnums are held in the names of more than one person.

Where a partition has taken place among the members of a Hindu Undivided Family or when an Association of Persons has been dissolved after a deduction has been allowed under this scheme, the first name holder will be in receipt of the amount withdrawn and will be deemed to be the assessee.

 

2. Tax Benefits Related to Income Distribution

As per the provisions, Income distributed by debt schemes will be subject to a dividend distribution tax of 12.5 % (plus applicable surcharge) for individual investors and 20 % (plus applicable surcharge) for other including corporate investors but the income is tax free in the hands of the investor.

 

3. Tax Benefits Related to Capital Gains

Tax benefit is available under sections 48 & 112 on capital gains for resident Indians.

 

 

4.  Tax Benefits Related to Repurchase/ Redemption/ Transfer

Magnums held for a period of more than 1 year will be treated as long-term capital assets. The Magnum holders will have the option to pay the long term capital gains tax @ 10% (plus applicable surcharge) without the cost inflation index benefit or @ 20% (plus applicable surcharge) with the cost inflation index benefit, whichever is more beneficial. Short Term Capital Gains Tax would be at the prevailing income-tax slab as applicable to the investor. There will be no Tax Deducted at source for resident investors in respect of capital gains tax.

 

5. Wealth Tax Benefits

Mutual fund Magnums are not considered as “assets” liable to wealth tax u/s 2(ea) of the Wealth-tax Act, 1957. Consequently Magnums held under the scheme will not be liable to wealth tax under the Wealth-tax Act, 1957.

 

6. Tax Benefits to Religious / Charitable Trusts

Investments in these magnums by Religious / Charitable Trusts will qualify for tax benefits under section 11(5) of the Income Tax Act, 1961.

7. Tax Benefits to Mutual Fund

As the Mutual Fund has been registered with SEBI under the SEBI Regulations, the entire income of the Fund is exempt from income tax under Section 10 (23D) of the Act.

 

 

XXI. INVESTORS’ RIGHTS AND SERVICES

1. Rights of Beneficiaries

a) After closing of the annual accounts, SBI Mutual Fund shall provide for depreciation on investments and also make a provision for bad and doubtful debts to the satisfaction of its auditors and shall disclose the method of depreciation in the notes to the accounts. After making such provisions the profits of the scheme together with the capital appreciation, if any, may be distributed to the investors either as a dividend payout or plough back to the scheme as may be decided by the Board of Trustees.

b) SBI Mutual Fund will publish-

(i) The Schemes’ audited annual accounts or an abridged summary of the same within six months from the date of closure of the relevant financial year.

(ii) Before the expiry of one month from the close of each half year i.e. on 31st March and on 30th Sept., the fund shall publish its unaudited financial results in one national English daily newspaper and in a Marathi newspaper. These shall also be displayed on the website of the mutual fund and that of AMFI.

iii) The scheme portfolio in the prescribed format before the expiry of one month from the close of each half year i.e. on 31st March and on 30th Sept. or send a copy to all unit holders. This will also be displayed on the website of SBI Mutual Fund.

The investors have a right to call for the above information, including the full annual report, at the SBI Mutual Fund’s office or its Investors Service Centres and if so desire, they can receive a copy of the above information on payment of a nominal fee.

The Fund will also issue for publication the NAV and the Sale and the Repurchase prices of this scheme on a daily basis in at least two newspapers in accordance with SEBI Regulations.

c) An abridged scheme wise annual report will be mailed to all the Magnum holders not later than six months from the date of closure of the relevant accounting year and the full annual report shall be available for inspection at the head office of the Mutual Fund and a copy shall be made available to the unit holders on the payment of nominal fees, if any.  d) The investors have the right to ask the Trustees about any information which may have an adverse bearing on their investments and the trustees shall be bound to make disclosures about such information to the investors.

The investors are also advised to see the relevant provisions of the Indian Trust Act, 1882, in this regard.

2. Other Significant Rights of the Magnum holders

(a) The fundamental attributes as defined above or fees and expenses payable or any other change which would modify the scheme and affects the interest of Magnum holders, shall not be carried out unless, a written communication about the proposed change is sent to each Magnum holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and the Magnum holders are given an option to exit at the prevailing Net Asset Value without any exit load.

(b) The Appointment of the AMC for the scheme can be terminated by a majority of the Trustees or by not less than 75% of the Magnum holders of the scheme.

(c) The despatch of dividend warrants shall be made within 30 days of the declaration of the dividend and despatch of redemption/repurchase proceeds will be made within 10 working days from the date of redemption/repurchase. In the event of failure to despatch the redemption or repurchase proceeds within 10 working days, the asset management company is liable to pay interest to the magnum holders at the rate of 15% p.a. Such interest would be borne by the Asset Management Company (AMC).

d) Suspension or restriction of repurchase/redemption facility under any scheme of the mutual fund shall be made applicable only after the approval from the Board of Directors of the Asset Management Company and the Trustee. The approval from the AMC Board and the Trustees giving details of circumstances and justification for the proposed action shall also be informed to SEBI in advance.

e)         No change in the controlling interest of the asset management company shall be made unless, -

i.          prior approval of the trustees and the SEBI is obtained;

ii.          a written communication about the proposed change is sent to each Magnum holder and an advertisement is given in one English daily newspaper having nationwide circulation and in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and

iii.         The Magnum holders are given an option to exit on the prevailing Net Asset Value without any exit load.

f) The following would be the procedure for seeking approval of the Magnum holders in specified circumstances

  1. The Mutual Fund shall first determine a cut off date for ascertaining the names of the Unit Holders whose consent is to be sought. This may necessitate the closing of books and register of Magnum Holders, if any, and suspension of approval of the sale and purchase of magnums for a short period prior to the cut off date.
  2. The Board of Trustees of the Mutual Fund shall pass a resolution for convening a meeting of the general body of the Magnum Holders and give a notice atleast 21 days before the meeting too all Magnum holders specifying the date, time, venue and purpose of holding the meeting and publish the public notice in at least two leading newspapers circulated in Mumbai including one English and one Marathi newspaper.
  3. At the meeting so convened, 5 Magnum Holders personally present shall constitute the quorum for the meeting and the Magnum Holders personally present at the meeting shall elect one of themselves to be the Chairman thereof by a show of hands. The Chairman of the meeting shall have the power to regulate the procedure at the meetings.
  4. At the meeting, the amendment proposed shall be put to vote and shall be decided in the first instance by a show of hands, unless a poll is demanded. A poll demanded shall be taken at such time not being later than 48 hours from the time when the demand was made, as the Chairman may direct. The result of the poll would determine whether the amendment proposed will be passed or not.
  5. Before or on the declaration of the result of voting on a proposed amendment by a show of hands, a poll may be ordered to be taken by the Chairman, of his own motion and shall be ordered to be taken by him on a demand made in that behalf by any Magnum Holder or Magnum Holders, holding units having a issue price of not less than Rs. 50,000/-.

g)         No amendments to the Trust Deed will be carried out without the prior approval of SEBI and the Magnum holders’ approval would be obtained where it affects the interests of the Magnum holder.

3. Documents Available for Inspection

Following documents are available for  inspection  by investors at their office of the SBI Funds Management Pvt. Ltd., 191, Maker Tower E, Cuffe Parade, Mumbai - 400 005:

i)          Trust deed

ii)         Memorandum and Articles of Association of SBI Funds Management Pvt. Ltd. and the State Bank of India Act & Regulations.

iii)         Copy of Annual Reports including Auditors Report of SBI

iv)        Scheme Rules and Regulations

v)         Auditors Reports, Audited Annual Accounts & Offer Documents of all the existing schemes of the SBIMF.

vi)        Agreements with Custodians, Registrars & Transfer Agents, Bankers, if any.

vii)        Investment Management Agreement with the Trustees.

viii)       Securities & Exchange Board  (Mutual Fund) Regulations 1996

ix)        Indian Trust Act, 1882.

x)         Consent letters of Auditors and Legal Advisors

4. For Your Convenience and Help

SBI Mutual Fund has opened 26 Investor Service Centres (ISCs) and 19 Investor Service Desks all over the country. The addresses of these ISCs and the name of the contact person are given below:

 

sbimf investor service centres (iscs)

Ahmedabad: Shri Shivaji Kumar Dey, Chief Relationship Manager, SBIMF - Investor Service Centre,1st Floor, State Bank Of India, Ahmedabad Main Branch, Bhadra, Ahmedabad - 380001, Tel - 25507442,  Bangalore: Shri R. s. Srinivas Vice President & Regional Head (South), SBIMF - Investor Service Centre, 1st Floor, Block-I, SBI LHO Campus, 65,St. Marks Road, Bangalore  - 560001, Tel  - 22272284, 22122507, 22123784(D), Bhilai: Shri  A. K. Mitra, Asst.vice President, SBIMF -  Investor Service Centre, F-7, Commercial complex, Uttar Gangotri,  G. E. Road, Bhilai  - 490023, Tel-  5010955,  2273261, Bhopal: Relationship Manager, SBIMF- Investor Service Centre, State Bank Of India, Local Head Office, Hoshangabad  Road, Bhopal  - 462011, Tel - 2557341, 5273983, 5288277, Bhubaneshwar: Shri  N.  Tripathi, Asst.  Vice  President, SBIMF-  Investor Service Centre, SBI  LHO Building, Ground Floor, Pandit  Jawaharlal  Nehru  Marg,  Janpath, Bhubaneshwar - 751001, Tel - 2402401,  Chandigarh: Shri  D. P.  Singh Asst. Vice President & Regional Head (North), SBIMF  - Investor Service Centre, State Bank Of India, Local Head Office, Sector - 17 - B, Chandigarh - 160017, Tel  - 709728, 711869  Chennai : Shri  P. Venkatesh, Chief Manager, SBIMF - Investor Service Centre, 2nd Floor, Greams Dugar, Above SBI CAG Branch, 149, Greams Road, Chennai  - 600006,Tel  - 28293384, 28293385   Coimbatore: Shri Rajesh Ramnarayan, Chief Relationship Manager, SBIMF -  Investor  Service Centre, State Bank Of India, Main Branch, Bank Road, Coimbatore - 641018, Tel - 2303863,  Cochin: Shri  A. Sree Kumar, Asst. Vice President, SBIMF -  Investor Service Centre, 28/218,  2nd Floor,  Manorama Junction, Above  SBI  Ernakulam  South  Branch, S. A. Road, Panampilly Nagar, Ernakulam, Cochin  -  682036, Tel  -  2318886, 2320107  Goa: Mr. Niranjam Mazumdar, Relationship Manager, SBIMF -  Investor  Service Centre, 203, Kamat Chamber, Opp-Neptune Hotel, Panaji,  Goa - 403001, Tel - 5642475,  Guwahati:  Shri  Shashank Mohan Goswami, Asst. Vice President,  SBIMF  - Investor Service Centre, C/O  State Bank Of India,  Local Head Office, Applo Building Annexc,  Bharalumukh, Guwahati  -  781009, Tel  -  2521993 Hyderabad: Shri  D. S. Prashanth  Rao, Chief Manager, SBIMF -  Investor Service Centre, 1st Floor, State Bank Of India, Local Head Office,  Bank Street,  Koti, Hyderabad  -  500195, Tel - 24756241, 24756066 Indore: Shri  Harish  Sharma, Relationship Manager, SBIMF -  Investor  Service Centre, 120-121, City Centre, 570, M. G. Road,  Indore - 452001, Tel - 2541141, 5045944  Jaipur: Shri  Sameer Saxena, Sr. Relationship Manager, SBIMF  - Investor Service Centre, State Bank Of India, Sanganeri Gate, Jaipur  - 302001, Tel - 2567354, 2574134  Kolkata: Mr. Manoj Kumar Sinha, Chief Manager & Regional Head (East), SBIMF  - Investor Service Centre, 10th Floor, Nagaland House, 11 & 13,  Shakespeare  Sarani, Kolkata  - 700071, Tel - 22821471, 22822816, Lucknow: Mr. Devesh Srivastava, SBIMF, Investor Service Centre, C/o SBI LHO Building, 8th Floor, B Wing, Moti Mahal Marg, Lucknow, Tel.:(0522) 2234042, 2234060,   Ludhiana:  Shri Anil Kumar  Verma, Sr. Manager, SBIMF -  Investor  Service Centre, C/O State Bank Of India, Civil Lines,  Ludhiana -  141001, Tel-2449849, Fax - 2443167, Mangalore:  Shri Micheal Lobo, Sr. Relationship Manager, SBIMF -  Investor Service Centre, State Bank Of India, Arya Samaj Road,  Bellamatta, Mangalore  - 575003, Tel - 445892  Mumbai: Shri Shantanu Ray, Chief Manager & Regional Head (West), SBIMF -  Investor  Service Centre, 42, Rajgir Chambers,  5th Floor, Shahid Bhagat singh Road, Fort,  Mumbai - 400023, Tel - 22658302, 22658303, Fax - 22691146 New Delhi : Shri  Albert Baretto, Chief Manager, SBIMF  - Investor Service Centre, 5th Floor,  Ashoka Estate, 24,  Barakhamba Road, New Delhi  - 110001, Tel  - 23315058, 23317262,  Patna: Shri  Gopal Krishan, Relationship Manager, SBIMF -  Investor Service Centre, 2nd Floor,  Left Wing, SBI Main Branch, West Of Gandhi Maidan, Patna  - 800001, Tel - 2220232, 2220235 Pune:  Mr. Rajesh S. Singh, Senior Relationship Manager, SBIMF -  Investor Service Centre, SBI Personal Banking Branch Premises, Madhuri Kishor Chambers, 1st Floor, Senapati Bapat Road, Pune - 411016, Tel - 5670961,5671524 Ranchi:  Shri  Rajneesh Kumar Singh, Chief Relationship Manager, SBIMF -  Investor Service Centre, C/O State Bank Of India,  Service  Branch, Kutcheri  Road,  Ranchi - 834001,  Tel - 2315212, Fax - 2310413  Siliguri : Shri  Sudipto Barman, Senior Relationship Manager, SBIMF -  Investor Service Centre, State Bank Of India,  Mangaldeep Building, Hill  Cart  Road, Siliguri  - 734401, Tel - 2537065 , 2537065, 2534206, Vadodara: Relationship Manager, SBIMF -  Investor  Service Centre, C/O SBI , Zonal Office, 6th Floor,  Paradise Complex, Sayaji Ganj,  Vadodara - 390005, Tel - 2225628, 2225629, Vijayawada: Shri W. K. Kumar, Asst. Vice President, SBIMF -  Investor  Service Centre, State Bank Of India, Station  Road  Branch, Vijayawada  - 520003, Tel -  2574113, 2578215.

 

sbimf Investor Service DeskS (ISDs)

Agra: Ms Nimisha Gupta, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, Chipitola, Agra 282001, Mobile: 0562-3124365; Ajmer: Shri Rohit Raj Mathur, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Special Branch, Ajmer - 305001 Tel - 9829067357 Dehra Dun: Mr Rahul Bhat, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, 4, Convent Road, Dehra Dun, Mobile: 9412992892, GURGAON: Shri Junaid Ahmed,  Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd. C/o. SBI Commercial Branch, 6th Floor, Palm Court, Near MDI, Mehrauli Road, Gurgaon - 122001, Tel: 5083769 Hubli: Mr. Vinod Tantri, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O State Bank Of India, P.B.No.7, 1st Floor, Keshwapur, Hubli - 580023, Tel -(0836) 2368477, Jamshedpur: Mr. Tariq Khan, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O State Bank Of India, 2nd  Floor, Bistupur, Jamshedpur - 831001, Tel - 09835367720 Kanpur: Ms. Meenakshi Asnani, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI C & I Division-Main Branch, M. G. Road,  Kanpur, Tel- (0512) 2331631,  Kota: Shri Vivek Shringi, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, Chawani Choraha, Kota - 324005, Tel. 09829067358, Madurai : Mr. Mugunthan, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Personal Banking Branch, 7-A, West Veli Street, Madurai - 1, Tel - 09843266670  Moradabad: Shri Deepak Budhella, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, Civil Lines, Moradabad, Tel- 2411411, Nagpur: Mr. Pranay Shah,  Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, S. V. Road, (Kingsway), Nagpur - 440001, Tel -2543123 NASIK: Mr. Santosh Trivedi, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/o. SBI MainBranch, Opp. Hotel Samrat, Mainroad, Nasik - 422001 Raipur: Shri Deepak Mishra, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, Jai Stambh Chowk, Raipur  Tel - 536372,  RAJKOT: Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, 1st Floor, Jawahar Road, Rajkot 360 001, Tel.: 09825504876 surat: Ms. Jahnvi Bane, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/o. SBI MainBranch, Chowk Bazar, Surat - 395001,Tel.:09879114453 Thiruvananthapuram: Mr. Joseph N. j., Secretary, Investor Service Desk, SBI Mutual Fund, Ground Floor, SBI Zonal Office, LMS Compound, Vikas Bhavan P O, Trivandrum-695033 Tel. :(0471) 2724790,(0484)3339225, Vishakhapatnam: Mr. Vishnu Vardhan, Secretary, Investor Service Desk, SBI Funds Management Pvt. Ltd., C/O SBI Main Branch, Near Old Post Office, Vishakhapatnam - 530001, Tel - (0891) 3093018. 

 

5. Investor Relations Officer

The AMC has appointed an Investor Relations Officer to look into investor grievances regarding deficiencies, if any, in the services provided by the Registrars or the Investor Service Centres.

Name of the Investor     :           Shri G. Kandasubramanian        
Relations Officer                       Asst. Vice President, Customer Service

Address:           SBI Funds Management Pvt. Ltd.                     

191, Maker Tower “E”, 19th floor, Cuffe Parade, Mumbai - 400 005.

Telephone Number: 2218 0244 / 2218 0221

The AMC will have the discretion to change the Investor Relations’ Officer depending on operational necessities and in the overall interest of the fund.

 

XXII. INVESTOR GRIEVANCES REDRESSAL MECHANISM

The Customer Service Department at SBI Mutual Fund functions under the supervision of Asst. Vice President. The investor grievances are redressed by the AMC directly and also by our 26 Investor Service Centres (ISC) and 19 Investor Service Desks all over the country. All grievances are redressed within the time stipulated by SEBI. Our ISCs are equipped with upgraded technological facilities to respond to the investor queries.

The statistical data for investor complaints received is as follows:

 

From

01.04.04

01.04.03

01.04.02

01.04.01

To

31.01.05

31.03.04

31.03.03

31.03.02

Complaints Received

23737

67986

40044

44961

Complaints Redressed

23652

66572

40549

45234

Balance

85

1414

78

583

 


 

XXIII.PENDING LEGAL PROCEEDINGS AND
OTHER INFORMATION

 

1. Pending Legal Proceedings

Apart from the ordinary routine litigation incidental to the business of the Fund, there is no petition / summary suit against the Fund pending in the Court:

Our Sponsor, the State Bank of India is India’s largest bank with branches in India and offices in countries worldwide. In addition to this, SBI also has 7 associates and 1 banking subsidiary in addition to other non-banking subsidiaries in India. To the best of our knowledge there are no criminal cases against the Sponsor, its Directors or Key Personnel, which will have any impact on the operations of SBI Mutual Fund.

 

2. Penalties Awarded by SEBI or any other Regulatory Body

All cases of penalties awarded by SEBI under the SEBI Act or any of its regulations against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the Asset Management Company, Trustee Company/Board of Trustees, or any of the directors or key personnel (specifically the fund managers) of the Asset Management Company and Trustee Company. The nature of the penalty must be disclosed. For Sponsor and its associates, other than the penalties as mentioned above, the penalties awarded by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debenture holders and depositors shall also be disclosed. Additionally, penalties awarded for any economic offence and violation of any securities laws shall be disclosed.

a. State Bank of India

i. Securities and Exchange Commission of USA has concluded that SBI violated Sections 5 (a) and (c) of the Securities Act, by offering and selling securities i.e. Resurgent India Bonds, that were not registered with the commission. Hence, it ordered that SBI cease and desist, pursuant to Section 8A of the Securities Act, from committing or causing any violation and any future violation of Sections 5 (a) and (c) of the Securities Act. SBI accepted this Order without admitting or denying the findings contained in this Order. No monetary penalty was involved.

ii. Bank's US operations were subjected to a C&D Order and a Civil Money Penalty of USD 3.75 mio to Federal Reserve Bank and Federal Deposit Insurance Corporation and a Civil Monetary Payment of USD 3.75 mio to New York State Banking Department without admitting to any of the allegations in the C&D Order.

iii. In INMB Bank, a subsidiary in Nigeria, Central Bank of Nigeria imposed a penalty .of Naira 1,100,000 (USD 8730 only) for procedural irregularities pointed out by them

iv. A settlement amount of Euro 163,028.12 was paid by Frankfurt Branch in the year 2002 in full satisfaction of a notification received from the German Regulators alleging exceeding of exposure norms, which was purely technical in nature and there was no deliberate violation of any regulatory provisions.

 

v. Bijzondere Opsporing Brigade (BOB), Belgium registered a case in 1997 against key personnel of SBI, Antwerp branch for alleged violation of the tax laws of the Belgium Commission for Banking and Finance. The case is presently sub-judice.

b. State Bank of Indore

i. SEBI has warned the Bank to exercise more care and diligence as a Merchant Banker vide their letter No. IES/ID3/UN/AJS/9404/2002. dated 29.5.2002 in case of M/s Saket Extrusions Ltd.

ii. Due to default in maintenance of adequate CRR during 1990-91, RBI had levied net penalty of Rs.95 lakh on the Bank which was paid in September 2000 / April 2001.

c. State Bank of Saurashtra

SEBI had undertaken an inquiry on the public issue of M/s Tirupati Finlease Ltd., Ahmedabad, brought out during 8.1.96 to 10.1.96, wherein the Bank acted as one of the Bankers to the issue. The subject of inquiry was suspected acceptance of applications by the Bank's Shahibaug, (Ahmedabad) branch after the closure date of the issue. Pursuant to the inquiry, a penalty for suspension of Shahibaug (Ahmedabad) branch from undertaking any Banker to the Issue activity for a period of three months was imposed, vide SEBI judgment dated 31.1.2000. The case has since been closed.

d.      State Bank of Travancore

A penalty of Rs.5 lakh was imposed by RBI on account of certain irregularities with respect to opening of accounts and non-monitoring of large value cash transactions by the Bank's Chavakad and Mumbai branches and the same was paid on 19.9.2002.

b) Pursuant to a complaint made by Consumer Research and Education Centre (CREC), Ahmedabad that Ahmedabad branch of the Bank accepted share applications even after the stipulated date of closure of the public issue of M/s. Kengold India Ltd. in 1994, RBI conducted a detailed investigation and directed the Bank not to conduct the business of accepting share applications at Ahmedabad branch till 31st December 1996. Later, on consideration of the remedial measures taken by the Bank, RBI permitted resumption of the business w.e.f. 1st January 1997.

 

In April 1996, SEBI called for the 3explanation of the Bank for the inordinate delay in realization of cheques collected for the captioned issue. The Bank furnished its explanation which was accepted by SEBI. A petition filed by CREC before the Delhi High Court in the matter was dismissed in Sept. 1999.

e. SBI Commercial & International Bank Ltd.

(i) RBI, vide letter No. DBOD No.1722/12.07.059/99 dated 15.02.99, had observed that the Bank has defaulted in maintenance of CRR for four fortnights during the quarter ended March 1998. RBI advised the Bank to pay a penalty of Rs.10,230/, which was paid by the Bank on 08.03.99.

(ii) RBI, vide letter No. DBOD No.1725/12.07.059/99 dated 15.09.99, had observed that the Bank has defaulted in maintenance of CRR for four fortnights during the quarter ended June 1998. RBI advised the Bank to pay a penalty of Rs.3, 11,664/-, which was paid by the Bank on 08.03.99.

Further, RBI did not pay the interest on eligible CRR balances for the above mentioned two quarters, to the Bank

f. State Bank of Patiala

 

An investigation by SEBI regarding alleged irregularities in connection with Rights issue of M/s. Majestic Industries Ltd. against one of the branches which was designated to collect applications is under process at present.

 

g. SBI Capital Markets Ltd.

 

Penalties levied by Stock Exchange for delay in submission of Margin Certificates, late / non-submission of client data Rs.29, 800/- during May, 2002 to May, 2004.

 

3. Enquiry or Adjudication

 

Any enquiry/adjudication proceedings under the SEBI Act and the Regulations made there under, that are in progress against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees/Trustee Company or any of the Directors or key personnel of the Asset Management Company are being disclosed below.

As on date, there are no enquires/adjudication proceedings under the SEBI Act and the Regulations made there under that are in progress against the Sponsor or any company in any capacity associated with the Sponsor including the AMC, the Board of Trustees or any of the directors or key personnel of the AMC.

4. Deficiency in Systems or Operations

Any deficiency in the systems and operations of the Sponsor of the Mutual Fund or any company associated with the sponsor in any capacity including the AMC or the Trustee Company which SEBI has specifically advised to be disclosed in the offer document, or which has been notified by any other regulatory agency, shall be disclosed.

There is no deficiency in the systems or operations of the Sponsor or any company associated with the Sponsor (including the AMC), which SEBI or any other regulatory agency has specifically advised to be disclosed in the offer document.

 

Date of Approval of the scheme by SBI Mutual Fund Trustee Company Private Limited by Circulation: 27th January 2005

 

For and on behalf of the Board of Directors,
SBI Funds Management Private Limited
(the Asset Management Company for SBI Mutual Fund)

                                   

 

 

           

 

                       

Place: Mumbai                                                           Name:             P.G.R. Prasad

Date: 16th March, 2005                                  Designation:   Managing Director

 

(Notwithstanding anything contained in the offer document the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the Guidelines there under shall be applicable.)

(Drafted as per SEBI’s Standard Observations dated 26.12.2003)