OFFER
DOCUMENT
PIONEER
ITI GILT FUND
An open
end dedicated gilt scheme investing exclusively in government securities
Issue
of units at Rs.10 per unit for cash at par during the initial issue period
Subsequent
sale of units on an ongoing basis to be at Net Asset Value
Initial
issue opens on :
Initial
issue closes on :
Sale/repurchase
of units on an ongoing basis from
Asset
Management Company : Pioneer ITI AMC
Ltd
Mutual
Fund :
Pioneer ITI Mutual Fund
The
particulars of Pioneer ITI Gilt Fund 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 and the units being offered for public
subscription have not been approved or disapproved by the Securities and
Exchange Board of India nor has the Securities and Exchange Board of India
certified the accuracy or adequacy of the Offer Document.
The
Offer Document sets forth concisely the information about the scheme that a
prospective investor ought to know before investing. Please retain this
Offer Document for future reference.
This Offer
Document shall remain effective until a ‘material change’ (other than a change
in fundamental attributes and within the purview of the Offer Document) occurs
and thereafter the changes shall be filed with SEBI and circulated to the
unitholders along with the quarterly/half-yearly reports.
Contents Page
No
I.
Definitions 3
II.
Highlights & risk factors 3
III.
Introduction 4
IV.
Constitution of the Mutual Fund 6
V.
Investment objectives and policies 14
VI.
Management of the Fund 19
VII.
How to invest 22
VIII.
How to redeem 27
IX.
Information about units of the scheme 28
X.
Tax benefits 33
XI.
Net Asset Value (NAV) and valuation of assets of the
scheme 34
XII.
Expenses 36
XIII.
Associate Transactions 39
XIV.
Condensed Financial Information 40
XV.
Investor rights and services 44
XVI.
Due diligence certificate 49
I DEFINITIONS
In this Offer Document, unless
the context otherwise requires
1. ‘Fund’
means Pioneer ITI Mutual Fund
2. ‘AMC’
means Pioneer ITI AMC Ltd
3. ‘Scheme’
means Pioneer ITI Gilt Fund offered through this Offer Document
4. ‘Trustee’
means the Trustee company which holds the property of Pioneer ITI Mutual Fund
in trust
5. ‘SEBI’
means the Securities & Exchange Board of India
6. ‘SEBI
Regulations’ means Securities & Exchange Board of India (Mutual Funds)
Regulations 1996 as applicable and amended from time to time including any
circulars, directions or clarifications issued by SEBI or any Government
authority
7. 'RBI'
means the Reserve Bank of India
8. Working day means any day other than : (a) Saturday
and Sunday (b) a day on which capital/debt markets in Chennai/Mumbai are closed
(c) a day on which sale and/or redemption of units are suspended by the Trustee
and (d) a day on which the register of unitholders is closed.
Highlights
·
Open end dedicated gilt scheme investing in government
and government guaranteed securities
·
Eligible for investment by
provident/pension/gratuity/superannuation funds and banks, financial
institutions, bodies corporates, trusts and individual investors
·
Choice of Liquid Plan, Investment Plan and Specific
Maturity Plan
-
Liquid Plan for shorter maturity investments - offers
Monthly Dividend Option and Growth Option
-
Investment Plan for longer maturity investments - offers
Quarterly Dividend Option and Growth Option
-
Specific Maturity Plan for fixed maturity options –
offers short term (upto 6 months); medium term (upto 13 months) and long term
(upto 25 months) options
·
Dividends tax-free in the hands of investors (the scheme
will pay a distribution tax, presently @10% plus surcharge)
·
No load scheme
·
Tax benefits under Sec 48 and Sec 112 of the Income Tax
Act, 1961
Risk
Factors
¨
Mutual funds and securities investments are subject to
market risks and there is no assurance or guarantee that the objective of the
mutual fund will be achieved
¨
As with any investment in securities, the Net Asset Value
(NAV) of the units issued under the scheme can go up or down depending on the
factors and forces affecting the securities
¨
Past performance of the sponsors/the asset management
company/mutual fund does not indicate the future performance of the scheme of
the mutual fund
¨
Pioneer ITI Gilt Fund is the name of the scheme and does
not in any manner indicate either the quality of the scheme or its future
prospects and returns
¨
The sponsors, The Investment Trust of India Ltd and
Pioneer which is part of the UniCredito group (one of Italy’s leading banking
company) are not responsible or liable for any loss resulting from the
operation of the scheme beyond the initial contribution made by The Investment
Trust of India Ltd of an amount of Rs.50,000/- towards setting up of the mutual
fund.
¨
There is no guarantee or assurance on the frequency or
quantum of dividends although there is every intention to declare a dividend on
a monthly or quarterly basis in the respective plans.
¨
The performance of the scheme may be affected by changes
in Government policies, general levels of interest rates and risk associated
with trading volumes, liquidity and settlement systems in Government debt
markets
¨
Engaging in securities lending is subject to risks
related to fluctuations in the collateral value/settlement/liquidity/counter
party.
¨
Investments
in Government debt instruments are subject to interest rate risk. Interest rate
risk results from changes in demand and supply for money and other macro
economic factors and creates price changes in the value of the debt
instruments. Consequently, the Net Asset Value of the plans under the scheme
may be subject to fluctuation.
¨
The
scheme may invest in non-publicly offered Government debt securities. This may
expose the scheme to liquidity risks
¨
Derivatives
are high risk, high return instruments as they may be highly leveraged. A small
price movement in the underlying security could have a large impact on their
value and may also result in a loss. Also, the market for derivative
instruments is nascent in India.
The
Indian debt markets are one of the largest markets in Asia. Government and
Public Sector enterprises are predominant borrowers in the market. While interest
rates were regulated till a few years back, there has been a rapid deregulation
and currently both the lending and deposit rates are market determined.
The
debt markets are developing fast with the rapid introduction of new instruments
including derivatives. Foreign Institutional Investors are also allowed to
invest in Indian debt markets now. There has been a considerable increase in
the trading volumes in the market with the daily trading volumes in the
vicinity of Rs.2500 crores. The trading volumes are largely concentrated in the
Government of India securities which contribute about 90% of the daily trades
The
various instruments currently available for investments are :
|
|
Maturity |
Current Yield |
Liquidity |
|
Central/State Government
securities |
Upto 1 year 1 year to 3 years |
7.00% - 7.50% 7.25% - 8.00% |
Very High Very High |
|
|
3 years to 7 years |
7.75% - 8.50% |
Very High |
|
|
Above 7 years |
8.25% - 10.00% |
Very High |
|
Call/Notice Money |
- |
6.75% - 7.00% |
Very High |
|
Repo |
- |
6.50% |
Very High |
The
actual yields will however vary in line with general levels of interest rates
and debt/money market conditions
prevailing from time to time.
Fixed income instruments usually carry two kinds of risks – default risk and
interest rate risk. Default risk is one wherein the issuer of the debt defaults
or fails to meet its obligation on the payment of interest or principal or
both. Interest rate risk arises on account of changes in interest rate. For e.g
the market value of fixed income instrument will go down in value if interest
rates rise and vice versa. This would be a notional loss if such instrument is
held upto maturity. However, if the holder sells the instruments before
maturity, then there could be a loss on such investment on account of a rise in
interest rate.
Government
securities or Gilts, which are issued/guaranteed by the State/Central
Government do not have any default risk as they have sovereign guarantee.
Traditionally, only large institutions have been able to invest in gilts as
investments in gilts require large sums of money. Pioneer ITI Gilt Fund has
been designed to provide access to such securities to all categories of investors.
Pioneer ITI Gilt Fund (Gilt
Fund) is an open end dedicated gilt scheme devised with the objective of
generating regular returns by investing in securities issued/guaranteed by the Central/State Government.
Investors have the option of investing
in the Liquid Plan, Investment Plan and Specific Maturity Plan.
In normal circumstances, the
average maturity of the securities in the plan will be less than 3 years. This
is ideal for short term investments and offers a choice of Monthly Dividend
Option (minimum investment Rs.25,000) and Growth Option (minimum investment
Rs.5,000).
In normal circumstances, the
average maturity of the securities in the plan will be over 3 years. This is
ideal for long term investments and offers a choice of Quarterly Dividend
Option (minimum Rs.25,000) and Growth Option (minimum Rs.5,000).
However, in the interest of
investors, these asset allocation/maturity profiles may be altered at the
discretion of the AMC.
Specific
Maturity Plan
Under the Specific Maturity
Plan, investors have a choice of choosing from 3 sub plans of varying maturity
periods; Short Term (upto 6 months); Medium Term (upto 13 months) and Long Term
(upto 25 months). These plans with 3 different maturity periods have been
provided to help investors reduce the ‘interest rate risk’ on the portfolio,
matching with their chosen investment horizon.
Depending on the duration of investment, investors can
choose the suitable sub plan – For e.g if an investor is investing for a period
of say 6 months, the short term sub plans would be suitable, as it offers a
lower interest rate risk compared to the other sub plans.
Investors have the choice of
investing in the Growth Option and Dividend Option under each sub plan.
The fund/AMC
reserves the right to extend the maturity period in the short term, medium term
and long term sub-plans, after following the procedure outlined in the
paragraph “Fundamental Attributes’.
Please note that there is no
guarantee or assurance on the frequency or quantum of dividend payments,
although there is every intention to declare a dividend on a monthly &
quarterly basis in the respective plans.
A brief description of the
objectives of the Mutual Fund
To mobilise savings and
investments from the public and to manage them as per the SEBI Regulations.
Pioneer ITI Mutual Fund has
been constituted as a Trust in accordance with the provisions of the Indian Trusts
Act 1882 [2 of 1882] and is registered under the Indian Registration Act, 1908.
a. Sponsors
Pioneer ITI Mutual Fund is sponsored by
the Pioneer Investment Management Inc. of The Pioneer Group, Inc., USA. and The
Investment Trust of India Ltd.
Pioneer ITI is a joint venture between
Pioneer, one of America’s oldest mutual funds and ITI, one of India’s
established finance companies. Pioneer helped found the modern mutual fund
industry in the US in 1928, and has operations in several countries across the
globe. Pioneer has recently become part of the UniCredito Italiano Group - one
of Italy’s largest banking companies with over USD 150 billion in assets and
3500 branches and formed a powerful global asset management company - Pioneer
Global Asset Management, with a strong base in both the US and Europe and
assets under management of over USD 100 billion (as on December 2000). The
Investment Trust of India Ltd. was established in 1946 and is one of India’s
well-known and highly regarded financial services companies.
A Trust has been formed pursuant to the Trust Deed which has been
duly registered on July 29, 1993 under the provisions of the Indian
Registration Act, 1908 and executed by the sponsors, and a corpus fund has been
formed to be held upon by the Trustee.
Mr. P.S. Balasubramaniam Mr.
A.L.Mudaliar
Mr. N.C. Singhal Mr.
Sanjay Maloo
Mr. P.L. Maloo Mr.
Dharmesh Doshi
Board of Directors - Pioneer Investment Management, Inc.
Mr. John F. Cogan, Jr Mr.
David D. Tripple
Financial Performance - The Investment
Trust of India Ltd
Details given relate to the preceding
three financial years for which audited financials are available
(Rs in Lakhs - except 6, 7 & 8)
Financial Year 2000-2001 1999-2000 1998-99
1. Turnover/ Total income 1976.61 3540.07 3866.02
2. Profit after tax (1124.46) 46.43 66.23
3. Equity capital 871.60 871.60 435.60
4. Reserves 1717.30 2839.76 2419.88
5. Networth 2586.90 3711.36 2855.48
6. Earnings per share (Rs.) N.A 0.53* 1.52
7. Book value per share (Rs.) 29.68 42.58 65.55
8. Percentage of Dividend (%) N.A 5 -
* Basic
Financial Performance - Pioneer
Investment Management, Inc. (USA)
Details given relate to the preceding three
financial years for which audited financials are available.
(US Dollars in thousands- except 6, 7
and 8)
Financial Year 2000 1999 1998
1. Turnover/ Total income 39,697 154,101 166,405
2. Profit after tax (30,491) 30,467 40,019
3. Equity capital 10,49,872 40,755 40,755
4. Reserves (29,642) 103,319 172,622
5. Networth 10,20,230 143,763 213,214
6. Earnings per share N.A. 15,241 20,019
7. Book value per share N.A. 71,917
106,660
8. Percentage of Dividend % N.A. - 0.80
Financial Performance - UniCredito
Italiano
In billions
of Italian Lire - Except 6, 7, 8 and 9
Financial Year 2000 1999 1998
1. Total Income 31041.90 24247.50 23543.00
2. Profit after Tax (net income) 2700.80 2490.00 390.60
3. Share Capital 2512.10 2488.10 2340.50
4. Other Reserves 14224.60 12434.90 9779.10
5. Shareholders’ Equity 16736.70 14923.00 12119.60
6. Earnings Per Share (Lire) 538 497 374
7. Book Value Per Share (Lire) 3331 2999 2523
8. Payout ratio 46.50% 50.40% 30.80%
9. Dividend
Ordinary Share 250 250 115
Savings Share 265 265 130
Previous years figures have been
regrouped/adjusted wherever necessary.
b. The Trustee
The rights and obligations of the Trustee shall be in
accordance with Regulation 18 under Chapter III of SEBI [Mutual Funds]
Regulations and include the following:
·
The Trustee is responsible for entering into an
Investment Management Agreement with
the AMC by which the latter is entrusted with the task of floating and managing
schemes of Pioneer ITI Mutual Fund
·
The Trustee shall hold the properties of the fund in the
trust for the benefit of the fund’s investors
·
The Trustee shall be responsible for ensuring that the
fund’s business is run in conformity with SEBI [Mutual Funds] Regulations, 1996
·
The Trustee shall be responsible for ensuring that the
income due to the fund is received and properly accounted
·
The Trustee is responsible for appointing a custodian to
hold the securities of the fund in safe custody
·
The Trustee is responsible for obtaining consent of the
fund’s investors as per SEBI [Mutual Funds] Regulations, 1996
·
In carrying out his responsibilities, a Director of the
Trustee Company shall maintain arm’s length relationship with other companies
or institutions or financial intermediaries or any body corporate in which he
may be interested
·
No Trustee shall participate in the meetings of the
Trustee when any decisions for investments in which he may be interested are
taken
·
Each Trustee shall furnish particulars of interest which
he may have in any other company, or institution or financial intermediary or
any corporate by virtue of his position as director, partner or with which he
may be associated in any other capacity
·
The Trustee shall have the right to obtain from AMC such
information as is considered necessary by the Trustee and shall review all
reports and compliance procedures from the AMC.
·
The Trustee shall 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
·
The Trustee shall ensure that the AMC has not given any
undue or unfair advantage to any associates or dealt with any of the associates
of the AMC in any manner detrimental to the interest of the unitholders
·
The Trustee shall ensure that the transactions entered
into by the AMC are in accordance with the SEBI Regulations and the scheme
·
The Trustee shall ensure that the AMC has been managing
the scheme independently of other activities and have taken adequate steps to
ensure that the interest of the investors of the scheme are not being
compromised with those of any other scheme or of other activities of the AMC
·
Each Trustee shall file the details of his holdings in
securities on a half-yearly basis with the trust
·
The Trustee shall take steps to ensure that the
transactions of the mutual fund are in accordance with the Trust Deed
·