SUN F&C MUTUAL FUND

 

O F F E R ...D O C U M E N T

SUN F&C FIXED INCOME SECURITIES FUND

An Open-End Income Scheme dedicated to investing in

Fixed Income Securities

from

SUN F&C MUTUAL FUND

Issue of Units of Rs.10/- Per Unit for Cash

Investment Manager:
SUN F&C Asset Management (India) Pvt. Ltd.

Scheme Opens on          :                ***

Earliest Closing Date      :                ***

Scheme Closes on         :                ***

 

This Offer Document sets forth concisely the information about the Scheme that a prospective investor ought to know before investing. Prospective investors should study this Offer Document carefully in its entirety and consult with their legal, tax and investment advisors to determine possible legal, tax, financial or other considerations of subscribing for, purchasing or holding Units before making a subscription for Units and retain the Offer Document for future reference.

The Scheme particulars have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (the SEBI Regulations) as amended till date, and filed with SEBI. The Units being offered for public subscription have not been approved or disapproved by the Securities and Exchange Board of India (SEBI) nor has the SEBI certified the accuracy or adequacy of the Offer Document.

The SUN F&C Mutual Fund (the Mutual Fund) and the SUN F&C Asset Management (India) Pvt. Ltd (the AMC), have not authorized any person to give any information or make any representations, either oral or written, other than as stated in this Offer Document in connection with issue of Units under the Scheme. Prospective Investors are accordingly advised not to rely upon any information or representations not incorporated in this Offer Document. Any subscription, purchase or sale made by any person on the basis of statements or representations which are not contained in this Offer Document or which are inconsistent with the information contained herein shall be solely at the risk of the Investor.

The Scheme is an open-ended perpetual scheme. This Offer Document will remain effective till a revised version is printed and circulated. In accordance with SEBI directives, this Offer Document will be revised and updated at least once in two years from the date of issue. Till the time the Offer Document is reprinted an addendum giving details of each of the changes will be attached to the Offer Document. The yearly condensed financial information of the schemes launched by SUN F&C Mutual Fund will also be included in the form of addendum to the Offer Document till the time the revised Offer Document is printed. The investors may also obtain information about any further changes after the date of this Offer Document from the Mutual Fund, Investor Service Centres, Distributors or Brokers. Material changes will be filed with SEBI and circulated to the Unitholders or as may be publicly notified by advertisements in the newspapers subject to the applicable SEBI Regulations.

All references to "Dollars" or "$" refer to United States Dollars and "Rs" to Indian Rupees. The reference exchange rate between the United States Dollar and the Indian Rupee has been taken at US$1 = Rs.48. A "crore" means "ten million" and a "lac" means a "hundred thousand".

The date of this Offer Document is ****

TABLE OF CONTENTS

I. DEFINITIONS & ABBREVIATIONS

II. SUMMARY

III. RISK FACTORS

V. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

VI. EXPENSES

A. Unitholder Transaction Expenses or Load Structure. 

B. Initial Issue Expenses

· For the Present Scheme

· Past Schemes

C. Estimated Annual Scheme Recurring Expenses:    

VII. CONDENSED FINANCIAL INFORMATION

(i) SUN F&C Value Fund      

A. Information for the Previous Fiscal Years

B. Information for the Current Fiscal Year (2001-2002)

(ii) SUN F&C Money Value Fund

A. Information for the Previous Fiscal Years

B. Information for the Current Fiscal Year (2001-2002)

(iii) SUN F&C Balanced Fund 

A. Information for the Previous Fiscal Years

B. Information for the Current Fiscal Year (2001-2002)

(iv) SUN F&C Emerging Technologies Fund  

A. Information for the Previous Fiscal Years

B. Information for the Current Fiscal Year (2001-2002)

(v) SUN F&C Monthly Income Plan  

A. Information for the Previous Fiscal Year

B. Information for the Current Fiscal Year (2001-2002)

(vi) SUN F&C Resurgent India Equity Fund     

A. Information for the Previous Fiscal Year

B.  Information for the Current Fiscal Year (2001-2002)

(vii) SUN F&C Fixed Maturity Series  

(viii) SUN F&C Performance Fund (Offshore Fund)  

(ix) Information regarding borrowing  (All Schemes launched till date)    

VIII. CONSTITUTION OF THE MUTUAL FUND

A. The Mutual Fund  

B. Functions and Responsibilities of the Constituents of the Mutual Fund   

· The Sponsor

· The Asset Management Company

· Duties and Obligations of the Asset Management Company

· Rights and Obligations of the Trustees

· 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      

IX. INVESTMENT OBJECTIVES AND POLICIES

A. Investment Objective      

B. Fundamental Attributes    

C. Investment Pattern

D. Position of Debt Securities Market in India    

E. Asset Allocation

F. Change in Investment Pattern

G. Investment Strategy and Risk Control  

H. Investment Process at the AMC  

I. Investment of Subscription Money 

J. Investment in Illiquid Securities/ Liquidity Risk 

K. Investment by the AMC in the Scheme

L. Portfolio Turnover Policy

M. Hedging Policies/ Trading in Derivatives

N. Investment Restrictions

O. Underwriting Activity

P. Investment in Other Schemes or in Schemes of Other Mutual Funds 

Q. Modifications to the Scheme   

R. Investment in Overseas Financial Assets/ securities, ADRs/GDRs

X. MANAGEMENT OF THE FUND

A. Name of the AMC

B. Fund Manager(s) for the Scheme  

C. Name of the Investor Relations Officer  

D. Board of Directors     

E. Date of entering the Investment Management Agreement

F. Experience of the AMC  

G. AMC's Compensation 

H. Name and Business Experience/ Exposure of the Key Personnel of AMC 

I. The Custodian   

J. Statutory Auditor and Tax Consultant for the Scheme

K. Registrar 

L. SEBI's Registration Numbers

M. Depository 

XI. UNITS AND OFFER

A. The Offer 

B. Listing and Transfer 

C. Issuance of Units on Allotment and Refund 

D. Transfers Between Schemes/ Between Plans of the Scheme - Switching 

E. Default Option

XII. SALE OF UNITS

A. Who can Apply  

B. Availability of Application Forms and Offer Document

C. How to Apply

D. Investment Plans  / Options 

E. SUN F&C Personal Investment Plans (PIP)  

· Systematic Investment Facility (SIF)

· Systematic Withdrawal Facility (SWF)

· Systematic Switch Facility (SSF)

· Automatic Trigger Facility (ATF)

· Composite Portfolio and Rebalancing Facility

F. Payment Procedure for the NRI/ OCBs/ PIOs

G. Application under Power of Attorney/ Body Corporate/ Registered Society/ Trust/ Partnership

H. Joint Applications

I. Brokerage 

J. Subsequent Purchase of Units 

K. Allotment / Lien on Units

L. Fractional Units

M. Nomination Facility

N. Split in the Face Value of Units

O. Dividend Sweep Facility 

P. Issue of Bonus Units

XIII. DIVIDENDS AND DISTRIBUTIONS

· Dividend Policy  

· Effect of Dividends      

· Unclaimed Redemption/ Dividend Amount      

XIV. INTER-SCHEME TRANSFERS OF INVESTMENTS

XV. ASSOCIATE TRANSACTIONS

· Associate Transactions (for the last three fiscal years)      

· Investment in the Scheme by Sponsors/ Associates    

· Policy for Investing in Group Companies of the Sponsor of the Mutual Fund    

· Utilisation of Services of Sponsor(s)/ Associate(s)

XVI. BORROWING BY THE MUTUAL FUND

XVII. SECURITIES LENDING ACTIVITIES

XVIII. NET ASSET VALUE AND VALUATION OF ASSETS OF THE SCHEME

A. Computation of Net Asset Value    

B. Valuation of Assets 

· Traded Debt Securities

· Thinly Traded Debt Securities

·  Non Traded Debt Securities

·  Valuation of Non-Traded/ Thinly Traded Debt Securities

XIX. REDEMPTION OR REPURCHASE

A. Redemption of Units 

B. Redemption Price

C. Redemption Amount 

D. Payment of Redemption Proceeds 

E. Redemption by NRIs, PIOs, OCBs, and FIIs 

F. Right to Close a Unitholder's Account 

G. Notice Period for Redemptions 

H. Right to Limit Redemptions

I. Suspension of Sale or Redemption of Units 

J. Sale and Redemption Price  

XX. ACCOUNTING POLICIES

XXI. TAX TREATMENT OF INVESTMENTS IN MUTUAL FUNDS

XXII. INVESTORS' RIGHTS AND SERVICES

A. Rights of Unitholders

B. Documents Available For Inspection 

C. Access to Information

· Net Asset Value

· Quarterly Reports

· Annual Financial Reports

· Half Yearly Disclosures

· Response Time

· Householding (Newsletters only)

D. Investor Services

· Account Number

· Account Statement

· Receiving Account Statement / Correspondence by e-mail

· Direct Credit Facility

· Personal Identification Number (PIN)

· Gift Facility

· Electronic Clearing Service (ECS)

· Pledge of Units

· Payment to Alternate Payee

XXIII. INVESTOR GRIEVANCES REDRESSAL MECHANISM

· Grievance Redressal 

· Investor Complaints  

XXIV. PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF INSPECTIONS OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE BEEN TAKEN OR IS IN THE PROCESS OF BEING TAKEN BY ANY REGULATORY AUTHORITY

XXV. MISCELLANEOUS

· Power to Make Rules

· Power to Remove Difficulties

· Scheme to be Binding on Unitholders 

· Winding Up 

· Procedure and Manner of Winding Up

· Books and Records

DIRECTORY

CAMS INVESTOR SERVICE  CENTRES.

SUN F&C ASSET MANAGEMENT (INDIA)  PVT. LTD. - List of Offices

 

I. DEFINITIONS & ABBREVIATION

AMC: Asset Management Company.

Applicable NAV: Applicable NAV is the declared NAV per Unit computed at close of each Business Day.

Auditor & Tax Consultant: The Auditor and Tax Consultant to the Mutual Fund - Price Waterhouse, Mumbai.

Bank: Any Scheduled Commercial Bank in India

Board of Directors or Board: Board of Directors of the Asset Management Company.

Business Day: A Business Day is any day other than: (1) a Saturday or a Sunday or (2) a day on which Banks or the Reserve Bank of India and/or National Stock Exchange are closed for business or (3) a day on which there is no RBI Clearing/settlement of securities or (4) a day on which the sale and redemption of Units is suspended by the Trustees/AMC.

CBDT: Central Board of Direct Taxes

Credit Risk: Risk of default in payment of principal or interest or both

Custodian: The Custodian to the Mutual Fund - ABN-AMRO Bank N.V . The Bank will also act as the Custodian for investments done for the International Plan.

FCEM: F&C Emerging Markets Ltd., of the U.K.

FII: Foreign Institutional Investors, registered with SEBI under SEBI (Foreign Institutional Investors) Regulations, 1995.

Fixed Income Securities: Debt Securities created and issued by entities such as the Central Government, State Government(s), Local Authorities, Municipal Corporations, PSUs, Public Companies, Private Companies, Bodies Corporate, and any other entities which may be recognised/permitted which yield a return at fixed or variable rate by way of interest, premium, discount, or a combination of any of them.

Investment Manager or AMC (as appropriate): The Investment Manager to the Mutual Fund - SUN F&C Asset Management (India) Pvt. Ltd.

Initial Offer Period of the Scheme: The dates on or period during which the initial subscription to Units of the Scheme can be made i.e. * ________, 2002 to * __________, 2002, subject to the earlier closure or extension, if any, such offer period not being more than 30 days.

Legal Advisor: The Legal Advisor to the Mutual Fund and the Asset Management Company - Little & Co., Mumbai.

Money Market Instruments: Commercial Papers, Commercial Bills, Treasury Bills, Government Securities having an unexpired maturity upto one year, call, notice or term money, certificate of deposit, usance bills discounting scheme, repos/reverse repos and any other like instruments as specified from time to time by RBI.

Mutual Fund: SUN F&C Mutual Fund

NAV: Net Asset Value

NRI: A Non-Resident Indian or a person of Indian origin residing outside India.

OCB: Overseas Corporate Bodies, firms and societies which are held directly or indirectly but ultimately to the extent of at least 60% by NRIs and trusts in which at least 60% of the beneficial interest is held irrevocably by such persons.

RBI: Reserve Bank of India

Registrar: The Registrar & Transfer Agent to the Mutual Fund - Computer Age Management Services Pvt. Ltd., (CAMS) Chennai.

Scheme: The offer made by the Mutual Fund through this Offer Document viz. SUN F&C Fixed Income Securities Fund.

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

SEBI Regulations/ Regulations: The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time and includes any Mutual Fund Guidelines, Circulars, Press Releases or Notifications that may be issued by SEBI.

Sponsor: The sponsor of the Mutual Fund - FCEM (SSIL is the co-sponsor).

SSIL: SUN Securities (India) Pvt. Ltd.

Trustees: Board of Trustees of the Mutual Fund.

Unitholder: A participant in the Scheme.

Units: The security representing the interest of the Unitholders in the Scheme. Each Unit represents one undivided share in the assets of the Plans/ Options of the Scheme.

II. SUMMARY

SUN F&C FIXED INCOME SECURITIES FUND

Name of the Scheme: SUN F&C Fixed Income Securities Fund dedicated to investing in Fixed Income Securities.

Objective: The Scheme seeks to generate income by investing in portfolios of debt and money market instruments of varying maturities under four Investment Plans with a view to maximising income while maintaining optimal balance of yield, safety and liquidity. The objective of its introduction is to cater to the needs of investors in the fixed income segment with varying investment horizons namely short, medium and long term and seeking stable returns.

A principal and unique feature of the Scheme unwill be the opportunity given to Unitholders to design and construct a ‘Composite Fixed Income Portfolio’ by investing in two or three or all four Investment Plans in certain allocation and weightage with the facility of rebalancing carried out periodically (say once every quarter)by the Mutual Fund as per instructions given by the Unitholder. This facility will be given to the Unitholder free of charge and is described in detail under the ‘Composite Portfolio and Rebalancing Facility’ on Page __.

Unitholders will also have an option to dertake portfolio balancing on their own on any Business Day by giving switch instructions to the Mutual Fund subject to a small switchover fee to meet incidental expenses such as postage etc.

Structure: Open-ended Income Fund dedicated to investment in Fixed Income Securities.

Initial Offer Price: Rs.10 per unit for cash at par.

Subsequent Subscription(s): At NAV based prices, subject to Entry Load, if any.

Features: The Scheme will offer four Plans to investors to choose from:

1. Short Term Plan (Plan A).

The investment portfolio of this Plan will be predominantly oriented towards shorter maturity Fixed Income Securities and is ideal for investors with short term horizons since it benefits them by reducing the interest rate risk. The weighted average maturity of the portfolio as a whole of this Plan will be a year and less.

2. Medium Term Plan (Plan B).

This investment portfolio of the Plan will be invested in a broad spectrum of Fixed Income Securities such that the weighted average maturity of the portfolio as a whole will be  between one to three years. This maturity profile would serve as an effective de-risking mechanism with superior returns due to higher allocation to debt instruments.

3. Long Term Plan (Plan C).

The investment portfolio will predominantly invest in long dated Fixed Income Securities. The weighted average maturity of the portfolio of this Plan as a whole will be more than three years. Long Term Plan will be ideal for investors whose risk preference permits investment in a portfolio of longer maturities with commensurate returns.

4. International Plan (Plan D).

The investment portfolio of this plan will invest in a diversified portfolio, primarily consisting of high quality debt securities, government obligations and money market securities domiciled in markets around the world in countries with fully convertible currencies. It is suitable for investors who believe that diversified investment in income from debt securities of established issuers around the world could provide opportunities for generating high level of income, consistent with preservation of capital.

All four Plans viz. Plan A, B, C and D will offer Growth and Dividend Options, which investors may choose from. Dividend Reinvestment Facility (DRF) is available by which Unitholders can choose to reinvest all their dividends by way of additional Units of the Scheme, instead of receiving dividends in cash. 

Load: For the present, it is not intended that any entry load on the purchase of units under any Plan will be levied, but an Exit Load of 0.25%, if redeemed within 30 days of allotment will be levied on all Plans.  Please refer to Load Structure on Page __ for further details.

Application Amount: Minimum Rs. 25,000/- for each Plan, additional amounts in multiples of Re.1 thereafter.

Duration of Initial Offer of the Scheme: The Scheme will open for subscription from *____________, 2002 to  *_________, 2002 during the Initial Offer Period. The earliest closing date will be *___________, 2002. The Trustees reserve the right to extend the closing date for the Initial Offer Period of the Scheme, subject to the condition that the Initial Offer shall not be kept open for more than 30 days.

Target Amount: Rs.1 lac each for Plan A, B and C and Rs. 10 crores (approx $2 million) for Plan D during the Initial Offer Period.

Liquidity: The Scheme will accept subscriptions on a continuous basis at NAV based prices, subject to Entry Load, if any, not later than 20 Business Days after the closure of the Initial Public Offering. The Scheme may change the minimum investment requirements and / or pricing structure at any time after the IPO.

Being an open end scheme, the investors may redeem part or whole of their balance of units as and when desired on any Business Day, at the price calculated on the basis of the Applicable NAV, subject to the applicable Exit Load.

Listing and Redemption: The Units of the Scheme are not proposed to be listed on any exchange. The Mutual Fund will, under normal circumstances, endeavor to dispatch the redemption cheques by courier or by registered post within 3  Business Days from the date of acceptance of the redemption request at any of the Investor Service Centers as notified by the AMC.

Transparency:  NAV will be determined every day and declared on every Business Day. NAV of the Scheme shall be made available at all Investor Service Centers of the AMC. The AMC shall also arrange to have the NAV published daily in newspapers and displayed on website of Association of Mutual Funds in India and the Mutual Fund. The Mutual Fund shall disclose the full portfolio of the Scheme every quarter.

Repatriation facility: NRIs, OCBs and FIIs may invest in the Scheme on a full repatriation basis.

Initial issue expenses: To be borne by the AMC.

Credentials: SUN F&C Mutual Fund is a mutual fund set up by F&C Emerging Markets Ltd of the U.K.  (FCEM), in association with the SUN Securities (India) Pvt. Ltd. FCEM is part of the F&C Group, one of Europe's oldest and leading asset management groups.  Eureko B. V., a substantial pan-European financial services group has recently taken over F&C and the total funds under management of the enlarged entity is over $ 90 billion (Rs. 432,000 crores).

Tax Benefits:

·   Dividend distributions by Mutual Funds are tax-exempt in the hands of the Unitholder. However, the Finance Bill, 2002 proposes to tax dividend in the hands of the Unitholder.

·   Unitholders who redeem units held for more than 12 months will get the benefit of long-term capital gains tax and resident and other eligible investors will be entitled to get the benefit of indexation.

·   Investments in the Scheme are exempt from Wealth Tax and Gift Tax.
Please refer to section on 'Tax treatment of Investment of Mutual Funds' for further details.

Switching: Unitholders can switch from one Plan to another or to other Schemes of SUN F&C Mutual Fund.

Allotment: Subject to the applications being in accordance with the terms of the offer, full and firm allotment will be made to all applicants of Plan A,B and C. In case of Plan D, The Trustees reserve the right to restrict applications upto the prescribed amount for investment by the Mutual Fund in Fixed Income Securities in foreign countries that may be stipilated by RBI / SEBI from time to time.

III. RISK FACTORS

STANDARD RISK FACTORS

Ø Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved.
Ø As with any investment in securities, the NAV of the units issued under the Scheme can go up or down depending on the factors and forces affecting the capital markets. 
Ø Past performance of the Sponsor/ AMC/ Mutual Fund does not indicate the future performance of the schemes of the Mutual Fund.
Ø SUN F&C Fixed Income Securities Fund is the name of the Scheme and does not in any manner indicate either the quality of the Scheme, its future prospects or returns.
Ø The sponsors are not responsible or liable for any loss or shortfall resulting from the operations of this Scheme beyond the initial contribution of Rs.5 lacs towards setting up the Mutual Fund.
Ø There is no guarantee or assurance towards the frequency or quantum of distribution of income under the Dividend Option nor of the rate of return or actual return in the hands of the investor though there is every intention to manage the portfolio so as to make quarterly distributions to Unitholders depending on the return of the Scheme’s investments.

SCHEME SPECIFIC RISK FACTORS

Interest Rate/ Price Risk: Fixed Income Securities such as bonds, debentures, and money market instruments run the price-risk or interest rate risk.  Generally, when interest rates rise, prices of existing fixed income securities 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, the present level of interest rates and the increase or decrease in the level of interest rates.

Credit Risk: Debt securities are also subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations. Even where no default occurs, the price of a security may go down because the credit rating of an issuer goes down.

Reinvestment Risk: Investments in Fixed Income Securities may carry reinvestment risk as interest rates prevailing on the interest or maturity due dates may differ from the original coupon of the instrument.  Consequently, the proceeds may get invested at a lower rate.

Regulatory Risk: Changes in government policy in general and changes in tax benefits applicable to Mutual Funds may impact the returns to investors in the Scheme.

Risks associated with investment in unlisted securities: Except for any security of an associate or group company, the Scheme has the power to invest in securities which are not listed on a stock exchange ("unlisted securities") which in general are subject to greater price fluctuations, less liquidity and greater risk than those which are traded in the open market.  Unlisted securities may lack a liquid secondary market and there can be no assurance that the Scheme will realise their investments in unlisted securities at a fair value.

Currency Risk: The Scheme may also invest in overseas Fixed Income Securities, ADRs/GDRs of Indian Corporates as permitted by the concerned regulatory authorities in India. The International Plan is specifically designed to invest predominantly in Fixed Income Securities issued in foreign countries.   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/ fluctuation in the value of certain foreign currencies relative to the 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.

Liquidity Risk: Low trading volumes, settlement periods and transfer procedures may restrict the liquidity of the Scheme’s investments. Transacting may become difficult due to extreme volatility in the market resulting in constriction in volumes. Additionally, changes in the SEBI/ RBI Regulations/Guidelines may have an adverse impact on the liquidity of the Scheme. In the event of an inordinately large number of redemption requests or of a restructuring of the Scheme's portfolio, the time taken by the Scheme for redemption of Units may become significant. Please see Section ‘Right to Limit Redemptions’ on Page __ .

Risks associated with Derivatives: As disclosed elsewhere in this Offer Document, the Scheme intends to invest in derivative products, as per guidelines and directives issued by concerned regulatory authorities from time to time. Derivatives are specialised instruments that require investment techniques and risk analysis different from those associated with stocks and bonds, which carry a high-risk return ratio.

Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price of interest rate movements correctly.  There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the "counter party") to comply with the terms of the derivatives contract also called the settlement risk. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Also, the Indian markets for derivative instruments is relatively new. Please also see the section on ‘Trading in Derivatives’ on Page __ ).

Risks associated with Securities Lending: The Scheme may, depending on the composition of its portfolio, engage in securities lending activities in accordance with the Securities Lending Scheme, 1997, ‘Guidelines for Participation by Mutual Funds in Stock Lending’ issued by SEBI and other applicable SEBI Guidelines / Regulations.

The risks in lending portfolio consist of the failure of another party, in this case the approved intermediary, to comply with the terms of agreement entered into between the lender of securities and the approved intermediary.  Such failure to comply can result in the possible loss of rights in the collateral put up by the borrower of the securities, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of any benefits accruing to the lender from the securities deposited with the approved intermediary.

In order to limit the exposure to risk on account of securities lending, a maximum of 40% of the net assets of each Plan will be deployed in securities lending and the maximum single party exposure will be restricted to 10% of the net assets under each Plan outstanding at any point of time.

The investors in the Scheme are not being offered any guaranteed/ indicated returns.

Special Considerations: Mutual funds being vehicles of securities investments are subject to market and other risks and there can be no guarantee against loss resulting from investing in the Scheme.  The various factors which impact the value of the Scheme's investments include, but are not limited to, fluctuations in the equity and bond market, interest rates, prevailing political and economic environment, changes in government policy, factors specific to the issuer of the securities, tax laws, liquidity of the underlying instruments, settlement periods, trading volumes, etc.

Investment decisions made by the AMC may not always be profitable.

The Sponsors are not responsible or liable for any loss resulting from the operation of the Scheme beyond the contribution of an amount of Rs.5 lacs made by them towards setting up the Mutual Fund and such other accretions and additions to the corpus set up by the Sponsors.

From time to time and subject to the SEBI Regulations, the Sponsors, the Mutual Funds and investments companies managed by them, their affiliates, their associate companies, subsidiaries of the Sponsors, and the AMC may invest either directly or indirectly in the Scheme.  The funds managed by these affiliates, associates, the Sponsors, subsidiaries of the Sponsors and/or the AMC may acquire a substantial portion of the Scheme's Units and collectively constitute a major investor in the Scheme.  Accordingly, redemption of Units held by such funds, affiliates, associates and Sponsors may have an adverse impact on the Units of the Scheme because the timing of such redemption may impact the ability of other Unitholders to redeem their Units.

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 SEBI Regulations, no investment management fees will be charged for such investments.

Lower rated or unrated securities are more likely to react to developments affecting the market and the credit risk than the highly rated securities which react primarily to movements in the general level of interest rates.  Lower rated securities also tend to be more sensitive to economic conditions than higher rated securities.  The Investment Manager will consider both credit risk and market risk in making investment decisions.

Zero coupon or deep discount bonds are debt obligations that do not entitle the holder to any periodic payment of interest prior to maturity or a specified date when the securities begin paying current interest and therefore, are generally issued and traded at a discount to their face values.  The discount depends on the time remaining until maturity or the date when securities begin paying current interest.  It also varies depending on the prevailing interest rates, liquidity of the security and the perceived credit risk of the issuer.  The market prices of zero coupon securities are generally more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than other coupon bearing securities having similar maturities and credit quality.

The credit risk factors pertaining to lower rated securities also apply to lower rated zero coupon or deferred interest bonds.  Such bonds carry an additional risk in that, unlike bonds that pay interest throughout the period to maturity, the Scheme would not realise any cash until interest payment on the bonds commence and if the issuer defaults, the Scheme may not obtain any return on its investment.

The Scheme has the power to invest in securities which are not listed on a stock exchange ("unlisted securities") which in general are subject to greater price fluctuations, less liquidity and greater risk than those which are traded in the open market.  Unlisted securities may lack a liquid secondary market and there can be no assurance that the Scheme will realise its investments in unlisted securities at a fair value.   

As liquidity of the Scheme's investments could, at times, be restricted by trading volumes and settlement periods, the time taken by the Fund for redemption of Units may be significant in the event of an inordinately large number of redemption requests or of a restructuring of the Scheme's portfolio.  In view of this, the Trustees have the right, in their sole discretion to limit redemptions (including suspending redemption) under certain circumstances, as described under the section titled "Right to Limit Redemptions" on Page __.

In case the Scheme undertakes securities lending under the SEBI Regulations, the Scheme may, at times, be exposed to counter party risk.

In case the Scheme utilizes any derivatives, under the Regulations, the Scheme may, in certain situations, be exposed to price risks. (Please see Section titled 'Trading in Derivatives' on Page-----)

V. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

A Due Diligence Certificate duly signed by the Chief Compliance Officer of SUN F&C Asset Management (India) Pvt. Ltd. has been submitted to SEBI on ______, ____, 2002 which reads as follows:

DUE DILIGENCE CERTIFICATE

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

 
sd/-

	Initial Issue	Subsequent Issue
Maximum Sales/ Entry Load imposed on purchases (as % of NAV)*	Nil	Nil Trustees reserve the right to levy an Entry Load subject to a maximum Load of 6% with prospective effect.
Sales/ Entry Load, if any, on issue of Units in lieu of dividends (as % of NAV)	Nil	Nil
Contingent Deferred Sales Load	Nil	Nil
Exit Load (as % of NAV) *	0.25%, if redeemed within 30 days of allotment. With approval of Trustees, Load can be changed from time to time with prospective effect to suit the market conditions.	0.25%, if redeemed within 30 days of allottement. With approval of Trustees, Load can be changed from time to time with prospective effect to suit the market conditions
Switch over/Exchange Fee (as % of NAV) ** Interscheme Intra-Scheme	Switchover fee of upto 0.05% will be levied on all switches done within the scheme other than those under the ‘Rebalancing Facility’, Please see section on ‘Composite Portfolio and Rebalancing Facility’  on Page 41 for further details. Trustees reserve the right to  levy/ revise  Switch over/ Exchange Fee with prospective effect.	Switchover fee of upto 0.05% will be levied on all switches done within the Scheme other than those under the 'Rebalancing Facility', please see section on 'Composite Portfolio' and 'Rebalancing Facility' for further details. Trustees reserve the right to  levy/ revise  Switch over/ Exchange Fee with prospective effect