• Canbank Mutual Fund will not be responsible for any loss of Tax Benefits in the event of winding up of the Scheme or for any amendment in Tax laws that may affect the Tax Benefits available under the Scheme. The Tax benefits available as indicated above are based on the present laws and rules in force.

It is confirmed that:

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: 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. 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: All the intermediaries named in the Offer Document are registered with SEBI and till date such registration is valid.

Date : Signature:

Place :

Name:

S.L. Manjrekar

Compliance Officer

Canbank Investment Management Services Limited

5. CONSTITUTION OF CANBANK MUTUAL FUND :

Canbank Mutual Fund  (herein after referred to as the "Fund") was set  up by Canara Bank, pursuant to the approvals received  by  it from the Government of India, Ministry of Finance, New  Delhi  vide letter No. D.O. No F.1/65/SE/87 dated 15th December 1987 for making investments in equity and other securities. The Securities  & Exchange Board of India has also granted registration vide Registration No.MF/004/93/4 dt. 19/10/1993. Canbank Mutual Fund  has also  been  recognised under section 10(23D) of  Income-Tax  Act, 1961  vide  Notification No.SO/1064/E dated 18th  November, 1988 issued by Central Board of Direct Taxes, Department of  Revenue, Ministry of Finance, Government of India.

i) OBJECTIVES OF CANBANK MUTUAL FUND :

1. The basic objective of Canbank Mutual Fund is to channelise the savings from a wide section of people and to provide them returns by way  of annual income distribution/capital appreciation by investment in Capital/Debt Markets and to provide liquidity.

1. The performance of Canbank Mutual Fund Schemes for the financial years 1997-98, 1998-99 and for the period ending 23rd Aug 1999,  in terms of Income distribution is furnished below :

Income Distribution for the year :        1997-98          1998-99         1999-2000   


                                                                           (till 03.09.99) 


      Canpremium                                                6.50%             6%


      Canpep-93                                                                  12.50%       


      Candouble                                                                  20%


      Cancigo                                12.50%           12.50%                


      Cangilt                                12.25%           12.25% 

ii ) SPONSOR - CANARA BANK

Canara Bank, established in 1906, is a leading nationalised Bank operating in India and abroad, through its network of branches in India and offices in London, Moscow, UAE (Exchange Companies) and Hong Kong. The Bank is known for its innovative, visionary and forward thinking policies in the Banking sector. The Bank has the following Sponsor Companies / subsidiaries. They are: CANFIN HOMES LTD., CANBANK INVESTMENT MANAGEMENT SERVICES LTD., GILT SECURITIES TRADING CORPORATION LTD,. CANBANK FACTORS LTD. CANBANK FINANCIAL SERVICES LTD. CANBANK VENTURE CAPITAL LTD., & CANBANK COMPUTER SERVICES LTD.,

The Bank's owned funds stood at Rs. 2412.81 crores as on 31^st March, 1999. The capital adequacy ratio of the Bank, as on 31^st March, 1999 was 10.96 % as against 8% stipulated by RBI.

Financial performance of Canara Bank is given below:

(Rs in Crores)

* (In Rupees)

iii) BOARD OF TRUSTEES :

The Board of Trustees comprises the following eminent personalities:

iv) Duties and obligations of the Trustees and Substantial Provisions Of Trust Deed:

The duties, responsibilities and functions of the Board of Trustees of the Canbank Mutual Fund are contained in the  Principal Trust  Deed  dated 31st January, 1990 as also in the  Supplemental Trust Deed dated 20th April, 1993. The rights and obligations of the Trustees are also governed by the Securities and Exchange Board of India (Mutual Funds) Regulations 1993 as amended in 1996. They are briefly stated as under:

a) The Trustees shall ensure that the transactions entered into by the Asset Management Company are in accordance with the SEBI Regulations and the Scheme objectives.

b) The Trustees shall ensure that the AMC has been managing the Mutual Fund Schemes independently of other activities and have taken adequate steps to ensure that the interest of investors of one Scheme are not being compromised with those of any other Scheme or of the activities of the AMC.

c) The Trustees shall take steps to ensure that the transactions of the Mutual Fund are in accordance with the provisions of the Trust Deed.  

• The Trustees shall be responsible for the calculation of any income due to be paid to the Mutual Fund and also for any income received in the Mutual Fund for the holders of the units of any Scheme in accordance with these regulations and the Trust Deed.
• The Trustees shall ensure that there is no conflict of interest between the manner of deployment of its networth by the asset management company and the interest of the unit holders.

The Trustees shall obtain the consent of the unit holders for any 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 or affect the interest of the unit holders. No amendment to the Trust deed will be carried out without the prior approval of SEBI.

The Board of Trustees meet at regular intervals, at which reports pertaining to the performance of the Schemes / compliance with statutory requirements / Trustees' orders are placed. Apart from the said reports, the AMC also submits reports and information called for by the Trustees. The Board of Trustees has met eight times during the year 1998-99 and four times for the period 01.04.99 to01.09.99.

v) Trusteeship Fees: At present, no Trusteeship fees is being charged to any of the existing Schemes or to the proposed CANLIQUID (MMMF) Scheme. However, Trustees may levy such fees and expenses within the overall ceiling as may be prescribed by SEBI.

1. MANAGEMENT OF THE FUND :

a) THE ASSET MANAGEMENT COMPANY :

Canbank Investment Management Services Ltd. - a wholly owned subsidiary of Canara Bank, (hereinafter referred to as the "Investment Manager") has been set up as per the Securities and Exchange Board of India (Mutual Funds) Regulations1993. An Investment Management Agreement has been signed between Canbank Mutual Fund and the Investment Manager, whereby the Investment Manager is empowered to manage the affairs  of Canbank Mutual Fund and operate its various Schemes".

Canbank Mutual Fund has launched 19 Schemes since its inception. Of the nineteen Schemes, four Schemes have been fully redeemed so far and remaining fifteen Schemes are being managed by the Investment Manager. As at the end of Mar'99, the total corpus was Rs.1435 Crs and total net assets stood at Rs. 1776 Crs., In addition, the Investment Manager is also the sub Investment Manager to the OFF SHORE FUND - IS HIMALAYAN FUND.

b) BOARD OF DIRECTORS :

The Board of Directors of the Investment Manager comprises the following eminent personalities:

c) AMC FEES :

For management of the above funds, the Investment Manager at present charges a fee not exceeding 1.25% of the weekly average NAV of each Scheme, which is charged to the respective Schemes. In future, the Investment Manager 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.

For the CANLIQUID (MMMF) Scheme, the Investment Manager will initially charge a fees of 0.75% of the weekly average Net Assets of the Scheme. The Investment Manager may change the same within the overall limit prescribed by SEBI (MF) Regulation.

d) Fund Manager ************* will be furnished separately *************-

e) Compliance Officer : Sri S.L.Manjrekar

CANBANK INVESTMENT MANAGEMENT

SERVICES LIMITED

ORIENT HOUSE, 2^ND FLOOR ,

ADI MARZBAN PATH, BALLARD ESTATE,

MUMBAI-400 038.

f) KEY EMPLOYEES OF THE AMC :

The day to day operations of the Investment Manager is managed by the following key personnel who are on secondment from Canara Bank:

g) REGISTRAR : "The Registrar & Transfer Agents work will be handled by the Investment Manager, in-house and the charges will be levied to the Scheme at competitive rates and as per section 25 (15) of the SEBI (MF) Regulation, 1996".

h) CUSTODIAN :

IIT CORPORATE SERVICES LTD, IInd FLOOR SUREN ROAD, ANDHERI (E), Mumbai-400 093, has been appointed as the Custodian to the Scheme. The Custodian has been registered with SEBI under Registration No. IIT/CUS/007 Dated 21.05.98. The Trustees have entered into an Agreement dated 23^RD July, 1993, with the Custodian and the salient features of the said Agreement are as under :

• Provide post trading and custodial services to the Mutual Fund
• Ensure benefits due on the holding are received.
• Provide Management information and other reports as required by the Investment Manager.
• Maintain confidentiality of the information .
• Be responsible for the loss and damage to the assets of the Scheme due to the negligence on its part or on the part of its approved agents.
• Segregate assets of the Schemes.
• Not to assign, transfer, hypothecate, pledge, lend, use, or otherwise dispose of the assets or property, except pursuant to instructions from the Trustee/ Investment Manager or under express provisions of the Agreement.
• Not to deal on its own account, in securities purchased or sold by the Mutual fund, without making an adequate disclosure to SEBI, the Trustee, and the Investment Manager.
• The Custodian will be entitled for his remuneration as per the Agreement.

However, the Trustees, if required, may consider appointing any other Custodian who is registered with SEBI.

i) AUDITORS TO THE SCHEME :

The Trustees will be appointing a firm of auditors, as may be required from time to time.

j) Collecting Banker and other intermediaries: The Investment Manager may utilise the services of CANARA BANK as principal collecting Banker for the Scheme. The Investment Manager may also utilise the services of the branches of Canara Bank, as collecting branches for the Scheme. Any fee / incidental charges will be paid as per the prevailing market rate / at the negotiated rate with Canara Bank. The Investment Manager may also utilise the services of other Banks for the purpose.

7.HISTORICAL PER UNIT STATISTICS :

No new Schemes were launched in the past three years. However, the following Schemes were converted into open ended :

1. CANPREMIUM on 1^st February, 98
2. CANBONUS Scheme on 3^rd May, 99
3. CANEXPO, Scheme on 15^th May, 99
4. CANPEP'93 Scheme on 15^th May, 99 and
5. CANTRIPLE + Scheme on 1^st July, 99.

# Income distribution made on half yearly basis .

1. Converted into open ended Scheme on 3-5-1999
2. Converted into open ended Scheme on 15-5-1999
3. Converted into open ended Scheme on 15-5-1999
4. Converted into open ended Scheme on 1-2-1998
5. Converted into open ended Scheme on 01-07-1999

$ Close Ended Schemes NAV as on 26-08-99; Open Ended Schemes NAV as on 27-08-99

Fully Redeemed Schemes :

Name of Scheme Launch Redemption Redemption Returns

period Date Value CAGR(%)

----------------------------------------------------------------------------------------------------------------------

Canshare December-87 16.01.95 24.40 43.84

Can80cc89* March-89 01.04.92 320.85 47.39

Can80cc90 March-90 30.12.95 10.06 1.61

Cangrowth September-89 20.11.96 13.41 20.09

* Face Value - Rs. 100/-

ROLLED OVER Schemes :

-----------------------------------------------------------------------------------------

Name of Scheme Launch Roll over Returns

period Date CAGR(%)

---------------------------------------------------------------------------------------------------------------------- CANSTOCK 15-03-88 31-1-95 19.17%

CANDOUBLE 01-03-90 15-2-95 16.62%

8. INVESTMENT OBJECTIVES AND POLICIES:

a) The Scheme:

Canbank Mutual Fund proposes to launch CANLIQUID (MMMF) Scheme with the objective of inviting subscription from investors including those from Corporates, institutions and high networth individuals. The fundamental attributes and salient features of the Scheme are set out below for the purpose of inviting subscription to the Scheme.

b) Fundamental Attributes

1. Type of Scheme : Open-ended Money Market Mutual

ii Investment Objective : Being a Money Market Mutual Fund Scheme

the funds will be invested only in short term Money Market instruments offering reasonable liquidity and Returns, with risk perceived by the Investment Manager as under :

iii Instruments Credit Risk

Call Money Lending Low

Central Govt. Securities Sovereign

State Govt. Securities - do -

Treasury Bills -do-

Trade Bills Rediscounting Low

Commercial Papers Low to medium

Certificate of Deposits Low

Bonds of PSUs & FI's -do-

The Scheme envisages investments in Money Market instruments as well as Government securities, Bonds with residual maturity of less than one year. The objective is to generate reasonable returns by reducing risks associated with long term investments while ensuring liquidity. A portion of the fund will be invested in Call Money Market in order to meet the day-to-day liquidity requirements of the Scheme. The Scheme will seek to underwrite issuance of Government Securities if any, to the extent permitted by SEBI / RBI, subject to the prevailing rules and regulations specified in this respect. The Scheme may also participate in their auction from time to time.

There can be no assurance that the investment objective of the Scheme will be realised. It is however emphasised that, the investments made under this Scheme in Government Securities, Treasury Bills, there is no risk of default of payment of either principal or interest amount.

c) Terms of Issue: The nature & duration of the Scheme, provision for repurchase, Scheme's expenses & fees, as stated elsewhere in the Offer Document.

The fundamental attributes of the Scheme as defined above cannot be changed/altered/ modified without the consent of not less than 75% of the Unit holders of the Scheme. However, the Trustees may alter or change the Fundamental Attributes of the Scheme after receiving such consent from atleast 75% of the Unitholders & those who do not give their consent will be allowed to redeem their CANLIQUID (MMMF) Holdings at the applicable NAV price. The Fund will follow the procedure for seeking the approval of the Unitholders as prescribed by SEBI from time to time.

d) Type, Nature & Duration of the Scheme

The Scheme is an open ended Money Market MutuaL Fund Scheme with an unlimited duration.

e) Objective of the Scheme.

The objective of the Scheme is to achieve reasonable return while maintaining stability of the Capital and liquidity. Being a Money Market Mutual Fund Scheme, the funds will be invested in money market instruments, with a maturity of less than one year.

The Scheme may also invest in any other instruments permitted or which may be permitted in future under the Money Market Mutual Fund Scheme of RBI ( subject to relevant RBI/SEBI guidelines /approvals).

f) Investment strategy.

The investments may be made in primary as well as secondary markets. As far as possible, the portfolio will be adequately diversified to reduce the risk of under performance, arising out of unexpected security-specific factors. Investments in Government Securities will be in securities - i) supported by the ability to borrow from the Treasury ii) supported by sovereign guarantee or of the State Government, iii) supported by the Government of India / State Government in any other manner.

Please refer to the paragraph "Right to Limit Repurchase" in item 13 (b) of this Offer Document and also on "NAV and valuation of Assets of the Scheme" in item 16 of this Offer Document.

The Funds raised under the Scheme shall be invested only in transferable securities as per Regulation 44(1) read with Seventh Schedule to the SEBI (Mutual Funds) Regulations 1996.

In accordance with Regulation 18(15)(d), the Trustees are required to obtain the consent of the unitholders when any change in the fundamental attributes of this Scheme or fees and expenses payable or any other change which would modify the Scheme or affect the interest if the unitholders is proposed to be carried out. The unitholders who express dissent to such alteration/modification or change will allowed to redeem their holdings in the Scheme at the Redemption Price.

g) Portfolio Turnover Policy

The Scheme will manage its portfolio taking into account the associated risks (such as interest / liquidity / redemption etc.) perceived / expected, so as to minimise the risks by using adequate risk management techniques. The portfolio turnover policy will be aimed at maximising the returns.

h) Investments in Associate or Group Companies of the Sponsor

The Scheme will invest in the securities of the Sponsor or its associates., to the extent that the said instruments are in conformity with the schemes objectives. Further, the aggregate investment made by all the Canbank Mutual Fund Schemes, in the securities of sponsor or its associates will not exceed 25% of the net assets of the Fund as a whole. The Scheme will not invest in privately placed or unlisted securities of associates / group Companies.

i) Investment in other Schemes

The investment by this Scheme in other mutual fund Schemes will be in accordance with Regulation 44(1) read with Clause 4 of the Seventh Schedule to the SEBI (MF) Regulations, 1996 according to which :

"A Scheme may invest in another Scheme under the same AMC or any other mutual fund without charging any fees, provided that aggregate inter-Scheme investment made by all Schemes under the same management or in Schemes under the management of any other AMC shall not exceed 5% of the net asset value of the Mutual Fund".

In order to be consistent with the Scheme's objectives, such an investment may only be in another Scheme investing mainly in Money Market instruments, and will not be in any Scheme which invests in equity or equity-linked securities or derivatives based on equity . No investment management fee will be charged by the Investment Manager on such investments.

j) AMC's Investments in the Scheme

The Investment Manager may invest in the Scheme, either in the initial issue or on an ongoing basis, such amount as it deems appropriate. Such investments will be in conformity with the Regulation 24(3) of the SEBI (Mutual Fund) Regulations, 1996. The AMC shall not be entitled to charge any fee on its investment in that Scheme.

k) Underwriting

The Scheme may take up underwriting of other issues in consonance with the schemes investment objectives, subject to the relevant SEBI Regulations and as may be permitted by the Board of Directors of the Investment Manager.

Regulation 46 of SEBI (Mutual Funds) Regulations,1996, states that :

" Mutual Funds may enter into underwriting agreement after obtaining a certificate of registration in terms of the SEBI (underwriters) rules and SEBI (underwriters) Regulations, 1993, authorising it to carry on activities as underwriters.

1. For the purpose of these Regulations, the underwriting obligation will be deemed as if the investments are made in such securities.
2. The capital adequacy norms for the purpose of underwriting shall be the net assets of the Scheme. Provided that the underwriting obligation of a mutual fund shall not at any time exceed the total net asset value of the Scheme".

l) Hedging and Derivatives

The Scheme may use any hedging techniques that are permissible or in future may become permissible under SEBI Regulations, in consonance with the Schemes investments objectives, including investments in derivatives such as interest rate derivatives.

Trading in derivatives has the following risks:

1. An exposure to derivatives in excess of the hedging requirements can lead to losses.
2. An exposure to derivatives can also limit the profits from a genuine investment transaction.
3. Efficiency of a derivative market depends on the development of a liquid and efficient market for underlying securities.

Any loss on derivatives transaction is sought to be prevented by taking exposure to derivatives only for the purpose of hedging and not for speculative purposes. Such an exposure will be backed by assets in the form of cash or securities adequate to meet the cost of derivative trading and loss, if any, due to unfavourable movements in the market. There will be no investment in derivatives based on equity or equity index. The investment in derivatives will be based only on derivatives related to debt such as interest rate derivatives. At present, no such derivatives are available.

m) Borrowings

The amount borrowed by Canbank Mutual Fund, for all its Schemes, for the period ended 31-7-99 ----- N I L.

n) Others :

• Investment by any Company, more than 5% of the net asset value of a scheme(as on 31^st March, 1999) and the investment made by that Scheme or by any other Scheme of the Mutual Fund in that company or its subsidiaries has been brought to the notice of the trustees by the AMC which indicate the names of Companies / Schemes in which such investments have been made provided the latter investment has been made within one year of the date of the former investment calculated on either side. As on 31^st March, 1999, no such investments were made.
• As on 31^st March, 1999, the Fund under all its Schemes has not invested more than 10% of the paid capital of a Company carrying voting rights.

9. UNITS ON OFFER :

a) Scheme details :

b) Retention of Over subscription:

The Scheme seeks to raise minimum of Rs.1 crore out of the initial public offer. Any amount in excess of this will be retained by the Scheme.

c) Refund of application money

In case of failure to mobilise the minimum amount of Rupees One Crore, Canbank Mutual Fund and the Investment Manager will refund the application money/excess application money, to the applicants in accordance with regulation 35 (2) of SEBI (Mutual Funds) 1996, within a period of 6 weeks from the date of closure of subscription list, by Registered AD and by cheque or demand draft marked "A/C payee" to the applicants. In the event of failure to refund the amounts within the said period of six weeks, the Investment Manager will be liable to pay interest to the applicant at a rate 15% p.a. on the expiry of six weeks from the date of closure of subscription list.

d) Date of opening of subscription list

Within six months from the date of approval.

e) Period for which subscription is open - 30 days

Initial issue will be open for 30 days from the commencement of banking hours of --------. On ongoing basis the Scheme will be open for fresh subscription on a daily basis after maximum of 30 days of the closure of the Initial Public Offer on any working day. The Investment Manager may extend or reduce the period of the Initial Public Offer, by giving a Press Release, within the limits prescribed by SEBI. However, the Fund may temporarily suspend acceptance of fresh applications at any time.

f) Listing

The Scheme is not going to be listed in any of the stock exchanges.

g) Allotment

Allotment to the eligible applicants under the Scheme who comply with the terms of the Scheme.

Allotment, both initial and subsequent ,will be made to all the applicants provided the applications are complete in all respects. [Fractional units will be allotted upto four decimals]. However, acceptance of application and allotment of units / fractional units will be at the absolute discretion of the Trustees and the application can be rejected without assigning any reason whatsoever.

Investors will be issued with a CANLIQUID (MMMF) statement of accounts evidencing allotment of units.

The allotment of units will be completed not later than 30 days from the date of closure of the initial offer period.

h) Interest on application money received during the Initial Offer:

No Interest will be paid on application money.

i) Date of Commencement of the Scheme and Date of Closure ( including earliest closure, if any) will be announced separately.

Transferability: No transfer of units is envisaged under ordinary circumstances. 10. SALE OF UNITS :

HOW TO APPLY

a) DURING THE INITIAL OFFER:

Applications complete in all respects together with necessary remittance may be submitted before the closing of the initial offer at the offices of the Investment Manager or such collecting centres as may be designated by the Investment Manager. Payment will be accepted only through a cheque or demand draft drawn payable at the centre where the application is lodged, drawn in favour of "CANBANK MUTUAL FUND A/C CANLIQUID (MMMF) SCHEME" and Crossed "A/c Payee only". Investors at places other than the investor relation centres of INVESTMENT MANAGER or at designated centres, are requested to make payment by demand draft. In case of payment by demand draft, DD charges as stipulated by Indian Bank Association will be absorbed by the Scheme.

b) Ongoing Basis: Applications complete in all respects together with necessary remittance may be submitted at the offices of the Investment Manager or such collecting centres as may be designated by the Investment Manager. The number of units allotted will be the amount invested divided by the sale price applicable for the day on which funds are realised by the Investment Manager. Such allotment will be for a minimum of Rs.5,000/- . Applications received by post will be deemed to have been submitted on the date of receipt at the office of the Investment Manager and the applicable rate will be the rate prevailing on the date of realisation of underlying instrument accompanying such application. In case of payment by Bank Drafts, the amount of investment will be deemed to be the amount of DD plus Bank Charges, if any. Such Bank Charges will be absorbed by the Scheme. The Sale price of units during ongoing subscriptions will be NAV plus a sales charge, if any, as decided by the Investment Manager, from time to time to meet the expenses of sale . However the INVESTMENT MANAGER may periodically review the sale price and reserves the right to lower or waive the sales charge for a particular period in a year. Such modifications shall be announced periodically along with the NAV / sale price. At any time, the spread between the selling and repurchase price will not be more than 7%. However, allotment of units will be at the absolute discretion of the Trustees and the applications can be rejected without assigning any reason whatsoever.

c) WHO CAN APPLY

• Adult Individual(s) and also minor(s) through their parents/guardians.( Application of minors jointly with adults not allowed)
• Adult Individual(s) jointly not exceeding three, on first holder or survivor/s basis.
• Hindu Undivided Family ( HUF)
• A Company as defined in the Companies Act,1956.
• A Body Corporate established by or under any law in force in India.
• A Co-operative Society registered under any law relating to Co-operative Societies in India.
• A Religious or Charitable Trust/Wakfs or a Society established under the relevant laws and authorised to invest in Mutual Fund Schemes.
• FIIs/OCBs/NRIs on repatriation / non repatriation basis (subject to necessary approvals)
• Any other category of investors that may be permitted by the Trustees as per the laws of India in future.

Average cost per Unit = Rs. 12.69 (i.e. Rs. 6000 / 472.593 units)

The units are assumed to be sold without any sales load.

e) Bank Account Details :

As per SEBI guidelines it is mandatory for investors in mutual funds to state their Bank account details in their applications and in redemption requests. Hence all the 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 dividend / repurchase / redemption warrants in transit. Kindly note that applications not containing these details are liable to be rejected.

1. Minimum amount of subscription per application:

• When one or more of the Stock Exchanges /debt/money markets, which provides basis for valuation for a substantial portion of assets of the Schemes is closed or otherwise for ordinary holidays or trading is restricted.

• During the periods of extreme volatility in the stock market/debt/money market, which in the opinion of the Investment Manager, is prejudicial to the interest of the investors.

• A complete breakdown in the means of communication used for valuation of investment of the Schemes, or dislocation of business in the major financial markets and as a result value of securities cannot be correctly calculated.

• In case of Natural calamity, strikes, riots, bandhs etc.

• In the event of any major disaster that affects the functioning of the INVESTMENT MANAGER or the Registrar.

• Declaration of war or occurrence of insurgency, or any other serious or sustained financial, political or industrial emergency or disturbance.

• If SEBI, by order, so directs.

12. (a) EXPENSES : Under SEBI Regulations, the Fund is entitled to levy, contingent deferred Sale Load to the Unit Holders exiting from the Scheme within four years of date of purchase. The CDSC is aimed to allow the AMC to recover expenses incurred for promoting the Scheme which otherwise the Unitholders may have borne, if it had been a Load Scheme. In a no Load Scheme the Trustees reserve the right to levy the CDSC Structure if they so deem fit in the Interest of efficient running of the Fund. If the Trustees choose to change the CDSC Structure, subscription made by the Unitholders prior to such date will attract CDSC applicable prior to such changes.

------------------------------------------------------------


LOADS							     % OF NAV 		 


------------------------------------------------------------





ENTRY                                       	nil





EXIT                                            nil





CDSC                                            nil 				 


------------------------------------------------------------

(b) Initial Issue Expenses: The initial issue expenses associated with the launch of this Scheme will be fully borne by the Investment Manager. Therefore, the entire amount received during the initial offer period will be invested.

(c) Past Schemes: No new Schemes were launched in the past three years. However, the following Schemes were converted into open ended: a] CANPREMIUM on 1^st Feb'98, b] CANBONUS Scheme on 3^rd May '99, c] CANEXPO CANPEP'93 Schemes on 15^th May'99 and d] CANTRIPLE+ on 1^st July' 99.

d) Annual Scheme Recurring Expenses: The following expenses will be charged to the Scheme on a recurring basis:

Category of expenses	Estimate
Investment management 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 each accounting year, as long as the net assets do not exceed Rs. 100 Crs., and 1% of the amount in excess of Rs. 100 Crs., where net assets so calculated exceed Rs. 100 Crs.
	ii) additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year for units allotted on no load basis.
Fees and expenses of Trustees	Subject to the overall limits prescribed by SEBI from time to time.
Custodian fee	On actuals, within the overall ceiling mentioned below
Fees for Services of Registrar	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 agents 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 & redemption / repurchase/income distribution warrants	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	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 Investment Manager.

13. REDEMPTION OR REPURCHASE :

a) HOW TO REPURCHASE :

The repurchase facility will commence after a maximum period of 30 days (subject to the lock in period of 15 days from the date of allotment) of the closure of the initial offer and thereafter the facility will be available on an ongoing basis.

The repurchase requests can be made on the pre-printed forms available at the investor relation centres or by submitting the duly discharged statement of accounts . The repurchase rate, will be the applicable rate for the day on which the application for the repurchase request received by the Investor Relation Centre of the Investment Manager or its authorised agent. The repurchase / sale rates will be linked to the NAV, calculated for the business day on which sale and repurchase requests are accepted. The sale price will be the price prevailing on the day of realisation of funds by the Investment Manager.

1. CHEQUE WRITING FACILITY:

14. WINDING UP OF THE SCHEME :

1. to SEBI; and
2. in two daily newspapers having circulation all over India and a vernacular news paper circulating at the place where the Mutual Fund is formed.

15. TAX PROVISIONS

15A. TAX BENEFIT TO MUTUAL FUNDS In terms of Section 10(23D) any income received by the Mutual Fund is exempt from tax. But by virtue of amendment introduced in Sec 10(23D) of the Income Tax Act, 1961 in the Finance Bill, 1999 the mutual fund is liable to pay income tax at the rate of 10% (to be increased by the rate of surcharge, if any, applicable to the relevant year) on any income distributed by it. Such payment of Income Tax shall be charged to the fund and does not form part of the annual recurring expenses chargeable to the fund.

15B. TAX TREATMENT OF INVESTMENTS IN MUTUAL FUNDS

1. By virtue of amendment introduced in Sec 10(33) of the Income Tax Act, 1961 in Finance Bill, 1999 the income received in respect of units of a Mutual Fund specified u/s 10(23D) shall be exempt in the hands of investors. As a result of granting exemption of tax on Income received in respect of units of mutual fund, the income so received shall not be included in the total income of investors an as a consequence : erstwhile deduction available to the investors u/s 80L of the Income Tax, 1961 stands withdrawn ; and no deduction of tax at source shall be made from such income. (Attention is also invited to point 15A above.)

2. Units held under the Scheme for a period of more than twelve months preceding the date of acquisition will be treated as a long term capital asset. Under Section 112 of the Act, the capital gains arising from the transfer of long - term capital assets are subject to tax @ 20% in respect of all assesses, including Non-Residents, except tax exempted categories like Provident Funds / such other Funds. The long-term capital gains are computed by deducting the following amounts from the full value of sale consideration (u/s 48 of IT Act):

I) Expenditure incurred wholly and exclusively in connection with such transfer, and,

II) Cost of acquisition adjusted by the inflation Index notified by the Central Government in the Official Gazette. Indexation will not be available to Foreign Institutional Investors ("FIIs") and other Non Resident unit holders in certain cases.

3. Under Section 54EA of the Act, capital gains from the transfer of a long-term capital asset (on or after October 1, 1996) shall be exempt from tax if the assessee invests within a period of six months after the date of transfer, the whole of the net consideration in any of the assets specified by the Central Board of Direct Taxes ("CBDT") in this regard, by notification in the Official Gazette (hereinafter referred to as the long-term specified assets) Where only a part of the net consideration is so invested, then capital gains proportionate to the net consideration invested, will be exempt. Where the long term specified assets are also eligible for rebate of income - tax under Section 88 of the Act, the said rebate will not be allowed if the exemption is availed of under Section 54EA of the Act. By a notification, CBDT has specified that all Units, redeemable after a period of three years, issued or to be issued by any mutual fund referred to in clause (23D) of Section 10 of the Act have been specified as long-term specified assets for purpose of Section 54EA of the Act. Under Section 54EB of the Act, capital gains arising from the transfer of a long-term capital asset (on or after October 1, 1996) shall be exempt from tax if the assessee invests within a period of six months after the date of transfer the whole of the capital gains in any of the specified assets as specified by the "CBDT" in this regard, by notification in the Official Gazette (herein after referred to as the long-term specified assets). Where only a part of the capital gains is so invested, then capital gains proportionate to the amount invested will be exempt. Where the long term specified assets are also eligible for rebate of income-tax under Section 88 of the Act, the said rebate will not be allowed if the exemption is availed under Section 54EB of the Act. By a notification, the CBDT has specified that all Units, redeemable after a period of seven years, issued or to be issued by any mutual fund referred to in clause (23D) of Section 10 of the Act have been specified as long-term specified assets, for purpose of section 54EB of the Act. However investors should note that the amount so invested would have to be locked in for a period of three years in case of section 54 EA and for a period of seven years in the case of section 54EB and the units so allotted cannot be redeemed or switched to another Scheme or otherwise any reason of extinguishment for any right thereto, during the lock in period of three years or seven years respectively.

4. Short-term capital gains i.e gains on transfer of Units held for not more than 12 months, will be included in the gross total income and will be chargeable to tax at the rates applicable thereon

5. Any income other than income received in terms of Sec 10(33) as in 1 above, due to NRI or FOREIGN COMPANY or FII shall be liable to tax and liable to deduction of tax at source in u/s 195, 196B, 196C and 196D wherever applicable and shall at its option be liable to tax at the rate specified under the Income Tax Act, 1961 or the rate specified in the double taxation avoidance treaty made between the country of domicile of the Assessee and the Government of India, whichever is more beneficial to the Assessee.

6. Investments in Units is one of the forms of investment permitted for investment by trusts set up for charitable purpose U/s 11(5) (xii) of the Act, read with rule 17 (c) of the Income Tax Rules, 1961.

7. Mutual Fund Units are not treated as assets as defined under Section 2 (ea) of the Wealth Tax Act, 1957, and hence will not be liable to wealth tax.

8. The units of any value can be gifted without attracting any Gift Tax, after 1-10-98, by virtue of repealment of Gift Tax Act 1958. NOTE : All the tax benefits will be available only to CANLIQUID(MMMF) holder or the first named holder in case the CANLIQUID(MMMF) is held in the names of more than one person. The above list of tax treatment is not exhaustive and depends on specific entitlements of the assessee and his affairs and therefore the treatment may vary from case to case basis. In view of the individual nature of Tax Benefits, each investor is advised to consult his or her own Tax consultant with respect to the specific Tax implications arising out of his or her participation in the Scheme.

16. NET ASSET VALUE & VALUATION OF SECURITIES:

Market or Fair Value of Scheme's investments 


+ Current assets - Current Liabilities and Provisions                   


 _________________________________________________          =        NAV (Rs.)


 No. of Units outstanding under the Scheme.

17. ACCOUNTING POLICIES & STANDARDS : In accordance with the SEBI (MF) Regulations, 1996, the INVESTMENT MANAGER follows the Accounting Policies and Standards as under :

• The INVESTMENT MANAGER, for each Scheme, keeps and maintains proper books of accounts, records and documents, so as to explain its transactions and to disclose at any point of time the financial position of the Scheme and in particular give a true and fair view of state of affairs of the Fund.
• For the purpose of the financial statements, the Scheme shall mark all investments to market and carry investments in the Balance Sheet at the market value. However, since the unrealised gains arising out of appreciation on investments can not be distributed, provision shall be made for its exclusion when calculating distributable income.
• Non traded investments shall be valued in "good faith" by the Investment Manager on the basis of appropriate valuation method as prescribed by SEBI and approved by the Trustees from time to time.
• In respect of interest - bearing investments, income is 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 up to the date of purchase will not be treated as cost of purchase. Similarly, interest received at the time of sale for the period from the last interest due date up to the date of sale will not be treated as an addition to sale value but must be credited to Interest Recoverable Account.
• In determining the holding cost of investments gain or loss on sale of investments, the "Average cost" method is followed for each security.
• Transactions for sale and purchase of investments is recognised as of the settlement date and not as that of the traded date, so that the effect of all investments settled during a financial year are recorded and reflected in the financial statements for that year .Where investments transactions take place outside the market, for example, acquisition through private placements or purchase or sale through private treaty, the transactions shall be recorded, in the event of a purchase as of the date on which the Scheme obtains an enforceable obligation to pay the price or, in the event of a sale, when the Scheme obtains an enforceable rights to collect the proceeds of sale or an enforceable obligation to deliver the instrument sold.
• Where income receivable on investments has been accrued and has not been received for a period of 12 months beyond the due date, provision shall be made by debit to revenue account for the income so accrued and no further accrual of income shall be made in respect of such investments.
• When in the case of 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.
• When units are sold in the Schemes, an appropriate part of the sale proceeds shall be credited to an Equalisation Account and when units are repurchased an appropriate amount shall be debited to Equalisation Account. The net balance in this account shall be credited or debited to the revenue account .The balance in the equalisation Account debited or credited to the revenue account shall not increase or decrease the net income of the Fund but only an adjustment to the distributable surplus. It shall therefore be reflected in the revenue account only after the net income of the Fund is determined.
• When the units are sold, after considering the equalisation as stated above, the difference between the sale price and the face value of the units, if positive, shall be credited to reserve, and if negative, shall be debited to reserve, the face value being credited to the capital account. Similarly, when the units are repurchased, after considering the equalisation as above, the difference between the purchase price and the face value of the units, if positive, shall be debited to reserve and, if negative, shall be credited to the reserve and the face value being debited to the capital account.
• The cost of investment acquired or purchase shall include brokerage and any charge customarily included in the Brokers' bought note. In respect of direct subscriptions, any front end discount offered shall be reduced from the cost of investments .
• Underwriting commission shall be recognised as revenue only when there is no devolvement on the Scheme, the full underwriting commission received and not merely the portion applicable to the devolvement shall be reduced from the cost of investment.
• The accounting policies and standards outlined above are as per the existing regulations and are subject to changes as per changes in the SEBI regulations .

18. INTER SCHEME TRANSFERS : Transfer of investments from / to CANLIQUID (MMMF) Scheme to another Scheme(s) will be made only if:-

1. Such transfers are done at the prevailing market price for quoted instruments on spot basis (spot basis having the same meaning as specified by the Stock Exchange for the spot transactions)
2. The securities so transferred shall be in conformity with the investment objective of the Scheme to which such transfer has been made.
3. As per the Accounting policies approved by the Trustees / Regulations .

1. Who is an associate:

• Canfin Homes Ltd.
• Canbank Computer Services Ltd.
• Canbank Financial Services Ltd.
• Canbank Factors Ltd.
• Gilt Securities Trading Corporation Ltd.
• Canbank Venture Capital Fund Ltd.

1. Investments in Associate or Group Companies of the Sponsor:

1. Subscirption in Issues lead managed by the Sponsor or its Associates:

The brokerage paid to Canbank Financial Services Ltd., an associate company, for the years 1997-98 and 1998-99 - is N I L.

The INVESTMENT MANAGER may from time to time for conducting the normal business, utilise the services of any of these Associates / Subsidiaries of the Sponsors. The INVESTMENT MANAGER may also utilise the services of any of the subsidiaries of the Sponsor to be established at a later date in case such subsidiaries are in a position to provide requisite services to the INVESTMENT MANAGER. The INVESTMENT MANAGER shall conduct its business with these Subsidiaries / Associates of the Sponsor on commercial terms and on arms length basis and at the then prevailing market rates / prices to the extent permitted under the regulations, after an evaluation of the competitiveness of the pricing offered by the Associates / Subsidiaries of the Sponsor and the services to be provided by them. The Investment Manager may also utilise the services of Canara Bank for marketing / distribution of applications and agency commission at a rate not exceeding the rate of commission being paid to other agents for the Scheme will be paid for such services.

20. BORROWING BY THE SCHEME :

The Scheme may borrow upto 20% of the net assets managed for a maximum tenure of six months for the purpose of meeting outflows on account of repurchase/redemption or Income Distribution.

In terms of Regulation 44(2) of SEBI(Mutual Funds)Regulations,1996:

"The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual fund for the purpose of repurchase, redemption of units or payment of dividend / interest to the unitholders. Further as per Regulations, the fund shall not borrow more than 20% of the Net Assets of the respective Schemes and the duration of such borrowing shall not exceed a period of 6 months "

If the Scheme decides to borrow, it may borrow either from Canara Bank or any other bank(s) or from any other sources as may be decided by the Investment Manager. 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 Investment Manager and the Board of Trustees of the Scheme.

Potential Risk of Loss to the Investment Manager / CANLIQUID (MMMF) unit holders:

The borrowing by the Scheme will not involve any potential loss to the Investment Manager or to the unitholders. 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 redemption / repurchase needs.

Present borrowings of the Schemes - as on 30-6-99 was NIL

21 a) STOCK LENDING BY THE SCHEME:

Subject to regulation and applicable guidelines, the Scheme may, if the Trustees permit, engage in stock lending.

b) Power to make rules : -

The trustees may from time to time prescribe such forms and make such rules for the purpose of giving effect to the provisions of the plan with power to the Trustees to add to, alter or amend all or any of the forms and rules that may be formed, from time to time.

c) Miscellaneous : -

The trustees may from time to time, add to or amend or alter all or any of the term of this plan with prior approval from SEBI and such amendments shall be in conformity with the guidelines and notifications issued by SEBI / GOI. The forms of CANLIQUID (MMMF), including any amendments thereof from time to time shall be binding on each holder of CANLIQUID (MMMF) and any person claiming through or under him / her / them, as if he / she / they had expressly agreed that they should be so binding.

22. INVESTORS' RIGHTS AND SERVICES.

The Fund will publish un-audited financial results of the Scheme in one national English daily news paper and in a new paper of the language of the region where the head office of the fund is situated, before expiry of two months from the close of each half year i.e., on 31-3 and 30-9. An abridged annual report will be mailed to all the unitholders of the Scheme not later than six months from the date of closure of the relevant account year and the full annual report will be made available at the head office of the Fund and a copy will be made available to the unitholders on payment of nominal fee.

Appointment of AMC can be terminated by majority of the Trustees or by 75% of the unit holders of the Scheme.

Following documents are available for inspection by the investors at the Registered Office of the Investment Manager - Canbank Investment Management Services Ltd., Orient House, IInd Floor, Adi Marzban Path, Ballard Estate, Mumbai - 400 038 on any working day during business hours .

1. The Trust Deed

2. Investment Management Agreement

3. The Scheme Rules and Regulations

4. Agreement entered into with Custodians.

5. Consent from the Auditors to act in the said capacity.

6. The Audited Balance Sheets of the various Schemes of the Mutual Fund

for the year ended 31.03.1997.

7. SEBI (Mutual Fund) Regulations, 1996 issued by Securities and

Exchange Board of India.

8. Indian Trust Act, 1882.

9. Memorandum and Articles of Association of the Investment Manager.

23. INVESTOR GRIEVANCES AND REDRESSAL :

The Canbank Mutual Fund has an investor base of nearly eight lakhs (as on 31/3/99). The Fund has appointed three Registrars to service the investors and is constantly monitoring their functioning, by interacting with them, to provide efficient and expeditious service to the investors. Nine Investor Relation Centres have been set up at important places to give efficient service to the investors. The statistical data for investor complaints / queries received is as follows :

** includes Canstar complaints in respect of regulated repurchase stipulated by the Trustees/ offer made by Canara Bank.

24. PENALTIES & PENDING LITIGATION :

• SEBI has not imposed any penalty nor instituted any litigation/proceedings against the sponsors or its associates (which have a bearing on the functioning of the Mutual Fund), Investment Manager, Directors of the Investment Manager, Trustees of the Mutual Fund or any of the key personnel of the Investment Manager.
• One of the executives of the Investment Manager has been held guilty of contempt of court by the Special Court constituted under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 at Mumbai. The matter is pending in appeal in the Supreme Court. The Fund has taken necessary steps as legally advised.
• A Criminal complaint No. CR 2319/95 has been filed by Mr. Kiran Chand Lunawat and others on 8^th Nov '95 in the court of the Metropolitan Magistrate, Calcutta, against the Trustees of the Mutual Fund and the Managing Director, Executive Director of the AMC, concerning repurchase facility of Canstar units and the same is pending. The Fund has taken necessary steps as legally advised.
• Writ Petition No. 2677/97, filed by Midas Touch Investors Association and another before the Lucknow Bench of Allahbad High Court concerning susProvident Fundof repurchase facility under Canstar Scheme is pending. The Fund has taken necessary steps as legally advised .
• There are two cases pending before the civil courts at Sholapur and Calcutta concerning repurchase of Canstar units. Owing to the encashment of units by the plaintiffs/petitioners in response to the Offer made by Canara Bank, the said suits are awaiting final disposal. Cases are also pending before various Consumer Foras alleging deficiency of services by R&T Agents, and also concerning suspension of repurchase facility under Canstar Scheme and claiming three times the investment in Cantriple Scheme in some cases. The cases are at various stages of hearing/appeal. The Fund has taken necessary steps as legally advised .
• The Mutual Fund is facing /has filed cases in the Special Court constituted under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992. The Fund has taken necessary steps as legally advised.
• Writ Petitions have been filed before the Hon'ble Bombay High Court & Hon'ble Calcutta High Court , for direction to prohibit Canbank Mutual Fund from converting the closed ended Cantriple+ Scheme into open ended and for direction regarding payment of three times the original investment.

APPLICATION FORM DULY COMPLETED IN ALL RESPECTS SHOULD BE SUBMITTED AT ANY OF THE INVESTOR RELATION CENTRES GIVEN BELOW :

Address Phone Nos.

CANLIQUID (MMMF) SCHEME

CONTENTS