This Offer Document is dated December 31, 2001.
 
 
 
 

Scheme Specific Risk Factors & Special Considerations:

Scheme Specific Risk Factors:

Price-Risk or Interest-Rate Risk: Government securities carry a price risk depending upon the general level of interest rates prevailing from time to time. Generally, when interest rates rise, prices of Gilts fall and when interest rates drop, such prices increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of interest rates. The price risk is not unique to government securities. It exists for all fixed income securities.

Reinvestment Risk: Investments in fixed income securities may carry re-investment risk as interest rates prevailing on the interest or maturity due dates may differ from the original coupon of the bond. Consequently, the proceeds may get invested at a lower rate.

Special Considerations:

All the above factors not only affects the prices of securities but may also affect the time taken by the Fund for redemption of units, which could be significant in the event of receipt of a very large number of redemption requests or very large value of redemption requests. The liquidity of the assets may be affected by other factors such as general market conditions, political events, bank holidays and civil strife. In view of this, the Trustee has the right in its sole discretion to limit redemption (including suspension of redemption) under certain circumstances. Please refer to the para ix under section V titled Units on Offer.

The liquidity of the Scheme’s investments may be restricted by trading volumes, settlement periods and transfer procedures. In the event of an inordinately large number of redemption requests or of a restructuring of the Scheme’s portfolios, the time taken by the Scheme for redemption of Units may become significant. . In view of this, the Trustee has the right in its sole discretion to limit redemption (including suspension of redemption) under certain circumstances.

Please refer to the para ix under section V titled Units on Offer

The Scheme may also invest in overseas financial assets as and when permitted by the concerned regulatory authorities in India. To the extent that the assets of the Scheme will be invested in securities denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes in the value of certain foreign currencies relative to Indian Rupee. The repatriation of capital to India may also be hampered by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.

The Scheme may trade in derivatives as permitted under the Regulations subject to guidelines issued by SEBI and RBI from time to time. Trading in Derivatives involves risks. Please refer to the para 7 under section IV titled "Trading in derivatives".

Redemptions due to change in the fundamental attributes of the Scheme or due to any other reasons may entail tax consequences. The Trustee, AMC, Mutual Fund, their directors or their employees shall not be liable for any such tax consequences that may arise.

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

 No person has been authorised to give any information or to make any representations not confirmed in this offer document in connection with the Offer Document or the issue of Units, and any information or representations not contained herein must not be relied upon as having been authorised by the Mutual Fund or the Asset Management Company.
 
 

It is confirmed that:

1. 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.
2. All legal requirements connected with the launching of the Scheme and also the guidelines, instructions, etc. issued by the Government of India and any other competent authority in this behalf, have been duly complied with.
3. 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.
4. The intermediaries named in the Offer Document, according to the information given to the AMC, are registered with SEBI and till date such registration is valid.

In this Offer Document, the following words and expressions shall have the meaning specified herein, unless the context otherwise requires:

Unless stated otherwise in the Offer Document, Applicable NAV is the Net Asset Value as of the Day as of which the purchase or redemption is sought by the Investor and determined by the Fund. (For details, please refer paragraph "Applicable NAV" in Section No.V named "Units on Offer")

A. THE FUND

Standard Chartered Mutual Fund

ANZ Grindlays Mutual Fund, which has been renamed as Standard Chartered Mutual Fund ("the Mutual Fund" or "the Fund") had been constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) vide a Trust Deed dated December 29, 1999. The office of the Sub-Registrar of Assurances at Mumbai has registered the Trust Deed establishing the Fund under the Registration Act, 1908. The Fund was registered with SEBI vide registration number MF/042/00/3 dated March 13, 2000.

Standard Chartered Bank (SCB) had acquired the interest of ANZ Banking Group in the ANZ Grindlays Asset Management Company Private Limited and ANZ Grindlays Trustee Company Private Limited and subsequently these entities were renamed as Standard Chartered Asset Management Company Private Limited and Standard Chartered Trustee Company Private Limited. SCB has contributed an amount of Rs.10,000/- to the corpus of the Fund. SEBI has approved the change in the name of the Fund to Standard Chartered Mutual Fund vide letter no. MFD/PM/017/2001 dated February 26, 2001. A deed of amendment to the Trust Deed dated March 2, 2001 has been executed and registered.

The Trust has been formed for the purpose of pooling of capital from the public for collective investment in securities / any other property for the purpose of providing facilities for participation by persons as beneficiaries in such properties/ investments and in the profits / income arising therefrom.

B. SPONSOR

Standard Chartered Bank

The sponsor of Standard Chartered Mutual Fund is Standard Chartered Bank (SCB).

SCB (belongs to Standard Chartered Group), a multinational banking and financial service group with a unique international network. Built over 140 years it now spans the developed and emerging economies of the world, i.e. markets of Asia (the Indian sub-continent), Africa, the Middle East and Latin America. The Standard Chartered Group operates through more than 670 offices in over 57 countries and has over 34,000 people managing assets over UK £ 50 billion. Through the years SCB has grown its operations and is now a truly international bank offering a wide array of financial products and services. As an organisation, SCB is committed to delivering consistently superior performance and to building shareholder value.

SCB is regulated by the Financial Services Authority and is a clearing bank in the United Kingdom. As a banking group, Standard Chartered is primarily focussed in the following areas:

• Consumer Banking which includes Mortgage and Banking services, Cards, Consumer Finance
• Wholesale Banking which includes Corporate and Institutional banking,Treasury, Cash management, Custody and Trade services

SCB operates in India through 19 of its own branches as well 40 branches of its wholly owned subsidiary - Standard Chartered Grindlays Bank Limited These branches are spread over 16 cities and offer a complete range of banking and financial products. It is the largest combined foreign bank in India. The current customer base is approximately 2.2 Million.

The sponsor or any of its associates which operates as a scheduled commercial bank in India, does not in any way guarantee the performance or return of the Fund and an investment in this fund does not in any way represent a deposit or other liability of the sponsor or any of its associates.
 

Share holding pattern of the AMC	Percentage
Standard Chartered Bank	74.99
Propycon Trading & Investments Private Limited	14.18
Trivikram Investments & Trading Company Limited	10.83
Others	0.00008

Propycon Trading & Investments Private Limited and Trivikram Investments & Trading Company Limited belong to the Atul Choksey Group of Companies. They carry on the business of investment company and invest/hold/sell/buy or otherwise deal in shares, stocks, units, debentures, debenture-stock, bonds, mortgages, obligations and securities of any kind issued, real estates etc.

C. THE TRUSTEE

The Trustee Company (The Trustee)

Standard Chartered Trustee Company Private Limited (The Trustee), a company incorporated under the Companies Act, 1956 is the Trustee to the Fund vide Trust Deed dated December 29, 1999 as amended from time to time. SCB holds 100% of the shares of the Trustee Company.

1. Directors

The details of the Directors of the Trustee Company in brief:
 

Mr. Sanjeev Agrawal* 16A Manek L. D. Ruparel Marg Malabar Hill Mumbai 400 026	He is the Chief Financial Officer of Standard Chartered Group-Bombay with responsibilities for Financial and Capital Planning. He has also successfully managed the integration process for the Finance function across Standard Chartered Bank and Standard Chartered Grindlays Bank. Prior to this assignment he was associated with Tata Steel, Bombay and with Price Waterhouse-New Delhi. Other Directorships : 1. Standard Chartered Finance Limited 2. IT-365 Private Limited 3. Standard Chartered UTI Securities India Private Limited
Dr. R. H. Patil 601, Neat House 766, College Galli Dadar, Mumbai 400 028	Is an M.A., Ph.D. (Economics) University of Bombay. He is presently the Chairman of Clearing Corporation of India Limited and Divestment Commission of India. He was formerly the Managing Director of National Stock Exchange of India Limited for over 7 years. Prior to this assignment, he was the Executive Director in Industrial Development Bank of India. During his career spanning more than 25 years, he has been closely associated with the financial sector in various capacities and particularly with the capital market. Other Directorships : 1.National Stock Exchange of India Limited 2.India Index Services & Products Limited 3.National Securities Clearing Corporation Limited 4.National Securities Depository Limited 5.Credit Analysis and Research Limited 6.Debtonnetindia.com Limited 7.NSE.IT Limited 8.SBI Capital Markets Limited 9.Clearing Corporation of India Limited 10.UTI Institute of Capital Markets-Governing Council (Member) 11.RBI-National Payment Council (Member) 12.RBI-Standing Committee on Money Market & Government Securities (Member) 13.The Society of Certified Investment Bankers, Hyderabad-Board of Governors (Member) 14. Divestment Commission of India- Chairman 15. Local Advisory Board-BNP Paribas -Chairman
Mr. Dattatraya M. Sukthankar 5 ‘Priya’ 9 Abdul Gaffar Khan Road Worli, Mumbai 400 018	In his career spanning over 34 years till 1990 as an IAS Officer, he had held very important portfolios in the Govt. of Maharashtra including that of Secretary, Education Department, Secretary, Industries Dept, Metropolitan Commissioner, Municipal Commissioner, Greater Bombay, and finally as Chief Secretary to the Govt. of Maharashtra. He was also the Secretary, Ministry of Urban Development, Govt. of India for two years. Other Directorships : 1.Housing Development Finance Corporation Limited 2.Tata Housing Development Co. Limited 3.Phoenix Township Limited 4.Indoco Remedies Limited 5.HDFC Developers Limited 6.Indian Institute of Education, Pune-Board of Trustees/Management 7.Sangit Mahabharati, Mumbai-Board of Trustees/Management 8.The Society for Recycling of Waste of Recoverable Disposal (REWARD), Mumbai- Board of Trustees/Management 9.The Electoral Trust, Mumbai- Board of Trustees/Management 10. Jeevan Bima Sahayog Asset Management Co. Limited
Mr. Jamsheed G. Kanga 182, Buena Vista General Bhosale Marg Cuffe Parade Mumbai 400 021	In his career as an I A S officer, he held various important positions including that of Managing Director, Maharashtra State Agro Industries Development Corporation and Maharashtra State Tourism Development Corporation, Joint Secretary, Finance Department, Maharashtra State, Joint Secretary (Projects & Finance), Department of Atomic Energy, Secretary to Government of Maharashtra, Municipal Commissioner, Bombay Municipal Corporation, Chairman and Managing Director, Export Credit Guarantee Corporation of India in the rank of Secretary to Government of India. After retirement, he had been the Vice-Chairman and Managing Director of Tata Housing Development Co. Limited and now is a Senior Corporate Advisor to Tata Housing Development Co. Limited from April 1997. He is also a Consultant to Forbes Gokak Limited. Other Directorships : 1.Forbes Campbell Holdings Limited 2.The Associated Building Company Limited 3.International Technology Park Limited -Whitefield, Bangalore

*Associated with SCB Group

2 Rights, Obligations, Responsibilities and Duties of the Trustee under the Trust Deed and the Regulations :

Pursuant to the Trust Deed dated December 29, 1999 constituting the Mutual Fund and in terms of the Regulations, the rights, obligations, responsibilities and duties of the Trustee are as follows:

1. The Trustee shall have a right to obtain from the AMC such information as is considered necessary by it.

2. The Trustee shall ensure before the launch of any Scheme that the Asset Management Company has:

4. The Trustee is required to ensure that the AMC has not given any undue or unfair advantage to any associate or dealt with any of the associates of the AMC in any manner detrimental to the interests of the Unitholders.

5. The Trustee is required to ensure that the transactions entered into by the AMC are in accordance with the Regulations and the Scheme.

6. The Trustee is required to ensure that the AMC has been managing the Scheme(s) independently of other activities and has taken adequate steps to ensure that the interest of investors of one Scheme are not compromised with those of any other Scheme or of other activities of the AMC.

7. The Trustee is required to ensure that all the activities of the AMC are in accordance with the provisions of the Regulations.

8. Where the Trustee has reason to believe that the conduct of the business of the Fund is not in accordance with these Regulations and the Scheme it is required to take such remedial steps as are necessary by it and to immediately inform SEBI of the violation and the action taken by it.

9. Each Director of the Trustee is required to file with the Trust the details of his transactions of dealings in securities on a quarterly basis.

10. The Trustee is accountable for and is required to be the custodian of the Fund’s property of the respective Scheme and to hold the same in trust for the benefit of the Unitholders in accordance with the Regulations and the provisions of the Trust Deed.

11. The Trustee is required to take steps to ensure that the transactions of the Fund are in accordance with the provisions of the Trust Deed.

12. The Trustee is responsible for the calculation of any income due to be paid to the Fund and also of any income received in the Mutual Fund for the holders of the units of any Scheme in accordance with the Regulations and the Trust Deed.

13. The Trustee is required to obtain the consent of the Unitholders of a Scheme:

16. The Trustee is required to review quarterly, all transactions carried out between the Fund, the AMC and its associates.

17. The Trustee is required to review quarterly, the net worth of the AMC and in case of any shortfall ensure that the AMC makes up for the shortfall as per clause (f) of sub regulation (1) of Regulation 21 of the Regulations.

18. The Trustee is required to periodically review all service contracts such as custody arrangements and transfer agency, and satisfy itself that such contracts are executed in the interest of the Unitholders.

19. The Trustee is required to ensure that there is no conflict of interest between the manner of deployment of its net worth by the AMC and the interest of the Unitholders.

20. The Trustee is required to periodically review the investor complaints received and the redressal of the same by the AMC.

21. The Trustee is required to abide by the Code of Conduct as specified in the Fifth Schedule of the Regulations.

22. The Trustee has to furnish to SEBI on a half yearly basis:

General Due Diligence:

24. The Trustee shall be discerning in the appointment of the directors of the Asset Management Company.

25. The Trustee shall review the desirability of continuance of the AMC if substantial irregularities are observed in any of the Schemes and shall not allow the AMC to float any new Schemes.

26. The Trustee shall ensure that all service providers are holding appropriate registrations from SEBI or concerned regulatory authority.

27. The Trustee shall arrange for test checks of service contracts.

28. The Trustee shall immediately report to SEBI of any special developments in the mutual fund.

29. Specific Due Diligence :

The Trustee shall:

During the period from April 1, 2001 to December 10, 2001, three meetings of the Directors of the Trustee were held. The Trustee’s supervisory role is discharged by reviewing the Half -Yearly and Annual Accounts of the Fund, Bi-monthly, Quarterly and Half- Yearly compliance reports. Further, the Internal Audit Committee set up by the Trustee reviews reports being submitted by the Internal Auditors of the Fund.

3. Trusteeship Fees

Pursuant to the Deed of Trust constituting the Fund, the Scheme is authorised to pay the Trustee a fee for its services in such capacity of a sum, computed at a rate up to 0.05% per annum payable annually. The Trustee may charge further fees as permitted from time to time under the Trust Deed and the Regulations in addition to the reimbursement of all costs, charges and expenses.

D. ASSET MANAGEMENT COMPANY

Standard Chartered Asset Management Company Private Limited

ANZ Grindlays Asset Management Company Private Limited, a company registered under the Companies Act, 1956, was established by Australia and New Zealand Banking Group (ANZ), and has been appointed by the Trustee to act as the Investment Manager of the ANZ Grindlays Mutual Fund vide the Investment Management Agreement dated January 3, 2000. Consequent to sale of business by ANZ to Standard Chartered Bank (SCB), 75% stake in the equity share capital of the AMC and 100% stake in the Preference Share Capital of the AMC have been transferred to SCB. Balance 25% of the equity share capital is held by a well-known Indian industrialist, Mr. Atul C.Choksey (through his Group Companies). Mr. Atul C.Choksey is a Director of the AMC and his bio data is given below with those of other Directors.

Consequent to the transfer of shareholding as stated above, SEBI vide its letter No.MFD/PM/017/2001 dated February 26, 2001 accorded its approval for the induction of SCB as a shareholder of the AMC.

The AMC will manage the Scheme(s) of the Fund, including the Scheme mentioned in this Offer Document, in accordance with the provisions of Investment Management Agreement, the Trust Deed, the Regulations and the objectives of each of the Scheme(s).

1.  Directors

The details of the Directors of the Asset Management Company in brief:
 

Mr. Paul Jebson* (Chairman)     15 Cheltenham Road Orpington Kent BRL 9HL	He is the Head Funds Management, Global Markets with Standard Chartered Bank. He has been associated with Standard Chartered Bank since June 1977 with responsibilities of institutional and commercial bank sales and marketing and treasury functions. He was the Group Head of Institutional and Commercial Bank Sales and Marketing from 1999 to 2001 and the Global Head of Treasury Bank relationships from 1998 to 1999. Other Directorships : Standard Chartered Global Liquidity Funds plc
Dr. A.C.Shah C 1/2 Lloyds Garden Appa Saheb Marathe Marg Prabhadevi Mumbai 400 025	Is an M.A., Ph.D. (Economics) from the University of Bombay.  He retired as the Chairman and Managing Director of Bank of Baroda after a meritorious service of over 30 years during which he held many responsible positions in the bank. He was advisor to UTI for setting upUTI Bank. He is a Guest Faculty at : 1.Indian Institute of Management, Ahmedabad 2.National Institute of Bank Management, Pune 3.Bankers Training College Other Directorships : 1. Hexaware Technologies 2. National Organic Chemical Industries Limited 3. Reliance Capital Trustee Company Limited 4. The Zandu Pharmaceuticals Works Limited 5. S. Kumars Nationwide Limited 6. Elecon Engineering 7. Adani Exports Limited 8. NABARD Supervisory Board-Member 9. Smart Bridges, Singapore 10. Gujarat Petro Synthesis
Mr. Atul C. Choksey 4B, Geetanjali 9N Gamadia Road Mumbai 400 026	Is a Chemical Engineer from Illinois Institute of Technology, Chicago, USA. He has also completed courses in management disciplines like Finance, Personnel, Micro and Macro Economics etc. during his stay abroad. He is the Chairman of Apcotex Lattices Limited, Apcotex Financial Services Limited and Apcotex Infoway Private Limited as well as other group companies. He was the Managing Director of Asian Paints (India) Limited from 1984 to 1997. Other Directorships: 1. Apco Enterprises Limited 2. Apcotex Lattices Limited 3. Apcotex Securities Limited 4. Trustee-Baif Development Research Foundation 5. Blue Star Limited 6. Cricket Club of India 7. Ceat Limited 8. Finolex Cables Limited 9. Mazda Colours Limited 10. Nurture Finance Limited 11. Priyam Investment Consultants Limited 12. Shyamal Finvest (India) Limited 13. Titan Trading & Agencies Limited 14. Trivikram Investments & Trading Company Limited 15. Wharton Asian Executive Board-Member 16. Apcosoft Infoway Pvt. Limited 17. Choksey Chemicals Pvt. Limited 18. Marico Industries Ltd
Mr. Pradip Madhavji 1 Aashiana 5 Altamount Road Mumbai 400026	Is the Chairman of Thomas Cook (India) Limited and is responsible for enhancing its position externally, through further strengthening the company’s relationships with business partners, trade bodies and associates. He has been with Thomas Cook since 1977 and has held senior positions as Managing Director in 1979, Deputy Chairman & Managing Director in 1982, Executive Chairman in 1993 and now as Chairman since 1995. Prior to this he was with Dena Bank for over 18 years. Other Directorships : 1. Kishco Cutlery Limited 2. Thomas Cook Tours Limited 3. Indian Horizon Travels & Tours Limited 4. India Alive Tours Limited 5. Hindustan Cargo Limited 6. Shreeji Bhatia Co-op Bank 7. Thomas Cook (India) Limited
Mrs. Bakul Patel P1 & P2 Eden Hall Rajni Patel Chowk Dr. Annie Besant Road Worli	Is a member on the Indian Advisory Board, Standard Chartered Grindlays Bank Limited. She was the Chairperson of Maharashtra State Financial Corporation from 1992 to 1995. She is also a Member of Zonal Advisory Board, Western Zone, Life Mumbai 400 018 Insurance Corporation of India and Western Regional Advisory Committee, Industrial Development Bank of India. She was the Sheriff of Mumbai from 1992 – 1993. She is a Chartered Secretary from the Chartered Institute of Companies Secretary, U.K. Other Directorships : 1. Neo Indcom Consultancy Pvt. Limited 2. Bay Petroplast Pvt. Limited 3. M/s Merchant Media Pvt. Limited 4 Dynamic Advertising & Research Team Pvt. Limited 5. Zonal Advisory Board of Western Zone, LIC-Member 6. Western Regional Advisory Committee IDBI-Member
Mr. Jaspal Bindra* (Alternate Director to Mr. Paul Jebson) 11/12A Ridgeway  29 A Ridge Road Malabar Hill Mumbai 400 006	Is the Regional General Manager India & CEO Standard Chartered Grindlays Bank since August, 2000. He has been associated with Standard Chartered Bank since 1998 as Head of Corporate & Institutional Banking, India. Prior to this assignment he was Head Business Development, India with Union Bank of Switzerland from 1993-94. From 1993 to 1994 he was Head Financial Institutions Group, India with Bank of America. He was associated with Bank of America from 1984 to 1994 in various capacities Regional Manager Asia-Non Resident Business Group Other Directorships: 1. Standard Chartered Finance Limited 2.SCOPE International 3. Indian Banks Association (Management Committee)
Mr. Naval Bir Kumar* B-1 Breach Candy Apartment Bhulabhai Desai Road Mumbai 400 026	Is the Managing Director of Standard Chartered Asset Management Company Private Limited. Prior to this he was Director & Head Originations of Global Capital Markets for ANZ Investment Bank. In this role he has handled debt and equity capital market transactions for a number of leading Indian corporates and was successful in improving the Bank’s position in the domestic capital markets from 193 to number 6. He joined the Bank in 1990 in the Merchant Banking Division and was appointed Head of the Merchant Bank for West India in 1994 and subsequently Head of the Investment Bank for West India in 1996. In these roles he has worked on a cross-section of investment banking products such as: Infrastructure financing, Corporate finance, Cross-border debt financing and Domestic capital market transactions. He worked briefly with Colgate Palmolive (India) Limited as a Brand Manager prior to joining Standard Chartered Grindlays Bank. He is a rank holder in Mathematics from Bombay University and holds an MBA from the Indian Institute of Management, Calcutta. Other Directorships : Standard Chartered Global Liquidity Funds plc

* Associated with the Group

2.  Powers, Duties and Responsibilities of the AMC

The Regulations and the Investment Management Agreement shall govern the duties and responsibilities of the AMC. The AMC, in the course of managing the affairs of the Mutual Fund, has the power, inter-alia:

3.  AMC Fee:

In terms of the Investment Management Agreement and the Regulations, the AMC is entitled to an investment management fee at 1.25% per annum of the average net assets for a corpus up to Rs.100 crore and at 1.00% per annum for the corpus amount in excess of Rs.100 crore. For Schemes launched on a No-Load basis, the AMC is entitled to collect an additional management fee up to 1% per annum of the average net assets outstanding in each financial year and the total management fee shall not exceed the limit stated under the Regulations. The AMC reserves the right to charge such additional management fees till the initial issue expenses (to a maximum extent of 6%) incurred under the Scheme are recovered or as may be permitted from time to time under the Regulations.

4.  Key Personnel of AMC
 

Employee	Designation	Qualifications	Experience
Mr. Naval Bir Kumar	Managing Director	PGDM (IIM, Calcutta), BA-Mathematics (Bombay University).	Over 10 years of experience in capital markets.
Last assignments held: Was a Director & Head Origination of Global Capital Markets for ANZ Investment Bank. In this role, he has handled debt and equity capital market transactions for a number of leading Indian corporates. He joined the Bank in 1990 in the Merchant Banking Division and was appointed Head of the Merchant Bank for West India in 1994 and subsequently Head of the Investment Bank for West India in 1996. Age : 36 years

Mr. Rajiv Anand	Head–Investments	B.Com, ACA. in fixed income markets.	Over 10 years' experience
Last assignments held: Worked in treasury of HSBC for 4 years and Standard Chartered Grindlays Bank for 3 years. In last assignment, was part of the bank’s Treasury team managing balance sheet portfolios like SLR, daily funding as well as the foreign currency loan /deposit book. It was in this job that he was exposed to the cutting edge techniques of interest rate and liquidity risk management. It is this experience that he brings to managing investments in a manner that will meet the stated investment philosophy of each scheme. Age : 35 years

Mr. Debashis Roy	Head- Operations	M.Sc, MBA	Over 11 Years experience in Capital Market Operations
Last Assignment Held : Was Senior Manager, Projects & Domestic Custody for Standard Chartered Bank. In this role, he handled a special project team to provide a comprehensive one stop services to domestic mutual funds. He joined the Standard Chartered Grindlays Bank in 1995 in Custodial Services and was later appointed as Head of Custody in 2001. Prior to joining the bank he worked for ICICI Limited and SHCIL. Age : 38 years

 
 

Ms. Nita Mehta	Company Secretary and Compliance Officer	B.Com. L.L.B. FCS.	Over 12 years' experience in area of Secretarial Legal and Compliance.
Last assignments held: Worked with Reliance Capital Mutual Fund in similar role for five years, Reliance Capital Limited for one year where handled various assignments interalia public cum right issue. Before was with Wartsila Diesel (India) Limited for four years. Age : 38 years

Mr. Emron Samuel	Head – Distribution	B.Com, ACA.	Over 7 years' experience in capital markets.
Last assignments held: Previously was with ANZ Grindlays Bank (now Standard Chartered Grindlays Bank) in Treasury- Sales for two years. Age : 33 years

Mr. K. Muhund	Fund Manager	B.E, M.B.A.	Over 5 years' experience in funds management in mutual funds.
Last assignments held: Research and Fund Management in SBI Funds Management from 1994-2000. Age : 30 years

Ms. Anjali Anchan	Sr. Manager – Operations & Accounts	B.Com. L.L.B.	Over 7 years' experience in Operations & the Mutual Fund industry
Last assignments held: Worked for Zurich India Mutual Fund (erstwhile ITC Threadneedle Mutual Fund) from October 1995 to December 1999. In the capacity of Operations Manager, was responsible for operations related issues including investment accounting. Having joined as part of their core set up team for operations, was responsible for putting in place the necessary systems and building the requisite interfaces for investment accounting. Age: 30 years.

Fund Manager : Mr. Rajiv Anand

Compliance Officer : Ms. Nita Mehta

Investor Relations Officer : Mr. Kantish Salian

E.  AUDITORS

Bharat S. Raut & Co., Chartered Accountants, (full member firm of KPMG), KPMG House, Kamala Mills Compound, 448 Senapati Bapat Marg, Lower Parel, Mumbai 400 013, a full member firm of KPMG, have expressed their willingness to act as Auditors for the Scheme offered under this Offer Document and have been appointed as Auditors of the Scheme by the Trustee Company.

F.  THE REGISTRAR

Computer Age Management Services (P) Limited, A & B, Lakshmi Bhawan, 609, Anna Salai, Chennai 600 006 (CAMS) have been appointed as Registrar for the Scheme. The Registrar is registered with SEBI under registration No: INR000002813 dated July 22, 1995. As Registrar to the Scheme, CAMS will handle communications with investors, perform data entry services and despatch Account Statements. The AMC and the Trustee have satisfied themselves that the Registrar can provide the service required and has adequate facilities and the system capabilities.

G.  THE CUSTODIAN

Deutsche Bank AG, Mumbai has been appointed as Custodian for the Scheme mentioned in the Offer Document. The Custodian has been registered with SEBI and has been awarded registration No. IN/CUS/003 dated March 20, 1998. The Trustee has entered into a Custodian Agreement dated January 3, 2000 with the Custodian and the salient features of the said Agreement are to:

H.  COLLECTING CENTRES

The Collecting Bankers to the Initial Offer/Continuous Offer will be Standard Chartered Grindlays Bank (SEBI registration No INBI 00000056), Standard Chartered Bank (SEBI registration No INBI 00000885), and HDFC Bank (SEBI registration No INBI 00000063). Applications for the Initial Offer/Continuous Offer will also be accepted at the Investor Service Centres/Collection Centres designated by the AMC.
 
 
 
 
 
 

1. Investment Objective

To generate optimal returns with high liquidity by investing in Government Securities. There can be no assurance that the investment objective of the Scheme will be realised.

2. Investment Pattern

The corpus of the Scheme will be invested in Government Securities. Subject to the regulations, the corpus of the Scheme can be invested in any (but not exclusively) of the following securities:

2. Securities guaranteed by the Central Government.
3. Debt obligations of domestic Government agencies and statutory bodies, which may or may not carry a Central/State Government guarantee

The Scheme may invest the funds of the Scheme in short-term deposits of scheduled commercial banks.

The Scheme may also enter into repurchase and reverse repurchase obligations in all securities held by it as per the guidelines and regulations applicable to such transactions.

Gilts being an obligation of the Central Government, carry a zero risk weight under Capital Adequacy Weights prescribed by the RBI and are not liable to credit/default risk. Gilts only carry market risk i.e risk arising from the price movement in the market.

The Fund will apply to SEBI/RBI for permission to invest in Securities overseas in conformity with the guidelines, rules and regulations as may be announced by RBI/SEBI from time to time.

Prices of all Government securities bear an inverse relationship to movements in interest rates. When interest rates fall, prices of these Securities rise and vice versa. Price movement also depends upon the maturity period of the instrument. Longer maturity instruments generally tend to rise or fall more in relation to movements in interest rates, than shorter maturity instruments.

3. Asset Allocation

The asset allocation under the Scheme will be as follows:
 
 
 

Type of Instruments*	Normal Allocation* (% of Net Assets)	Likely Yield** %	Risk Profile
Government Securities	50 to 100	7 to 9	Low
Money Market Instruments	0 to 50	6 to 8	Low

 

* On introduction of cheque writing facility by RBI/such other authority, the AMC may introduce the same under the scheme. On introduction of the said facility, the Scheme will comply with guidelines, procedures issued and as required, a minimum of required percentage of the net assets or such other minimum asset allocation, as may be prescribed by the concerned authority from time to time, will be adhered to. For details refer to paragraph on cheque writing facility.

** As on December 20, 2001

The Funds objective is to optimise returns for investors and in doing so the fund will endeavor to manage interest rate risk effectively by managing the duration of the portfolio, which implies that the fund will attempt to reduce its duration when interest rates are rising and lengthen the duration when interest rates are falling and hence the funds portfolio may move from money market securities to short, medium and long dated securities.

The Fund in normal circumstances would invest primarily in Government securities of varying maturities. The Asset allocation pattern may be modified in the interest of investors, however, the same will be reviewed by the trustee on a quarterly basis and will be rebalanced to its normal position in a time frame as permitted by the trustee. However, the AMC will endeavour to achieve normal asset allocation pattern in a maximum period of 6 months.

Change in Investment Pattern

Subject to the SEBI Regulations, the asset allocation pattern indicated above may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It must be clearly understood that the percentages stated above are only indicative and not absolute. These proportions can vary substantially depending upon the perception of the Investment Manager; the intention being at all times to seek to protect the interests of the Unit holders. Such changes in the investment pattern will be for short term and for defensive considerations only.

Cheque writing facility

The Reserve Bank of India (RBI) had announced in its mid-term Review of Monetary and Credit Policy for 1999-2000 that it would permit scheduled commercial banks to offer ‘cheque writing’ facility to Gilt Funds and to those Liquid Income schemes of mutual funds which predominantly invest in money market instruments (not less than 80% of their corpus).

In accordance with this announcement and the guidelines issued by RBI and any amendments to the Guidelines thereof, the Scheme may, offer Cheque Writing Facility to its Unit holders.

Liquidity Support from RBI

Grindlays Sovereign Interest Fund being exclusively dedicated to investments in Government Securities, will be eligible to avail at any time, liquidity support from RBI upto 20% of the outstanding value of its investments in government securities (as at the close of business on the previous working day), made available by the RBI under its Guidelines (REF.IDMC.No. 2741/03.01.00/95-96 dated April 20, 1996). Liquidity support under these guidelines is available through reverse repurchase agreement in eligible Central Government dated securities and Treasury Bills of all maturities.

4. Investment Strategies and Risk Control

Investment Strategy

The domestic debt markets are maturing rapidly with liquidity emerging in various debt segments through the introduction of new instruments and investors. The aim of the Investment Manager will be to allocate the assets of the Scheme between various money market and gilt securities with the objective of achieving optimal returns with a highly liquid portfolio. The actual percentage of investment in various gilt securities will be decided after considering the prevailing political conditions, the economic environment (including interest rates and inflation), the performance of the corporate sector and general liquidity and other considerations in the economy and markets.

The Fund has put in place detailed Investment Discretion Guidelines defining the prudential and concentration limits for the portfolio and setting dealer limits. The investment management team is allowed full discretion to make sale and purchase decisions within the limits established. For individual transactions dealer limits apply and the maximum limit rests with the Managing Director. The Compliance Officer tracks that limits are not violated on an ongoing basis. The Fund Manager/(s) record a justification for investments made, on the deal slip. The Investment Management Committee (IMC) in its periodic meetings tracks portfolio investment rationale, portfolio composition, performance and limits. Any modifications to the Investment Discretion Guidelines can be made by the IMC and is ratified by the Board. The performance of the fund is monitored against its peer group in the industry and presented at every Board meeting alongwith the portfolio of the schemes. The Board of directors discusses the performance of and portfolio composition and queries are responded to by the Managing Director. Once a year, the Managing Director makes a detailed presentation to the board on the activities of the fund.

Risk Control

Since investing requires disciplined risk management, the AMC would incorporate adequate safeguards for controlling risks in the portfolio construction process. The risk control process involves reducing risks through portfolio diversification, taking care however not to dilute returns in the process. The AMC believes that this diversification would help achieve the desired level of consistency in returns.

The AMC aims to identify securities, which offer superior levels of yield at lower levels of risks. With the aim of controlling risks, rigorous in depth credit evaluation of the securities proposed to be invested in will be carried out by the investment team of the AMC.

The Scheme may also use various derivatives and hedging products from time to time, as would be available and permitted by SEBI, in an attempt to protect the value of the portfolio and enhance Unitholders’ interest.

The Scheme may invest in other Schemes managed by the AMC or in the Schemes of any other Mutual Funds, provided it is in conformity to the investment objectives of the Scheme and in terms of the prevailing Regulations. As per the Regulations, no investment management fees will be charged for such investments and the aggregate inter Scheme investment made by all Schemes of Standard Chartered Mutual Fund or in the Schemes under the management of other asset management companies shall not exceed 5% of the net asset value of the Standard Chartered Mutual Fund.

 For the present, the Scheme does not intend to enter into underwriting obligations. However, if the Scheme does enter into an underwriting agreement, it would do so after complying with the Regulations and with the prior approval of the Board of the AMC/Trustee.

5. Debt Market In India

The debt market in India is well developed. The largest market consists of the Government of India securities daily trading in which can exceed Rs.5000 crores with instruments tenors ranging from short dated Treasury Bills to long dated securities extending beyond 20 years. The yield curve tends to be positive sloping i.e. yield of shorter dated securities being lower than that of longer dated ones.

6. Portfolio Turnover

Portfolio turnover is defined as the aggregate of purchases and sales as a percentage of the corpus of the Scheme during a specified period of time.

 The AMC’s portfolio management style is conducive to a low portfolio turnover rate. However, the AMC will take advantage of the opportunities that present themselves from time to time because of any the inefficiencies in the securities markets. The AMC will endeavour to balance the increased cost on account of higher portfolio turnover with the benefits derived therefrom.

 7. Trading in derivatives

In terms of SEBI guidelines No.MFD/CIR/011/061/2000 dated February 1, 2000 the following disclosure requirements are stipulated by the guidelines for participation by Mutual Funds in trading in Derivative Products as given below:

The fund will use derivatives instruments for the purpose of hedging and portfolio balancing.

Example of a derivatives transaction

Basic Structure of a Swap

Bank A has a 6month Rs 10 crore liability, currently being deployed in call. Bank B has a Rs 10 crore 6 month asset, being funded through call. Both banks are running an interest rate risk.

To hedge this interest rate risk, they can enter into a 6month MIBOR (Mumbai Inter Bank Offered Rate) swap. Through this swap, A will receive a fixed preagreed rate (say 14%) and pay "call" on the NSE MIBOR ("the benchmark rate"). His paying at "call" on the benchmark rate will neutralize the interest rate risk of lending in call. B will pay 14% and receive interest at the benchmark rate. His receiving of "call" on the benchmark rate will neutralize his interest rate risk arising from his call borrowing.

The mechanism is as follows:

• Assume the swap is for Rs.10 crore March 1, 2000 to September 1, 2000. A is a fixed rate receiver at 14% and B is a floating rate receiver at the overnight compounded rate.
• On March 1, 2000 A and B will exchange only an agreement of having entered this swap. This documentation would be as per International Securities Dealers Association (ISDA).
• On a daily basis, the benchmark rate fixed by NSE will be tracked by them.
• On September 1, 2000 they will calculate the following:
• A is entitled to receive interest on Rs.10 crore at 14% for 184 days i.e. Rs. 70.57 lakh, (this amount is known at the time the swap was concluded.) and will pay the compounded benchmark rate.
• B is entitled to receive daily compounded call rate for 184 days & pay 14% fixed.
• On September 1, 2000, if the total interest on the daily overnight compounded benchmark rate is higher than Rs. 70.57 lakhs, A will pay B the difference. If the daily compounded benchmark rate is lower, then B will pay A the difference.
• Effectively Bank A earns interest at the rate of 14% p.a. for six months without lending money for 6 months fixed, while Bank B pays interest @ 14% p.a. for 6 months on Rs. 10 crore, without borrowing for 6 months fixed.

Under normal circumstances, the Scheme shall not have exposure of more than 50% of its net assets in derivative instruments. However, the AMC, with a view to protect interests of the investors, may increase exposure in derivative instruments as deem fit from time to time.

Risk factors

1. Credit Risk: The credit risk is the risk that the counter party will default obligations and is generally negligible, as there is no exchange of principal amounts in a derivative transaction.
2. Market risk: Derivatives carry the risk of adverse changes in the market price.
3. Illiquidity risk: The risk that a derivative cannot be sold or purchased quickly enough at a fair price, due to lack of liquidity in the market.
4. The fund pays the daily compounded rate. In practice however there can be a difference in the actual rate at which money is lent in the call market and the benchmark, which appears and is used.

8. Fundamental Attributes

Notwithstanding the above, when any change in the fundamental attributes of the Scheme or the Trust or fees and expenses payable or any other change which would modify the Scheme or affects the interest of the Unitholders, is proposed to be carried out, the Trustees shall ensure that such changes are made on fulfillment of parameters laid down by SEBI (Mutual Funds) Regulations, 1996.

For the purposes of this section, as per the current Regulations, "fundamental attributes" of the scheme shall mean:

(i) Type of scheme

Open ended income Scheme.

(ii) Investment Objectives & Policies

Investment Objective as defined in paragraph 1 above.

Asset Allocation Pattern as defined in paragraph 3 above.

(iii) Terms of Issue

Sale and Redemption of units as defined in Section named Units on Offer of this Offer Document

Fees and expenses as specified in paragraph C-1& 2 in Section named Loads & Recurring Expenses of this Offer Document /as permitted by the Regulations.

Fundamental Attributes will not cover such actions of the Trustees of the Mutual Fund or the Board of Directors of the Asset Management Company, made in order to conduct the business of the Trust, the Scheme or the Asset Management Company, where such business is in the nature of discharging the duties and responsibilities with which they have been charged. Nor will it include changes to the Scheme made in order to comply with changes in regulation with which the Scheme has been required to comply.

9. Investment of Subscription Money

The Fund may invest subscription money received from the investing public in money market instruments before finalisation of the allotment of Units. The AMC, on being satisfied of the receipt of the minimum subscription amount, can commence investment out of the funds received in accordance with the investment objectives of the Scheme and as per the existing Regulations. The income earned out of such investments would be merged with the corpus of the Scheme on completion of the allotment of the Units.

10. Investment by the AMC in the Scheme

The AMC may invest in the Scheme from time to time. As per the Regulations, such investments are permitted subject to disclosure being made in the Offer Document. However, the AMC shall not be entitled to charge any management fee on its investments in the Scheme. The maximum extent of investment by the AMC at any given time shall not exceed the networth of the AMC.

11. Investment in Overseas Financial Assets

The Scheme may also invest in securities overseas in conformity with the guidelines, rules and regulations as and when permitted by the concerned regulatory authorities in India. The Fund shall seek permission to invest in Government Securities issued by G-7 nations and other Foreign Governments provided such securities are considered as Investment grade and provided RBI permits such investment under the guidelines for a dedicated Gilt Fund.

To the extent that the assets of the Scheme will be invested in securities denominated in foreign currencies, the Indian Rupee equivalent of the net assets may be adversely affected by changes in the value of certain foreign currencies relative to Indian Rupee. The repatriation of capital to India may also be hampered by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.

12. Investment Restrictions for the Scheme

Pursuant to the Regulations and amendments thereto, the following investment restrictions are presently applicable to the Scheme:

1. Transfer of investments from one Scheme to another Scheme in the same Mutual Fund is permitted provided:

a) Such transfers are done at the prevailing market price for quoted instruments on spot basis (spot basis shall have the same meaning as specified by a Stock Exchange for spot transactions); transfer of unquoted securities will be made as per the policies laid down by the Trustees from time to time; and

b) The securities so transferred shall be in conformity with the investment objective of the Scheme to which such transfer has been made.

2. The Scheme may invest in other Schemes under the same AMC or any other Mutual Fund which have the same investment objective, without charging any fees, provided the aggregate inter-Scheme investment made by all the Schemes under the same management or in Schemes under management of any other asset management company shall not exceed 5% of the Net Asset Value of the Fund.

3. The Fund shall get the securities purchased transferred in the name of the Fund on account of the concerned Scheme, wherever investments are intended to be of a long-term nature.

4. The Fund may buy and sell securities on the basis of deliveries and will not make any short sales or engage in carry forward transactions except as and when permitted by the RBI in this regard (for example "when issued market" transactions).

5. No loans for any purpose can be advanced by the Scheme.

6. The Fund shall not borrow except to meet temporary liquidity needs of the Fund for the purpose of repurchase/redemption of units or payment of interest and/or dividend to the Unitholders, provided that the Fund shall not borrow more than 20% of the net assets of the individual Scheme and the duration of the borrowing shall not exceed a period of 6 months.

7. Pending deployment of funds of a Scheme in securities in terms of investment objectives of the Scheme, the AMC can invest the funds of the Scheme in short term deposits of scheduled commercial banks or in call deposits.

8. The Scheme may also use various hedging and derivative products from time to time, as are available and permitted by SEBI, in an attempt to protect and enhance the interests of the Unitholders at all times. Derivatives are contractual instruments whose performance is derived from that of an underlying asset.

9. All the Scheme's investments will be in transferable securities or bank deposits or in money at call or any such facility provided by RBI in lieu of call.

The Scheme will comply with SEBI regulations and any other Regulations applicable to the investments of Mutual Funds from time to time.

The Trustee may alter the above restrictions from time to time to the extent that changes in the Regulations may allow and/or as deemed fit in the general interest of the Unitholders.

All investment restrictions shall be applicable at the time of making investment.

13. Computation of Net Asset Value

The NAV of the Units of the Scheme will be computed by dividing the net assets of the Scheme by the number of Units outstanding on the valuation date. The Fund shall value its investments according to the valuation norms, as specified in Schedule VIII of the Regulations, or such norms as may be prescribed by SEBI from time to time.

These norms are indicated based on the current Regulations and the guidelines/instructions issued by SEBI i.e. MFD/CIR/8/92/2000 dated September 18, 2000. In terms of SEBI letter no MFD/CIR/8(A)/104/2000 dated October 3, 2000, the said guidelines on valuation of non-traded and thinly traded debt securities come into force from December 1, 2000 and the same was modified vide letter no. MFD/CIR/14/088/2001 dated March 28, 2001.

1) Traded Securities: -

i) Traded securities shall be valued at the last quoted closing prices on the National Stock Exchange (NSE).

ii) When on a particular valuation day, a security is not traded on the NSE, it will be valued at the last quoted closing price on the stock exchange where the security is principally traded (principal exchange). It would be left to the AMC to select the appropriate stock exchange, and the AMC shall record the reasons for the selection in writing. There should, however, be no objection for all scrips being valued at the prices quoted on the stock exchange where a majority of the investments are principally traded.

iii) When on a particular valuation day, a security has not been traded on the principal exchange; the value at which it is traded on another stock exchange will be used.

iv) When a security is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the NSE or principal exchange or another stock exchange where it is frequently traded, as the case may be, on the earliest previous day may be used, provided such date is not more than thirty days prior to the valuation date.
 
 

2. Non-Traded / Thinly Traded Securities

Non traded/ thinly traded securities shall be valued "in good faith" by the asset management company on the basis of the valuation principles laid down below:

Such securities shall be valued at yield to maturity based on the prevailing market rate, in accordance with item (cc) of Clause 2 of the Eighth Schedule of SEBI (Mutual Funds) Regulations, 1996 i.e. (Government securities will be valued at yield to maturity based on the prevailing market rate).

Where instruments have been bought on repo basis, the instrument would be valued at the resale price after deduction of applicable interest upto the date of the repurchase. Where an instrument has been sold on a repo basis, adjustment would be made for the difference between the repurchase price (after deduction of applicable interest upto the date of repurchase) and the value of the instrument. If the repurchase price exceeds the value, the depreciation will be provided, if the repurchase price is lower than the value, credit will be taken for the appreciation.

The valuation guidelines as outlined above are as per SEBI Regulations and are subject to change from time to time in conformity with changes made by SEBI.

Valuation of Derivative Products

1. The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (I) to (v) of clause 1 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended by SEBI Circular No.MFD/CIR/8/92/2000 and MFD/CIR/14/088/2001 dated September 18, 2000 and March 28, 2001respectively.
2. The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (I) and (ii) of clause 2 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended by SEBI Circular No.MFD/CIR/8/92/2000 and MFD/CIR/14/088/2001 dated September 18, 2000 and March 28, 2001respectively.

All expenses and incomes accrued up to the valuation date shall be considered for computation of NAV. For this purpose, major expenses like management fees and other periodic expenses would be accrued on a day to day basis. The minor expenses and income will be accrued on a periodic basis, provided the non-daily accrual does not affect the NAV calculations by more than 1%.

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

NAV of units under the Scheme shall be calculated as shown below:

NAV (Rs.)=

No. of Units outstanding under Scheme

The NAV of the Scheme will be calculated on a daily basis. The valuation of the Scheme’s assets and calculation of the Scheme’s NAV shall be subject to audit on an annual basis and shall be subject to such regulations as may be prescribed by SEBI from time to time.

The first NAV will be calculated and announced on the day of close of the Initial Offer Period. Subsequently, the NAV shall be calculated and announced on a daily basis. The NAVs of Growth Option and Dividend Option will be different after the declaration of first dividend.

14. Accounting Policies & Standards

In accordance with the Regulations, the AMC will follow the accounting policies and standards, as detailed below:

a) The AMC, for each Scheme, shall keep and maintain proper books of account, 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 the state of affairs of the Fund.

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

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

d) In determining the holding cost of investments and the gains or loss on sale of investments, the "average cost" method shall be followed for each security.

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

f) Where income receivable on investments has been accrued and has not been received for a period specified in the guidelines issued by SEBI, provision shall be made by debiting to the revenue account for the income so accrued in the manner specified by guidelines issued by SEBI.

g) When units are sold, the difference between the sale price and the face value of the unit, if positive, shall be credited to reserves and if negative is debited to reserves, the face value being credited to Capital Account. Similarly, when units are repurchased, the difference between the purchase price and face value of the unit, if positive shall be debited to reserves and, if negative, shall be credited to reserves, the face value being debited to the capital account.

h) When units are sold an appropriate part of the sale proceeds shall be credited to an Equalisation Account and when units are repurchased an appropriate amount would be debited to Equalisation Account. The net balance on this account shall be credited or debited to the Revenue Account. The balance on the Equalisation Account debited or credited to the Revenue Account shall not decrease or increase the net income of the Fund but is 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.

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

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

The accounting policies and standards outlined above are as per the existing Regulations and are subject to change as per changes in the Regulations.
 
 
 
 
 

A.  UNITS ON OFFER

1. Type of Scheme & Investment Plans and options offered under the scheme

An open ended income scheme which offers two Plans: a) Investment Plan and b) Short Term Plan with growth and dividend options under each plan.

Investment Plan

Is designed for investors seeking a long term investment option and generally has a medium term maturity profile. It will provide stable returns over a relatively longer tenor period of investment.

Short Term Plan

Is designed for investors seeking stable returns over shorter periods and will generally have a much shorter average maturity of assets thereby providing consistent returns even over a shorter period of investment.

Options under the Plans

Growth Option

The Scheme will not declare any dividend under this option. The income attributable to units under this Option will continue to remain invested in the Scheme and will be reflected in the Net Asset Value of units under this option. This option is suitable for investors who are not looking for current income, but who have invested only with the intention of capital appreciation. If the units under this option are held as a capital asset for a period of at least one year, from the date of acquisition, Unit holders should get the benefit of long term capital gains tax.

Dividend Option

Under this option, the Fund will endeavour to declare dividends periodically.

The distribution of dividend will be made out of the net surplus under this Option subject to availability of distributable profits, as computed in accordance with SEBI Regulations. The remaining net surplus after considering the dividend and tax, if any, payable thereon will remain invested in the Scheme and be reflected in the NAV.

Following options are available in Grindlays Sovereign Interest Fund –Investment Plan (GSIF-IP)

Quarterly Dividend : Under this option, the Fund will endeavour to declare dividends to the unitholders on a quarterly basis.

Half Yearly Dividend : Under this option, the Fund will endeavour to declare dividends to the unitholders twice in a year

Annual Dividend : Under this option, the Fund will endeavour to declare dividend to the unitholders once in a year

For the Grindlays Sovereign Interest Fund-Short Term Plan (GSIF-ST) the Fund will endeavour to declare dividend to the unitholders on a monthly basis.

Dividends, if declared, will be paid out of the net surplus of the Scheme to those Unitholders whose names appear in the Register of Unitholders on the record date. In order to be a Unitholder, an investor has to be allocated Units against clear funds.

The NAV of the Unit holders in the Dividend Option will stand reduced by the amount of dividend declared on the Record Date. The NAV of the Growth Option will remain unaffected.

As per the Regulations, the Fund shall despatch the dividend warrants within 30 days of declaration of Dividend. However, the Mutual Fund will endeavour to make dividend payments sooner to Unitholders.

There is no assurance or guarantee to Unitholders as to the rate of dividend distribution nor that dividends will be paid, though it is the intention of the Mutual Fund to make dividend distributions under the respective options of the Scheme.

As per the provisions the of the Income Tax Act, 1961 applicable as on the date of the Offer Document any income received from a mutual fund specified under clause 33 of section 10 of Income Tax Act, 1961 is exempt from tax. The dividend to be declared by the Fund will, accordingly, be exempt from income tax in the hands of the recipient under the above provisions.

As per the provisions of the Income Tax Act applicable as on the date of the offer document, the dividend declared to the Unitholders of a mutual fund shall be charged to tax at a flat rate of 10% (subject to applicable surcharge, if any), to be payable by the mutual fund. The tax liability of a mutual fund is notwithstanding the existing provisions of clause (23D) of Section 10 of Income Tax Act, 1961, which exempts the income of a mutual fund from income tax.

However, it must be distinctly understood that the actual declaration of dividend and the frequency thereof will inter-alia, depend on the availability of distributable profits as computed in accordance with SEBI Regulations. The decision of the Trustee/AMC in this regard shall be final. The AMC reserves the right to change the record date from that stated herein and the AMC also reserves the right to change the frequency of dividend payments.

Investors should clearly indicate the plan and the option for which the subscription is made by indicating the choice in the appropriate box provided for this purpose in the application form. In case of valid applications received, in the absence of such instruction, it will be assumed the investor has opted for Growth Option of the Investment Plan and processed accordingly. If, the investor has indicated the plan but not the option, it will be assumed the investor has opted for the Growth Option of the said plan. Investors may also opt to invest in both the plans of the Scheme subject to minimum subscription requirements under each plan.

The Investors should note that NAV of Dividend Option and Growth Option will be different after the declaration of dividend under the Scheme.

Dividend Reinvestment facility

Investors opting for the Dividend Option may choose to reinvest the dividend to be received by them in additional units of the scheme. Under this provision, the dividend due and payable to the unitholders will be compulsorily and without any further act by the unitholders, be reinvested in the scheme (under the dividend option, at the first ex-dividend NAV). The dividends so reinvested shall constitute a constructive payment of dividends to the unitholders and a constructive receipt of the same amount from each unitholder for reinvestment in units.

On reinvestment of dividends, the number of units to the credit of the unitholder will increase to the extent of the dividend reinvested divided by the NAV applicable as explained above. There shall, however, be no entry load on the dividends so reinvested.

2.  Minimum Subscription Amount

The Scheme under this Offer Document seeks to raise a minimum subscription of Rs.10,000/- during the Initial Offer Period. There is no limit on maximum amount for the Scheme.

3.  Minimum Application Amount

The minimum application amount per option in the Scheme is Rs.10,000/- and in multiples of Re.1/- thereafter under each Option. For details refer paragraph on "How to apply". There is no maximum limit.

The minimum application amount can be changed by the AMC from time to time.

4.  Subscriptions

Subscriptions to this scheme shall be open from the commencement of banking hours from ______, 2002,. Thereafter, the Scheme shall remain open perpetually. On the first day of opening i.e. ____________, 2002, the units will be offered at a price of Rs 10 per unit, for cash at par. From the next Business Day after the closure of the Initial Public Offer, there will be ongoing sales and repurchases at NAV based prices.

5.  Extension of the Initial Offer Period

The Trustee reserves the right to extend the closing date, subject to the condition that the subscription list shall not be kept open for more than 30 days.

6.  Face Value of Units

The face value of each unit issued under the scheme shall be Rs. 10 (Rupees ten).

7.  Initial Issue Expenses

1. Initial issue expenses of the Scheme are estimated as under:

The above percentages have been arrived at based on the minimum subscription as stated above. The above estimates are subject to change as per actuals. The entire amount of Initial Issue Expenses for the Scheme will be borne by the AMC and will not be charged to the Scheme.

ii) Past Schemes

The details of the Schemes launched prior to the date of this document and the Initial Issue Expenses charged thereunder are as follows:
 

Name of the Scheme	Date of launch	Initial Issue Expenses charged to the Scheme (as per the disclosure made in the offer document)
GSSIF	June 13, 2000	Nil
GFSS Series (I)	March 22, 2001	Nil
GFSS Series (II)	June 25, 2001	Nil
GCF	July 2, 2001	Nil
GFSS Series (III)	September 24, 2001	Nil
GFSS Series (IV)	December 10, 2001	Nil

Given below are the details of actual aggregate issue expenses incurred under the above mentioned fund/s.

Grindlays Super Saver Income Fund & Grindlays Cash Fund
 

Category of Expenses	GSSIF	GCF
Collections During IPO (Rs. in crores)	257.69	45.84
Advertising, Marketing		0.081
Printing and Distribution expenses	0.12%	0.017
Collection and Registrar	0.01%
Bank charges & other expenses	0.01%	0.005
Selling Commissions	0.08%
Total	0.22%	0.103

Grindlays Fixed Saving Scheme
 

Category of Expenses	GFSS Series  (I)	GFSS Series (II)		GFSS Series (III)
		Plan A	Plan B	Plan A	Plan B
Collections During IPO (Rs. in crores)	70.54	11.74	7.27	12.75	7.18
Advertising, Marketing		0.117	0.188	0.6340	1.1253
Printing and Distribution expenses	0.34%	0.168	0.271	0.0611	0.1085
Collection and Registrar	0.00%	0.012	0.020	0.0068	0.0121
Bank charges & other expenses	0.00%
Selling Commissions	0.46%	0.700	1.131	0.7533	1.3369
Total	0.80%	0.997	1.610	1.4552	2.5827

8.  Pledge of Units for loans

The Units can be pledged by the Unitholders as security for raising loans subject to the conditions of the lending institution. The Registrar will take note of such pledge / charge in its records.

9.  Switch facility

Unitholders under the Scheme have the option to swit