ICICI Prudential Mutual Fund - Statement of Additional Information 1 STATEMENT OF ADDITIONAL ...

215 Pages·2012·1.65 MB·English

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NNNNAAAAMMMMEEEE OOOOFFFF MMMMUUUUTTTTUUUUAAAALLLL FFFFUUUUNNNNDDDD: ICICI PRUDENTIAL MUTUAL FUND

NNNNAAAAMMMMEEEE OOOOFFFF AAAASSSSSSSSEEEETTTT MMMMAAAANNNNAAAAGGGGEEEEMMMMEEEENNNNTTTT CCCCOOOOMMMMPPPPAAAANNNNYYYY: ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY LIMITED

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12th Floor, Narain Manzil, 3rd Floor, Hallmark Business 2nd Floor, Block B-2, Nirlon
23, Barakhamba Road, Plaza, Sant Dyaneshwar Marg, Knowledge Park, Western
New Delhi – 110 001 Bandra (East), Express Highway, Goregaon
www.icicipruamc.com Mumbai – 400051 (East), Mumbai – 400 063

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This Statement of Additional Information (SAI) contains details of ICICI Prudential Mutual
Fund, its constitution, and certain tax, legal and general information. It is incorporated by
reference (is legally a part of the Scheme Information Document).

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ICICI Prudential Mutual Fund - Statement of Additional Information 1
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A Constitution of the Mutual Fund 3
B Sponsor 3
• ICICI Bank 3
• Prudential plc 4
C The Trustee
• Details of Trustee Directors 5
• Responsibility and duties of the Trustees 7
• General and Specific due diligence 10
D The Asset Management Company
• Details of Asset Management Company Directors 12
• Powers, Duties and Obligations of the AMC 18
• Information on Key Personnel 22
E Service Provider
• Custodian 29
• Transfer agent 30
• Statutory auditor 30
• Fund Accountant 30
• Collecting Bankers 30
F Condensed financial information (CFI) 31

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• Taxation on investing in Mutual Funds 95
• Legal Information 102
• General Information 121

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ICICI Prudential Mutual Fund - Statement of Additional Information
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ICICI Prudential Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a
Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) as per the
Trust Deed dated August 25, 1993 and amended from time to time.

ICICI Prudential Trust Limited (“the Trustee”) is the trustee of the Schemes of the Fund. It was
incorporated under the Companies Act, 1956.

The Mutual Fund was registered with SEBI on October 13, 1993 under Registration code
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ICICI Bank Ltd. holds 51% of the share capital of the Trustee and Prudential plc, through its
wholly owned subsidiary, Prudential Corporation Holdings Ltd., holds 49%.

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The Fund is sponsored by Prudential plc (through its wholly owned subsidiary namely
Prudential Corporation Holdings Ltd) and ICICI Bank Ltd. The Sponsors are the Settlors of the
Mutual Fund Trust. ICICI Bank Ltd. contributed Rs. 10 lakhs and Prudential plc, with the
approval of Reserve Bank of India, Rs. 12.2 lakhs to the Trustee as the initial contribution
towards the corpus of the Mutual Fund.

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ICICI Bank (“the Bank”) is India's second-largest bank. The Bank has a network of 2,765
branches and 9,363 ATMs in India, and has a presence in 19 countries, including India.

ICICI Bank offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its specialised
subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and
asset management. The Bank currently has subsidiaries in Canada, Russia and United
Kingdom (UK), branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar
and Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The UK subsidiary of the
Bank has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on BSE Limited and the National Stock Exchange
of India Limited and its American Depositary Receipts (ADRs) are listed on the New York
Stock Exchange (NYSE).

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(Rs. In Crores)
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Net Worth (Equity capital plus Free 51,618.37 55,090.94 60,405.24
reserves)
Total Income 33,184.58 32,621.95 41,045.41
Profit After Tax 4,025 5,151 6,465
Assets under Management NA NA NA

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ICICI Prudential Mutual Fund - Statement of Additional Information
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Prudential plc is an international financial services group with significant operations in Asia,
the US and the UK. They serve over 26 million customers and have £351 billion of assets
under management (as of 31 December 2011). Prudential is one of the best capitalised
insurers in the world with an Insurance Groups Directive (IGD) capital surplus estimated at
£4.0 billion (as of 31 December 2011 before final dividend).

Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose
principal place of business is in the United States of America.

The Group is structured around four main business units:

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Prudential Corporation Asia comprises the life insurance, asset management and consumer
finance operations of Prudential plc in Asia. Prudential has operations in 13 markets and is a
leading life insurer in Asia, providing a comprehensive range of savings, protection and
investment products. Prudential’s asset management business in Asia, Eastspring
Investments, is one of the region’s leading fund managers and one of the largest multi-
national onshore mutual fund managers in Asia

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Jackson is one of the largest life insurance companies in the US, providing retirement savings
and income solutions to more than 2.9 million policies and contracts in force. Jackson is also
one of the top three providers of variable annuities in the US. Founded 50 years ago, Jackson
has a long and successful record of providing advisers with the products, tools and support to
design effective retirement solutions for their clients.

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Prudential UK is a leading life and pensions provider to approximately 7 million customers in
the United Kingdom. It has a number of major competitive advantages including significant
longevity experience, risk management and multi-asset investment capabilities, a highly
respected brand and financial strength. Prudential UK continues to pursue a value-driven
strategy built around its core strengths in with-profits and annuities.

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M&G is Prudential’s UK and European fund management business with total assets under
management of £201 billion (as of 31 December 2011). M&G has been investing money for
individual and institutional clients for 80 years. Today it is one of Europe’s largest active
investment managers, as well as being a powerhouse in fixed income.

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Total Income 48,099 47,646 36,506
Profit After Tax and minority interests 677 1,436 1,494
Free Reserves 4,301 6,048 7,117
Net-worth 3,826 4,267 7,357
Assets under Management NA NA NA

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The Trustee, through its Board of Directors, shall discharge its obligations as trustee of the
ICICI Prudential Mutual Fund. The Trustee ensures that the transactions entered into by
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ICICI Prudential Mutual Fund - Statement of Additional Information
the AMC are in accordance with the SEBI Regulations and will also review the activities
carried on by the AMC.

ICICI Bank Ltd. holds 51% of the share capital of the Trustee and Prudential plc, through
its wholly owned subsidiary, Prudential Corporation Holdings Ltd., holds 49%.

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Mr. Keki Bomi 67 years Mr. Dadiseth is closely associated with
Dadiseth* B.Com, F.C.A, Fellow of various industry, educational, management
The Institute of Chartered and medical bodies. He is a Trustee of the
Accountants in England & Ratan Tata Trust and a Member of the
Wales Managing Committee, Breach Candy Hospital
Trust. He is on the Boards of The Indian
Hotels Company Limited, Britannia Industries,
Nicholas Piramal, Siemens, ICICI Prudential
Life Insurance and Godrej Properties Limited.
He is also a Director on the Board of the
Indian Business School. He is a Member of
the International Advisory Board of Marsh &
McLennan Companies Inc. and Fleishman-
Hillard Inc., a Non-Executive Director of
Prudential plc, Non-Executive Chairman of
Omnicom India, a Member of the Senior
Advisory Board of Oliver Wyman Limited, U.K.
and a Member of the International Advisory
Board of Goldman Sachs – with special focus
on South Asia. He is also a director on the
Board of Sony India Private Limited and a
Senior Advisor to the Sony Group in India.

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ICICI Prudential Mutual Fund - Statement of Additional Information
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Mr. M. S. 73 years Mr. M.S. Parthasarathy’s professional
Parthasarathy B.Com, Certified experience and knowledge, gained over five
Associate of the Indian decades, span different areas of banking and
Institute of Bankers finance, commercial, central, and export
(AIIB), Associate of the banking, development financing, private
Chartered Institute of equity and mutual funds.
Bankers( AIB), London
Mr. M.S. Parthasarathy represented ADB/AFIC
on the boards of Bangkok Expressway and
Malaysian Equity Fund. Returning to India in
1995, he joined the boards of Federal Bank
Ltd. and Sundaram Asset Management Co.
Ltd. (1996-2004). During 1996-1999, he was an
advisor to the Daiwa Far East and Eastern
Siberia Fund, sponsored by the European
Bank for Reconstruction and Development
(EBRD) with Japanese assistance. Currently,
he is an independent director of Sundaram
BNP Paribas Home Finance Ltd.

Mr. Parthasarathy holds a first-class
commerce honours degree from the Madras
University, and is an associate member of the
Indian and British institutes of bankers,
securing top spots in their examinations. He is
a fellow of the World Bank Economic
Development Institute.
Mr. M. N. Gopinath 64 years, B Com, CAIIB, Mr. Gopinath is a career banker and was
MBA associated with the banking sector as a
Director of Bank of India. He joined Bank of
India as a Probationary officer in 1970 and
served them for 25 years, including 5 years at
their New York Branch. He gained valuable
exposure to all facets of banking including
Treasury, International Banking, Merchant
Banking, Retail Banking, Rural Banking, HR
etc. At New York Branch he served as Vice
President – Treasury, Vice President -
Operations and Comptroller of US Operations
consisting of three branches.

Mr. Gopinath has served as a Nominee
Director of ICICI Bank Limited on the boards of
ICICI Home Finance Ltd, ICICI Webtrade Ltd
and Stock Holding Corporation Ltd. He is also
associated with DISHA, the credit counseling
agency supported by ICICI Bank Limited as a
member of its Advisory Committee.
Mr. Vinod Dhall 68 years, LLB University Mr. Dhall has special experience in the fields
of Delhi & M.Sc. of Finance, Corporate Affairs, Industry, and
University of Allahabad Commerce, in which he worked for about 27
years. This includes experience of the banking
and insurance sectors including insurance
reforms, industrial financing, economic
regulation including capital markets,
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ICICI Prudential Mutual Fund - Statement of Additional Information
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competition law and policy, industrial
development and investment promotion,
corporate governance and corporate law
reforms, and international experience.

He is also a director on the Board of Bharti
Foundation.
Mr. Sandeep Batra * 46 Years, B.com, F.C.A, Mr. Sandeep Batra is the Group Compliance
A.C.S. Officer & Company Secretary of ICICI Bank. He
is responsible for Regulatory compliance for
the ICICI Group including its banking and non-
banking subsidiaries and overseas offices. He
moved into this assignment in November
2006.

He is also responsible for Internal Controls
over Financial Reporting (SOX).

Prior to moving to ICICI Bank, Mr. Batra was
working with ICICI Prudential Life Insurance
Company Limited since its inception in
September 2000. As the Executive Vice
President and Chief Financial Officer of the
company, he had overall responsibility of
finance, strategic planning, taxation,
compliance and administration. In addition, he
also supervised the human resources
function. As a founding member of the
Management Committee, he played a key role
in development of the strategy and its
deployment over the years as well as the set
up of the governance structure of the
organization.

Previous experience includes being the
Financial Controller of Citicorp Maruti Finance
Ltd. and Citicorp Credit Services Ltd.
*Mr. Keki Bomi Dadiseth is a Nominee Director of Prudential plc U.K.
*Mr. Sandeep Batra is a Nominee Director of ICICI Bank.

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Pursuant to the Trust Deed dated August 25, 1993, constituting the Mutual Fund, and in terms
of the SEBI (MF) Regulations, the rights, obligations, responsibilities and duties of the Trustee
are as under:

1. The trustees and the asset management company shall with the prior approval of the
Board enter into an investment management agreement.

2. The investment management agreement shall contain such clauses as are mentioned
in the Fourth Schedule and such other clauses as are necessary for the purpose of
making investments.
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ICICI Prudential Mutual Fund - Statement of Additional Information
3. The trustees shall have a right to obtain from the asset management company such
information as is considered necessary by the trustees.

4. The trustees shall ensure before the launch of any scheme that the asset management
company, has,—
a) systems in place for its back office, dealing room and accounting;
b) appointed all key personnel including fund manager(s) for the scheme(s)
and submitted their bio-data which shall contain the educational
qualifications, past experience in the securities market with the trustees,
within 15 days of their appointment;
c) appointed auditors to audit its accounts;
d) appointed a compliance officer who shall be responsible for monitoring the
compliance of the Act, rules and regulations, notifications, guidelines,
instructions, etc., issued by the Board or the Central Government and for
redressal of investors grievances;
e) appointed registrars and laid down parameters for their supervision;
f) prepared a compliance manual and designed internal control mechanisms
including internal audit systems;
g) specified norms for empanelment of brokers and marketing agents;
h) obtained, wherever required under these regulations, prior in principle
approval from the recognised stock exchange(s) where units are proposed
to be listed.

5. The trustees shall ensure that an asset management company has been diligent in
empanelling the brokers, in monitoring securities transactions with brokers and
avoiding undue concentration of business with any broker.

6. The trustees shall ensure that the asset management company has not given any
undue or unfair advantage to any associates or dealt with any of the associates of the
asset management company in any manner detrimental to interest of the unitholders.

7. The trustees shall ensure that the transactions entered into by the asset management
company are in accordance with these regulations and the scheme.

8. The trustees shall ensure that the asset management company has been managing
the mutual fund schemes independently of other activities and have taken adequate
steps to ensure that the interest of investors of one scheme are not being
compromised with those of any other scheme or of other activities of the asset
management company.

9. The trustees shall ensure that all the activities of the asset management company are
in accordance with the provisions of these regulations.

10. Where the trustees have reason to believe that the conduct of business of the mutual
fund is not in accordance with these regulations and the scheme they shall forthwith
take such remedial steps as are necessary by them and shall immediately inform the
Board of the violation and the action taken by them.

11. Each trustee shall file the details of his transactions of dealing in securities with the
Mutual Fund on a quarterly basis.

12. The trustees shall be accountable for, and be the custodian of, the funds and property
of the respective schemes and shall hold the same in trust for the benefit of the
unitholders in accordance with these regulations and the provisions of trust deed.

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ICICI Prudential Mutual Fund - Statement of Additional Information
13. The trustees shall take steps to ensure that the transactions of the mutual fund are in
accordance with the provisions of the trust deed.

14. The trustees shall be responsible for the calculation of any income due to be paid to
the mutual fund and also of any income received in the mutual fund for the holders of
the units of any scheme in accordance with these regulations and the trust deed.

15. The trustees shall obtain the consent of the unitholders—
a) whenever required to do so by the Board in the interest of the unitholders; or
b) whenever required to do so on the requisition made by three-fourths of the
unitholders of any scheme; or
c) when the majority of the trustees decide to wind up or prematurely redeem
the units.

15A. The trustees shall ensure that no change in the fundamental attributes of any
scheme or the trust or fees and expenses payable or any other change which would
modify the scheme and affects the interest of unitholders, shall be carried out
unless,
i) written communication about the proposed change is sent to each unitholder
and
ii) an advertisement is given in one English daily newspaper having nationwide
circulation as well as in a newspaper published in the language of region where
the Head Office of the mutual fund is situated; and
iii) the unitholders are given an option to exit at the prevailing Net Asset Value
without any exit load.

16. The trustees shall call for the details of transactions in securities by the key personnel
of the asset management company in his own name or on behalf of the asset
management company and shall report to the Board, as and when required.

17. The trustees shall quarterly review all transactions carried out between the mutual
funds, asset management company and its associates.

18. The trustees shall quarterly review the networth of the asset management company
and in case of any shortfall, ensure that the asset management company make up for
the shortfall as per clause (f) of sub-regulation (1) of regulation 21.

19. The trustees shall periodically review all service contracts such as custody
arrangements, transfer agency of the securities and satisfy itself that such contracts
are executed in the interest of the unitholders.

20. The trustees shall ensure that there is no conflict of interest between the manner of
deployment of its networth by the asset management company and the interest of the
unitholders.

21. The trustees shall periodically review the investor complaints received and the
redressal of the same by the asset management company.

22. The trustees shall abide by the Code of Conduct as specified in the Fifth Schedule.

23. The trustees shall furnish to the Board on a half-yearly basis,
a) a report on the activities of the mutual fund;

b) a certificate stating that the trustees have satisfied themselves that there have
been no instances of self-dealing or front running by any of the trustees,
directors and key personnel of the asset management company;
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ICICI Prudential Mutual Fund - Statement of Additional Information
c) a certificate to the effect that the asset management company has been
managing the schemes independently of any other activities and in case any
activities of the nature referred to in clause (b) of regulation 24 have been
undertaken by the asset management company and has taken adequate steps
to ensure that the interests of the unitholders are protected.

24. The independent trustees referred to in sub-regulation (5) of regulation 16 shall give
their comments on the report received from the asset management company
regarding the investments by the mutual fund in the securities of group companies of
the sponsor.

25. No amendments to the Trust Deed shall be carried out without the prior approval of
SEBI and Unitholders approval/ consent will be obtained where it affects the interests
of Unitholders as per the procedure / provisions laid down in the Regulations.

26. Notwithstanding anything contained in sub-regulations (1) to (25), the trustees shall
not be held liable for acts done in good faith if they have exercised adequate due
diligence honestly.

27. The independent directors of the trustees or asset management company shall pay
specific attention to the following, as may be applicable, namely:—
i) the Investment Management Agreement and the compensation paid under the
agreement,
ii) service contracts with affiliates, whether the asset management company has
charged higher fees than outside contractors for the same services,
iii) selections of the asset management company’s independent directors,
iv) securities transactions involving affiliates to the extent such transactions are
permitted,
v) selecting and nominating individuals to fill independent directors vacancies,
vi) code of ethics must be designed to prevent fraudulent, deceptive or
manipulative practices by insiders in connection with personal securities
transactions,
vii) the reasonableness of fees paid to sponsors, asset management company and
any others for services provided,
viii) principal underwriting contracts and their renewals,
ix) any service contract with the associates of the asset management company.

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i) The Trustees shall be discerning in the appointment of the directors on the Board
of the asset management company.

ii) Trustees shall review the desirability or continuance of the asset management
company if substantial irregularities are observed in any of the schemes and shall
not allow the asset management company to float new schemes.

iii) The Trustee shall ensure that the trust property is properly protected, held and
administered by proper persons and by a proper number of such persons.

iv) The Trustee shall ensure that all service providers are holding appropriate
registrations from the Board or concerned regulatory authority.

v) The Trustees shall arrange for test checks of service contracts.

vi) Trustees shall immediately report to the Board of any special developments in the
mutual fund.
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ICICI Prudential Mutual Fund - Statement of Additional Information