SECURITIES AND EXCHANGE BOARD OF INDIA

MUMBAI

 

 

FORM - NS

 

 

Filing of scheme offer document in terms of sub-regulation (1) of regulation 28 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

 

 

ESCORTS HIGH YIELD EQUITY PLAN

(Name of the Scheme)

 

 

ESCORTS MUTUAL FUND

(Name of the Mutual Fund)

 

 

ESCORTS ASSET MANAGEMENT LIMITED

(Name of the Asset Management Company)

 

 

11, SCINDIA HOUSE, CONNAUGHT CIRCUS, NEW DELHI 110 001

(Address of the Mutual Fund)

 

 

Approximate Date of Proposed Public Offering: ----------, 2001

 

 

This filing will become deemed effective 21 days after the date of such filing.

 

 

 

 

 

 

 

ESCORTS HIGH YIELD EQUITY PLAN

AN OPEN ENDED GROWTH SCHEME

OFFER OF UNITS OF FACE VALUE OF RS. 10 EACH

 

 

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 Securities and Exchange Board of India 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 on the accuracy or adequacy of the Offer Document.

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 the SEBI and circulated to the unitholders alongwith quarterly / half yearly reports

(A) The Offer Document sets forth concisely the information about the Scheme that a prospective investor ought to know before investing;

(B) Prospective investors should study this Offer Document carefully, in its entirety and independently consult their legal, tax and investment advisors to determine possible legal, tax, financial and other consequences of subscribing to, purchasing or holding Units under the Scheme, before making an application for subscription to Units under the Scheme; and

(C) The Offer Document should be retained for future reference.

 

 

ESCORTS MUTUAL FUND

Head Office: 11, Scindia House, Connaught Circus,

New Delhi 110 001

Tel: (011) 335-1343, 331-9991, 332-1654 Telefax: (011) 376-1495

 

 

SPONSOR                          TRUSTEE                                        ASSET MANAGEMENT COMPANY

Escorts Finance Limited       Escorts Investment Trust Limited       Escorts Asset Management Limited

N-6, Pratap Building              N-6, Pratap Building                        N-6, Pratap Building

Connaught Circus                 Connaught Circus                            Connaught Circus

New Delhi 110 001                New Delhi 110 001                            New Delhi 110 001

            INITIAL OFFER OPEN FROM ---------, 2001 TO --------, 2001

ON-GOING SALE/ REPURCHASE OF UNITS FROM ----------, 2001

 

 

TABLE OF CONTENTS

S.No.

Contents

Page No.

I

Definitions

4

II
  1. Highlights         
  2. Risk Factors

5                  5

III

Due Diligence by the Asset Management Company

6

IV

Expenses

  1. Unitholder Transaction Expenses or Sales Load
  2. Initial Issue Expenses
  • For the present scheme
  • Past schemes

C. Annual Scheme Recurring Expenses

 

6

                   6                  7

7

V

Condensed Financial Information

8

VI

Constitution of Escorts Mutual Fund

A. The Mutual Fund

B. Functions and Responsibilities of the constituents of Escorts Mutual Fund

  • The Sponsor
  • The Asset Management Company
  • The Trustee
  • Custodian

C. Board of Trustees

D. Summary of substantive provisions of the Deed of Trust which may be of material interest to the Unitholders

E. Trusteeship Fee

 

8

 

                     8                 9                10               11

12

12

                 13

VII

Investment Objectives and Policies

  1. Investment Objective
  2. Asset Allocation
  3. Fundamental Attributes
  4. Investment Approach
  5. Investment Policy
  6. Change in investment pattern
  7. Derivatives & Hedging
  8. Underwriting
  9. Investment by the AMC in the Scheme
  10. Portfolio Turnover Policy
  11. Investment Restrictions
  12. Policy for borrowings
  13. Securities Lending

 

13             13              14             15              15              15             16             16             16             16             16              17               17

VIII

Management of Escorts Mutual Fund

  1. Name of the AMC
  2. Fund Manager
  3. Key Personnel
  4. Investor relations officer
  5. Board of Directors
  6. AMC’s Compensation
  7. The Custodian
  8. Investor (Registrar and Transfer Agency) Services
  9. The Auditors

 

17             17                 18             18             18             19             19             19             19

IX

Units and Offer

A. Initial Offer

 

20

 

S.No.

Contents

Page No.

X

Sale of Units

  1. Who can apply
  2. Availability of application forms and offer document
  3. How to apply(Instructions for investors)
  4. Mode of payment
  5. Dual Investment Options
  6. Investment Plans
  1. Systematic Investment Plan
  2. Dividend Re-investment Plan
  3. Systematic Withdrawal Plan
  1. Inter Plan Switching
  2. Basis of Allotment
  3. Statement of Account
  4. Refunds
  5. Transfer
  6. Transmission
  7. Listing
  8. Duplicate Statements of Account/Dividend Warrants/Redemption Warrants, Consolidation of Accounts
  9. Register of Unitholders
  10. Personal Accident Insurance
  11. Sale and Purchase of Demat Units through Stock Exchanges
  12. Winding Up
  13. Subsequent purchase of Units

 

20             21             21                 22             22

                 23             23               23

23             23             23             23              24             24              24               24

24             25             26

30             30

XI

Dividends and Distribution

31

XII

Inter Scheme Transfers

32

XIII

Associate Transactions

32

XIV

Borrowing by Escorts Mutual Fund

32

XV

Stock Lending by Escorts Mutual Fund

33

XVI

Net Asset Value and Valuation of Assets of the Scheme

  1. Computation of Net Asset Value
  2. Valuation

 

33             33

XVII

Redemption or Repurchase

35

XVIII

Accounting Policies

37

XIX

Tax treatment of investment in Mutual Funds

38

XX

Investors’ rights and services

  1. Rights of Unitholders
  2. Documents for inspection
  3. Investor services

 

39             40              40

XXI

Investor grievances and redressal mechanism

40

XXII

Penalties, pending litigation or proceeding, findings of inspections or investigations for which action may have been taken or is in the process of being taken by any regulatory authority

40

XXIII

General

41

 

 

I. DEFINITIONS

Act

Income-tax Act, 1961

Asset Management Company (AMC)

Escorts Asset Management Limited, incorporated under the Companies Act, 1956 and having its registered Office at N-6, Pratap Building Connaught Circus, New Delhi 110 001 and its successors and assigns.

Bank

Scheduled Commercial Bank in India.

Business Day

A day other than Saturday, Sunday and any holiday declared under the Negotiable Instruments Act, 1882 at New Delhi.

Custodian

HDFC Bank Limited, Custodian and Depository Services, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, SEBI registration no. INBI00000063.

Initial Contribution

The sum of Rs. 1,00,000/- (Rupees One Lac only) entrusted to the Trustee by the Sponsor towards the corpus of the Mutual Fund trust.

Initial Offer

Offer of Units of Escorts High Yield Equity Plan during the Initial Offer Period.

Initial Offer Period

The period during which the Initial Offer of Units under the Scheme shall be open for subscription.

Investment Management Agreement

The agreement dated 15th April, 1996 between the Trustee and the Asset Management Company.

Load/ Contingent Deferred Sales Charge

Amount collected to cover the cost of promotion of the Scheme.

Mutual Fund or Mutual Fund Trust

The trust established in accordance with the Deed of Trust dated 15th April, 1996 and registered with the Securities and Exchange Board of India on 3rd July, 1996 vide registration no. MF/028/96/4.

Net Asset Value (NAV)

It is the actual value of a Unit issued under the Scheme, on the valuation day.

 

Offer Document

This document issued by the Mutual Fund offering Units of this Scheme for subscription.

On-going Sale/ Redemption of Units

The facility afforded to prospective investors/ Unit holders to purchase/ redeem Units issued under this Scheme at NAV based sale/ repurchase prices, on an on-going basis.

RBI

Reserve Bank of India

Regulations

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended.

SEBI

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

Scheme

Escorts High Yield Equity Plan Mutual Fund Scheme.

Sponsor

Escorts Finance Limited, a Company incorporated under the Companies Act, 1956 and having its Registered Office at N-6, Pratap Building, Connaught Circus, New Delhi 110 001.

Trustee

Escorts Investment Trust Limited, a Company incorporated under the Companies Act, 1956 and having its Registered Office at N-6, Pratap Building, Connaught Circus, New Delhi 110 001.

Trust Deed

The Deed of Trust dated 15th April, 1996 establishing the Mutual Fund.

Unit

An undivided share in the NAV of the Scheme.

 

II. (A) HIGHLIGHTS

1.       Growth Orientation: The primary objective of the scheme is to generate income by investing predominantly in a well diversified portfolio of equity stocks providing high dividend yield but at the same time capture long term capital appreciation as and when the opportunity arises.

2.       Dual Investment Options: The investor can opt for either Dividend (Regular Income) or Growth (Capital Appreciation) Options. Units under each Investment Option will have a separate Net Asset Value, after the first dividend distribution.

3.       Switching: Unit holdings can be switched from one Option to another within the Scheme or to Options under other Open Ended Schemes of Escorts Mutual Fund at Net Asset Value based prices, on daily basis, subject to applicable load, if any.

4.       Liquidity: An open-ended scheme giving opportunity to invest and exit at NAV related prices, with applicable load, on daily basis.

5.       Multiple Investment Plans: Investors can participate in Systematic Investment Plan (SIP) and/ or Dividend Re-investment Plan (DRIP) and/ or Systematic Withdrawal Plan (SWP).

6.       Load: No initial load.

7.       Transparency: Daily determination of Net Asset Value.

8.       Free Personal Accident Insurance: Available for first named individual unitholder.

9.       Tax Benefits: (Under Income Tax Act, 1961)

·         Dividend income from Units under the Scheme is exempt from income tax under Section 10(33) in the hands of Unitholders.

·         There shall be no deduction of tax at source (TDS) on redemption amount for resident investors.

·         Under Section 112 of the Act the unitholders can opt for being taxed at 10% (plus applicable surcharge) without the cost inflation index benefit "OR" 20% (plus applicable surcharge) with cost inflation index benefit, whichever is beneficial.

·         Investments in Units under the Scheme are exempt from Wealth Tax.

·         Investments in Units by Religious and Charitable Trusts is an eligible investment under Section 11(5) of the Act, read with Rule 17(C) of the Act.

(Tax benefits to the mutual fund and unitholders are in accordance with prevailing tax laws.)

II. (B) RISK FACTORS

STANDARD RISK FACTORS :

1.       All Mutual Funds and securities investments are subject to market risks and there is no assurance and no guarantee that the Fund’s objectives will be achieved.

2.       As with any investment in stocks and shares, 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 capital markets such as price and volume volatility in stock markets, interest rates, currency exchange rates, change in Government policies, taxation, political or economic developments and closure of stock exchanges, liquidity and settlement systems in equity and debt markets.

3.       Past performance of the Sponsor/ Asset Management Company/ Mutual Fund does not indicate the future performance of the Schemes of the Mutual Fund.

4.       Escorts High Yield Equity Plan 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.

5.       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 Rupees One Lac only towards setting up of the Mutual Fund.

SCHEME SPECIFIC RISK FACTORS :

1.       Escorts High Yield Equity Plan’s investment portfolio will be concentrated in select companies across various sectors. This might lead to increased volatility in the movement of NAV.

2.       Engaging in securities lending is subject to risks related to fluctuations in collateral value/ settlement/ liquidity/ counter party.

3.       In the event that investible funds of more than 50% of the total proceeds in the scheme are not invested in equity shares of domestic companies, the proposed tax exemption on income distribution will not be available to such scheme.

4.       Subject to necessary approvals, the Scheme may invest in overseas markets, which carry a risk on account of fluctuations in the Foreign Exchange rates.

5.       The liquidity and valuation of the scheme’s investments due to its holdings of unlisted securities may be affected if they have to be sold prior to their target date of divestment.

III. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

It is confirmed that:

(i)         the draft Offer Document forwarded to SEBI is in accordance with the SEBI (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 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)        the intermediaries named in the Offer Document are registered with SEBI and till date such registration is valid.

Date :   20.11.2001                                                                                            K.K.MITAL

Place : New Delhi                                                                      Vice President and Head and

                                                                                                 Compliance Officer

                                                                                                 Escorts Asset Management Ltd..

IV. EXPENSES

A.      UNITHOLDER TRANSACTION EXPENSES OR SALES LOAD

The Units under the Scheme can be purchased and redeemed, on an on-going basis, at the then prevailing NAV without any Sales Load. There is no CDSC in the scheme, at present.

An Exit Load of 1% of the prevailing NAV shall be applicable for redemptions made within 1 year of purchase. In case of redemptions made after one year of purchase, an Exit Load of 0.5% shall be applicable.

The Asset Management Company and the Trustees reserve the right to introduce / modify / change entry load, exit load and / or switchover load if it so deems fit in the interest of smooth and efficient functioning of the Mutual Fund, subject to a maximum as prescribed under the Regulations with prospective effect. In case of an exit / repurchase load this may be linked to the period of holding. All loads for each scheme shall be maintained in a separate account and may be utilised for meeting the selling and distribution expenses. Any surplus in this account may be credited to the scheme, whenever felt appropriate by the scheme.

At the time of change in the load structure the AMC may take following measures:

·         An addendum detailing the changes may be attached to the Offer Document and Abridged offer document. The addendum may be circulated to all the distributors / brokers so that the same can be attached to the Offer Document and Abridged offer document already in stock. The addendum may be sent alongwith the newsletter sent to the unitholders immediately after the changes.

·         Arrangements may be made to display the changes / modifications in the offer document in the form of a notice to all the investors service centers and distributors / broker office.

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

·         Any other measures as may be deemed necessary.

B. INITIAL ISSUE EXPENSES

i.                        For the present scheme

The estimated break-up of Initial Issue expenses, as a percentage of the amount raised in the Initial Issue is as follows:

Expenses

(%)

Brokerage & Commission

1.50

Marketing & Advertising

1.50

Printing & Stationery

1.00

Registrar’s Fee

0.50

Legal Expenses

0.25

Bank Charges

0.50

Other Expenses

0.75

Total

6.00

 

The above break-up of Initial Issue expenses has been estimated ‘in good faith’, on the basis of information available to the Asset Management Company and is subject to change inter se, as per actuals. The entire initial issue expenses for this Initial Offer Period will be borne by the Scheme, which under the Regulations is limited upto a maximum of 6% of the initial resources raised under the Scheme.

(ii) Past Schemes

The details of the estimated and actual Offer Expenses for Escorts Balanced Fund, Escort Gilt Plan and Escorts Growth PLAN Mutual Fund Schemes (as a %age of the amount raised in the Offer) launched in February, 2001 is as follows:

Expenses

Estimated (%)

Actual (%)

 

Escorts Balanced Fund

Escorts Gilt Plan

Escorts Growth PLAN

Escorts Balanced Fund

Escorts Gilt Plan

Escorts Growth PLAN

Brokerage & Commission

1.25

1.00

1.00

0.30