OFFER
DOCUMENT
PIONEER
ITI SHORT-TERM INCOME PLAN
An open
end income scheme investing in shorter maturity fixed income securities
Issue
of units at Rs.1000 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 Short-Term Income Plan 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 13
VI.
MANAGEMENT OF THE FUND 18
VII.
HOW TO INVEST 22
VIII. HOW TO
REDEEM 24
IX.
INFORMATION ABOUT UNITS OF THE SCHEME 26
X.
TAX BENEFITS 31
XI.
NAV AND VALUATION OF ASSETS OF THE SCHEME 33
XII.
EXPENSES 35
XIII. ASSOCIATE
TRANSACTIONS 38
XIV. CONDENSED
FINANCIAL INFORMATION 40
XV.
INVESTOR RIGHTS AND SERVICES 45
XVI. DUE
DILIGENCE CERTIFICATE 50
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 Short-Term Income Plan 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, or the banks/RBI 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.
9. “Unit
holder” or “investor” means a person holding unit in the scheme of Pioneer ITI
Mutual Fund
Highlights
·
An open end income scheme investing in shorter maturity
fixed income securities
·
Under normal circumstances, the average maturity of the
scheme is likely to be between 4 months and 12 months
·
Eligible for investment by banks, financial institutions,
bodies corporates, trusts and individual investors
·
Choice of Growth and Dividend Plans
-
Dividend Plan offers weekly, monthly and quarterly
options
·
Dividends tax-free in the hands of investors (the scheme
will pay a distribution tax, presently @10% plus surcharge)
·
No load scheme
·
Units allotted on the same day for investors at major
locations (subject to applicable rules)
·
Overnight redemption facility for investors at major
locations (subject to applicable rules)
·
Bank type convenience - can invest or withdraw on any
working day between 9.30 a.m. and 4.30 p.m (subject to applicable rules)
·
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 Short-Term Income Plan 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 Investment Management Inc., which is part of the UniCredito Italiano
Group (one of Italy’s leading banking companies) 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.
¨
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 debt markets
¨
There is no guarantee or assurance on the frequency or
quantum of dividends although there is every intention to declare a dividend on
a weekly, monthly and quarterly basis in the respective plans
¨
Engaging in securities lending is subject to risks
related to fluctuations in the collateral
value/settlement/liquidity/counterparty
¨
Investments
in debt instruments are subject to default risk and interest rate risk.
Interest rate risk results from changes in demand and supply for money and
other macroeconomic factors and creates price changes in the value of the debt
instruments. Consequently, the Net Asset Value of the scheme may be subject to
fluctuation. Generally, prices of long term securities fluctuate more in
response to interest rate changes than short term securities
¨
The
scheme may invest in non-publicly offered debt securities. This may expose the
scheme to liquidity risks
¨
Investments
in debt instruments are subject to reinvestment risks as interest rates
prevailing on interest or maturity due dates may differ from the original
coupon of the bond, which might result in the proceeds being invested at a
lower rate
¨
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.
Indian
debt and money markets – an overview
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 money markets in India essentially consist of
call money market (i.e market for overnight and term money between banks and
institutions), repo transactions (temporary sale with an agreement to buy back
the securities at a future date at specified price), commercial papers (CPs,
short term unsecured promissory note, generally issued by corporates),
certificate of deposits (CDs, issued by banks) and Treasury Bills (issued by
RBI). A predominantly institutional market, the key money market players are
banks, financial institution, insurance companies, mutual funds, primary
dealers and corporates.
Important risks associated with debt and money
market instruments
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 a fixed income instrument will go down in value if interest
rates rise and vice versa. This would be a notional loss if such an instrument
is held upto maturity. However, if the holder sells the instruments before
maturity, then there could be an actual loss on such an investment on account
of a rise in interest rate.
Managing Risks
The
default or credit risk can be controlled by investing in high quality fixed
income securities. Interest rate risk in shorter maturity fixed income
instruments is normally lower than longer maturity fixed income instruments as
the impact of interest rate changes on the market value of short term
securities is less.
What is Short-Term Income Plan
Pioneer
ITI Short-Term Income Plan (Short-Term Income Plan) is an open end income
scheme devised with the objective of generating stable returns by investing in
fixed income securities having shorter maturity periods. Under normal
circumstances, the average maturity of the scheme is likely to be between 4
months to 12 months, and the maturity of individual securities in the plan is
likely to be less than 3 years.
Investors
have the choice of investing in the Growth Plan and Dividend Plan.
Dividend Plan
Under this plan, investors can choose to receive tax-free
dividends under the weekly, monthly and quarterly dividend options. While
dividends will be compulsorily reinvested under the weekly dividend plan,
investors in the monthly and quarterly options can choose to receive a payout
or reinvest their dividend for additional units. Investors may note that while
there is every intention to declare a dividend at the specified frequency,
there is no assurance on the frequency or quantum of dividends as they depend
on the availability of distributable profits.
Growth Plan
Under this plan,
the growth in NAV will reflect the appreciation of the value of investment.
Investors have the benefits of indexation of cost and favourable long term
capital gains tax rate.
Some of
the instruments in which the scheme proposes to invest are :
|
|
Maturity |
Current Yield |
Liquidity |
|
Gilts |
Upto 3 years |
7.0% - 8.5% |
Very High |
|
Corporate/PSU Bonds |
Upto 3 years |
8.5% - 10.5% |
Medium – High |
|
CPs/T-Bills |
Upto 1 year |
7% - 9.5% |
Very High |
|
Call/Notice Money/Repo |
- |
6.5% - 7.5% |
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.
The
scheme may also invest in other fixed income instruments that may be available
from time to time. The securities above, subject to applicable SEBI
regulations, could be listed, unlisted, privately placed, secured, unsecured.
The securities may be acquired through initial public offerings, secondary
market operations, private placement etc.
Role of Short-Term Income Plan
Pioneer
ITI Short-Term Income Plan is designed to be an effective derisking interim
investment avenue for investors who have an investment horizon of 3 months to 1
year. With a higher allocation to debt instruments, it has the potential to
deliver superior returns compared to a liquid scheme, and to have a lower
interest rate risk compared to an income fund on account of the lower maturity
profile of securities in its portfolio.
A brief description of the
objectives of the Mutual Fund
To mobilise savings and
investments from the public and to manage them as per 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 Investment Management USA
Inc. and The Investment Trust of India Ltd (ITI).
Pioneer ITI is a joint venture between
Pioneer, manager of Pioneer Fund Inc., one of America’s oldest mutual funds and
ITI, one of India’s established finance companies. Pioneer, with the
establishment of Pioneer Fund in 1928, helped found the modern mutual fund
industry in the US, 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
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.
Shareholding pattern of the AMC
Percentage
The Investment Trust of India 47.71%
Pioneer Investment Management Inc. 47.61%
Others 4.68%
Mr. P.S. Balasubramaniam Mr.
A.L.Mudaliar
Mr. Sanjay Maloo Mr.
P.L. Maloo
Mr. Dharmesh Doshi
Board of Directors - Pioneer Investment Management, Inc.
Mr. John F. Cogan, Jr Mr.
Daniel T. Geraci
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.
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 1,049,872 40,755 40,755
4. Reserves (29,642) 103,319 172,622
5. Networth 1,020,230 143,763 213,214
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