icici prudential india

SCHEME INFORMATION DOCUMENT ICICI Prudential Fixed Maturity Plan – Series 49 (A Close - Ended Debt Fund) From ICICI PRUDENTIAL MUTUAL FUND Offer of Units of Rs. 10 each for cash during the New Fund Offer Plan(s) Three Months Plan A Three Months Plan B Three Months Plan C Three Months Plan D Three Months Plan E One Year Plan A One Year Plan B One Year Plan C One Year Plan D One Year Plan E Being a close-ended fund the plans under the scheme will not reopen for subscriptions. Name of Mutual Fund Name of Asset Management Company Name of Trustee Company : ICICI Prudential Mutual Fund : ICICI Prudential Asset Management Company Limited : ICICI Prudential Trust Limited New Fund Offer opens New Fund Offer closes INVESTMENT MANAGER ICICI Prudential Asset Management Company Limited Registered Office: 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi – 110 001 Corporate Office: 8th Floor, Peninsula Tower, Peninsula Corporate Park, Ganpatrao Kadam Marg, Off Senapati Bapat Marg, Lower Parel, Mumbai 400 013. www.icicipruamc.com TRUSTEE ICICI Prudential Trust Limited Registered Office: 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi – 110 001 The particulars of the Scheme have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations 1996, (herein after referred to as SEBI (MF) Regulations) as amended till date, and filed with SEBI, along with a Due Diligence Certificate from the AMC. The units being offered for public subscription have not been approved or recommended by SEBI nor has SEBI certified the accuracy or adequacy of the Scheme Information Document. 1 The Scheme Information Document sets forth concisely the information about the scheme that a prospective investor ought to know before investing. Before investing, investors should also ascertain about any further changes to this Scheme Information Document after the date of this Document from the Mutual Fund / Investor Service Centres / Website / Distributors or Brokers. The investors are advised to refer to the Statement of Additional Information (SAI) for details of ICICI Prudential Mutual Fund, Tax and Legal issues and general information on www.icicipruamc.com SAI is incorporated by reference (is legally a part of the Scheme Information Document). For a free copy of the current SAI, please contact your nearest Investor Service Centre or log on to our website. The Scheme Information Document should be read in conjunction with the SAI and not in isolation. This Scheme Information Document is dated September 10, 2008 2 TABLE OF CONTENTS HIGHLIGHTS/SUMMARY OF THE SCHEME .....................................................................4 Investment Objectives............................................................................................................4 Liquidity.................................................................................................................................4 Benchmark .............................................................................................................................4 Transparency/NAV Disclosure..............................................................................................5 Loads (During NFO as well as ongoing basis): – .................................................................5 Minimum Application Amount..............................................................................................5 Maturity..................................................................................................................................5 Roll Over Facility ..................................................................................................................6 Repatriation facility ...............................................................................................................6 Eligibility for Trusts...............................................................................................................6 Options available under the Plans of the Scheme..................................................................6 I. INTRODUCTION ..................................................................................................................7 A. RISK FACTORS...............................................................................................................7 B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME............................12 C. SPECIAL CONSIDERATIONS, if any..........................................................................12 D. DEFINITIONS................................................................................................................13 E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY ...........................14 II. INFORMATION ABOUT THE SCHEME ......................................................................15 A. TYPE OF THE SCHEME...............................................................................................15 B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME?.............................15 C.HOW WILL THE SCHEME ALLOCATE ITS ASSETS? .............................................15 D.WHERE WILL THE SCHEME INVEST? .....................................................................16 E.WHAT ARE THE INVESTMENT STRATEGIES? .......................................................17 F: FUNDAMENTAL ATTRIBUTES .................................................................................18 G. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE ? .......................18 H. WHO MANAGES THE SCHEME?...............................................................................18 I. WHAT ARE THE INVESTMENT RESTRICTIONS?...................................................19 J. HOW HAS THE SCHEME PERFORMED?...................................................................20 III. UNITS AND OFFER ...............................................................................................................21 A. NEW FUND OFFER (NFO)...........................................................................................21 B. ONGOING OFFER DETAILS .......................................................................................24 C. PERIODIC DISCLOSURES ..........................................................................................27 D. COMPUTATION OF NAV............................................................................................28 IV. FEES AND EXPENSES....................................................................................................29 A. NEW FUND OFFER (NFO) EXPENSES......................................................................29 B. ANNUAL SCHEME RECURRING EXPENSES..........................................................29 C. LOAD STRUCTURE .....................................................................................................30 D. WAIVER OF LOAD FOR DIRECT APPLICATIONS.................................................30 V. RIGHTS OF UNITHOLDERS .......................................................................................30 VI. 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 ......................................................................................................................31 3 HIGHLIGHTS/SUMMARY OF THE SCHEME INVESTMENT OBJECTIVES The investment objective of the Plans under the Scheme is to seek to generate regular returns by investing in a portfolio of fixed income securities/ debt instruments normally maturing in line with the time profile of the Plans under the Scheme. However, there can be no assurance that the investment objective of the Plans under the Scheme will be realized LIQUIDITY Purchase of Units Being a close-ended Scheme, investors can subscribe to the Units of the Scheme during the New Fund Offer Period only. Repurchase facility To provide liquidity to the investors, the Fund proposes to provide repurchase facility at fortnightly intervals from the date of allotment, i.e, on every 2nd and 4th Wednesday of each calendar month under all three-month plans. Under all other plans, the Fund proposes to provide repurchase facility at quarterly intervals on every 15th day from the end of each calendar quarter. The investors may redeem the units on the stipulated dates for redemption at NAV based prices, subject to the prevalent exit load provisions. If such date happens to be the non-business day, repurchase facility would be available on the following Business Day of the said date. The investors may redeem the units on the stipulated dates for redemption as mentioned in this scheme information document at NAV based prices, subject to the prevalent exit load provisions. The Fund will, under normal circumstances, endeavor to dispatch redemption cheques within 1 Business Day from the date of acceptance of the redemption request at any of the official point(s) of transaction(s). This service standard will apply only at the centers where RBI handles clearing directly and is able to transfer funds from Mumbai on the same-day-value basis. In respect of all non-RBI centers, for redemption payments, AMC will take additional day(s) – not exceeding 3 Business Days- that would essentially be linked to the time taken by banks to clear funds at such Non-RBI centers. Investors are requested to note that the Trustee reserves the right to modify the frequency of liquidity/repurchase facility for the benefit of the investors under each plan of the Scheme. 9 BENCHMARK Plan(s) Three Months Plan A Three Months Plan B Three Months Plan C Three Months Plan D Three Months Plan E One Year Plan A One Year Plan B One Year Plan C One Year Plan D One Year Plan E Benchmark CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Liquid Fund Index CRISIL Short Term Bond Fund Index CRISIL Short Term Bond Fund Index CRISIL Short Term Bond Fund Index CRISIL Composite Bond Fund Index CRISIL Composite Bond Fund Index 4 17 (a) TRANSPARENCY/NAV DISCLOSURE The AMC will calculate and disclose the first NAV not later than 30 days from the closure of the New Fund Offer Period. Subsequently NAV will be normally once a week i.e. every Wednesday and the AMC shall also endeavor to have the NAV updated on AMC's website (www.icicipruamc.com) on weekly basis on every Wednesday. NAV of the Plan(s) shall be made available at all Customer Service Centers of the AMC. AMC shall update the NAVs on the website of Association of Mutual Funds in India - AMFI (www.amfiindia.com) on weekly basis on every Wednesday. In case of any delay, the reasons for such delay would be explained to AMFI and SEBI by the next day. If the NAVs are not available before commencement of business hours on the following day due to any reason, the Fund shall issue a press release providing reasons and explaining when the Fund would be able to publish the NAVs. The Mutual Fund shall disclose the full portfolio of Plans under the Scheme at least on a half-yearly basis on the website of AMC. LOADS (DURING NFO AS WELL AS ONGOING BASIS): – Entry Load Nil Redemptions made on Maturity do not attract any exit load. However, Exit Load redemptions made on any other Business Day during the repurchase facility period will attract, for the present, an exit load of the following percentage of the amount sought to be redeemed under the Plan. Three Months Plan A, B, C, D & E 1% of the applicable NAV One Year Plan A, B, C, D & E 2% of the applicable NAV MINIMUM APPLICATION AMOUNT Minimum application amount Retail Option Institutional Option Institutional Option I Rs.5000 per option and in multiples of Re.1 thereafter. Rs. 2,500, 000 /- per option and in multiples of Re.1 thereafter. Rs. 1,000, 000 /- per option and in multiples of Re.1 thereafter. MATURITY The Plans under the scheme shall be fully redeemed at the end of the maturity period unless rolled over as per SEBI guidelines. The tenure of the Plans under the Scheme are as under: Plan(s) Three Months Plan A Three Months Plan B Three Months Plan C Three Months Plan D Three Months Plan E One Year Plan A One Year Plan B One Year Plan C One Year Plan D One Year Plan E Tenure of the Plan(s) 90 days 90 days 90 days 90 days 90 days 370 days 370 days 370 days 370 days 370 days The Fund will, under normal circumstances, endeavor to dispatch redemption cheques within 1 Business Day from the date of acceptance of the redemption request at any of the official point(s) of transaction(s). This 5 service standard will apply only at the centers where RBI handles clearing directly and is able to transfer funds from Mumbai on the same-day-value basis. In respect of all non-RBI centers, for redemption payments, AMC will take additional day(s) – not exceeding 3 Business Days- that would essentially be linked to the time taken by banks to clear funds at such Non-RBI centers. ROLL OVER FACILITY At the time of maturity, if it is perceived that the market outlook for the similar securities/ instruments is positive and investment in the similar kind of instruments would likely to fetch better returns for the investors, then in the interest of the Investor, the Trustees may decide to rollover the Plans under the scheme. This would be based on demand/ request of the investors for the same. All other material details of the scheme/plans including the likely composition of assets immediately before the roll over, the net assets and net asset value of the scheme, will be disclosed to the unitholders and a copy of the same filed with the SEBI. Such rollover will always be permitted only in case of those unitholders who express their consent in writing. REPATRIATION FACILITY NRIs/PIOs/FIIs have been granted a general permission by RBI [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] for investing in / redeeming units of the schemes subject to conditions set out in the aforesaid regulations. ELIGIBILITY FOR TRUSTS Religious and Charitable Trusts are eligible to invest in the Plans under the Scheme under the provisions of Section 11(5)(xii) of the Income-tax Act, 1961 read with Rule 17C of Income-tax Rules, 1962. OPTIONS AVAILABLE UNDER THE PLANS OF THE SCHEME Presently, there are Three options available under each Plan of the Scheme i.e. Institutional Option I, Institutional Option and Retail Option. Cumulative and Dividend sub-options will be available under the each option. Dividend Payout is the only facility available under Dividend sub-option. Retail option shall be the default option; Dividend Payout shall be default sub option under Three Month Plans and Cumulative sub option shall be the default sub-option under all other Plans. The Trustee reserves the right to declare dividends under the dividend option of the Scheme depending on the net distributable surplus available under the Scheme. It should, however, be noted that actual distribution of dividends and the frequency of distribution will depend, inter-alia, on the availability of distributable surplus and will be entirely at the discretion of the Trustee. 6 I. INTRODUCTION 2 A. RISK FACTORS Standard Risk Factors: • Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. • As the price / value / interest rates of the securities in which the scheme invests fluctuates, the value of your investment in the scheme may go up or down • Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance of the scheme. • The name of the scheme does not in any manner indicate either the quality of the scheme or its future prospects and returns. • The sponsor is not responsible or liable for any loss resulting from the operation of the scheme beyond the initial contribution of Rs. 22.2 lacs made by it towards setting up the Fund. • The present scheme is not a guaranteed or assured return scheme • ICICI Prudential Fixed Maturity Plan Series 49 is the name of the Scheme and Three Month Plans, One Year Plans are the names of the Plans under the Scheme and do not in any manner indicate either the quality of the Scheme or its future prospects and returns. • The NAVs of the Plans may be affected by changes in the general market conditions, factors and forces affecting capital market in particular, level of interest rates, various market related factors and trading volumes, settlement periods and transfer procedures. • In the event of receipt of inordinately large number of redemption requests or of a restructuring of any of the Plan’s portfolio, there may be delays in the redemption of Units. • The liquidity of the Plans' investments is inherently restricted by trading volumes in the securities in which it invests. • The Plans may use derivative instruments like Interest Rate Swaps, Forward Rate Agreements or other derivative instruments for the purpose of hedging and portfolio balancing, as permitted under the Regulations and guidelines. Usage of derivatives will expose the Plans to certain risks inherent to such derivatives. • Changes in Government policy in general and changes in tax benefits applicable to mutual funds may impact the returns to Investors in the Plans. • Investors in the Scheme are not being offered any guaranteed/indicated returns. • From time to time and subject to the Regulations, the Sponsors, the Mutual Funds and investment 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 might 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. Further, as per the Regulation, in case the AMC invests in any of the schemes managed by it, it shall not be entitled to charge any fees on such investments. • 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. • From time to time and subject to the regulations, the AMC may invest in this Scheme. The decision to invest in the Scheme by the AMC will be based on parameters specified by the Board of the AMC. • Further, as per the Regulation, in case the AMC invests in any of the schemes managed by it, it shall not be entitled to charge any fees on such investments. • 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 Schemes. The various factors which impact the value of the Plan’s investments include, but are not limited to, fluctuations in the bond markets, fluctuations in interest rates, prevailing political and economic environment, changes in government policy, factors specific to the issuer of the securities, tax laws in various countries, liquidity of the underlying instruments, settlement periods, trading volumes overseas etc. • Different types of securities in which the scheme would invest as given in the scheme information document carry different levels and types of risk. Accordingly the scheme’s risk may increase or decrease 7 1 depending upon its investment pattern. E.g. corporate bonds carry a higher amount of risk than Government securities. Further even among corporate bonds, bonds which are AAA rated are comparatively less risky than bonds which are AA rated. Scheme Specific Risk Factors Fixed Income Securities • Interest Rate Risk: As with all debt securities, changes in interest rates may affect the Schemes' Net Asset Value as the prices of securities generally increase as interest rates decline and generally decrease as interest rates rise. Prices of long-term securities generally fluctuate more in response to interest rate changes than do short-term securities. Indian debt markets can be volatile leading to the possibility of price movements up or down in fixed income securities and thereby to possible movements in the NAV. • Liquidity or Marketability Risk: This refers to the ease with which a security can be sold at or near to its valuation yield-to-maturity (YTM). The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer. Liquidity risk is today characteristic of the Indian fixed income market. • Credit Risk: Credit risk or default risk refers to the risk that an issuer of a fixed income security may default (i.e. will be unable to make timely principal and interest payments on the security). Because of this risk corporate debentures are sold at a yield above those offered on Government Securities which are sovereign obligations and free of credit risk. Normally, the value of a fixed income security will fluctuate depending upon the changes in the perceived level of credit risk as well as any actual event of default. The greater the credit risk, the greater the yield required for someone to be compensated for the increased risk. • Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received from the securities in the Plans are reinvested. The additional income from reinvestment is the “interest on interest” component. The risk is that the rate at which interim cash flows can be reinvested may be lower than that originally assumed. • Settlement risk: The inability of the Plan to make intended securities purchases due to settlement problems could cause the Plan to miss certain investment opportunities. By the same rationale, the inability to sell securities held in the Plan’s portfolio due to the extraneous factors that may impact liquidity would result, at times, in potential losses to the Plan, in case of a subsequent decline in the value of securities held in the Plan’s portfolio. • 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. Risks associated with investing in Derivatives: • As and when the Scheme trades in the derivatives market there are risk factors and issues concerning the use of derivatives that Investors should understand. Derivative products are specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself. 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 or 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. Other risks in using derivatives include the risk of mis pricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. • Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have a large impact on their value. Also, the market for derivative instruments is nascent in India. Derivatives products are leveraged instruments and provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the fund manager to identify such opportunities. Identification and execution of the strategies to be pursued by the 8 5 • fund manager involve uncertainty and decision of the fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify to execute such strategies. • The risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. The specific risk factors arising out of a derivative strategy used by the Fund Manager may be as below: Lack of opportunity available in the market. The risk of mispricing or improper valuation and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. • • • Risks associated with investing in securitised debt. Generally available Asset Classes for securitisation in India • Commercial Vehicles • Auto and Two wheeler pools • Mortgage pools (residential housing loans) • Personal Loan, credit card and other retail loans • Corporate loans/receivables In terms of specific risks attached to securitisation, each asset class would have different underlying risks, however, residential mortgages are supposed to be having lower default rates as an asset class. On the other hand, repossession and subsequent recovery of commercial vehicles and other auto assets is fairly easier and better compared to mortgages. Some of the asset classes such as personal loans, credit card receivables etc., being unsecured credits in nature, may witness higher default rates. As regards corporate loans/receivables, depending upon the nature of the underlying security for the loan or the nature of the receivable the risks would correspondingly fluctuate. However, the credit enhancement stipulated by rating agencies for such asset class pools is typically much higher and hence their overall risks are comparable to other AAA rated asset classes. The rating agencies have an elaborate system of stipulating margins, over collateralisation and guarantees to bring risk limits in line with the other AAA rated securities. It is relevant to note here that predominantly the scheme intends to invest in only AAA rated securitised debt. This compares favourably with a portfolio which is constructed on the basis of AA rated securitised debt. Some of the factors, which are typically analyzed for any pool are as follows: Size of the loan: generally indicates the kind of assets financed with loans. Also indicates whether there is excessive reliance on very small ticket size, which may result in difficult and costly recoveries. To illustrate, the ticket size of housing loans is generally higher than that of personal loans. Hence in the construction of a housing loan asset pool for say Rs.1,00,00,000/- it may be easier to construct a pool with just 10 housing loans of Rs.10,00,000 each rather than to construct a pool of personal loans as the ticket size of personal loans may rarely exceed Rs.5,00,000/- per individual. Also to amplify this illustration further, if one were to construct a pool of Rs.1,00,00,000/- consisting of personal loans of Rs.1,00,000/- each, the larger number of contracts(100 as against one of 10 housing loans of Rs.10 lakh each) automatically diversifies the risk profile of the pool as compared to a housing loan based asset pool. Average original maturity of the pool: indicates the original repayment period and whether the loan tenors are in line with industry averages and borrower’s repayment capacity. To illustrate, in a car pool consisting of 60month contracts, the original maturity and the residual maturity of the pool viz. number of remaining installments to be paid gives a better idea of the risk of default of the pool itself. If in a pool of 100 car loans having original maturity of 60 months, if more than 70% of the contracts have paid more than 50% of the installments and if no default has been observed in such contracts, this is a far superior portfolio than a similar car loan pool where 80% of the contracts have not even crossed 5 installments. Loan to Value Ratio: Indicates how much % value of the asset is financed by borrower’s own equity. The lower LTV, the better it is. This Ratio stems from the principle that where the borrowers own contribution of the asset cost is high, the chances of default are lower. To illustrate for a Truck costing Rs.20 lakhs, if the borrower has himself contributed Rs.10 lakh and has taken only Rs.10 lakh as a loan, he is going to have lesser propensity to default as he would lose an asset worth Rs.20 lakhs if he defaults in repaying an installment. This is as against a borrower who may meet only Rs.2 lakh out of his own equity for a truck costing Rs.20 lakh. Between the two 9 scenarios given above, the latter would have higher risk of default than the former. Average seasoning of the pool: indicates whether borrowers have already displayed repayment discipline. To illustrate, in the case of a personal loan, if a pool of assets consist of those who have already repaid 80% of the installments without default, this certainly is a superior asset pool than one where only 10% of installments have been paid. In the former case, the portfolio has already demonstrated that the repayment discipline is far higher. Default rate distribution: Indicates how much % of the pool and overall portfolio of the originator is current, how much is in 0-30 DPD (days past due), 30-60 DPD, 60-90 DPD and so on. The rationale here is very obvious, as against 0-30 DPD, the 60-90 DPD is certainly a higher risk category. Unlike in plain vanilla instruments, in securitisation transactions it is possible to work towards a target credit rating, which could be much higher than the originator’s own credit rating. This is possible through a mechanism called ‘Credit enhancement’is fulfilled by filtering the underlying asset classes and applying selection criteria, which further diminishes the risk inherent for a particular asset class. The purpose of credit enhancement is to ensure timely payment to the investors, if the actual collection from the pool of receivables for a given period are short of the contractual payouts on securitisation. Securitisation is normally non-recourse instruments and therefore, the repayment on securitisation would have to come from the underlying assets and the credit enhancement. Therefore, the rating criteria centrally focus on the quality of the underlying assets. World over, the quality of credit ratings is measured by default rates and stability. An analysis of rating transition and default rates, witnessed in both international and domestic arena, clearly reveals that structured finance ratings have been characterized by far lower default and transition rates than that of plain vanilla debt ratings. Further, internationally, in case of structured finance ratings, not only are the default rates low but post default recovery is also high. In the Indian scenario, also, more than 95% of issuances have been AAA rated issuances indicating the strength of the underlying assets as well as adequacy of credit enhancement. Investment exposure of the Fund with reference to Securitised Debt The Fund will predominantly invest only in those securitisation issuances which have AAA rating indicating the highest level of safety from credit risk point of view at the time of making an investment. The Fund will not invest in foreign securitised debt. The fund may invest in various type of securitisation issuances, including but not limited to Asset Backed Securitisation, Mortgage Backed Securitisation, Personal Loan Backed Securitisation, Collateralized Loan Obligation / Collateralized Bond Obligation and so on. The fund does not propose to limit its exposure to only one asset class or to have asset class based sub-limits as it will primarily look towards the AAA rating of the offering. The fund will conduct an independent due diligence on the cash margins, collateralisation, guarantees and other credit enhancements and the portfolio characteristic of the securitisation to ensure that the issuance fits in to the overall objective of the investment in high investment grade offerings irrespective of underlying asset class. Risk Factors specific to investments in Securitised Papers Types of Securitised Debt vary and carry different levels and types of risks. Credit Risk on Securitised Bonds depends upon the Originator and varies depending on whether they are issued with Recourse to Originator or otherwise. Even within securitised debt, AAA rated securitised debt offers lesser risk of default than AA rated securitised debt. A structure with Recourse will have a lower Credit Risk than a structure without Recourse. Underlying assets in Securitised Debt may assume different forms and the general types of receivables include Auto Finance, Credit Cards, Home Loans or any such receipts, Credit risks relating to these types of receivables depend upon various factors including macro economic factors of these industries and economies. Specific factors like nature and adequacy of property mortgaged against these borrowings, nature of loan agreement/ mortgage deed in case of Home Loan, adequacy of documentation in case of Auto Finance and Home Loans, capacity of borrower to meet its obligation on borrowings in case of Credit Cards and intentions of the borrower influence the risks relating to the asset borrowings underlying the securitised debt. Holders of the securitised assets may have low credit risk with diversified retail base on underlying assets especially when securitised assets are created by high credit rated tranches, risk profiles of Planned Amortisation Class tranches (PAC), Principal Only Class Tranches (PO) and Interest Only class tranches (IO) will differ depending upon the interest rate movement and speed of prepayment. Unlike in plain vanilla instruments, in securitisation transactions, it is possible to work towards a target credit rating, which could be much higher than the originator’s own credit rating. This is possible through a mechanism called ‘Credit enhancement’. The process of ‘Credit enhancement’ is fulfilled by filtering the 10 underlying asset classes and applying selection criteria, which further diminishes the risks inherent for a particular asset class. The purpose of credit enhancement is to ensure timely payment to the investors, if the actual collection from the pool of receivables for a given period is short of the contractual payout on securitisation. Securitisation is normally non-recourse instruments and therefore, the repayment on securitisation would have to come from the underlying assets and the credit enhancement. Therefore the rating criteria centrally focus on the quality of the underlying assets. The change in market interest rates – prepayments may not change the absolute amount of receivables for the investors, but may have an impact on the re-investment of the periodic cash flows that the investor receives in the securitised paper. Limited Liquidity & Price risk Presently, secondary market for securitised papers is not very liquid. There is no assurance that a deep secondary market will develop for such securities. This could limit the ability of the investor to resell them. Even if a secondary market develops and sales were to take place, these secondary transactions may be at a discount to the initial issue price due to changes in the interest rate structure. Limited Recourse, Delinquency and Credit Risk Securitised transactions are normally backed by pool of receivables and credit enhancement as stipulated by the rating agency, which differ from issue to issue. The Credit Enhancement stipulated represents a limited loss cover to the Investors. These Certificates represent an undivided beneficial interest in the underlying receivables and there is no obligation of either the Issuer or the Seller or the originator, or the parent or any affiliate of the Seller, Issuer and Originator. No financial recourse is available to the Certificate Holders against the Investors’ Representative. Delinquencies and credit losses may cause depletion of the amount available under the Credit Enhancement and thereby the Investor Payouts may get affected if the amount available in the Credit Enhancement facility is not enough to cover the shortfall. On persistent default of a Obligor to repay his obligation, the Servicer may repossess and sell the underlying Asset. However many factors may affect, delay or prevent the repossession of such Asset or the length of time required to realize the sale proceeds on such sales. In addition, the price at which such Asset may be sold may be lower than the amount due from that Obligor. Risks due to possible prepayments: Weighted Tenor / Yield Asset securitisation is a process whereby commercial or consumer credits are packaged and sold in the form of financial instruments Full prepayment of underlying loan contract may arise under any of the following circumstances; • Obligor pays the Receivable due from him at any time prior to the scheduled maturity date of that Receivable; or • Receivable is required to be repurchased by the Seller consequent to its inability to rectify a material misrepresentation with respect to that Receivable; or • The Servicer recognizing a contract as a defaulted contract and hence repossessing the underlying Asset and selling the same • In the event of prepayments, investors may be exposed to changes in tenor and yield. Bankruptcy of the Originator or Seller If originator becomes subject to bankruptcy proceedings and the court in the bankruptcy proceedings concludes that the sale from originator to Trust was not a sale then an Investor could experience losses or delays in the payments due. All possible care is generally taken in structuring the transaction so as to minimize the risk of the sale to Trust not being construed as a “True Sale”. Legal opinion is normally obtained to the effect that the assignment of Receivables to Trust in trust for and for the benefit of the Investors, as envisaged herein, would constitute a true sale. Bankruptcy of the Investor’s Agent If Investor’s agent, becomes subject to bankruptcy proceedings and the court in the bankruptcy proceedings concludes that the recourse of Investor’s Agent to the assets/receivables is not in its capacity as agent/Trustee but in its personal capacity, then an Investor could experience losses or delays in the payments due under the swap agreement. All possible care is normally taken in structuring the transaction and drafting the underlying documents so as to provide that the assets/receivables if and when held by Investor’s Agent is held as agent and in Trust for the Investors and shall not form part of the personal assets of Investor’s Agent. Legal opinion is normally obtained to the effect that the Investors Agent’s recourse to assets/receivables is restricted in its capacity as agent and trustee and not in its personal capacity. Credit Rating of the Transaction / Certificate The credit rating is not a recommendation to purchase, hold or sell the Certificate in as much as the ratings do not comment on the market price of the Certificate or its suitability to a particular investor. There is no assurance by the rating agency either that the rating will remain at the same level for any given period of time or that the rating will not be lowered or withdrawn entirely by the rating agency. 11 Risk of Co-mingling The Servicers normally deposit all payments received from the Obligors into the Collection Account. However, there could be a time gap between collection by a Servicer and depositing the same into the Collection account especially considering that some of the collections may be in the form of cash. In this interim period, collections from the Loan Agreements may not be segregated from other funds of the Servicer. If the Servicer fails to remit such funds due to Investors, the Investors may be exposed to a potential loss. Due care is normally taken to ensure that the Servicer enjoys highest credit rating on stand alone basis to minimize Co-mingling risk. 6 • Risks associated with Short Selling and Securities Lending – The Plans under the Scheme will not do any ‘Stock Lending’ activity. B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME The Scheme(s) and individual Plan(s) under the Scheme(s) shall have a minimum of 20 investors and no single investor shall account for more than 25% of the corpus of the Scheme(s)/Plan(s). These conditions will be complied with immediately after the close of the NFO itself i.e. at the time of allotment. In case of nonfulfillment with the condition of minimum 20 investors, the Scheme(s)/Plan(s) shall be wound up in accordance with Regulation 39 (2) (c) of SEBI (MF) Regulations automatically without any reference from SEBI. In case of non-fulfillment with the condition of 25% holding by a single investor on the date of allotment, the application to the extent of exposure in excess of the stipulated 25% limit would be liable to be rejected and the allotment would be effective only to the extent of 25% of the corpus collected. Consequently, such exposure over 25% limits will lead to refund within 6 weeks of the date of closure of the New Fund Offer. C. SPECIAL CONSIDERATIONS, if any Investors are urged to study the terms of the Scheme information document carefully before investing in this Scheme, and to retain this Scheme information document for future reference. Any tax liability arising post redemption on account of change in the tax treatment with respect to dividend distribution tax, by the tax authorities, shall be solely borne by the investor and not by the AMC, the Trustees or the Mutual Fund • • Investors in the Scheme are not being offered any guaranteed returns. Investors are advised to consult their Legal /Tax and other Professional Advisors in regard to tax/legal implications relating to their investments in the Scheme and before making decision to invest in the Scheme or redeem the Units in the Scheme. 12 D. DEFINITIONS In this Scheme information document, the following words and expressions shall have the meaning specified herein, unless the context otherwise requires Asset Management Company or AMC or Investment Manager ICICI Prudential Asset Management Company Limited (erstwhile Prudential ICICI Asset Management Company Limited), the Asset Management Company incorporated under the Companies Act, 1956, and registered with SEBI to act as an Investment Manager for the schemes of ICICI Prudential Mutual Fund (erstwhile Prudential ICICI Mutual Fund). Being a Close-ended Scheme, units of the Plans under the Scheme can be purchased during New Fund Offer period only. In respect of valid applications received upto the Cut-off time of the last date of the New Fund offer period by the Mutual Fund along with a local cheque or demand draft payable at par at the place where the application is received, the units will be issued. No applications will be accepted after the Cut-off time by the Mutual fund. In respect of valid applications received upto the cut-off time on the business day on which repurchase facility is provided by the Mutual Fund, same day’s closing NAV shall be applicable. No applications will be accepted after the cut-off time on the business day on which repurchase facility is provided by the Mutual Fund, as stated above. A day other than: (i) Saturday and Sunday; (ii) a day on which Banks in Mumbai or RBI are closed (iii) a day on which there is no RBI clearing/ settlement of securities or (iv) a day on which the Sale and Redemption of Units is suspended by the Trustee. However, if the AMC's offices in such centers are open on such local holidays, then redemption and switch requests will be accepted at those centers, provided it is a Business Day for the Plan on an overall basis. The AMC reserves the right to declare any day as a non-business day at any of its locations at its sole discretion. HSBC Ltd, Mumbai, acting as Custodian to the Plan, or any other custodian who is approved by the Trustee. Foreign Institutional Investors registered with SEBI under Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as amended from time to time. ICICI Bank Limited The Agreement dated September 3, 1993 entered into between ICICI Prudential Trust Limited (erstwhile Prudential ICICI Trust Limited) (formerly ICICI Trust Limited) and ICICI Prudential Asset Management Company Limited (erstwhile Prudential ICICI Asset Management Company Limited) (formerly ICICI Asset Management Company Limited) as amended from time to time. Net Asset Value of the Units of the Plan /Plans and Options therein, calculated on weekly basis i.e. on every Wednesday in the manner provided in this Scheme information document or as may be prescribed by Regulations from time to time. If such date happens to be a non-business day, it would be computed on the day following the non-business day. Non-Resident Indian This document issued by ICICI Prudential Mutual Fund, offering Units of ICICI Prudential Fixed Maturity Plan Series 49 under various plans. Prudential plc of the U.K. and includes, wherever the context so requires, its wholly owned subsidiary Prudential Corporation Holdings Limited. 13 Applicable NAV (for purchases including switch ins) Applicable NAV (for redemptions including switch outs) Business Day Custodian FII ICICI Bank Investment Management Agreement NAV NRI Scheme information document Prudential RBI SEBI Reserve Bank of India, established under the Reserve Bank of India Act, 1934, as amended from time to time. Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992, as amended from time to time. ICICI Prudential Fixed Maturity Plan – Series 49 & plans launched thereunder. ICICI Prudential Mutual Fund, a trust set up under the provisions of the Indian Trusts Act, 1882. The Fund is registered with SEBI vide Registration No.MF/003/93/6 dated October 13, 1993 as ICICI Mutual Fund and has obtained approval from SEBI for change in name to Prudential ICICI Mutual Fund vide SEBI’s letter dated April 16, 1998. The change of name of the Mutual Fund to ICICI Prudential Mutual Fund was approved by SEBI vide Letter No. IMD/PM/90170/07 dated 2nd April 2007. ICICI Prudential Trust Limited (erstwhile Prudential ICICI Trust Limited), a company set up under the Companies Act, 1956, and approved by SEBI to act as the Trustee for the schemes of ICICI Prudential Mutual Fund. Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended from time to time. The Trust Deed dated August 25, 1993 establishing ICICI Mutual Fund, (subsequently renamed ICICI Prudential Mutual Fund) as amended from time to time. Amounts settled/contributed by the Sponsors towards the corpus of the ICICI Prudential Mutual Fund and additions/accretions thereto. The interest of an Investor, which consists of, one undivided shares in the Net Assets of a Plan. A holder of Units in any of the Plans of ICICI Prudential Fixed Maturity Plan Series 49. ICICI Prudential Fixed Maturity Plan – Series 49 The Fund or Mutual Fund The Trustee The Regulations Trust Deed Trust Fund Unit Unitholder E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY It is confirmed that: (i) the draft Scheme Information 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 Scheme Information Document are true, fair and adequate to enable the investors to make a well informed decision regarding investment in the proposed scheme. (iv) the intermediaries named in the Scheme Information Document and Statement of Additional Information are registered with SEBI and their registration is valid, as on date. Place : Date : Mumbai Septembre 09, 2008 sd/Ranganth Athreya Executive Vice President – Legal, Compliance & Company Secretary Note: The Due Diligence Certificate as stated above was submitted to SEBI on September 10, 2008 14 II. INFORMATION ABOUT THE SCHEME A. TYPE OF THE SCHEME A close-ended Debt Fund B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME? The investment objective of the Plan is to seek to generate regular returns by investing in a portfolio of fixed income securities/ debt instruments normally maturing in line with the time profile of the Plan. However, there can be no assurance that the investment objective of the Scheme will be realized 14 C.HOW WILL THE SCHEME ALLOCATE ITS ASSETS? Under normal circumstances, the asset allocation of the Scheme will be as follows: Indicative allocations (% of total assets) Maximum Minimum 100 0 Risk Profile High/Medium/Low Low to medium Instruments Money Market instruments, Shortterm and medium term debt securities/debt instruments and securitised debt*# 4 Note: The investments in central and state government securities will be in normal circumstances limited to 50% of the net assets of the Plan. * Including securitised debt of upto 50% of the net assets and derivatives instruments to the extent of 50% of the net assets of the Scheme # Under the abovementioned Plans, it is proposed to make investments in debt securities normally matching with the tenure of the Scheme The above percentages would be adhered to at the point of investment. The portfolio would be reviewed quarterly to address any deviations from the aforementioned allocations due to market changes. It may be noted that no prior intimation/indication would be given to investors when the composition/asset allocation pattern under the scheme undergo changes within the permitted band as indicated above or for changes due to defensive positioning of the portfolio with a view to protect the interest of the unitholders on a temporary basis. The investors/unitholders can ascertain details of asset allocation of the scheme as on the last date of each month on AMC’s website at www.icicipruamc.com that will display the asset allocation of the scheme as on the given day. Investors may note that securities, which endeavour to provide higher returns typically, display higher volatility. Accordingly, the investment portfolio of the Scheme would reflect moderate to high volatility in its equity and equity related investments and low to moderate volatility in its debt and money market investments 12 POSITION OF DEBT MARKET IN INDIA The debt market in India is estimated at about Rs.15,00,000 crores as of now. A bulk of the debt market consists of Government Securities. Other instruments available currently include Corporate Debentures, Bonds issued by Financial Institutions, Commercial Paper, Certificates of Deposits and Securitized Debt. Securities in the Debt market typically vary based on their tenure and rating. Government Securities have tenures from one year to thirty years whereas the maturity periods of the Corporate Debt varies from one year to Fifteen years. Recently some banks have also issued perpetual bonds. Securities may be both listed and unlisted and increasingly most securities of maturities of over one year are being listed by issuers. While in the corporate bond market, deals are conducted over telephone and are entered on principal-toprincipal basis, due to the introduction of the Reserve Bank of India's NDS- Order Matching system a 15 significant proportion of the government securities market liquidity on various securities, currently, are as under: Issuer Instrument Maturity GOI Treasury Bill 91 days GOI Treasury Bill 364 days GOI Short Dated 1-3 Yrs GOI Medium Dated 3-5 Yrs GOI Long Dated 5-10 Yrs Corporates Taxable Bonds (AAA) 1-3 Yrs Corporates Taxable Bonds (AAA) 3-5 Yrs Corporates CPs (P1+) 3 months Corpo CPs (P1+) 1 Yr rates *Money Market yield **Semi-annual yield ***Annualised yield Change in Investment Pattern is trading on the new system. The yields and Yields 7.35-7.45%* 7.65-7.75%* 7.80-7.90%** 7.85-7.95%** 8.15-8.25%** 9.70-10.2%*** 10.1-10.4%*** 8.2-8.6%* 9.50-9.90%* Liquidity High High High High High Medium Low to medium Medium to High Medium Subject to the 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 and that they 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 defensive considerations. Provided further and subject to the above, any change in the asset allocation affecting the investment profile of the Scheme shall be effected only in accordance with the provisions of sub regulation (15A) of Regulation 18 of the Regulations, as detailed later in this document 15 D.WHERE WILL THE SCHEME INVEST? The corpus of the Plan will be invested only in debt and money market instruments. Subject to the Regulations, the corpus of the Plan(s) can be invested in any (but not exclusively) of the following securities/debt instruments: 1) Securities created and issued by the Central and State Governments and/or repos/reverse repos in such Government Securities as may be permitted by RBI (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills). 2) Securities guaranteed by the Central and State Governments (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills). 3) Debt obligations of domestic Government agencies and statutory bodies, which may or may not carry a Central/State Government guarantee. 4) Corporate debt (of both public and private sector undertakings). 5) Obligations/ Term Deposits of banks (both public and private sector) and development financial institutions. 6) Money market instruments permitted by SEBI/RBI, having maturities of up to one year or in alternative investment for the call money market as may be provided by the RBI to meet the liquidity requirements. 7) Certificate of Deposits (CDs). 8) Commercial Paper (CPs). 9) Securitised Debt. 10) The non-convertible part of convertible securities. 11) Any other domestic fixed income securities as permitted by SEBI / RBI from time to time. 12) Derivative instruments like Interest Rate Swaps, Forward Rate Agreements and such other derivative instruments permitted by SEBI/RBI. The securities/debt instruments mentioned above could be listed or unlisted, secured or unsecured, rated or unrated and of varying maturity. The securities may be acquired through Initial Public Offerings (IPOs), secondary market operations, private placement, rights offers or negotiated deals. 16 The Plan may also enter into repurchase and reverse repurchases obligations in all securities held by it as per the guidelines and regulations applicable to such transactions. 7 E.WHAT ARE THE INVESTMENT STRATEGIES? ICICI Prudential Fixed Maturity Plan – Series 49 is a close-ended debt fund and its objective is to generate regular returns by investing in a portfolio of Fixed income securities / debt instruments normally maturing in line with the time profile of the Plan. Under normal circumstances, up to 100 % of the fund will be invested in Money Market instruments, Short term and medium term debt securities/ debt instruments and securitised debt 5 STRATEGIES INVOLVING DERIVATIVES Further, the Scheme may use derivatives instruments like Interest Rate Swaps, Forward Rate Agreements or such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and as may be permitted under the Regulations and guidelines. Interest rate swap is a strategy in which one party exchanges a stream of interest for another party's stream. Interest rate swaps are normally 'fixed against floating', but can also be 'fixed against fixed' or 'floating against floating' rate swaps. Interest rate swaps will be used to take advantage of interest-rate fluctuations, by swapping fixed-rate obligations for floating rate obligations, or swapping floating rate obligations to fixed-rate obligations. A floating-to-fixed swap increases the certainty of an issuer's future obligations. Swapping from fixed-tofloating rate may save the issuer money if interest rates decline. Swapping allows issuers to revise their debt profile to take advantage of current or expected future market conditions. The Scheme shall under normal circumstances not have exposure of more than 50% of its net assets in derivative instruments. i) Advantages of Derivatives The volatility in Indian debt markets has increased over last few months. Derivatives provide unique flexibility to the Scheme to hedge part of their portfolio. Some of the advantages of specific derivatives are as under: ii) Interest Rate Swaps and Forward rate Agreements Bond markets in India are not very liquid. Investors run the risk of illiquidity in such markets. Investing for short-term periods for liquidity purposes has its own risks. Investors can benefit if the Fund remains in call market for the liquidity and at the same time take advantage of fixed rates by entering into a swap. It adds certainty to the returns without sacrificing liquidity. The following is an illustration how derivatives work Basic Details: Fixed to floating swap Notional Amount: Rs. 5 Crores Benchmark: NSE MIBOR Deal Tenor: 3 months (say 91 days) Documentation: International Securities Dealers Association (ISDA). Let us assume the fixed rate decided was 10% At the end of three months, the following exchange will take place: Counter party 1 pays: compounded call rate for three months, say 9.90% Counter party 2 pays fixed rate: 10% In practice, however, the difference of the two amounts is settled. Counter party 2 will pay Rs 5 Crores *0.10%* 91/365 = Rs. 12,465.75 Thus the trade off for the Fund will be the difference in call rate and the fixed rate payment and this can vary with the call rates in the market. Please note that the above example is given for illustration purposes only and the actual returns may vary depending on the terms of swap and market conditions. Risk Factor: The risk arising out of uses of the above derivative strategy as under: o Lack of opportunities available in the market. o The risk of mispricing or improper valuation and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. 8 17 F: FUNDAMENTAL ATTRIBUTES Following are the Fundamental Attributes of the scheme, in terms of Regulation 18 (15A) of the SEBI (MF) Regulations: "Fundamental Attributes" in the context of the scheme will be: (i) Type of Scheme: ICICI Prudential Fixed Maturity Plan – Series 49- a close-ended Debt Fund (ii) Investment objective: To seek to generate regular returns by investing in a portfolio of fixed income securities /debt instruments normally maturing in line with the time profile of the plan. (iii) Terms of Issue: provisions in respect of redemption of units, fees and expenses as indicated in this Scheme Information document. In accordance with Regulation 18(15A) of the SEBI (MF) Regulations, the Trustees shall ensure that no change in the fundamental attributes of the Scheme(s) and the Plan(s) / Option(s) thereunder or the trust or fee and expenses payable or any other change which would modify the Scheme(s) and the Plan(s) / Option(s) thereunder and affect the interests of Unitholders is carried out unless: • A written communication about the proposed change is sent to each Unitholder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated; and • The Unitholders are given an option for a period of 30 days to exit at the prevailing Net Asset Value without any exit load. 9 G. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE? Plan(s) Benchmark Three Months Plan A CRISIL Liquid Fund Index Three Months Plan B CRISIL Liquid Fund Index Three Months Plan C CRISIL Liquid Fund Index Three Months Plan D CRISIL Liquid Fund Index Three Months Plan E CRISIL Liquid Fund Index One Year Plan A CRISIL Short Term Bond Fund Index One Year Plan B CRISIL Short Term Bond Fund Index One Year Plan C CRISIL Short Term Bond Fund Index One Year Plan D CRISIL Composite Bond Fund Index One Year Plan E CRISIL Composite Bond Fund Index The composition of the aforesaid benchmarks is such that, they are most suited for comparing performance of the respective plans. The Trustees may change the benchmark in future if a benchmark better suited to the investment objective of the scheme is available. 10 H. WHO MANAGES THE SCHEME? The Fund Manager, Mr. Chaitanya Pande, will manage the investments under the Scheme. His qualifications and experience are as under: Name of the Fund Manager Mr. Chaitnya Pande Age 37 years Qualification PGDM from IMI, New Delhi, BSc from St. Stephens College, New Delhi Experience 13 Years Manager – Fund Management Number of Schemes Managed 1. ICICI Prudential Liquid Plan 2. ICICI Prudential Short Term Plan. 3. ICICI Prudential Floating Rate Plan 4. ICICI Prudential Sweep Plan 18 5. All the Fixed Maturity Plans 6. All the Interval Funds 11 I. WHAT ARE THE INVESTMENT RESTRICTIONS? Pursuant to the Regulations and amendments thereto, the following investment restrictions are presently applicable to the Scheme: 1) A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer which are rated not below investment grade by a credit rating agency authorised to carry out such activity under the SEBI Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset management company. Provided that, such limit shall not be applicable for investments in government securities and money market instruments. Provided further that investment within such limit can be made in mortgage backed securitised debt, which are rated not below investment grade by a credit rating agency registered with SEBI. With respect to investments in securitized debt (mortgage backed securities/asset backed securities), issuer would be considered to be the originator of underlying receivables of assets such as mortgage backed securities / asset backed securities / collaterialised debt obligations etc. in which the scheme/plan has invested and not the Trust/SPV. As per SEBI Circular no. SEBI/IMD/CIR No.6/63715/06, with respect to investment in securitized debt (mortgage backed securities / asset backed securities) restrictions at the originator level will not be applicable. 2) A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made by an internal committee constituted by AMC to approve the investment in un-rated debt securities in terms of the parameters approved by the Board of Trustees and the Board of Asset Management Company. Debentures, irrespective of any residual maturity period (above or below one year), shall attract the investment restrictions as applicable for debt instruments as specified under Clause 2 & 3 above. 3) 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); and b. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. Further the inter scheme transfer of investments shall be in accordance with the provisions contained in clause Inter-Scheme transfer of investments, contained in Statement of Additional Information: 4) The Scheme may invest in other schemes under the same AMC or any other Mutual Fund 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. No investment management fees shall be charged for investing in other schemes of the Fund or in the schemes of any other mutual fund. 5) 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. 6) The Fund may buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and will not make any short sales or engage in carry forward transaction or badla finance. Provided that mutual funds shall enter into derivatives transactions in a recognised stock exchange in accordance with the guidelines issued by SEBI. 7) All the Scheme’s investments will be in transferable securities (whether in capital markets or money markets) or bank deposits or in money at call as in privately placed debentures as securitised debt. 8) No loans for any purpose can be advanced by the Scheme. 9) No mutual fund scheme shall make any investments in; a) any unlisted security of an associate or group company of the sponsor; or b) any security issued by way of private placement by an associate or group company of the Sponsor; or c) the listed securities of group companies of the Sponsor which is in excess of 25% of its net assets. 19 10) 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 dividend to the Unitholders. Such borrowings shall not exceed 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. 11) In accordance with SEBI Circular no SEBI/IMD/CIR No. 1/91171/07 dated 16th April 2007 and SEBI/IMD/CIR No. 7 / 129592 dated June 23, 2008, following guidelines shall be followed for parking of funds in short term deposits of Scheduled commercial Banks pending deployment a. b. c. “Short Term” for such parking of funds by mutual funds shall be treated as a period not exceeding 91 days and the tenure of term deposits placed as margin for trading in derivatives shall not exceed 182 days Such short-term deposits shall be held in the name of the concerned scheme. No mutual fund scheme shall park more than 15% of the net assets in Short term deposit(s) of all the scheduled commercial banks put together. However, it may be raised to 20% with prior approval of the trustees. Also, parking of funds in short term deposits of associate and sponsor scheduled commercial banks together shall not exceed 20% of total deployment by the mutual fund in short term deposits. No mutual fund scheme shall park more than 10% of the net assets in short term deposit(s), with any one scheduled commercial bank including its subsidiaries. Trustees shall ensure that no funds of a scheme may be parked in short-term deposit of a bank, which has invested in that scheme. Asset Management Company (AMC) shall not be permitted to charge any investment management and advisory fees for parking of funds in short term deposits of scheduled commercial banks in case of liquid and debt oriented schemes. All funds parked in short-term deposit(s) shall be disclosed in half yearly portfolio statements under a separate heading. Details such as name of the bank, amount of funds parked, percentage of NAV may be disclosed. d. e. f. g. h. Trustees shall certify in the half-yearly reports that the provision of the Regulation pertaining to parking of funds in short term deposits - pending deployment is being complied with at all points of time. Further the AMC shall also certify the same in its bi-monthly compliance test report 12) 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. 13) The Mutual Fund having an aggregate of securities which are worth Rs.10 crores or more, as on the latest balance sheet date, shall subject to such instructions as may be issued from time to time by the Board, settle their transactions entered on or after January 15, 1998 only through dematerialised securities. Further all transactions in government securities shall be in dematerialised form. J. HOW HAS THE SCHEME PERFORMED? “This scheme is a new scheme and does not have any performance track record” 20 III. UNITS AND OFFER This section provides details you need to know for investing in the scheme. A. NEW FUND OFFER (NFO) Plan(s) New Fund Offer opens New Fund Offer closes Three Months Plan A Three Months Plan B Three Months Plan C Three Months Plan D Three Months Plan E One Year Plan A One Year Plan B One Year Plan C One Year Plan D One Year Plan E 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 45 days. New Fund Offer Price: The corpus of each of the Plans will be divided into Units having an initial value of Rs.10 each. Units can be purchased during the New This is the price per unit that the investors Fund Offer Period only. have to pay to invest during the NFO. Minimum Amount for Application in the NFO Name of the Option Minimum Application amount per under the Plans of Option the Scheme Retail Option Rs. 5, 000/- per option and in multiples of Re. 1 thereafter Institutional Option Rs. 25 lacs per option and in multiples of Re. 1 thereafter Institutional Option I Rs. 10 lakhs per option and in multiples of Re. 1 thereafter Minimum Target amount During the New Fund Offer period of the Plans under the Scheme, This is the minimum amount required to each Plan seeks to raise a minimum subscription of Rs.5 crores. operate the scheme and if this is not collected during the NFO period, then all the investors would be refunded the amount invested without any return. However, if AMC fails to refund the amount within 6 weeks, interest as specified by SEBI (currently 15% p.a.) will be paid to the investors from the expiry of six weeks from the date of closure of the subscription period. Maximum Amount to be raised (if any) There is no Maximum Amount. This is the maximum amount which can be collected during the NFO period, as decided by the AMC. Plans / Options offered Presently, there are Three options available under each Plan of the Scheme i.e. Institutional Option I, Institutional Option and Retail Option. Cumulative and Dividend sub-options will be available under the Scheme. Dividend Payout is the only facility available under Dividend sub-option. Retail option shall be the default option; Dividend Payout shall be default sub option under Three Month Plans & Cumulative sub option shall be the default sub-option under all other One Year Plans. The Trustee reserves the right to declare 21 dividends under the dividend option of the Scheme depending on the net distributable surplus available under the Scheme. It should, however, be noted that actual distribution of dividends and the frequency of distribution will depend, inter-alia, on the availability of distributable surplus and will be entirely at the discretion of the Trustee. Dividend Policy The Trustee may approve the distribution of dividends by the AMC out of the net surplus of the Scheme. To the extent the net surplus is not distributed, the same will remain invested in the Scheme and be reflected in the NAV. Subject to receipt of minimum subscription amount, full allotment will be made to all valid applications received during the New Fund Offer Period. Allotment of units will be completed not later than 30 days after the close of the New Fund Offer Period. Allotment 18 An Account Statement will be sent by ordinary post to each Unitholder, stating the number of Units allotted, not later than 30 days from the close of New Fund Offer Period. In case the investor provides the e-mail address, the Fund will provide the Account Statement only through e-mail message. The Account Statements shall be non-transferable. If the Unitholder so desires, nontransferable unit certificates will be issued within six weeks of the receipt of request for the certificate. Allotment of Units and despatch of Account Statements to FIIs will be subject to RBI approval. Any addition/ deletion of name from the folio of the unitholder is deemed as transfer of units. But the Units of the Scheme are not transferable. In view of the same, additions/ deletion of names will not be allowed under any folio of the Scheme. The above provisions in respect of deletion of names will not be applicable in case of death of unitholder (in respect of joint holdings) as this is treated as transmission of units and not transfer. Refund Who can invest This is an indicative list and you are requested to consult your financial advisor to ascertain whether the scheme is suitable to your risk profile. If application is rejected, full amount will be refunded within 6 weeks of closure of NFO. If refunded later than 6 weeks, interest @ 15% p.a. for delay period will be paid and charged to the AMC. For Retail and Institutional Option The following persons are eligible and may apply for subscription to the Units of the Plan (subject, wherever relevant, to purchase of units of Mutual Funds being permitted under respective constitutions and relevant statutory regulations): • Resident adult individuals either singly or jointly (not exceeding three) • Minor through parent/lawful guardian • Companies, Bodies Corporate, Public Sector Undertakings, association of persons or bodies of individuals and societies registered under the Societies Registration Act, 1860 (so long as the purchase of units is permitted under the respective constitutions) • Religious and Charitable Trusts under the provisions of 11(5)(xii) of Income-tax Act, 1961 read with Rule 17C of Income-Tax Rules, 1962 • Partnership Firms • Karta of Hindu Undivided Family (HUF) • Banks & Financial Institutions 22 Non-resident Indians/Persons of Indian origin residing abroad (NRIs) on full repatriation basis or on non repatriation basis • Foreign Institutional Investors (FIIs) registered with SEBI on full repatriation basis • Army, Air Force, Navy and other para-military funds • Scientific and Industrial Research Organizations • Mutual fund Schemes Every investor, depending on any of the above category under which he/she/ it falls, is required to provide the relevant documents alongwith the application form as may be prescribed by AMC. • Institutional Option - I Non-individual investors using specified institutional application form evidencing presence of underlying investors who are making direct investments in the scheme Where can applications. you submit the filled up Computer Age Management Services Private Limited (CAMS), Spencer Plaza, Phase II, S49A, 172, Anna Salai, Chennai 600002 have been appointed as Registrar for the Scheme. The Registrar is registered with SEBI under registration No: INR000002813. As Registrar to the Scheme, CAMS will handle communications with investors, perform data entry services and dispatch Account Statements. The AMC and the Trustee have satisfied themselves that the Registrar can provide the services required and has adequate facilities and the system capabilities. Investors can submit the application forms at the official points of acceptance of CAMS and Branches of AMC which are provided on back cover page. Investors can also subscribe and redeem units from the official website of AMC i.e. www.icicipruamc.com How to Apply Listing Special Products / facilities available during the NFO The policy regarding reissue of repurchased units, including the maximum extent, the manner of reissue, the entity (the scheme or the AMC) involved in the same. Restrictions, if any, on the right to freely retain or dispose of units being offered. Please refer to the SAI and Application form for the instructions. It is not proposed to list the scheme on any of the Recognised Stock Exchanges in India. Investors can subscribe to the units of the plan(s) under the Scheme using the Prutracker facility available in the website of the AMC. Presently the AMC does not intend to reissue the repurchased units. The trustee reserves the right to reissue the repurchased units at a later date after issuing adequate public notices and taking approvals, if any, from SEBI. The Units of the Scheme are not transferable. In view of the same, additions/ deletion of names will not be allowed under any folio of the Scheme. The above provisions in respect of deletion of names will not be applicable in case of death of unitholder (in respect of joint holdings) as this is treated as transmission of units and not transfer. 23 B. ONGOING OFFER DETAILS Ongoing Offer Period This is the date from which the scheme will reopen for subscriptions/redemptions after the closure of the NFO period. Being a close-ended Scheme, investors can subscribe to the Units of the Scheme during the New Fund Offer Period only and the scheme will not reopen for subscriptions after the closure of NFO. To provide liquidity to the investors, the Fund proposes to provide repurchase facility at fortnightly intervals from the date of allotment, i.e, on every 2nd and 4th Wednesday of each calendar month under all three -month plans. Under all other one year plans, the Fund proposes to provide repurchase facility at quarterly intervals on every 15th day from the end of each calendar quarter. The investors may redeem the units on the stipulated dates for redemption at NAV based prices, subject to the prevalent exit load provisions. If such date happens to be the non-business day, repurchase facility would be available on the following Business Day of the said date. The investors may redeem the units on the stipulated dates for redemption as mentioned in this scheme information document at NAV based prices, subject to the prevalent exit load provisions. The Fund will, under normal circumstances, endeavor to dispatch redemption cheques within 1 Business Day from the date of acceptance of the redemption request at any of the official point(s) of transaction(s). This service standard will apply only at the centers where RBI handles clearing directly and is able to transfer funds from Mumbai on the same-day-value basis. In respect of all non-RBI centers, for redemption payments, AMC will take additional day(s) – not exceeding 3 Business Days- that would essentially be linked to the time taken by banks to clear funds at such Non-RBI centers. Investors are requested to note that the Trustee reserves the right to modify the frequency of liquidity/repurchase facility for the benefit of the investors under each plan of the Scheme. Ongoing price for subscription (purchase)/switch-in (from other schemes/plans of the mutual fund) by investors. This is the price purchase/switch-in. you need to pay for Units cannot be subscribed after the closure of NFO. Example: If the applicable NAV is Rs. 10, entry load is 2% then sales price will be: Rs. 10* (1+0.02) = Rs. 10.20 24 Redemption of Units The Units can be redeemed (i.e., sold back to the Fund), at the Applicable NAV (hereinafter defined) commencing from not later than 30 days after the close of the New Fund Offer Period on every 2nd and 4th Wednesday of each calendar month under all one-month plans. Under all other plans, the Fund proposes to provide repurchase facility at quarterly intervals on every 15th day from the end of each calendar quarter. The investors may redeem the units on the stipulated dates for redemption at NAV based prices, subject to the prevalent exit load provisions. If this date happens to be the non-business day, repurchase facility would be available on following Business Day of the said date. The Redemption requests can be made by unit holders in amounts, with a minimum of Rs 5,000 or 500 units provided that minimum balance under a particular folio does not fall below Rs. 5,000/- under Retail Option. A Unit holder may request redemption of a specified amount or a specified number of Units (subject to the minimum redemption amount as mentioned above) the number of Units specified would be considered for deciding the redemption amount. If only the redemption amount is specified by the Unit holder, the Fund will divide the redemption amount so specified by the Applicable NAV based price to arrive at the number of Units. Unitholders may also request for redemption of their entire holding and close the account by indicating the same at the appropriate place in the Redemption Request Form. Ongoing price for redemption (sale) /switch outs (to other schemes/plans of the Mutual Fund) by investors. This is the price you will receive for redemptions/switch outs. Example: If the applicable NAV is Rs. 10, exit load is 2% then redemption price will be:Rs. 10* (10.02) = Rs. 9.80 The Redemption Price of the Units will be based on the Applicable NAV subject to the prevalent exit load provisions. The Redemption Price of the Units will be computed as follows: Redemption Price = Applicable NAV * (1-Exit Load, if any). The redemption will be at Applicable NAV based prices subject to applicable load structure. However, subject to the maximum load as permitted under the Regulations, the Trustee has a right to fix, from time to time, the exit load payable by the investors under the Scheme. Notice of the changes in the load structure shall be made by a suitable display in the Customer Service Centres of the AMC and will be communicated to the intermediaries and investors in the matter prescribed by SEBI. 17(b) While determining the prices of the units, the mutual fund shall ensure that the repurchase price is not lower than 95% of the Net Asset Value of the Scheme. In respect of valid applications received upto the cut-off time on the business day on which repurchase facility is provided by the Mutual Fund, same day’s closing NAV shall be applicable. No applications will be accepted after the cut-off time on the business day on which repurchase facility is provided by the Mutual Fund, as stated above. 25 Cut off timing for subscriptions/ redemptions/ switches This is the time before which your application (complete in all respects) should reach the official points of acceptance. Investors should note that if a redemption request is submitted mentioning only the name of the Plan and Folio Number but not mentioning the units and the amount for redemption, the Fund shall assume that the redemption request is for all the units under the stated folio from the Plan and the option mentioned on the redemption request and shall redeem all the units. Cut-off time for redemptions including switch outs: 3.00 p.m. Where can the applications for purchase/redemption switches be submitted? Minimum amount for purchase during NFO The details of official points of acceptance, collecting banker etc. are provided on back cover page. Retail Option Institutional Option Rs.5000 (plus in multiple of Re.1). Rs. 2,500, 000 /- (plus in multiple of Re.1 thereafter) Rs. 1,000, 000 /- (plus in multiple of Re.1 thereafter) Institutional Option I Minimum balance to be maintained and consequences of non-maintenance. The Redemption requests can be made by unit holders in amounts, with a minimum of Rs 5,000 or 500 units provided that minimum balance under a particular folio does not fall below Rs. 5,000/- under Retail Option and in case of Institutional Option and Institutional Option – I redemption request can be made for any amount in multiples of Re.1/-. Investors can subscribe to the units of the plan(s) under the Scheme using the Prutracker facility available in the website of the AMC. For normal transactions (other than SIP/STP) during ongoing sales and repurchase: • The AMC shall issue to the investor whose application (other than SIP/STP) has been accepted, an account statement specifying the number of units allotted (state the service standard for the same) • For those unitholders who have provided an e-mail address, the AMC will send the account statement by email. • The unitholder may request for a physical account statement by writing/calling the AMC/ISC/R&T. Annual Account Statement: • The Mutual Funds shall provide the Account Statement to the Unitholders who have not transacted during the last six months prior to the date of generation of account statements. The Account Statement shall reflect the latest closing balance and value of the Units prior to the date of generation of the account statement, • The account statements in such cases may be generated and issued along with the Portfolio Statement or Annual Report of the Scheme. • Alternately, soft copy of the account statements shall be mailed to the investors’ e-mail address, instead of physical statement, if so mandated. Special Products / facilities available Accounts Statements Dividend The dividend warrants shall be dispatched to the unitholders within 30 days of the date of declaration of the dividend. 26 Redemption The redemption or repurchase proceeds shall be dispatched to the unitholders within 10 working days from the date of redemption or repurchase. The Asset Management Company shall be liable to pay interest to the unitholders at such rate as may be specified by SEBI for the period of such delay (presently @ 15% per annum). Delay in payment of redemption / repurchase proceeds Bank Account Details 19 As per the directives issued by SEBI, it is mandatory for applicants to mention their bank account numbers in their applications for purchase or redemption of Units. If the Unitholder fails to provide the Bank mandate, the request for redemption would be considered as not valid and the Fund retains the right to withhold the redemption until a proper bank mandate is furnished by the Unit-holder and the provision with respect of penal interest in such cases will not be applicable/ entertained. C. PERIODIC DISCLOSURES Net Asset Value This is the value per unit of the scheme on a particular day. You can ascertain the value of your investments by multiplying the NAV with your unit balance. Half yearly Disclosures: Portfolio / Financial Results This is a list of securities where the corpus of the scheme is currently invested. The market value of these investments is also stated in portfolio disclosures. Net Asset Value of the Units of the Plan /Plans and Options therein, calculated on weekly basis i.e. on every Wednesday in the manner provided in this Scheme information document or as may be prescribed by Regulations from time to time. If such date happens to be a non-business day, it would be computed on the day following the non-business day. The Fund shall before the expiry of one month from the close of each half year, that is as on March 31 and September 30, publish its unaudited financial results in one English daily newspaper having all India circulation and in a newspaper published in the language of the region where the Head Office of the Fund is situated and update the same on AMC's website at www.icicipruamc.com within 30 days and 60 days in two different formats prescribed in terms of SEBI’s circular dated April 20, 2001 and on AMFI's website at www.amfiindia.com within 30 days from the close of each half year, in the prescribed formats. Further the Fund shall also disclose the half-yearly scheme portfolios on its web site at www.icicipruamc.com and on AMFI web site (www.amfiindia.com) in the prescribed format before the expiry of one month from the close of each half-year. Half Yearly Results The mutual fund and Asset Management Company shall before the expiry of one month from the close of each half year that is on 31st March and on 30th September, publish its unaudited financial results in one national English daily newspaper and in a regional newspaper published in the language of the region where the Head Office of the mutual fund is situated. The Fund will, not later than six months after the close of each financial year (March 31), mail to the Unitholders an abridged scheme wise annual report. Further, the full text of the Annual Report will be available for inspection at the office of the Fund. A copy of the Annual Report will be sent to Unit holders, free of cost, on specific request. 27 Annual Report Associate Transactions Taxation Please refer to Statement of Additional Information (SAI). For details on taxation please refer to the clause on Taxation in the SAI. The Fund will follow-up with Customer Service Centres and Registrar on complaints and enquiries received from investors for resolving them promptly. For this purpose, Ms. Anisha Iyer has been appointed the Investor Relations Officer. She can be contacted at the Corporate Office of the AMC. The address and phone numbers are: 8th Floor, Peninsula Tower Peninsula Corporate Park Ganpatrao Kadam Marg, Off Senapati Bapat Marg Lower Parel Mumbai 400 013 Phone: (91)(22) 24997000 Fax : (91)(22) 24997029 Investor services D. COMPUTATION OF NAV 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. The NAVs of the fund shall be rounded off upto four decimals. NAV of units under the Scheme shall be calculated as shown below : Market or Fair Value of Scheme’s investments + Current Assets - Current Liabilities and Provision NAV (Rs.) =_____________________________________________________ No. of Units outstanding under Scheme The NAV of the Scheme will be calculated on weekly basis on every Wednesday. If such date happens to be the non- businees day, it would be computed on following Business day. The valuation of the Scheme’s assets and calculation of the Scheme’s NAV shall be subject to audit on an annual basis and such regulations as may be prescribed by SEBI from time to time. 28 IV. FEES AND EXPENSES This section outlines the expenses that will be charged to the schemes. A. NEW FUND OFFER (NFO) EXPENSES These expenses are incurred for the purpose of various activities related to the NFO like sales and distribution fees paid marketing and advertising, registrar expenses, printing and stationary, bank charges etc. Entire NFO expenses will be borne by the AMC. In terms of SEBI circular No. SEBI/IMD/CIR No. 11/115723 /08 dated January 31, 2008, close ended schemes are not permitted to charge initial issue expenses to the scheme. Hence, NFO Expenses will not be charged to the Scheme. B. ANNUAL SCHEME RECURRING EXPENSES These are the fees and expenses for operating the scheme. These expenses include Investment Management and Advisory Fee charged by the AMC, Registrar and Transfer Agents’ fee, marketing and selling costs etc. as given in the table below: The AMC has estimates the following percentage of the weekly average net assets of the scheme will be charged to the scheme as expenses). For the actual current expenses being charged, the investor should refer to the website of the mutual fund. The mutual fund would update the current expense ratios on the website within two working days mentioning the effective date of the change. Particulars Investment Management & Advisory Fee Custodial Fees Registrar & Transfer Agent Fees including cost related to providing accounts statement, dividend / redemption cheques / warrants etc. Marketing & Selling Expenses including Agents Commission and statutory advertisement Brokerage & Transaction Cost pertaining to the distribution of units Audit Fees / Fees and expenses of trustees Costs related to investor communications Costs of fund transfer from location to location Other Expenses* (including service tax) Total Recurring Expenses *As permitted under the Regulation 52 of SEBI (MF) Regulations The investment management fee for all the options will be the same. The purpose of the above table is to assist the investor in understanding the various costs and expenses that an investor in the Scheme will bear. These estimates are based on a corpus size of Rs.2 crore under the Scheme and would change to the extent assets are lower or higher. If the corpus size is in excess of Rs.2 crore, the above mentioned recurring expenses in the Scheme would change. The above expenses are subject to inter-se change and may increase/decrease as per actual and/or any change in the Regulations. These estimates have been made in good faith as per information available to the Investment Manager based on past experience and are subject to change interse. Types of expenses charged shall be as per the SEBI (MF) Regulations. As per the Regulations, the maximum recurring expenses that can be charged to the Scheme shall be subject to a percentage limit of weekly net assets as in the table below: First Rs. 100 crore 2.25% Next Rs. 300 crore 2.00% Next Rs. 300 crore 1.75% Over Rs. 700 crore 1.50% 29 Institutional Option I 1.00 0.20 0.21 0.17 0.25 0.06 0.12 0.04 0.15 2.20 Institutional Option 1.00 0.20 0.21 0.17 0.25 0.06 0.12 0.04 0.15 2.20 Retail Option 1.00 0.20 0.21 0.17 0.30 0.06 0.12 0.04 0.15 2.25 Subject to Regulations, expenses over and above the prescribed limit shall be borne by the Asset Management Company. 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 crores and at 1.00% per annum for the corpus amount in excess of Rs.100 crores. Further, as per the Regulations, for the schemes launched on no load basis, the Asset Management Company is entitled to collect an additional management fees not exceeding 0.50% of the average net assets outstanding in each financial year C. LOAD STRUCTURE Load is an amount, which is paid by the investor to subscribe to the units or to redeem the units from the scheme. This amount is used by the AMC to pay commissions to the distributor and to take care of other marketing and selling expenses. Load amounts are variable and are subject to change from time to time. For the current applicable structure, please refer to the website of the AMC (www.icicipruamc.com) or may call your distributor. i) Entry Load: Being a close ended Scheme; investors can subscribe to the units of the Plans under the Scheme during the New Fund offer period only. Presently, the Trustees do not intend to charge any entry load on subscription received. Exit Load: Redemptions made on maturity do not attract any exit load. The investors may redeem the units on the stipulated dates on which Repurchase facility is provided, at NAV based prices subject to the following exit load provision: Three Month Plan A, B, C, D & E 1% of the applicable NAV One Year Plan A, B, C, D & E 2% of the applicable NAV All loads including CDSC for each scheme shall be maintained in a separate account and may be utilized towards meeting the selling and distribution expenses. Any surplus in this account may be credited to the scheme, whenever felt appropriate by the AMC. ii) 16 Any imposition or enhancement in the load shall be applicable on prospective investments only. However, AMC shall not charge any load on issue of bonus units and units allotted on reinvestment of dividend for existing as well as prospective investors. Bonus units and units issued on reinvestment of dividends shall not be subject to entry and exit load. The investor is requested to check the prevailing load structure of the scheme before investing. For any change in load structure AMC will issue an addendum which shall be published in one English daily newspaper having nationwide circulation and in the language of the region where the Head Office is situated and display it on the website/Investor Service Centres. D. WAIVER OF LOAD FOR DIRECT APPLICATIONS In terms of SEBI circular No. SEBI/IMD/CIR No. 10/ 112153 /07 December 31, 2007, no entry load shall be charged for direct applications received by the Asset Management Company (AMC) i.e. applications received through internet, submitted to AMC or collection centre/ Investor Service Centre that are not routed through any distributor/agent/broker, for all the Fresh investments/Additional purchases under the same folio / Switch- in to a scheme from other schemes, directly made by investors, w.e.f. January 04, 2008. V. RIGHTS OF UNITHOLDERS Please refer to SAI for details. 30 20 VI. 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 A. Cases of penalties awarded by SEBI under the SEBI act or any of its regulations or any other regulatory body against the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the asset management company, trustee company/board of trustees, or any of the directors or key personnel of the asset management company and trustee company: 1. ICICI Bank (the Bank) received show cause notices in the matter of alleged custom duty and excise duty evasion by the companies mentioned below in respect of the equipments purchased for their project funded by the Bank under Asian Development Bank (ADB) / World Bank line of credit. The said companies, have paid the duty under protest and sought refund thereof. The Bank filed its replies through advocates and agues the matter. In the following cases, penalties have been levied. On January 25, 2007 the Assistant Commissioner of Central Excise, Kolkata passed an order and imposed a fine of Rs. 0.19 million on us in respect of the case of BCML. We have filed an appeal before the Commissioner of Central Excise (Appeals), Kolkata. On, 15 June 2007, after considering the submissions made, the Commissioner of Central Excise, Appeals directed the Commissioner of Central Excise to prove the show cause notice and the hearing notice was served upon ICICI Bank Ltd. ICICI Bank Ltd. has been directed to file return submissions. On an application for the stay of proceedings made by ICICI Bank, the Commissioner of Central Excise, Appeals, has granted the said application and has directed the Commissioner of Central Excise not to take any coercive action against ICICI Bank Ltd for recovery of penalty. On 7 September 2007, the impugned order of the Assistant Commisioner of Central Excise was set aside on the ground that right to defend of the appellant was effectively denied because of non delivery of show cause notice. Pursuant to the show cause notice served to us in the matter relating to Triveni Engineering and Industries Ltd., hearing was held on July 25, 2007. However, the other parties to whom show cause notice have been served, are yet to be heard. Accordingly, the next date of hearing will be informed to us by the Commissioner. Pursuant to the show cause notice in the case of Rashtriya chemicals & Fertilizers Ltd (RCF), on December 15, 2005 the Commissioner of Customs (Import) passed an order and imposed the penalty of Rs. 5.0 million on us. We have filed an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal and on November 10, 2006 a stay has been granted against recovery and waiver of predeposit of Rs. 5.0 million. Final hearing of the appeal is pending. On April 21, 2006 the Commissioner of Customs (Import) passed an order and imposed the penalty of Rs. 20.0 million us in respect of the case of Madras Aluminium Company Ltd (MALCO). We have filed an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal (CESTAT). The Appellate authority has observed that, prima facie the penalty on us is on the higher side and directed us to deposit Rs. 2.0 million. We filed a writ petition in Madras High Court challenging this order and stay was granted in our favour on January 19, 2007 against the predeposit and this was made absolute on March 21, 2007. The CESTAT appeal has been adjourned to March 10, 2008. On September 29, 2006 the Commissioner of Customs (Import) passed an order and imposed the penalty of Rs. 1.0 million on us in respect of the case of Jindal Steel & Power Ltd. We have filed an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal. On January 8, 2007, a stay against the recovery and the waiver of the pre-deposit of Rs. 1.0 million was granted. Final hearing of the appeal is pending. In respect to the show cause notice in Balarampur Chini , against the order dated January 25, 2007 for the penalty of Rs 1,92,2606 passed by the Assistant Commissioner of Central Excise, on filing the appeal before the Commissioner of Central Excise (Appeal II), Kolkata by its order dated September 7, 2007 allowed the appeal and set aside the said order dated January 25, 2007 ICICI Bank (the Bank) has received a show cause notice dated January 31, 2005 from Reserve Bank of India (RBI) in relation to M/s Anand Agencies, wherein the Bank was called upon to show cause why proceedings should not be initiated against the Bank for non-adherence to RBI directions on the procedure for return/dispatch of dishonoured cheques, and why monetary penalty of Rs. 5 lacs should not be imposed on the Bank. The position of the Bank has been explained to RBI and a written submission was also made. ICICI Bank (the Bank) had sanctioned External Commercial Borrowing (ECB) facility to a customer on February 5, 2004 from its Singapore Branch. It was observed by RBI that since the customer was engaged in "retail" sector, the sanction of the ECB facility is not in compliance with the guidelines of RBI dated January 31, 2004. RBI had observed that, as per these guidelines, ECB could be sanctioned 31 2. 3. 4. 5. 6. 7. only to customers who are engaged in "real sector comprising of the industrial and especially the infrastructure sector in India". Accordingly, RBI issued a Show Cause Notice on June 22, 2006, to the Bank for non-compliance with the extant rules/regulations/directions under the Foreign Exchange Management, Act 1999. The Bank had submitted its detailed response to the Show Cause Notice vide letter dated June 30, 2006 stating that the sanction of the facility was undertaken, as the Bank understood that the "retail sector" fell under the category of the "real sector" and that the "real estate sector" was the only ineligible sector as per the RBI guidelines. Certain additional information was also submitted to RBI. Subsequently, the Bank had made an oral submission to the Executive Director of RBI on August 4, 2006 explaining its earlier submissions in detail. RBI has advised that the guidelines issued by RBI be adhered to both in letter and spirit, and the lapses do not recur. Pursuant to reports received from the Securities & Exchange Board of India (SEBI), Reserve Bank of India (RBI) had conducted a scrutiny with regard to certain accounts across various banks including ICICI Bank. Based on the scrutiny conducted, RBI had issued a show cause notice dated December 29, 2005 to seven banks including ICICI Bank. In the show cause notice issued to ICICI Bank, RBI observed that ICICI Bank had violated the RBI directions, instructions and guidelines relating to opening of accounts, monitoring of transactions and non-adherence to normal banking practices. ICICI Bank submitted its detail response to RBI, which was followed by an oral submission, stating that the RBI regulations have been adhered to and that the normal banking practices have been followed. After considering the submissions of the seven banks, RBI had imposed penalty on these banks ranging from Rs. 5 lacs to Rs. 20 lacs. A penalty of Rs. 5 lacs was imposed on ICICI Bank by RBI, vide its communication dated January 23, 2006. The steps taken by RBI against the banks are aimed at strengthening the country’s banking system and ensuring that instances of misuse of the banking system by certain individuals, seeking to manipulate capital market processes, are prevented. ICICI Bank has paid the penalty of Rs. 5 lacs. The Securities and Futures Commission of Hong Kong ("SFC") had filed charges against ICICI Bank (the Bank) for carrying on the business of dealing in securities in Hong Kong between June 15, 2004 and March 8, 2006, without having a license to do so. ICICI Bank had accepted the charges without contesting and had submitted its mitigation statement before the Court. The Eastern Magistrate's Court, Hong Kong, consequently fined the Bank a sum of HKD 40,000 (USD 5,120 -- INR 2.2 lacs) and ordered the Bank to further reimburse prosecution costs of HK$ 54,860 (USD 7000 -- INR 3.01 lacs) to the SFC. The contravention was limited to a small segment of the branch's business in Hong Kong and has not resulted in any loss either to the Bank's customers or to the Bank. The Bank has, based on the findings of an internal review conducted upon the discovery of this incident in April 2006, taken appropriate staff accountability actions against the relevant staff whose conduct resulted in the contravention. The Bank has since implemented significant measures to strengthen the compliance, monitoring and control functions at the Hong Kong Branch which included bringing in a new management team. The Securities and Exchange Board of India (SEBI) issued a notice to us in connection with matters pertaining to erstwhile Bank of Madura’s Bhadra, Ahmedabad branch, asking to show cause as to why the said branch should not be suspended from conducting merchant banking activities for a period of 6 months. SEBI stated that there were irregularities in fiscal 1996 in the operations of the account of North Star Gems Limited with this branch. A detailed reply was filed with SEBI in this regard. SEBI vide order dated October 16, 2002 issued a warning to the Bhadra, Ahmedabad branch with a further direction to that branch to act with due skill, care and diligence while acting as banker to an issue. SEBI noted that we had taken appropriate disciplinary action against the concerned employees. SEBI further noted that inspection by the Reserve Bank of India did not indicate malafide actions on the part of our officials. In view of the same, SEBI concluded that the aforesaid warning would suffice as sufficient action against the branch. Ms. Nivedita Sharma has filed a consumer complaint before the State Consumer Disputes Redressal Commission, Delhi against us and three others (CC No. 09/06). She has alleged that we and another party have purchased confidential information pertaining to her and other subscribers from various mobile service providers indulging in tele-marketing activities leading to invasion of her right to privacy under Article 21 of Constitution. She had claimed compensation to the tune of Rs. 3.45 million. Cellular Operators Association of India (COAI) also got impleaded as a party in this matter. We raised a preliminary objection stating that she is not a “Consumer” of the Bank, as provided for in the Consumer Protection Act, as she has not been provided any services by us. Further, we have denied purchasing any such confidential information of the subscribers. The final hearing in this matter was held on November 27, 2006 and the final orders were reserved. Vide final order dated December 26, 2006, a penalty of Rs. 2.5 million has been jointly imposed upon ICICI Bank & another (our share Rs. 1.25 million) and a compensation of Rs. 0.05 million has been granted in favour of the Complainant, payable equally by all the four parties (our share Rs. 0.012 million). We have filed a writ petition 32 8. 9. challenging the order which is pending before the Delhi High Court. Next date of hearing is April 21, 2008. In the interim, the claimant had filed an application for execution of the order of the State Commission, which was dismissed by the State Commission on September 7, 2007 in light of the High Court order. The claimant has filed an application for restoration of the contempt petition under Section 151 of CPC wherein the State Commission has held that the application shall be heard as an execution petition confining only with respect to the prohibitory order of the State Commission. It was observed by RBI that the issue of ADR had not been reported to RBI in Annexure C till date. RBI had observed that, in terms of para 4(2) of Schedule 1 to Notification No. FEMA.20/2000-RB dated May 3, 2000 an Indian Company issuing Global Depository Receipts/American Depository Receipts (GDRs/ADRs) is required to be furnished to RBI in Annexure ‘C’ within 30 days from the date of closing of the issue. Accordingly, RBI issued a Show Cause Notice on December 18, 2007, to the Bank in relation to reporting of ADR/GDR issued in Annexure ‘C’, wherein the Bank was called upon to show cause why penalty should not be imposed against the Bank under Section 13 of the Foreign Exchange Management Act, 1999. The Bank had submitted its response to the Show Cause Notice vide letter dated December 27, 2007. O.R.J.Electronic Oxides Limited – The erstwhile Bank of Madura (the Bank) granted lease finance of US $ 72,00,000 (INR Rs. 2578.00 lakhs) to the company on May 22, 1997 for import of capital goods from IPTE, Inc., USA. 1) Based on DRI’s Report : Commissioner of customs initiated proceedings and imposed a fine of Rs.1 crore on the Bank. The same has been remanded by the Central Excise and Service Tax Appellate Tribunal (CESTAT) to another Commissioner of Customs for De Nova adjudication. The Commissioner of Customs, Tuticorin, without making fresh adjudication passed an order dated September 28, 2006 based on the earlier DRI’s investigation report and the documents mentioned therein. The Commissioner has held that both the Bank and ORJ are the joint importers of machinery and willfully and collusively misdeclared to the customs authorities the value and the description of the worthless capital goods of Indian origin. Hence he has directeda. payment of customs duty of Rs.12,86,61,198/- payable by the Bank and ORJ jointly and severally; b. to redeem confiscated goods on payment of fine of Rs.1,00,000/- jointly and severally by the Bank and ORJ; c. penalty of Rs.5,00,00,000/- payable by the Bank; d. penalty of Rs.5,00,00,000/- payable by ORJ; and e. payment of penalty of Rs.1,00,00,000/- by Late N.M.Parthasarathy, Chairaman and Managing Director, M/s ETK International Ferrites Limiited, Ranipet, Tamil Nadu. We filed an appeal No.C/PD/326/06 before CESTAT on December 4, 2006. We have also filed an application No.C/Appl.516/06 for interim stay and waiver of deposits. CESTAT after hearing the arguments of our Senior Counsel at length granted waiver of deposit of both the fine and the customs duty of Rs.180.0 million and interim stay of the above order on March 5, 2007. We have filed an application before the CESTAT for advance hearing of the appeal filed by us and the appeal isposted to January 30, 2008 We have filed an application before the CESTAT for advance hearing of the appeal filed by us. 2) Based on DRI’s Report : Enforcement Directorate initiated proceedings against the Bank and its officials for aiding and abetting the importer and the company in acquiring foreign exchange to the tune of US $ 72 lacs and imposed a fine of Rs.10.00 lacs on the Bank. We have filed an Appeal No. 496 of 2004 against this order, before the Appeal Tribunal for Foreign Exchange Regulation Act (FERA), Delhi and obtained interim stay on condition of deposit of 50% of the fine imposed. Against this order of conditional stay we filed a writ petition in High Court, Madras and obtained interim stay. Considering our arguments the Appellate Tribunal adjourned the appeal and advised us to inform the outcome of the Writ Petition. 3) Based on DRI’s Report : CBI investigated into the allegations of criminal conspiracy, cheating etc., against our Bank and its officials, also against M/s Sundaram Finance Limited and its officials, and also against ORJ Electroncis and Oxide Limited and the importer (IPTE Inc., USA). Charge sheet has been filed by CBI before the Chief Metropolitan Magistrate, Egmore against all the persons concerned in Crl. Case No. 5 of 2004. M/s Sundaram Finance Limited filed a Crl.O.P.No.22976 of 2004 before the High Court, Madras and sought for quashing of the above criminal proceedings. An interim stay was granted by the High Court in Crl. M.P.No.7436 of 2004. We filed an application Crl. O.P. No.2425 of 2007 before the High Court, Madras for quashing the above criminal case in CC No.5 of 2004 and sought for interim stay and for dispensing with the personal appearance of Mr.V.Nachiappan, General Manager and Mr.N.Narayanan (Ex-Official of 33 EBOM). The HC, Madras vide its order dated August 13, 2007 granted interim stay of the above criminal proceedings and dispensed with personal appearance without imposing any conditions. 4) Based on DRI’s Report : Joint Commissioner of Income Tax, Special Range III, Chennai by its order dated 28-2-2001 disallowed the depreciation on the lease finance amount of Rs.2578 lacs thereby called upon the Bank to pay arrears of Income Tax for a sum of Rs.15,83,42,475/-. This order was confirmed by the Commissioner of Income Tax, (Appeals) and against which the Bank filed an appeal before the Income Tax Appellate Tribunal and the same is pending. 5) The Enforcement Directorate (ED) issued a prohibitory order to the Bank to freeze the Foreign Currency Non Resident Deposit (FCNRD) of IPTE placed in the name of M/s ETKIF, America for Rs.2.00 crores during the year 2000 and RBI also issued directions to the Bank to remit the proceeds to Directorate of Enforcement under Sec. 11 of FEMA. The Bank has replied to both ED and RBI that since Income Tax liability is crystallized for Rs.15.83 crores against the Bank, the Bank has exercised a lien on the deposits of IPTE. Hence a detailed letter has been sent in consultation with our Senior Counsel. However RBI has sought for certain clarification, which has been replied. Sundaram Finance Ltd filed an application No.2035 of 2007 before High Court, Madras in the arbitration proceedings initiated against ETK Softek Private Limited and obtained Pro-Order dated February 23, 2007 against deposits held by us in the name of ETKIF America Inc and ETKIF Export Consultants. We entered appearance through our Advocate in the above application. The FCNR deposits held by us in the name of ETKIF America Inc has already been lien marked in our favour for the Income Tax liability and Sundaram Finance has no locus standi to claim the deposits in the name of ETKIF America Inc. The HC was pleased to consider our arguments and directed the Bank vide its order dated August 27, 2007 not to release the deposits in the name of ETK Export Consultants on account of Sundaram Finance pending disposal of the proceedings initiated by FERA, RBI and Income-tax. 10. Sandeep Malhotra ("the noticee") was appointed as the nominee director by the erstwhile ICICI Ltd., on the Board of directors of Daewoo Motors India Ltd (DMIL) in January 2000. The Enforcement Directorate (ED) passed an order dated November 20, 2003 (served upon the noticee on February 8, 2008), which, inter alia, records that DMIL had acquired and remitted abroad, foreign exchange to the tune of US $ 49,21,000/- for making certain imports into India and that DMIL failed to submit necessary documentary evidence to the authorized dealer evidencing the import, thus violating the provisions of Section 8(3) & 8(4) read with Section 68 of the Foreign Exchange Regulation Act, 1973 (FEMA) read with Para 7A, 20(i) of ECM 1995 read with 49(3) & 49(4) of the Foreign Exchange Management Act, 1999. ED without hearing the noticee imposed on him a personal penalty of Rs.2,10,00,000/- (Rupees Twenty one million only), in SCN No.T-4/322-D/2002(SCN) dated May 29, 2002. ED has also imposed penalty against DMIL & other directors of DMIL. The noticee is in the process of preferring an appeal against the said order before the Appellate Tribunal for Foreign Exchange, New Delhi. 1. The office of Superintendent of Financial Institutions at Canada (OSFI) has imposed penalties on the late and erroneous submission of regulatory returns at various points in time during 2007-08 (so far) amounting to CAD 18,250. These penalties are imposed under the Late and Erroneous Filing Penalty (LEFP) framework of OSFI. All the penalties have been paid by the Bank and steps are being taken to prevent the recurrence of the same. B. Any pending material litigation proceedings incidental to the business of the mutual fund to which the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the AMC, Board of trustees/trustee company or any of the directors or key personnel is a party. Any pending criminal cases or economic offence cases against the sponsor or any company associated with the sponsor in any capacity such as AMC, Board of Trustees/Trustee Company or any of the directors or key personnel. There are no outstanding or pending litigations or suits or proceedings, pertaining to matters incidental to the business of Mutual Fund whose outcome could have a material effect on us. However, at December 31, 2007, the following are the outstanding or pending litigations or suits or proceedings against ICICI Bank involving a claim of Rs. 10 crores and more, and criminal complaints or cases against us and our directors. The compiled position of claims against us (excluding tax related matters) involving an amount of less than Rs. 10 crores has been provided separately as under. 34 CLAIMS AGAINST ICICI BANK AS ON DECEMBER 31, 2007 WHERE THE CLAIM AMOUNT IS LESS THAN RS. 10 CRORES & CASES WITH NO MONETARY CLAIMS Nature of claim Cases with Monetary Claim less than 10 Crs Number 1 2 Suits filed by shareholders/bond holders of the Bank. Suits filed by debenture holders against the Bank as Debenture Trustees. Suits filed by lessees/hirers seeking injunction against the Bank Counter claims filed by Borrower/s or Guarantor/s. Suits/Cases filed by other persons Writ Petitions filed by employees/ex employees Writ Petitions filed by other persons Cases filed Ombudsman before the Banking 35 16 Amount Crs 0.1872 0.0651 in Cases with no monetary claim Number 407 5 3 4 5 6 7 8 9 7 10 4 7 6 10 11 0.0502 14.9950 9.0845 0.3134 0.3890 0.0260 6.7324 123 1 0 15 6 26 3 Suits pertaining to fraudulent transactions / theft / deceit / misrepresentation or similar conduct Suits pertaining to foreign exchange regulations Suits pertaining to products /facilities provided by the Bank Suits/proceedings/investigations statutory/regulatory authorities Suits pertaining to interest charges Suits pertaining to property disputes Suits where the bank is impleaded as Proforma Defendant Suits/Cases in respect of labour related matters Criminal cases against the Bank Cases pertaining to economic offences including stamp duty matters Suits in relation to securities law Cases filed under Sec. 138 of Negotiable Instruments Act by 10 11 0 1206 0.0000 24.1272 0 1144 12 13 14 15 16 17 18 0 10 5 1 0 0 0 0.0000 2.2696 2.3575 0.0106 0.0000 0.0000 0.0000 1 1 44 17 16 117 4 19 20 0 0 0.0000 0.0000 0 0 35 21 22 Suits against Government of India (SDFC cases) Miscellaneous suits/legal proceedings in the course of business. Criminal cases against the Directors of the Bank Criminal cases against other Officials of the Bank Civil cases against the Directors of the Bank Civil cases against other Officials of the Bank Cases against Nominee Directors of the bank TOTAL 0 287 0.0000 17.4737 10 17 23 24 25 26 27 31 3 1 0 0 7.2049 0.0012 1.0700 0.0000 0.0000 16 0 36 14 4 1650 86.3576 2027 DETAILS OF CLAIMS AGAINST THE BANK AS ON DECEMBER 31, 2007 WHERE THE CLAIM AMOUNT IS MORE THAN RS. 10 CRS. 1. We have filed a recovery application (O.A No. 278 of 2002) against Mardia Chemicals Ltd. (“MCL”) and its guarantors for recovery of an aggregate sum of Rs.1.362 billion before the Debts Recovery Tribunal, Mumbai (“DRT”). Pursuant to this MCL filed a counter claim for Rs. 56.31 billion against us. We have filed documents and a claim affidavit to establish our claim and to support our case for rejection of the counter claim. MCL was in the meantime ordered to be wound up. Therefore the aforesaid counter claim against us would now have to be pursued by the Official Liquidator (“OL”) attached to the High Court of Gujarat. Though the OL has been brought on record, the OL has so far not entered appearance in the proceedings. In the meantime, we have filed a Chamber Summons for dismissal of this counter pursuant to the Order of the City Civil Court, Ahmedabad rejecting the suit no. 3189 of 2003 filed by Mardia Chemicals Ltd. against the Directors of ICICI Bank on the same matter. This Chamber Summons is now kept for hearing. 2. A suit was filed against us before the City Civil Court, Ahmedabad (Civil Suit No. 1431 of 2003) by Rasiklal S. Mardia, Rakesh S. Mardia and Rajiv S. Mardia, the promoters of Mardia Chemical Ltd (“MCL”), in their capacity as guarantors, for damages amounting to about Rs.20.79 billion allegedly payable to MCL. We have filed applications for dismissal of the suit on various grounds, including inter alia that the suit is barred by the laws of limitation. We have further submitted that since this suit is essentially in the form of a counter claim to the suit filed by us before the DRT, Mumbai against these guarantors the same is required to be tried before the DRT. The Court after hearing the arguments of both the parties by its order dated January 10, 2008, returned the plaint for presenting the same before the DRT, Mumbai within four weeks in terms of the alternate relief sought by us in our application, failing which the suit shall stand dismissed 3. Civil Suit No. 899 of 2005 – We had filed a suit before the Debt Recovery Tribunal (DRT), Ahmedabad in January 2002 against Gujarat Telephone Cables Limited (GTCL) for default on term loans, debentures and working capital provided by us to GTCL. Our exposure as a lender to GTCL was transferred to the Asset Reconstruction Company India Limited (ARCIL) in March 2004. GTCL filed a suit in the Civil Court claiming damages of Rs. 10.03 billion jointly and severally from State Bank of India, Bank of Baroda, United Western Bank, UTI Bank, Bank of India, ARCIL and us. We have filed an application for rejection of the plaint. GTCL filed a reply to our application. We have filed our rejoinder. The matter is to come up for hearing 36 4. OA no. 128/98 - Industrial Finance Corporation of India Ltd (IFCI) filed this joint suit with erstwhile ICICI Limited and Life insurance Corporation of India (LIC) before Debt Recovery Tribunal (DRT), Delhi against Foremost Ceramics and its guarantors for recovery of payable dues. One of the guarantors, Shri H.S.Jalan, has filed a counter claim in DRT, Delhi on October 16, 2001, for an amount of Rs. 4.50 billion jointly and severally against IFCI, LIC and us on various frivoulous grounds to which IFCI has filed a reply that has been adopted by LIC and us. denying the averments made therein and pointing out that the counter claim does not deny the guarantee and that the guarantor is merely trying to avoid liability. 5. Civil Suit No. 107 of 1999 – Erstwhile ICICI Ltd. had filed an application in the Debt Recovery Tribunal (DRT), Delhi against Esslon Synthetics Limited (ESL) and its managing director (in his capacity as guarantor) for recovery of dues payable to it. The guarantor filed a counter-claim in the year 2001 for an amount of Rs. 1.00 billion against erstwhile ICICI Limited and others. Further, ESL moved an application for amending the counter-claim in January 2004 to which we filed our reply on March 31, 2004. The matter is pending disposal. To delay proceedings, the guarantor has also filed an interim application on the ground that certain documents have not been exhibited to which ICICI has filed its reply clearly stating that the required documents are neither relevant nor necessary for adjudicating the dispute between the parties. This interim application is pending disposal. 6. Erstwhile ICICI Ltd had filed a suit against Punalur Paper Mills Limited (PPL) for recovery of dues in the Bombay High Court, which got transferred to Debt Recovery Tribunal (DRT), Mumbai. Our loan exposure in PPL has been assigned to Kotak Mahindra Bank in September 2004. Subsequently PPL and its directors have filed a suit in the Bombay High Court against the erstwhile ICICI Ltd and other lenders claiming Rs. 266.9 million as damages, jointly and severally. We have filed our written statement and served a copy of the same to PPL’s advocates. It is pending for hearing and final disposal before the Hon’ble Bombay High Court. 7. Civil Suit No. 192 of 2001: We have filed a suit in the Debt Recovery Tribunal (DRT), Baroda against Vision Organics Limited (VOL) for the recovery of Rs. 312.7 million. VOL has filed a counter claim against us for Rs. 230.0 million to which we have filed our reply. An interim application was filed by VOL for the payment/setting off of the main claim which was rejected by the DRT, pursuant to this rejection VOL preferred an appeal before the Debt Recovery Appellate Tribunal which has been finally heard and reserved for orders. The matter pending before the DRT has been adjourned and shall be listed before DRT-II 8. Civil Suit No. 434 of 2001: The Peerless General Finance & Investment Company Ltd., a debenture holder of Essar Oil Limited, has filed a suit against Essar Oil Limited and others in the High Court, Kolkata for non-receipt of redemption amount and interest of Rs. 112.3 million. We in our capacity as a debenture trustee were named as a defendant in this suit. Our written statement along with an application under Order VII Rule 11, Code of Civil Procedure, 1908 to dismiss the plaint has been filed. The suit is pending disposal. 10. Civil Suit No. 1559 of 1998: Anchor Electronics and Electricals Limited (AEEL) paid the outstanding dues for and on behalf of Kalpana Lamps and Components Limited (KLCL) who had availed of financial assistances from us and other lenders. and thus AEEL requested for assignment of the securities in it’s favour. AEEL filed a suit for specific performance but subsequently amended it to a money suit claiming Rs. 106.8 million with interest thereon from us and others and the same is pending before the Bombay High Court. We have filed our written statement. AEEL has filed an application for release of title deeds of KLCL’s properties at Ranipet to which we have given our no-objection certificate (NOC) however other charge holders are yet to give their NOC. We have received a letter from the office of the Official Liquidator, Chennai that a winding up order has been passed by the Madras High Court in respect of KLCL and that they have taken possession of KLCL’s properties. The application filed by AEEL for release of title deeds has been dismissed as withdrawn. 37 11. A counterclaim has been filed by Hindustan Agrochemicals and five others (OA no. 29/2001 before the Debt Recovery Tribunal (DRT), Jaipur) against IFCI, IDBI, Central Bank of India, Rajasthan Pollution Control Board and us in February 6, 2007. The applicants claim that on account of them being blacklisted by the RBI at the behest of IFCI, IDBI, Central Bank of India and us, their reputation, image and prestige have been adversely affected because of which they have also been deprived of their livelihood and have claimed financial losses of Rs. 100.0 million, along with interest at the rate of 18% per annum jointly and severally, against IFCI, IDBI, Central Bank of India and us. The reply to this counterclaim has to be filed. 12. 11.O.R.J.Electronic Oxides Limited – The erstwhile Bank of Madura (the Bank) granted lease finance of US $ 72,00,000 (INR Rs. 2578.00 lakhs) to the company on May 22, 1997 for import of capital goods from IPTE, Inc., USA. Based on DRI’s Report, Commissioner of customs initiated proceedings and imposed a fine of Rs.1 crore on the Bank. The same has been remanded by the Central Excise and Service Tax Appellate Tribunal (CESTAT) to another Commissioner of Customs for De Nova adjudication. The Commissioner of Customs, Tuticorin, has directed a. payment of customs duty of Rs.12,86,61,198/- payable by the Bank and ORJ jointly and severally; b. to redeem confiscated goods on payment of fine of Rs.1,00,000/- jointly and severally by the Bank and ORJ; c. penalty of Rs.5,00,00,000/- payable by the Bank; We filed an appeal No.C/PD/326/06 before CESTAT on December 4, 2006. We have also filed an application No.C/Appl.516/06 for interim stay and waiver of deposits. CESTAT granted waiver of deposit of both the fine and the customs duty of Rs.180.0 million and interim stay of the above order on March 5, 2007. CASES AGAINST CHAIRMAN AND DIRECTORS Criminal Complaints : 1. A criminal complaint (64 of 2002) was filed against 36 individuals including Mr. K. V. Kamath before the Court of the Chief Metropolitan Magistrate, Patiala House, New Delhi by Mr. M. M. Sehgal, the promoter of Sehgal Papers Limited (SPL). ICICI as part of a consortium of lenders had extended financial assistance to SPL. No summons has been issued against us so far. The matter is at the stage of pre-summoning evidence before Patiala House. The matter is posted for hearing on July 10, 2008. Case No. – 2064I of 2000- Vijay Shankar Prasad, as a debenture holder of Lloyds Finance & Investment Company Limited (LFICL), had filed this criminal complaint (for non-receipt of interest and redemption amount from the LFICL, in the Court of Chief Judicial Magistrate, Patna (CJM). As we are acting as trustees, he has inter alia, impleaded Mr. K. V. Kamath. The CJM had taken cognizance of the offence and issued summons for appearance, Aggrieved by such direction, a criminal revision application (CRA No. 754/2001) was filed before the Sessions Judge, Patna, which was admitted and directions were issued for staying the proceedings before CJM court and records were also called from the lower court. However, the company has since paid the outstanding dues of the debenture holder and to this effect a Memorandum of Understanding (MOU) has also been executed between the complainant and the company. The Bank had filed an application enclosing a copy of the MOU before the Sessions Judge for quashing of the proceedings. Hearing of the matter was concluded after prolonged hearings on several dates and the matter was fixed on November 6, 2007 for judgement. On November 6, 2007 the matter was taken up and the Criminal Revision filed by the Bank has been allowed and issuance of summons against Mr. Kamath has been reversed. The case against Mr. Kamath will be dropped on filing the certified copy of the order passed by the Revision Bench before the Lower Court. Case No. – 2175I of 2001- Madan Gopal as a debenture holder of Modern Denim Limited (MDL) had filed a criminal complaint for non-receipt of interest and redemption amount from MDL, in the Court of Chief Judicial Magistrate, Patna (CJM). As we are acting as a trustee, he has inter alia, impleaded Mr. Narayan Vaghul, our Chairman. The CJM court had taken cognizance of the offence and issued summons for appearance. Aggrieved by such direction, a criminal revision application (CRA No. 640/2006) was filed before the Sessions Judge, Patna, which was admitted and directions were issued for staying the proceedings before CJM court and records were also called from the lower court. However, the company has since paid the outstanding dues of the debenture holder and to this effect a 38 2. 3. Memorandum of Understanding (MOU) has also been executed between the complainant and the Company. We have filed an application enclosing a copy of the MOU before the Sessions Judge for quashing of the proceedings. Hearing in the matter is continuing. the Sessions Judge passed an order in the Criminal Revision stating that issuance of summons against Mr. Vaghul has been reversed. The certified copy of the order has been filed before the lower court. The matter has been fixed for orders. 4. Case No. – 795 (C) of 2001- Binay Kumar one of the debenture holders of Modern Denim Limited (MDL) had filed a criminal complaint for non receipt of interest and redemption amount against the aforesaid company, in the Court of Chief Judicial Magistrate, Patna (CJM). We are acting as a trustee and thus Mr. Narayan Vaghul, our Chairman has been impleaded as a party. The trial court took cognizance of the offence and issued non-bailable warrant of arrest. Aggrieved by such direction, a criminal revision application was filed before the Sessions Judge, Patna (Case No. 640 of 2006) which was admitted and directions were passed against execution of warrant of arrest and the matter was transferred to the Court of 7th Additional Sessions Judge, Patna for disposal. However, the company has since paid the outstanding dues of the debenture holder and to this effect a Memorandum of Understanding (MOU) has also been executed between the complainant and the company on September 30, 2003.. We have filed quashing proceedings before the High Court, Patna for quashing the entire criminal proceedings of Complaint Case No. 795 (C) of 2001 against Mr. Vaghul. The matter has not been taken up for hearing by the court. Giridharilal Bishambardas Nayyar, Managing Director of Vishwa Electronics (I) Ltd has filed a criminal complaint in the year 2002 before the Chief Judicial Magistrate (CJM), Ahmednagar against IDBI, their 16 directors (which includes Mr. Narayan Vaghul, our Chairman) and their three officers. The complaint alleges that IDBI did not disburse the full amount of loan, as well as made misrepresentation about sanctioning the loan. IDBI has filed a recovery suit against the company in 2000. The CJM issued bailable warrants against all the accused on December 5, 2005 against which a revision petition was filed in the Session Court, which stayed the bailable warrant. The Court got vacated in January 2007; hence the case is pending disposal. and the next date has not yet been listed. Three criminal complaints (2412/S/2003, 2413/S/2003 and 2414/S/2003) were filed by Inspectors, Security Guards Board, Greater Bombay & Thane District, in the year 2000 against erstwhile ICICI Ltd and Mr. K.V. Kamath, before the Metropolitan Magistrate, Mumbai, under the Maharashtra Private Security Guards Act, 1981 on the grounds that security guards were engaged from exempted security agencies even though ICICI was registered with the Security Guards’ Board. Revision petition was filed in the Session Court for quashing of the complaint, which has been admitted and the proceedings of the complaints have been stayed till further orders. Matter to come up for hearing on February 28, 2008 in the Metropolitan Magistrate’s Court whereas the revision application is to come up for hearing on February 18, 2008 before the Sessions Court. Our Ranchi branch received a notice from Regional Labour Commissioner, Ranchi on September 25, 2004 stating that we had not registered as Principal Employer under Contract Labour (Regulation & Abolition) Act 1970 with the Regional Labour Commissioner (Central) Ranchi, impleading Ms. Chanda Kochhar, our Deputy Managing Director and two of our employees. We replied stating that our Kolkata office of has obtained a Registration Certificate for all our branches/offices/establishment in the eastern part of India,. therefore, there was no need of taking separate registration certificate for the Ranchi branch. Ranchi branch also submitted a copy of the registration certificate. However, Assistant Labour Commissioner Ranchi, proceeded with filing of criminal case inter alia against Ms. Chanda Kochhar in the court of Chief Judicial Magistrate(CJM), Ranchi. An application under section 482 of CrPC has been filed before Ranchi High Court for quashing of the proceedings before the CJM, pursuant to which court has granted stay on the criminal proceedingsin the lower court matter. The court has granted stay on the proceedings. Surendra Dutta has filed a criminal complaint (FIR I III dated April 9, 2001) against Mr. K. V. Kamath and others, before Rajpura City Police Station, Chandigarh for alleged offence of car booking by forging his signature during 1995 by certain officers of erstwhile Anagram Finance Ltd (AFL). We have made submissions to DIG, Patiala that our directors cannot be proceeded against for an alleged offence committed by AFL in 1995 as AFL was taken over by erstwhile ICICI Ltd in 1998. The DIG Patiala having been convinced has directed investigating officer of Rajpura Police Station not to proceed in the matter without explaining entire details to him. The matter is pending before the Investigating Officer for the purpose of investigation but is not being proceeded with as the files relating to the same are not traceable. 39 5. 6. 7. 8. 9. A case has been filed (no. 35 of 2006) by P. S. More, Inspector S & E, in the Court of the Additional Chief Metropolitan Magistrate, Mumbai against us and our Directors, Mr. K.V.Kamath, Ms. Kalpana Morparia, Ms. Chanda Kochhar and Dr. Nachiket Mor for non renewal of license of the Capital Markets Branch, Fort, Mumbai, under the Bombay Shops & Establishments Act, 1958. By an order dated November 20, 2006 the application filed for dropping of summons and discharge of our directors was rejected against which a revision application was filed in the Sessions Court vide application no. 1380 of 2006 wherein the Session Court had passed an interim order dated December 13, 2006 in our favour, granting stay on further proceedings till the revision application is finally disposed off. On December 18, 2007, the Hon’ble Judge, Sessions Court, rejected the revision application and we will be filing a writ petition in Hon’ble High Court, Bombay on receipt of copy of the order. We had filed a criminal complaint against the Direct Sales Agent (DSA) and his associates for cheating and defrauding us. Ajatshatru Mishra, an associate of the DSA, has filed a counter complaint bearing no.2858/2006 (u/s 323, 341, 506 r/w 34 IPC) against Rasmi Ranjan Swain, Viresh Sharma, Mr. K. V. Kamath and us in the Court of Judicial Magistrate, Bhubaneshwar. The court has passed an order u/s. 156(3) of CrPC and the same is pending for investigation. The Crime Branch, Bhubaneshwar has taken up the matter for investigation and the statement of the complainant as well as the witness have been recorded. The police is yet to submit a final report in the court. Shri Ram Lal filed a complaint with Station House Officer (SHO), Mandawa Delhi against the Chairman and all Directors of ICICI Bank. The complainant has been sanctioned a loan of Rs. 85,000.00. However, an amount of Rs. 64,145.00 has been paid in cheques and the balance has been paid in cash against receipt. The complainant states that we have manufactured the said receipt. The complaint further states interalia that the Equated Monthly Installments (EMIs) of Rs. 5,855.00 were to start from October 7, 2004 to January 7, 2006, however, 18 post dated cheques have been taken by us in advance. Further that the rate of interest as was informed to the complainant by the officer of the bank was lesser but the rate of interest is being charged at the rate of 14.1%. The complainant has further alleged that he has suffered a loss of Rs. 40,000.00 or more on account of commission or omission by us. The complaint was initially not registered by the SHO. He then filed a complaint with the Commissioner of Police as also with RBI. Lastly, the complainant has moved the Additional Chief Metropolitan Magistrate (ACMM) for seeking directions to register a First Information Report (FIR). The ACMM directed the SHO to register the FIR, which has since been registered as FIR No. 50 of 2007 dated January 22, 2007. We are in the process of moving the High Court for quashing FIR U/S 482 CRPC. A complaint (No. 375 of 2007) was filed by Mr. P. Dhanraj on March 2, 2007 in the court of the Metropolitan Magistrate, R.R. District at Cyberabad, Hyderabad, against Mr. K.V. Kamath and certain of our officials for a direction by the court to Moinabad police station to initiate action against Mr. K.V. Kamath and the said officials. The father of the complainant who was our customer had availed a vehicle loan from us anddefaulted in making repayments. Even after being given a chance on such default and releasing his repossessed vehicle the customer defaulted again in making repayments and thus the vehicle was again repossessed and the same was sold by us in January 2007. A letter was sent to the customer in this regard on February 2007 requesting him to come to our branch and to accept a refund of Rs. 229,692. It was at this stage that the complainant informed us about the death of the customer in the month of May 2006. The Complainant, instead of approaching us for the refund, then proceeded to file the aforesaid complaint. On March 5, 2007, the Metropolitan Magistrate passed an order to register an FIR in the matter pursuant to which, on April 3, 2007 the police registered an FIR against Mr. K.V. Kamath and the said officials and on June 14, 2007 the police came for enquiry at our branch office. The police are yet to file a report before the magistrate in the matter. A criminal complaint (No. 892/2007) was filed by Mr. Amit Kumar Bhattacharya against Mr. K. V. Kamath on June 8, 2007, before the Judicial Magistrate, Jamshedpur inter alia alleging criminal breach of trust and cheating. The complainant had purchased a repossessed vehicle from the Bank and a receipt in this regard was issued by the Bank. We further provided certain documents to the complainant in this regard including a no-objection letter addressed to the concerned insurance company for removal of hypothecation and relevant forms for the termination of the hypothecation subsisting on the vehicle as well as for transfer of ownership of the vehicle in question. Allegedly, when the complainant approached the District Transport Office for the registration of the said vehicle he was informed that no such vehicle has been registered in their registration records. Aggrieved by this the complainant has filed the aforesaid complaint against Mr. K. V. Kamath and the then branch manager of our Jamshedpur branch. The magistrate has not taken cognizance of the complaint as of June 22, 2007 and no notice has been issued to the Bank in this regard. 40 10. 11. 12. 13. 14. The following proceedings have been initiated against Mr. Prem Watsa who is contesting each of the proceedings through his counsel and is taking steps to have the same quashed. O.R.E Holdings Limited, an affiliate of Fairfax Financial Holdings Limited, had earlier filed Petition No. 76 of 2005 before the Company Law Board at Chennai against Mr. K.C. Palanisamy alleging fraud, oppression and mismanagement. (a) Mr. Palanisamy, on March 07, 2007 instituted a complaint (CMP No 897 of 2007) before the Judicial Magistrate against Mr. Watsa and others at Kangeyam alleging offences under Sections 420, 109, 408, 409 read with Section 120 (B) of the Indian Penal Code, 1860 (“IPC”). The Judicial Magistrate directed registration of a first information report (“FIR”) and an FIR was registered at Erode. The High Court at Madras has stayed the investigation in this matter by its order passed in a petition bearing Criminal OP No 19384 of 2007. (b) A private complaint was filed during December 2006 in the court of the Judicial Magistrate, Perundurai, Erode District, Tamil Nadu by Mr. Palanisamy against Mr. Watsa and 7 others alleging offences committed under Sections 406 of the IPC read with Sections 109, 420 and 467 of the IPC, which complaint was dismissed by the court. Mr. Palanisamy has filed a revision petition (C.R.P 26 of 2007) before the Additional District Judge at Erode impugning the order as aforesaid passed by the Judicial Magistrate dismissing the private complaint filed against Mr. Watsa and others which is pending. (c) Mr. C. Cheniappan, an associate of Mr. Palanisamy, has on June 01, 2007, June 08, 2007 and on June 9, 2007 filed three FIRs (FIR No 238 of 2007, 466 of 2007 and 468 of 2007) at Chenimalai and Kangeyam Police Stations in Erode alleging offences under Sections 109, 120B, 406, 409, 420, 467, 468, 472, 477 and 471 of the IPC against Mr. Watsa and others. The High Court at Madras has stayed investigation in each these matters by its orders passed in petitions bearing Criminal OP Nos 19385 of 2007, 20722 of 2007 and 20721 of 2007 respectively. 15. A case has been filed before the Metropolitan Magistrate’s Court, Mazagaon (CC No. 99/SS/2007) against ICICI Home Finance Company Ltd (“ICICI Home Finance”) and Mr V.Vaidyanathan in his earlier capacity as Managing Director & CEO of ICICI Home Finance during 2005. An official of the Employee State Insurance Corporation of India (ESIC) had inspected the records of ICICI Home Finance during October 2005 for the period August 2004-October 2005 and submitted a report in this regard. Subsequently, based on the outcome of the inspection, ICICI Home Finance was allotted an ESIC Code number effective as of May 2004. ESIC thereafter expressed the need to re-inspect the records of ICICI Home Finance for the same period without assigning any reason for such reinspection. No reasons were assigned nor was any re-inspection conducted at any time pursuant to the request as above. Instead, ESIC filed the complaint as aforesaid before the court against ICICI Home Finance and Mr V Vaidyanathan. ICICI Home Finance is taking steps to procure that the proceedings are quashed and have appointed legal counsel in the matter. The matter is currently pending. 16. Raj Dadhich has filed a complaint before the Chief Judicial Magistrate, Alipore, Kolkata under section 200 of CrPC against ICICI Bank ,Mr. Vaghul, Mr. K.V.Kamath, Ms. Chanda Kochhar, Mr. V.Vaidyanathan and 4 other officials under section 420,468,471,383,120B of IPC for taking cognizance of offence, being Complaint Case No: C-9622/07 [TRNO:-887/07]. The allegation of the customer is that a sum of Rs.1,40,450.33 has been wrongly debited from his bank account towards the dues under the credit card, which he claimed to have not received. We are in the process of filing our reply inter alia to bring the correct facts on record including the loan availed by the customer on his credit card. 17. The bank had filed Complaint under section 138 against Sudershan Gupta and Mr. Manish Gupta on December 18, 2006 after giving the statutory notice on November 10,2006, However, the customer after receiving the notice paid the amount and regularized the account. However, the complaint was filed inadvertently. The bank made an application before the Magistrate for withdrawal of the Complaint. Though the Learned Magistrate allowed the application for withdrawal , but the Learned Magistrate issued notice to the MD under section 211 of IPC. Section 211 of IPC relates to False charge of offence made with intent to injure. We are in the process of filing our reply. The matter is posted to February 20, 2008. Show Cause Notice : 1. A show cause notice for Contempt of Court has been issued by Mr Manoharlal Gupta against Shri K.V.Kamath in Petition no. 47/2005 filed in Civil Court Kota for alleged “wrongful seizure” of vehicle. 41 ICICI Bank has filed its written statement. The proceedings are still at the evidence stage. The plaintiff, Mr. Manoharlal Gupta was testified on April 23, 2007 and the matter is to come up for hearing. Others : 1. We have filed a suit against Sajjan Textile Mills Limited (STML) and guarantors for recovery of our dues before Debt Recovery Tribunal, Mumbai and obtained Recovery Certificate (RC) for Rs. 59,032,753.00. As the secured assets are situated at Tamil Nadu, the RC was transferred to Debt Recovery Tribunal, Coimbatore for its execution. In the auction held the successful bidder failed to remit the bid amount of Rs. 25,099,999.00 and hence opportunity was given to the second bidder by the Recovery Officer (RO), Debt Recovery Tribunal, Coimbatore. As the RO and the Presiding Officer (PO), Coimbatore were shifted, the PO, Debt Recovery Tribunal (DRT), Chennai having concurrent charge on the DRT, Coimbatore, took up the recovery proceedings and passed orders for transfer of RC to Mumbai as he has no jurisdiction to execute the RC. Against this we filed a writ petition before High Court, Madras and on August 2, 2004 obtained directions to the DRT to complete the sale in favour of the second bidder within two months from the date of order. Accordingly, the DRT passed orders for removal of machineries in five lots on payment of these lots by the second bidder. A total sum of Rs. 25.10 million has been remitted by the second bidder and as per the directions of the DRT, the machinery were handed over to him. The STML filed a Special Leave Petition (SLP) against us and the purchaser before the Supreme Court against the Order dated August 2, 2004 and obtained an interim stay of the operation of the above order. The Supreme Court directed the purchaser to bring back all the machinery. Even though the machinery were sold and delivered to the purchaser as per the directions of the DRT before the order of status quo passed by the Supreme Court on October 29, 2004,STML issued a contempt notice against us and subsequently filed a Contempt Petition No.84 of 2005 against Mr. K. V. Kamath, our Managing Director and Chief Executive Officer and Mr. P. Anandakrishnakumar, Assistant General Manager, and the purchaser. The Supreme Court was pleased to order notice to the purchaser and also dispensed with the presence of Mr. K. V. Kamath and others. We have filed detailed counters in the contempt petition. The hearing of contempt petition is posted with main SLP for disposal. The Supreme Court also passed orders for payment of share of the sale proceeds to us on giving an undertaking before the Supreme Court to redeposit the amount in case the Civil Appeal is allowed. Accordingly, we have filed an affidavit before Supreme Court and received the sale proceeds from the Debt Recovery Tribunal, Coimbatore to the extent of our share for a sum of Rs. 12.5 million and the same is appropriated. We have filed a perjury application against directors of the company and others for having made false evidence and false statement in the contempt petition. The Supreme Court Registry has refused to take up the perjury application for mentioning unless the contempt petition is tagged on to the perjury application. Therefore the perjury application will be taken up along with Civil Appeal. STML filed a Writ Petition No.12854 of 2007 before HC, Madras for issue of a Writ of Mandamus directing an Advocate Commissioner to be appointed, to search and seize all the machinery belonging to the company and sold in the Public Auction held by DRT, Coimbatore at the instance of ICICI Bank wherever they may be found, with the aid and assistance of Director General of Police, Chennai by strictly complying with the Order dated January 17, 2005 passed by Supreme Court in Civil Appeal No.573 of 2005 and handover the same to the company. The HC was pleased to dismiss the above writ petition on April 9, 2007. Against this order, STML filed a Writ Appeal SR No.40090/2007 before HC, Madras which was also dismissed at the admission stage on August 22, 2007. We have filed a caveat petition before the Supreme Court. There were allegations of insider trading against Hindustan Lever Limited (HLL) in connection with acquisition of 800,000 shares of Brooke Bond Lipton India Limited (BBLIL) by private negotiations with UTI, a few months before the merger of BBLIL with HLL was announced in 1996. SEBI held the company and five of the directors of HLL, including Mr. M. K. Sharma guilty of insider trading. On appeal, the Appellate Authority allowed the appeal and set aside the order of SEBI and absolved the company and its Directors of this charge. SEBI has preferred a writ petition before the Bombay High Court challenging the order of the Appellate Authority, which is pending. SEBI has also filed a prosecution against HLL (and five of its directors including Mr. M. K. Sharma) and these proceedings are also pending, but have not progressed. 2. CASES AGAINST ICICI BANK LTD Criminal Complaints : 42 1. A criminal complaint (1648 of 2001) was filed against us by Mr. Rajiv Agarwal before the Chief Judicial Magistrate, Jaipur impleading amongst others, our then Managing Director and CEO, Mr. H. N. Sinor. The reason for Mr. Agarwal filing the case involved dishonour of a cheque which he had issued and which had been returned unpaid at Calcutta as the cheque was not drawn on the correct branch. By an order dated September 13, 2001 the Chief Judicial Magistrate took cognizance of the said complaint and directed issuance of summons to all the accused. On November 21, 2001, Mr. Apoorv Ghosalpuria, then branch manager of our Jaipur branch was granted bail as he was present in court, however, the Chief Judicial Magistrate, Jaipur directed that another accused Mr.K.Ravi, erstwhile branch manager of our Jaipur branch be summoned by a bailable warrant. ICICI Bank approached the Jaipur bench of the High Court of Rajasthan (“High Court”) with a criminal revision petition (15 of 2002) for quashing the criminal complaint. The High Court by an order dated January 9, 2002 stayed the proceedings before the Chief Judicial Magistrate, Jaipur until a final decision was reached in the revision petition filed before it. The stay order has the effect of also staying arrest warrants, if any, issued by the Chief Judicial Magistrate, Jaipur. On July 18, 2005, vide an ex-parte order, the High Court vacated the above-referred stay order dated January 9, 2002. We then filed a miscellaneous petition before the High Court against the lifting of the stay as aforesaid and pursuant to our averments in this regard the High Court reinstated the stay order dated January 9, 2002 vide an order dated October 20, 2005. Mr. Agarwal then filed an application for lifting of the stay granted as aforesaid. The said application by Mr. Agarwal has however been dismissed by the High Court. As a result, the stay that was granted by the High Court on January 9, 2002 continues to be operative and in effect. The revision petition filed by us to quash the criminal complaint has been listed for hearing before the High Court. Five criminal complaints (9419/S/2002 to 9423/S/2002) were filed against us before the 39th Court of Presidency Metropolitan Magistrate (MM) at Mumbai by the Municipal Corporation of Greater Mumbai (BMC) for violation of Section 471 of the BMC Act read with Section 328-A thereof on grounds of non-payment of licence fees for the illuminated signboards at our ATM centres. We filed a writ petition (2377 of 2002) in the Bombay High Court challenging the applicability of the provisions of Sections 328 & 328-A of the BMC Act in respect of the ATM centres but it was dismissed and so we filed a special leave petition (24215 of 2002) (SLP) in the Supreme Court. The Supreme Court granted a stay against all prosecutions and proceedings by BMC in this regard. On August 4, 2005 the Supreme Court passed the order with a finding that putting of the ATM Board by us does not fall under the category of sky sign under Section 328, liberty has been given to BMC to consider whether the said issue falls under the category of advertisement under Section 328-A, and issue fresh notice before the hearing. We have submitted a copy of the Supreme Court order to the MM and prayed for the dismissal of the complaints and an order is awaited. The BMC had also filed two similar complaints (88/M/2003 and 89/M/2003) before the 27th Court of Presidency Metropolitan Magistrate at Mumbai against us. We have submitted a copy of the Supreme Court order to the Magistrate and prayed for the dismissal of the complaints. 3. Based on the investigation of Directorate of Revenue Intelligence (DRI), CBI investigated into the allegations of criminal conspiracy, cheating etc., against us and our officials, also against M/s Sundaram Finance Limited (SFL) and its officials, and also against ORJ Electronics and Oxide Limited and the importer (IPTE Inc., USA). A chargesheet has been filed by CBI before the Chief Metropolitan Magistrate, Egmore against all the persons concerned in Criminal Case No. 5 of 2004. SFL filed a Crl.O.P.No.22976 of 2004 before the High Court, Madras seeking quashing of the above criminal proceedings. An interim stay was granted by the High Court in Crl.M.P.No.7436 of 2004 on the criminal proceedings pending on the file of the Chief Metropolitan Magistrate, Chennai. However all the cases are being reposted. We filed an application Crl. O.P. No.2425 of 2007 before the High Court, Madras for quashing the above criminal case in CC No.5 of 2004 and sought for interim stay and for dispensing with the personal appearance of Mr.V.Nachiappan, General Manager and Mr.N.Narayanan (Ex-Official of EBOM) that was allowed. Based on DRI’s report, the Enforcement Directorate initiated proceedings against us and our officials for aiding and abetting the importer company (O.R.J. Electronics Oxides Ltd) in acquiring foreign exchange to the tune of US$ 7.2 million and imposed a fine of Rs. 1.0 million on us. We have filed an appeal No. 496 of 2004 against this order, before the Appellate Tribunal for Foreign Exchange Regulation Act (FERA), Delhi and have obtained an interim stay on the condition of deposit of 50% of the fine imposed. Against this order of conditional stay we filed a writ petition in High Court, Madras and obtained an interim stay. The appeal before FERA Appellate Tribunal, Delhi was posted on 43 2. 4. February 27, 2006 and our advocate argued that since the interim stay had been granted by the High Court, Madras the appellate tribunal should not proceed further in the matter. Considering our arguments the appellate tribunal adjourned the appeal and advised us to inform the outcome of the writ petition. 5. Shri Durgeshwar Deka has filed a criminal complaint against us in May 2006 before the Court of the Chief Judicial Magistrate, Kamrup at Guwahati bearing CC No 4540 of 2006. The complainant had purchased a car from a dealer in Guwahati and we were the financing bank. The complainant alleged that he was being charged a higher rate of than the agreed amount and also that his bank statement showed the financed amount to be Rs 216,000 whereas the actual financed amount was Rs 198,000. We have filed a criminal revision petition bearing no 141 of 2006 before the Guwahati High Court. The High court has passed an order stating that the proceedings in the lower court be stayed till disposal of the criminal revision filed by us is disposed off. A criminal complaint (no 895/06) has been filed by SKM enterprise in 2006 before the Judicial Magistrate First Class, Ranchi against the Branch Manager, Ranchi Branch , ICICI Bank , Shri Arnab Das of ICICI Bank ( the Bank) and Shri Pradipto Sinha of the Bank. The complainant (a current account holder of the Bank) has alleged illegal deduction of amounts on account of cash handling charges. The complainant alleged that the aforesaid officers of the Bank had promised there would be no deductions on account of cash handling charges and that they would waive the abovementioned charges, but despite the abovementioned assurances amounts have been deducted on account of cash handling charges. On the basis of the aforesaid allegations the learned magistrate had taken cognizance u/s 406 and 418 of IPC. Thereafter summons were issued. The next date of the matter is on December 12, 2007 for cross-examination of the witnesses produced by the complainant. In the meantime we have filed a quashing application before the High Court, Ranchi and on December 4,2007 the Hon’ble High Court has stayed the proceedings before the lower court. 6. 1. Show Cause Notice, Penalties : A show cause notice was issued on July 5, 2007 to ICICI Bank and its employees Mr. Rajesh Rajah and Mr. Vinod Panicker by the Directorate of Revenue Intelligence, New Marine Lines, Mumbai in the case of misuse of EPGC license by M/s Mars Enterprises and others. The allegations against us and our employees are that despite we and our officers being aware that the BMW car in question was imported under EPGC scheme and that as per the said scheme neither possession nor ownership was transferable, we facilitated the sale of the car. We and our employees were to show cause in writing within 30 days of receipt of the notice before the Commissioner of Customs, Export, Jawahar Custom House, Nhava Sheva, Uran, Maharashtra, as to why penalty under Section 112(A) & (B) of the Costoms Act, 1962 should not be imposed on them. Replies on behalf of the Bank and its employees have been filed in August and receipt of the same has been acknowledged. Thereafter in November, we received a notice from the Office of the Commissioner of Customs that they had not received our replies. Copies of our replies have been re-filed along with an explanation that our replies had been filed earlier). Prudential Plc Top 10 monetary penalties in case of foreign entities and all monetary penalties in case of Indian entities , imposed against the AMC / Trustee Company / Sponsor or any associate of the sponsor (for irregularities / violations in the financial services sector or for defaults in respect of shareholders / debenture holders and depositors, in jurisdiction country as determined in the above clause , by any financial regulatory body or government authority of settlement arrived with any financial regulatory body during the last five years and details thereof. No. 1 Date Sep 2005 BU JNL all broker dealers: SII, NPC, ICA, INVEST SAL Country & Regulator USA NASD Fine/Sanction & Details $3.85m fine for the JNL broker dealer network in relation to violations of an interpretation of an NASD rule which prohibited broker-dealers from favouring or disfavouring the sale or distribution of mutual fund shares on the basis of brokerage commissions received by the firm. £750,000 fine in respect of sales of mortgage endowments by tied agents in 2000. Advisers did not place appropriate emphasis on identifying whether customers were prepared to 44 2 Mar 2003 UK FSA 3 Oct 2001 April 2006 Jun 2004 Pru UK UK PIA USA NASD USA NASD 4 5 JNL NPC JNL: NPC SII 6 Jan 2007 Jan 1997 JNL NPC Pru UK/M&G: PPEPL 7 USA State Florida UK IMRO of 8 Jun 2004 Sep 2007 Nov 2007 JNL SII JNL 9 10 PCA Life Taiwan USA State of Kansas USA State of Arizona Taiwan Financial Supervisory Com-mission make the risk that the endowment might not be prepared to take the risk that the endowment might not pay well enough to payoff the mortgage. £650,000 fine by PIA (forerunners of FSA) for failures in its pensions review procedures relating specifically to delays in making payments of redress to supplement pension policy. $315,000 fine levied – a mutual fund share sweep investigation. $200,000 fine against SII and NPC ($100,000 on each). This followed an enforcement review of late trading and market timing practices. The violation stated was a failure to establish and maintain adequate supervisory systems and written procedures reasonably designed to detect and prevent late trading of mutual funds. An agreement has been reached for a Consent Order and negotiated administrative fine of $172,000 for books and records violations. £75,000 fine by IMRO (forerunners of FSA) for breaches of IMRO rules relating to its PEP business around failing to carry out reconciliations and corrections of PEP client money accounts, not notifying IMRO of this and failing to have adequate compliance arrangements in specific areas of its business. $50,000 contribution to the state's investor protection fund to resolve issue where theft of $1.8m of customer funds lead to allegations of failure to supervise staff. $39,000 penalty following a market conduct exam. $37,000 approximate penalty (NT$1.2m in local currency) following an audit and general exam in April 2007. Fine related to breaching Article 144 of the Insurance Act due to the use of two unapproved application forms for Bancassurance. C. Any deficiencies in the systems and operations of the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the AMC or the trustee company which SEBI has specifically advised to be disclosed in the scheme information document, or which has been notified by any other regulatory agency. NIL D. Any enquiry/adjudication proceedings under the SEBI Act and the regulations made there under, against the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the AMC, Board of Trustees/Trustee Company or any of the directors or key personnel of the AMC 1. We have received show cause notices in the matter of alleged excise duty evasion to the extent of Rs. 14.8 million by Bannari Amman Sugars Limited (BASL), Rs. 19.6 million by Triveni Engineering Company Limited (TECL), and Rs. 13.1 million by Balrampur Chini Mills Limited (BCML) in respect of the equipments purchased for their project funded by us under Asian Development Bank (ADB) / World Bank line of credit. BASL, TECL and BCML have paid the duty under protest and sought refund thereof. We have filed replies through our advocates showing cause as to why the penalty is not payable and have sought personal hearing. We are awaiting hearing of the matter. 2. We have received show cause notices in the matter of alleged customs duty evasion to the extent of Rs. 39.0 million by Jaypee Cements Ltd (JCL), Rs. 42.5 million by Orient Ceramics & Industries Ltd. (OCIL), Rs. 4.7 million by Balarampur Chini Mills Limited (BCML), in respect of the equipments purchased for their project funded by us under ADB line of credit. We have filed our replies through our advocates showing cause as to why the penalty is not payable by us and have sought a personal hearing. 45 3. The Securities and Exchange Board of India (SEBI) issued a notice to us in connection with matters pertaining to erstwhile Bank of Madura’s Bhadra, Ahmedabad branch, asking to show cause as to why the said branch should not be suspended from conducting merchant banking activities for a period of six months. SEBI stated that there were irregularities in fiscal 1996 in the operations of the account of North Star Gems Limited with this branch. A detailed reply was filed with SEBI in this regard. SEBI vide order dated October 16, 2002 issued a warning to the Bhadra, Ahmedabad branch with a further direction to that branch to act with due skill, care and diligence while acting as banker to an issue. SEBI noted that we had taken appropriate disciplinary action against the concerned employees. SEBI further noted that inspection by the Reserve Bank of India did not indicate malafide actions on the part of our officials. In view of the same, SEBI concluded that the aforesaid warning would suffice as sufficient action against the branch. 4. A preliminary investigation under Section 11(2) of the Monopolies and Restrictive Trade Practices Act, 1969 has been initiated against us by the Office of the Director General of Investigation and Registration (“DG I&R”) based on a complaint filed by Mr. Ramesh Kumar Sharma dated April 26, 2007. We have received a notice in this regard from the Office of the DG I&R on June 4, 2007. The complainant is a holder of our credit card, due to non-payment of dues he was charged interest and a late payment fee by the Bank. The complainant has claimed that levying of late payment fee in addition to interest on the amounts dues may be treated as double charging. We are in the process of replying to the notice. 5. M.S. Pandit filed a Case no. C-147/2006/DGIR before the Monopolies and Restrictive Trade Practices Commission, on November 7, 2006. The Complainant, M.S. Pandit, held a credit card issued by us against which he made purchases from M/s Arihant Colour Lab for the amount of Rs. 11,959 While processing the amounts to be recovered, he agreed to pay the EMI at the processing charge of 1%, to be calculated after deducting one EMI in advance from the total purchases. Although the complainant did not initially raise any objections as to this, he subsequently complained of unfair trade practices. We have replied to this complaint. Thereafter, the complainant sought to examine the basis on which we charged him the EMI without his consent. On this issue, the Monopolies and Restrictive Trade Practices Commission has issued a query raising certain questions to which we are still to reply. 6. We have received a notice of enquiry from the MRTP Commission dated May 31, 2007 under the Monopolies and Restrictive Trade Practices Act, 1969 and the Monopolies and Restrictive Trade Practices Commission Regulations, 1991 in the matter of DG (I&R) vs ICICI Bank Limited. A preliminary investigation report has been filed before the MRTP Commission inter alia alleging unfair trade practices on our part while promoting our services of providing credit cards to the general public through our direct sales agents (“DSA”). It has been alleged inter alia that we are promoting and sourcing credit card customers through DSAs without disclosing that the DSAs are not our agents but are independent contractors; that applications are obtained from prospective credit card customers without adequate disclosure of the ‘Most Important Terms and Conditions’ (“MITC”); and that we are levying penal charges without ensuring that the statements of accounts have been received on time by credit card holders etc. We have submitted our detailed reply and additional affidavit. We need to file our affidavit of compliance by February 15, 2008 and the next date of hearing is March 18, 2008. Additionally a reply to the notice of enquiry has to be filed by the Bank by March 18, 2008. 7. Pursuant to the news report published in The Economic Times dated October 18, 2007, MRTP has undertaken a preliminary investigation against ICICI Bank (the “Bank”) (DGIR/2007IP/104 dated 11th December 2007) under Section 11(1) of the MRTP Act, 1969, into unfair trade practices allegedly carried on by the Bank while sanctioning various loans under fixed and floating rate of interest. Pursuant to the same, the Bank was required to furnish certain information along with the supporting documents for the purpose of the investigation. A detailed reply of the same with relevant documents will be filed with the MRTP Commission shortly. 8. We had received a complaint dated October 8,2007 from J.G. Finance Pvt. Limited addressed to the Securities and Exchange Board of India (SEBI) alleging illegal Public issue of unsecured bonds in the nature of Debentures aggregating to Rs.5000.0 Mn of ICICI Bank Limited which was opened on September 29, 2007. The Complainant has alleged fraudulent suppression and non-disclosure of substantial default and/or outstanding of the Bank in the Prospectus and the application form. We have replied to SEBI stating that under the SEBI (Disclosure and Investor Protection) Guidelines, 2000 pending litigations against the issuer need to be disclosed in prospectus relating to public issues of bonds. However the suit mentioned by the Compalaint in the aforesaid complaint (Civil Suit No.832 of 1995) has not been disclosed in the prospectus for the public issue of Bonds by ICICI Bank ("Prospectus") since the High Court of Madras has dismissed the said suit on September 15, 2006. Moreover ICICI Bank has 46 made a full and final settlement of the amounts required to be paid by it to the Company as per its calculations and detailed statements in this regard were sent to the Company along with the calculations by ICICI Bank. The Company has not initiated any action in any court of law in relation to this claim made by it and there is thus no outstanding litigation in this regard that needs to be disclosed by ICICI Bank PRUDENTIAL PLC Details of all cases of suspensions and cancellation of certificate of registration (for irregularities / violations in financial services sector or for defaults in respect of shareholders , debenture holders and depositors) of the AMC , Trustee Company and the sponsor or any associate of the sponsor shall be disclosed for the last 10 years. £12,500 (200,000 RMB) fine imposed by Chinese regulator CIRB for breaches of licensing regulations. One agency office had been operating without a licence and another announced its opening before the licensing process had been completed. This office had to be closed down, a notice had to be placed in a regional newspaper apologising for the formal announcement before completion of the formalities, the current General Manager at the Beijing office had to be removed and the sales licence for the new agency office was rejected. GENERAL INFORMATION • Power to make Rules Subject to the Regulations, the Trustee may, from time to time, prescribe such terms and make such rules for the purpose of giving effect to the Scheme with power to the AMC to add to, alter or amend all or any of the terms and rules that may be framed from time to time. • Power to remove Difficulties If any difficulties arise in giving effect to the provisions of the Scheme, the Trustee may, subject to the Regulations, do anything not inconsistent with such provisions, which appears to it to be necessary, desirable or expedient, for the purpose of removing such difficulty. • Scheme to be binding on the Unitholders: Subject to the Regulations, the Trustee may, from time to time, add or otherwise vary or alter all or any of the features of investment plans and terms of the Scheme after obtaining the prior permission of SEBI and Unitholders (where necessary), and the same shall be binding on all the Unitholders of the Scheme and any person or persons claiming through or under them as if each Unitholder or such person expressly had agreed that such features and terms shall be so binding. 22 Notwithstanding anything contained in this Scheme Information Document, the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the guidelines there under shall be applicable. Note: The Scheme under this Scheme information document was approved by the Directors of ICICI Prudential Trust Limited on September 09, 2008 by circulation. For and on behalf of the Board of Directors of ICICI Prudential Asset Management Company Limited Sd/Nimesh Shah Managing Director Place : Mumbai Date : 47