statement of additional information statement of additional information name of mutual fund

242 Pages·2013·1.81 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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A Constitution of the Mutual Fund 3
B Sponsor
i) ICICI Bank 3
ii) Prudential plc 4
C The Trustee
i) Details of Trustee Directors 5
ii) Responsibility and duties of the Trustees 7
iii) General and Specific due diligence 10
D The Asset Management Company
i) Details of Asset Management Company Directors 11
ii) Powers, Duties and Obligations of the AMC 18
iii) Information on Key Personnel 22
E Service Provider
i) Custodian 30
ii) Transfer agent 30
iii) Statutory auditor 30
iv) Fund Accountant 30
v) Collecting Bankers 30
F Condensed financial information (CFI) 31

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A) Taxation on investing in Mutual Funds 106
B) Legal Information 115
C) General Information 134

ICICI Prudential Mutual Fund - Statement of Additional Information 2
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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
MF/003/93/6.

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 largest bank private sector bank. The Bank has a network of
3,382 branches 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 51,618.37 55,090.94 60,405.24
Free 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

ICICI Prudential Mutual Fund - Statement of Additional Information 3
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Prudential plc is an international financial services group with significant operations in Asia,
the US and the UK. They serve around 24 million insurance customers and have £405 billion
of assets under management (as of 31 December 2012). It is listed on the stock exchanges in
London, Hong Kong, Singapore and New York. Prudential is one of the best capitalised
insurers in the world with an Insurance Groups Directive (IGD) capital surplus estimated at
£5.1 billion (as of 31 December 2012 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 is a leading international life insurer in Asia with operations in 13 markets,
providing a comprehensive range of savings, protection and investment products.
Prudential’s Asia-based asset management division, Eastspring Investments, is one of the
region’s leading fund managers and the largest retail asset manager (based on a 2012 survey
conducted by Asia Asset Management).

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Jackson is one of the largest life insurance companies in the US, providing retirement savings
and income solutions to approximately 4 million customers. Jackson is also one of the top
two 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. Its expertise in areas such as longevity, risk management and multi-asset
investment, together with its financial strength and respected brand, makes it strongly
positioned 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 £228 billion (as of 31 December 2012). 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.

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Total Income 47,646 36,506 55,476
Profit After Tax and minority interests 1,436 1,419 2,197
Free Reserves 6,048 6,564 8,342
Net-worth 4,267 7,357 6,536
Assets under Management NA NA
• The Group has adopted US GAAP requirements for deferred acquisition costs as an
improvement to its accounting policy under IFRS 4 for those operations of the Group
which measure insurance assets and liabilities substantially by reference to US GAAP
principles. Accordingly, the 2011 comparative results have been adjusted from those
previously published for the retrospective application of the change as if the new
accounting policy had always applied.

ICICI Prudential Mutual Fund - Statement of Additional Information 4
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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
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 68 years Mr. Dadiseth is closely associated with various
Dadiseth* B.Com, F.C.A, Fellow industry, educational, management and medical
of The Institute of bodies. He is a Trustee of Sir Ratan Tata Trust and
Chartered Bai Hirabai J.N. Tata Navsari Charitable Institution,
Accountants in Member of the Managing Committee, Breach Candy
England & Wales Hospital Trust, Member of the Executive Committee,
The B. D. Petit Parsee General Hospital and Member
of the Executive Board, India School of Business. He
is on the Boards of The Indian Hotels Company
Limited, The Britannia Industries, Piramal Enterprises
Limited, Siemens Limited, ICICI Prudential Life
Insurance co. Limited, JM Financial Limited, JM
Financial Services Ltd, Atos India Pvt Ltd, PwC -
PricewaterhouseCoopers Private Limited, Accenture
Services Pvt. Ltd and Godrej Properties Limited. He is
a Member of the International Advisory Board of
Marsh & McLennan Companies Inc. India and
Fleishman-Hillard Inc., and ICICI Prudential Trust
Limited, Non-Executive Chairman of Omnicom India
Marketing Advisory Services Pvt Ltd and Member of
Audit Committee in Prudential Asis Corporation.

ICICI Prudential Mutual Fund - Statement of Additional Information 5
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Mr. M. S. 74 years Mr. M.S. Parthasarathy’s professional experience and
Parthasarathy B.Com, Certified knowledge, gained over five decades, span different
Associate of the areas of banking and finance, commercial, central,
Indian Institute of and export banking, development financing, private
Bankers (CAIIB), equity and mutual funds.
Associate of the
Chartered Institute of Mr. M.S. Parthasarathy represented ADB/AFIC on the
Bankers( AIB), boards of Bangkok Expressway and Malaysian Equity
London 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 65 years, B Com, Mr. Gopinath is a career banker and was associated
CAIIB, MBA 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. Gopinath is currently on the Board of Punjab
National Bank and ICICI Prudential Pension Funds
Management Company Limited.

Mr. Vinod Dhall 69 years, LLB Mr. Dhall has special experience in the fields of
University of Delhi & Finance, Corporate Affairs, Industry, and Commerce,
M.Sc. University of in which he worked for about 27 years. This includes
Allahabad experience of the banking and insurance sectors
including insurance reforms, industrial financing,
economic regulation, including capital markets,
competition law and policy, industrial development
and investment promotion, corporate governance
and corporate law reforms, and international
experience.

ICICI Prudential Mutual Fund - Statement of Additional Information 6
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Mr. Dhall is currently on the Board of ICICI Prudential
Life Insurance Company Limited, Schneider Electro
Infrastructure Limited, ICICI Prudential Pension Funds
Management Company Limited, Bharti Infratel
Limited and Orient Cement Limited.
Mr. Sandeep Batra 47 Years, B.com, Mr. Sandeep Batra is the Group Compliance Officer &
* F.C.A, A.C.S. 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. Batra is currently on the Board of
ICICI International Limited and ICICI Securities
Holdings Inc. (ISHI).
*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.

3. The trustees shall have a right to obtain from the asset management company such
information as is considered necessary by the trustees.
ICICI Prudential Mutual Fund - Statement of Additional Information 7
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.

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.

ICICI Prudential Mutual Fund - Statement of Additional Information 8
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;

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
ICICI Prudential Mutual Fund - Statement of Additional Information 9
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.

ICICI Prudential Mutual Fund - Statement of Additional Information 10